Nicolas Kristoff in the New York Times: “Franklin Delano Obama”
American businesses are at a competitive disadvantage when they have to pay for health care and foreign companies don’t. Among General Motors’ burdens is that it has to pay health costs equivalent to $1,500 for each car it sells.
As Don Boudreaux points out:
Mr. Kristof naively supposes that government-supplied health care comes from some magical font of resources such as tooth fairies. In fact, nationalized health care will both raise businesses’ tax burdens and shrink their revenues.
Those who truly believe that government can lighten economic burdens by relieving private parties of the need to pay for them directly should go much further than Mr. Kristof does. Such persons should want government also to relieve private firms of the need to directly pay workers’ wages and of the need to directly pay for factory equipment and office supplies. Only those persons who conclude that the economy would be made even more “competitive” by this more complete nationalization should agree with Mr. Kristof’s claim.
Kristof also fails to point out that comparing life expectancies in the USA to those in Slovenia, without controlling for other variables (such as immigration — not a whole lot in Slovenia), is not very useful information. Moreover, he doesn’t mention that people in the US opt to spend a LOT more on pain reduction and palliative care than people in state-controlled systems are allowed to spend. (I have some unpleasant personal experiences of that from having lived in the UK.) Moreover, a big part of the expenditures on health care by US citizens goes to paying for pharmaceutical innovations, on which Canadians and Europeans free-ride. If the single payer system, with the inevitable price controls, were introduced to the American market, it would harm everyone, as the profits from drug research would disappear. As the German economist Olaf Gersemann noted, “No one in free-riding Europe should hope that Americans ever reverse their direction.” (Cowboy Capitalism: European Myths, American Reality, p. 140)
If Kristof were serious about reducing the costs of obtaining health care in the US, he would propose reform of the out-of-control tort system in the US, which serves as a gigantic wealth redistribution machine for trial lawyers.
About “magic wands”… In France the real cost of an empoyee wage for a company is exactly the double of the net given to the employee. This means our so-called efficient social system costs 100% of the net wage (before income tax). No wonder we have an employment problem in France. Unfortunately the law prevents the French to have a access to the information when they read their payroll. Only an accountancy expert can read it. Thus the French are not even aware of how much this state-run system costs.
On the last point you made about cost drivers, I would also mention the cost of drug approval and the drug lag. I think FDA overhaul or abolishment is way overdue.
Tom, What were your unpleasant experiences while living in the UK?
Tom, I often agree with you, though I am not a libertarian — I’m a classical liberal and academic Gadamerian who started reading your blog after loving your essay in the Don Lavoie _Hermeneutics and Economics_ anthology. Anyway, I always _dis_agree with you re: (1) gun control and (2) as here, single-payer health care. As a US/Canadian dual citizen with experience of both systems, I find the profit-motive argument on this issue theoretically dogmatic and empirically myopic. On both counts, interestingly enough, it is precisely mirrored by the Canadian argument for a no-profit-motive system. Surely a mixed system is best, with the maximum possible efficiency. The latter goal, surely, is not served by the crazy US system, with money leaking out of every one of its innumerable joints between patients, providers and insurers — like Rube Goldberg plumbing. And on the cry of “no fair” when non-US jurisdictions benefit from US profit-motive innovation in drug research — what is this? Capitalism in one country? Don’t we all have to live in the world as it is?