Like Arnold, I just read Kotlikoff’s plan to reform American health care.  I realize that my first-best proposal – separation of health and state – has almost zero political support.  But I’d still like to know why Kotlikoff ignores a far simpler and more reliable reform: Austerity.  As I’ve argued before:

Instead of pushing for “constructive” free market reforms, libertarians should doggedly focus on austerity: opposing spending increases, and pushing spending cuts.  Instead of trying to “privatize” Social Security, for example, libertarians should push for lower benefits, a higher retirement age, and means testing. Instead of pushing for school choice, libertarians should try to restrain/shrink education budgets and push user fees.  If libertarians have any political success, this will automatically expand the role of the market.  After all, the less government does for people, the more they will do for themselves.  Dissatisfied with government provision, people will save more for their own retirement and spend more on private education.  In the limit, once the flow of government money ceases, voluntary exchange is all that’s left.

Austerity has two major advantages over more “constructive” free-market reforms:

1. If anything goes wrong, public opinion is less likely to blame the market.  Government decided to spend less on X; how is that the market’s fault?  Logically, people could simply reframe their complaints.  But psychologically, it’s easier to point fingers at markets directly sanctioned by government action than markets indirectly prompted by government inaction.

2. Congress is also less likely to use austerity as an excuse for new kilo-page legislation.  Officially expanding market options takes “sweeteners.” Mere budget cutting, not so much.

I originally addressed this argument to libertarians.  But most of my points are relevant for anyone concerned about the government’s fiscal future.  It’s easy to be constructive.  But the best way to cut trillions of dollars from the budget is probably just to fall in love with the words “less” and “no.”