Rethinking the Economy

At this weeks’s annual gathering of professional economists, there was a panel on “the political economy of the US debt and deficits.” Aside from Alan Blinder, the panelists – all prominent economists – nattered on about how deficits were destroying the country, we need to cut Social Security and Medicare, etc. At the end of the panel presentations, Mark Weisbrot jumped in.

I called attention to Blinder’s presentation of the long-term budget problem as almost completely a problem of the rising price of healthcare. I pointed out that you could take any country with a life expectancy greater than ours – including the other high-income countries – and put their per capita healthcare costs into our budget, and the long-term budget deficit would turn into a surplus.

My question was simple: are Americans so inherently different from other nationalities that we can’t have similar healthcare costs? And if not, then why are we talking about long-term budget problems – instead of how to fix our healthcare system?

Damn good question. Their replies were what you would expect:

None of the panelists offered a serious answer to this question. Auerbach, the moderator, said that other countries have rising healthcare costs, too. And some of the others said or implied that healthcare costs were rising at an unsustainable pace worldwide.

But this is nonsense. The United States pays about twice as much per person for healthcare as other high-income countries – and still leaves 50 million people uninsured. This is a result of a dysfunctional healthcare system that has had healthcare prices rising much faster than those of other high-income countries for decades.

As Mark explains, what they were really saying is that we have to stomp grandma instead of reining in insurance companies and big Pharma.

What the budget hawks are basically telling us is that we must assume that insurance and pharmaceutical companies will have a veto over the provisions of healthcare reform for decades to come. And that, therefore, we must find other ways to make up for these excessive costs, including cutting social security and other government spending, and pushing us into higher rates of poverty and inequality than we already have.

Yay for economists!