Can we keep government out of our lives?

I have politics on my mind in the wake of the stunning results form the Massachusetts election. There are many reasons why Dems lost that election but I have serious doubts that there will be any serious introspection to analyze the causes among the career politicians. That is a topic for another day but today after getting an earful about the reason being public support for free-market economy and anger against socialism, I feel compelled to point out that whether we like it not government policy shapes our lives much more deeply than we realize. Let us examine some basic human necessities.

Food: Americans currently consume a heavily corn-based diet, not because they love it, or beacause it has been their staple diet for centuries or because they are aware of its health benefits or lack thereof. Corn is directly and indirectly in lot of our foods because corn is cheap, and corn is cheap not because market forces make it so but because of direct government subsidies.

Health: The present American health care system is as far from free-market system as could be. Even more socialist countries than the US have much more consumer-based health care systems. Let us examine the roots of this system. Most people in America afford their health-care because of insurance provided by their employers. The employer-funded health insurance system came about because in 1954 Congress passed a law making employer contributions to employee health plans tax-deductible without making the resulting benefits taxable to employees. In case of both Medicare and employer-based health insurance it is the government, that is directly or indirectly subsidizing health insurance, note that it is the insurance, not the care that is getting subsidized. However, this is also the reason why health care costs are getting out of control - the consumer is not directly exposed to the cost of the product they use, meaning that the health care system is not at all controlled by free-market forces. I encourage you to read this enlightening article if you want more.

Housing: It is the government tax subsidies, and the government's creation of entities such a Freddie Mac and Fannie Mae that enable the dream of home ownership for most Americans. These entities also assumed all the risk of the downside of these mortgages and thus turned mortgage-based bonds essentially into US Government backed bonds, which then Wall Street traded with impunity. Free market forces came into play and exploited a market that was skewed by the government.
Another facet of housing is the design of our towns and cities. Urban planning or lack thereof is caused by the fact that we can drive everywhere for cheap. If gasoline was expensive, we would have dense cities with public transit systems in a heartbeat. However, price of gasoline is not determined by free-market forces. Gasoline is kept cheap by the government.

I very much like individual accountability and responsibility but I do believe government plays a central role in the shaping the future, but career politicians intent on saving their jobs cannot look past the next election. Partisan hacks on one side will blame Coakley for losing and mock the idiots who voted for pickup-truck-driving-cosmo-centerfold, or on the other side heave a sigh of relief that now government will be kept out of health-care and Medicare will be saved!

I think we need drastic measures. A viable third party? Term limits in house & senate? Any ideas?