Sorry, Dems. The problem really is entitlement spending.

Is Barack Obama winning the budget fight but losing the deficit war?

President Barack Obama just destroyed the Republican Party for its fickle, muddled and ultimately incoherent stand on the fiscal cliff.

It’s likely that the White House will make the GOP look stupid, weak or worse yet, radical again over the debt ceiling.

In the midst of a fragile global economic recovery, no one with a lick of common sense wants the United States of America to default on its debts.

The weird thing about these Democratic victories is that, in broad terms, Republicans and conservatives are in the right.

Our fundamental fiscal problem really is out of control spending on social programs, and not taxation or the size of the US military.

Here are the basic facts.

Through post-War American history, tax receipts to the US treasury and total Federal spending have remained fairly stable, floating between 15% and 20% of GDP.

From the Great Society years through the era of Newt Gingrich and the Republican renaissance — and despite all the ideological debates — government remained remarkably stable in size.

That’s according to figures compiled by the White House itself.

Yes, the Bush tax cuts pushed us from the higher end of that scale (around 20.6% of GDP) down toward the middle of that scale (taxation around 17.6% of GDP).

Which was problematic, given that President George W. Bush exploded spending, boosting entitlements and launching a couple of wars that he had no practical way to pay for.

And yes, the Obama tax cuts — passed as part of the controversial stimulus — helped push revenue even lower, down to around 15.1% of GDP.

This at a time when he too blew up spending, paying for a vast array of programs designed to keep the domestic economy from tanking.

But it’s important to note that taxation, even through this hardscrabble period, remained in the range that was recognizably “normal.”

By the White House’s numbers, however, Federal spending has now ballooned to well over 24% of GDP.  That’s far outside what you might describe as the “social contract” range for America’s post-war society.

Indeed, Federal spending hasn’t been this high, as a percentage of GDP, since 1946.  When you factor in state and local government spending, the public sector’s role in our economy has reached levels not seen since World War 2.

Which is a problem.  Even if we bring taxation back up to the historic high-end level of around 20% of GDP, America will face deficits of between 2% and 4% of our entire economy into the foreseeable future.

Nate Silver’s graph captures the rise of entitlement spending in American government. It now comprises one in five dollars spent on government. (Source: NYT)

That is — in layman’s terms — a massive and unsustainable level of debt-building.  It just won’t work.

Liberals have tried to argue that the debt problem is a short-term crisis caused by low Bush-era taxation and a bubble of stimulus spending.

The economy will recover, more people will go back to work, the ship will right itself — especially if we just boost taxes a bit to close the gap.

Unfortunately, the numbers say otherwise.

Nate Silver, the esteemed New York Times statistician, just published a devastating essay showing the rapid and long-term increase in spending on entitlement programs.

He points out that when you include local and state spending, social entitlement and welfare programs already represent nearly 20% of GDP.

“Spending on entitlement programs was about $500 billion per year in 1972 in today’s dollars,” Silver writes.

“If it had increased at the same rate as the gross domestic product, it would now be about $1.4 trillion. Instead, it is now about $2.9 trillion per year. What this means is that there has been about a $1.5 trillion increase in entitlement spending above and beyond gross domestic product growth.”

In other words, every single year since 1972, we’ve added roughly $38 billion to the cost of entitlement programs, again and again and again, and that’s beyond the rate of inflation.   With our aging population, that number is only expected to grow.

By way of contrast, military spending, as a percentage of GDP, has been stable or declining for decades.

So why aren’t Republicans winning this fight?  Several reasons.

First, they haven’t confronted their own history.  Yes, Barack Obama’s stimulus spending ballooned government spending as a share of GDP.  But George W. Bush was no piker.

He added $900 billion worth of red ink during the final year of his presidency alone.

The GOP has also resisted even modest calls to cut the size of the US military, despite the fact that we’re winding down two wars, are in something akin to peace time and currently spend more on defense than the next ten nations in the world combined.

Meanwhile, Republicans continue to lavish attention on symbolic budget cutting gestures — public broadcasting, Planned Parenthood, etc. — and on ludicrous proposals that tax revenues be cut even further.

This posture has made it all but impossible for conservatives to propose the kind of serious, credible and (yes) painful budgets that would bring social spending back into line with historic norms.

I suspect Republicans could regain the high ground very quickly.

