Private Sector Versus Government - Which Is Better?

T H E P R I VA T E S E C T O R V E R S U S G O V E R N M E N T : W H I C H I S B E T T E R ?
“We must bear in mind, then, that there is nothing more difficult and dangerous, or
more doubtful of success, than an attempt to introduce a new order of things in any
state. For the innovator has for enemies all those who derived advantages from the
old order of things, whilst those who expect to be benefited by the new institutions
will be but lukewarm defenders. This indifference arises in part from fear of their
adversaries who were favoured by the existing laws, and partly from the incredulity
of men who have no faith in anything new that is not the result of well-established
experience. Hence it is that, whenever the opponents of the new order of things have
the opportunity to attack it, they will do it with the zeal of partisans, whilst the oth-
ers defend it but feebly, so that it is dangerous to rely upon the latter.'' - Niccolò
Machiavelli, (1469-1527) in The Prince (1513), Chapter 6.
THE PRIVATE S E C TO R V S G O V E R N M E N T: W H I C H I S B E T T E R ?
In answering the question: “Which is better, the private (business) sector or
public (government) sector?” there is a simple metric. Which sector, given the
economic activity in question, can produce a better ROIC (return on invested
capital) for capital allocated to that activity in the economy.
FOR A REAL R O I C , R E A L P R O F I T S M U S T B E G E N E R AT E D
The actual accounting that goes into calculating ROIC assumes such calcula-
tion includes externalities and contingent liabilities that may result from the
economic activity in question. All known and understood inputs and outputs
from the industrial activity (means human-initiated activity that includes
manufacturing, all services, farming, etc.) is fully accounted for. Today, busi-
nesses in some industries collectively report accounting profits, but due to
unaccounted for externalities and contingent liabilities, they produce no eco-
nomic profits.
PRIVATE & P U B L I C S E C TO R S A R E B O T H A C C O U N TA BL E F O R
PRODUCING A P O S I T I V E R O I C
Ideology is oftentimes a poor determiner for choosing one sector over an-
other to manage an activity of the economy. Ahead of an analysis of real-
world results there may be no easy analytical means for determining which
activities of an economy are better left to the private sector, or which are best
left to the public sector. There are some activities, however, such as fighting
wars, eliminating drug trafficing, etc. that have no rational ROIC analysis.
LYLE A. BRECHT ---DRAFT 3.5---C A P I TA L M A R K E T S R E S E A R C H -- 410.963.8680 --- Thursday, September 3, 2009 Page 1 of 18
CONFUSION A B O U T C A P I TA L I S M V S . S O C I A L I S M
Socialism denotes the government ownership of the means of production. 1 To-
day, corporatism, the resistance to economically productive change and pres-
ervation of dis-economic activities is more a threat to capitalism than social-
ism. The economist, Joseph Schumpeter (1883-1950, Austria/Hungary), in his
book, "Capitalism, Socialism and Democracy," discussed capitalism’s greatest
strength as creative destruction - old ways of doing things are destroyed and
replaced by new ways through entrepreneurship. For Schumpeter, socialism
was no match for capitalism. However, he predicted that corporatism would
threaten and would finally undermine capitalism. Where today some see
government bringing socialism, Schumpeter would see government fighting
corporatism, providing the necessary energy to reform and replace market
structures that are dis-economic and destructive of wealth.
CONFUSION A B O U T ‘ F R E E M A R K E T S ’ , G O V E R N M E N T
REGULATION S & ‘ S O C I A L I S M ’
In standard economic parlance, markets connect buyers and sellers of goods
and services to enable them to complete transactions. Market participants

