The Great American Impasse
Published on: February 19, 2012
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  • WigWag

    Single payer health care produces lower costs and better outcomes in many nations throughout the world. This reform would provide more and better health care to a majority of Americans and would go a long way to ameliorating the fiscal problems of the federal and state governments.

  • Two suggestions:

    1. Why don’t we do healthcare the way our neighbor to the north does? They get the same results at half the price.

    2. Wage subsidies (such as the earned-income-tax-credit) work better and are easier to administer than means-tested welfare benefits. For one thing they would keep the link between effort and reward. And for another they would be able to address the problem of falling wages whether caused by trade, immigration, or labor-saving technology.

    We should consider extending the EITC to include all hourly workers, single as well as married, with or without children. With a big enough budget it could in theory restore the distribution of income to what it was a generation ago.

    The American economic pie is much bigger now. So though relative shares would stay the same everybody’s slice would be bigger than before.

  • Here’s a link to the Canadian healthcare system. Read it and weep.

  • Kenny

    “Reich and Romney both get the reality that it is the declining fortunes of the middle class that should worry us.”

    Exactly.

    Look at the tremendous amount of resourtces that already gets showered on the poor in this country. So much so that the American poor are very well off by worldly standards. Fact. Does any bleeding heart out there doubt this?

    And all this welfare, both in direct and indirect payments, basicaly comes from the the generosity of the middle class.

    But if the middle class is hurt, then logically the flow of resources to the so-caled poor has to diminish.

    And to tell the truth, this diminishing might be a good thing. For too long, the safety net, as it’s called, has tended to become a hammock preventing the poor from being motivate to change their lifestyles and behavior patters that are a big part in making the poor.

  • Andrew Allison

    For shame Prof. Mead! You known, or should, that Romney did not suggest dismantling the safety net. It’s very disappointing to see you recycling Berserkley Reich propaganda. The man’s as much a stranger to the truth as Krugman.

    WigWag’s right again(!). Single-payer insurance is the only way we can afford adequate medical care. Currently, more than half the costs are in insurance and overhead rather than care.

  • stan

    I’m constantly amazed at the idiots who look at the disasters of national health care plans and fail to see the easy. I’m a little more forgiving that they fail to understand that the American system provides and enormous subsidy to all the nations that free ride off our drug and technology innovations. If we go single payer, innovation stops dead. And the whole world suffers from our foolishness.

  • Eurydice

    I see it more as an employment problem. Our system is set up to keep the young and the old out of the job market. As the definition of adolescence reaches toward 30 and life expectancy stretches out toward 100, the group in between has to carry the groups on either side for longer and longer. We can lower the cost of education, lower the cost of health care, save more for retirement, but we’ll still have an awful lot of people hanging around with nothing to do.

  • MarkE

    In the United States health expenditures across all sectors consumes 18% of GDP in 2012. The government pays for 48% of healthcare across all sectors. http://www.cms.gov/NationalHealthExpendData/downloads/proj2008.pdf
    Most consumers view this as a subsidy. Single payer systems, i.e., totally government controlled systems, decrease consumption by various forms of rationing. There is another way.
    Generally the price of any good or service goes up when it is subsidized. Conversely the prices go down when the subsidies are removed or decreased. We saw a perfect example of this in the housing bubble. When the housing was subsidized with cheap mortgages, the price of housing rose unreasonably. Now that the whole scheme has collapsed the price of houses fell 50% or more in many areas.
    It is likely that we are in a healthcare “bubble” at this time. If we decrease healthcare subsidies gradually and thoughtfully we may be able to avoid the painful bubble bursting. Lower subsidies would incentivize private investment in the development of more cost effective treatments and avoid the inevitable frictional costs and elephantine delicacy of total government control.

  • Anthony

    WRM, a key take away for me is: “my concern that the costs of living the way we want to live are rising faster than our ability to pay for them” (cf. Poor, White, and Republican – George Packer). That is, rethinking American Middle Class Idea may be justified as we diagnose American recasting – perhaps we need newer/better/different measurements to actually identify middle class life; what truly underpins life satisfaction beyond market income measures and material acquisition? Furthermore, I agree the relationship between the middle class and government benefits and subsidies is complex and deserving of focused attention: this is an American problem (government dependence of various Americans would surprise) not a problem for Republicans, Democrats, Libertarians, etc.

