Rising Healh-Care Costs; C. Van Eaton

by Charles Van Eaton W hy is the level of healthcare spending what it is? Why does the rate of growth in healthcare spending tend to rise faster than spending on other things? Can anything be done to control the rate of growth, if not the level, of healthcare costs, short of having government take control of what now constitutes almost 14 percent of our entire Gross Domestic Product? What can be done to decrease the number of persons who are without some form of private healthcare insurance? As the political debate about healthcare unfolded, it became clear that virtually no one in the federal establishment thought that trying to get answers to these questions made any difference in what the politicians were trying to do to move government even more heavily into the healthcare-services production system than it is now. It does make a difference. There are strong differences of opinion on why the level of U.S. healthcare costs are what they are, why these costs have been rising faster than the cost of other goods and services, and what government can do both to reduce the level of costs and to arrest the rate of cost growth.

On one side is the view that if the level of spending on health care is the product of Dr. Van Eaton is McCabe/UPS Professor of Economics at Hillsdale College, Hillsdale, Mich igan. forces over which government can, at best, have little control, there is no reason to give government more control. However, if part of the reason healthcare spending tends to rise faster than other streams of spending is the product of policies generated by government programs, and if the goal is to reduce this rate of spending growth, the obvious place to start would be to do away with those government policies which con tribute to spending growth. Those who believe that both the level and rate of growth in healthcare spending are problems unique to the private-sector char acter of the American healthcare-services production system see no solution which does not involve granting considerably more power to government.

Why are costs what they are and why do they tend to rise as fast as they do? "Villain Theories" On one side of the debate one hears what may be called "villain theories" of health care costs. These theories focus on the production side of services and conclude that both the level and rate ofgrowth in costs are the product of greed on the part of insurers, pharmaceutical companies, hospi tals, and physicians. 1 Until these parts of the healthcare-services production and financ ing system are brought under control, this argument goes, nothing can be done to 235 236 THE FREEMAN • APRIL 1995 reduce healthcare spending. Clearly, poli cies based on this approach must eventually come to rely on command over, and control of both producers and consumers of health care services. Against the villain theory of healthcare costs lies the view that the level of health care costs is a product of six factors, none of which involves villains of any stripe.

1. The level of healthcare costs relative to Gross Domestic Product is higher in the United States than it is in other countries because the American healthcare system has been so successful in treating conditions which, in past times, would have been untreatable. 2 Consequently, good medicine increases rather than reduces the proportion of people in our population who have ill nesses requiring continued treatment. Dr. Willard Gaylin argues that "There are more people wandering the streets of the cities of the United States with arterioscle rotic heart disease, diabetes, essential hy pertension, and other expensive chronic diseases than there are in Iraq, Nigeria, or Colombia. Good medicine keeps sick people alive, thereby increasing the number of sick people in the population; patients who are killed by their diseases are no longer part of the population.,,3 (Put another way, while the dead are no longer a cost burden to the healthcare system, survivors are.) 2. The technological superiority of the American healthcare-services production system has resulted in an increase in the quantity of healthcare services demanded.

The technical diagnostic capacity to test for that additional one percent of information, which might provide answers to a medical puzzle, results in a demand for additional testing and additional treatment-at addi tional cost, of course. (If this reflects a basic American value-wrong in the view of some critics-which says "damn the costs, save lives and use expensive technology when ever necessary, " costs are bound to be higher than would otherwise be the case.) Conse quently there are many who argue that Amer ican medical technology is a major reason for the high level of healthcare costs.4 3. What is all too often overlooked when the level of American healthcare spending is unfavorably compared to spending in other nations is that the United States, in many ways that are unfortunate, is not like other nations. Therefore comparing the level of healthcare spending in the United States relative to spending in other nations is not particularly useful unless all those distinguishing factors are addressed and statistically held constant before cost com parisons are made.

For example, many Americans lead life styles that contribute to strong demand for healthcare services. As former Secretary of Health and Human Services Louis W. Sullivan noted, "It cannot be overempha sized that the top ten causes of illness and premature death in our nation are signifi cantly influenced by personal behavior and lifestyle choices."5 Comparing data col lected in 1977 and 1983, researchers found more obesity, less exercise, more drinking, and less sleep in 1983 than in 1977.6 Add to this those other factors which extend beyond health care per se while simulta neously imposing greater demands on the system-problems having to do with rates of drug usage, crime, family breakdown, rates of HIV infection, and low-birth-weight ba bies born to unwed mothers-and it is not surprisingthat healthcare spendingis as high as it is.7 In addition, the United States has a broad underclass enmeshed in poverty. Be cause they are often uninsured, low-income people with health problems often enter the medical system through emergency wards the most costly part to the healthcare pro duction system-and often postpone treat ment to the point thatwhen treatment is given it is more costly.8 4. Despite having a persistent poverty segment, America is a high-income nation.