First by arguing for comprehensive tax reform –simplifying the system, closing loopholes, modest and targeted tax rate hikes, etc. — that would bring overall Federal revenues back to roughly 19% of GDP.

That’s the level we saw during the first three years of Ronald Reagan’s presidency.

Second, by pushing for balanced spending reductions that phase in cuts of roughly 1% of GDP per year, bringing Federal spending down to about 19% of GDP by 2018.

A serious proposal of this kind would mean abandoning Ayn Randian fantasies about returning the public sector to the role it held prior to the New Deal.  (In the early 1930s, Federal spending was only about 3% of GDP.)

But a credible budget balancing plan would also force Democrats to engage with a real and credible set of fiscal arguments about the limitations of government.

The days where Barack Obama could shadow box with tea partiers in Ben Franklin costumes would be over.

By phasing the cuts in slowly, we would also avoid the kind of “austerity cliff” that has crippled the recovery in parts of Europe.

As a final note, it’s an open question whether Democrats in Washington might try to grapple with some of these fiscal realities on their own.

I know conservatives are deeply skeptical about this.  But California’s Democratic governor, Jerry Brown, worked with a Democratic legislature to rein in his state’s fiscal crisis — through big tax hikes but also through massive cuts to social spending.

That state is now expected to post significant surpluses.

And New York’s Democratic governor, Andrew Cuomo has done much the same, taking on public sector unions over wages and benefits, curtailing pension costs, capping local property taxes, and adopting something resembling fiscal discipline.

Is it possible that President Obama, in his second term, might lay out a plan that would follow this Democratic model, stabilizing America’s long-term fiscal health?

We may get our first answers to that question when Mr. Obama gives his second inaugural address on Monday.

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156 Comments on “Sorry, Dems. The problem really is entitlement spending.”

  1. Mervel says:

    I know that like single like single payer is for conservatives, bringing in competition is anethema to liberals, but how many health insurance companies do we have competing for our business? Health insurance needs to be like auto insurance with healthy national competition for our business, instead we are made to feel lucky that some lousy over priced health insurance company is willing to insure us at all. That is a sign of a monopoly system., it needs to be cracked open. The same goes for the stranglehold on the number of doctors that are allowed to graduate each year in the US, it should be doubled, but if you do that you have more competition and the prices fall, this is not what the AMA wants.

    Until prices come down on medical care we are going to be hurting.

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  2. hermit thrush says:

    bringing in competition is anethema to liberals

    mervel what are you smoking?

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  3. hermit thrush says:

    Krugman’s prescriptions for the great recession have not been that accurate.

    what specifically has he gotten wrong?

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  4. knuckleheadedliberal says:

    Actually Mervel, in NY we have much more competition than in most states. I have a choice among several providers and each provider has a multitude of plans. Talk to a health insurance broker sometime; they will tell you that there is so much choice that you as a customer have no way of understanding it all – that is why you need them, people who spend all day every day reviewing plans.

    They used to call that “wow ’em with the bulls***.”

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  5. knuckleheadedliberal says:

    And did you know that there is money built into every plan to pay for an insurance broker? Who pays for that?

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  6. mervel says:


    What he suggested did not work. Of course his claim was that it was not enough, others claim that it was the entirely wrong plan to start with and the fact is the debt would even be higher under his plan and he miscalculated how high the debt ended up being. We were told in WWII we had much higher debt per GDP, no more now we match WWII, and we are not fighting a world war, this is very concerning. We are literally just blowing money, not on infrastructure, not on helping the poor, not on giving people jobs, not on education, we are just sending out checks to many people who do not even need them, this is the issue with Medicare and Social Security.

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  7. mervel says:

    I don’t buy it Knuckle.

    We could only get two health care plans for our staff in SLC, one was extremely expensive. We need national competition for health care insurance and we need national competition for doctors and all medical services. Right now we have a over-regulated monopoly system. I should be able to buy health insurance from California or Connecticut etc.

    The fact is all of these guys make to much. Now I would agree with you that I don’t think we can get to a true competitive system at this point, so why not go with a single payer. At least that way the government could force cost control it could force all of these guys to accept less money.

