Thursday, January 21, 2010

(Still)The Question O'The Day: Why Must Universal Health Care Cost So Much In The USA?

Clive Cook is a British expat who chooses to live in the United States. However, Cook is not blind to European superiority over the USA in areas of national policy like universal health care. We pay more and get less for our health care money in the Land O'The Free and the Home O'The Brave and the Dumbos like it like that. If this is (fair & balanced) national stupidity, so be it.

[National Journal]
U.S. Versus Europe: No Winner
By Clive Crook

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Which has the superior economic model, the United States or Europe? The question keeps coming up and never gets resolved. It is having another go-round at the moment, with the adversaries lining up as usual. Conservatives say that Europe's social-democratic model is bound for the landfill of history. Progressives defend the model, even if they usually stop short of recommending it outright.

As a British import, allow me to join in. My answer, to cut to the chase — one picks up these expressions — is that neither model is objectively better. You can guess which I prefer, because like many other Europeans I have chosen to live in the United States. But the European approach is perfectly viable, and I can see why many Americans might like it. (For some reason, not many seem to move to Europe. The traffic seems to be mainly in the other direction. A mystery.) To be sure, each side has things to teach the other.

In the newest turn of this discussion, Jim Manzi of the Manhattan Institute and Ross Douthat of The New York Times point to Europe's slower economic growth. Jonathan Chait of The New Republic and The Times's Paul Krugman reply that this is a statistical illusion: The U.S. is growing faster only because its population is rising faster, not because its living standards are improving any more quickly.

Then Greg Mankiw of Harvard (who was chairman of President George W. Bush's Council of Economic Advisers) and Mark Perry of the University of Michigan piped up, saying that the level of living standards in United States is still a lot higher. Moreover, as Manzi said, population matters if you are comparing relative economic power. Europe's stagnant or diminishing populations are a harbinger of decline. Switzerland is rich but small. The United States is not content to be Switzerland.

In what follows, bear in mind that "Europe" is a dangerous generalization, whichever side in this discussion you intend to take. It is not one country, but many. You cannot even say exactly how many, because the region is a fluctuating idea that depends on your notions of geography and the period under consideration. Within Europe — as within the United States — there are rich areas and poor areas; places that are growing and places in decline. And within Europe, political borders still matter a lot. Forms of government and economic arrangements — levels of taxation and public spending, the role of trade unions, the scope of economic regulation — all vary.

With that caveat in mind, put growth rates and population to one side for the moment and consider living standards and productivity. As Mankiw says, living standards in the United States are much higher on average than in Europe, as measured by per capita income. On the other hand, productivity is not. This is the most interesting and surprising point of comparison.

As Mankiw notes, average income in the U.S. is around $47,000. Adjusting for purchasing power, in Britain and Germany it is around $36,000; in France, $34,000; in Italy, $31,000. Overall, U.S. living standards are more than one-third higher than in Europe.

Perry underlines the point by comparing European countries with American states. "Although [the] Netherlands, Sweden, and Denmark are among Europe's wealthiest countries, as U.S. states they would be between 14.5 percent and 18 percent below the U.S. average.... If France became a U.S. state, it would rank No. 48 out of 51 by per capita [gross domestic product], just barely ahead of America's two poorest states, West Virginia and Mississippi.... Belgium, Finland, Britain, Germany, and Spain would rank in the bottom 20 percent of U.S. states by per capita GDP, just barely ahead of Arkansas but below Kentucky."

In a recent column, Krugman urged readers to trust their eyes more than dry statistics (something you could rarely accuse him of doing, which I honestly mean as a compliment). Don't people seem well off in London, Paris, and Frankfurt, he asks? They do. Milan is also really nice: all those Ferraris. But these places are not exactly at the European mean. He should try comparing Bolton, Lancashire (my hometown) with Princeton, NJ That would remind him that statistics can be useful. But if superficial impressions are allowed, here is mine gleaned from traveling around the U.S.: Americans live in bigger houses than their European counterparts, eat better food, drive bigger cars, wear better clothes, and are surrounded by more and better stuff.

Put it this way: If America's living standards suddenly descended to Europe's, rather than the other way round, it would be a calamity that would make the country's present economic difficulties look trivial.

And yet, as I say, higher U.S. productivity is not the main reason for this prosperity gap. Comparing America with the richest European countries, output per hour worked is not that different. In levels of productivity, Europe's most successful economies have caught up. Then why are they still so much poorer? Because Europeans work less. A higher proportion of the U.S. population is employed, and Americans work longer hours. Effort, not efficiency, is why Americans are richer.

