(This is really two posts: one on health care and one on taxes and spending, but they are tied together by the theme of ideological consistency — or a lack thereof.)
On his show Real Time yesterday, Bill Maher said this: “A sixth of our economy is based on people getting sicker.” He also said, “People are sick and we make money off sick people.”
That struck me as an extremely pessimistic, upside-down view of health care. In Bill Maher’s world, money spent on health care is based on people getting sicker. In his world, it’s a giant corporate conspiracy, whereby Big Agriculture produces horrible food products that we stupid Americans ingest, some other cabal of corporations figure out a way to get us to stop exercising and become couch potatoes (not sure who does that – but I’m sure Sony, Microsoft and Nintendo are all involved), then Big Pharma comes in and gives us pills to fix everything. Everybody makes money in the process, while Americans just get sicker. In this pessimistic world view, it’s obvious that we would want to reduce health care spending. I have a more optimistic view of our health care system, where drug companies find cures for diseases that allow us to live longer, more productive, more enjoyable lives. Yes, providing statins that can reduce cholesterol levels might reduce a person’s incentive to exercise — but providing unemployment insurance reduces a person’s incentive to find a job and we have no problem with that. It seems that if Bill Maher had his way, we wouldn’t spend any money on health care and people would just have to eat better and make smarter health decisions. Fine, Bill — just don’t get sick. And be sure not to age, okay? (more on this later)
Taxes and Spending
On that same show, Bill Maher brought up a speech made earlier this week by Sarah Palin. In it, she said that if we want to create jobs, we have to reduce income taxes, reduce payroll taxes, reduce capital gains taxes, and eliminate the estate tax (the death tax if you’re a Republican). It’s the classic supply-side argument that has been shown to increase labor supply when it has been done before. The debate is usually about whether doing this will also increase tax revenues, and that depends on which side of the Laffer curve we are on. Paul Krugman had a different take on this proposition, ignoring the tax revenue question and basically saying it would result in less employment: “What she’s saying basically is we need to do more of what George W. Bush did.” He goes on to say this is like a witch doctor making a sick patient bleed more to cure him, wonders why we would want to continue the policies that led to the worse employment-creating presidency since Herbert Hoover (patience, Paul –just wait until Obama’s done with the economy) and argues that instead the solution to our current unemployment situation is an increase in taxes. Many macroeconomists, including Richard Posner and Krugman himself, have gained a newfound respect for Keynesian economic theories as a result of our current economic situation. But even Keynes himself would have a really hard time rationalizing how higher taxes would increase output in the short run, but somehow Krugman thinks it can happen. The problem I have is that I’m not sure how that squares with what he’s written already about this financial crisis. For example, in this article, he argues that cutting spending during a crisis is an absolutely crazy, horrible thing to do — yet somehow raising taxes is the right thing to do, Paul?
I also find it laughable that people like Krugman will point to the Bush economy and say “he did X, and it didn’t work out well, so it would be insane to do even more X,” as if X were the only thing that happened in 8 years. Nevermind 9/11, wars, increased globalization, and a variety of other factors — it’s all because of tax cuts. Yet even if this were true, this is a new philosophy for politicians (admittedly, Krugman is not a politician, but when your weekly column consists entirely of bashing Republicans, you’re flirting with the label). Usually, their strategy is: spend money on X, and if that doesn’t fix the problem, spend even more money on X. Democrats have been fighting the “war on poverty” for decades and aren’t getting anywhere. Republicans have been fighting the “war on drugs” for just as long and with just as much success. We keep increasing spending and government control over education, and our country’s educational performance continues to get worse and worse, yet the solution proposed by Democrats is to spend even more. (This includes Michael Moore this week on the Howard Stern show — no transcript available unfortunately, but I was listening to the show and heard him say that the problem is we don’t spend enough money on education.)
If spending increases are good, then tax increases should be bad. If “doubling down” on wars or tax cuts is bad, then doing so on education should also be bad. There seem to be no principles left in either party — it’s just bashing the other side and trying to get votes. How about a little ideological consistency?
Back to Health Care
Here’s where, as much as it may pain me to do so, I am going to give Bill Maher some credit. On his show last week, he slammed Obama for not asking Americans to sacrifice anything. He said that those who chastised George Bush for not asking Americans to sacrifice after 9/11 (remember that he basically said that if we don’t keep shopping, the terrorists win), should also be chastising Obama for not asking Americans to make any accomodations on health care. If this is in fact a crisis, as we keep hearing from the President, then he can’t come out and say “we’ll pass health care and you can keep your doctor and keep your insurance and we’ll cover everyone and it won’t increase the deficit and everything will be perfect, I promise.” (Not an actual quote, just my paraphrasing.) Maher argued that Obama needs to come out and tell us that we can’t keep doing what we’re doing, and that we will have to sacrifice. We need to eat healthier, we need to exercise more, we need to stop smoking — those 3 things account for a significant part of our health care spending and are 100% preventable.
I don’t agree with Bill Maher on much, but I’m completely behind him on his proposition. The only problem is that if we were to do all of that, health care spending in our economy would likely increase, not decrease. Studies have clearly shown that the longer people live, the more expensive each year of routine health care becomes. We’ll spend a lot more money on expensive procedures like hip replacements, knee replacements, bypasses, etc. for people who used to die of a heart attack at age 50 but now have statins, read nutritional information on their food, and exercise regularly. The number of hip replacement surgeries is expected to double from 2002 to 2015, and only 5-10% of them are performed on people under age 50 (stats). Seventy percent of knee replacement surgeries are on people over the age of 65, although as the technique become better, we’re starting to see more of them performed on younger people (stats). Hip replacements cost $39,000 on average and knee replacements cost $35,000. Expect the cost of health care to continue to increase as we live longer lives. These cost increases are obviously not due to people being sicker. They’re due to an aging of the population and improvements in technology and surgical techniques that allow more people to qualify for the surgery than before.