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  8. hermit thrush says:

    mervel, what are you talking about? i’ve been reading just about every word on krugman’s blog going back to at least 2007, if not earlier. he’s been overwhelmingly vindicated by what’s happened. he told us in advance that the stimulus was too small. he told us in advance that europe’s turn to austerity wouldn’t work. he told us in advance that interest rates and inflation would stay low while the economy was still depressed. he’s just been right right right.

    you make two particular claims about what he said. the first is that “what he suggested did not work.” no. what he suggested was not tried. and what was put into place, he was completely right about.

    the second is that “he miscalculated how high the debt ended up being.” where’s the calculation? fwiw, he’s also argued that, under current circumstances, austerity stands a good chance of being self-defeating. so it’s not at all clear that debt (at least in the medium term) would be higher under his plan.

    if everyone could read just one blog (besides the in box, of course!), it should be krugman’s. even if you come from a very different political persuasion, just read it. you’ll be much better informed.

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  9. hermit thrush says:

    Newt, try Amity Shlaes, “The Forgotten Man” for a more critical look at FDRs micro management and bungling efforts at making himself a King.

    it’s absolutely true that the new deal contained some mistakes. but shlaes’s book is crappy revisionist history. jonathan chait has a very thorough takedown. too many good quotes for there to be a single definitive one, but this gives the gist:

    Now here is the extremely strange thing about The Forgotten Man: it does not really argue that the New Deal failed. In fact, Shlaes does not make any actual argument at all, though she does venture some bold claims, which she both fails to substantiate and contradicts elsewhere. Reviewing her book in The New York Times, David Leonhardt noted that Shlaes makes her arguments “mostly by implication.” This is putting it kindly. Shlaes introduces the book by asserting her thesis, but she barely even tries to demonstrate it. Instead she chooses to fill nearly four hundred pages with stories that mostly go nowhere. The experience of reading The Forgotten Man is more like talking to an old person who lived through the Depression than it is like reading an actual history of the Depression.

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  10. Newt says:

    hermit thrush-

    I do read one other blog besides this one, and it is Krugman’s. I wish there was one respected mainstream conservative or middle-of-the-road economist with a track record who would stand toe-to-toe and debate him, but he or she does not seem to exist. Instead all we get is this conventional wisdom from the usual suspects about how the debt is horrible and is going to do this and that, but they never seem to be right, and krugman nearly always is. The only saw him debate anyone it was a couple of years ago with that CNBC evening show host, also a WSJ editorial board member, kind of a business/economic O’Reilly, and Krugman chewed him up and spit him out. I’m not sure how much impact he has on policy, however. Not very much, it seems.

    One thing, I can’t find a really record of a really strong warning from him about the financial meltdown. i cited something in one of my first comments on this thread, about his 2005 warning about the housing bubble, but can’t find anything where he warns of the involvement of the big banks with debt collateralization and all that. If he failed to catch that, then his standing falls in my eyes from God of All Economic Wisdom to merely Better Than Anyone Else.

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  11. knuckleheadedliberal says:

    Newt, I knew there was going to be a financial meltdown. If I knew it Krugman probably expected everyone knew it.

    So how did I know? Because years ago I had 3 credit cards. Then the banks kept buying each other and each time they did they sent me a new card. I just threw them on a pile unopened. One day, I dont remember exactly when, maybe in 2006, I decided I should get rid of all those extra cards. I had more than 20 of them and my credit limit on each one ranged from $20,000 to $100,000.

    It was clear to me at that point that there would be millions of people who were flooded with cards just like I was who were probably running up way too much debt on those cards. You can’t expect me to believe that the heads of all those big banks didn’t know about that.

    Coincidentally I had been talking to people who had taken 2nd mortgages on their homes who were telling me about how their banks were telling them to leverage the equity in their homes to buy new snowmobiles or a pool or other such stuff.

    And everyone who had a mortgage was talking about how they were sending mortgage checks to some bank they had never heard of.

    It didnt take a Nobel Prize winner to figure out that there was a giant scam going on and it was going to collapse pretty soon.

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  12. Rancid Crabtree says:

    “Walker says:
    January 22, 2013 at 1:19 pm

    Speaking of credentials: “Amity Shlaes graduated from Yale University magna cum laude with a bachelor’s degree in English in 1982.” (Wikipedia)

    I’m not seeing anything else, although she has served on some prestigious right-wing think tanks.

    Here’s Krugman’s take on her: Amity Shlaes strikes again.”

    Here Walker, I’ll do the work for you.

    Are you a well respected Professor and author who has written for the WSJ or served in any of her capacities? This woman has far, far more credentials than Obama yet his “Professor” status and Ivy league ed are considered unquestionable proof of his intellect. Just because she bucks the establishment doesn’t mean she’s a dunce, in fact it likely means shes on the right track!

