Bernie Sanders Wants to Spend $18 Trillion: So What?

By James Kwak

The front page of yesterday’s Wall Street Journal featured an article claiming that Bernie Sanders wants to increase federal government spending by $18 trillion over the next ten years—an increase of about one-third over that time period. This was apparently supposed to raise some kind of alarm—what kind of maniac is this?—and I’m sure both Republicans and Hillary Clinton are happy the Journal is doing their work for them.

The problem is that a spending figure, even one as big as $18 trillion, is meaningless on its own.

Most of that money—$15 trillion—is the expansion of Medicare to cover all Americans. Yes, that’s a lot of money. But we are already spending a ton of money on  health care—with embarrassingly poor results. In 2013, total premiums for private health insurance cost Americans $962 billion, individuals and families paid $339 billion out of their own pockets and “other private revenues” accounted for another $121 billion of health care (data here). That’s $1.4 trillion of health care spending, paid for by families and businesses, most of which would be replaced by Sanders’s plan. Project that out for ten years, add health care inflation, and you’re talking about a lot more than $15 trillion.

At the end of the day, what matters isn’t the amount of money that the federal government spends for health care. What matters is the amount of money that the American people spend for health care. The government is just a device that we use to provide certain services that are better handled collectively than individually. If the government can provide equivalent service at lower prices, then the gross dollar amount involved doesn’t matter.

I’m pretty sure—and I’m speaking partly from personal experience—that most businesses would be happy to have the federal government take the health care headache off of their hands once and for all. Rising health care premiums are a major reason why companies find it hard to give their employees generous raises. This is a real problem for, say, profitable technology companies (Apple, Google, etc.) who have to compete with unprofitable startups who can offer big raises without worrying about the bottom line.

Many people would be happy to stop paying private insurance premiums (either in the individual market, or the employee contributions in the employer-sponsored market) and instead pay a higher payroll tax to support expanded Medicare. Many people would also be happy separating health insurance from their work status permanently. Some other people would prefer the current system—primarily rich people whose payroll taxes would exceed their current insurance premiums. That’s a distributional issue, and it comes down to whether we want a policy that favors rich people or one that favors poor people.

Now the big issue, I admit, is whether the government can provide equivalent service at lower prices. For the vast majority of consumer goods and services, it can’t. That’s why we buy our phones and computers from private companies like Apple, not from government agencies.

The usual argument against a federal health insurance program is a blind assertion that the government can never provide services that rival the private sector. That’s what you learn in Economics 101, therefore it must be true. But real economists have known for more than half a century that health care doesn’t behave like ordinary consumer goods. The paper that everyone still cites is by Kenneth Arrow—he of the Arrow-Debreu Theorem, which is perhaps the most extreme theoretical statement of the powers of markets to achieve efficient outcomes in equilibrium.

If you don’t want to read economics papers, the best evidence that health care is different comes from comparing the United States to other rich countries, which all have something closer to a single payer model for health insurance. As is well known, we spend a lot more money and have comparable or worse aggregate health outcomes. There is a huge ongoing debate about why this is, which I’m not going to try to settle here.

The main point, however, is that if you want to argue against the Bernie Sanders health care plan, you have to make the case that Medicare for all will actually produce worse outcomes or higher costs than our current system. The fact that it costs a lot of money is beside the point.

Also posted at Medium.

18 thoughts on “Bernie Sanders Wants to Spend $18 Trillion: So What?”

  1. Single-payer systems need not be run by the government. The excellent French one is run jointly by trade unions and employers’ federations, under the aegis of the government.
    Shaving off administrative costs and marketing would be significant, but not enough. The real savings require taking on the AMA that in a case of the fox guarding the henhouse also gets to control the supply of new doctors, and also confronting Big Pharma. It is unconscionable that Medicare/Medicaid is banned by law from negotiating volume discounts on medications.

  2. Our government loves regulation, maybe they should regulated the costs of Health Care, regulate every aspect of it, Doctors, Hospitals and Drug Companies.

  3. Your argument does not apply to healthcare alone. Education is another area in which state involvement provides benefits the market alone cannot. Then, looking to other sectors: in general, markets are badly placed to provide a good service in sectors which by their very nature involve natural local monopolies and provide the basic requirements for modern life. The two most obvious are water and electricity, though there is a good argument that railway falls into this category as well. In each, how likely is it that three or four operators will run a network of water pipes? How likely is it that three or four operators will service the same rail route? Not very, and it does not in fact happen.

  5. From my point of view, and it’s an extended one, every aspect of life has been done wrong and most likely shall continue to be so. There is simply to much that needs attention and and too few who are qualified to address it. The law of numbers is not on our side and until the tools of utopia have arrived here on this planet, in this universe, (they have arrived in others), it makes no sense to even attempt to do so until the resistance level has been reduced and real progress can be achieved. Not that trying to do so one more time in the the very near future is vain, but eventually one has to put priorities in their place and let the chips fall where they may. I have no delusions in this regard and the proof is beyond a shadow of a doubt at this point in time. Sorry for the bad news, but it is what it is.