The interesting question is, how much does this subtract from the claim that Americans are truly better off? This is not easy to answer. Europe has higher unemployment, which is obviously bad — a consequence of labor-market policies that the U.S. would be wise to avoid. But what about working hours? Perhaps Europeans are happy to work fewer hours in return for less pay — because they are lazy, or, to put it more kindly, because they value their leisure more highly. If so, good luck to them. But perhaps they work less hard because taxes are higher and they think, why bother? In that case, they really are worse off, even though they may value the public services and income redistribution that taxes pay for. Maybe it is some of both.

Now consider growth, which is really to ask how the two models will compare 10 or 20 years from now. The Europhiles are correct that Europe's per capita incomes have grown about as quickly as the United States' over the past few decades, and correct that in many countries Europe's productivity (output per hour worked) has grown faster. But this is what you would expect, because its economies were catching up. The richer they get, the harder it is for European countries to match, let alone surpass, U.S. performance. Meanwhile, the surprising thing is just how persistent American economic leadership, based on its supposedly inferior model, has proved.

In Europe, euro-optimism is out of style. The European Union's economic problems are becoming more apparent. I mentioned that if Europe had not narrowed the gap in the postwar decades, something would have been wrong: Over the more recent past, Europe's governments have come to believe that something is.

Increasingly, they worry that U.S. pre-eminence in innovation is unchallenged — by Europe, anyway. They worry that Europe has been much slower to realize the benefits of the information-technology revolution. They worry that creaking labor markets and ill-adapted employment policies will delay recovery from the recession. Lack of competitiveness with respect to the U.S. is a constant preoccupation — too much so, in fact, but there it is. When European policy makers get together, they talk of little else but their next abortive push to spur competition and make Europe a bit more like the U.S. So far as I can see, Washington's policy makers are not losing much sleep over the emerging economic threat from Europe.

I have one other quarrel with the Europhiles. Their view, as The New Republic's Chait put it, is that social democracy provides greater social cohesion; if you discount the growth penalty, it must be the superior model. Agreed, American Europhobes exaggerate the growth penalty, although I think that Europe's governments, looking ahead, are right to believe it is not zero. Beyond that, however, the other claim also needs thinking about. Does Europe really have greater social cohesion?

Europe has less inequality, thanks to its high taxes and welfare states. It has stronger unions and labor-market protections — and the higher unemployment that go with them. Its public schools are often better, and in some European countries, social mobility is higher than in the United States. All European governments, in different ways, manage to provide universal health care at comparatively modest cost. That is surely the most important thing that Europe can teach America.

More than the United States, though, many of Europe's countries are socially divided. Unassimilated immigrants are an enormous and still-growing problem across the European Union. Again, look to labor markets for one reason why. Despite the worsening polarization of its politics and the astounding variety of its cultures, ethnicities, and religious traditions, the United States binds its people together more harmoniously than most European countries do. Everywhere, the Stars and Stripes: That, too, is social cohesion.

The idea of America, with its emphasis on individualism and the market, is a remarkably powerful unifier. This is a paradox that social democrats need to ponder. Ω

[Clive Crook is a senior editor of The Atlantic Monthly, a columnist for National Journal and a commentator for the Financial Times. He was formerly on the staff of The Economist, latterly (from 1993 to 2005) as deputy editor. A graduate of Oxford and the London School of Economics, he has served as a consultant to the World Bank and worked as an official in the British Treasury.]

Copyright © 2010 by National Journal Group Inc.

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Cowboy Up, Donkeys!

Massachusetts Attorney General Martha Coakley attended the Michael Dukakis School of Political Campaigning. Big surprise. Today, Eags offers the pithy response of the herdsmen out West: Cowboy Up! This slogan works everywhere but Dallas (and Brokeback Mountain). If this is a (fair & balanced) laconicism, so be it.

[x NY Fishwrap]
Time To Cowboy Up
By Timothy Egan

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The polls had barely opened in Massachusetts on election day, a winter dawn that showed Democrats really were going to lose the seat of the lion Teddy Kennedy, when the stocks of big health care companies started to surge.

You could hear the cheers from Wall Street, the boo-yahs from the bottom line crowd. Yeaayyyyy! Up went the big insurance companies, up went the big pharmaceutical conglomerates, the drugmakers and H.M.O.s. Health care reform is dead — hooray for the status quo!

