Fiscal Cliff Deal

[Bonam]

Context free charts aren't really much evidence. I'm sure 'entitlement spending' has grown more rapidly in the US. Just as it has everywhere else in the world. After all, in 1965, your base year, many countries had just begun to address social spending issues and how to try and deal with the poor and downtrodden. Things like student loans and grants to the poor and aid to disabled people, heck, even public pensions. The Canada Pension Plan wasn't even brought into existence until 1966. In the US, Medicaid and Medicair started up in 1965. And the development of extremely expensive health technologies in recent year has caused the cost of health care to skyrocket across the board, especially in the US, where there is little effort at consolidation and efficiencies.

The base year may be 1965, but the rapid growth is continuous thereafter, outpacing economic growth by a factor of more than 3. This trend shows no signs of abating.

It seems most people in the west wanted a more caring society where the poor were helped to get more skills and education (and in any event weren't left to die of starvation) and the elderly were cared for. In nations which have run their affairs in an orderly fashion that has not turned out to be all that difficult a task to accomplish. So my question is why can Americans not afford basic care for those who can't pay for it themselves?

In which nations is that? Europe's economies are fairing no better, with record high unemployment rates averaging ~11% and various austerity packages are being imposed. Economic and population growth is slowing to a standstill in many of these nations, despite their frantic efforts to increase international trade and open up new markets.

Is it perhaps because you have so many poor? I note that the poverty line in the US for a family of four is set at about $24k and 15% of Americans are considered to be below the poverty line. In Canada, the poverty line for a family of four is set at $35k, and the rate is about 10%. Could this be because the US has not been very effective in poverty elimination programs?

These poverty numbers are completely arbitrary. What is it that makes a family of four living on $35k poor? Is that in a city like Vancouver, or somewhere out in the prairies of Manitoba? No adjustment is made for such vast differences in cost of living eh? To me, poverty means you don't have regular access to basic food and shelter. What % of people is that true for in the US?

In fact, your poverty numbers are growing. That means fewer people contributing and able to save and more people needing help. Maybe you guys should be working on eliminating poverty instead of focusing on cutting the help you give to the poor.

And if that sounds like a leftist viewpoint I'd like to point out I don't come at this budgetary stuff out of any ideological standpoint but that of a lover of efficiency and effectiveness shaded with humanity and empathy. It is a GROSS waste of resources for so many people to be spending their lives in poverty with little hope of advancement. It is also extremely costly to the state both in terms of absent productivity and taxation and the costs of maintaining those individuals at a bare minimum lifestyle. Extreme efforts should be made to get them into productive work, regardless of what that costs in skills training, education, addiction programs, etc.

You don't lift people out of poverty with handouts, but with economic growth that creates jobs. Stifling the economy with the gigantic tax increases needed to sustain and expand the social programs you talk about will only slow economic growth and leave more people unable to find work, and will in the end bankrupt the nation because as long as entitlement spending is growing faster than the economy, then someday even taxing everything at 100% won't get you the revenue you need.

[bush_cheney2004]

.... I note that the poverty line in the US for a family of four is set at about $24k and 15% of Americans are considered to be below the poverty line. In Canada, the poverty line for a family of four is set at $35k, and the rate is about 10%. Could this be because the US has not been very effective in poverty elimination programs?

Frankly, I am surprised that Canada does so poorly given that it does not have large military or government R&D expenditures.

[Argus]

The base year may be 1965, but the rapid growth is continuous thereafter, outpacing economic growth by a factor of more than 3. This trend shows no signs of abating.

You know what else has had a rapid growth? The cost of health care; whether it's paid by the government or privately. I bet if you compared the percentage increases in the cost of health care to your chart you'd find a remarkable similarity. Also increasing is the cost of maintaining the elderly because the number of elderly are increasing.

Note that that does not imply the government is being ever more generous or wasting ever more money. It's simply facing other factors which are increasing the cost.

In which nations is that? Europe's economies are fairing no better, with record high unemployment rates averaging ~11% and various austerity packages are being imposed. Economic and population growth is slowing to a standstill in many of these nations, despite their frantic efforts to increase international trade and open up new markets.

The problems of some European economies has little to do with the cost of social services. What you have to bear in mind is that there is a cost to something like health care. The economy doesn't care if that price is paid for through tax dollars, or through private sector insurance companies. If anything, whichever is most efficient and less costly is a boon to the economy. And given the expense and lack of efficiency of the American health care system I'd say the European economies have it better on that score.

