Oh the Scary, Scary Debt. Is Obama to Blame?
The Economist has put together an interactive graphic showing public debt worldwide. While it’s fun and colorful and interesting to play with, it’s also a visual illustration of the state of the world’s economies, especially all the developed countries with massive debt.
If you’re an African country (other than Zimbabwe, whose money is basically fictional) your per capita debt is quite low. Because if you live in an African country, you are receiving very few benefits from the government. And your country has no credit rating to finance a debt splurge. The developed nations, on the other hand, are credit maxed to the hilt. All of them, not just the US.
Obama Had Help
It seems that Obama, while he has made some unwise decisions like proposing a massively expensive healthcare overhaul during a nasty recession, or bailing out failed enterprises including auto companies and badly run banks like so much crack to crackheads, he is mostly the victim of bad timing. Republican antipathy toward Obama is misplaced for the most part. Every conversation I’ve witnessed degenerates into “Obama’s socialist policies are spending us into hell,” followed by, “Well, Bush caused the problem in the first place with an unnecessary war and no bank regulation.”
Truth is, both are accurate. Developed nations have been living like there’s an infinite tomorrow and no limits to what the great machine of capitalism can achieve. Our country is experiencing a massive let-down. For many, the bitterness is transparent. They thought the gravy train would eventually reach their lives. Now, the gravy’s gone and people are pissed.
Good News, Bad News on Economic Recovery
One bit of good news is that Americans are awesomely responsible when they need to be. According to the AP, the personal savings rate “fell steadily from 9.59 percent in the 1970s to 2.68 percent in the easy-money era from 2000 to 2008; from 2005 to 2007, it averaged 1.83 percent. Today, that trend is in reverse. From April to June, Americans’ personal savings rate was 5 percent, and it could go higher if the unemployment rate keeps rising.”
The bad news is that the machine needs capital to churn out GDP growth. Banks are keeping more and refusing to lend (good news for recovery, bad news for business and consumers) despite all those bailout dollars. And unemployment is creeping higher as a result.
Can the US Stay on Top?
One huge question when I look at all the debt represented in the graphic is to whom is all the debt owed? And of course, the answer is to each other, so what does that mean? Here’s where my understanding of global finance breaks down. Naively, I assume that it will all work itself out since everyone owes money to everyone else, therefore, can’t we all just call it roughly even? Fact is, the answer could be radically different. Maybe when all the debt is accounted for, new countries will be left at the top of the heap. Like China. Or India. And the US will be left struggling under a burden caused by too many years of fiscal irresponsibility.
This is where we need to take President Obama to task. Yes, he is the victim of bad timing. The bottom line is, blame can’t fix the economy and reduce the debt. Fiscal responsibility will. Our leaders need to rein in the spend-like-there’s-no-tomorrow habit. A weakness of democracy is the constant chasing after public popularity. When times call for painful policies, Congress and the President need to see past the short term pain and lack of popularity and do what’s right for the country. The country needs to stop expecting handouts and do its part, too.
And About that Healthcare Reform…
A final note, if healthcare reform really does have cost control as its main thrust, I’m for it. If healthcare reform has more coverage to more people as its goal, we can’t afford it. Right now, the message is that both goals are covered. I’m having trouble buying that.
Paying for the Healthcare Bill
It’s a fairly well-accepted premise amongst progressives that the United States spends far too much money on the military. The federal budget for defense spending fiscal year 2010 comes in at $618 billion according to the Congressional Budget Office. Not including intelligence funding. That’s about 4% of our GDP. Crazy, huh?
Not even close. Healthcare spending in the US dwarfs military spending at 15% of GDP.
A few facts from the CIA World Factbook, and the World Health Organization searchable database:
- The government of France, a socialist country, pays 79% of its health costs.
- The Canadian government pays 70%.
- In the US, government pays 45% of all health costs.
- For per capita spending in France and Canada, the overall cost of care, comes in at about $3,500.
- In the US, our per capita spending overall is $6,700.
- Out-of-pocket average payments for the US: $873.
- Out-of-pocket average payments for Canada: $532.
- Out-of-pocket average payments for France: $238.