consist of all parties that influence the price at which these goods and serv-
ices are exchanged. In free markets, all the information that influences the
prices of goods and services is accounted for. Ideally, there are no externali-
ties or contingent liabilities created by a market trade. This enables capital to
be allocated efficiently. 2 Without free markets, it may be difficult or impossi-
ble to produce the innovation and reallocation of labor and capital to produc-
tive uses that establishes sustainable economic growth. Free markets may ex-
ist in democratic capitalistic (corporistic capitalism) and socialistic (state capi-
talism) economies, and to facilitate both private sector and public sector ac-
tivities.
UNREGULAT E D M A R K E T S A R E N O T ‘ F R E E M A R K E T S ’
Free markets require structure (rules of the game) to function efficiently.
Regulations help to define this structure as fair and equitable for all parties
who wish to transact business in this market. Unregulated markets tend to
develop unfair practices that are driven by avarice. This leads to the ineffi-
cient allocation of capital by markets that are not adequately regulated. Over
time, if capital is not efficiently allocated to activities that are productive and
that produce a real economic return on invested capital, the market tends to-
wards collapse. Thus, the primary purpose of regulations is to prevent the
collapse of markets due to the inefficient allocation of capital within those
markets. By definition, collapsing markets have not been properly regulated.
Markets that are not prone to collapse are sustainable. It takes sustainable
markets to produce sustainable economic recovery and sustainable economic
growth. All markets are dynamical systems. These systems are either tending
toward collapse or towards sustainability. Sound regulations enable markets
to move toward sustainability.
‘COERCED M A R K E T S ’ A R E N O T F R E E M A R K E T S
Coerced markets are markets where market exchange prices do not reflect the
full value of externalities and/or contingent liabilities created by the trade. In
other words, market participants are coerced to engage in the dis-economic
allocation of capital to projects, purchases of products and services, and ex-
penditures of human resources and time that may not actually produce a real
economic return. Coerced markets may occur in corporist or socialist capital-
istic economic structures, and both private and public sector activities. Co-
erced markets are the result of inadequate information, bad accounting rules,
and/or lack of meaningful regulations. One common feature of coerced mar-
kets is the socialization of private sector risk in order to boost profits.
CONFUSION A B O U T W H E N M A R K E T S A R E A P P R O P R IAT E
Free Markets are a relatively new way of ‘doing business.’ During much of
human history, markets (at least the way markets are conceived of today), did
not constitute the dominant mode of business. Tribalism, the divine right of
rulers, patronage, feudalism, manifest destiny, etc. drove the majority of
transactions, not free market exchange. There are some economic activities in
any economy where markets are an inappropriate mechanism for efficiently
allocating capital to that activity. 3 For example, uncertainty of what one is
buying (purchasing health care is not like buying a loaf of bread, a car, or a
home) and lack of consumer information (and even basic understanding of
the service being purchased) for comparison shopping may forever doom
health care as an economic activity that responds to free market forces. Thus,
there are always economic activities in any economy where markets are an
inappropriate mechanism for managing transactions.4
CONFUSION A B O U T C H R I S T I A N I T Y A N D C A P I TA L I S M
Capitalism today is based on technological positivism and utilitarianism.
Technological positivism claims that human ingenuity, not God’s will, deter-
mines what is possible. Utilitarianism declares that what is good is deter-
mined by an activity’s utility. This utility is typically determined from the
perspective of the elite of a society and measured in monetized terms. 5 Chris-
tianity, on the other hand, believes that newness is not only possible, but is
promised by God. That God is present in human history on the side of the
weak and the vulnerable, the blind and the lame, those with child and those in
labour.6 The future is hidden deeply in God’s heart. Human community must
walk by faith where it may not yet see.7 It is our relationality with God as our
sovereign8 and love for our neighbor that is what defines us as Christian.9
Many aspects of capitalism, especially its underlying technological positivism
and utilitarianism are incompatible with the tenets and values of
Christianity. 10
CONFUSION A B O U T W H AT C A P I TA L I S M I S & I S N O T
Today, there are many flavors of capitalism in the world. There are also many
flavors of capitalism evident in the United States. Thus, to speak of ‘capital-
ism’ as a monolithic ‘way of doing business’ in opposition to ‘government’ is
nonsense. Today, in the U.S. many if not most industries either receive direct
or hidden subsidies from the federal, state, or local governments (corporate
welfarism); receive special tax breaks for their industry; and/or are regulated
in ways that create an unfair advantage for entrenched businesses over new
competitors. Thus, capitalism does not mean, and has never meant, a bright-
line separation between business and government. It is also a falsehood that
“without business profits, government could not exist.” What is more accu-
rate is that without government setting the rules of market exchange (this in-
cludes what market exchanges will be protected e.g the market for illegal
drugs will not be protected but prosecuted. etc.), businesses could not make
profits.
CONFUSION A B O U T W H AT P R O F I T S A R E & A R E N O T
Economic profits represent the creation of new, real wealth for the commu-
nity. The world is better off for the economic activities that generated these
profits. However, sometimes firms report accounting profits even as no real,

