Health costs hurt incomes in Bush years
With information from a recent report, we may finally be able to reach a verdict on President George W. Bush's economic record. Commentator David Frum doesn't like what he sees.
Commentator David Frum. (David Frum)
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TEXT OF COMMENTARY
Kai Ryssdal: Federal Reserve chairman Ben Bernanke said yesterday the recession's technically over already. The way these things work, it's going to take another six or eight months before we know officially that that's the case. And it's going to be years before we really know whether President Obama handled the economy the right way. Same thing is true for the Bush administration. And commentator David Frum doesn't really like the former president's chances.
DAVID FRUM: Last week, the Census bureau delivered its report on American incomes in 2008. We can put this report together with the seven previous to reach a final verdict on the economic record of President George W. Bush. It's not good.
In terms of income growth and poverty reduction, Bush performed worse than any two-term president of the modern era. Even in the best year of his presidency, 2007, the typical American household still earned less after inflation than in the year 2000. The next year, 2008, American households suffered the worst income drop since record-keeping began six decades ago.
In my Republican party, there is worryingly little discussion of this damning trend. We do criticize ourselves for over-spending in office. But economic management gets much less, almost zero, internal discussion.
So, what went wrong? Liberals criticize the Bush tax cuts, but it's impossible to see any causation between lower taxes and the failure of incomes to gain ground. All three of the previous major tax cuts in U.S. history -- in the 1920s, 1960s, and 1980s -- were followed by very strong income growth.
The more plausible culprit is the surge in health care costs. Over the years from 2000 to 2007, the price employers paid for labor rose handsomely: on average, 25 percent. Yet for the typical worker, none of that extra cost translated into higher wages.
Between 2000 and 2007, the cost of the average health insurance policy for a family of four doubled, from about $6,000 to over $12,000. That took a big bite out of the gains available for wage increases. More than a bite: the health-care system gulped down every morsel, and forced employers to raise co-pays and deductibles for good measure.
Conservatives and Republicans need to keep this history in mind and remember that when we are debating health-care costs, we are also debating wages, incomes, and by the way, explaining the true reasons for the disappointing economic record of the Bush years.
RYSSDAL: Probably relevant to point out here that David Frum used to be a speechwriter for President Bush. He's currently a resident fellow at the American Enterprise Institute.
Comments
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From windham, CT, 09/19/2009
Great to hear this important explanation between income levels and healthcare cost, especially comming from an insider in the Bush administration and the Republican Party. Good for you Mr. Frum for your insight and honesty! Catina Caban-Owen, PhD, ACSW
From Bellingham, WA, 09/18/2009
All excellent comments above; I would especially hope that Marketplace features more progressive editorialists than those from the Enterprize and Brookings Insitutions, economists such as Dean Baker, James Galbraith, Joseph Stiglitz, Robert Kuttner, Simon Johnson, and linguistics experts such as George Lakoff. I know you occasionally provide Robert Reich who is gratefully appreciated, but I would like more diversity. Thanks.
Dianne Foster, RN, ARNP
From Cincinnati, OH, 09/18/2009
Damn, my jaw dropped when I heard David Frum of all people actually hold the Bush administration accountable for the miserable economic "gains" passed on to the average worker during his tenure. Me and all my friends have wondered that past 8 years who the heck was making all the money in the so-called great economy they kept talking about. Some raked it in I suppose, but mostly vaporous "growth!"
From Minneapolis, MN, 09/17/2009
When Frum speaks, I listen. Tired of the screaming and hyperbole, I tend to discount anything that comes from the Right. But Frum's analytic skill is remarkable. He has me nodding in agreement, and I learn something, everytime.
From San Diego, CA, 09/17/2009
Thank you for the honest report.