Though many US citizens fear socialized or single-payer systems, they are far more cost-effective than our current public-private system. A series on Frontline illustrates the costs and benefits of public systems in the UK, Japan, Germany, Taiwan, and Switzerland as compared to the current US system. In the graphs, quality of care is represented by life expectancy (nearly equal for all), infant mortality (the US is shamefully high), the number of MRI machines and CT scanners per million people (we do well on equipment after Japan).
The bottom line is that we pay too much. We get quality care, but we also pay a huge price, an unsustainable price according to the Congressional Budget Office, “The federal budget is on an unsustainable path, primarily because of the rising cost of health care.”
The current system requires reform. Conservatives who object on the grounds that we’re socializing medicine, thereby restricting free market forces, fail to understand that our government already pays 45% of healthcare costs. By broadening and restricting coverage, the new system should stop the worsening cost spiral. Some conservatives have even signed on to support HR 676, a single-payer proposal.
If you’ve got the time, read the text for the Health Bil here, but for a quick understanding of why we haven’t embraced healthcare reform before now, just follow the lobbying dollars at OpenSecrets.com.:
The health sector boosted its campaign contributions compared to the last presidential cycle, to $167.7 million in 2008 from $123.7 million in 2004. The various health industries have also steadily increased their lobbying efforts, from $448.1 million in 2007 to $484.4 million in 2008. So far this year, the sector has paid lobbyists $126.8 million to do its bidding on Capitol Hill.
Tackling the Cost of Healthcare Reform
In the healthcare debate, everyone seems to agree, at least at a lukewarm level, that universal healthcare is a good thing. While I find the term “socialism” to be an absolute misnomer when applied to a government-backed group package for the uninsured (because strictly speaking it’s only an alternative insurance policy, not a complete takeover of the entire health system), universal coverage will be insanely expensive. The Congressional Budget Office estimates $1 trillion. Where will we find the funds?
In both the California budget and the healthcare debate, something’s got to give. We cannot have the programs without the funds, at least not without overleveraging like irresponsible hedgefund managers. Either taxes must go up, or benefits must come down.
In the healthcare debate, an industry-supported initiative proposes measures to reduce the growth of costs. Apparently not the costs, but the growth of costs:
“The savings would come from standardizing and simplifying all sectors of the health care system; implementing measures to reduce overuse and underuse of health care; investing in effective treatment and prevention; and reducing costs by developing technology and regulatory reforms.” Certainly money will be saved by offering increased preventative care and increasing efficiencies. But it won’t begin to cover the costs of universal healthcare.
So what would?
We could save huge amounts of money and increase coverage by rationing healthcare services to remain within a targeted budget. Translation: maybe terminal cancer patients would be offered fewer options near end-of-life so that more prenatal care could be offered. Would this be devastating? Yes, sometimes it would. But we need to leave behind a mindset that we’re entitled to every ounce of care available when it’s a government administered program. There would still be two tiers: those who could afford to pay privately for extreme measures and those who couldn’t. At least basic healthcare could be had by all.
The Wall Street Journal ran a Democrat-bashing opinion piece entitled How Washington Rations – ObamaCare omen: a case-study in ‘cost-control’. The article argues against a government-funded insurance program by detailing a long description of a “virtual” colonoscopy procedure (a CT scan) which will no longer be covered under Medicare. In an effort to contain costs, Medicare has stopped covering the scanning procedure, though the more invasive traditional colonoscopy is still covered. According to the author, “This is precisely the sort of complexity that the Democrats would prefer to ignore as they try to restructure health care. Led by budget chief Peter Orszag, the White House believes that comparative effectiveness research, which examines clinical evidence to determine what “works best,” will let them cut wasteful or ineffective treatments and thus contain health spending.” Precisely. And everyone will have to stop whining about getting “less than the best.” Unless you’d like to pay for it yourself. Insurance companies, public or private, are not under any obligation to provide services that cost too much for their business plans.
You know what else could cover the costs of universal healthcare for US citizens? Reducing military expenditures ($700 billion per year) and aid to foreign countries (another $34 billion per year). We give billions in aid to Israel (or Pakistan or Albania or Russia) or build more fighter jets ($300 billion) while Americans in poverty go without basic healthcare benefits. Will Obama and the Democratic congress reduce the military budget to reduce the deficits? That remains to be seen. If we are to become a country that spends within its means, we’d better.
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