    As far as Krugman, he disagrees with her but offers no basis for why he disagrees. Read her books, it’s there for you to decide. What she writes is entirely in line with what my grandparents who suffered under FDR reported.

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  13. Rancid Crabtree says:

    Newt, how is a stimulus given to large, wealthy corporations and businesses using tax payers dollars any different than giving large, wealthy corporations and businesses a tax cut? In both cases the idea is that they will spend the money growing the business, hiring people, so the tax money will flow back to the gov’t. In both cases it’s trickle down. You design a way for the wealthy to have more money to use, they hire people who spend the money and we collect income tax, sales tax, etc. A true stimulus that isn’t trickle down would be things like the Bush/Obama tax rates, the Bush individual surplus rebate check, things like that. You can’t call giving money to States for infrastructure or mega corps anything but trickle down. It’s the same thing.

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  14. Rancid Crabtree says:

    BTW- as fart as Sirotas little blurb, that hardly offers any proof of anything, and that from a political hack writer who worked for Bernie Sanders. You think he’s going to believe any opposition to the status quo “FDR was God” tripe?

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  15. Rancid Crabtree says:

    Knuckle, judgement is being passed on all of us that DID plan and work around our runs of bad luck, why isn’t everyone else the same? My beef is that gov’t has sold the idea that SS is enough to retire on. It’s not and we can’t afford to make it enough. Go to means testing for a start. There’s no reason Joe Biden or John Kerry should be able to receive SS, or Geo. HW Bush either. Morph it into what it really is- welfare for the elderly poor. If you have a decent pension, as I do, perhaps you should only receive a reduced payment. No it’s not “fair” and it sucks for me and others like me, but it will provide more funding for those that really need it and give a giant dope slap to the fools that believe gov’t will provide cradle to grave funding for them.

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  16. Rancid Crabtree says:

    I would also note Knuckle, that your insurance costs are going up because, at least in part, of Obamacare. Mine did. My wifes did. Sorry, but I recall you supporting the bill even though you were more in favor of single payer. You’re on lofty company though, Al Franken and several other Dems that voted for Obamacare are trying their best to get exemptions for their big dollar donors.

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  17. Walker says:

    “This woman has far, far more credentials than Obama yet his “Professor” status and Ivy league ed are considered unquestionable proof of his intellect.”

    She still has only a BA in English from Yale, far as I can see. And last I heard, Yale was in the Ivy League.

    Have you ever noticed that the only conservative women who make waves in the Republican party are the hot ones?

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  18. knuckleheadedliberal says:

    RC: “Morph it into what it really is- welfare for the elderly poor.”

    No, RC because that is exactly what people like you want it to be so that you can demonize people who collect Social Security.

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  19. Rancid Crabtree says:

    Hermit, I’ve read at least a dozen widely acclaimed books discussing the Great Depression. They all repeated the same talking points- FDR and his Brain Trusts were pure genius, it was all that saved the US and the world, that no real mistakes were made by FDR himself. They never fit in with the evidence I saw and heard from people who were there at the time, people who were badly hurt by FDRs policies. Consider that he seized- confiscated-all privately held gold. Oh yes, he paid the owners at market value. Within days the market values climbed 40% by FDRs decree. A 40% loss for all those people that had their gold seized. My relatives lost their hotel on Lake George and were forced to move back to the farm in Smiths Basin where they lived a subsistence lifestyle. You never, ever hear about those people in the “FDR is God” books. Shlaes book fit their stories to a “T”. You find the same lack of honesty in all the books about the McCarthy era, yet it’s clear by looking at documents released some years back that Alger Hiss and the gang WERE communists. People call that revisionist history. Maybe it is, but it’s fact.

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  20. Rancid Crabtree says:

    Walker, I would hardly classify Amity as “hot”. And the point is that she has actual real world working experience and the same Ivy League background as many of the lefts heroes, yet somehow she’s an idiot? Look at her bio and tell me why so many prestigious organizations would hire this idiot?

    Knuckle, no. You have it entirely wrong. The purpose is to bring it back to what it was supposed to be int he first place. at leas the claimed purpose, to provide a real safety net for those who were at the bottom of the heap. I find it markedly hypocritical for you to bash my ideas when you are so fond of tearing into “the rich” at every other point. We have a choice- lay the burden on the backs of the taxpayers with increasing taxes or limit the ability to receive funds to those that actually need it. Why do you object to that? Isn’t that the way things are supposed to work? Those who need help get it?

