Wednesday, September 10, 2014

The Zero-Sum Health Care Pie and Lack of Economic Growth

He has an oar in every man’s boat, and a finger in every pie.

Cervantes (1547-1616), Don Quixote

A rising tide lifts all boats.

Phrase attributed to President John Kennedy, used in 1963 speech, when Kennedy advocated tax cuts to stimulate economic growth

Zero-Sum Game- A situation in which one person’s gain is equivalent to another person’s loss, so the net effect on wealth or benefits is zero.

Definition, Zero-Sum Game

Critics often blame ObamaCare as a major factor for slowing economic growth and for making heath care unaffordable.

To wit:

“The Affordable Care Act is weakening the economy. And for the large number of families and individuals who continue to pay for their own health care, health care is less affordable."

So wrote Casey Mulligan, an economics professor at the University of Chicago (“The Myth of ObamaCare’s Affordability, “ WSJ, September 9, 2014).

The conservative argument goes like this:

ObamaCare affects all citizens. Economic growth fosters prosperity. Prosperity distributes health benefits for all. The road to prosperity goes through a series of measures – repeal ObamaCare, cut taxes and regulations, give tax credits for all, promote free market competition and stress America’s strengths – internet innovation, individual initiatives and incentives, free enterprise, increased energy production.

In effect, the conservatives are saying: expand America’s economic pie and the redistribution of health care benefits will take care of itself.

Liberals will counter: Nonsense. That is pie in the sky.

This line of thinking has led to a number of pie metaphors - ObamaCare is a finger in everyone’s economic pie. ObamaCare’s adverse economic consequences are baked into a shrinking pie.

Critics hold these truths to be self-evident:

Over the last 6 years, under President Obama, the U.S. GDP has only grown a measly 2 to 2.5% annually, the slowest growth in 7 recessions since World War Two, and far short of the 3 to 4% required for full recovery. Things aren't getting any better. In 2014, the economy is expected to poke along at 2.5%.

The top 1% of the population take home 30% of America’s total income, and their share of the economic pie continues to grow. The bottom 99% of Americans share a shrinking piece of the total economic pie. In other words, economic inequality is growing .

The middle class share of the pie are shrinking. even more so than those in the bottom economic tiers. Thanks to ObamaCare, the lower classes’ piece of the health care pie is shrinking slower because of health care subsidies and a 15% growth in Medicaid. Meanwhile, the income of the middle class has shriveled 10% over the 6 years, and health care premiums for them have become unaffordable.

According to Casey Mulligan, author a new E-book Side-Effects: The Economic Side Effects of Health Reform, ObamaCare helps the poor by giving them a bigger slice of the economic pie, but diminishes the pie itself and it reduces total employment and the benefits of employment for employers and employees alike.

Employers who wish to expand are threatened with penalties so they do not expand, and place workers on 29 hour weeks so they do not qualify as full-time employees requiring benefits.

As for employees, 35 million work for employers who offer no health benefits, or for employers have reduced part-time work to avoid paying for health benefits. Another 25 million work full-time, making them ineligible for federal subsidies. The only ways to get assistance are to work part-time, find an employer who doesn’t offer coverage, or stop working.

Everyone wants a bigger piece of a bigger pie, but that is impossible in today’s zero-sum economic game.

Only one thing is for sure. By a margin of 59% of 27% in a survey, the Global Strategy Group found Americans prefer candidates who focus on growth rather than fairness, and by 80% to 16%, they prefer economic growth to income inequality.

What Americans want is growth that works for all, not just for a favored pplitical few like the rich and minorities, but for the middle class as well.

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