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Wednesday, May 18, 2005

A winning issue, yours for the taking

Posted by: Jambo / 3:51 PM

Matt Miller writing in today's NYT:
[S]piraling health costs have aligned corporate interests with workers' for the first time in ages.

The article as a whole is not bad as far as it goes, but that nugget alone is worth the price of the paper. If you don't want to read the whole thing just know that it is a call for CEOs to take the lead in pushing for healthcare reform. I talked about this a couple weeks ago in a post on a Paul Krugman column about what was going to change America's healthcare system. My prediction was that Krugman would eventually claim that big business rather than healthcare activists would lead the drive for universal healthcare. I haven't seen that column from him yet but this one by Matt Miller is close to saying the same thing.

Keep this thought in mind: corporate interests are aligned with workers. That rarely happens on such an important issue so I hope we are able to jump on it. The current health insurance system is not working for quite a large swath of the population these days as premiums and co-pays raise, benefits get cut, and people risk losing insurance when they quit their job or are fired. But the "good" news is that the system is no longer working for big employers either. This is good news because they, unlike the working class, have the political power to change the system. Large American employers, especially those in the auto industry, are finding health care spending takes a growing share of their profits and puts them at a competitive disadvantage to their foreign counterparts in countries with national health insurance. GM estimates that it spends $1400 per car just to pay for employee and retiree health insurance. All other things being equal the exact same car made by a company in a country with universal nation health insurance will sell for $1400 dollars less than one made by GM.

The implications for American business should be clear. National health care is a good deal for them. The implication for un- or under-insured Americans is equally clear. National health care is a good deal for them. When is a national politician, or political party, going to come to the conclusion that national health care is a winning issue for them?


All other things being equal the exact same car made by a company in a country with universal nation health insurance will sell for $1400 dollars less than one made by GM.

Doesn't this assume that the money spent on health care in a national system appears out of nowhere, by, oh, I don't know, magic? Angels, perhaps?

I guess you could make the claim that we'd save money with national universal insurance, but clearly not the whole $1400. Directly or indirectly, GM will be paying in some fashion.

By Blogger Joseph Thvedt, at 9:18 AM  

It depends entirely on how national health insurance would be funded. If national health insurance were funded through income taxes, it's safe to say that GM would bear little or no costs.
I'll make two assumptions: national health insurance would save 1/3 of our current health care costs and that corporations pay 10% of total taxes. If those assumptions are correct, GM would pay about $90 per car (10% of 2/3s of $1400) in taxes to fund health insurance for all Americans. Individuals would end up paying the rest -- about $900 per car.

By Blogger Hammer, at 9:44 AM  

OK, you and I are paying the bulk of the cost. Our taxes are a little higher, so instead of buying a Buick, now I can only afford a Chevy. Or worse, from GM's standpoint, a Hyundai.

By Blogger Joseph Thvedt, at 9:54 AM  

Yep, we have less money, but GM's cars are cheaper. It's not a free lunch.

By Blogger Hammer, at 10:56 AM  

Couple of things: We currently pay more for health care as a percentage of GDP in this country than than any other Western nation that has a national health program and get worse results as well. There is a good chance that national health care would cost LESS than we are paying now so everyone wins. I won't go into all the reasons for this since there are plenty of articles out there that explain the inefficiencies of our system better than I can. A short list would include uninsured using emergency rooms rather than cheaper clinics because the former will take them even if they can't pay, the overhead costs (overhead in private health plans are about 4 times what they are for Medicare), and the lack of preventative care for the uninsured. But even if health spending ends up the same it is still an advantage to GM to nationalize it because they are selling in a global market. Even if American consumers are made worse off by exactly the same amount that GM saves and reduce their auto purchases appropriately GM cars still end up being $1400 dollars cheaper in overseas markets. Anyone who has spent any timeout side the US will notice how few American cars there are out there so this would be a good thing. I was recently in Argentina for a couple weeks and other than a few Ford Ranger pick-ups I saw NO American cars. (Obviously this is not all price driven, but still...)

