Thursday, July 15, 2004

Healthcare Watch: Canadian Crisis or American Crisis?

Ian via BOP-news discusses how there is no Canadian healthcare crisis. The oldman has been posting about healthcare himself. Meanwhile Kevin Drum points out that the US both pays out high costs AND has poor service in healthcare, and has as politicians are now bandying about 43 million some uninsured persons in our nation.

Okay I am willing to concede that the US system is not preferable to European or the Canadian system. I am willing to concede that a nationalized healthcare system while not my preference may be the best course of action politically feasible in the midterm. But that still leaves two major problems.

It's one thing to praise other countries' nationalized healthcare systems, but it's another to imply that we could easily recreate those systems here. If the present plan of Kerry is merely to extend Medicaid benefits to everyone, and to start providing catastraophic healthcare cost indemnity to private providers then that plan will fail. It will fail because unless the industry is restructured so that it simply can't take the money while denying coverage to people, then it'll be pushing on a string. No net improvement will be made while the cost of healthcare will be shifted to the tax base, driving corporate profits up even higher while corporate taxes decline.

Unless Democratic policy wonks wake up and think their plan through more thoroughly, that is exactly what is going to happen when we try to nationalize healthcare that way. That doesn't mean that there isn't a fix but it's a way more complicated task than just extending Medicaid benefits. It's just not that simple.

Also another point is that it's unlikely that we can pay for it without actually raising taxes. I understand that one of my readers has noted that Kerry has suggested that we roll back tax-cuts on the top 3% earners to "pay for it." But the truth is that I think that even if we rolled back all the tax cuts that we would still be in the red as far as tax receipts versus expenses. And as long as we still have to borrow more and more money, then we're not really "paying" for it. Just borrowing less.

I understand that some people advocate cutting the defense budget. However Kerry has not said we would cut and run in Iraq. Likely we might be there for years. That means that defense expenditures are likely to grow and not fall. There will be a tremendous cost to restructuring the military in the next two years. Perhaps as much as $100 billion dollars or more. This is because of the "overstretch" problem we're having. And in addition much of that cost will be recurring, since personnel compensation have to hire at higher wages, more people, or both. Easily $50 billion in increased budget costs.

This is what neither Democrats or Republicans are saying. Whatever you do: draft, increase the volunteer army, military transformation, etc., whatever your plan it's going to cost a lot of money. And that's on top of all the red ink we're going to be bleeding in Iraq occupation costs going into the future - easily to the tune of $75 billion a year ongoing costs.

Then Kerry is going to have to begin thinking about how to fix Social Security. Unlike some commentators on the liberal side have disingenuously commented, it is not a problem for later because it will take another nineteen years to empty the Social Security principal. Right now receipts for SS exceed payouts. This money, to the tune of $200 billion a year, is now being spent in the general budget. As we approach FY2011 and the baby boomers begin to claim SS benefits that money will decrease and eventually start going negative. At the very least that means even if we intend to suck the SS reserve dry that means on an ongoing basis we're going to need to come up with an additional $200 billion a year just to tread water.

So as you can see, the situation is rather complicated. So when I ask "Can we really afford a national healthcare system?" I'm looking at the total budget picture. To close the tide of red ink and put us back in the black with our ongoing commitments it will not be enough to simply roll back tax cuts. We will have to raise taxes.

In addition there's the debt service issue. Interest rates are at a historical low. We all understand that this won't last much longer. Federal Reserve watchers indicate that we may have short term rates back to about 4% if the Fed follows it's plan by 2006. The national debt is almost entirely weighted toward the short term end. That means in two years approximately, the debt service on all our previous debt and all the debt we've accumulated during Bush's Administration will be guarenteed to double or perhaps triple the interest payments we need to make on it. And that money will have to come out of the general fund.

Last year that totaled $318 billion dollars. If our debt service requirements due to interest rates rising merely double, that will mean another $300 billion dollars in ongoing expenses will have to be found somewhere. To put that in perspective that's three quarters (~75%) of the entire defense budget approximately.

Let's add that all up: 300 + 50 + 75 + 200 = 625. Let's say to be kind 600. That's $600 billion in additional obligations that we're likely to have be able to come up with every year beginning in the next few years. That's with not addind a penny because of nationalized healthcare. That by no means is the limit of our obligations outstanding, just a few numbers.

If my readers are beginning to see the picture of why I question whether we might be able to afford an American nationalized healthcare system, then they can begin to appreciate my reticence. Of course there are a few Bush boondoogles that we can get some money back on. For instance we can trash missile defense. That'll save us a several tens of billions of dollars. But think about it. That's $600 billion a year. Without fixing social security at all. And if the debt service triples that ballons to $900 billion more every year.

I'd like a better healthcare system too. But our economy is about to be plunged into a fiscal budget crisis by the government like it has never seen before. Taxes, hyperinflation, debt default, economic contraction, interest rates in the teen percentages, real estate and market deflation, currency devaluation - you name it and we're on the brink of it. It's ugly.

The only question is whether it's going to take a decade - both Kerry Administrations and most of Edwards' first one - in order to dig us out of this hole. Or whether it's going to be my own former Republican party that turns America into Argentina part II. I would agree with Ian. The Canadian healthcare system is not in crisis. It is the American healthcare system. And the sad thing is that in simple financial terms I just don't know if we have the money to fix it.

UPDATE: One of my readers Grand Moff Texan asks perhaps jokingly what English Speaking nation should he immigrate to if things are going to be so bad. My response is that I love this country and I rather doubt if I would abandon it in its dire hour. However I am encouraging my relatives to leave if that is at all feasible. If there are are people out there with a chance as a decent life as an ex-pat in Australia, New Zealand, Canada, Belize, or Great Britain, etc. then by all means take it.

Things are not going to be very pretty over here. With the social unrest and the polarized electorate we could easily have either widespread civil anarchy or outright civil war here in the next decade. My mom won't leave the house where she and Dad lived their lives, and I don't have the heart to ask her to. So I'm staying. But I've told my sister and brother-in-law to take the chance when they asked what I thought, and I hope they take my younger brother with them (he's thinking of starting a business with them).

It won't all happen right away of course. But the sooner you start searching and get your assets transferred and find occupational employment the more likely you'll be to get out "in time". Don't panic but don't think of the America of the next two or three decades as the land of opportunity that the past three or so were for many people.

My thinking is perhaps it will be one to two years before the hammer starts coming down. Then it'll start getting steadily pretty bad to worse for most people. Some people will always do okay so maybe you and I can have drinks together sometime while the whole country is burning down around us. And no I'm not a prophet, but it doesn't take a genius to realize the rats are leaving the ship en masse for a reason and to take the hint. I don't know exactly how it's going to play out. I just know that there's a tremendous amount of ugliness fiscal, economic, and political to get itself worked out and that most people won't want to be there when it happens if they have a choice.

If you do want to stick it out, I suggest reading or rereading "The Grapes of Wrath".

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