November 7, 2011 · 0 Comments
Source: Beat the Press
By Dean Baker:
It sometimes hard to get news about the economy over in the middle of New York City. Communications ain’t what they used to be. That is what people might conclude after reading David Leonhardt’s piece telling us that our big problem is that the United States and governments in Europe have promised too much to their populations.
Leonhardt tells us:
“On the most basic level, affluent countries are facing sharply increasing claims on their resources even as those resources are growing less quickly than they once were.
The increasing claims come from the aging of the population, while the slowing growth of available resources comes from a slowdown of economic expansion over the last generation.”
The problem that we have too many demands on our scarce resources seems more than a bit otherworldly when both the U.S. and European economies are operating way below potential output. The Congressional Budget Office (CBO) puts the United States GDP at about 6 percent below its potential output. This means that the country has the “available resources” to produce about $900 billion more a year, if only we had the demand for it.
In fact, CBO’s projections put the cumulative loss from this downturn atover $6 trillion. This is more than the projected 75-year shortfall in Social Security that we hear about so much in the media. It certainly seems more than a bit bizarre that at a time when the country faces a massive shortfall in demand, the NYT is lecturing us about too many demands on our resources.
It is also worth noting that, at least in the U.S. case, the projected long-term budget problem is due to our broken health care system. If our per person health care costs were comparable to those in any other country then we would be looking at long-term budget surpluses, not deficits.
While the health care industry is incredibly powerful in the United States, making cost reductions difficult, it is in principle possible to open the sector to trade, which would allow people in the United States to take advantage of the more efficient health care systems in other countries. Unfortunately the NYT and most other major media are such hard core protectionists when it comes to the health care industry, they do not allow the topic of freer trade in health care to even be discussed.
Finally, this piece tell us that at its core this debate is about philosophy:
“Everywhere, though, the debate is about much more than just partisan advantage or the next election. It is a philosophical debate.”
The only evidence for this assertion is a quote from Republican Senate leader Mitch McConnell. There is nothing obvious philosophical about this debate. The issue is whether we are going to cut benefits like Social Security and Medicare that the overwhelming majority of the working population depends upon now or expects to in the future. The protection of these programs is supported by large majorities of every demographic and ideological group. Even large majorities of self-identified conservatives and Tea Party supporters are opposed to to cuts in these programs in poll after poll.
Of course paying for the programs will require some amount of additional tax revenue (presumably mostly from upper income taxpayers) and also restructuring of the health care system in ways that will hurt the incomes of insurers, drug companies, medical instrument manufacturers, and doctors. These powerful interest groups will fight the effort to reduce their incomes in any way they can.
Since they are a small minority of the population it is understandable that they would want to confuse matters by turning this into a debate over philosophy. However there is nothing obvious philosophical about whether we should pay more than necessary for prescription drugs and medical equipment so that some people can get very rich.