new economic wealth was created. Instead, the accounting profits are merely
figments of imaginative managements as these reported profits fail to account
for externalities and contingent liabilities, or are ginned-up based on creative
or fraudulent accounting schemes. Likewise, individuals may report that
they personally ‘profited’ from a business activity (i.e. they made ‘a lot of
money’) even in situations where no economic or even accounting profits
were generated by the business itself. The individually ‘profitable’ activity
did not contribute in any fashion to net, real wealth creation for the commu-
nity. In essence, in situations like these, from an economic perspective, it may
be more proper to think of these payments to individuals where no real prof-
its were generated as merely thefts of someone else’s money. Albeit, these
thefts, in many cases, are still considered ‘legal’ from a criminal justice system
perspective, although they may be subject to shareholder derivative suits and
civil penalties if pursued by interested parties.
SECTOR PRE F E R E N C E C O N F U S I O N
Since the mid-1970’s there has been a common cultural perception in the U.S.
that, everything else being equal, the private sector could perform an activity
of the economy at less cost and less waste than the public sector. In fact, there
is a fair body of research and much experience to the contrary. Not only are
some traditional public sector activities not able to be performed efficiently
by private sector companies, but when they are undertaken by private sector
entities, they not only cost more, but they produce a lower ROIC than do
similar public sector entities performing these services. What this means is
that being against paying higher taxes as an ideology is irrational.
CONFUSION A B O U T TA X E S
Are taxes bad? Sometimes. But, when necessary services produce a higher
ROIC when provided by government than if that same amount was invested
by the private sector, paying taxes are less expensive than the alternatives.
Sometimes there is an economic case, for the economy to function at all, that
adequate taxes are a reasonable and responsible solution, not an economic
burden.
WHY PERSON A L R E S P O N S I B I L I T Y I S N O T A N A LT E R N AT I V E
TO GOVERNM E N T R E G U L AT I O N S
The government, no matter how benign and useful, is not a substitute for
personal responsibility. Likewise, personal responsibility, even that of the
highest moral rectitude, is not an alternative for government regulations. This
is primarily due to scale differences. For example, no matter how much re-
sponsibility individuals embrace, if their environment is polluted with PCBs,
abrupt climate change has engendered persistent drought for the farmers in
their nearby communities, or an unscrupulous businessperson locates a nu-
clear waste dump on land he/she owns near one’s own home, without gov-
ernment intervention and oversight, our homes, our families, and our com-
munities are threatened - whether we are acting responsible as individuals or
not.
CONFUSION A B O U T I N S U R A N C E A N D S C A R C I T Y T H I N K I N G
The population estimate for the U.S. in 2008 is 304,059,724 (Census Bureau
estimate). If another 45 to 80 million people are added to the ‘insured’ in the
U.S., this will only increase costs for everyone, therefore this is not the ‘right
time’ to attempt reform. 11 Some point to the ballooning budget deficit as a
reason why reform of the health care system should not be attempted now.12
Actually, just the opposite is true. The larger the risk pool, the lower the in-
surance costs for everyone. Without reform, the budget deficits will only
grow much larger and economic recovery is imperiled But the large number
of uninsured is expensive. It is also a national security issue.13 Today, millions
of citizens do not have access to primary care. In the advent of a pandemic,
this situation could prove catastrophic.14 Having this many people neglecting
basic care requirements may cost the economy as much as $1,000 billion an-
nually in lost productivity. But, in times of pandemics, neglecting care be-
cause of no insurance could cripple the economy.
MEDICARE, A G O V E R N M E N T P R O G R A M , I S ‘ B R O K E N ’ O R
‘BANKRUPT’ S O W H Y S H O U L D W E B E L I E V E T H AT E X T E N D-
ING MEDICA R E I S A S O L U T I O N
Medicare, compared with private insurance in the U.S., is a bargain. With
Medicare 95 cents of every premium dollar is spent on health care. For pri-
vate insurers, only 80 cents of every premium dollar is spent on health care.
Health providers also get paid, on average, faster by Medicare than by pri-
vate insurers, although not fast enough (in other countries with universal
single payer systems, payments to providers happen in 3-5 days). Thus, some
believe a single payer system for all citizens is a sound choice.15
But Medicare will be bankrupt (payments will exceed premiums) within

