Robert Samuelson: "We should not be stampeded into far-reaching changes that have little to do with today's crisis"

Matt Welch | April 13, 2009

The Washington Post's resident op-ed economist argues today that President Obama's big-think plans constitute the opposite of what we traditionally consider "economic progress"; i.e., the productivity of getting more output for less money.

Consider global warming. The centerpiece of Obama's agenda is a "cap-and-trade" program. This would be, in effect, a tax on fossil fuels (oil, coal, natural gas). The idea is to raise their prices so that households and businesses use less or switch to costlier "alternative" energy sources such as solar. In general, we would spend more on energy and get less of it.

The story for health care is similar, though the cause is different. We spend more and more for it (now 21 percent of personal consumption, says Brookings economist Gary Burtless) and get, it seems, less and less gain in improved health. This is largely the result of costly new technologies and the unintended consequence of open-ended insurance reimbursement that encourages unneeded tests, procedures and visits to doctors. Expanding health insurance might aggravate the problem. Many of today's uninsured get health care for free or don't need much because they're young (40 percent are between 18 and 34).

Together, health care and energy constitute about a quarter of the U.S. economy. If their costs increase, they will crowd out other spending. The president's policies might, as he says, create high-paying "green" or medical jobs. But if so, they will destroy old jobs elsewhere. Think about it. If you spend more for gasoline or electricity -- or for health insurance premiums -- then you spend less on other things, from meals out to home repair. Jobs in those sectors suffer.

The prospect is that energy and health costs may rise without creating much gain in material benefits. That's not economic "progress."

Whole thing here. And read Samuelson's great "Lessons From the Great Inflation" article in Reason's January issue.

More on the magic elixir of Obama's "green jobs" from Senior Editor Jacob Sullum here, here, here, and here; and from Science Correspondent Ronald Bailey here, here, and here.

Comments

|4.13.09 @ 10:59AM|#

The centerpiece of Obama's agenda is a "cap-and-trade" program. This would be, in effect, a tax on fossil fuels (oil, coal, natural gas).

I can't tell you how pleased I am that cap-and-trade is universally recognized as a crypto-tax, not as a mere pollution regulation. I'm sure its proponents were counting on it not being tagged as a tax. They have failed, and therefore the rest of us win, at least this round.

|4.13.09 @ 11:02AM|#

"Think about it. If you spend more for gasoline or electricity -- or for health insurance premiums -- then you spend less on other things, from meals out to home repair. Jobs in those sectors suffer."

Of course, if you can get a "raise," because there is magically more money circulating in the economy, you can afford ALL of those things -- at least until prices catch up and you have to make the tradeoff decisions again.

|4.13.09 @ 11:25AM|#

This is largely the result of costly new technologies and the unintended consequence of open-ended insurance reimbursement that encourages unneeded tests, procedures and visits to doctors. Expanding health insurance might aggravate the problem.

It's amazing how many otherwise sensible people don't get this.

They also believe all that nonsense about the nobility of doctors; they are shocked and appalled when I suggest doctors intentionally run up their bills.

hmm|4.13.09 @ 11:33AM|#

Mom,"If it isn't bleeding profusely or falling off you ain't going to the doctor."

The next line usually being, "If you don't stop bitching you will be going to the doctor."

|4.13.09 @ 11:38AM|#

Taxes are what we pay for a civilized society.

bill|4.13.09 @ 11:44AM|#

The high cost of medical care can be boiled down to two causes, Medicare and Medicaid.

|4.13.09 @ 11:56AM|#

Yeah we should definitely wait to enact Obama's campaign promises until they are less politically tenable. Sometime in 2011 when the Republicans have begun impeachment proceedings over the president's ineligibility to be president.

New World Dan|4.13.09 @ 12:07PM|#

They also believe all that nonsense about the nobility of doctors; they are shocked and appalled when I suggest doctors intentionally run up their bills.

Doctors don't need to run up their bills. They usually get more than enough mileage out of covering their ass. The fear of malpractice and the fact that extra tests don't cost the doctor or patitent anything does far more to run up bills than any attempt to do so by most doctors. If copays were a percent (however small) instead of, or in addition to, a flat fee, people would pay far more attention to what their doctors were proposing.

Gilbert Martin|4.13.09 @ 12:42PM|#

"The high cost of medical care can be boiled down to two causes, Medicare and Medicaid."

More and more doctors are refusing to take Medicare patients because Medicare's reimbursement rate doesn't pay enough to cover their costs and the paperwork is a huge headache.

That pushed more people to the emergency room and the resulting cost are pushed to every privately insured or paying patient to cover that.

creech|4.13.09 @ 1:10PM|#

No, taxes are what we pay because we don't have a civilized society. If 'we" were civilized, we'd all gladly pay for goods and services that we used.

Michael M.|4.13.09 @ 1:30PM|#

It's amazing how many otherwise sensible people don't get this.

Evidence? I hear and read so much about what has caused our health care costs to spiral out-of-control. Everyone seems to have pet theories, but no one backs them up convincingly.

I tend to think it is a combination of factors, including those Samuelson identifies -- including, but not limited to. What's not clear to me is whether fixing any one of them will help enough to make a difference.

What does seem clear is that we are getting shafted. We have the highest costs by a wide margin and noticeably poorer results than many nations that pay a lot less. The central failure is that our present system is not effective at controlling costs. Having doctors cut back on "unneeded tests" isn't going to solve the problem, because nothing spells "lawsuit" better than an instance of one test turning out to have been needed after all. That "fix" will just shift the costs from one place to another.

|4.13.09 @ 2:39PM|#

I pointed out the unintended consequences of open-ended insurance reimbursement some motnhs ago.

It's the same effect as what happens when you have car insurance - the body shop will jack the price up cause they know you aren't even going to look at the bill. If you are paying out of pocket, they usually cut you a deal.

But in the case of doctors and hospitals, they have the added problem of risking a malpractice suit for omitting any test or procedure that might help.

Imagine if, say, auto repair men were expected to do a complete inspection of you car on every trip, and could be sued if they missed any problem. You can be sure there would be a lot of fancy new technology for analyzing your cars health, and that any trip to the auto shop would end up costing an arm and a leg.

|4.13.09 @ 2:45PM|#

Nationalize malpractice insurance and the government might try to contain the lawsuit costs.

jtuf|4.13.09 @ 8:41PM|#

From each according to his ability; to each according to his need. When you think about it, this plan rather fool proof. Making everyone work 14 hours a day (a task we are all able to do) in return for spartan food, shelter, and clothing (our needs) is bound to make ends meet. The problem is that setting the goalpost so low results in a life most of us would not enjoy.

economist (evil alternate goat|4.13.09 @ 9:36PM|#

"Having doctors cut back on "unneeded tests" isn't going to solve the problem, because nothing spells "lawsuit" better than an instance of one test turning out to have been needed after all."
This is one of the advantages of our National Health Systems in my universe. We don't have to pay for those unnecessary tests because the waiting lists are so long that most of the people on them croak before we have to run the test.
Long live the proletarian revolution!

economist (evil alternate goat|4.13.09 @ 9:37PM|#

Luckily, in our universe we won the war against the evil Russian capitalists.