You don't lift people out of poverty with handouts, but with economic growth that creates jobs.

You lift people out of poverty by giving them an education and skills training. You don't lift them out of poverty by having them work at MacDonalds.

And over the last ten years or so all economic growth has done is created jobs in China. Almost anything which takes a large amount of employees is being outsourced, often to third world countries, wherever possible.

because as long as entitlement spending is growing faster than the economy, then someday even taxing everything at 100% won't get you the revenue you need.

Stifling the economy with the gigantic tax increases needed to sustain and expand the social programs you talk about will only slow economic growth and leave more people unable to find work, and will in the end bankrupt the nation

Evidently the northern European countries have found that this isn't the case. Maybe you should look into how they do it.

[Bonam]

It doesn't matter that it's health care. Yes, I understand that the price of health services has gone up and will continue to go up. Let's say we developed even more advanced medicine that extends people's lives by another 10 or 20 years but costs a few million per person per year. Does that mean that access to such medicine must then be provided to all senior citizens via national healthcare programs even though it's economically unfeasible? No. The growth rate of entitlement spending, including healthcare, should be capped to the growth rate of the economy, and what people can afford with that level of benefits is what they get, unless they have their own personal funds to draw on.

Jobs at MacDonalds are sufficient to not be poor during times of economic growth, when they pay considerably above minimum wage and there are not enough workers, although of course more skilled jobs are always desirable. I fully agree that investing in education is key for a successful economy. The US spending on training and education is already one of the highest of all western nations.

Outsourcing is a problem, and I have often argued that the rapid pace of globalization, while it may have some benefits, is a massive shock to Western economies and the primary cause of wage stagnation among the working/middle class. In my opinion, there are economic policies that could be pursued that would ease the pains of globalization, and correspond well to other modern issues (for example, a "green tariff" for goods imported from nations that have not taken adequate steps to reduce their CO2 emissions would effectively raise the price of goods from places like China and address outsourcing). Further, the end game is that wages everyone around the world will increase as economies develop and catch up to the West, and eventually there will not be the opportunity for the same kinds of savings as before by outsourcing.

By "northern European countries" you are referring to precisely two countries: Norway and Sweden, both of which have substantial resource wealth. Nonetheless, both of these nations are experiencing a rapid decline in population, a symptom of severe social problems which will lead to dire consequences over the next several decades. Perhaps the lack of any meaningful challenges or risks in life and a sense of complacency created by the absolute social safety nets available deprives people of their motivation to do anything, not even bothering to reproduce and create children to inherit their rich legacy?

[Argus]

It doesn't matter that it's health care. Yes, I understand that the price of health services has gone up and will continue to go up. Let's say we developed even more advanced medicine that extends people's lives by another 10 or 20 years but costs a few million per person per year. Does that mean that access to such medicine must then be provided to all senior citizens via national healthcare programs even though it's economically unfeasible? No. The growth rate of entitlement spending, including healthcare, should be capped to the growth rate of the economy, and what people can afford with that level of benefits is what they get, unless they have their own personal funds to draw on.

So... if they don't have enough money, they can just die. Is that it? Don't raise the specter of millions per person as that's not what we're talking about. We're talking about the rising costs of standard medical treatment of any kind, be it broken legs in teenagers or broken hips in the elderly. Be it cancer treatment for the young or bypass surgery for the middle aged. Further, you have not been able, nor even really attempted to show that providing this health care is not feasible. Do you not find it even mildly curious that no other nation is having this sort of discussion? Other nations seek efficiencies in health care, but none, so far as I know, are suggesting its not affordable and we'll just have to let people die.

Jobs at MacDonalds are sufficient to not be poor during times of economic growth when they pay considerably above minimum wage and there are not enough workers

Riiiight. And that happens all the time, and it's not offset by high inflation which eats away at those extra dollars.

Sorry, but in almost all cases and in almost all situations outside ones teen years working at Macdonalds most certainly does make you poor.

although of course more skilled jobs are always desirable. I fully agree that investing in education is key for a successful economy. The US spending on training and education is already one of the highest of all western nations.

I am leery of the reported amount the US pays for education. Given the results I suspect much of that money, as in the health care industry, is wasted, and does not produce impressive results. l I have no idea how its adult education and skills training for the poor matches up with other countries. I suspect, given the downward slope in income mobility in the United States, and the high poverty level it doesn't match very well.