A nation with high income is going to spend more on everything, especially health care, because health care is, to use economists' jargon, highly income'elastic. When income levels rise by some given percent, the de mand for health care rises proportionately more.9 It's both as simple and as compli cated as this: a rich nation spends more on health care simply because it is rich. 10 The Foundation for Economic Education Irvington-on-Hudson, New York 10533 Tel. (914) 591-7230 Fax (914) 591-8910 April 1995 Budget Deficits A n old English proverb may help us understand.the nature of debt: "A small debt makes a man your debtor, a·large debt makes him your enemy." When the national debt amounted to just a few million dollars, the federal government was a gracious debtor, a protector of all its subjects, enjoying public trust and admiration. Today, with the federal debt approaching $5 trillion, it is a pub lie enemy feared and disdained by millions of suffering taxpayers.

The pyramid of debt is growing at an annual rate of some $300 billion and is expected to accelerate in the future. Both the White House and the u.s. Congress are unwilling and incapable of balancing the federal budget. In a sense of desper ation about the growing alienation between the people and their govern ment, many Americans favor a constitu tional amendment which would require that "total outlays for any fiscal year do not exceed total receipts for that year." No matter what we may think of such an amendment, the deficits, whether they are on or off budget, are too big to be ignored or taken lightly. They are felt not only in every home and business but also in the money and capital markets of the world. After all, the U.S. economy is a substantial part of the world economy, and the U.S. dollar the paramount world currency. Budget deficits of the present magni tude are a prominent cause of all that ails the American economy: declining pri vate investments, stagnant or even falling standards of living, unemploy ment of millions of workers, and inabili ty to compete in many world markets. It is a fundamental economic principle that economic productivity, income, and wealth primarily depend on the instru ments of production in use, that is, on the amount of capital invested per work er. When government deficits consume the capital coming to market, they impede progress and bring stagnation.

The trillion-dollar deficits of the federal government have curbed American pro ductivity, obstructed production, and brought on much economic and social evil. The federal debt is a pyramid of IOUs for income and wealth consumed in the past. It differs fundamentally from busi ness debt which generally is productive and indicative of rising productivity. Government neither forms nor accumu lates capital; it merely consumes the sav ings of its subjects. Even when it spends the funds on public works, it usually wastes them serving lesser needs than they would have served if left in the hands of taxpayers. Budget deficits are objectionable also on moral grounds. No generation has any right to impose a debt burden on future generations. And yet, our genera tion did not hesitate to hang a $20,000 first-mortgage around the neck of every baby born in this country and does not scruple to increase it by more than $1,000 every year. As individual debt is the worst measure of poverty, so is political debt placed on our children the greatest outrage.

Yet, it is imperceptive to fault only politicians and bureaucrats for their spending predilection. In an open soci ety, like ours, they are merely the repre sentatives and agents of the public which is condoning or even demanding the deficit spending. In final analysis, we must fault the ideas and morals that guide the people in their political aspira tions. Most Americans live under the spell of progressive economic thought which confers respectability on political profli gacy. On all levels of education the "new economics" teaches that govern ment spending sustains, stimulates, and invigorates economic life. Government spending is presented as a benefit with out cost, a grand addition to general welfare, a social achievement of the highest order. In reality, it does not sus tain, stimulate, nor invigorate an econo my; it diverts economic resources to many nonproductive uses and thereby aggravates the situation.

The popular view of government spending as a grand addition to general welfare springs from man's inclination to prefer the seen over the unseen. Government largess is visible to all in many forms, as benefit checks and subsi dies, public housing and office build ings, many of which look like Greek temples built to the gods. Few observers see the costs borne by millions of people who are forced to tighten their belts and do without. They must forgo better housing, warmer clothing, comfortable transportation, better education, medical insurance, etc., etc. To a thoughtful per son, the marble temples of politics, which may last a thousand years, are durable monuments to the supremacy of political power over individual freedom and economic prosperity. They speak of onerous taxation and deficit spending. Our growing national debt casts a shadow over our future. Profligacy always comes to an end. Unless he changes his ways, the spendthrift falls in disgrace, facing bankruptcy. A national government need not fear bankruptcy in the usual sense, with complete discovery and equitable distribution of its property.

