Posts Tagged ‘ economy ’

The United States has the worst health care system in the developed world

The title of this post is not hyperbole or an exaggeration. Judging by cost, access and quality of outcomes, the three metrics commonly used to evaluate a health care system, the United States does have the worst system in the developed world. On two of the three metrics (cost and access), the US is not even close to its competitors and the final one (outcomes) is a bit debatable but it still looks like the US is on bottom. (Let’s define “developed world” as the US, Canada, Europe and the highly developed Pacific Rim countries) I’ll knock out the easy metrics first.


Cost is where the US does the worst, and I mean the absolute worst compared to any other country. You’d think that since we aren’t even covering 18% of our population, our total health care costs would be less than most other countries, but as it turns out, our market-focused health care economy is remarkably inefficient and wasteful. Here is our per capita spending on health care:

From the Kaiser Family Foundation

The price the US pays for its strange private/public jumble of a health care system is that we spend twice what the Europeans spend for (less of) the same product. We almost spend three times what Japan and Italy do per capita. There is no question that the US has the most expensive health care system in the world by far. We spend huge sums of money on health care that could be going towards education, consumer spending, capital for new businesses or any other productive end. Instead, we waste a lot of money on health care for no apparent gain. Clearly, our approach to health care has failed on this front.

Now, the counter-argument to this is that we may spend a lot on health care, but at least we have choice in our health care market. At least the government doesn’t control our health care economy. But even if choice and limiting government intrusion into the marketplace are your goals, the US still fails miserably.

As for choice, how many Americans actually have a choice in their health insurer? Everyone over 65 doesn’t. They have Medicare. People that get health care through their job don’t have a choice. They get whatever their employer chooses for them. People with pre-existing conditions have no choice. They get no insurance unless they are lucky enough to qualify for a government plan. The poor have no choice. They are lucky if they qualify for Medicaid. The few people with a small say in their insurance provider are the handful of healthy (and somewhat wealthy) people under 65 whose employer does not provide them coverage. If that describes you then congratulations!  You get to choose from among a bunch of inexplicably complicated plans with astronomically high prices. And you better hope that your provider doesn’t find a loophole that will allow it to retroactively cancel your coverage once you get sick!

As for limiting government spending (the most important thing to many conservatives) the American system also surprisingly…. fails. Take a look:

US public sector spending exceeds or matches countries with universal coverage

Government health care plans control just as much of the US economy as they do everywhere else. That’s right. The US public sector spends just as much to cover the very old, *some* of the very poor and some veterans as most countries do to cover their entire population!

Our health care system is so inefficient that even our government spends more than most other countries’ governments. Amazing. The US could, for instance, completely adopt Canada’s health care system and actually see government spending drop as a result. If the US switched to a universal health care system, conceivably, we could reduce government spending as a proportion of the economy.


The US is the only developed nation that does not guarantee its citizens access to health care. About 50 million Americans or one-sixth of the population lacks health insurance. A 2009 study found that there were 45,000 annual deaths in the US because of a lack of health insurance. That’s the equivalent of fifteen different 9/11 terror attacks every year. We expend countless billions to protect our citizens from terrorists. Why not do the same to battle a much larger killer?

Beyond the deaths (which are obviously extremely regrettable and preventable), the US suffers diminished economic productivity because American workers lack access to the care they need and must stay home from work or come to work sick. This is an economic cost that other countries do not have to bear because their citizens can always go to the doctor or buy drugs when they are ill.

Our labor market is also much less efficient than other countries’ market. Since most health insurance is given out through an employer in the US, workers may find themselves in a state of “job lock.” Job lock occurs when a worker wants to leave a job but cannot because he cannot get comparable health benefits anywhere else. For example, if an entrepreneur has a pre-existing health condition he cannot leave his menial job to start a new company because he will have no way to pay his health bills. The US health care system stifles innovation and creativity, and distorts the labor market.


As far as quality goes, the US has a multi-tier system. The top tier, which only the most wealthy can afford, probably offers the best health care outcomes in the world. But we are looking at systems as a whole here and not just their effect on the top 1-5%. As a whole, our health care system delivers much worse outcomes than most other advanced systems.

For example, the US has a life expectancy of 78.3 years from birth. That’s good enough to put us in a tie with the communists living on Cuba. We’re ranked #36, which puts us behind the rich Pacific Rim nations and every European country that wasn’t formerly part of the Soviet bloc.  The US ranks similarly on measures of infant mortality. These deaths are immensely tragic, not the least because they are so preventable.