    Related, Wig Wag is correct health care costs are unsustainable (the private health care insurance industry, the pharmaceutical industry, the private guilds wittingly or unwittingly help to increase cost of health care delivery in United States). Americans have to “recast” how health care is both delivered and purchased as we engage policy and seek to regain prosperity during “The Great American Impasse.”

  • Derek Footer

    I think you make the central point which is buried in your attempt to be evenhanded to the parties. The Democrats think that this is a problem solvable with tinkering, that is, raise taxes on the rich. The Republicans, whether or not they are able to fix it, at least recognize we are heading off a cliff, and the whole edifice needs to be overhauled.

  • John

    A note from the shop floor:
    Excellent again Dr. Mead. A thought provoking question,”what do we expect the relationship of Government to the middle class to be?” I would guess that many have some very unrealistic expectations of what that relationship should be. But you’re right this relationship is key. And thank you for not banging too hard on us Neanderthal Conservatives. I will look forward to more of your thoughts on this.

  • Anthony

    A look at data vis-a-vis policy debate inherent in essay’s theme WRM shows analysis from Center on Budget and Policy Priorities reveal that middle class received close to 60% of entitlement benefits in last fiscal year (contrary to what a substantial share of Americans may assume, non-Hispanic whites receive slightly more than their proportionate share of entitlement benefits: 69% of entitlement benefits fiscal 2010 – CBPP).

    We have an American problem – not a poor vs. middle vs. upper, neither a liberal vs. conservative vs. moderate nor a democrat vs. republican vs. libertarian – and WRM is correct in suggesting that we rethink both our current ways of organizing and managing social arrangements.

    “Terms like entitlements, government benefits and safety net often conjure images of tax dollars sliding from the hands of the wealthy into the pockets of the poor.” Not true, benefits now flow primarily to the middle class; if social programs are undermining the U.S. work ethic then our middle is being hollowed out and erosion not only affects poor and stereotyped – is this implication of WRM’s bad tempered example?

  • tim

    what’s sad is Reich finally gets something right, yet can’t admit its HIS liberal policies that create “growing poverty”….spread the suffering..

  • Just some guy

    How about that the US has been hollowing out our manufacturing capabilities for fifty years, living on a series of financial bubbles especially for the last twenty, and in 2008 the last one burst?

    I don’t think Romney has a clue, even as a vulture capitalist I assume he is more an empty suit and a big name, than an actual playa. “He doesn’t worry about poor people”, right? That is NOT a proposal to cut the safety net. And (for a change) Reich is right, consumption of food stamps et al is a bad sign – and Romney would agree, fwiw. Who wouldn’t?

    The accusation that “Obama is the food stamp president”, who fosters dependency on government programs, even THAT is not a suggestion to cut the net, but TO OFFER BETTER ALTERNATIVES!

    And just what ARE those better alternatives? That, my friends, is the question.

  • Bob Reed

    A major part of the reason that the, “the costs of living the way we want to live are rising faster than our ability to pay for them”, are that there is in essence a feeding frenzy among service providers to get the government dollars earmarked to provide the desired “assistance”; causing the education and healthcare bubbles to expand, as well as participating in the inflation of the housing bubble.

    One of the major problems with the US achieving the social welfare model of, say, Sweden is that our friends who clamor for such all encompassing entitlement programs aren’t willing to openly advocate the need for the concomitant, necessarily regressive, tax model to fund their ideal vision for society.

    It is a fact that if ALL of the income of the “one-percenters” were siezed, you know-in the name of fairness, it wouldn’t even underwrite this year’s projected federal defecit.

    So the answer must lie somewhere in between abolishing entitlements altogether, or having their proponents explain to average Americans why they need to be willing to pay signifigantly more to provide the necessary revenue stream.

    Either way, as you so eloquently write, the relationship between the government and middle class must change. I’m hoping that part of the change involves dispensing with the false populist/class warfare rhetoric, and deciding on a direction based on factual analysis, intellectual honesty, and thoughtful contemplation.