Even if from an internal economic standpoint it ends up being a zero sum game both American companies and consumers would benefit, one by being more competitive overseas and one by greater access to health care. (This of course assumes that other issues involved, like rising health care costs generally, are unaffected by the change. I don't know the subject well enough to comment on that. I will see if I can get an expert to weigh in on this, maybe my friend the Canadian economics professor (and big Soul Asylum fan) who I am going dub "Cheyenne on the Beach" for blog purposes. Unless he wants to come up with his own name.)

By Blogger Jambo, at 12:04 PM  

When you say Soul Asylum, do you mean the early years (Made to be Broken, While you Were Out), the polished move to a Grammy (Hang Time, Grave Dancers Union), or the unlistenable stuff (Let Your Dim Light Shine and everything after)?

By Blogger Hammer, at 12:19 PM  

C on the B and I first became friends in about 1989 when he was dismayed that I considered the newest Trip Shakespeare album better than the latest Soul Asylum album. I'm sorry to say I no longer remember which albums those were.

By Blogger Jambo, at 12:52 PM  

Even if American consumers are made worse off by exactly the same amount that GM saves...

So much for aligned interests.

Anyone who has spent any time out side the US will notice how few American cars there are out there

Anyone care to take a guess what GM's second-biggest market, after the US, is? Canada, perhaps? Some western European country? Nope. China. Up 27% last year. I'd guess (and please correct me if I'm wrong) that very few of those cars were built in America, and thus don't figure in the domestic health policy debate.

By Blogger Joseph Thvedt, at 12:57 PM  

Across the Universe (blue vinyl) and Hang Time, most likely. Clam Dip might've come out in 1989, too. Across the Universe is better.

By Blogger Hammer, at 1:06 PM  

As for being worse off, see my point about universal health care costing less than we currently spend. Perhaps I should have said "if cost to tax payers equals what GM et al save" since universal care, depending on how the system is set up, has effects beyond just the amount companies are currently paying. If consumers end up paying lower premiums than they did with private insurance (and I know very few employers who pay all the premiums for their workers) that saving will off set the tax hit. Additionally if the tax to cover health care is progressive most workers will end up paying less than they do now. Add to that the fact that many people who don't currently get any employer paid health care would now have coverage at a lower rate than they can buy it themselves. Even if it DID result in taxes that are higher for some workers than they currently pay for premiums and co-pays I'm guessing most of them would still be better off with insurance not tied to employment, that wasn't a hassle to deal with when you go to a doctor when you are out of town, and was automatic.

As for China, I bet other than the US China is jsut about every car maker's biggest market. And to the extent taxes effect American consumer's ablility to buy cars (and I think you oversell this problem) American companies would still be on an even playing field with imports as opposed to now being at a disadvantage. Teh only difference would be that they might have to change the model mix to match the new level of demand.

By Blogger Jambo, at 4:03 PM  

For the record: I think
- the US should pursue national health insurance
- it has a chance to be a minor economic boon for the country as a whole (it would certainly be good for some and bad for others)
- we should be ashamed of the health care the poorest in this country receive (this is the real reason we should do it)
- getting big business on board is essential
- yes, tax us to make it happen, and by all means, make it progressive (at least more progressive than the current Medicare tax)

But promising it's going to be a $1400 rebate for everyone who buys a new car is not the right way to convince people, because it's not true. First, for the reasons I already gave (that it wouldn't translate directly to the bottom line), and second, if GM found that it was suddenly getting $1400 more per car, they'd use it to return to profitability rather than to pass it on entirely to customers.

And now to pick some nits (what else are blogs for?).

I don't think I was "overselling" the problem of higher income taxes. First, because I didn't quantify it (other than Chevy vs. Buick). Second, because lower take-home pay leads to fewer car sales. Despite the alarmingly low and sinking savings rate, income and spending are still linked.

And the point I was making about China was to illustrate that your point about imports, exports, and level playing fields is largely bogus. GM isn't shipping millions of cars from Detroit to Asia; they're building them there. Similarly, the top selling cars in the US are the Toyota Camry and the Honda Accord, which aren't built by Japanese workers with national health insurance. They're built right here in the US by Americans with, one can safely assume, private health insurance that's just about the same as GM employees have.