“Investors scooped up health care shares,” as Reuters wrote, trying to explain to the rest of the world why a change in one Senate seat could mean so much money for a handful of big companies, on a bet that a single new Republican “could stall U.S. President Barack Obama’s reforms and remove a threat to profits in the sector.”

Jim Cramer, of the aptly named “Mad Money,” was equally ebullient — no reform equals no change equals larger profits for those who gain from the ossified medical industrial complex. About 47 million Americans will remain without health care — yes!

The markets fell on other concerns Wednesday, but the biggest beneficiaries of not fixing the system had made their point.

The public never saw it that way. They saw a spend-crazy Congress backing Wall Street and bailouts. Health care reform seemed like just another reckless gamble, complete with special deals for whining senators, at a time when unemployment is 15 percent or more in some states.

“It’s a message of ‘that’s enough,’ let’s stop the giveaways and let’s get jobs going,” Marlene Connolly, 73, told The Times. A lifelong Democrat, she voted Republican for the first time, she said.

Of course, Martha Coakley, the Democrat who lost in a state where only 13 percent of voters identified as Republicans, ran a campaign that should be a mandatory lesson for all her supporters in Cambridge.

Among other great sins, she belittled the retail politics of her opponent, who stood in the cold of a Bruins hockey game at Fenway Park, thus disparaging three great New England institutions a single two-second sound bite. It follows, then, that she didn’t know that Curt Schilling, the Boston pitcher who bled through his sox, was a Red Sox fan. Stealing a page from Mike Dukakis when he decided to spend August mowing his lawn while the 1988 presidential contest slipped away from him, her campaign essentially went dark with a double-digit lead. And she did what no Kennedy had ever done — she took the voter for granted.

But make no mistake. Scott Brown’s win was a rout, a repudiation of Democrats and Obama. In famously well-educated Massachusetts, it cannot be said that the voters were stupid.

But those Red Sox also offer a way out for Democrats — they can cowboy up, to use the rallying cry of the 2003 team, back when they were still lovable underdogs and not entitled favorites.

The t-shirt then said it all: “Are You Gonna Cowboy Up or Just Lay There and Bleed?”

Democrats are good at bleeding, kvetching and woe-is-me-ing. Particularly the left, which has never come around to the idea that Democrats have to govern in a country that is essentially center-right.

While the filibuster-proof margin is gone, the Democrats still have a 58 seats in the Senate — perhaps 59, depending on Joe Lieberman’s loyalty of the hour. This huge majority, as America’s most astute political observer, Jon Stewart, pointed out, is far more than George W. Bush ever had, and he used it to do whatever he wanted to with the country.

Critics will say: listen to the people, the voters don’t want health care. But in fact, when you break out the major points on reform — getting rid of policies that deny coverage for preexisting conditions, expanding care and choice, forcing insurers to put more money into treatment and less in their pockets — there is strong support. Majorities also back a public option, but that’s off the table, for now. See Lieberman, Traitor Joe.

What people are against is “the bill” — this radioactive product of arcane deal-making. They even tried to keep C-Span out! What is there to hide? Who knows. But most people believe it will add to the deficit, instead of reduce costs as the nonpartisan Congressional Budget Office has said.

Democrats swept the land in 2008 by running on a couple of things: not being George Bush, change in the economy, health care and getting rid of a lobbyist-rich culture in Washington that seemed to work only for those on the inside. The voters knew, as they did in Massachusetts on Tuesday, what they doing.

If Democrats were to waste this majority, and have nothing to show for it but bailouts of the biggest banks, auto companies and insurers, they deserve to be returned to minority status in the fall.

Who are they governing for? They can cowboy up, pass health care that helps right the major wrongs of the system and then explain what they’re doing. One way to start is to point to the bottom line, the market, and ask who gets rich when nothing changes. Ω

[Timothy Egan writes "Outposts," a column at the NY Fishwrap online. Egan — winner of both a Pulitzer Prize in 2001 as a member of a team of reporters who wrote the series "How Race Is Lived in America" and a National Book Award (The Worst Hard Time in 2006) — graduated from the University of Washington with a degree in journalism, and was awarded an honorary doctorate of humane letters by Whitman College in 2000 for his environmental writings. Egan is the author of four other books, in addition to The Worst Hard TimeThe Good Rain: Across Time and Terrain in the Pacific Northwest, Lasso the Wind: Away to the New West, Breaking Blue, and The Winemaker's Daughter. Egan's most recent book is The Big Burn: Teddy Roosevelt and the Fire that Saved America (2009).]

Copyright © 2010 The New York Times Company

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