    Another Brilliant Essay Sir,
    My Regards

  • Walter Grumpius

    This is a lot simpler than you think.

    “With more Americans impoverished than at any other point over the past fifty years… Reich believes it is a sign of growing poverty…”

    Here’s a thought experiment.

    Australia has a population of about 20 million people. It also has an advanced economy, a military, police and judicial systems, hospitals, universities, infrastructure, mining, commerce, you name it.

    Imagine for a moment that Australia had none of these things. Imagine that all 20 million people in Australia were semi-literate unskilled diabetic peasants with a 3rd grade education, small children, and zero money in the bank. Now imagine that in the space of 15 years, they all moved here.

    I tricked you — it isn’t a thought experiment at all! It’s reality! It just happened! We imported 20 million illegal superfluous poverty-stricken peons from Mexico, not to mention points farther away and even more pathetic.

    Are Americans really getting poorer? Or is America just packed to the rafters with surplus poor people who aren’t Americans?

    And don’t let’s get started on the H1-B visa immigrants hammering the middle class from the other direction.

    This country doesn’t need to completely re-imagine its economy and health-care systems. It just needs to build a gigantic flush handle the size of Colorado, and then summon the political will to use it.

  • Toni

    “My concern is that the costs of living the way we want to live are rising faster than our ability to pay for them.”

    Prof. Mead, my concern is that you and many other Americans have failed to pay attention to the Law of Unintended Consequences.

    I don’t have time to nail down the statistics, but I believe that when Social Security first passed, the average life expectancy was 65 years. Meaning that until an older person reached that age, he or she had to rely on extended family the way families always had, and as they still do in much of the world. Another factoid that sticks in my head is that, for those who reached 65 and then had the funds to live alone, their children were the first generation who could move away from Mom or Dad in the latter’s elder years.

    Congress passed the Great Society programs in the 1960s with the highly laudatory goals of alleviating poverty and providing truly equal opportunity for Blacks. One problem: On the premise that a married couple didn’t need as much money as two individuals living alone, a couple who didn’t marry got more than a couple who did. Another: Congress created “Aid to Families with Dependent Children” on the premise that only a widow or widower would need help raising children. One U.S. Senator wrote a report predicting the pernicious effects such programs would have on the Black families*. The book Coming Apart documents similar effects among working-class whites.

    As for poverty, what many Americans don’t realize is that our official “poverty level” is a statistical construct, one that even the staunchly liberal Economist finds misleading. From a 2007 story**:

    “It sounds awful to say that 36.5m Americans are living in poverty. But “poverty” in America, as defined by the Census Bureau, does not mean destitution. A typical poor American lives in a three-bedroom house with a car, air-conditioning and two televisions. …
    “Americans are deemed poor if their pre-tax income falls below a certain threshold—for example, $20,614 for a family of four. By this measure, the proportion of Americans who are poor is no better today than it was in the 1970s. But this is nonsense. The census ignores non-cash benefits such as government health insurance, food stamps and subsidised housing. It also ignores the earned-income tax credit, a wage subsidy for the working poor that is reckoned to be one of America’s most effective anti-poverty measures.”

    According to the WSJ***, a recent Census analysis shows that as of March 2010, nearly half of Americans “lived in a household receiving some type of government benefit.” From that article:

    “Expanding government programs combined with the worst downturn since the Great Depression have led to an explosion in the share of Americans relying on outside help. To combat prolonged economic weakness, Congress extended unemployment benefits to a record 99 weeks (up from the normal 26-weeks offered in most states). The food stamp program was tweaked so it was more generous. Americans flocked to Social Security disability, a last bastion of support for some of the long-term unemployed. (See a timeline on the history of government benefits programs here.)”

    The elderly poor living alone, the breakup or non-formation of families, and escalating dependence on government aid are all unintended consequences of Blue Social Model measures that had been meant to be compassionate.