Recently, a study came out that ranked 19 developed nations according to how well they prevented the deaths of citizens with treatable conditions. “In establishing their rankings, the researchers considered deaths before age 75 from numerous causes, including heart disease, stroke, certain cancers, diabetes, certain bacterial infections and complications of common surgical procedures.” Predictably, the US ranked last. 19th out of 19.

There are differing opinions, of course. One of the most common responses is that the US system is better at treating disease once it has  been identified. Sometimes people claim that care  is “rationed” in other countries. One example put forward is that the US has higher survival rates for some types of cancer than many other countries. Many claim that this shows that treatments in the US are superior to those in other countries. It is very likely that this is not the case.

Uniquely, the US over-diagnoses certain types of cancer through excessive screenings. These screenings lead to an inflated number of diagnoses and the over-treatment of small abnormalities that would never develop into cancer if left alone. This problem has even led prominent doctors groups to recommend that their members cut back on the number of screenings and tests performed on populations who are not usually at-risk of developing cancer. Naturally, you are very likely to survive if you never actually had cancer in the first place, and that’s probably why the US ranks so highly.

As for other measures of care being “rationed,” it would seem to be the US that is doing the rationing. The US has fewer hospital beds per person than almost every other developed country. And despite our higher salaries, the US has fewer doctors per person than almost every other country. As a result, we get fewer annual doctor’s visits than most.

All in all, Americans pay much, much more for health care that is not available to the entire country and which produces no better results than in other developed nations. Clearly, this is a system in need of monumental reforms.

(Edit: Added some more information under “Quality”)


At least he’s honest…

This guy, who wrote a column in Forbes yesterday is basically a conservative, supply-side stereotype in every way except one: he’s honest about his policies and about what they would do. Usually when someone with views as extreme as this guy starts talking, they at least try to pretend that tax breaks should go to everybody (not just the rich) and that giving gobs of money to the super-wealthy will help the rest of us. Not this guy (can he really be an editor at Forbes??). Observe:

Obama will never do it, but the only tax cuts that are effective are those that impact the “vital few”, or the highest earners whose capitalistic exploits employ us and raise our living standards on a daily basis. Much as naive minds want to believe that the “great middle” is the source of our nation’s economic strength, the more realistic truth is that we gain our strength from the kind of individuals that populate the Forbes 400 and other rich lists…

Businesses are not in business to create jobs. If this is doubted, try to get your venture funded by leading with your plan to hire lots of workers. You won’t. Businesses attract investment precisely because they promise to get the most output with as little labor input as possible as a way of achieving profits. Of course, profits attract more investment that leads to new ventures, and jobs are invariably created. But to pay businesses to hire is not the spark that will ignite the economic rebound. It puts the cart before the horse. (italics mine)

That’s supply-side economics in all its naked glory. He outright admits that he thinks that the only tax cuts that matter are those that go to the richest of the rich. These people already only pay 21 percent of their income in taxes, a much lower percentage than the typical middle class family, but damn it! They need to pay less! I take it that this person’s ideal tax system would draw all of its income from the poor and middle class while taking nothing from the rich.

And when the rich pay less in tax, it’ll help everybody else out because these people are “job creat…. O wait. Our ever-so-helpful author informed us that businesses are not out to create jobs. Jobs are just the unfortunate and costly by-product of attaining wealth. There goes that Republican talking point.

I do think that a lot of Republicans (not all) think this way. However, they usually try to cover it up and appear fair by saying that they want tax breaks for all, not just the rich. The Bush tax cuts did toss a couple nickels toward the poor even as the rich got loaded up with Benjamins. And Republicans usually say that giving money to the very rich will create jobs for the rest of us. You have to do those kinds of things to achieve popular support. Its good to see that this author has dropped all pretense and told us the truth about businesses and supply-side economics. Neither care anything for you if you aren’t worth $50 million. As I said, at least he’s honest.

Obama pushes Republicans to pass the WHOLE jobs bill

I stated yesterday that I think the Republicans will try to split up and pass only small parts of Obama’s proposal. Doing so will minimize the beneficial economic effects of the American Jobs Act (the jobs bill Obama proposed Sept 8th) and deprive the White House a badly needed win, while making the Republicans look like a reasonable political bloc that is able to compromise. It seems the White House has foreseen this Republican strategy.

Greg Sargent reports that the White House is doubling down on President Obama;s proposal and is pushing Congress to pass the entire American Jobs Act, as is.