By "northern European countries" you are referring to precisely two countries: Norway and Sweden, both of which have substantial resource wealth. Nonetheless, both of these nations are experiencing a rapid decline in population, a symptom of severe social problems which will lead to dire consequences over the next several decades. Perhaps the lack of any meaningful challenges or risks in life and a sense of complacency created by the absolute social safety nets available deprives people of their motivation to do anything, not even bothering to reproduce and create children to inherit their rich legacy?

Sweden and Norway, Finland and Denmark, Belgium and the Netherlands, among others. And their low reproduction levels reflect a general problem around the world, which the United States is not immune to. Your own birth rate has been plunging the last some years, and is at its lowest rate in nearly a hundred years. The only reason levels remain as high as they are is because of illegal Hispanic immigration and the vast horde of children which results from that. If you want to get right down to it, your own society is being replaced by immigrants too. They will inherit your rich legacy... after they translate it into Spanish, of course.

[Bonam]

So... if they don't have enough money, they can just die. Is that it? Don't raise the specter of millions per person as that's not what we're talking about. We're talking about the rising costs of standard medical treatment of any kind, be it broken legs in teenagers or broken hips in the elderly. Be it cancer treatment for the young or bypass surgery for the middle aged. Further, you have not been able, nor even really attempted to show that providing this health care is not feasible. Do you not find it even mildly curious that no other nation is having this sort of discussion? Other nations seek efficiencies in health care, but none, so far as I know, are suggesting its not affordable and we'll just have to let people die.

"Standard medical treatment" is getting more and more expensive, because more and more things are becoming "standard". I do think it is possible to provide healthcare sustainably, however. In many nations, the cost of healthcare is not exceeding the rate of growth of the economy by a factor of 3 or more. What America needs to figure out is why it is growing that rapidly, and how that growth in cost can be slowed. I absolutely agree that efficiencies should be looked for, But as long as you just keep throwing more and more money at the problem, as the US has been doing, who is gonna look for efficiencies? Once healthcare insurers and providers come to terms with the reality that healthcare spending is finite, rather than limitless and exponentially growing, maybe costs will start coming down as they look for ways to provide the needed services in that context. Many procedures and medications are just much more expensive in the US than other Western nations, simply because they can be. And that will continue to be the case as long as the government is willing to spend an essentially unbounded amount of money on healthcare.

Riiiight. And that happens all the time, and it's not offset by high inflation which eats away at those extra dollars.

Sorry, but in almost all cases and in almost all situations outside ones teen years working at Macdonalds most certainly does make you poor.

Actually ~22k per year (minimum wage) is plenty to live on comfortably if you're single and not supporting any dependents. Been there, done that, was just fine. It certainly won't make you rich, but you're not poor either.

I am leery of the reported amount the US pays for education. Given the results I suspect much of that money, as in the health care industry, is wasted, and does not produce impressive results. l I have no idea how its adult education and skills training for the poor matches up with other countries. I suspect, given the downward slope in income mobility in the United States, and the high poverty level it doesn't match very well.

Quite possible. Again, blindly throwing money at the problem does not always produce the best results.

Sweden and Norway, Finland and Denmark, Belgium and the Netherlands, among others. And their low reproduction levels reflect a general problem around the world, which the United States is not immune to. Your own birth rate has been plunging the last some years, and is at its lowest rate in nearly a hundred years. The only reason levels remain as high as they are is because of illegal Hispanic immigration and the vast horde of children which results from that. If you want to get right down to it, your own society is being replaced by immigrants too. They will inherit your rich legacy... after they translate it into Spanish, of course.

Just want to point out, first of all, that I'm not American. I've lived in Seattle the past 3 years, but I am Canadian and lived the vast majority of my life in Canada. You seem to be addressing this to me as if I am an American, but I am not. Secondly, while the rate has also been declining in the US, it remains among the highest in the Western world, including among Americans that have lived here for several generations, not just recent immigrants.

But let's get back to the basics. You can't have your expenses constantly growing much more quickly than your economy. If they do, then no matter how you tax your economy, you eventually won't be able to pay for all those expenses. This seems mathematically fairly obvious, and yet you seem to ignore this fact. The rate of growth of spending has to be capped or the nation will sink in debt within a few decades, there's just no way around it.

[Pliny]

You lift people out of poverty by giving them an education and skills training. You don't lift them out of poverty by having them work at MacDonalds.

Working at MacDonald's could be considered education and skills training. There is value in learning the proper operation of equipment, handling cash, safe food preparation, plus the skills of showing up for work, being on time, keeping a schedule, essentially developing a work ethic. It isn't meant to be a career for most people.