    In one sense, every one of us Americans has become a mini-corporation. If our laws create an incentive for oilmen to extract natural gas from seams of coal, and they figure out how to, oilmen will produce lots of coal seam gas. If our laws create incentives for solar energy entrepreneurs like Solyndra, we get plenty of solar entrepreneurs. And if our laws provide financial subsidies and benefits to everyday Americans, more Americans come to rely more on the government instead of their own efforts. Some are indignant that the government doesn’t provide more.

    In short, the Progressive Century has led to a disconnection in some people’s minds between effort and effects. I repeat my parent’s story, 1930s high school sweethearts who married and through hard work and thrift created middle-class lives for themselves and their four children. Through an accident of history (Pearl Harbor), my father spent his career as a civilian with the Air Force; when he retired, his replacement was required to have an engineering degree. He had never gotten beyond high school.

    They were white, so their life course was unavailable to blacks and Hispanics, and remained so in civilian society for decades. (Military desegregation, begun in 1948, has created far more opportunity for minority advancement.) But hard work – including education – combined with thrift remains the only sure foundation for an economically secure life.

    The Founders would be astonished at how far U.S. local, state and especially the federal government go to support citizens economically, and to try to prevent them from making mistakes (e.g., too much debt) that would have been self-evident to most Americans up till 50 or 60 years ago. No, I do not advocate a return to laissez-faire or Social Darwinist economics. But I do believe that Americans individually need to rediscover the principles that once allowed them to be (as to the rest of the world saw them) famously self-reliant.

    Collectively, we also need to figure out how to restructure government programs so they don’t lead to collectively unhealthy behavior, like the creation of millions of children who grow up without both their biological parents involved in their lives.
    The latter goal will, of course, require us to elect politicians who can overhaul those programs in the most productive and compassionate way.

    Hey, I didn’t say this would be easy! May the Lord help us.

    *http://en.wikipedia.org/wiki/The_Negro_Family:_The_Case_For_National_Action
    **http://www.economist.com/node/9725549
    ***http://blogs.wsj.com/economics/2012/01/17/nearly-half-of-u-s-lives-in-household-receiving-government-benefits/

  • Toni

    To readers who advocate a single-payer health care system:

    In support of Obamacare, Paul Krugman made a factually insupportable statement in an Aug. 2009 column. WSJ columnist has James Taranto has had great fun rounding up English press reports of the failings of Britain’s single-payer system. Go to the links below and search them for Great Moments in Socialized Medicine. Remember, these cite Brits writing about Brits.

    If Pres. Obama or Krugman or some other big-name liberal columnist made a similarly insupportable statement about Canada’s system, Taranto could no doubt do a similar Great Moments series.

    http://online.wsj.com/article/SB10001424052748704299804575095522722649104.html

    http://online.wsj.com/article/SB10001424052748703936804575108580191194318.html

    http://online.wsj.com/article/SB10001424052748703876404575199910374318350.html

    http://online.wsj.com/article/SB10001424052748703709804575202174211016454.html

    http://online.wsj.com/article/SB10001424052748704342604575222101791472076.html

    http://online.wsj.com/article/SB10001424052748704457604576011542286510636.html

  • Pete Dellas

    Anytime there is a third party payer in healthcare, the costs rise. Medicare, by setting a price for certain services or proceedures, doesn’t let free-market competition take its course. Healthcare providers know that in order to get a certain amount, they must charge more.

    We have a healthcare provider who operates at two levels. For those who are insured by either private insurance or medicare, the office visit is $150. For those who are uninsured, the office visit is $60 cash, no receipt. This particular office is booming.

    As an example of the free-market principle in action, I offer this Yahoo thread on LASIK surgery:

    http://answers.yahoo.com/question/index?qid=20100104220053AAt6oFu

  • Michael Mainello

    Not sure this fits, but I remember listening to Mr. Reich during the Bush years on NPR. One thing that struck me was his position on the death tax.

    He stated that upon death most if not all of a persons wealth should be returned back to the government and not transfer per the family wishes. He said he was concerned that too many people would benefit from this transfer of wealth and it would hurt the economy if these people were wealthy.

    I wish I had a copy of the transcript.

  • Optimus Primed

    If anyone believes the Canadian HC system is a shining beacon of success that should be emulated in this country, they are nothing more than liberal partisan hacks.

