The domestic U.S. auto industry and state and local governments face a crisis. Sales for the former and tax revenues for the latter are collapsing, at the same time each face soaring health care costs for employees and (because of the rich pensions after early careers their employees receive) retirees. General Motors has said that absent assistance it will have to shut down by the end of the year; public services are about to collapse, and state and local taxes are about to soar, particularly in New York. The federal government could prevent the disaster by enacting a universal health care financing system at the federal level, providing a choice of a public program such as a less extravagant version of Medicare and a similar subsidy for the purchase of private insurance. Such a system would lift an enormous weight off both older corporations with many retirees and state and local governments, more than enough to offset the taxes that would be required to fund it, and federal aid in other categories that states and localities could thereafter fund themselves. But there is a political party, and powerful interests backing that party, that stand in the way, because they have such a sweet deal under the existing system. I refer, of course, to the Democratic Party, the auto industry, and public employee, auto industry and health care unions and lobbyists.
Under current arrangements executives, employees of unionized industries with rich pensions, and public employees and retirees all receive extremely costly health insurance benefits that are either paid for or subsidized (through the exclusion of employer provided health insurance from taxable income) by the government. Others pay taxes to fund this, more and more all the time, even though they, younger generations in particular, get little or nothing. The United States, however, already spends more than anyone else, as a share of the economy, on health care. So providing something for everyone would inevitably mean somewhat less for those who now get more, unless they were willing to pay for it themselves without tax funding or subsidies. And if people were forced to confront the cost of health care, rather than believing it was “free,” they might not be as willing to tolerate the price increases the health care industry imposes each and every year.
I described the tradeoff between the extent of benefits and their universal application in this essay in August 2007. A slave to already-advantaged interests, the Democratic Party has abandoned the ideal of universal, equal benefits of any kind ever since the mid-1960s, when the minimum wage, previously only applicable to large corporations in highly unionized and politically potent industries, was expanded to everyone. I described this abandonment here. Anyone who wants to know the actual principles by which we are governed would do well to read all the posts in my overview of equity and eligibility, beginning with the post of that name, on this page. One principle is the tendency of those who already have a benefit to expand it when money is available in good times, as when President Bush and the Congress directed $trillions of future dollars to senior citizens who already received extensive Medicare benefits by enacting the prescription drug benefit (rather than do anything for the uninsured), and then for the benefits of those to be preserved in downturns regardless of the cost, without anything being done for the less well off. The cycle is repeating.
Even before President-elect Obama takes office, the grab for money by those who already have health insurance benefits is underway. According to the Associated Press “the leaders of General Motors, Ford, Chrysler and the president of the United Auto Workers union came to Capitol Hill Thursday to discuss billions of dollars more in financial help for the companies, which have struggled under a weakened economy.” “The new $25 billion in loans that the automakers want from Congress would help them make required payments to health care trust funds that were created as part of the 2007 labor deal. Reuther said the companies are required to provide $15 billion to the fund in January 2010 and an additional $15 billion by 2012….’It’s very important that those monies be contributed so retirees continue to have health care…The financial community is looking at that liability, and it’s a major factor in their willingness to provide loans to the companies.’” House Speaker Nancy Pelosi also is pushing for aid to state and local governments, no doubt ensuing that their retirees will continue to receive extensive health insurance as well, because that is “very important” also.
So they want a universal system for everyone, right? Wrong. They want a deal just for themselves, up front, right now.
Meanwhile, in every publication I read, politicians and pundits of all political persuasions are writing that due to the soaring federal budget deficit, the $trillions required for bailouts of various sorts, and the state of the economy, President-elect Obama is going to have to give up or scale back many of his promises, including universal health insurance. Not one politician or pundit, of any political persuasion, has said that because of those same factors, people working for the auto industry, public employees and retirees, and senior citizens receiving Medicare will have to accept diminished benefits. No, it is those who currently receive no benefits at all, and are having to sacrifice and pay taxes those better off than they are, who must be left out due to “circumstances beyond our control.”
And who are those people whose problems are not “very important?” For starters, hundreds of thousands of people in their 50s and early 60s, some with health problems, have lost or will lose their jobs in the recession. And it will be almost impossible for them to find work, because if a small- or medium-sized employer with health insurance hires them, the change to its risk pool would lead to a premium increase it could not afford. Lacking the lucrative pensions they are paying taxes for others to have, and with the extra taxes they have paid for their future Social Security benefits already spent, these people, millions of them, will have to work until their late 60s or later or face severe poverty. The way we finance health care stands in their way, and the longer they remain unemployed, the more their skills and work habits will erode.
And where will the potential jobs come from. Tens of thousands, perhaps hundreds of thousands, of businesses less politically potent than the big three are going to go broke. What will replace them and revitalize the economy? Tens of thousands of would-be entrepreneurs will be inhibited from striking out on their own and starting a business because of the high cost of health insurance.
The young and less educated, in a position of even less power in the labor market in a recession, will continue to hired as “contract employees” or “freelancers” without health insurance, retirement benefits, or even eligibility of unemployment benefits when they are fired from their “job.” They have no incentive to save for the future, because any illness or economic upset will throw them onto public assistance and Medicaid after their savings are depleted.
In other words, in addition to being disgustingly unfair, the way we finance health care is destroying our economy, as I explained in this post, part of my overview of the health care issue last January.
None of the unions care about these people, and neither does the Democratic Party.
No doubt some of the “egalitarian” “liberals” assuage their consciences by telling themselves that the more that is given to the politically powerful today, the more everyone will get tomorrow, with the money coming from “somewhere.” It is the political equivalent of the economic trickle down theory of prosperity pushed in the 1980s by the Republicans. More benefits for the politically (rather than financially) rich will eventually lead to more benefits for every one, they tell themselves. And Democratic trickle down works about as well. When resources aren’t unlimited, and there won't be enough to go around if everyone stops working at 55 and receive unlimited health care for as much as the health care industry chooses to charge, that isn’t their fault is it? Oh well! You can’t take things away from people — that’s politically unrealistic. So those without will have to remain without, and circumstances or the other side are to blame.
So Cerebus Capital Management, a private equity firm with holdings of both GM and Chrysler, will get its money back from its stupid investment. Auto industry executives will get their bonuses. And auto industry retirees will continue to receive health and other benefits that my grandmother, a GM retiree herself, told me were too fat and unfair to the next generation. No doubt public employee unions will jump on the gravy train too, including the United Federation of Teachers, whose member can now never do anything for anyone else again upon reaching age 55 (instead of 62). We will continue to serve them, involuntarily, through tax exactions, to an ever greater extent.
And then, after the rest of the bailouts for the better off, a decision will be make as to what the less well off and younger generations, the very generations that put President-elect Obama in office, will receive. Not at the same time as those bailouts. And not with those bailouts being part of something universal. After.
I wrote earlier that each of the last two times there was a Democratic President and Congress, the Democrats blew it and were thrown out. They are going to have to choose between the extensive privileges of the interests that back them and the basic needs of everyone else. Being from New York, and being familiar with the sort of “Democrat” we have here, I’m not betting on the right choice. I’m betting on an evil non-decision being made to do nothing, after all the bailouts have passed.
Change? Those with unearned and inequitable privileges have never been in favor, and are not in favor now. That's why, for example, the UFT and Local 1199 worked so hard to keep the Republicans in the State Senate, and why Local 1199 worked to prevent universal health care under Clinton. No Governor or President can change that. That is the audacity of hopelessness.