Mark WeisbrotThe New York Times (International Herald Tribune), 9 de octubre, 2012En Inglés

Dean Baker
CNN Opinion, October 10, 2012

The New York Times coverage of Venezuela’s election must have been a disappointment to anyone who, even if they don’t like President Hugo Chávez of Venezuela, wanted to find out how he managed to win yet another election, this time by an 11 percentage poi

Dean Baker
Truthout, October 8, 2012

Mark WeisbrotThe New York Times (International Herald Tribune), October 9, 2012En Español

Dean Baker
The Guardian Unlimited, October 8, 2012

While we may not know whether David Brooks' try out as a Romney speechwriter was successful, he clearly is doing his best for the campaign. Today he pushes the idea that a voucher system is the only way to contain Medicare costs. This requires ignoring an awful lot of evidence, but that is an exercise at which David Brooks excels.

To start, in dismissing the idea that governments can be successful in designing policies that contain costs, Brooks ignores all the evidence from every other wealthy country. All of them have much greater involvement of the government in their health care system (in some countries like the United Kingdom and Denmark they actually run the system) yet their average cost per person is less than half as much as in the United States. And they have comparable health care outcomes, with all enjoying longer life expectancies. If health care costs in the United States were comparable to those in any other wealthy country we would be looking at long-term budget surpluses, not deficits. (We could look to trade to reduce costs, but policy debates in the United States are dominated by ardent protectionists in the area of health care.)

Of course relying on the private sector to contain costs in Medicare is not a new idea, contrary to what Brooks seems to believe. The Gingrich Congress' Medicare Plus Choice plan opened Medicare to private insurers as did President Bush's Medicare Advantage plan. Both raised costs. We also have the massive under 65 market which is overwhelmingly served by private insurers. Yet per person costs have consistently risen more rapidly for the non-Medicare population (Table 16) than for the Medicare population. This is in addition to the fact that the administrative costs as a share of expenses for Medicare are less than half of the costs for private insurers (this is even after adjusting for the higher denominator with the expenses of Medicare patients).  

Brooks seems to think it would be a great idea for providers to be paid by the patient rather than for the specific services provided. That may prove to be a very good idea and the Affordable Care Act actually puts in place a number of incentives to push providers into going this path. Most private insurers do not now follow this route in spite of Brooks' positive assessment of this approach. But Brooks still links this method of payment with private insurers.

In effect Brooks is arguing that if pointy headed government bureaucrats in Washington force private insurers to change the way that they provide benefits, then it will lead to lower costs than if we just left the market to itself. Brooks faith in the effectiveness of government intervention is impressive.

Interestingly, Brooks gives the voucher structure of the Medicare drug benefit credit for containing the costs of the program and holds it up as a model for Medicare more generally. In fact, the main reason that costs have been contained is that drug prices in general have risen much less rapidly than had been projected. In 2004, the Center for Medicare and Medicaid Services projected (Table 2) that we would be spending $440 billion in 2012 for prescription drugs. Instead we are now expected to spend $277.1 billion.

The slower growth in costs was in turn attributable to a slower pace of innovation in the drug industry. The Food and Drug Administration data put the number of breakthrough drugs developed in recent years at less than half the late 90s rate.(A priority approval means that a drug is seen as presented a qualitative advancement over existing drugs.) Perhaps Brooks wants to attribute the slowdown in innovation to the voucher system in the Medicare drug benefit.

Source: FDA and Knowledge Ecology International.

Greg Ip is usually a solid analyst of economic trends. However he apparently agreed to adopt house standards in his column for the Washington Post that told readers that "Obama is saving the economy, but maybe not in time to save the economy."

The main assertions in the piece are just flat out wrong. For example, the column tells readers:

"Paradoxically, the same forces that made for such a weak recovery during Obama’s first term suggest that the next four years will be better, regardless of who holds the White House. Right now, businesses, households and governments are all trying to wrestle down their debts. That “deleveraging” saps spending and blunts the power of low interest rates."

This statement would lead readers to believe that the problem is low consumer spending and low business investment because of high debt burdens. However the Commerce Department's data strongly disagrees with this assessment. Here is the ratio of consumption to disposable income over the last four decades. (Adjusted disposable income has to do with the statistical discrepancy in GDP accounts.)

Source: Bureau of Economic Analysis.

The Commerce Department strongly disagrees with Ip, telling us that consumption remains far above its long-term share of disposable income even if it is somewhat below the peaks driven by the wealth from the stock and housing bubbles. It also disputes the business side of Ip's argument. In the second quarter of 2012 (the most recent quarter for which data are available), businesses spent an amount equal to 7.4 percent of GDP on equipment and software investment. In 2007, the last pre-recession year they spent 7.9 percent. See the collapse? In fact, given the large amounts of excess capacity in major sectors of the economy, business investment is surprisingly high.

The real story of the current shortfall in demand is very simple. The wealth generated by the housing bubble led to unusually high consumption. It also led to a building boom in both residential and non-residential construction. Consumption fell back to more normal levels after the wealth that was driving it disappeared. Construction went from boom to bust, as we had enormous overbuilding of both homes and most types of non-residential structures.