President Bush's new budget for a health care program to insure millions of uninsured children has already failed to gain support. The program aims to insure people, primarily children, who do not qualify to use Medicaid. But, like according to Rothbard in For a New Liberty; Inherent in all government operation is a grave and fatal split between service and payment (196). The program depends on states who run budget surpluses to keep the other states afloat. There is enough money among states to cover short-term shortfalls, if states with surpluses would share with those with deficits, an idea that has little support among governors (Associated Press). Governors from both parties oppose this budget. The federal government is incapable of internalizing the costs of this program, so it wants the states to finish paying for it. Analysts say his [Bush's] spending plan would shortchange the health program even if the number of people served did not grow... The longterm shortfall is put at $10 billion to $15 billion over the next five years (Associated Press). As consumers demand more, the government must either produce more at higher costs, or allow shortages.
The Federal Government is incapable of producing public goods at an efficient price and quantity. According to Rothbard in For A New Liberty; there is no profit and loss mechanism in government to induce investment in efficient operations and to penalize and drive the inefficient or obsolete ones out of business (198). Government monopoly of public goods allows programs to be coercively forced on citizens. Free markets are much more cost effective and productive; they have the ability to cut costs and meet consumer demand. Should the federal government try and increase its already inefficient medical programs? No. The government relies on taxes, through coercion and sanction, as its capital. In this case, it relies on direct intervention from the states. That is not to say there is no coercion; the federal government may withhold federal funds from states who do not comply.