From highland, IL, 09/17/2009
In my opinion, the reason the economy has not worked as well some would hope in the last eight years; is not due to the tax cuts or rinsing cost of health-care. It is two-flawed ideal that come more conservative people. One you cannot trust the government two the rich can solve all problems. There is a saying that a high tie raises all boats but we know that where there is a high tie there is also a low tie also. Just as the moon and gravity moves water here and there on our planet, money flow in a healthy economy. In a world where the rich get richer and the poor get poorer, we in no way are making large reservoirs on the rich side of the economy and leaving very little on the other side. When poor half gets a little extra money they buy things with it that keeps the economy rolling. On the other hand the rich seems to take the excess money and invest it in all kinds of weird and complicated investment plans makes Wall Street looked good but does very little for Main Street. Therefore, in my opinion what we are seeing is the collapse of the bomb half of the economy, which will bring the whole house down
From Richmond, TX, 09/17/2009
I continue to be convinced that David’s spots on Marketplace are satire pieces aired just to see if the listeners are paying attention.
Let’s remember that David’s previous spot was also on healthcare, where he gave his now famous four step reform program:
- Wear your seat beat
- Stop smoking
- Loss weight
- Take care of mommies to be
Paraphrased it boils down to “Patient, heal thyself!” And yes, these are all excellent things to do. Just doesn’t tackle the full problem.
He is getting better at dressing up his underlying theme so you have to drill pretty hard to sort out where he is really headed.
I’ll give you that Healthcare costs are a drag on the cost of doing business, and sure it enters into the overall equation of how businesses spend their money which does have some effect on salaries and wages.
Let’s for the moment ignore that David’s plan this session ignors those without health insurance, ignors small business which likely does not have healthcare benefits, and tends to focus on the “big business” part of the problem.
And then let’s say Congress does take David’s advice and drives down healthcare costs for (big)business.
What happens to the “funds saved on reduced healthcare costs? Improved wages – for the average hardworking employee? Or higher profits and executive bonuses?
Oh! I forgot. David covered that last time…. Patient – Heal Thyself!
You know, I’m almost beginning to look forward to these every other week sessions of orthogonal thinking.
09/17/2009
Is it just me, or is David Frum trying to be Robert Reich Mini-me?
From Athens, GA, 09/16/2009
"You lie!"--repukelickcon man, SC congressman, distinguished Right wing nut member of your potty, Herrn Frum, the power of pride, eh?
..."the Insurance Industry Profit Protection and Enhancement Act."--your hero, Right man, and all your cronies can take credit for this "pre-existing condition", ol' girl, eh?
"I think an overwhelming portion of the intensely demonstrated animosity toward President Barack Obama is based on the fact that he is a black man."--JC on the Right wing nut ad hominum attacks on BHO...denial, hah? Examplar:
Mark Williams, teabagger-in-tschiezez, well, he is all yours, dude, eh?
http://crooksandliars.com/john-amato/teabagger-mark-williams-says-obama-indo
Finally, just how much can one little "Mission Accomplished", the Surge, war cost while ignoring the national debt, national deficit, and urging people to go shop, but then to be very afraid, live in fear, eh, little man?
"Hey, Joe, where you goin' with that gun in your hand?"--to stand outside a town hall meeting and exercise my so-called 2nd amendment Right as a militia man.
Paula Nelson,
SC born, GA grown and very blue in a very red zone...not exactly,
The True North strong and free!
From Newton, NJ, 09/16/2009
The primary cause for dropping wages cannot be blamed solely on healthcare; it is also due to the tidal wave of inexpensive labor known as "outsourcing". While Mr Frum states that labor costs increased 3% annually from 2000 to 2007 (which should be considered a minimal and expected inflation rate adjustment), Americans who earned $50,000 a year twenty years ago in services and manufacturing were replaced by overseas workers willing to perform the same jobs for $3 an hour.