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  21. knuckleheadedliberal says:

    About health insurance. I got a letter last year from my insurance company saying that ObamaCare was goping to increase costs — I dont remember the exact number but it was something like 2%.

    My current plan is going up 15.9%

    It isn’t about ObamaCare, it is about the insurance company wanting to get rid of the plan I’m in. The company rep told me that people are getting out of the plan because it is a dinosaur. So they offered me other options. These options are all high deductible or deductible with coinsurance. Deductibles are from $1,500 to $2,500 per year.

    So they are figuring that the vast majority of people wont have $1,500 worth of healthcare costs per year and they wont have to pay out anything in insurance but I will still be paying in $thousands. My company is very small and pays 100% for health insurance, but that isnt true for most private businesses. For most businesses the employee picks up an ever greater share of the cost insurance every year and by switching from HMO type care to this EPO type coverage more of the cost of healthcare will be thrown onto the individual. Some people will be able to afford that many wont.

    So what do I get from my health insurance personally? Well, in the time that I’ve paid for it through my own company I’ve had a check-up once a year and I went to the Emergency room once to have some stuff taken out of my eye. That’s it. So my copays paid for almost all of the services I’ve received and the rest of the money has been spent on taking care of other people and paying the salaries, profits, overhead, and dividends to investors in the insurance company.

    I dont mind all that much that much of my premiums are helping to pay other peoples’ health care costs. But I would prefer it if the government took on all the costs, had better oversight of the providers, pharma, and medical device industry and covered every single person in the country – tourists and illegal immigrants and all.

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  22. Walker says:

    “…she has actual real world working experience…”

    Like what? She’s a journalist and an author. She’s a “professor” only in the sense that she teaches a single course at NYU. Where does the “real world” experience come in?

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  23. knuckleheadedliberal says:

    Stop it RC, I dont “tear into” the rich. I know plenty of what people think of as “rich” people. I also work for the people who are really rich – the kind of rich that most people can’t even comprehend. I like most of them just fine, they are just like other people. Most are nice and some are jerks.

    What offends me is when the Capitalist system runs amok without proper restraint and some people get ridiculously wealthy in schemes that should be illegal.

    I wouldnt mind being a millionaire myself, though to be honest I dont consider being a millionaire to be rich. But I’m not prepared to be a millionaire if it means taking more than a reasonable profit from my work. I dont inflate my prices when I work for rich people like some do, and like rich people believe everyone does. I expect people to be honest and fair and the last couple of decades show that many people who rise to the highest positions in a Capital market are willing to do things that arent honest and fair.

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  24. Newt says:


    I agree that Krugman’s status as a Nobel Prize winner and Ivy League Professor, and Shales apparently only a BA, is not really important. The fact that he has consistently been right, and his highly-qualified opponents in academia, the media, and the political world so consistently WRONG, does. Or maybe Amity Shales has racked-up a better record in economic forecasts than Krugman. I’m holding my breath in anticipation of seeing that link.

    If you want to call the New Deal and WWII War effort “trickle down”, and nobody else does, that is your business.
    If you want to say that Bush 43 policies’ were not trickle down, ditto.

    I think the facts are pretty clear whose policies were followed by increases in prosperity, and whose were followed by economic catastrophe. If you think that that there was no connection between these events, that is also your business. But it is, to say the least, unconvincing.

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  25. If Clapton is God, Warren Haynes is Jesus says:

    Valid points, Philip, on the pension issue. And while there’s still need of reform to some degree, some of your concerns have been addressed with the creation of the new tier five and six levels of the state pension system at least.

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  26. myown says:

    Seems like Krugman is responding to this discussion: “….the idea that we’ve had some kind of spending surge, and that current deficits reflect that surge, is just wrong, and distorts public discussion.”

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  27. Newt says:

    It’s about time Krugman got involved with this thread.

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  28. Walker says:

    “…Krugman’s status as a Nobel Prize winner and Ivy League Professor, and Shales apparently only a BA, is not really important.”

    Well, no, I suppose you could have some untutored genius… But economics is a really esoteric field, not one in which down-to-earth business experience would be as good as or better than years of academic training. It really is rocket science. Running a business is nothing like running a nation’s finances. Not that I see any evidence that Shlaes ever ran a business, for that matter. I’m sure she’s very bright, and a good writer. That’s not enough.

