Mathematical Truths vs. Economic Truths

In an op-ed at the Wall Street Journal critical of the Democratic presidential aspirants in particular and the Democratic Party in general, staunch Democrat Alan Blinder points out three “economic truths” that Democrats “can’t handle”:

  • Truth No. 1: You can improve and expand health-insurance coverage without going to a Medicare for All plan that bans private insurance.
  • Truth No. 2: You can make great strides toward mitigating climate change without embracing the Green New Deal.
  • Truth No. 3: International trade is good for the country, even when the U.S. has a large trade deficit.

In response to Dr. Blinder I would like to suggest some mathematical truths that he, apparently, can’t handle.

First, the reason, beyond the neatness of the slogan, for M4A and the abolition of private insurance is that its advocates can’t make their numbers add up without it. The only way they can envision lowering health care spending while increasing coverage is by legislating a single price for medical services—the Medicare reimbursement rate. Any other alternative within the power of the federal government would result in a substantial net increase in federal taxes. Since I don’t believe that the Congress will hold the line on reimbursement rates I am distrustful of Medicare for All.

More importantly increasing GDP or aggregate income is not necessarily “good for the country”. A simple example will prove that for you. Imagine that you increased the income of the Walton family by $1 trillion while holding all other incomes in the country constant. That would increase aggregate income and average income but I think it would manifestly not be good for the country. In the early Aughts the U. S. economy lost more than 2 million manufacturing jobs in very short order, while most job growth was in low-end service sector jobs. I would submit that was not good for the country. Loss of the manufacturing jobs might have been inevitable but losing them that quickly wasn’t.

As for his second point, I think that any carbon tax will inevitably be finessed as has been the case in Europe but that isn’t a mathematical truth, it’s a political one.

6 comments… add one
  • TarsTarkas Link

    The loony left intends to pay for both M4A and the GND by utilizing MMT, which translates to ‘let the printing presses roll and impose price and wage freezes’, and by confiscating the accumulated wealth of anybody who has it, because they stole it in the first place (with exceptions for the ruling class, of course).

    I pay little attention to Blinder’s proposals, he’s been wrong so often you’re better off doing the opposite of what he suggests. His mantra is ‘let the experts rule’ and he’s an expert because he’s smart and gone to school and knows all the theories, forgetting that economics is call the dismal science for a reason. As a science it rivals psychology in its inability to predict even the past.

  • That’s what I have deemed “folk MMT”. Sadly, just as the proponents of folk Keynesianism (deficit spending is always good) outnumber actual Keynesians so folk MMT-ers outnumber actual MMT-ers and give them a bad name.

    What Dr. Blinder does not realize is the critical shortage of philosopher-kings. Policies are determined by politicians and bureaucrats and both pursue the incentives distinctive to each.

    Economics is called “the dismal science” because the 18th and 19th century economists did not provide a justification of slavery.

  • steve Link

    Most of the loony left has not heard of MMT, just like most on the right haven’t either. If you look at actual budget numbers, not just talk, you will find that there is no evidence that the GOP is averse to letting the printing presses roll. The result of all of the wealth confiscation that people here whine about is that the wealthy have a growing share of our income and wealth.

    M4A, as envisioned by Sanders and some others won’t be adopted because the numbers dont add up. That is the same reason Trump couldn’t deliver on his promise to give everyone health care that would be cheaper and of a higher quality that what we have now. (Plus it would be easy!) The numbers dont add up for Trump’s claim, or much of what he has ever claimed. If we use Medicare as it exists now and spread it out to everyone, then total health care drops, but we have to increase taxes. That would be offset by decreased private spending, but I dont see how you keep that from being demagogued, and not so sure it is necessarily best anyway. We may end up with a public option. If we do then it will be interesting to see how private insurance competes.


  • We may end up with a public option. If we do then it will be interesting to see how private insurance competes.

    I think the whole system implodes. As I’ve been saying for some time the problems with our health care system are basic. They can’t be cured by tinkering around the edges.

  • Andy Link

    As you’ve said many times, “it’s the prices stupid.”

    An M4A plan that doesn’t address that is going to fail. Making private insurance illegal is not going to lower prices. The great lie in M4A proposals is that the government can set or “negotiate” prices and lower costs – something that the AMA and other powerful medical lobbies would fight and likely win.

  • The great lie in M4A proposals is that the government can set or “negotiate” prices and lower costs – something that the AMA and other powerful medical lobbies would fight and likely win.

    Well, they can. The question is will they? Experience to date tells us they won’t. That’s essentially the argument I’ve been making. If the federal government were willing to negotiate prices, we could cut prices now without M4A or any other major reorganization of our health care system.

    It’s not just the system’s structure that pushes costs higher. It’s the unwillingness to cut and without that prices will only go higher.

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