Weekend Reader: ‘Divided: The Perils Of Our Growing Inequality’

Weekend Reader: ‘Divided: The Perils Of Our Growing Inequality’

Today the Weekend Reader brings you Divided: The Perils of Our Growing Inequality, a collection of essays edited by David Cay Johnston, a Pulitzer Prize-winning investigative journalist, best-selling author, and regular contributor to The National Memo. The growing gap between rich and poor remains a dominant issue among the 99 percent, but without the support of a majority of elected leaders, the middle class diminishes while the 1 percent continues to thrive. In Divided,  journalists, activists, and political leaders explain the significance of repairing the middle class, and offer advice for rolling back the years of inequality created by American oligarchs.  

 You can purchase the book here.

America spends far more than any other modern country on health care yet alone lacks universal coverage. If America had in place the French system, which the World Health Organization says is the world’s best, the savings in 2010 would have been enough to eliminate the federal income tax that year.

Here is how much America’s health care system costs: in 2010 Americans spent $2.64 per person for health care for each dollar spent by the thirty-three other countries with modern economies. The United States spent $8,233 per capita compared with an average of $3,118 in the other thirty-three countries, according to data compiled by the Organization for Economic Cooperation and Development. And those are not simple currency transactions used to compare dollars: the OECD used PPEs (purchasing power equivalents) to get the best possible measure of relative costs.

A growing share of federal tax dollars, in direct spending and in tax breaks, is going to U.S. health care as the population ages. Yet while the thirty-three other modern countries provide universal care, about one in six Americans lacks health insurance and another one in ten is covered for only part of the year. America’s health care system, more accurately described as a sick-care non-system, totaled 17.6 percent of the economy in 2010, compared to an average of 9.2 percent in the other thirty-three countries, the OECD data show.

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Here is another way to think about the cost of health care. The World Health Organization says France has the best health care system in the world, while the United States ranks thirty-seventh. The French system cost 11.6 percent of its economy in 2010, six percentage points less than the 17.6 percent of the American economy devoted to health care.

How much is six percentage points of the American economy, the extra burden Americans bore compared to the French? In 2010 it was equal to almost the entire federal income tax, which came to 6.3 percent of American gross domestic product. In other words, all else being equal, if Americans had put the French system in place in 2010 they could have eliminated the federal income tax that year. In 2013 they could have eliminated about half of income taxes. That is just measuring the American costs that are above the French cost when measured as a share of the economy.

Now consider the total cost, public and private, of U.S. health care. It is significantly greater than the total of corporate and individual income taxes, as well as payroll taxes. For each dollar paid in all three of those taxes in 2010, health care came to $1.29.

Health Care Spending Graph for Divided Weekend Reader


Take a look at your pay stub to get an idea of the kind of money being spent on a system that fosters personal bankruptcy, bedevils small business, and leaves the United States ranked thirty-first among the thirty-four OECD countries in preventing premature death.

Capitol Hill Republicans say the federal government is “structurally and financially broken” and that “three programs—Medicare, Medicaid, and Social Security—account for over 40 percent of total spending.” These costs, the GOP says, are “harming job creation and growth,” while “projections of future spending growth are nothing short of catastrophic, both economically and socially.” The Republicans offer what they say is a solution—a promise to “empower millions of seniors to control their personal health care decisions,” a vow immediately followed by a promise to cut federal spending.

The clearest explanation of what that would mean comes from Representative Paul Ryan of Wisconsin, the 2012 Republican vice presidential nominee. Before he started obfuscating during the campaign, Ryan laid out his plans in detail. He boasted that by changing Medicare from a plan that provides treatment for every older American into one that gives seniors a fixed sum to buy their own health insurance, taxpayers would save through 2084 the present equivalent of $4.9 trillion. What Ryan proposes is to change Medicare from a defined-benefit plan into a defined-contribution plan, which is to say from whatever health care an older American needs to whatever he or she can afford on a fixed budget.

His plan would, for sure, save the net present equivalent of almost $5 trillion. What Ryan did not mention is that for each tax dollar his plan saves, older Americans would have to spend $8 out of pocket.

We know how Ryan’s plan would raise total costs because of work by David Rosnick and Dean Baker, economists at the Center for Economic Policy and Research, which promotes government policies that it says would benefit workers and the poor. Rosnick and Baker applied the same formula that Ryan (or his staff) applied to the same Congressional Budget Office data not just for Medicare spending, but for private spending as well. For a long time, private health care costs have been rising faster than Medicare’s.

It makes no sense to spend $8 out of pocket to save $1 in taxes. Beyond that, older people do not have the money to cover those higher costs. A tenth of Americans age seventy-five and older live below the official poverty line. Another 24 percent have only a tad more.

Every indicator shows that Americans do not have enough for their old age and that a shrinking number have pensions. Ryan and many other, but not all, Capitol Hill Republicans also say they want to cut future Social Security benefits, if not kill the program. So if older Americans have less income how would they cope with higher private medical costs? Ryan will not answer questions about that, but the answer is obvious: they will die sooner for lack of medical care.

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Why would any Americans under age fifty-five, whose health care benefits Ryan wants to cut when they reach sixty-five, think they can afford to spend $8 to save $1 of tax? After withering criticism, Ryan softened his plan, saying those who wish to may stay in traditional Medicare. Anyone not rich who can count would stick with Medicare. That means Ryan’s promised $4.9 trillion of taxpayer savings would never materialize. Alan Grayson, the combative one-term Democratic representative from Florida, got it right when he said on the House floor in 2009: “The Republican plan—don’t get sick and if you do get sick, die quickly.”

In the 2012 elections, the Democratic platform called for universal health care. “We will end the outrage of unaffordable, unavailable health care,” it said, though that party promise remained unfulfilled for six decades. Indeed, President Nixon had agreed to universal health care back in the early 1970s, but union leaders put him off for a year, hoping for an even better deal, and ended up with nothing when the Watergate scandal consumed the White House.

President Barack Obama’s Patient Protection and Affordable Care Act will enable those with preexisting conditions and twenty-somethings without work to get health insurance starting in 2014. But the Obama plan does nothing to address the larger economic problem: American health care costs too much and needs replacement, not a nip and tuck.

Portugal, with half the income per person as America, provides universal health care for its citizens. Cuba, the CIA tells us, ranks fortieth in infant mortality, while the United States is nine steps lower at forty-ninth, an astonishing fact given U.S. spending compared to the poverty induced by Castro’s collectivist economic policies.

Doing worse than Portugal and Cuba is not just costly, it is immoral. Americans should be ashamed that they rank behind Cuba in any measure of health care and quality. And they should be angry that they pay so much but get less than the rest of the modern world in quality and reach of care.

If you enjoyed this excerpt, you can purchase the full book here.

Copyright © 2014 by David Cay Johnston. This excerpt originally appeared in Divided: The Perils of Our Growing Inequality by David Cay Johnston, published by The New Press and reprinted here with permission.

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