  6. Well, thanks to you for giving us the figure for securing a semblance of national health care, a cost that can now reduce the obligations of the business class, who have not yet learned to love Bernie.
    And thanks to the WSJ for postulating an entirely false scenario around this money – that it would be in addition to other spending, without crediting the government with a spending reduction in the cost of US made goods and services….. something they would rather do by cutting wages.
    Bernie’s fail at this point is to not realize the potential of a fiscal-monetary stimulus (People’s Dividend, form of QE 4 the People) funded by sovereign fiat money issuance seigniorage.
    THEN, we can get on with the Revolution that he wants..

  7. “This is a real problem for, say, profitable technology companies (Apple, Google, etc.) who have to compete with unprofitable startups who can offer big raises without worrying about the bottom line.”

    So what?

    Profitable technology companies like Apple and Google park their cash in off-shore tax havens, underpay their workers (local and foreign), don’t give a crap about the middle class and generally lean toward monopoly status. Don’t care.

  8. Not necessarily true, natural monopolies in these areas tend to create firms that abuse monopoly power, increase prices and make inequitable amounts of profit. Thus you would either need to heavy regulation which is high cost, or would need to introduce more competition. Point is, can’t paint all markets with same brush, must be pragmatic and look at individual market conditions.

  10. @anonanon – Just give back the freekin’ STOLEN savings, property and jobs back where they were, you fool.

    Where is the claw back!!?? NOTHING will be fixed without that!

  12. @anon, you wrote, “From my point of view, and it’s an extended one, every aspect of life has been done wrong and most likely shall continue to be so. There is simply to much that needs attention and and too few who are qualified to address it. The law of numbers is not on our side and until the tools of utopia have arrived here on this planet, in this universe, (they have arrived in others), it makes no sense to even attempt to do so until the resistance level has been reduced and real progress can be achieved. Not that trying to do so one more time in the the very near future is vain, but eventually one has to put priorities in their place and let the chips fall where they may. I have no delusions in this regard and the proof is beyond a shadow of a doubt at this point in time. Sorry for the bad news, but it is what it is.”

    So is that what you want to believe it was, just one big whoops, my bad, not a sustained triangular bankster attack through Nihilism, Hedonism and Anarchy?

    They even pleaded guilty to taking it ALL. So where is the claw back – why is giving people back what was STOLEN not part of the enforcement of LAW AND ORDER?

    Were not all the QUALIFIED people fired and ruined with psychobabble that painted them as disgruntled whistleblowers? Bring them back, like, duh.

    And the only normal and sane question that DESERVES to be answered is WHY ARE THEY STILL IN CHARGE AFTER THEY DID EVERYTHING WRONG?

    Don’t make me cut and paste the Declaration of Independence – AGAIN. The exact same list of grievances that launched the JUST WAR of Independence is exactly the same list of schticks – taxes, squirrelly legislature/delays of legislature/government shutdown, populace supporting PRIVATE army – pulled by the people laughing in that video!

  13. Listen here Ann, what I was describing are the evils of human nature in general, you shall certainly be part of your so called “claw back”, as will most everyone else alive. Stealing lives is no small matter I agree, but fixing the situation even after that requires great amounts of energy which STILL can only be accomplished by a chosen few, (you and most others NOT being included because you will be swept away with the landscape and rubble of the not so distance past in your current frame of mind) and it is those people to whom I am referring, the problems promise to remain the same and the priorities are the ones which need addressing. You should be concentrating more on the gvt default structure and surviving that rather than attempting to correlate the past -vs-the present so called “schticks” you mention.
    They remain in charge because of ignorance, greed, hypocrisy and the law of numbers, we hope to reverse this tide soon and force responsibility back into the public eye with education, responsibilty and a return to the gold standard. But even then it may not be possible, and that is where priorities have to be addressed as to the best course of action to achieve these extensive demands of the technology of man and those who put all this in place.

  14. @Anon – (you and most others NOT being included because you will be swept away with the landscape and rubble of the not so distance past in your current frame of mind)

    how ballsy and DELUSIONAL that you still THINK you still have the POWER of LIES with which to judge who is the “rubbish” to be swept away after MILLIONS of fake psychobabble diagnosis were written up to push a dangerous prescription drug on CHILDREN and the ELDERLY for the $$$$ – More misery for others + More $$$$ for ME ME ME:

    http://highline.huffingtonpost.com/miracleindustry/americas-most-admired-lawbreaker/chapter-6.html

    YOU will be swept away just like your schticks were by the Declaration of Independence and what followed – THIS is one of the items that were listed in the DOI as a “grievance” worthy of blood and treasure to REMOVE from “We the People”:

    “…..He (the King of England) has erected a Multitude of new Offices and sent hither Swarms of Officers to harass our People and eat out their Substance….”

  15. Ann, your derivatives are getting a bit out of control, people such as yourself believe what they want to believe and nothing else, time is not on your side, and neither now am I, if I ever was at one time, good luck for I will no longer be responding to your repLIES.

  16. Profitable technology companies like Apple and Google park their cash in off-shore tax havens, underpay their workers (local and foreign), don’t give a crap about the middle class and generally lean toward monopoly status.

  17. There is simply to much that needs attention and and too few who are qualified to address it. The law of numbers is not on our side and until the tools of utopia have arrived here on this planet, in this universe, (they have arrived in others), it makes no sense to even attempt to do so until the resistance level has been reduced and real progress can be achieved.

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