Tossing off "the only difference would be that they might have to change the model mix..." as an aside, as if it's not a big deal, is to ignore the countless hours that auto executives spend trying to find out how skew the model mix towards big, fat, SUVs, and away from small cars. It's how the big bucks are made (or in GM's case, how smaller losses are made).

By Blogger Joseph Thvedt, at 10:11 PM  

I agree with all your reasons to support national health insurance. As you may have guessed I'm a liberal Democrat so I almost assume all those reasons are a given when I start talking about the topic. What I find interesting about the current state of affairs is that business may finally be seeing that national health care is a good deal and that is exciting to me because for the first time in years we really do have a chance to make it happen.

The $1400 figure is something I use not to show a benefit to consumers (your points are well taken even if I have a quibble or two) but to show the benefit to producers. Those producers can use those benefits however they choose, lower prices, higher profits, dividends, etc. The point is that producers are finally seeing those benefits are out there. Indeed just about every article I come across these days talks about GM's CEO and how he has started to make this argument. I am guessing the $1400 figure in these articles comes straight from him.

And even if some percentage of American cars are made overseas unless that percentage is 100 there will still be a benefit to American car makers from the reduced cost. Of course the flip side of your argument might be "If you expect companies to make their cars here with American workers rather than abroad with foreign workers we need to have a national health insurance policy." Ya know, I had not even thought of that line of argument until just now. I think it is a good one and that alone makes this whole exchange worthwhile. I love the internet!

And of course auto makers were just the easiest example. There are other fields where production for foreign markets is less likely to be moved overseas where national health insurance would make American companies more competitive. (Yes, I will admit that there is less manufacturing in the US all the time, but see above argument.)

As for the model mix question, if American car makers can't come up with the models of cars Americans want to buy maybe they shouldn't be in business after all. (That's the free market economics major side of my brain pushing against the liberal Democrat side.)

By Blogger Jambo, at 11:37 AM  

The $1400 figure is something I use not to show a benefit to consumers... but to show the benefit to producers.

Fair enough. I was just applying Henry Hazlitt's Economics In One Lesson to expand the argument beyond the producers.

Of course the flip side of your argument might be "If you expect companies to make their cars here with American workers rather than abroad with foreign workers we need to have a national health insurance policy."

At first, I thought you meant foreign companies building cars here, but that's easily refuted by the examples of Honda and Toyota I gave earlier. You must mean that American companies would be more likely to build here and export rather than build in factories abroad. But Japan has universal health coverage (although partially employer-funded for some people, so maybe my argument here is a little weak), and they still build autos here in extraordinarily large volume. I'm not sure American companies building abroad would be any different.

By Blogger Joseph Thvedt, at 8:19 AM  

Some form of universal health care is simply neccessary. But notice any time anyone comes close to any type of reform- the television commercials with the kindly older Americans talking about how horrible it would be to lose all their "choices" start in. There's another form of evil in advertising for you.
Also as far as the poorest people receiving bad health care.. I deal with a lot of medicaid recipients on a daily basis- after 17 years I am saddened to recognize that the whole system is so very inefficiently run -it leads to much abuse of the system and boatloads of money being wasted. I truly believe that if the whole thing was treated more like a "business" we could eliminate a lot of waste and do so much more. As Jambo mentioned - simply look at the emergency room stats-many are using them as a "primary care doctor". If we at least had one doctor coordinating care- there would be less waste and better care for the patient. All the xrays and labs and history for 1 patient would be in 1 place- and they wouldn't be able to get 4 different oxycontin rx for their pain from 4 different drs that government (we) are paying for.
One more thing and I shall shut-up... I know a pregnant single mom that works full time and intends to keep doing so- maybe 20,000 a year. She went to inquire just about help with daycare expenses so she can continue to work. The good folks at our social service offices told her to come back & reapply once she quits working & they will be able to help. Does that sound totally wrong to anyone else?

By Blogger BETH, at 11:27 PM  

That is pretty sad on a number of levels. I won't even get into the subject of maternity leave or compare our ridiculous system with the ones in Europe where both mothers and fathers get, in some countries, up to 6 months paid leave. I am guessing that the woman who makes $20k doesn't qualify for Medicaid either. For all the squawking they do about family values the Republicans sure as hell don't do much of anything that might actually help families.

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