Reeding Between the Lines

I've finally gotten around to watching last Friday's episode of Real Time with Bill Maher and not surprising they started with the scandal at Walter Reed Hospital. Don Boudreaux at George Mason University summarizes the importance of the scandal succinctly:

This "flagship" institution is at the heart of Uncle Sam's system of socialized medical care for military personnel. So, why are many politicians and pundits clamoring for socialized medical care for all Americans?

Bill Maher disagreed:

This Walter Reed thing is bad because they privatized it. Because they outsourced it to corporations which have no soul. Which only care about the bottom line. Which only care about greed. At least government workers might have a conscience. Corporations never do.

So who's right? The answer came in the very next comment (though no one noticed it) which was made by Dana Milbank of the Washington Post. He noted the contracted company actually charged than what it would have required of the government. In other words, there was no privatized hospital here, even though a company did the work. If it was truly a free market-if there was entry and exit and competition-the government (as the customer) would have fired them in favor of someone else. Walter Reed was pure politics.

Just because a firm is doing something, doesn't mean they are doing it in the context of a free market. When an industry gets into politics, that industry is no longer privatized in any relevant way. They are in bed with the government just like any bureaucracy. Don't be fooled by a free market facade.