eight years without substantive reform. Why is that? There are two reasons:
(1) premiums are collected through payroll taxes on a relatively smaller
population of workers to fund premiums for a larger population of retired.
The changing demographics of the U.S. population has made this form of
funding premiums obsolete; (2) Today, it ‘costs’ ~$50,000 in medical costs, on
average, within one year of an elderly person dying of natural causes (non-
preventable reasons for dying due to the aging process).
Some argue that the large unfunded liabilities for Medicare indicate that
Medicare is a poorly run insurance program. However, all advanced coun-
tries with public health insurance programs that offer universal care typically
fund health care costs from current revenues. In the U.S., because of the split
between private and public insurance, the government must account for its
future liabilities for the ‘unfunded’ portion of public insurance. What this
number represents is the future taxes citizens must pay to provide Medicare
benefits to those citizens who have been promised these benefits.
However, if the same logic was applied to private insurance in the U.S., the
amount of ‘unfunded’ liabilities would be ~$673,000 per household plus
Medicare’s at $421,000. Each household would ‘owe’ $1 million in future ‘un-
funded’ health care costs. Under the present system, some of these costs will
be paid indirectly through lower pay and lower business profits, some di-
rectly through deductions from income, and some directly through payroll
taxes. Whatever the mechanism for payment, individual citizens, not ‘em-
ployers’ or ‘government’ are on the hook for this entire amount.
Should it cost $50,000 for someone to die of ‘old age’ from natural causes in
the U.S.? Have we ‘medicalized’ (death as something that must be ‘treated’)
and commodified death (turned death into a billable event in a person’s life)
beyond the point that is ethically and morally defensible? This is something
for our churches to wrestle with, and this has begun. 16, 17 But, it is also some-
thing that our entire society must begin to deal with, for no country, includ-
ing the U.S. is wealthy enough to use medical technology to forestall a natu-
ral death. For example, using advanced medical technology, it is theoretically
possible to keep someone ‘alive’ as long as 150 years, at the cost of about one
million dollars a year. Is this something our society wants to do, wants to
subsidize, and curtail its future economic growth to accomplish (spending
capital for ‘health care’ after a point, starves the economy of capital needed to
address climate change, deal with pollution, grow food, develop new energy
sources, invent new technology in other areas of human endeavor, educate
our children, etc.)?
CONFUSION A B O U T W H AT G O V E R N M E N T I S & I S N O T,
WHAT GOVE R N M E N T I S R E S P O N S I B L E F O R & W H E R E G O V-
ERNMENT IN T E RV E N T I O N I S I N A P P R O P R I AT E
One might argue that the primary and essential function of a nation’s gov-
ernment is to “supply the institutions that create and sustain trust in financial
promises.” 18 The foundation of such trust is built on a “government account-
able to the large mass of property owners” and the maintenance of “the most
important of all financial markets – that in government debt.” 19 Thus, protect-
ing one’s country through military means is only effective if such military
defense achieves “trust in financial promises.” For a country without a viable
economy is one where no amount of military budget can rescue. “{I}t is only
when governments are solvent that money – the unit of account, the ultimate
means of payment and, in the absence of inflation, the safest store of value –
will remain trustworthy.”20 “Good government is then the foundation of
any…financial system” that relies on trust that promises future return of capi-
tal with interest in exchange for the provision of capital to fund productive
activities today. 21
While this on first blush appears that government should solely be involved
in the affairs of Wall Street, upon reflection, what becomes clear is that creat-
ing and sustaining trust in financial promises involves structuring markets so
that transactions incorporate the best information as to the productive alloca-
tion of capital. Otherwise, over time, transactions would otherwise tend to
allocate capital to those agents who have an unfair competitive advantage,
cheat, or use coercive force (bribes, lobbying, implied threats, etc.) to achieve
a greater share of the market pie. The result of this situation, should it persist,
would be the negligence of basic needs of the citizenry and collapse of sup-
port systems for the economy.
For example, this is the entire rationale behind environmental regulations in

advanced economies. Businesses act rationally by externalizing costs as this
enables greater profits for the firm. However, if such externalized costs are
borne entirely by the public, the costs may exceed any profits generated by
the firm. Overall, the society and economy are worse off in this situation.
Thus, a market tax is imposed in the form of a monetary price adjustment,
penalty, or assertive requirement that market transactions include this previ-
ously externalized cost. In this fashion, government, at its best, reinforces the
dictum with whatever means at its disposal, “There is no free lunch.”
But that is where the problem often arises. Instead of government of the peo-
ple, by the people, for the people, 22 government gets turned towards a gov-
ernment by the elite (who do not have the people’s interests at heart), of the
special interests (corporatism), for the existing institutions (and how they op-
erated today, i.e. corporate wefarism). At least in the Constitution, the task of
having a government of, by and for The People, is ultimately, the people’s re-
sponsibility. But, this is a far cry from railing against government in general,
as corporatism takes over the government and corporate welfarism becomes
the primary function of government. Thus, any intrusion of government into
the marketplace where The People’s needs are not uppermost, but corporate
welfarism predominates is primarily where government intervention is inap-
propriate. Today, it is not that citizens ask too much of government, it is that
they ask too little. It’s past time to ask government to get out of the business
of corporate welfarism and start attending to the real needs of the People.23
PROPOSITIONS
Some activities in the economy are best left to the public sector;
Some activities in the economy are best left to the private sector;
Over time, it appears that if ROIC has been robust when performed
by one sector, a positive ROIC can only be maintained when those
same activities are transfered, for some time, to the other sector;
Some activities can only be accomplished profitably when both sec-

tors are engaged in a partnership of public/private nature;
The private sector capital markets posses far superior liquidity and
credit than do public (government) capital markets in normal times;
However, under times of severe economic distress, the public sector

capital markets may need to come to the rescue of the private capital
markets;
There are individual instances where both public and private entities
exhibit unparalleled capabilities and competences that are not easily
duplicated by the other sector, even with massive infusions of capital;
There are individual instances where markets inappropriately reward