    Everything you need to know is proven by the upper class non-politically connected Canadians who routinely pay cash in the US simply to avoid the Canadian single payer system.

    I am a Canadian expat and have watched countless friends and family members die because of the rationing system of government. It never ceases to amaze me the complete ignorance Americans who have never set foot inside a Canadian/British HC system can have. The American HC system is BAR NONE the best system in the world.

    Just proves how strong blind ideology can be.

  • tom beebe st louis

    America will recover its prosperity and regain its honor when all branches of government adopt the “equal justice for all” motto found on the SCOTUS building. We must eschew all the favoritism embodied in our taxation system, in the policies of every department, most obviously embodied in the policies of choosing winners like Solyndra and GM. This suggests a much smaller government, a flat or fair tax, and a non-interventionist foreign policy. Might this suggest the other half of his ticket?

  • RichmondG30

    Higher education is following the same bubble trajectory as housing did a few years back, and they share the same characteristics: massive government intervention in the markets. Pushing student loans to everyone graduating high school creates massive demand for college educations. What is happening? Prices are skyrocketing.

    Healthcare is the same thing. Government intervention (in the form of state and federal regulation) along with massive government subsidies is causing the same phenomenon in the healthcare industry. Solutions:
    1. Dramatically cut rules and regulations that force insurers to cover everything from eyeglasses to drug counseling to weight-loss therapy. Open up insurance to interstate competition.
    2. ELIMINATE tax deductibility of health insurance for employers and let individuals buy their own health insurance where they can shop for the best deal, including high-deductible plans. Increase competition.

  • Sexypig

    Funny, we are 3+ years into this mess, and still no one has come up with any big bang reforms of taxation.

    1) Eliminate the corporate income tax: It brings in very little money, and keeps foreign earnings from coming home, and stifles investment. Kill it and tax carried interest or whatever instead as a deal with the Left.

    2) Reform the income tax. Flatter, simpler, with the same basic progressivity.

    3) Reduce regulations. I would do this by having one party pledge that for one year of their two year Congressional term, they will only vote on REMOVING laws, not making new ones. I’m sure they can start with tax reform, as our codes are thousands of pages long. Hong Kong’s tax code is 157 pages TOTAL. (That would make a great ad, by the way…just show the US tax code, and then show that of fast-growing flat tax countries.)

    Spurring growth will help the economy recover and thus tax receipts.

    BTW, the Dems always raise a trial balloon of cutting corporate tax rates around election time, and then never do it. Kerry did that, Obama just did that. Why don’t they ever follow through?

  • Mark J

    Reich and other libs are slowly seeing the light, or in this case, the darkness of their past ways. Bob Beckel recently said on Fox that the Great Society programs were well-intentioned but have resulted in something not so good … a victim class with a palm open.

    What befuddles me is how anyone including Dr. Meade, cannot see the obvious. Wealth is not created by thinkers, pundits, government, or do-gooders. Wealth only comes from entrepreneurs … there is no other source.

    In the last election Linda McMahon and Dick Blumenthal had a moment of clarity in a debate in Connecticut. It’s must-see TV. Check it out:

    http://tinyurl.com/2uq7lm5

  • AD-RtR/OS!

    The more government interjects itself into the economy, the more distortions – and loss of individual Freedom & Liberty – result.
    Government should be kept in a small cage, and on a short leash and rations.

  • G.R. Mead

    This strikes me as a describing grand Girardian mimetic crisis in the offing:

    “The American middle class isn’t making enough money to do all the things we think of as middle class essentials: it cannot afford to educate its kids without saddling them with enormous debts, and it cannot afford the health care it wants without bankrupting the country. It can’t fulfill its dream of owner-occupied housing without setting off bubbles that threaten the whole global economy, it can’t pay for the level of government services it wants without incurring mounting debts, it can’t save enough for the kind of long, secure retirement that it craves.”

    Suffice to say that when everybody is busy trying to imitate what everybody else is doing then we run out of the wherewithall for everybody to that…

    True diversity — true liberty — would lie in a society that encouraged differentiations in connection with one another — not choices of imitation of a limited set of celebrated models — or rebellion,(which simply imitates the obverses of the detested models).

