They, Them, And Government Spending

From the dawn of time, in every civilization, the means to shape and control lives have been grabbed and held by those with power. Military power, advantages wrought by innovation, economic resources; all have been monopolized by one entity or another and used to control a population. Mongol warlords, Chinese emperors, Venetian merchants, the Papal authority, and feudal lords have all found ways and reasons to rule. Titans of finance, communicators with the Gods (or God), and kings of men; they are all still with us today. But at times in human history; in some of the Greek city-states, in the Roman Republic, and in a little 18th Century backwater of the English Empire called America, the notion of a people consolidating power and sharing it among themselves has taken root.

The notion of democracy, the foundation driven into bedrock of the ideal, is the ability of a people to collectively control their environment. The democracy shared via the voting public it governs, must be able to influence the marketplace to the benefit of the majority, while safeguarding the entire population from external threats and the erosion of individual liberty. It is, as a number of folks have said over the years, a case study in advanced citizenship. It is not easy, it is not clean, it is not simple. Most Americans have some experience with (and a healthy respect for) the difficulties of democracy in small groups. Church and business committees, parent/teacher organizations, sports organizations and the like give regular examples to regular folks of the difficulties inherent in finding and reaching consensus.

If you think it is tough to find a balance that makes 50 or 50 people out of 100 happy in your organization, try crafting a balance that can make even 160 million Americans happy. “Listening to the citizens” is fine, in fact, it is mandatory. Listening, however, does not guarantee voter happiness in a democracy as large as the United States. Especially when citizens have reached a point where even the most astute are able to rely on services while simultaneously complaining about the existence of said services. All of which brings us to they, them, and that sticky notion of government spending. You see, when “we” aren’t happy with, or are confused by something, we tend to take the “we” out of government and substitute they and them. The we can then, conveniently, take ourselves out of the government value chain, where we are free to criticize anything we don’t like from the perspective of fiscal responsibility.

To be sure, this is a process that has fed it’s share of liberal politics over the years, but the primary value of the process is the legitimacy it grants conservative legislation with the working class Americans such legislation typically hurts. The basic fact of our nation is that all of us benefit from a super-majority of government spending, and that said benefit always exceeds the individual input of every taxpayer, rich or poor. This truth extends first from the reality that the United States of America does not feature any market vacuums; spending and service inputs by private firms and governments alike have unmistakable and clearly measurable benefits on both individuals and organizations across the country. We are, all of us, connected. And because state and federal budgets are so much larger, serving so many more people than even the largest businesses, taxpayers leverage the ultimate scale economies in this marketplace. Essentially, our democracy buys us services at a wholesale rate the marketplace can’t touch.

Nowhere is this more evident than in the medical marketplace. Medicare and Medicaid represent the 800 pound gorilla in the room for our system of government. Cost escalations in those programs are the single biggest threat to government budget stability, past, present, and future. Those escalations reflect the explosive growth in the cost of delivery of medical services throughout our economy, growth that limits access and saps productivity. This needs to be dealt with, and an attempt was made to fix the problem via what was (as early as 15 years ago) a conservative plan for health care reform. But the reform has been roundly attacked by people as diverse as providers, consumers who have coverage, and (of course) conservative ideologues.

The problem, they say, is spending. The solution, they say, is to cut the spending (or tether it to an artificial leash that has the same long term effect). The problems with this approach are many and varied, but I have listed a few below:

  1. The spending supports a need in our economy, not a want. When people are forced to spend larger shares of their income on the same need in their personal budget, they restrict spending on both wants and (critically) the savings for future needs. This has the dual effect of crippling current consumer spending, and placing a cap on long term returns for investors in the domestic economy.
  2. Government spending does not disappear into a black hole or some alternate universe. Spending on domestic programs goes to domestic business. Even that ridiculous boondoggle in Las Vegas with the GSA, while a waste, generated significant economic benefit to business owners and working class people in Las Vegas. For hospitals, half of a typical hospital’s net revenues come from Medicare or Medicaid. What would the care at those facilities be like if that revenue was compromised?
  3. Exacerbating problem #2 is the overall picture for a typical hospital’s gross revenue. Half, that is 50% of a typical hospital’s gross revenue is written off as either charity or bad debt. Subtractions from the principal federal programs for health care necessarily compromise 75% of the typical facility’s revenue.
  4. For the FQHC’s that make up one quarter of U.S. hospitals, the last number given in problem #3 is illustrated succinctly; 75% of revenues in federally qualified facilities come from federal sources. And these facilities are not staples of Blue State largess, most of the large states East of the Mississippi River (including Florida, North Carolina, and Georgia), as well as Texas, are included in those that feature the highest distribution of these facilities.
  5. While we see evidence of rapacious profit-taking in pharmaceutical and medical device firms, the cost of care does support a thriving subset of working class America; nurses, pharmacists, and medical technicians. In our service-based economy, these professions (along with the more aggressively compensated doctors they support) provide badly needed core consumers to the market. Without better compensated consumers, the sellers would have no profits to take. So it is clear that Medicare and Medicaid support a substantial part of the consumer marketplace.

These are just a few problems, in one industry, with the political convention of attacking spending as a disconnected entity in our democracy. The enlightened reader will find many others spring to mind. And this article does not discuss the other imperatives of democracy that must be considered; choice and liberty. These factors are all supposed to be discussed in the institution of democracy we call Congress, but forces have stacked perceptions of liberty and choice against and ahead of all other considerations, with no better reason than the advancement of a political ideology that values electoral victories over real results.


The Rational Middle is listening…