the activities of a public or private sector actor, even as negative re-
turn on invested capital has been realized over considerable period;
Both private and public sector firms have in their employment indi-
viduals of superior talents who could easily function in either sector;
Likewise, both private and public sector firms may employ individu-
als of vastly inferior skills and talents who would be unable to func-
tion in the other sector;
Both sectors also employ individuals who posses special skills and
talents that are not directly applicable to or transferable to the other
sector;
Both large public organizations and private sector firms tend to lack
sufficient entrepreneurial management capabilities to maintain high
ROIC activities over extended periods.
ENDNOTES
1The military and Veterans Administration ( VA) run socialized health care in the
U.S., similar to NHS in UK, Spain, most Scandinavian countries, New Zealand, Hong
Kong, Cuba have for all their citizens (Beveridge model).
Federal employees, Congress, and their staff have a single payer, similar to what the
Swiss, Germans, France, Switzerland, Belgium, the Netherlands, Japan have for all
citizens (Bismark social insurance Model).
Medicare is a single payer system similar to what Canada, Taiwan, South Korea have
for all their citizens (National Health Insurance Model).
In U.S. health insurance is linked to employment for those under 65 yrs of age. Those
working for certain private and public employers get insurance. Those working for
other employers, changing jobs, or out of the workforce for any reason don't get it
and may even be denied coverage from the individual market at the discretion of the
insurer and get nothing. - that's 'free market' health care, U.S. style.
2 Fundamental and structural inefficiencies in some markets propel these markets to