    Too many grand plans are in play that depend on the many following the one for there to be a sane outcome.

  • Kirk Parker

    LL,

    Why don’t we do healthcare the way our neighbor to the north does? They get the same results at half the price.

    Oh no they do not. Don’t you remember all those stories a while back about Canada sending maternity cases to Montana because they couldn’t handle the difficult ones themselves? This is in addition to providing high-end overflow for Canada (doing the expensive or unusual things for the better-off Canadians so that social acceptance of their system remains at acceptable levels.)

  • Kirk Parker

    Michael M.,

    [Raich]stated that upon death most if not all of a persons wealth should be returned back to the government [emphasis added]”

    Doesn’t that tell all? (Assuming you’re paraphrasing him accurately.)

  • teapartydoc

    Luke Lea thinks our neighbor to the North gets the same results we do and that we should adopt their model. This is balderdash that doesn’t deserve refutation. The fact is that the benefits and subsidies complex is linked to the medical-industrial complex, and that the key to freedom lies in a little-known phrase in the Virginia Declaration of Rights:”…no man, or set of men, are entitled to any exclusive or separate emoluments or privileges from the community…” If the path toward making certain classes of people special at the expense of everyone else had never been undertaken, as was essential to the onset of the progressive program, we would not have the captured regulatory environment that has caused medical costs to soar along with the supposedly remedial interventions that are meant to alleviate the expense, only to worsen it, or require rationing (the solution found in luke lea’s Eden to the North), in the long run. I know that we aren’t going to wake up in the morning to find that there are no government licenses for physicians and nurses who are nonetheless just as qualified and talented as they were the day before, but the fact is that if we are ever going to have a truly free country once again, our children or grandchildren are going to have the pleasure of so awakening.
    As to the short-term, what any intelligent politician should be saying is that we are going to have to prioritize our use of resources with an eye toward dealing with the reality that our forebears’ desires have over-matched our abilities to follow through on them. We will try and keep Medicare and Social Security going as long as we can for our elderly while cutting the Hell out of everything else. All other programs are ballast. When we run out of ballast, we start making the changes we have to make.

  • Brian

    People here don’t seem to realize that the Netherlands and Switzerland both have far less expensive health care and systems that are arguably more free market than ours (the percentage of health costs paid out of pocket in those countries is far higher than here).

    Our biggest healthcare problem in the United States is that we get most of our healthcare through employers. This gives us the worst of both the single-payer and free market worlds, without many of the benefits of either.

  • Richard Treitel

    One correction. For a very long time, most people thought they didn’t need a university education, and most of them were right. But then the high schools stopped teaching subjects that taxed the kids’ brains (or stopped hiring teachers who knew how to teach such things), so the burden was pushed onto the universities, who have not handled it any too well either. At the same time, much of what high schools do try to teach is in the curriculum not because kids will need it in real life, but because universities request it.

    See also the argument about how education doesn’t have to be one big chunk at the start of your life, and probably shouldn’t be. I’m developing, and will some day post (but not here!), an argument about how education should be.

  • Jim.

    The solution is simple, and has been known for centuries: government cannot make promises to provide all our desires, because our desires will always outstrip our means. Democracy will survive until the populace realizes it can vote itself money from the public till, and all.

    As for Reich — he’s a dangerous idiot of the Krugmanite school: Borrow, borrow, borrow today and spend, spend, spend; make promises you know you can’t keep because it feels good to make them; it doesn’t matter that we will self-destruct if we do.

    As for WigWag’s strawman-of-the-day: single-payer promises more service, better service, for less money? Right, and in his backyard there’s a lake of stew, and whiskey too, you can paddle all around them in a big canoe…

    An uncharacteristic strawman from Luke Lea too, in terms of the Canadian health care system… others on this thread have dealt with it far more thoroughly than I can.

    @G.R. Mead:

    Well said. Americans are probably going to go through a period where they can’t get what they always thought they wanted, so they’ll start trying to find value and meaning in other ways. Some interesting things may come of this. I keep expecting to see a resurgence of the old Greek Orthodox system of retirement / (mutual) elder care in the form of monastic communities. We’ll see.

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