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  • Health Care is at Heart of Long-Term Debt Problem


    Bob Pollin: GOP Medicare plan no solution, but Obama allowing debate to be about cuts not jobs -   June 16, 2011
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    Bio

    Robert Pollin is Professor of Economics and founding Co-Director of the Political Economy Research Institute (PERI) at the University of Massachusetts, Amherst. His research centers on macroeconomics, conditions for low-wage workers in the U.S. and globally, the analysis of financial markets, and the economics of building a clean-energy economy in the U.S. Most recently, he co-authored the reports Job Opportunities for the Green Economy (June 2008) and Green Recovery(September 2008), exploring the broader economic benefits of large-scale investments in a clean-energy economy in the U.S. He has worked with the United Nations Development Programme and the United Nations Economic Commission on Africa on policies to promote to promote decent employment expansion and poverty reduction in Latin America and sub-Saharan Africa. He has also worked with the Joint Economic Committee of the U.S. Congress and as a member of the Capital Formation Subcouncil of the U.S. Competiveness Policy Council.

    Transcript

    Health Care is at Heart of Long-Term Debt ProblemPAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay in Washington. And in Washington the debate continues on whether to raise the debt ceiling or not. The US debt's now just something over $14 trillion, and to borrow more money, legislation has to raise the ceiling. Republican Party, as most people know by now, is saying they don't want to raise it without major reforms to Medicare. Now joining us from Amherst, Massachusetts, is Bob Pollin. He's codirector of the PERI institute at UMass. Thanks for joining us, Bob.

    PROF. BOB POLLIN, CODIRECTOR, POLITICAL ECONOMY RESEARCH INSTITUTE: Thank you for having me, Paul.

    JAY: The issue of this debt ceiling seems to be focusing, at least from the Republican point of view, on whether or not to cut the costs of health care, federal costs of health care. And they're focusing on Medicare. And they say if this new voucher system they're proposing is not introduced, then Medicare will run out of money and seniors won't have any coverage at all. So what do you make of this whole debate?

    POLLIN: Well, the issue of controlling health care costs is at the center of the long-term problems of the fiscal deficit. It doesn't have anything to do with the short-term problems, which were all due to the recession. The long-term problems are mostly about controlling health care costs. And that's why when Obama got elected, that's why the first thing he focused on was reforming health care. And, in fact, whatever the issues around the new health care legislation, the Medicare trust fund projected that actually the Obama new legislation would itself go very far to controlling health care costs. Now, we don't know whether that's true or not, but what the Republicans are saying is, look, we have universal health care for people, seniors; let's get rid of it. That's a solution, but that's not a solution, because that makes life worse for people in this country, in particular people who need health care more. So what we really want is universal health care more generally for everybody, and to do it in a way where the costs are at least more or less in line with other advanced economies. Right now, the United States spends, on average, about twice as much per person as do other advanced economies, like Canada, like France, like the United Kingdom. And that's not due to Medicare. In fact, Medicare is actually a relatively cheap way to deliver decent health care. The problem is the private insurance companies and the private pharmaceutical companies. And that's what needs to be controlled to get long-term health care costs down.

    JAY: So what would be the effects of, first of all, the voucher system?

    POLLIN: What the Republicans are talking about are effectively getting rid of, you know, any kind of public control over health care, and public control over health care costs in particular, and giving us money, giving us a voucher, but then letting the private health care system do whatever the hell they want, run amok, which is what they're doing already without a voucher system. At least the Medicare system has cost controls and it has some, you know, semblance of monitoring what's going on in the private system. If we allow the private system to proceed as it wishes, we will continue to have health care costs at twice as much as other countries or more. So that's only going to make things worse.

    JAY: So there seems to be two parts to this debate, first of all the debate about the debt ceiling itself, which seems to me somewhat of a piece of political theater. The US Chamber of Commerce has come out saying they must raise the debt ceiling. It's very difficult to believe that when it comes down to the wire, the Republican Party's going to defy the American business community and virtually every economist on the planet that says this could induce a kind of a meltdown of the global finance system if the American debt ceiling isn't raised. So you've got this kind of brinkmanship, which seems so artificial. So that's one piece of the debate. So, I mean, let's do that, and then maybe we'll come back to a little bit more on the health care issue itself. I mean, am I right? Is this kind of not just a piece of theater going on here?