No government on earth has the power to hold the U.S. government responsible for its debt, and the U.S. government does not apply and enforce its own laws on itself. But, like bankrupt individuals, it may be hopelessly discredited, as in resources and character. It may pretend to make payment with depreciated dol lars or conduct currency and credit reforms which defraud the creditors. It may declare an indefinite moratorium. After all, a vast army of constabulary is ever ready to enforce its laws, no matter how predatory and immoraL No law or constitutional amendment can break the spending predilection. It will take a radical change of political thought and public morality to reverse the trend. The change will come when, pressed upon by public opinion, the politicians themselves will begin to forgo some of their own largess. It is difficult for legislators who thrive on expensive gratu ities, fees, perks, and shady salary increas es to cut the entitlements of welfare moth ers and children and to reduce federal outlays for the sick and homeless. Any such attempt is bound to run aground the fury of the beneficiaries and the wailing of many politicians who are humorless hyp ocrites or hypocritical humorists.

Example draws where precept fails. The federal budget could be balanced promptly if the President himself would be made to suffer a salary cut of 50 per cent, if the legislators were made to take a cut of 25 percent, and if all entitlements were frozen immediately. Such cuts would signal an honest beginning and allow us to look forward with hope. -LUj New from FEE FREE TO TRY Introduction by Hans F. Sennholz T he free order is future oriented. It permits individuals to save and invest for a better tomorrow. It liberates man from ancient restraints and limitations that shackle his initiative and creative energy. In a free society the future is most discernible in the plans and aspirations of the great entrepreneurs and geniuses of enterprise. Through their actions and provision for the future they greatly affect the lives of everyone~ The 23 essays in this collection include inspiring stories of rags-to-riches entrepreneurs, the fruits of freedom, and the politics of envy that threat ens prosperity. Contributors include, among others, Jane Shaw, Israel Kirzner, John C. Sparks, John K. Williams, Howard Bae~er Jr., Lawrence Reed, and E. C. Pasour, Jr.

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RISING HEALTHCARE COSTS: WHO'S THE VILLAIN? 237 5. If there are reasons to believe that Americans spend more on health care be cause, to an important extent, we are what we are, this only explains the level of health care spending, not the annual rate of growth in spending. (The issue of medical malprac tice litigation, too, is one that affects the level of healthcare costs.) Why have U.S. healthcare costs been rising? Is the cost increase issue one that also requires a "vil lain" explanation? What can government do to change these cost factors? Virtually nothing. The rate of growth in American health care costs relative to the cost of other things Americans buy, New York University econ omist William Baumol argues, is due to the relative difficulty of expanding productivity in services production compared to goods production. 11 In Baumol' s view, there are no villains. Baumol, long considered one of Ameri ca's foremost scholars in the field of pro ductivity analysis, argues that "There is no advanced country in which complaints about rates of cost increase are not heard. "

In fact, "in fourteen of eighteen countries in the years 1960 through 1990, healthcare prices rose more rapidly than prices in gen eral. The·U.S. rate of increase was exceeded by that in seven countries-Australia, Aus tria, Canada, the Netherlands, New Zealand, Norway, and Switzerland. The universality and persistence ofthe problemsuggestssome thing which lies deeper than the particular administrative or institutional arrangements adopted in any single country." Those inclined to see the rise in health care costs in terms of villains who must be managed by direct government intervention into the healthcare-services production system may be failing to grasp the nature of services production relative to goods pro duction. Both data and theory compel seri ous observers to acknowledge that it is far more difficult to increase productivity in services such as health care, law, welfare programs, mail, police, sanitation, repairs, and the performing arts, compared to man ufacturing, because in thalatter the contin ual development of new tools and management techniques makes it possible to expand output with fewer units of labor input.

