Moral Hazard Is Central To What Ails America

social_security_ii

In today’s Grand Forks Herald editorial, Tom Dennis decides to cut Rep. Paul Ryan some slack. Dennis and his editorial board have been pretty tough on Ryan, but Dennis wants to give Romney’s running mate some credit for his focus on “moral hazard.”

Which represents some fairly inconsistent thinking for the folks at the Herald. Even as Dennis continues to scold Ryan for “willful ignorance” about “low-income people’s health care needs” he applauds Ryan for recognizing that an entitlement for nursing home care embedded in Medicare creates a moral hazard.

“[A] key reason why so few people have nursing-home insurance is the fact that long-term care is available for “free” to people who qualify for Medicaid,” writes Dennis.

That’s true, but why would you allow that thinking to stop there?

The reason so few people save for retirement is because they expect entitlement behemoths like Social Security and Medicare to provide for them.

The reason so few save adequately for college is because they expect to get government-subsidized, low-interest student loans.

The reason so many Americans live such irresponsible lives, living paycheck to paycheck among other risky behaviors, is that they expect the government’s safety net to catch them if they fall.

The reason why banks engaged in irresponsible lending practices in the lead up to the subprime housing crisis is because they expected, and ultimately received, government bailouts.

Safety nets promote risky behavior. These government programs create moral hazards because they disconnect the person and their behavior from consequences.

If we recognize that in a nursing home entitlement, then we must recognize it in other areas in our society as well.

Rob Port is the editor of SayAnythingBlog.com. In 2011 he was a finalist for the Watch Dog of the Year from the Sam Adams Alliance and winner of the Americans For Prosperity Award for Online Excellence. In 2013 the Washington Post named SAB one of the nation's top state-based political blogs, and named Rob one of the state's best political reporters. He writes a weekly column for several North Dakota newspapers, and also serves as a policy fellow for the North Dakota Policy Council.

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