America's True Crisis
Health care spending in the United States is out of control, limiting the country's competitiveness and leading it into a mess
I have written for a decade that the U.S.'s economic trouble is due to out-of-control health care. The excessively high spending is due to (1) the exceptionally high and rising obesity rate and (2) unregulated supply pricing combined with insurance and government-funded expenditure. The U.S.' health care catastrophe is a combination of dangerous lifestyle and a bad system. And it is not purely a government size issue. Though the government pays nearly half, the other half is mostly funded by company-sponsored insurance. What a company pays for an employee's health insurance is twice the total labor cost in emerging economies. Unless the cost of health care is brought under control, the U.S.' unemployment rate is likely to remain high.
Obama passed a health care law to expand coverage to tens of millions who had no insurance and were not qualified for government assistance. That law doesn't seriously touch the cost issue. Hence, it is likely to increase total health care spending.
The health care crisis is a systemic and social crisis. The United States' food consumption increased from 3,300 calories per day in 1970 t0 3,800 in 2000. The increase is likely to have continued. But its economy has become less labor intensive through outsourcing factory jobs to Asia. The resulting increase in obesity rate is inevitable. The country suffered a 36 percent obesity rate among adults and another 33 percent overweight in 2010. Unless these numbers are brought down significantly, the health care cost won't be under control. The reforms to how health care is supplied and funded could only play a marginal role.
The Wrong Priorities
Ryan is a follower of Ayn Rand, who advocates everyone for him or herself and zero government intervention in market competition or income distribution. This view is certainly extreme. Some government intervention in market competition is inevitable. Banks that are "too big to fail," for example, can cost a society dearly, as the last financial crisis shows. The government has to either break up big banks or regulate them tightly.
The government as a tool for income redistribution is a modern ideal, mostly happening after World War II. Northern European countries epitomize the vision of a government guaranteeing a minimum living standard and safeguarding human dignity. This philosophy has guided European economies to governments spending half of GDP, mostly for redistribution and egalitarian welfare programs like education, health care, pension and unemployment benefits. This vision is being tested in the current euro debt crisis. While northern European economies are still stable, their southern brothers are falling apart. Through this crisis, a balanced view on how much the government should redistribute may come out.
The United States is not a big-government country at all. The government at the federal and local level took in only 24.5 percent of GDP last year. It is one of the most lightly taxed economies in the world. The fierce debate on the role of government in the United States is mainly due to rising income inequality. The views on the government's role become radicalized as a result. Ryan, while marketing himself as a thinker, is really a creature of the anti-tax movement.
I believe that a government should be moderate in size (e.g., 25 percent of GDP for developing economies and 35 percent for mature economies) and balanced in redistribution and investment (e.g., half in investment and half in redistribution). The best means for social equality should be through keeping housing prices down, education quality high and cost low for all, and health care affordable. When these elements are in place, the need for income redistribution is pretty low. To achieve these goals requires good policies more than government spending.
The whole world is experiencing aging. Resources are increasingly allocated for retirees. The investment in youth is declining. This trend cannot be good for the world. There has to be a debate on how to balance the two. In that regard, the U.S. presidential election is a disappointment. It is talking about cutting, not about balancing and prioritizing. Regardless of who wins the election, though I believe Obama will win, the U.S. continues to slide down the path of deficit spending on seniors without investing in youth. It is likely to suffer a debt crisis within a decade.
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