MONEY TALKS - Health care could be the death of us

We have seen the enemy, and they is us, my father likes to say. It's always true, of course, but sometimes it feels really true.
Norwalk Reflector Staff
Jul 25, 2010

 

We have seen the enemy, and they is us, my father likes to say.

It's always true, of course, but sometimes it feels really true.

According to the best, smartest people, Osama Bin Laden was taking a page out of Ronald Reagan's book on Sept. 11.

To over-simplify: Reagan initiated an arms race with the Soviet Union, forcing that country to spend more on defense than it could truly afford. Within a few years, its economy crumbled under the weight of its defense budget.

Bin Laden, in training with the Mujahadeen in Afghanistan had a front-row seat. He came of age, as it were, learning at Reagan's knee.

Bin Laden believed he could give us a dose of our own medicine. By attacking a prominent target on U.S. soil, Bin Laden thought he would force the U.S. to spend so much on security that once again, an economy would crumble under the weight of protecting itself.

Defense spending is inefficient. And economics hates inefficiency. Where many types of spending have a positive ripple effect throughout an economy, defense spending doesn't really. It tends to siphon off resources from everything else.

The U.S. has always been wary of this effect, and we've been lucky enough to be able to do something about it. Basically, President Eisenhower understood that we could get away with a relatively bare-bones military by buying lots and lots of comparatively cheap nuclear weapons.

The USSR, on the other hand, was not surrounded by two oceans, Canada, and Mexico. Without natural obstacles, it needed to provide some manufactured ones. Therefore we could always afford more than they could even without considering how much stronger the U.S. economy was.

So Bin Laden's idea was not crazy. However, it wasn't well thought out. Even with all our off-budget military spending, the U.S. spends at most 5 percent of GDP on defense. Even France spends more than half of that.

Basically, we can afford a lot of defense.

But, what Bin Laden could not do, we may do ourselves.

You can see it right now in Norwalk. The hospital is now the largest employer in the county. It has expanded to the tune of tens of millions of dollars (its own money too). We are now building a seventh pharmacy in a town of 16,000.

We watch Walgreens going up and we think, they've got to be nuts. That's a pharmacy for every 2,000 or so people. But that's not what they're looking at.

What they're looking at (aside from the fact that they're drawing from the whole county and not just Norwalk) is that today Health Care spending represents about 15 percent of GDP and by 2015, it's going to be 20 percent GDP.

Something that represents 5 percent of GDP can't really ever kill an economy. But something that's 20 percent....

To some extent, it depends on how efficient health care is. Does it behave like a commercial industry or is it like defense?

The cost of health care, currently about $6,700 per person is and has been rising, while the average person's real income has remained flat. Health care has become a serious burden for every American family.

GM and Ford are themselves faltering under the weight of the cost of health care. How long until the rest of the country follows? After all, health care spending is growing at more than twice the rate of the economy as a whole (sounds like a siphon to me).

Ultimately, an economy shouldn't be able to crumble under health care after all, it is, like anything else, optional. If the weight is too great for any family, economics says they should reduce spending. Except they don't spend. The system spends, and thus, the built-in corrective functions of the market have been removed.

A real solution is needed. It almost makes you glad it's (or at least it feels like) an election year.