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  29. Rancid Crabtree says:

    Walker says:
    January 23, 2013 at 9:31 am

    “…she has actual real world working experience…”

    Like what? She’s a journalist and an author. She’s a “professor” only in the sense that she teaches a single course at NYU. Where does the “real world” experience come in?

    Are we dense today? She has more real world work experience in her field than our Adjunct Lecturer/Community Organizer President! She has more credentials than Sirota too. The point is she’s coming at it from a different perspective that goes against the hero worship and that’s about all anyone can offer in criticism.

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  30. Newt says:

    This speaks to a larger issue.

    If Shales, or somebody, was out there seriously involved in economic policy out of business, or media, of academia, or a combination, and they were a top performer in predicting trends and policy outcomes, better, perhaps, than Krugman, then that performance, not degrees or honors, would be the key factor in trusting them.

    A while back I heard a guy on PBS news Hour say that conservatives tend to take the position, “This is good, therefore it must be right.”, whereas liberals tend more often (with many exceptions) to say “This is right (meaning correct, accurate, confirmed by objective experience) , therefore it is good.” In other words, conservatives basing views of the world preconceived values, rather than letting objective reality shape their views of the world, and how best to deal with it. I think that I see a lot of that here. This practicing Christian also believes that this tendency also correlates strongly with why strong religious faith is found much more often among conservatives than liberals. Revealed TRUTH, scriptural or economic, trumps mere observed and experienced truth.

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  31. Rancid Crabtree says:

    Knuckle, you missed the point. I’m asking why means testing is wrong when it achieves what you and others have called for repeatedly- help to those who actually need it.

    Newt- I didn’t say anything about Shlaes as far as economic forecasts. I said I agreed with her opinion and that she was as qualified as anyone else regarding taking a look at FDR and the Depression. I also stated I didn’t see any substantive difference between Reagans Trickle Down model and Obamas Stimulus.

    Walker, what business did Krugman run? There are a lot of well respected economists and Professors of Economics that don’t agree with everything Krugman or anyone else says. And? Many of those people have good track records too, no one gets it 100% as Mervel noted. And if in 20 years Shlaes is a Professor at Yale or Harvard, will that mean you’ll then agree with her because of her position? Krugman is running a good track record now but I’m putting all my eggs in one basket.

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  32. knuckleheadedliberal says:

    I don’t know what Krugman has to say about the healthcare industry but I predict that we are near a collapse without major government intervention.

    Lets start by understanding that the health care business is divorced from the free market. Hardly anyone pays for their own healthcare out of pocket and probably nobody really understands the market well enough to make informed decisions on their treatments. Do the doctors know the relative costs of the drugs they prescribe? Do pharmacies post price lists of all their drugs so you can compare? Do people in rural areas really have much choice in who their health care provider is, which hospital to go to?

    hospitals are in competition to get customers for their ever more expensive and exotic imaging machines so they have incentive to run unnecessary diagnostics, doctors are afraid of being sued so they want more tests done. Medicare and Medicaid are squeezing providers by limiting reimbursement.

    Once a year the benefit administrator of company health plans tries to figure out which plan to buy for the coming year but their decisions are based on the economics of the insurance industry not on the cost or value of various medical treatments.

    When a person is sick they are in the worst position to make informed and dispassionate decisions on their treatment and the economic implications of their treatment. When a person is diagnosed with cancer, or a family member has a stroke or something and the family is distraught it is difficult for patients, their families, or even the doctors to know what the proper economic decision should be among the treatment options.

    And the options grow in variety, complexity and expense at a tremendous rate.

    Why are so many people in their 80’s getting joint replacements? I mean come on, isn’t that a matter of medical device manufacturers, doctors and hospitals in collusion to skim some more money out of the insurance companies, and the insurance companies don’t care all that much because they are just going to raise people’s rates next year to make up for the escalation of costs.

    It all adds up to a bubble.

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  33. Walker says:

    “Are we dense today?”

    Good question! Why are you comparing her to Obama? She’s not running for President, and he’s neither an economist nor a journalist. I thought we were comparing her to Krugman.

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  34. Walker says:

    “Walker, what business did Krugman run?”

    I didn’t claim he had real world experience. That was you, talking about Shlaes. Let’s keep things straight, shall we?

