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January 23, 2013 12:37 PM Partisan Differences on “Health Inefficiency” As Important as Tax Chasm

By Ed Kilgore

There are a variety of reasons I’m a pessimist about any sort of long-term bipartisan agreement on fiscal policy. The most obvious, of course, is the chasm between left and right about the significance of the “debt crisis” vis a vis the dictates of economic recovery, itself a major component in any movement towards lower federal budget deficits. At the Financial Times, Martin Wolf offers one of the clearest non-Krugman explanations of the liberal point of view and the differences between the two major parties:

If one judged by the debate in Washington, one would conclude that the federal government is close to bankruptcy. This view is false. Yes, the US does confront fiscal challenges in the long term. But these are largely caused by the soaring costs of its inefficient healthcare. Yes, the US is engaged in a fierce debate on fiscal policy. But this is due to philosophical disputes over the role of the state. Yes, the US has been running large fiscal deficits in the short run. But these are a result of the financial crisis.

Wolf runs the numbers in some detail, concluding that a modest deficit reduction package along with a modestly robust recovery could stabilize the medium-term debt-to-GDP ratio at around 73 percent.

Would this be unbearable? No. At current real interest rates, the cost would be zero. Even if real rates of interest were to rise to, say, 3 per cent, the fiscal cost, in real terms, would be a mere 2 per cent of GDP. That is perfectly manageable.

Keeping the long-term picture “manageable” will require stronger medicine, as most progressives have long conceded even as they resist a short-term deficit-mania that could defeat itself by stalling the recovery. But the problem, of course, is a vast gap between liberal and conservative prescriptions for dealing with tax rates—which Wolf thinks could become significantly more progressive in a time of extreme concentration of wealth at the top—but also for reducing “health inefficiency.”

It’s this second problem that needs more attention, because there is no obvious compromise available. Republicans have become inflexibly wedded to the notion that a massive retraction of public health insurance programs—notably abandonment of Obamacare, abandonment of Medicaid as an entitlement—and an equally massive expansion of “market mechanisms” both within (e.g, converting Medicare to a “premium support” system of private insurance) and beyond (e.g., interstate insurance sales that gut state regulation, and various disincentives to the utilization of health services) the public programs, is essential. Democrats are not as unified, but tend to see aggressive use of the public sector’s leverage in the health care system to improve medical practices, wring out unnecessary administrative costs, and flush out hidden cross-subsidies, is the key.

This is a bigger gap than any that currently exists between the two parties on tax policy, leading in two opposite directions. You can’t really “split the difference” between them as you can with tax rates. Perhaps, if Republicans fail to find ways to stop implementation of Obamacare, their health care policy prescriptions will eventually appear to be so out of touch that they will lose support even within the GOP. But I wouldn’t bet on it.

Ed Kilgore is a contributing writer to the Washington Monthly. He is managing editor for The Democratic Strategist and a senior fellow at the Progressive Policy Institute. Find him on Twitter: @ed_kilgore.

Comments

  • Josef K on January 23, 2013 12:53 PM:

    This is a bigger gap than any that currently exists between the two parties on tax policy, leading in two opposite directions.

    This makes it sound as if the GOP's side of the metaphorical gap actually exists. Their mania (and that's a charitable phrase for it) for lower tax rates, irregardless of consequence, is no more substantive a plan than pixie dust. Its an aspiration without grounding.

    Why are we treating it as anything else?

  • Mimikatz on January 23, 2013 1:01 PM:

    And something else that makes it intractable: as we saw with the death panels eruption, curbing end-of-life costs, one of the main drivers of health care costs (along with occasional provider greed) taps into the fears of those marginal personalities who see.abortion as an existential threat. Until we can have an intelligent, fact-based debate on health care costs, we will make little progress.

    At some point public opinion is going to shift and older people will be ushered out with dignity and compassion, because we just won't have the resources to do otherwise, and I daresay we who have failed so badly on major challenges like climate change won't be all that popular. But until then, we seem to be stuck between the needs of many and the greed of others.

  • SteveT on January 23, 2013 1:10 PM:

    The Republicans' plan for "reforming" health care is to ensure that there is no reduction in the profits of the health insurance corporations, the health provider corporations and the pharmaceutical corporations.

    It doesn't matter whether their policy comes from a belief in the magical power of Adam Smith's invisible hand or from a desire for they campaign money they earn by prostituting themselves. Republicans will continue to maintain the health care system as a pipeline for redistributing wealth -- upwards. And there are plenty of Democrats who also put the interests of their constituents second behind the interests of their corporate johns.

    The point is that the exploding costs of our for-profit health care system will swallow the entire federal budget unless we join the rest of the industrialized world in some form of a single-payer system. And we won't get there until Democrats make it part of the political debate.

  • jjm on January 23, 2013 2:05 PM:

    The people have spoken. The GOP makes no sense. Their claims of exaggerated spending by Obama and their claims that he has NOT lowered the deficit are pure lies.

    The GOP is not only repetitious in its lying, it's NOT WORKING. They think they're Goebbels and all they are is just BORING.

  • boatboy_srq on January 23, 2013 2:33 PM:

    @Mimikatz: You're on to something there. "Death panels" in dogwhistle aren't healthcare rationing; instead, they're placing a finite value on a human life. A lot of the anti-choice position rests on the inestimable value of "life," which is why the zero-exception approach to abortion bans are a must for them (no cost too high for a new Chahld of Gawd™), along with approval for endless sums for life support and vehement opposition to Death with Dignity. Remember Terri Schiavo? Their whinging about unplugging her was rooted in the same fever swamp. When it comes to "preserving Life™" their arithmetic absolutely deserts them because they can't imagine blowing every last copper to keep an Xtian breathing.

  • Th on January 23, 2013 2:59 PM:

    The next step I would propose on health care spending is to put Medicare in the exchanges for anyone over 55. Saves on exchange subsidies and lowers the per person cost for Medicare by adding healthier people. A win for everyone but insurance companies and health care providers which is why it won't happen.

  • Yellow dog on January 23, 2013 8:20 PM:

    When GOP reps talk about Medicare, they always add very quickly that no person over the age of 50 or 55 will see a single change. This assurance is as necessary to survival as operable rotors on a helicopter. However, In order to make any dent in government spending--which GOPers claim is a noble and moral cause--one has to change Medicare for current as well as future beneficiaries. This is not a matter of ideology--just mathematics. This is one point in Bill Clinton's speech at the convention that hit home and that will continue to vex Republicans as long as they talk about reducing government spending. People like Medicare and they depend on it--even 'conservatives.' Essentially, GOP can be pushed into a corner on the issue: pick what you want more, major spending reduction or Medicare for current voters, because you cannot have both. Forget the rhetoric. Get out the chalkboard.