John Feehery: Speaking Engagements


What We Can Learn from the Greeks

Posted on June 10, 2010

Greece / Photo credit: Ulamm

In actuality, there isn't much in common between the United States and the Greeks.

That was the conclusion of a distinguished panel of economists hosted by the American Action Forum and led by former CBO director Doug Holtz-Eakin.

But if we don't get our act together soon, things could get steadily worse for the economy and for the American people, and while we probably won’t default on our debt (because we can always print more money), it won’t be very pleasant around here unless we start making some fundamental changes

Senator Judd Gregg, a longtime deficit hawk and current ranking member of the upper chamber’s Budget Committee, keynoted the forum, wryly pointing out in his presentation that western Democracies founded on the Scottish Enlightenment philosophy of free market capitalism and representative government (which, of course, would include the UK, the US, and Japan) are having the hardest time dealing with debt.

Totalitarian regimes, like the Chinese and the Cubans, don’t have our debt problems, because in the case of the Chinese, they work hard and have a government that is immune to public opinion, and in the case of the Cubans, nobody sane would lend the large amounts of money in the first place.

Dealing the debt requires tough choices, and if there is something politicians don’t like to do, it is making tough, and politically unpopular choices.  It is all well and good to promise the voters deep tax cuts and nice sounding government spending programs, but when it comes to pay the piper, that is a different story.

There is a consensus on the left and right that health care costs are the key reason that we are all going bankrupt.  The left -- as represented by Dean Baker, the Co-Director for the Center for Economic and Policy Research at this particular forum -- blame the inefficiencies of the free market for the fact that America tends to pay far more for health care than other countries.  The right -- as represented by Andy Busch, the Global Currency and Public Policy Strategist for BMO Capital Markets -- blame the government expansion into health care, more specifically the prescription drug benefit added by Republicans in 2003 and the health care reform law signed by President Obama earlier this year, for the fact that America seems about ready to go broke.

They are both right, in a sense.  The private sector is inefficient in how it deals with health care in this country, but most of the inefficiencies are created by either government involvement or government non-involvement.  For example, health care costs are unnaturally inflated by government policies that keep generics off the market for an extended period of time, and by inflated pharmaceutical prices because of high import barriers, and of course, by government payments that serve to undermine the marketplace by making everything more expensive.   And when the government refuses to crack down on frivolous health care lawsuits, that also has a inflationary impact on all health care services, as doctors pay out of pocket to manage their risk with insurance and then practice defensive medicine with an eye to limit that risk.

At some level, health care rationing needs to take place.  Either the government is going to do it or the market place is going to do it.   But at the end of the day, we can’t afford to pay for every treatment for every person for as long as they want.  We can’t afford that and also afford to pay for education, for national defense, for roads and bridges and for anything else the government pays for now.

Having any representative government become the chief rationer is probably a bad idea, because then rationality goes out the window.  Those who vote then tend to have the most power to decide who gets the health care money.  In the case of the United States, senior citizens, who are currently the only group that gets their health care basically for free in the country, already have an inordinate power to steer health care money their way.  Not coincidentally, they are also the only group that consistently votes in large numbers in all elections, and with demographics being what they are, those numbers will continue to increase for the old codgers for the foreseeable future.

Gregg’s presentation can be summed up in one sentence:  We could fix all of this if we had the political will.  But it is an open question if a representative democracy can make the hard choices to right the ship before we head for bankruptcy.   Gregg thinks it is possible, that America is a resilient country, and that we will somehow muster that political will to make the small changes today that will make us more solvent tomorrow.  I hope he is right.

The world is awash in debt, led by the Japanese, the Brits and the Yanks.  Greece is but a small part, but a particularly symbolically important part of the larger problem.  Should Greece go bankrupt, that doesn’t mean that America will as well, and its collapse may very well play a useful role in waking the rest of us up, as one of the panelists said this morning.

But as Senator Gregg intimated, this debt problem isn’t just a problem of numbers.  It is a challenge to the very essence of representative democracy.  Can we as a nation come together and confront the debts that face us and thereby slay them or will our democracy collapse because we as a people decided that our individual special interests were more important than fiscal sanity?