An Adult Fairy Tale

by Don Boudreaux on April 12, 2012

in Health, Myths and Fallacies, Seen and Unseen

Here’s a letter to the Wall Street Journal:

Leon Mitrani believes that Canada’s recent sound economic performance is chiefly the result of that country’s “universal, single-payer, government-run health-care system” (Letters, April 12).  According to Mr. Mitrani, that system “frees up Canadian corporations from paying that employee expense and boosts their profits and economy.”

Splendid!  But if Canada’s economy is boosted by government relieving Canadian employers from having to pay a portion of their workers’ earnings (that is, the portion that would otherwise be paid as employer-provided health-insurance premiums), wouldn’t Canada’s economy be boosted even further if Ottawa relieved Canadian employers also from having to pay wages and salaries?  With government picking up employers’ entire tab for hiring workers, the economic boost would be stupendous.

And why stop there?  If Mr. Mitrani is correct, Canada’s economy would get a bigger boost yet if the government picked up not only the tab for hiring workers, but also the tab for any and all capital expenses.  With government relieving Canadian companies of the need to pay for their own workers, factories, machines, IT, and all other costs of doing business, Canada’s economy would become the envy of the world!

Who knew that the secret of economic success is so simple?

Sincerely,
Donald J. Boudreaux
Professor of Economics
George Mason University
Fairfax, VA  22030

And as my GMU colleague Tom Hazlett points out to me by e-mail,

And, of course, there seems to be about a 4-decade lag in Mr. Mitrani’s model.  The Canadian economy underperformed the US regularly and substantially until the 1990s, when Conservative reforms were put in place.  The correlations are interesting, including the lags.

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