Reality Was Never Like This!

I’ve got to confess that Eugene Ludwig’s column at The Hill frosts me a bit. The column explores the frequently mentioned claim that middle and lower-income Americans have not “shared in the economy’s economic advances”:

Most middle- and lower-income Americans have not shared in the economy’s economic advances over the last several decades. If the economy slides off with job losses, many middle- and lower-income Americans will face financial difficulties that could be even more extreme than those in 2008.

Yes, the market is up, and unemployment is the lowest it’s been in nearly 50 years. But education, health care and, in many places, housing are much more expensive than they once were, even as wage growth has fallen flat.

The broader economy may be steaming ahead, but consumer borrowing, particularly student debt is at an all-time high.

Today, 40 percent of Americans would struggle to come up with $400 in the face of a crisis, with many choosing to sell something or take a loan to come up with the cash.

Many Americans, particularly those living in America’s heartland, exist on the knife’s edge. Aggregates and averages obscure the economic turmoil that’s opened wounds in places like Dearborn, Mich., and York County, Pa.

and I think there’s a kernel of truth in that. But I don’t know how you can explore that subject in a meaningful way without mentioning health care prices, education prices, taxes, or immigration.

Consider, for example, the graph at the top of the page. In rough terms health care spending has risen ten-fold in real terms since 1970. That means that unless your income has risen ten-fold as well which is not true for most people you’re probably spending more of your income on health care and health care insurance than you (or the you-equivalent) was in 1970. That is unlikely to be changed by Medicare For All or any other likely health care reform. Those are only like to change who pays not how much is paid. It’s just moving the deckchairs around.

The same is true of education and taxes, both of which have increased substantially faster than incomes. Public benefits have risen sharply, too. Rather than just looking at incomes he should be looking at total compensation including benefits.

He also ignores the loss of job security so many Americans feel. Other than at the very top just about everyone is constantly looking over his or her shoulder, wondering whether she or he will be replaced by a worker from a staffing company like Tata. It’s no coincidence that business services is one of sectors in which the number of jobs is increasing fastest.

3 comments… add one
  • steve Link

    I would look at spending per person. Some of that increase is due to covering more people and with better coverage. Your point will still mostly hold. We do need to work on health care costs. You keep saying we cant fix it. “That is unlikely to be changed by Medicare For All or any other likely health care reform.”

    I would also suggest a hedonic adjustment for health care. 50 years ago the richest family in the US had a baby die when it was 3-4 weeks premature. Now almost all of those live. Even minor surgeries required a week in the hospital and months before you went back to work. Now you go home the same day and back to work in a couple of weeks. (Note that I think if you do this you still need to cut spending.)


  • You keep saying we cant fix it.

    What I keep saying is that fixing it is politically unacceptable. It either requires rationing or decreasing provider payrolls, either of which gores somebody’s ox.

  • James P Kirby Link

    I’ve noticed that everything we buy from China (or Korea) is much cheaper than it was decades ago. What we need is for one of them to manage our healthcare delivery system.

    I personally get my health care–surgical, medical and dental–in Brazil, Costa Rica, or Mexico, avoid all insurance, and pay far less than a typical co-pay in the USSA.

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