    POLLIN: Well, of course they're going to raise the debt ceiling. And, by the way, you're correct in saying that the overall debt is $14 trillion, but the debt that's owed, $5 trillion is within the government itself, including the Federal Reserve. The debt that is owed to the public is $9 trillion, and that's about 60 percent--as a ratio, 60 percent of GDP. And that's gone up due to the recession. It was due to the recession that we had to increase deficit spending, and that raised debt as a share of GDP from about 35 percent to 60 percent. But nevertheless let's keep in mind that at 60 percent of GDP we're still, like, way below other countries. Like, Japan, the debt as a share of GDP is about 225 percent. France is about 80 percent. Germany is about 78 percent. So the notion that we are hitting up against a fiscal train wreck has no credibility whatsoever.

    JAY: It's not just about the recession, though. Isn't it also about, you know, extension of Bush tax cuts, wars, and all the other things that have happened over the last decade?

    POLLIN: Yeah, but no. But even with the Bush tax cuts and everything else, before we hit the recession, the deficit was about 3 percent, 2 to 3 percent of GDP. It was the recession that brought it to 10 percent of GDP.

    JAY: But this could be a longer-term issue if--. I mean, a lot of people are projecting now that unemployment just may not go down very much in the next five to ten years. So these kinds of numbers, of, you know, recessionary levels of unemployment could be around for a while.

    POLLIN: Well, that's true if we don't do anything to fight unemployment, if we just keep talking about the debt ceiling and talking about killing Medicare or not killing Medicare, instead of talking about creating jobs. If the focus is on creating jobs, there are ways to create jobs. And if we were to create jobs and push unemployment down, as you and I have discussed before, that alone would get rid of about half of the fiscal deficit. And then we would still have to make changes, in particular in long-term health care. But we should also tax Wall Street, and we should cut the military. And if you do those three things, if you move the health care system even halfway to where, say, Canada is or where France is or where Germany is or where the UK is, just move us halfway, if you tax Wall Street, even a tiny tax of 0.5 percent on all trades, and if you cut the military to where it was under Clinton but then raise it another $150 billion dollars, if you do all those things, then there's no longer any debt problem whatsover.

    JAY: Now, is part of the problem, in terms of the public discourse on all of this, is that the Obama administration kind of gave up on the two types of health care reform that really would have made a difference? I mean, starting, obviously, with what people call Medicare for all, never mind cutting Medicare, this one proposal that was called single-payer, which is more like a Canadian or a European model, there's ample evidence that drastically cuts the cost of health care. But even the Obama option of the public option, which for some time he argued without--only the public option would allow real reform that would cut health care costs, and that got given up on and lost. So once you're there, maybe it's kind of hard to argue these kinds of things in a way that's more persuasive to public opinion.

    POLLIN: I think that's right, and I think people don't really even understand what the Obama legislation is. I mean, it did pass. And it's interesting that we're having this debate only months after this whole hoopla about the Obama legislation having passed, and we're still right back talking about how to control health care costs. Well, again, I mean, the trustees of the Medicare system, who are nonpartisan technocrats, they themselves are saying that the Obama legislation will not completely control health care costs but will go a significant way in controlling health care costs. And so, I mean, that--even Obama doesn't seem to be defending that point, which is bizarre. But the broader point is, yes, Medicare-for-all or single-payer, whatever the term is, drastically lowers, not increases, when the government gets involved as a single payer. You drastically lower administrative costs and the payouts to pharmaceutical companies. And that's why Canada, Germany, the UK, France, have far lower health care costs per person than we do and better health care outcomes than we do.

    JAY: So the bottom line is this all seems to a large extent some more theater to drive home the need for austerity in many ways. Even if on Medicare they don't win, the Republicans, they keep feeding this climate that it's all about cuts, it's not about unemployment.

    POLLIN: Well, yeah. I mean, it's really unfortunate. And the Democrats--at least the administration has played into this. And so, yes, the debate is as to how much we need to cut, how quickly we need to cut it, whether or not we need to make drastic reductions in people's health care provisions, instead of talking about the fact, as you said, that we're still stuck at officially 9.1 percent unemployment when the actual number is more like 16 percent unemployment as measured by the Department of Labor itself. And what are some measures that we could think about that would really attack unemployment? And when you attack unemployment and get that under control, then you also get the deficit under control. It's very straightforward. I mean, this is evidence in the reports of the Congressional Budget Office itself. It's not like this is any big secret or something I'm making up on my own. Everybody knows this who thinks seriously about these issues. But why it isn't even part of the discussion is beyond me.

    JAY: Well, it's part of our discussion on The Real News Network. Thanks for joining us, Bob.

    POLLIN: Thank you.

    JAY: And thank you for joining us on The Real News. And if you want more coverage that in fact does take these issues into consideration, then don't forget the donate button over here, 'cause if you don't do that, we can't do this.

    End of Transcript

    DISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.


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