In the debt ceiling fight, the White House at first demanded a “clean” extension, only to quickly concede to the GOP demand that it be accompanied by spending cuts. In the days leading up to the construction of the Congressional deficit super-committee, Democrats immediately signaled an openness to negotiate on their core priorities, even as Republicans drew a hard line and said they wouldn’t budge on their principles.

But this time — for now, at least — the usual dynamic seems to be reversed. It’s Republicans who want to be seen signaling a desire to compromise at the outset, while Obama and White House are the one sinsisting they won’t budge — and are even prepared to take their case to the American people to prove it, whether Republicans like it or not.

Its still not likely that this good bill will pass in its entirety. The best strategy for Republicans is still to just sit on their hands and wait for the furor over this jobs bill to pass everyone by. That way the economy continues to get worse and Obama is denied a needed victory. But at least this shows that Obama is aware of the risk posed by splitting up his bill.  If the bill gets split up, the economic benefits are small and Obama is unable to attack Republicans as a “do-nothing” group of partisans. Obama needs to keep his momentum here and keep up the pressure on the GOP for a good, long time.

President Obama’s speech and what happens next

President Obama gave a rousing speech last night in which he called for public investments in our country’s schools, roads and bridges, as well as large tax cuts for the middle class and small businesses. As the President noted, the individual components of the package have typically received bipartisan support. These tax cuts and investments are particularly needed right now as the economy is slumping, teachers are being fired across the country and our infrastructure is crumbling. The President also promises that it will be payed for.

Several economists have given preliminary scores to this $450 billion plan. All think it will help the economy. Mark Zandi, chief economist at Moody’s thinks the plan will create almost 2 million jobs. That seems to be the average estimate from economists surveyed by the Wall Street Journal. The economists also expect that passing the plan will increase growth by about two percent and bring the unemployment rate down a percentage point or more in the next year. But with Republicans opposed to almost everything the President puts forth, what is the chance that this package will pass through Congress?

First, the political dynamics at work here:

  • An improving economy helps President Obama’s approval rating and makes it more likely he will be re-elected. If the economy improves between now and the election it will be seen as a vindication of his economic leadership.
  • Passing a popular, bipartisan bill also helps President Obama’s brand. He has cast himself as a bridge-builder and as the responsible adult in the room. If he can bring Congress together around a jobs plan, that will help how he is viewed in the public eye.
  • Refusing to consider a jobs plan that is entirely made up of bipartisan proposals (as Obama’s is) probably hurts Congressional Republicans. They are already the most unpopular members of a very unpopular Congress and flat out refusing to consider a bill to put people back to work would hurt their brand even more. It is entirely possible (though unlikely) that voters could throw both Congressional Republicans and President Obama out of office next year, so Republicans must be careful.
  • That being said, Republicans don’t want to do anything that might damage their nominee’s chances of winning next year.

Taking all that into account, what is the most likely course of action for Congress to take? My prediction is that Congressional Republicans will make a show of considering the President’s proposals. They will wait for something to derail the proposals or for the jobs bill to fall out of the news, but their leadership will not come out and dismiss it.

If Obama and Democrats can force the issue and keep up the pressure on the Republicans, I think that they will agree to pass a few limited portions of the bill. This may include some of the payroll tax cuts and some of the tax breaks for small businesses. It is less likely that Republicans will agree to pass the infrastructure-repair, or the proposals aimed at helping teachers and schools. The GOP will complain that they cost too much or that they remind them too much of the stimulus bill, or that they’re too tired to take them up when they have so much else going on, or something of that nature.

Splitting up the bill and only passing some of it, has already been suggested by GOP majority leader Eric Cantor. This option has several advantages for Republicans. By passing some of  the President’s proposals, they can claim that they did indeed work with the President and extended a hand across the aisle. The proposals that they accept will likely be the ones that are most in alignment with their own principles and also the least likely to produce serious job growth over the next year.

By accepting only Obama’s weakest and most conservative proposals, Republicans will hope to get credit for being bipartisan, and rob Obama of his last chance to improve the economy before the election. That helps the Republican brand but also denies the country a chance at economic recovery. Afterall, an economic recovery makes it more likely that Obama will be re-elected.

The Wall Street Journal and the question: Did the Stimulus work?

The Wall Street Journal authored an editorial today titled “Why the Stimulus Failed” in which they cite a new study which they claim reports that the stimulus failed to deliver jobs. They could not be more wrong about this study and what economic literature says about the stimulus. The authors of the study interviewed businesses that had received stimulus funds, asking who had been hired by those firms with stimulus funds. The WSJ believes this study proves:

The lesson of such on-the-ground knowledge is that the stimulus was a lost opportunity. In practice it became a shotgun marriage between an economic theory justified by computer models and 40 years of liberal social priorities (clean energy, Medicaid expansions and the rest). This produced the 9.1% unemployment we now have.