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  35. hermit thrush says:

    shlaes’s credentials are really neither here nor there. some highly credentialed economists and finance types have put together terrible track records the past few years; some people without big time credentials have done great. krugman has it exactly right, speaking about commentator martin wolf:

    And note Portes’s praise for Martin Wolf, which I heartily second; Wolf doesn’t even have a PhD. And that matters not at all; what he has is a keen sense of observation, a level head, and an open mind, all attributes lacking in far too many of my colleagues.

    yes, you do have to learn some things to be able to comment effectively on economics. but anyone can do it. you just have to read and think. i think matt yglesias is a very fine blogger on econ matters, but he’s a philosophy major who (i believe) never took a proper economics course. instead he’s read some books on his own. so what?

    so no, the problem with shlaes isn’t her credentials. the problem is squarely with the content of what she writes. she’s a hack! her book isn’t any kind of serious history of the new deal. i mean, i know it’s long, but go read chait’s review that i linked to above.

    and rancid writes:

    As far as Krugman, he disagrees with her but offers no basis for why he disagrees.

    which is nonsense. in the post that walker linked to, krugman is addressing not shlaes’s book, but an opinion piece in which she actually writes “The Great Society of [the 1960s] was the ultimate Keynesian experiment, and it didn’t work very well.” and krugman rightly gives her hell for that.

    in fact, that line of hers perfectly illustrates her hackitude. if you’re going to write extensively about the ecnomic-political history of the depression and subsequent decades, then you’d better know really well what keynesianism is. but shlaes has revealed that she doesn’t have a clue.

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  36. hermit thrush says:

    Seems like Krugman is responding to this discussion: “….the idea that we’ve had some kind of spending surge, and that current deficits reflect that surge, is just wrong, and distorts public discussion.”

    krugman is right, but we should be careful. brian’s original post is about entitlement spending in the medium-to-long term, whereas krugman is talking about spending right now. long term entitlement spending projections — or more specifically, health care spending projections — really are scary. health care costs need to be brought to heel.

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  37. Mervel says:


    It really needs to change in a very fundamental way. But once no one wants to give an inch, to change health care means that those who work in the field will make less money there is simply no way around that and no one wants to even bring that up.

    Also the basic formulas for how we spend this sort of money. For example consider social security. Today social security is not just a retirement program, indeed, 40% of the people getting social security are not even of retirement age. All of these programs have expanded covering things that they never were intended to cover. Wealthy people don’t need Medicare, Medicaid does not need to offer all of the things that it does and so forth. There are simply no controls on any of these programs an almost willful refusal to consider even the most minimal of cuts. That attitude will have to change.

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  38. Rancid Crabtree says:

    Knuckle- Is the answer to a broken medical care system really gov’t intervention? Or is it addressing the core issues like you mention- doctors ordering tests that aren’t needed for CYA, no listings of options available to the consumer, things like that? I know people that pay out of pocket for their healthcare. They go in with, as an example, broken arm and they get an xray and cast and that’s it. No multiple xrays over the course of 2 months, no extra fluff and PT, that sort of thing. And the guy ended up paying a little over $600.00 for the whole thing. In the case of another kid with a broken arm with good insurance it was almost $13K!!! How is the State of Federal Gov’t going to fix all that?

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  39. Rancid Crabtree says:

    Okay Walker, I accept your apology for being dense.

    Thrush, read the books. Then decide.

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  40. Rancid Crabtree says:

    Knuckle, I’m still wanting to understand why means testing is not a good answer?

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  41. hermit thrush says:

    Is the answer to a broken medical care system really gov’t intervention?

    i really think people think too hard about this. the world is a complicated place. there are reasons to think that more government involvement would make the health care industry more efficient, and reasons to think that it would make it less efficient. it’s not clear what the answer is. so what you really have to do is to cut through all the theorizing and just consider the evidence.

    and the evidence is crystal clear. countries with more government involvement have cheaper health care. countries with less (like us) have more expensive health care. just yesterday matt yglesias flagged this chart comparing government health care expenditures per person in the u.s. and canada. it’s a breathtaking chart. the u.s. has spent more per person in every year going back to 2001. and the difference is growing. and the canadian government covers everyone! (so the table omits the massive amounts of private health care spending the u.s.)

    i have this crazy idea that if we want to rein in health care costs, we should try to be more not less like countries that are doing better than us.

