Who says ‘Obamacare’ will kill free enterprise? Romney does

In my column on Sunday, I quoted Mitt Romney’s warning last week that President Obama’s health reform law could doom the free-enterprise system in the United States.

“With Obamacare fully installed,” Romney said, “government will come to control half the economy, and we will have effectively ceased to be a free-enterprise society.”

Could that be true? Would “Obamacare,” which relies mostly on free-enterprise health insurance companies, really turn America into a socialist state?

I asked the Romney campaign for some numbers to back up the candidate’s charge, and they responded promptly. Here’s the Romney camp’s rationale:

In 2010, government expenditures for all purposes -- federal, state and local, including Social Security benefits -- amounted to about 38% of the U.S. economy.

By 2020, the Centers for Medicare & Medicaid Services project that government spending on healthcare, currently about 8% of GDP, will grow to about 10% -- partly because of Obamacare’s coverage for some of the uninsured but also thanks to baby boomers signing up for Medicare.

So that’s an increase of 2%. Add it to 38%, and you’ve got a projection that by 2020, government spending will come to about 40% of the economy.

At this point, the Romney campaign indulges in what (depending on your taste) you might call a magic trick, a redefinition or just a subterfuge: It adds in all projected private spending on healthcare in 2020 -- private health insurance, physician and hospital bills -- to declare another 10% of the economy government-controlled.

“If we count that as under federal control, we get to 50%,” a Romney aide emailed me.

The theory, apparently, is that once healthcare is federally regulated, it’s “under federal control” and no longer part of the free-enterprise system, no matter who owns and operates the hospitals and medical practices. Or else, perhaps, that the implementation of Obamacare will inevitably lead to the collapse of all private healthcare activity. (I asked the campaign for further explication but never heard back.)

But there’s another problem with the Romney campaign’s numbers: Its baseline assumption is shaky.

Yes, government expenditure grew to 38% of the economy in 2010, but that was largely because of the recession, which reduced GDP, increased spending on unemployment insurance and food stamps, and prompted stimulus packages under both Obama and George W. Bush. As the economy recovers, government spending’s share will almost certainly shrink, no matter who’s elected president. In fact, it already has; the Commerce Department -- the source of the Romney campaign’s 2010 numbers -- estimates government spending in the first quarter of 2012 at about 35% of GDP.

Finally, there’s the question of whether increased government spending means we would “effectively cease to be a free-enterprise society” if we ever passed the 50% mark.

That assertion might come as a surprise to entrepreneurs in Britain, Austria, Sweden and Denmark, all countries where government spending exceeded 50% of GDP in 2011. The conservative Heritage Foundation ranked their economies as “mostly free,” the same category as the United States, even though their government spending was much larger as a share of their economies. (Their governments are larger partly because they all have national health insurance systems.) Heritage also ranked both Ireland and Canada as freer than the United States, even though Ireland’s government spends about 48% of GDP and Canada’s about 40% -- some of it, again, on state-administered health insurance.

So maybe government expenditures on healthcare don’t doom free enterprise after all.

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