Giving people an education and skills training doesn't necessarily end in gainful employment. More often than not it ends in a disgruntled work force demanding more and producing less.

[bush_cheney2004]

...Just want to point out, first of all, that I'm not American. I've lived in Seattle the past 3 years, but I am Canadian and lived the vast majority of my life in Canada. You seem to be addressing this to me as if I am an American, but I am not. Secondly, while the rate has also been declining in the US, it remains among the highest in the Western world, including among Americans that have lived here for several generations, not just recent immigrants.

Yes, you have made this clear several times, but this still highlights an obvious point I have made in the past: Canadians who actually live and work in the United States have a far better understanding of such policies and competing interests in the country.

....But let's get back to the basics. You can't have your expenses constantly growing much more quickly than your economy. If they do, then no matter how you tax your economy, you eventually won't be able to pay for all those expenses....

Hence a "starve the beast" mentality of Republicans and other budget hawks when it comes to revenue. Ultimately, President Obama and the Congress are going to have to come to grips with the huge deficits by bending the curve on the growing costs of entitlement programs. Reagan and Clinton were able to do this, but Obama wasted his time and political capital on health care, which will actually add more costs.

[GostHacked]

Can I get my hands on a couple of those One Trillion Dollar coins???

[Argus]

"Standard medical treatment" is getting more and more expensive, because more and more things are becoming "standard". I do think it is possible to provide healthcare sustainably, however. In many nations, the cost of healthcare is not exceeding the rate of growth of the economy by a factor of 3 or more. What America needs to figure out is why it is growing that rapidly, and how that growth in cost can be slowed. I absolutely agree that efficiencies should be looked for,]

Getting rid of insurance companies and using a public health care system would be a start. The administration costs of the private insurance system in the US are phenomenal. It's grossly inefficient and expensive. Another thing they could is stop letting industry write their laws. For example, the recent huge prescription act contained a clause which forbids Medicare from trying to negotiate lower prices with the drug companies in the way Canadian government insurance companies (and all other insurance companies do). Who put that in? Well, the legislation was written by the pharmaceutical industry... You want the providers to stop jacking up prices? Have a central health care plan which can order prices be lowered in the way some provinces like Ontario have done with generic drugs. No more $500 a pill nonsense.

And don't try to argue the drug companies need that money to develop more drugs. Virtually all new drugs are developed by researchers funded primarily by the government.

[dre]

"Standard medical treatment" is getting more and more expensive, because more and more things are becoming "standard".

No medical care is getting more expensive primarily because of wages, and because its isolated from global competition.

Heres a salary of GP wages in Brittain for example... The red line shows GP pay and the blue line shows average earnings. Like I explained before theres two different economies... the healthcare economy is protected from global competition, both because of geography and because healthcare workers are very organized and have lobbied very well. The rest of the workers have had more or less stagnant wages for 30 years while doctors have seen nearly 10% annual wage growth.

So the people working in the global economy can no longer afford to buy products and services from workers in these siloed off national healthcare economies. Same goes for things like college tuition.

If the wages of healthcare workers had grown at the same rate as everyone elses wages for the last 30 years then health care prices would be more or less stable and we wouldnt be talking about this.

Pretty easy to understand if you think about it. If the shoemaker's wages triple, while the bricklayers wages are cut in half, then the bricklayer isnt going to be wearing shoes for long.

Base on what I explained above you should see a strong correlation between things like trade deficits and doctor salaries. So I went and looked....

The US has the highest doctors salaries in the world, and the highest trade deficit.

The UK has the second highest doctor salaries in the world, and the 5th highest trade deficit.

Canada has the sixth highest doctor salaries in the world, and the 9th highest trade deficit.

France has the 4th highest trade doctor salaries in the world, and the 6th highest trade deficit.

Limiting coverage is going to do nothing to change this dynamic. Regardless of which procedures and patients we choose to cover (or not cover) the cost of what we DO cover is going to keep increasing faster than the rate of inflation. Under these macro economic conditions rationing can never be more than a stop-gap measure and it will fix nothing. The causative macro economic factors need to be addressed.

Edited January 11, 2013 by dre

[Bonam]

dre, you make a strong argument, and as I've mentioned before, I am largely in agreement with what you say. But you seem to be misinterpreting my argument. I never said or implied that we should "limit what it covers". Rather, I said that we need to reduce the growth rate of costs. The reduction of this growth rate can be achieved in various ways, but government refusing to pay more than X for a doctor's time and thus capping the rate of growth in doctor's salaries would certainly be one way.