misprice inputs and outputs from productive and consumptive activities in the econ-
omy by either deferring known economic costs to the future or failing to account for
known economic costs and pushing these private costs to public taxpayers. These
inefficiencies not only often leave the United States government as the lender and
borrower of last resort, but also result in an economic system built on a castle of sand.
This untenable position may not only be a source for waves of financial crises, but
also of an increasing propensity for local resource wars and privatized, transnational
terrorism as preferred methods for sorting out temporary winners and losers in an
unstable global Ponzi scheme where real, economic costs are reallocated to the losers,
sometimes taxpayers in the United States.
3 Even today, free markets are not a panacea. Markets are not always applicable for
all transactions. Instead of encouraging the proper allocation of capital to economic
activities, the use of markets for some economic activities can be destructive of capi-
tal and harmful to the economy even when ‘properly’ regulated. Health care may be
an economic activity where markets are inappropriate for very good reasons. See link
to Kenneth Arrow’s Uncertainty and the welfare economics of health care in Paul
Krugman, “Why Markets can’t cure healthcare,” NY Times (July 25, 2009) at
http://krugman.blogs.nytimes.com/2009/07/25/why-markets-cant-cure-healthcare
/?pagemode=print.
4 There have been claims that 3rd party reimbursal for health care expenses ‘distort’
the true market for health care in the U.S. However, actual experience in other indus-
trialized countries, ones where insurance pays ~100% of billed services, is that health
costs as % of GDP is <10%. In U.S., where insurance pays <65% of billed services,
health care is 18% of GDP, soon to be 20% (CBO #s). The problem is not 3rd party
payers. Turns out markets don't work very efficiently for delivering health care (at
least no one has figured out to have them work efficiently in practice). In the U.S., we
have moved from not-for-profit community-based care to an industrial, for-profit
care model. Insurance companies are part of the problem as they have moved to a for
profit model themselves. This is one factor that is driving up the cost of health care in
America, not the 3rd party payer model.
5 Utilitarianism (‘the more human desires that can be met, the more moral good that
has been created’ or ‘the greatest good for the greatest number’) presently serves as
the “primary moral framework for decision making in modern societies.” Utilitarian-
ism is legitimized and sustained due to two factors: (a) a central myth of modernity
that equates the telos of history as human progress brought about by goods resulting
from economic development and technological innovation; and (b) the goods of hu-
man progress can be justified as moral exclusively through self-reflective interiority
and determined by human happiness measured in economic terms. “God is super-
fluous to the order of the material world.” See Michael S. Northcott, The Environment
and Christian Ethics (Cambridge: Cambridge University Press, 2001), 57, 70
6Jeremiah 31:8; cf. Exod. 22:25; 23:11; Lev. 19:10; 23:22; Deut. 15:11; 24:17; 26:12, 13; 1
Sam. 2:8; Job 22:9, 19; 24:3, 14; 29:12; Ps. 9:9, 18; 10:2; 12:5; 14:6; 22:26; 41:1; 68:5; 72:4,
12; 74:21; Isa. 1:17, 23; 9:17; 10:2; 51:14; 58:6; 61:1; Amos 8:4; Matt. 5:3; 11:5; 19:21; Luke
4:18; John 13:29; Rom. 15:26; 2 Cor. 9:9; Gal. 2:10; James 2:5,6.
7 “The God of Israel is a God who makes and keeps promises....The promises of God
are not theoretical or spiritual, but concern real-life in a reordered, political-economic
situation’ (Jer. 32:42-44). See Walter Brueggemann, A Commentary on Jeremiah: Exile &
Homecoming (Grand Rapids & Cambridge: Eerdmans, 1998), 265 (#3), 281, 284, 311.
8 Exod. 6:7; Lev. 26:12; Jer. 7:23; Jer 11:4; Jer. 30:22; Ezek. 36:28.
9 Lev. 19:18; Matt. 5:43; 19:19; Mark 12:31; Rom. 13:9; Gal. 5:14; James 2:8.
10 For example, “reforming health care is a moral obligation, and that the responsibil-
ity to heal the sick is at the heart of every faith tradition and is required for a civilized
society.” These imperatives are not typically what drive markets. See Marshall Gantz,
“We Have the Hope. Now Where’s the Audacity,” Harvard Kennedy School (August
30, 2009) at http://www.hks.harvard.edu/ news-events/news/commentary/we-
have-the-hope.
11For a compete analysis of why health care insurance and system reform is needed
now in the U.S. see Lyle Brecht, “Theopolitics of Health Care” available at:
http://www.scribd.com/doc/16487050/Theopolitics-of-Health-Care
12Current Congressional Budget Office (CBO) and Office of Management and Budget
(OMB) projected deficits of $1.58 trillion for FY2009 (11.9% of gross domestic product
(GDP) for fiscal year 2009)** and $9.0 trillion (this includes the FY2009 deficit) over
the 10-year period, FY2009-2018, are overwhelmingly a result of the current economic
contraction and policies put in place prior to FY2009.
An economic downturn will automatically create deficits because job loss and income
declines reduce tax revenue, and because they create more demand for public serv-
ices such as unemployment insurance, nutrition assistance, increased Medicaid
spending and federal subsidy costs for Fannie Mae and Freddie Mac. These factors
add up to just under half of the decline in the budget outlook (about 45%) since pre-
recession forecasts. As a result of the current recession and tax cuts enacted over the
last eight years, federal revenue in FY2009 will be the lowest since FY1950.
Policies enacted prior to the current fiscal year represent nearly 21% of the deteriora-
tion that occurred since FY2001. [Note: In FY2001, the federal budget was in surplus
by $281 billion (2.8% of GDP). Further, the CBO estimated surpluses would continue
through 2010 in their baseline projection.] Tax changes from the FY2001-03 period as
well as unpaid-for spending increases, including spending on the Global War on Ter-
ror (GWOT: wars in Iraq and Afghanistan, etc.) represent the majority of these costs.
Troubled Assets Rescue Program (TARP) from late FY2008 accounts for about 22% of
the projected budget deficits.
The American Recovery and Reinvestment Act (ARRA) has added about 12% to the
deterioration of the FY2009-2018 budget outlook since the start of the recession.
All together financial industry rescue and economic stimulus policies, enacted in late
FY2008 and early FY2009 to soften the economic impacts of the FY2007-FY2009 reces-
sion represent about 51.4% of the total projected federal deficits. Best estimates are
that these allocations of the federal budget have saved the loss of between 700,000-
800,000 jobs during FY2009-2011 and prevented a repeat of the Great Depression