By contrast, services-particularly health':' care services-all have a "hand-craft" at tribute in their supplyprocess. Consequently, when productivityrates differacross different sectors of an economy, say, manufacturing compared to health care, the money price of healthcare willrise relativeto the moneyprice ofoutputs in those sectors where productivity gains are real and substantial. Therefore, Baumol concludes, rising healthcare costs are "an inevitable and ineradicable part of a developed economy and the attempt to do anything about it may be as foolhardy as it is impossible." 12 But even when services productivity is relatively stagnant, real services costs can be seen to be falling despite the rise in services' dollar prices because there is in fact no service whose productivity is un touched by technical progress in other sec tors. A general rise in productivity led by those sectors where productivity gains are easier to accomplish means, by definition, that it requires ever less labor. time to acquire all things. "In an economy in which productivity is growing in almost every sector and declining in none (modern med ical technology has certainly improved some aspects of medical-labor productivity, particularly the development of new tools and techniques which make it possible to do surgical procedures on an outpatient basis compared to an inpatient basis), it is a tautology that consumers can have more of every good and service: they simply have to transfer some of the gains from the sectors that are becoming more productive into the sector that's becoming only a little more productive. ,,13 Consequently, the rise in the dollar price of healthcare services is not evidence of a system in despair, but only of a broad difference in relative productivity rates between services and goods.

But, Baumol rightly notes, "This happy conclusion is just a bit too simplistic. . . . It will not be easy to convince the layperson that, even though the prices of personal services appear to be rising at a phenomenal rate, in fact the costs of these services (in 238 THE FREEMAN • APRIL 1995 terms of their labor time equivalent) are really decliningbecause ofincreases in labor productivity generally." 14 6. While Baumol's argument as to why the dollar cost of health· care has risen relative to the cost of other components of GDP is compelling, it is not, as he would be the first to acknowledge, the whole story. The rest of the story deals with the fact that healthcare demand may now be the most heavily subsidized component of aggregate demand. Subsidizing demand for the out put of a relative-productivity-Iagginghealth care sector adds an additional source of pressure to increasing healthcare costs. 15 For example, even though the German insurance system is bankrupt despite pre miums that come to 13 percent of payroll, after paying the tax, Germans "graze them selves to obesity on medical services be cause the price of care, as perceived by individuals, is essentially zero. ,,16 A new econometric model developed by Gary and Aldona Robbins of Fiscal Asso ciates, Inc., which looks at how America finances health care, provides insight into why our current system for subsidizing health care distorts demand and adds costs that increase the probability that some people will be priced out of the market for affordable health insurance coverage.

The Robbinses note the following: • Prices matter. People are not price sensitive in the market for health care as they are in the market for other goods and services because some third-party (Medi care or a private insurer) pays most of the cost of health services. For the same reason, healthcare providers are less concerned about the costs of the services they supply because someone other than the patient will pay all or the major part of the bill. • Health spending has been rising be cause prices paid by patients have been falling. When we are using someone else's money, we pay less attention to costs and thus spend more. Over the period 1960-1990 the share of personal income spent out-of pocket on health care declined from 4 per cent of total consumption expenditures to 3.6 percent. Over the sameperiodthe amount spent from all third-party sources has more than tripled-from 4 percent of consumption on all goods and services in 1960 to 13.3 percent in 1990. Clearlythis increase reflects the fact that the demand for healthcare ser vices is the most heavily subsidized compo nent of household spending.

• Most Americans are overinsured be cause of government policies. Through gen erous tax subsidies to employers, govern ment "pays" up to one-half of the cost of employer-provided health insurance. A cor poration that pays, say, 50 percent of its income in federal and state taxes combined would be able to "escape" half the cost of providing such insurance to its employees. Through Medicaid and Medicare, govern ment directly pays medical bills for the poor and elderly. • Because it is easier to subsidize the demand for health care compared to the supply of health care, increases in demand result mainly in higher prices rather than in more services. On average, each additional dollar spent on health care buys only 43 cents more of real services but adds 57 cents more to prices. • The main cause of rising healthcare spending is government. Direct government spending has increased from 24 percent of allhealth-care spendingin 1960 to 42 percent in 1990. When tax policies are included which means provisions in the tax code that make employer-provided health insurance tax-free while individuals who purchase their own insurance must do so with after tax dollars-the government's share of health spending has risen from 34 percent in 1960 to 53 percent in 1990.

• Because of the third-party character of our healthcare finance system, most people have no idea how much they are personally contributing to cover the costs. In 1992 national health spending was equal to $8,821 for every U.S. household, with most of this burden hidden from view. • Because of third-party insurance and government subsidies, the most costly ser vices are often the cheapest to patients. On average, patients pay only 4.5 cents out of pocket for every dollar spent on hospitals, RISING HEALTHCARE COSTS: WHO'S THE VILLAIN? 239 but 68 cents out of pocket for every dollar spent on pharmaceuticals. Thus, to patients, hospital therapy appears cheaper than drug therapy while for society as a whole the opposite may be true. • Because of government policy, many Americans are uninsured. In 1990, through the tax system, government may be said to have "spent" about $64 billion subsidizing private health insurance by encouraging employer-based health insurance which is deductible for business tax purposes. At the same time, people who purchase their own insurance are penalized. When state man dates require insurers to cover a wide range of "health services" (hair transplants in Minnesota, for example) and larger firms which self-insure are exempted from such mandates, larger firms are exempted from the cost-increasing effects of such mandates while smaller firms and individuals are not.