Woah, woah, the stimulus produced our unemployment rate??? Was the editorial board at the WSJ  asleep during that little thing called the financial crisis? Now I’m not economist, but I think THAT may have been what caused our unemployment rate to grow this large, especially considering the fact that no credible study (certainly not the one they cite in their editorial) has ever shown that the stimulus cost the US jobs.

So what does this study show? To start with, the Mercatus Center’s study is not a comprehensive examination of the stimulus. In total, the $800 billion stimulus is estimated to have saved or created 2.5 to 4 million jobs. The authors of this study are only looking at the new (as opposed to the saved jobs) that resulted from the direct government spending in the stimulus. This is important because they never look at the third of the stimulus that was made up of tax cuts and they never look at the jobs that were saved because of the stimulus. Of the third of the stimulus that they did look at, the authors found:

Hiring isn’t the same as net job creation. In our survey, just 42.1 percent of the workers hired at ARRA-receiving organizations after January 31, 2009, were unemployed at the time they were hired (Appendix C). More were hired directly from other organizations (47.3 percent of post-ARRA workers), while a handful came from school (6.5%) or from outside the labor force (4.1%)(Figure 2). Thus, there was an almost even split between “job creating” and “job switching.”

Of course another way to look at this (as Jonathan Chait points out) is that firms were over four times more likely to hire the unemployed as the employed (since 90% of our workforce is employed  and 10% unemployed). Chait also asks (his article is worth the read): What do the authors “think happens when a new job is filled by moving a worker from another job”? The person who “job switches” probably got replaced by their old firm after another firm hired them with stimulus funds. Job-switches can be jobs-created as well!

Contrary to the beliefs of the WSJ, the stimulus was not just something dreamt up in Paul Krugman’s computer and then justified by mathematical algorithms at the CBO. There have been many studies that have used various methods to study the entire effect of the stimulus as a whole. This lazy editorial board could have done the work to find these studies, but doing so would not have helped them to make their biased, partisan point. Here is a listing and an evaluation of nine different studies of the effect of the stimulus. As a whole, they agree that it worked.

But don’t let facts get in your way, WSJ,  what would you have done as the economy was crashing around us in early 2009?

The economy would have benefitted far more if the government had instead improved the incentives for people and businesses to invest, produce and grow.

Well, doesn’t lowering taxes and giving businesses lucrative government contracts “improve their incentives  to invest, produce and grow?” Or does the WSJ just think that the Obama administration should have passed fewer regulations than the Bush administration did? Of course, the Obama administration did all of those things in 2009. So, can someone please tell me if they see the WSJ’s integrity laying around anywhere? They seem to have lost it.

Long-term versus short-term problems in the US

There are many daunting issues facing the United States. This country has an employment problem, a debt problem, an infrastructure problem and a political problem, to name a few. However, not all of these problems are created equal. Some are causing immediate  pain to the country (unemployment) while others are not currently causing us any pain at all (debt). The crucial distinction that people often forget when they talk about the country’s “problems” is that there are long-term problems and there are short-term problems and the these issues need to be tackled as such.

For instance, the US does not currently have a debt problem. Interest rates are at record lows and investors are actually paying the US to borrow more money. The US government’s debt load is not currently hurting the US economy at all. However, in about ten years or so, we will have a debt problem because around then the world economy will be different and we will not be able to borrow money for free. We will have to bring down our debt over the next decade or so, but for the time being, our debt is not really a even a nuisance. Therefore, our debt is a long-term problem. Solutions to that problem should focus on taming long-term drivers of debt, not on de-funding NPR or other such nonsense.

The US has an immediate employment problem. We have an unemployment rate of 9 percent and millions of people stuck in jobs they don’t want to be. This is a short-term problem that requires a short  term solution. Unfortunately, a solution to our employment issues is likely to involve measures  that temporarily increase the deficit. The government can solve the jobs problem,  but to do so it has to temporarily increase the deficit. That’s OK, because for now we do not have a debt problem– that problem is off in the future– and to a certain extent, we have to solve the jobs problem before we can solve the debt problem. To solve the debt problems we  need more people working and less people on public assistance (the symptoms of our jobs problem). Temporary spending now can solve our jobs problem, while also setting the stage for solving our debt problem down the road.

