The Reality of Nightmares

By J. D. Alt

In his 12/8 Washington Post column, Ezra Klein says, “Projected deficits are driven by two factors: health-care-costs and old people.” He goes on to suggest, quite logically it seems, that in order to pay for all the health-care services elderly American’s are going to require, tax rates will to have to be raised so high they’ll begin “doing real damage to the economy”, or deficits will “grow to the point that they cause a fiscal crisis.”

What’s odd about this is that it sounds to me like a huge, growth-industry opportunity: lots of customers (old people) needing lots of services and facilities (nursing-care, hospital beds, heart monitors, breathing tubes, etc.) I could well imagine that if we truly embraced the need to provide all these services and facilities, it might grow our GDP by four or five percent. Just taking really good care of old people—feeding them, reading to them, taking them for walks, massaging their feet, helping them grow tomatoes—could likely lower the national unemployment rate by three or four percentage points.

I suppose what Ezra is concerned about is the fact that all these old people don’t have enough money to pay for these services and facilities. It’s true that maybe one out of ten has managed to save enough dollars to buy what they’re going to need, but ninety percent or more simply couldn’t quite manage their lives in a way to set aside that kind of money. Life just doesn’t seems to work out that way. So we have this potentially huge pool of health and elderly-care consumers who are powerless to consume because they have no dollars. And we have this potentially very large pool of health and elderly-care providers who haven’t even been hired yet by the health and elderly-care industries because their potential customers are broke.

This strikes me as a very illogical and dysfunctional situation—sort of like not being able to get out of the rain because you’re too wet.

There’s an easy fix, of course, but unfortunately it’s impossible: The sovereign central bank could simply print the dollars necessary to buy the services and facilities—and then distribute those dollars to the pool of potential consumers (old folks.) The health and elderly-care industry would take off like a rocket; health and elderly-care providers would all have 9 to 5 jobs; car sales would go up; wheel-chair accessible miniature golf centers would flourish. To prevent all this new money and consumer spending from generating inflation, the sovereign government could impose a new carbon tax that would help slow global warming, while draining some percentage of the new dollars back out of the economy in a controlled way.

As I said, however, this is impossible. The sovereign central bank cannot simply print the dollars. That would be—what? A free lunch….  And free lunches are not something that can logically exist in the known universe. (See Dan Kervick here.) Besides, we all know that dollars do not come from the central bank, but rather they come from the private sector economy which somehow produces dollars by creating jobs. It is, in fact, because the private sector produces our dollars that the federal government is forced to levy taxes or sell treasury bonds in order to obtain dollars from the private sector. But there’s only so many dollars in the private sector at any given time, so if the federal government collects too many in taxes, or borrows too many by selling bonds—as it will need to do to pay for the baby-boomer’s health-care— then there won’t be enough dollars left in the private sector for the entrepreneurs to create jobs with. And this is why Ezra calls this whole situation a “nightmare scenario.”

What I’m wondering though is this: Is it possible that the logic Ezra is describing really is just a nightmare? One of those dreams you have that seem so real you actually whimper in your sleep, or jerk your arm up to avoid some monstrous bite, knocking the bedside lamp off its table, waking you up—and you roll over and look around and realize, wow, I was really just dreaming!

Wouldn’t it be great if we could all wake up?

14 responses to “The Reality of Nightmares

  1. “Projected deficits are driven by two factors: health-care-costs and old people.”

    I guess I’m gonna officially be one of them when I turn 67 in February 2013. I’m now a Medicare Bene, with the usual Sheet of Chronics.

  2. While I appreciate the point you are making here, I don’t find the idea of throwing even more money at the rapacious, horrendously inefficient healthcare cartel to be a morally justifiable action on any scale. This is an area where instead of wondering “can the government afford it?” we should be asking ourselves “should the government afford it?” Why it is that our healthcare costs are twice as much as any other developed nation? Medicare has been perverted and taken hostage by the private insurance sector, it bases its costs off of this same broken model. And most of the large insurers have begun taking it over completely with things like Medicare Preferred or Medicare Advantage, feeding at the public trough to fund 7 figure CEO salaries, endless paper shuffling and administrative waste.

    Feeding the beast is the wrong route here, and the private insurance industry is one of the largest tentacles of the vampire squid. Expand Medicare coverage for all citizens, rid ourselves of this absurdly inefficient private sector model, and find some other projects to spend government money on. How about a high-speed rail system?

    • So you agree with Ezra. Let Grandma die. OK then that’s another vote for a really creative solution.

      • I would re-read my last paragraph – we’re already paying for wayy more than what health-care coverage should cost us, and in fact does cost in most other countries. The problem is with the private insurance model (pharmaceutical companies are not helping either). Should we just paper over every problem with this blanket MMT response of “ahh the government can afford it” without actually looking at what’s going on??

