October 17, 2011
Robert Samuelson warns that our children may not do better than us. His warning is based on rising health care costs, aging of the population and the resulting rise in Social Security and Medicare expenses, and the risk of an end to productivity growth. Remarkably the upward redistribution of income doesn’t feature in his story.
This is striking since upward redistribution is such a huge part of the picture. His example of workers not gaining is taken from a Health Affairs article that reported that 95 percent of compensation growth from 1999 to 2009 for a median four person family was eaten up by inflation and health care costs. However, if there had not been an upward redistribution of income over this period, compensation for a typical family would be about 10 percent higher (@$10,000 in today’s dollars).
Samuelson also raises the prospect of productivity growth winding down. He wrongly says that productivity growth is already committed to supporting an aging population. In fact, it would take just 5 percent of the projected wage growth over the next 30 years to make the Social Security trust fund fully solvent for the rest of the century.
Health care costs are projected to take more of people’s income, but this is far more the result of our broken health care system. If we paid the same per person for our health care as other wealthy countries we would be facing enormous budget surpluses in the decades ahead. If our per person costs were the same as the average of other wealthy countries it would free up more than $1.2 trillion a year ($4,000 per person) for other uses.
It is difficult to reduce health care costs because the public debate on health care is dominated by protectionists like Samuelson who are resistant to allowing more trade in health care services.
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