Health care, income and innovation

Us spend 16-17% of GDP; OECD average is 9%.  the puzzling thing is that most industrialized countries have close to 100% coverage while the US is about 85% even though we spend almost twice as much.  Something is broken.  Reform efforts focus on expanding coverage.  The real problem is the need to cut spending.  If the question is why the US is losing its ability to compete globally, part of the answer might be because it spends $2 trillion on health care.

The old question: save and invest to earn more later or spend now?   The US has chosen not to save and invest, and to spend some of what it has for investment  on unproductive  assets (like housing).    Government policy shifts spending towards consumption, through transfer payments and entitlements.  The theory was the US was the most stable  of the fast growing countries  (albeit at the bottom of the list) and the fastest growing and most innovative of the stable countries, so foreigners sent their money here.  I don’t think this will continue to be true.

The new question: how do you innovate and grow in a cash-starved economy?  The extreme scenario is that the US is on the same path as California.  One party hands out entitlements freely; the other blocks any taxes to cover them, and the state goes bankrupt, forcing the legislature to adjust spending to the level of taxes.

“The state is the great fictitious entity by which everyone seeks to live at the expense of everyone else.”Frederic Bastiat

Sounds quite Calvinistic - I’d be happy to see a high level of entitlement as long as it is accompanied by a high level of taxation.   You can’t have European-style  entitlements with Florida-style taxes.