[dre]

dre, you make a strong argument, and as I've mentioned before, I am largely in agreement with what you say. But you seem to be misinterpreting my argument. I never said or implied that we should "limit what it covers". Rather, I said that we need to reduce the growth rate of costs. The reduction of this growth rate can be achieved in various ways, but government refusing to pay more than X for a doctor's time and thus capping the rate of growth in doctor's salaries would certainly be one way.

I definately didnt mean misrepresent anything you said. When you said "costs are going up because more things are becoming standard (covered)" I just assumed the suggestion that the way to bring costs down would be to cover less things.

But I really didnt mean to argue against your broader thesis that "healthcare costs cant keep growing way faster than GDP forever". I definately agree with that. I just meant to argue that wages are a bigger problem than more coverage and more procedures, and that just got me thinking and writing about increasing healthcare costs in general and off on a bit of a tangent I went

The reduction of this growth rate can be achieved in various ways, but government refusing to pay more than X for a doctor's time and thus capping the rate of growth in doctor's salaries would certainly be one way.

Tying the increase in physicians pay to average wages (fixing the red line to the blue line in that graph) is one answer. The problem is unless countries like Canada and the US do it at the same time, it will create scarcity. If Canada did that all our doctors would just go to the US.

Somehow we need to merge those two economies... We could introduce global competition in healthcare, or silo off other workers in the same manner healthcare workers are (protectionism). I like what you said in some other thread I read recently about slowing down globalism so that these imbalances in our economies have time to adjust... might be too late for that now though. We could take steps to devalue our currency to get rid of trade deficits...

Edited January 11, 2013 by dre

[Bonam]

I definately didnt mean misrepresent anything you said. When you said "costs are going up because more things are becoming standard (covered)" I just assumed the suggestion that the way to bring costs down would be to cover less things.

Yes I can see how it could have been interpreted that way.

But I really didnt mean to argue against your broader thesis that "healthcare costs cant keep growing way faster than GDP forever". I definately agree with that. I just meant to argue that wages are a bigger problem than more coverage and more procedures, and that just got me thinking and writing about increasing healthcare costs in general and off on a bit of a tangent I went

Tying the increase in physicians pay to average wages (fixing the red line to the blue line in that graph) is one answer. The problem is unless countries like Canada and the US do it at the same time, it will create scarcity. If Canada did that all our doctors would just go to the US.

Well, I'm not sure of how it would work in Canada, but the bigger obstacle to that plan is in the US, the government has no power or authority to dictate doctor's salaries. It can set how it is willing to compensate doctors that see medicare/medicaid patients, but that's not the same as setting their salaries, as doctors see many patients covered by private insurers rather than the government. And some doctors already do not accept medicare/medicaid patients, or have a maximum quota of said patients they are willing to accept. Of course, Argus's suggestion of converting the US system to a single payer system would fix this, but that is obviously a political impossibility in the US, and even were it not, it comes with its own big set of issues.

Somehow we need to merge those two economies... We could introduce global competition in healthcare, or silo off other workers in the same manner healthcare workers are (protectionism). I like what you said in some other thread I read recently about slowing down globalism so that these imbalances in our economies have time to adjust... might be too late for that now though. We could take steps to devalue our currency to get rid of trade deficits...

I don't think it's too late. The pace of outsourcing is actually slowing, and in some cases companies are bringing jobs back to Western countries as they begin to realize that the wage savings aren't always worth it when you take into account the increased cost and complexity of logistics, compliance with international regulations, and often reduced quality of service or work as multiple teams that do not communicate well with each other attempt to collaborate on large projects. There are many mechanisms that could be used to reduce the pace of globalization so as to reduce the harm it does to many sectors of Western nations' economies.

As to global competition in healthcare, I know you have brought that up on several occasions in the past, but personally I don't see it as a viable option. Few people would want to travel internationally to get important medical procedures done. When one is sick and needs serious medical attention, the last thing they need is to have the stress of arranging an international trip, having issues communicating with doctors whose first language is not English, being far away from friends and family, etc. Nor would it be a good move to try to drastically lower doctors' salaries here by flooding the market with hundreds of thousands of doctors from abroad, not least because this would be very destructive to the developing nations from which said doctors would come here.

Edited January 11, 2013 by Bonam

[Shady]

Can I get my hands on a couple of those One Trillion Dollar coins???

Yep, apparently faux economist Paul Krugman thinks its a fine idea!