Peter Orzag, Barak Obama's budget director has declared "the key driver of our long-term debt is healthcare." This is a very interesting admission. If we all overpaid for our cellphone service, would this affect the public debt? If we got poor value in return for our internet subscriptions, would this increase the deficit? How about if we all paid too much for college? It could happen. Would that drive the debt? The answer to all of these of course is "no." What drives the long term debt is what the government pays for healthcare, but even more specifically, what drives the debt is what the government borrows to pay for healthcare.

Set aside for the moment the fact that money spent on healthcare magically becomes income for healthcare providers, captial for hospitals and pharmaceutical research and investment income for those bold enough to risk regime uncertainty. How many people know anyone who borrowed into bankruptcy to pay for medical insurance, as opposed to medical services? It is the government and the government alone that borrows like a deadbeat brother-in-law to pay for healthcare. This is what "drives our debt."

Neither Mr. Orzag nor Mr. Obama will admit that it is government that cannot keep up with the efficiency of the private sector. So how is it that the argument is forwarded that private insurers will not be able to compete with a public plan? To understand this, you only need consider that a public plan can be subsidized by general revenues paid into the treasury through taxes, and money borrowed on the credit of the United States. Imagine what Blue Cross or Aetna could do if they could take twenty or thirty dollars out of everyones's paycheck, subscribers or not, to provide healthcare coverage.

Here's what all this public plan talk is about in a nutshell:

The United States has several publicly financed healthcare programs that are subsidized by taxpayers. These programs are inefficient, and the amount of resources they consume cannot keep up with the growth of costs that are accommodated in the current private payer market. To remedy this, the government has to slow down the rate of cost increase for everyone, and being inherently inefficient, can only do so by fiat and coersion. Thus, it must undercut private payers by using the advantage of being able to draw on the public treasury in what amounts to classic anti-competetive behavior. The goal is to enroll a sufficient number of patients into a controlled, i.e. bureaucrat-rationed system, that costs can be held down by explicitly limiting services. It is like the mafia-connected businessman who cannot compete in the fair market, so he has his thug buddies knee-cap the competition.

Obama won't repeat the glaring fact that Mr. Orzag hinted at. Here it is: Healthcare only affects the public debt because the government has assumed the responsibility of providing healthcare and has done so poorly. In order to limit the growth of its debt, which will increase regardless, it must slow the growth of costs by impairing the ability of private insurers to pay for those costs, and then hold costs down by unpalatable rationing. Simply stated the government cannot compete in the arena of healthcare excellence, so it has to eliminate those that can.