Fixing health care will help heal economy

There is an element of the auto-industry bailout debate that has Watching the debate over the car industry’s implosion and the need for federal largess that has received scant attention: the impact that health benefit costs have on costs.

A few analysts have comment on this — Robert Reich, Paul Krugman, the UAW and this piece from The Coastal Journal — but for the most part the health care issue has been off the table, except when it has been framed as one in which greedy employees are killing competition.

Progressives would be smart to counter this anti-worker rhetoric forcefully and use the auto-industry debate to bring the discussion of health care into the larger issue of our economic future.

Too many analysts — like Michael Boskin, for instance — are offering this kind of misguided advice:

The most important issues facing the country right now are income, jobs and wealth — not energy, health care, the environment or the distribution of income. This recession is the real thing, far worse than the two brief, mild recessions of the last quarter-century.

Mr. Obama needs to think about everything his administration does through the prism of how it will affect the economy in the next two years. That means postponing, scaling back or slowly phasing in proposals that impose significant costs on the economy. For example, his energy and health care proposals, if enacted, would destroy investment and jobs now, whatever they might accomplish later.

But investment in green technology and reforming health care will go a long way to fixing what ails us. Consider how health care affects the price of cars — and the decisions made by Detroit on what kinds of cars to build and market:

GM’s obligations to its employees and retirees add about $2,500 to the cost of each automobile sold. In part because of the high cost of these benefits, and in part because GM simply failed to read the market properly, GM manufactures and sells mostly large vehicles with large price tags. They also consume large amounts of fuel.

Toyota, on the other hand, benefits from a national health program and a retirement program in Japan, and in most of the countries where it manufactures its goods … Canada, and the countries of the European Union. So even though Toyota does buy insurance for its employees in Kentucky, the costs are more than offset by benefits it does not have to purchase for its employees in Kyoto. While GM’s average car price tag includes $2,500 for benefits, Toyota’s average car price tag includes about $300 for benefits.

As a result, GM can’t compete with Toyota on a straight apples-to-apples cost comparison. A Camry-like vehicle, manufactured by GM, would be a couple of thousand dollars more expensive. GM would lose comparison shoppers in price. And Toyota has developed a well-earned reputation for reliability over the years, too.

So, to compensate, GM manufactures mostly big vehicles … trucks and SUVs, high-priced sporty vehicles, such as the Corvette, and luxury cars, like the Cadillac. And for a time, these vehicles were the vehicles of choice, due to a strategic and successful marketing campaign in the United States.

But then the price of gas went up and concerns about the environment also rose. And while Toyota adjusted quickly … spending its capital in R&D and getting its small hybrids out within just a few years, GM kept making its SUVs, large pickups, and gas-hungry sports and luxury cars, betting that the price of gas would go down and that buyers would choose to stay with the bigger vehicles. But they were going the way of the dinosaurs on whose ancient blood these vehicles feasted … simply put, no one could afford the gas. If a buyer didn’t absolutely NEED a large pickup, he didn’t buy one. Toyota, meanwhile, couldn’t keep its Prius hybrids in stock. Even zero-interest car loans couldn’t bring the buyers back to GM for long.

Other industries in the United States that compete globally face the same uneven playing field. Taking health care off the table as a cost of business would go a long way toward improving out competitiveness, which is why reforming our broken health care system has to be a major short-term priority and not something left to later.

The new administration appears to understand this. Consider what Tom Daschle — Obama’s top health care advisor — had to say the other day:

“There is no question that the economic health of this country is directly related to our ability to reform our health-care system,” Daschle said.

Daschle cited the fact that high health care costs are preventing U.S. businesses from staying competitive and creating jobs. “That’s what makes this so urgent and so much a part of the economic recovery process,” Daschle said. “I believe that for the first time in American history, health-care reform will be done.”

Let’s hope so.

Author: hankkalet

Hank Kalet is a poet and freelance journalist. He is the economic needs reporter for NJ Spotlight, teaches journalism at Rutgers University and writing at Middlesex County College and Brookdale Community College. He writes a semi-monthly column for the Progressive Populist. He is a lifelong fan of the New York Mets and New York Knicks, drinks too much coffee and attends as many Bruce Springsteen concerts as his meager finances will allow. He lives in South Brunswick with his wife Annie. View all posts by hankkalet