The US also has an infrastructure problem. Most  of our bridges, dams, schools, levees, highways, power lines and railroad tracks were built before the 1970s. The number of deficient dams in the US tripled from 2001 to 2007, while our roads are crumbling, even as the funding to replace them is dropping. We obviously need infrastructure, and sooner or later the bill to fix our bridges will come due. Call it our second national debt. When you run budget deficits every year, they eventually add up and have to be re-payed. When you underfund your infrastructure  every year, it eventually has to be rebuilt. There’s no way around it. Fixing our infrastructure will cost money and will hurt the deficit whenever it is done. I’d say its a long-term problem, though its  best to fix it now. If we fix it now, while borrowing is free, it will hurt the debt much less than if we do it years from now when borrowing costs us money again. Spending money now on fixing our infrastructure will also put people back to work, helping to solve our jobs crisis. The solutions to all these problems have a way of intermingling.

Finally, our political crisis. This is both a short- and a long-term problem for the US. S&P downgraded US debt because they believe our political system will be unable to solve our debt problem. Businesses won’t invest in the economy because they don’t think our jobs problem will be solved soon. Foreigners are increasingly unwilling to invest in the US  because our infrastructure is lagging behind.

All this leads back to Washington. We have a political system that people have no faith in. Republicans almost caused a default back in August and rejected a proposal that would have solved our debt problem. There’s been almost no movement on jobs since last January, and the political system seems unable to complete even the simplest tasks. I fear this may be the most difficult problem to solve. Its a shame because solving our political problem is also the key to juggling and solving our other impending short-and long-term predicaments.

Obama, regulations and the economy

Republicans have been hammering President Obama over “regulations” lately, saying that they have been hurting the economy and are partially responsible for our slow growth. Its a fairly powerful claim. The Obama administration has gotten a reputation as a prolific regulator since their health care reform and financial reform bills  passed, so this claim seems to stick. But this accusation is also extremely vague. What regulations have been hurting the economy? How? Are there more regulations than usual? How does this compare to other countries? Are there other beneficial effects of the regulations passed?

In short, simply making the claim that “regulatory burdens are hindering job growth” leaves a lot of  information out of the picture.

Obama recently has been fighting the Republican-derived moniker of “regulator-in-chief.” Earlier this year, he ordered a government-wide review of all regulations on the books. As a result, the administration “produced reform plans from 26 agencies. A mere fraction of the initiatives described in the plans will save more than $10 billion over the next 5 years; as progress continues, we expect to be able to deliver savings far in excess of that figure.” In addition, the President just nixed a proposed regulation that would have reduced ground-level smog, because of the complaints of his critics. So, the White House has made  a concerted effort to reduce regulations on businesses.

The White House also noted this interesting tidbit: “‘the costs of final, economically significant rules reviewed by the Office of Information and Regulatory Affairs were actually higher in 2007 and 2008 than in the first 2 years of my Administration.’ He also argued that in 2009 and 2010, the benefits of those rules ‘exceeded the costs by tens of billions of dollars.'” There were  more costly regulations coming out of the Bush White House than out of the Obama White House? How can anyone complain about Obama’s regulations when they have been no more taxing than those under his regulation-averse predecessor?

Now for the international picture. Is the business environment in the US making us less competitive in the global economy? The answer would appear to be no. Conservative stalwarts The Wall Street Journal and the Heritage Foundation put together a list every year called the “index on Economic Freedom. This year’s Index (scaled to 100) puts “business freedom” in the US at a 91 (the world average was 64). This ranks the US ahead of comparable countries like France and Germany and light-years ahead of the  Brazilians and Chinese on that measure. The US also had an almost perfect “labor freedom” score of 95.7. These good scores  indicate that, in the big picture, regulations are a very small burden on US companies. Even using conservative measurements, regulations are not making the US significantly less competitive in the world economy.

Its  also important to note that the Obama administration is only currently considering six proposed regulations that would have an impact of $1 billion or more. A billion is a lot of money, don’t get me wrong, but it doesn’t really matter in the grand scheme of a $14 trillion economy.

This debate is especially important  now as Obama is  about to make a huge speech outlining ways to improve the economy and put people back to work. His speech will likely advocate spending money on programs that boost consumption and put people to work repairing our crumbling infrastructure. Doing this would be an opportunity we can’t afford to miss. But Republicans will likely counter that cutting spending and de-regulating are the best ways to employ people. They are wrong  on spending while the Obama administration is already aggressively targeting costly regulations. Not that it matters much anyway, because regulations just don’t have very much effect on the economy. “Getting rid of regulations” makes a great tag-line, but it just won’t lead to that many more people getting jobs (though it may harm public health).