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  42. Rancid Crabtree says:

    Thrush, is that chart apples to apples? Are all of Canadas hospitals, doctors, clinics, drug concerns in private hands or are they gov’t owned or public/private partnerships and does Canada have an price controls and supports involved? I haven’t looked, so I’m asking you since IIRC you live in the Toronto area. I also ask because people have compared us to Sweden in the past and I looked into it and found that the 2 systems are worlds apart and can’t rightly be compared.

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  43. hermit thrush says:

    the first sentence in the wikipedia article:

    Health care in Canada’ is delivered through a publicly funded health care system, which is mostly free at the point of use and has most services provided by private entities.

    lots more at the link.

    (also, i was in toronto for four years but moved back to the states last summer. about the only thing i miss is the health care!)

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  44. Walker says:

    And Rancid, I accept your apology for being muddled.

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  45. Rancid Crabtree says:

    Thrush, then how can you reasonably compare the 2 and argue costs? This is another case of using a statistic to prove a point when the statistic is not telling the whole story. All the stat says is the US spent more. It doesn’t compare all the details to give a really clear understanding of how the systems differ. I’m not saying we don’t in fact spend more than we need to, but without all the information I’d argue that it’s not apples to apples.You can say the US spends more on defense than Canada too, but even Canada admits they relied on the US to defend much of Canada for decades so they didn’t put money into it. Without all the information all you have is the US spends more.

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  46. knuckleheadedliberal says:

    RC, first law of socialism: everyone must be equal.

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  47. hermit thrush says:

    how is this not apples to apples? health care in both the u.s. and canada is mostly delivered by the private sector. the difference is in how it gets paid for. in canada the government pays for almost everything, and it ends up being more efficient.

    for what it’s worth, in britain the government runs the delivery side of things too. they’re even more efficient.

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  48. mervel says:

    I think the Canadian system is better than the British public system (which if you talk to Brits, is not that great compared to going private). Wealthy people in Britain do not use the public system they pay for better private care.

    Now the bottom line is though for the average American, both of those systems are better than we currently have if you compare costs and what we get for our spending in the US. The US health care system really is far far too expensive.

    Just take drugs. The same drug companies sell to the health system in Canada as sell to us; they charge Canadians much less than they charge us, why? For one reason, because they can. Canada says we are not paying that, this is what we will pay take it or leave it, they always take it. The same companies come to the US with the same drugs and charge sometimes over twice as much. The bottom line is we are just getting ripped off, and the scary part is that Obama care just institutionalizes the scam, drugs will not go down there is no cost control for drugs in his plan. Its nuts.

    So compared to our screwed up system I would rather go with the Canadian system and I don’t think the Canadian system is that great.

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  49. Rancid Crabtree says:

    Thrush, the Canadian Gov’t doesn’t pay for anything! The Canadian taxpayer does! What I’m asking is how far into the health care system is Canadas gov’t ownership? What are the differences between Canada and the US beyond gross costs? When I was looking into claims Swedens system was so much more efficient I found that Sweden owns the hospitals, employs the staff, owns the drug concerns and pretty much everything else AND takes something like 70% of everyones paycheck. Those are huge differences. That’s what I’m asking. Now you can tell me to look it up myself, but since it’s your claim I think you should defend it.

    Mervel, our gov’t has told people “what we will pay take it or leave it” too. That’s why it’s becoming so hard to find a doctor or hospital that will accept Medicaid/Medicare patients. That’s why my doctor is getting out of medicine in 4 years.

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  50. hermit thrush says:

    rancid, what part of “has most services provided by private entities” don’t you understand?

    if you want to get more into the weeds, another useful quote from the wikipedia article is

    The government does not participate in day-to-day care or collect any information about an individual’s health.

    also this (my emphasis):

    The Canadian system is for the most part publicly funded, yet most of the services are provided by private enterprises. Most doctors do not receive an annual salary, but receive a fee per visit or service. According to Dr. Albert Schumacher, former president of the Canadian Medical Association, an estimated 75 percent of Canadian health care services are delivered privately, but funded publicly.

    (i think that 75% should be taken as a rough figure. the previous paragraph in the article claims that 27.6% of canadian health care is paid for via the private sector, which added to 75% gives you more than 100%. but whatevs.)

    from a different article:

    Moreover, Canadian hospitals are controlled by private boards and/or regional health authorities rather than being part of or run by the government.

    drug companies aren’t run by the government either.

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