Add the tax deductibility component and small firms and individuals are often priced out of the market. 17 One must conclude that, however unin tentionally, our current system of third party-driven healthcare finance has yielded an unusually perverse outcome: while it contributes to higher levels of health cost for the nation as a whole, it sends a signal to individuals which leads them to believe that healthcare costs are cheap. Consequently, the direct effect of rising healthcare costs are largely hidden from the majority of individual healthcare consumers. In short, if the word "crisis" has any place at all in the debate, it should not be applied to the healthcare-services produc tion system, it should be applied to how we finance the demand for healthcare services because this system, which is based on having someone other than the healthcare consumer pay the bill, robs individuals of a direct stake in healthcare cost control. 18 What should government be trying to do?

It certainly should not be trying to impose a massive Medicare or Medicaid system on the whole country. Neither should it be moving to bring all Americans under the umbrella of employer-provided health insur ance. These two systems, to the extent that they have contributed to disguising health care costs to individuals, have been the single most critical factor in forcing health care costs upward. Government should move the system away from its heavy reliance on third-party payments toward a system based on individual accountability for healthcare spending. Is that the direction government will finallytake? We shall see. D 1. In Putting People First, President Clinton blamed greed for the growth in healthcare costs. "What we need," he said, "is leaders willing to take on insurance companies, the drug companies, and the healthcare bureaucracies to bring health care costs down." Princeton economist Dr. Uwe E. Reinhardt, a frequent speaker before The American Medical Association, believes that physicians earn too much relative to the quantity of real healthcare services supplied to patients. See, "Why You're Afraid of the Doctor," The New York Times Book Review, April 20, 1990; and "Resource Allocation in Health Care: The Allocation of Lifestyles to Providers," The Millbank Quarterly, Vol. 65, No.2, 1987, pp. 153-176.

2. Willard Gaylin, M.D., "Faulty Diagnosis: Why Clinton's HealthCare Plan Won't Cure What Ails Us," Harper's Magazine, October, 1993, pp. 57-64. 3. Gaylin, p. 59. 4. This is not a settled question. See, for example, Stuart H. Altman and Stanley S. Wallack, "Is Medical Technology the Culprit Behind Rising Health Care Costs? The Case for and Against," in Medical Technology: The Culprit Behind Health Care Costs? (Washington, D.C.: U.S. Department of Health, Education, and Welfare, Public Health Service, 1977), pp. 24-38. Note: while medical technology may be expensive, these advances almost always lead to more cost-effective total care and better quality of life. It is interesting that in no other industry is less technology considered progress. 5. AlfSiewers, "Don't Socialize U.S. Medicine, Sullivan Says," Chicago Sun-Times, June 24, 1991. 6. Leonard A. Sagan, The Health ofNations: True Causes ofSickness and WellBeing(New York: Basic Books, Inc. 1987).

7. Nicholas Eberstadt, "Why Are So Many Babies Dy ing?" The American Enterprise, September/October 1991, p. 38. 8. Alain C. Enthoven and Richard Kronick, "A Consum er-Choice Health Plan for the 199Os," New England Journal of Medicine, 320:29-31, January 5, 1989, p. 30. 9. In cross-section studies of differences in healthcare spending among nations, George J. Schieber and Jean-Pierre Poullier found that each 10 percent difference in per-capita Gross Domestic Product is associated with a 14 percent difference in per-capita healthcare spending. Schieber and Poullier, "Overview of International Comparisons of Health Care Expenditures," Health Care Financing Review, Annual Supplement 1989, p. 72. 10. Studies conducted by A. J. Culyer reveal that the significantly higher income level Americans enjoy accounts for 80 percent of the amount they spend on health care compared to other nations. See A. J. Culyer, "Cost Containment in Europe," Health Care Financing Review, Annual Supplement 1989, p. 23.

