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Friday, November 25, 2005

Paul Krugman: Bad for the Country

Paul Krugman continues his series on the need to fix our health care system. Here's a condensed version:

Bad for the Country, by Paul Krugman, NY Times: "What was good for our country," a former president of General Motors once declared, "was good for General Motors, and vice versa." G.M. ... has announced that it will eliminate 30,000 jobs. Is what's bad for General Motors bad for America? In this case, yes. ... I won't defend the many bad decisions of G.M.'s management, or every demand made by the United Automobile Workers. But job losses at General Motors are part of the broader weakness of U.S. manufacturing, especially ... manufacturing that offers workers decent wages and benefits. And some of that weakness reflects two big distortions in our economy: a dysfunctional health care system and an unsustainable trade deficit. ...

[L]ast year General Motors spent $1,500 per vehicle on health care. By contrast, Toyota spent only $201 per vehicle in North America, and $97 in Japan. If the United States had national health insurance, G.M. would be in much better shape ... Wouldn't taxpayer-financed health insurance amount to a subsidy to the auto industry? Not really. ...[T]ying health insurance to employment distorts the economy: it systematically discourages the creation of good jobs, the type of jobs that come with good benefits. And somebody ends up paying for health care anyway. ... either ... taxpayers or ...those with insurance. Moreover, G.M.'s health care costs are so high in part because of the inefficiency of America's fragmented health care system. We spend far more per person on medical care than countries with national health insurance, while getting worse results.

About the trade deficit: ... The flip side of the trade deficit is a reorientation of our economy away from ... manufacturing, to industries that are insulated from foreign competition, such as housing. ... The trade deficit isn't sustainable. ... [O]ne of these days the easy credit will come to an end, and the United States will have to start paying its way in the world economy. To do that, we'll have to reorient our economy back toward producing things we can export or use to replace imports. And that will mean pulling a lot of workers back into manufacturing. So the rapid downsizing of manufacturing since 2000 ... amounts to dismantling a sector we'll just have to rebuild a few years from now.

I don't want to attribute all of G.M.'s problems to our distorted economy. One of the plants G.M. plans to close is in Canada, which has national health insurance and ran a trade surplus last year. But the distortions in our economy clearly make G.M.'s problems worse. ... G.M.'s woes are yet another reminder of the urgent need to fix our health care system. It's long past time to move to a national system that would reduce cost, diminish the burden on employers who try to do the right thing and relieve working American families from the fear of lost coverage. Fixing health care would be good for General Motors, and good for the country.

[See also Paul Krugman in Money Talks:  Denial and Deception.]

Previous (11/21) column: Paul Krugman: Time to Leave
Next (11/28) column: Paul Krugman: Age of Anxiety

    Posted by on Friday, November 25, 2005 at 12:23 AM in Economics, Health Care, Market Failure | Permalink  TrackBack (0)  Comments (10)


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