And yet, this is not the biggest contradiction out there. No, the biggest contradiction is a "bi-partisan" one: Long-term deficit cutting is focused on broad middle-class entitelements, but the deficit itseld is caused by powerful oligopolies. This is one of the key insights in the paper, "A World Upside Down? Deficit Fantasies in the Great Recession" by Thomas Ferguson and Robert Johnson, which I first discussed in my earlier diary, "'A World Upside Down?'--a field biology approach to economic chaos"
In the paper's abstract, the authors write:
Our analysis of threats to the budget finds that not entitlement spending or Social Security, but the excessive costs of oligopoly in health care and defense spending play a large role in current concerns. So does the contingent liability of another financial crisis. In an era of unbridled money politics, concentrated interests in the military, financial, and medical industries pose much more significant dangers to U.S. public finances than concerns about overreach from broad based popular programs like" Social Security, which is itself in good shape for as many years as one can make credible forecasts.
In the paper, they further explain:
The real nature of the problems is almost entirely lost amid all the handwringing in the academy and the media: In the money-dominated U.S. political system, problems of out of control expenditures rarely arise from programs that confer benefits on large numbers of ordinary Americans. Political leaders responsive to major investors normally take extreme care to design such programs so that the burden of financing them falls heavily on precisely the people who receive the benefits. The famously regressive Social Security taxes, with their caps on incomes subject to any tax at all are a case in point.
In contrast, they describe where the real vast costs lie:
The nature of what we take to be the real threats to deficits - the budgetary "whales, as former Senator Simpson calls them - is quite different. It is that powerful blocs of corporations and investors have extensively captured the process of making public policy in key areas and used policy to reinforce oligopoly or even monopoly, while promoting demands for service that defy rational assessments. Such areas require wholesale regulatory reform, serious anti-trust restrictions, and cost-benefit systems that are not shaped by big money; controlling them by simply cutting expenditures, as deficit hawks usually propose, is like shooting at pigeons with a blunderbuss.
Social Security, of course, is well over $2.5 billion in surplus today. The idea that it represents a serious deficit threat is ludicrous, and, in fact, Social Security was not part of the Presidential Catfood Commission mandate in the first place.. Certainly, there are potential issues in the long run, but only potential, as the authors note:
If, for example, productivity runs even slightly higher than in the forecasts, then there may be no shortfall of any kind.
Raising the cap on income taxed could provide more funds as well. In any event, uncertain worries about 27 years from now should not be dominating our attention. OTOH, shortfalls in Medicare are another matter entirely-but not because of the government. Here, Ferguson and Johnson rely on an analysis by Dean Baker, which compares projected health care costs in the US with projections based on the costs structures of other countries. Here is a representative figure:
The authors go on to explain how this situation is rooted in the oligarchic power of the medical-industrial sector:
The U.S. spends a far higher percentage of its GDP on health care than any other country. It also gets less health for it than any other major country, in the sense other countries do just as well or be#er on most health indicators, though they spend much less.Why is no mystery, despite all the sound and fury of the health care "debate." The U.S. health care system is in no sense a competitive marketplace. Instead, it is chain of private oligopolies connected to each other by streams of payments administered by a vast, non-competitive private insurance network and the federal government. Producers and insurers together dominate government policymaking, at both federal and most state levels. Basically, health care regulation is like banking regulation: It is subject to the deadly syndromes we identified in an earlier paper on the financial crisis. Besides the tidal wave of direct and indirect political contributions, think tanks working in the area are virtually all dominated by producers. Perhaps even more devastating, a gap the size of the Grand Canyon yawns between compensation of regulators and the regulated, creating a pronounced tendency for regulatory agencies to function mostly as employment agencies for the regulated firms.89
The new health care reform law vastly extended coverage, but did li#le to control the oligopolies, not least because the administration relied on key parts of precisely that network to supply the political muscle to put over its program. The danger this creates for the future is obvious: some way has to be found to control the oligopolies just entrenched. Arguments about how health care affects the deficit are really bets on this and nothing else.
In the debate over the deficit, health care now functions rather like weapons of mass destruction in the run up to the invasion of Iraq. It is the device of choice to terrify the public.
The military-industrial complex, they note, is commonly taken to make up about 20% of the budget, but if we include all related functions--homeland security and intelligence agencies, plus significant parts of other Departments, like Energy, Transportation and State etc., plus the military share of the debt, the total nearly doubles:
One careful effort at a more comprehensive reckoning suggests that perhaps 39% of the proposed Fiscal Year 2011 budget goes toward defense.94
Finally, of course, the enormous costs inflicted by the financial meltdown that triggered the Great Depression need to be considered as well, along with the high probability of future such disasters. Such costs are necessarily much harder to calculate than, say, the excess costs structure of the American health care "system," yet they certainly tower far above the amount involved in the Social Security system, even under the worst-case projected scenario for it.
Conclusion
While it's vitally important to fight the immediate absurdity of massive tax give-aways in the face of large deficits, it's even more important to begin educating people about the real source of those deficists: the fat-cat non-competetitve special interests that currently control our government, and consistently have it do things that actively harm the vast majority of the American people, and very often are even consciously opposed by them.
No comments:
Post a Comment