The U.S. currently finds itself in an interesting position--our GDP is just beginning to once again swing upward out of recession (a recession is considered to be two or more consecutive quarters in which the GDP declines), and yet the unemployment rate continues to climb toward 10% (figures currently put the number at about 9.8% nationally)--and as always, this doesn't include people who have given up on finding jobs, or are partially, or under employed (meaning they have jobs, but not the kind of jobs they want or need financially--think Home Depot, or worse, fast food).
There are several primary reasons why our economy is in the dumps and why unemployment numbers are swelling: 1) the tremendous cost of healthcare, 2) the effects of illegal immigration on the labor market, 3) the lack of funding for education, especially higher education, and 4) the shift in wealth from the middle class to the ultra wealthy.
Over the next week or so, I will address each of these factors, and explain why, if we want a strong, healthy economy, our policies must change. We will begin with health care.
Healthcare is the single most controversial issue today in our society, and we have reached a critical point where we have a Democratic party that for the most part is in support of far reaching reforms, and a Republican party adamantly opposed to any action whatsoever. Many of the arguments, as usual, are ideological in nature, and therefore obscure the real problem with the status quo--it is just too damned expensive.
The current U.S. Healthcare system places a huge amount of responsibility on private employers to provide healthcare for their employees. Health care premiums have gone up 131% over the past decade, and are projected to rise 166% over the next decade (about $29,000 per employee). Simply put, the cost of providing employee healthcare is forcing many businesses out of business or overseas.(1) At the very least, they are finding ways around providing health care for their employees, which is one of the reasons that the U.S. boasts nearly 50 million people that do not have any kind of medical coverage.
Much of the tremendous cost of health care is due to bureacratic overhead. According to a Denver Post article published earlier this year, "More than 31 percent of every dollar spent on health care in the U.S. goes to paperwork, overhead, CEO salaries, profits, etc." Compare this to the provincial single-payer system in Canada, which, "operates with just a 1 percent overhead." As the author points out, "It is not necessary to spend a huge amount of money to decide who gets care and who doesn't when everybody is covered."
Continuing with the comparison, Canada's health care system is far less expensive. Whereas the U.S. spends about 17 percent of its GDP on health care to cover 85% of the population, Canada spends 10 percent of its GDP to cover 100% of its population.
So Canadians must pay far more in taxes than Americans to pay for this right? Acutally, the answer is no, as noted in the same article: "Overall, Canada's taxes are slightly higher than those in the U.S., Canadians are afforded many benefits for their tax dollars, even beyond health care (e.g., tax credits, family allowance, cheaper higher education), so the end result is a wash. At the end of the day, the average after-tax income of Canadian workers is equal to about 82 percent of their gross pay. In the U.S., that average is 81.9 percent." (2--this is a great article, by the way, to read on its own)
In other words, universal health care is far more economically viable than the current oligarchic private system. True reform (a single payer system--see the note at the end on this) would put that 7% of the GDP back into the U.S. economy in terms of consumer savings, business profit, and a reduction of operating costs in both the public and private sector. The amount of capital that this would free up for innovation, investment, and the viability of small businesses would be absolutely astounding.
(1)http://www.businessweek.com/bwdaily/dnflash/content/sep2009/db20090915_854650.htm
(2)http://www.denverpost.com/opinion/ci_12523427#
NOTE: It is important to remember, that no matter how hard and long people scream about it, a single payer system is not socialism. As the author of the Denver post article explains,
"Princeton University health economist Uwe Reinhardt says single-payer systems are not "socialized medicine" but "social insurance" systems because doctors work in the private sector while their pay comes from a public source. Most physicians in Canada are self-employed. They are not employees of the government nor are they accountable to the government. Doctors are accountable to their patients only. More than 90 percent of physicians in Canada are paid on a fee-for-service basis. Claims are submitted to a single provincial health care plan for reimbursement, whereas in the U.S., claims are submitted to a multitude of insurance providers. Moreover, Canadian hospitals are controlled by private boards and/or regional health authorities rather than being part of or run by the government."
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