11. William J. Baumol, "Anatomy ofan Illusion. Do Health Care Costs Matter?" The New Republic, November 22, 1993, pp.16-18. 12. Ibid., p. 16. 13. Ibid., p. 18. 14. Op. cit., p. 18. 15. Does the presence of subsidy really increase demand? According to a Brookings Institution study, as reported by David Kelley in Reason, January 1994,in 1964before Medicaid went into effect, the nonpoor saw physicians about 20 percent more frequently than the poor. By 1975, the poor were visiting physicians 18 percent more often than the nonpoor. In 1963 among those with incomes under $2,000, there were only half 240 THE FREEMAN • APRIL 1995 as many surgical procedures as among those with incomes of $7,500 or more; by 1970 the rate for low-income people was 40 percent higher than for those with middle-class incomes. 16. Wilfried Prewo, chief executive of the Chamber of Industry and Commerce in Hanover, Germany, "Germany is Not a Model," Wall Street Journal, February 1, 1994.

17. Gary Robbins, Aldona Robbins, and John Goodman, "How Our Health Care System Works," National Center for Policy Analysis Policy Report No. 177, February 1993. 18. Grace-Marie Arnett, president of Arnett & Co., a Letters to the Editor Libertarians and Crime In his article "The Real Enemy of Liberty" (December 1994), Robert James Bidinotto la ments that crime" curiously . . . has gotten scant attention from most proponents of the free mar ket system." Bidinotto goes on to say that' 'Free marketeers typically posit government per se as the enemy of individual rights and liberty. . . . [And] in their eagerness to denounce governmental violations of rights, these same individuals ignore the very evils that governments were established to erad icate: individual violations of rights." If all our taxes were used by government officialsfor the sole purpose of defending against and punishing internal crime, and defending from attack from enemies outside our country, it is probable that no free market and libertarian organizations would ever have come into exis tence.

But we are skewered to geometric tax levels to pay for the cost of thousands and thousands of functions that government should not be involved with. If the attention of government today were focused on and confined to combat crime, crime would once again become the entire focus of government action, with undivided attention. Su~ely Mr. Bidinotto is not suggesting that libertarians opt for another crime bill to spend billions to be raised by further increases in taxes! My greatest fear by far is of those who plunder and enslave me legally. I have no personal protection against government plunder, except to enter the overwhelming battle of numbers where it may take forty years to throw the rascals out via the ballot box. That is the fear libertarians are immersed in and talking about. Hopefully, Mr. Bidinotto, will distinguish the difference and get off the backs of libertarians. -JOHN C. SPARKS Canton, Ohio Robert James Bidinotto replies I agree that government has diverted resources and attention away from its basic goal-that of Washington, D.C., health-policy consulting firm, argues that "In virtually all developed countries, the concept of using health insurance as a protection against financial risk has been lost. Instead, health insurance has become a plan for pre-pay ment of routine medical expenses." See' 'You Bet Your Life,"

in National Review, May 24,1993, pp. 30-34. In the same vein, Peter Samuel argues that "While America's medical technol ogy and professional expertise are unmatched, our healthcare financing arrangements are collapsing." See "Health Reform Politics," in National Review, May 24, 1993, pp. 34-37. fightingcrime-into a vast array of activities that are morally onerous and constitutionally unwar ranted. In fact, that's exactly what I argue in my book, Criminal Justice? Welfare state programs "di verted badly needed funds from the criminal justice system. . .. [As a result,] police are underfunded and undermanned to face the ever mounting crime wave; court dockets are flooded with impossible caseloads; jails and prisons are filled to overflowing." (Pages 66-67) If public spending were redirected toward establishing justice and public safety, we'd certainly need no increase in taxes. However, I disagree that governmental viola tions of rights are somehow worse than private violations of rights. To most Americans, who victimizes them is far less important than the fact of their victimization. They thus find libertarian indifference to the current carnage on our streets bizarre and disproportionate, when contrasted with libertarian obsession with the hypothetical possibility of future dictatorship.

Libertarians must decide whether their defin ing purpose is a narrow "anti-statism," or if it's a broader defense of individual rights against any enemy, public or private. Should they continue to ignore or minimizethe valid concerns of ordinary Americans about private violations of rights (crimes), their cause will rightly remain socially marginal and culturally impotent. -ROBERT JAMES BIDINOTTO We will print the most interesting and provocative letters we receive regarding Freeman articles and the issues they raise. Brevity is encouraged; longer letters may be edited because of space limitations. Address your letters to: The Freeman, FEE, 30 S. Broadway, Irvington-on Hudson, New York 10533; fax (914) 591 8910.