        • Medicare for all: I agree. But the fact health care is expensive does not mean we cannot afford it. The high cost of health care needs to be addressed and that requires us to build the necessary real resources and to put in place effective regulations. We have around twenty million unemployed. Put some of them to work building the health care infrastrucure and educations systems we need. The last thing I want to see is an abadonment of the elderly, like Ezra seems to be really saying whether he admits it or not.

        • jerry, you have a point that there is a certain amount, a large amount even, of money being siphoned off for overpriced services. Remember, a lot of Medicare $$ go to private, for-profit providers. I don’t think J.D. would suggest that we ignore costs altogether or that we should not build a more efficient system, but rather that a shortage of money is not an excuse to keep from getting started and getting today’s elderly what they need in the meantime.

          • I don’t see a disagreement here. This is not an either/or proposition, but a both/and one. We need to provide the resources to expand Medicare of everyone and at the same time free it from the clutches of the for profit insurance and pharmaceutical industries.

  3. Good piece.
    It it is inevitable that everyone will wake up soon.

  4. “[Ezra Klein suggests] that in order to pay for all the health-care services elderly American’s are going to require, tax rates will to have to be raised so high they’ll begin ‘doing real damage to the economy,’ or deficits will ‘grow to the point that they cause a fiscal crisis.'”

    Wow, and this guy is treated like an economics expert on MSNBC.

  5. WOW!!! It seems that more and more those in society would like to determine who and who isn’t of value. I know people who believe (but afraid to say it) that “kids” are the money drain with the high cost of education from K through to College, the high cost of their clothes (which they outgrow every couple of months or so) their medical costs, and the list goes on. We have a Senator (Eric Cantor) who seems to believe that it’s should be ok to rape native American women without any consequences for the rapist, so women aren’t of value to this Senator; this list of whose to blame just goes on. Bankers, CEO’s, churches all those who are tax exempt in this society, are to blame, the problem is there are just too many of the rest of the country to enforce them to pony up so the easiest to blame are the struggling masses out here and especially the weakest.

    Ezra is a young man and has done pretty well in his life, the problem is all the Ezra’s in this country are working off projections of their life based on what they know today, it sure sounds good however life doesn’t always work out that way, not at all. I agree with the writer above that suggests we tackle the base cause of the problems, not the people forced to live with the consequences of so-called leader’s mistakes, greed, theft, fear, and the list goes on.

  6. What we need is a new Jonathan Swift with a ‘Modest Proposal’ to kill of all the elderly and frack their bodies into domestic biofuel. Soylent Green is people!
    Thanks for the humor… so much of media is irony challenged these days.

  7. I believe the greater place to start the healthcare conversation is with wellness. Using MMT principles, government subsidizing healthy foods like nutrient rich vegetables more than nutrient drained grains would seem appropriate. Now, the USA gives subsidies to producers of high fructose corn syrup. Huh? Epidemiological evidence shows that diabetes and HFCS use is highly correlated. So, this sort of revelation also lends itself to controlling healthcare costs as being a matter of ending crony capitalism, which diverts logical and affordable subsidies to the illogical. People on a budget will eat the foods they can afford. If healthy food was more affordable, and unhealthy food was more expensive, we would have less need for health care in the first place. There does seem to be an MMT paradox about destroying high paying sustainable medical jobs.

  8. Pete Peterson KNOWS that Nixon abolished the Gold Std for foreign trade and exchange, and that our global money system went totally “virtual” way back in 1971, because Commerce Secy Pete Peterson was at Camp David in a secret meeting with Nixon and a handful of others designing this policy before they unleashed it on the world, before Nixon announced it.

    Pete Peterson helped write it. They told the rest of the world to “stick it”, that America ruled the global economy (and military) and we would flip them the bird. No more Gold for Dollars.

    Pete Peterson rejected “fiscal conservatism”, not only as an ideal, but as a basic structural approach. Pete Peterson must have stated or agreed at Camp David, “after we do this, deficits won’t matter” (as Reagan and Cheney have said) —- THAT WAS THE WHOLE POINT OF THE MEETING!! TO FREE NIXON from the DEFICIT ISSUE (regarding the Vietnam War and the “balance of payments” deficit with foreigners).

    Having been so deeply involved, how can Pete Peterson still claim that Govt spending is constrained by revenue and deficits, as it was BEFORE they did their Camp David thing — which was a monetary revolution?

    [not a statement of approval of the Vietnam War — never said they did it for the right reasons]

    [this HAD to have been connected to the reason Milton Friedman and Nixon strongly considered a “Negative Income Tax” to give EVERYONE a minimal income to survive, regardless of job status — conservative Republicans killed that too, even tho it was fiscally not a problem, it was an ideological problem]

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