This pro-corporate strategy fills the coffers of wealthy investors who bought large shares of stock in the outsourcing companies, while workers who don't invest in stocks become even poorer because they no longer have a well-paying job and must lower their salary levels in order to compete. While a $3 an hour job makes an Indian a virtual king in his village, it is incomprehensible for any American to survive with such a low standard of living. And it will only get lower, as the minimum wage and environmental law evasion known as "outsourcing" becomes more rampant in the global marketplace.
09/16/2009
I have to disagree with David Frum's comment:
"So, what went wrong? Liberals criticize the Bush tax cuts, but it's impossible to see any causation between lower taxes and the failure of incomes to gain ground. All three of the previous major tax cuts in U.S. history -- in the 1920s, 1960s, and 1980s -- were followed by very strong income growth."
Tax cuts provide short term stimulus. But long-run, social investments decrease as does the government's ability to respond to "special needs" like war, recession, paying for a wave of retirement benefits.
As a temporary stimulus, growth happens faster than the natural rate.
The only way to avoid collapse is to provide a foundation of new technologies that expand the country's resource base - prefferably without environmental degradation.
The causality of this recession is the lack on the part of Government to take the reign.
The Government should have been funding and distributing competative technologies to the "status-quo" to provide more jobs.
Solar energy has been cut off at the knees with Bush's 2005 Federal Energy Regulation.
The "dividend tax cuts" causaly connect to the decrease in American standard of living.
Consider the world a teeter-totter with a limited growth potential based on infrastructures, cultural and reasources of the poppulation.
We have moved away from industrial manufacturing so all we have to sell to others is paper, not products. This is an exageration, but the point is, dividend tax cuts moved more jobs overseas.
How?
Grandma and Grandpa hold 90% of the family's wealth.
The retirement fund broker encourages them to invest in companies that pay dividends.
Small business, 50% of the growing economy before this recession, does not pay dividends.
Given the choice, the investment advisor would rather give that multinational company which is moving jobs to China the grandparents money than to lend it to the grandkids to start their own businesses.
So yes, the dividend tax cut has done a lot to move jobs overseas.
The end of the "exit tax" under the "Republican Revolution" of Newt Gingrich also allowes too many dollars to float in and out of the country too freely.
This might have had stimulative effects, but there were downsides too.
Any stimulus has issues.
Economies can grow faster than the natural rate, but if the new economy ignores the human aspect, what good is that path. Cultures will adapt various "new things" at different rates.
When we push our way of life on others so we can sell them more, we risk ruining our way of life. Globalization does that.
And inside the USA, we have the problem that the media and the lobbyists and political campaigns are largely paid for by the same people.
No companies that are going to start-up a year form now that are going to revolutionize our lives are going to pay a lobbyist, donate a campaign contribution or pay for a commercial today.
Without competition, partly from such aspects as government research and small business, private industry would not move forward nearly as fast as it can...
One can argue that the Reagan tax cuts crippled our public schools throughout the nation and that a lot of people who are out of work could use a vibrant healthy education system to learn a new trad to make a living...
So there are many effects, causality - tax cuts!
From Milton, GA, 09/16/2009
Excellent commentary. As a former member of a public company's benefits committee I can corroborate this and I have been spreading this message. Beyond social justice issues, healthcare is a global competitiveness problem for US businesses, a blackhole for wages, and a major threat to the nation's long term solvency. We can do better.
From San Diego, CA, 09/16/2009
Frum in 2003: "George W. Bush was hardly the obvious man for the job. But by a very strange fate, he turned out to be, of all unlikely things, the right man."
When I heard this backward looking critique from one of Bush's economic speechwriters (2001-2002), it made my stomach turn. Definitely need more time/perspective to forgive anybody that helped Bush.
From New York, NY, 09/16/2009
David Frum's thoughtful, implicit endorsement of health-care reform is concise and, curiously, clearer and more convincing than anything I have heard out of the present administration. As Mr. Frum shows, companies have a certain amount of money to dispense on their employees, and the more that goes to pay for health-insurance coverage does not go in people's pockets. We can only hope other Republicans are listening to this reasoned argument.
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