where in today’s world as many as 20 million additional Americans would have been
out of work than otherwise.***
Only a small fraction of the deficit increase since FY2001 is due to increased spending
and even a smaller share is due to policy changes since the start of FY2009 that are
unrelated to the recession.
* Numbers taken from analyses by John Irons, Economic Policy Institute, Washing-
ton, DC. See:
http://www.epi.org/analysis_and_opinion/entry/roots_of_deficit_pre-date_obama/;
http://www.epi.org/publications/entry/ib262/
**Note: “On a comparable basis, federal debt hit 109 percent of GDP at the end of World War
II, and hit a second peak of 49 percent at the end of the Reagan-Bush years. And a number of
European countries have hit substantially higher debt levels without crisis.” See:
http://krugman.blogs.nytimes.com/2009/08/25/deficits-debt-and-the-economy/.
13National security threats are: “actions that can degrade the quality of life for the
inhabitants of a state or significantly narrow the range of policy options available to
the government or private citizens of a state” - Richard Ullman, Redefining Security
(1983). U.S. National Security Strategy (2006): "Public health challenges like pandem-
ics (HIV/AIDS, avian influenza) ... recognize no borders. The risks to social order are
so great that traditional public health approaches may be inadequate, necessitating
new strategies and responses.”
14“Each year 300 million cases of malaria kill two million people. An estimated 3% of
the world’s population - 170 million people - is chronically infected with hepatitis C
virus. About four million people are newly infected each year, 80% of whom will
progress to a chronic infection associated with cirrhosis in about 20% and liver cancer
in about 5%. One third of the world is infected with the bacterium that causes tuber-
culosis with 10 million cases every year accounting for two million deaths.
“Approximately 40 million people worldwide are infected with HIV, which killed 3.9
million people in 2005. In Russia, Vladimir Putin just recommended financial incen-
tives to citizens to increase fertility because the death rate outstrips the birth rate.
While cardiovascular deaths lead the list, the incidence of HIV/AIDS and tuberculo-
sis are on the rise. In recognition of this demographic nightmare, Russia will make
the prevention and control of infectious diseases one of the priorities of the upcoming
G8 summit in St. Petersburg.
“Some lethal pandemics are still not as well known to the general public. For exam-
ple, an ongoing cholera pandemic started in Indonesia in 1961 is causing close to
120,000 deaths per year.”
See: Harvey Rubin, M.D, Ph.D., is Director, University of Pennsylvania Institute for
Strategic Threat Analysis and Response (ISTAR), and a Professor of Medicine, Micro-
biology and Computer Science, “A New, Global Approach to Pandemics and Na-
tional Security” (May 30, 2006).
15D048: Adoption of a "Single Payer" Universal Health Care Progra: PASSED: at the 76th Gen-
eral Convention July 8–17, 2009 in Anaheim, California:
Resolved, the House of Bishops concurring, That the 76th Convention of the Episcopal Church
urge passage of federal legislation establishing a "single payer" universal health care program
which would provide health care coverage for all of the people of the United States; and be it
further
Resolved, That the General Convention direct the Office of Government Relations to assess,
negotiate, and deliberate the range of proposed federal health care policy options in the effort
to reach the goal of universal health care coverage, and to pursue short-term, incremental, in-
novative, and creative approaches to universal health care until a "single payer" universal
health care program is established; and be it further
Resolved, That the Episcopal Church shall work with other people of good will to finally and
concretely realize the goal of universal health care coverage; and be it further
Resolved, That church members and the Office of Government Relations communicate the
position of the Episcopal Church on this issue to the President and Members of Congress, and
advocate passage of legislation consistent with this resolution.
EXPLANATION
The Episcopal Church, along with several other denominations in the National Council of
Churches, previously called upon the Congress and the President to ensure universal access to
health care for all people in the United States by the end of 2006. That deadline has now
passed, and the situation is worse than ever. More than 47 million people in the U.S. are cur-
rently without health insurance, more than 75 million went without for some length of time
within the last two years, and millions more have inadequate coverage or are at risk of losing
coverage. People of color, immigrants and women are denied care at disproportionate rates,
while the elderly and many others must choose between necessities and life sustaining drugs
and care. Unorganized workers have either no or inadequate coverage. The Institute of Medi-
cine has found that each year more than 18,000 in the U. S. die because they had no health in-
surance.
While we in the United States spend more than twice as much of our gross domestic product
as other developed nations on health care ($7,129 per capita), we remain the only industrial-
ized country without universal coverage, and the United States performs poorly in comparison
on major health indicators such as life expectancy, infant mortality and immunization rates.
Almost one-third (31 percent) of the money spent on health care in the United States goes to
administrative costs. Single-payer financing is the best way to recapture this wasted money.
The potential savings on paperwork, more than $350 billion per year, are enough to provide
comprehensive coverage to everyone without paying any more than we already do.
Under a single-payer system, all Americans would be covered for all medically necessary serv-
ices, including: doctor, hospital, long-term care, mental health, dental, vision, prescription
drug and medical supply costs. Patients would regain free choice of doctor and hospital, and
doctors would regain autonomy over patient care. Physicians would be paid fee-for-service accord-
ing to a negotiated formulary or receive salary from a hospital or nonprofit HMO / group practice. Hos-
pitals would receive a global budget for operating expenses. Health facilities and expensive equipment
purchases would be managed by regional health planning boards.
A single-payer system would be financed by eliminating private insurers and recapturing their adminis-
trative waste. Modest new taxes would replace premiums and out-of-pocket payments currently paid by
individuals and business. Costs would be controlled through negotiated fees, global budgeting and bulk
purchasing.
16Church discussion guide developed by the Diocese of East Tennessee at:

http://www.episcopal-life.org/81803_113644_ENG_HTM.htm
17C071: Health Care Coverage for All: The 76th General Convention of the Episcopal Church,
meeting in Anaheim, California, July 8-17, 2009, recently passed several health care-related
resolutions, including CO71, in support of universal access to quality, affordable health care in
the United States and calling on Congress to pass comprehensive health care reform this year.
Resolved, the House of Bishops concurring, That the 76th General Convention call on its con-
gregations to undertake discussions within the parish of the issue of health care coverage in
the United States, including:
a) recognition that health is multi-dimensional, with spiritual, social, environmental, and men-
tal elements as well as physical,
b) reminder of personal responsibility for healthy life choices and concern for maintaining
one's own health,
c) proclaiming the Gospel message of concern for others which extends to concern for their
physical health as well as spiritual well-being,
d) responsibility as a parish to attend to the needs (including health-related needs) of others,

both other members of the parish family and those of the wider community, the nation, and
the world,
e) recognition that there are limits to what the healthcare system can and should provide and
thus that some uncomfortable and difficult choices may have to be made if we are to limit
healthcare costs; and be it further
Resolved, That, The Episcopal Church urge its members to contact elected federal, state and
territorial officials encouraging them to:
a) create, with the assistance of experts in related fields, a comprehensive definition of "basic
healthcare" to which our nation's citizens have a right,
b) establish a system to provide basic healthcare to all,
c) create an oversight mechanism, separate from the immediate political arena, to audit the
delivery of that "basic healthcare,"
d) educate our citizens in the need for limitations on what each person can be expected to re-
ceive in the way of medical care under a universal coverage program in order to make the pro-
gram sustainable financially,
e) educate our citizens in the role of personal responsibility in promoting good health; and be
it further,
Resolved, That this resolution be distributed to all Provinces and dioceses of The Episcopal
Church for their consideration and support.
EXPLANATION: We, the members of the Bioethics Commission of the Episcopal Diocese of East Ten-
nessee believe that: a) provision of basic healthcare for all is a duty of a nation of Judaic-Christian val-
ues and, furthermore, b) the current healthcare delivery system of the United States is flawed in failing
to provide comprehensive coverage for 47 million of our citizens and, furthermore, c) our current system
with its escalating costs represents a non-sustainable financial challenge to employers competing in a
global market, d) the steps we specify above are all necessary to address this problem adequately.
See: http://gc2009.org/ViewLegislation/view_leg_detail.aspx?id=942&type=Final
18Martin Wolf, Fixing Global Finance (Baltimore: The Johns Hopkins University Press,
2008), 16.
19 Wolf, 17, 18.
20 Wolf, 17.
21 Wolf, 12, 19.
22From Lincoln’s Gettysburg Address on November 19, 1863: that this nation, under
God, shall have a new birth of freedom -- and that government of the people, by the people, for
the people, shall not perish from the earth
(http://showcase.netins.net/web/creative/lincoln/speeches/gettysburg.htm) that
was exegeted from the Preamble of United States Constitution adopted September
17, 1787: We the People of the United States, in Order to form a more perfect Union, establish
Justice, ensure domestic Tranquility, provide for the common defense, promote the general
Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and
establish this Constitution for the United States of America.
The intent of the Constitution was to establish a government of, by and for The People.
This was at the time, and still is, an innovation of governance. What is clear is that
governance in America was never intended to be limited to providing favors to the
elite of the land or the wealthy. It was also clear that people was envisioned as those
‘naturally borne’ and does not include corporations and the legal fiction that corpora-
tions are ‘individuals.’
23NICHOLAS D. KRISTOF in his op-ed “Health Care That Works,” NY Times (Sep-
tember 2, 2009) writes:
“Throughout the industrialized world, there are a handful of these areas where gov-
ernments fill needs better than free markets: fire protection, police work, education,
postal service, libraries, health care.
The United States goes along with this international trend in every area but one:
health care. The truth is that government, for all its flaws, manages to do some things
right, so that today few people doubt the wisdom of public police or firefighters. And
the government has a particularly good record in medical care.
“Take the hospital system run by the Department of Veterans Affairs, the largest inte-
grated health system in the United States. It is fully government run, much more “so-
cialized medicine” than is Canadian health care with its private doctors and hospi-
tals. And the system for veterans is by all accounts one of the best-performing and
most cost-effective elements in the American medical establishment.
“A study by the Rand Corporation concluded that compared with a national sample,
Americans treated in veterans hospitals “received consistently better care across the
board, including screening, diagnosis, treatment and follow-up.” The difference was
particularly large in preventive medicine: veterans were nearly 50 percent more
likely to receive recommended care than Americans as a whole.
“‘If other health care providers followed the V.A.’s lead, it would be a major step to-
ward improving the quality of care across the U.S. health care system,’ Rand re-
ported.
“As for the other big government-run health care system in the United States, Medi-
care spends perhaps one-sixth as much on administration as private health insurers,
although the comparison is imperfect and controversial.”
See: http://www.nytimes.com/2009/09/03/opinion/03kristof.html?_r=2.

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T H E P R I VA T E S E C T O R V E R S U S G O V E R N M E N T : W H I C H I S B E T T E R ?

and services to enable them to complete transactions. Market participants

profits. However, sometimes firms report accounting profits even as no real,

But Medicare will be bankrupt (payments will exceed premiums) within

For example, this is the entire rationale behind environmental regulations in

Some activities can only be accomplished profitably when both sec-

However, under times of severe economic distress, the public sector

There are individual instances where markets inappropriately reward

2 Fundamental and structural inefficiencies in some markets propel these markets to

16Church discussion guide developed by the Diocese of East Tennessee at:

d) responsibility as a parish to attend to the needs (including health-related needs) of others,

b) establish a system to provide basic healthcare to all,

19 Wolf, 17, 18.

21 Wolf, 12, 19.

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