These are the elephants in the American economy.
All other spending is minor compared to spending on healthcare and the military. If we can get greater efficiencies in these two areas, all the other problems become much more manageable.
Do we really need 234 military golf courses around the world, an $80 million military ski resort in the Bavarian Alps and a parade of unnecessary weapons, ships, and planes? It is increasingly obvious that our enormous untouchable "military" budget is not always being used for our national defense. Likewise, our massive health care budget, both public and private, is not making us any healthier. Much of the spending is squandered by inflated payments to a bloated medical establishment. Why does a simple colonoscopy cost Americans nearly $7,000 when the same procedure costs $700 in the rest of the advanced nations? These high costs explain why the United States is a clear outlier -- "A statistical anomaly, a data point that does not fit the 'curve' or the trend of other datapoints"--in health care and defense spending -- compared to similar expenditures in the rest of the industrialized nations.
These problems are deeper than just waste and inefficient spending and pork barrel projects. They have been well known since the days of Senator Proxmire and his Golden Fleece Awards when the Government spent $57,800 to measure "the length of the buttocks" of 432 airline stewardesses. Health care overspending has been well documented by my articles here, and here and here, and in a brilliant New York Times series.
But the reason why this overspending has continued unabated is that it enriches powerful special interest groups with entrenched hidden ties to politicians and government bureaucracies.
Regardless of any other flaws -- waste and corruption in our system -- unless we act quickly to curb these two areas of unproductive, but endemic, massive spending, it will lead to crumbling of the American Empire --"the indispensable nation." It's like the emperor's new clothes. Our economy and our politicians are foolishly prancing around naked.... Exhausting our national assets and growth prospects ...losing our competitive edge in the global economy...and people refuse to say anything.
The US Spends Nearly Twice As Much Consider this: -- The United States spends nearly twice as much on healthcare as any other industrialized country--a crippling 18% of our GDP. Yet, we keep falling behind our peers in nearly all national health statistics results. Up to 30% of all medical spending is unnecessary. In the U.S., a routine prescription for the anti-cholesterol drug Lipitor costs $124 monthly, while in the rest of the world the same drug costs $6 per month, according recent reporting by the New York Times.
-- The United States spends more than five times as much as any other nation on its armed services -- 41% of the entire world's military budget. China spends 8%, Russia 4%, and the United Kingdom, France and Japan each spend 3.5%. The U.S. spends more than the next 20 nations combined. It also spends twice as much, as a percentage of GDP, as any other industrialized nation. And the more we spend, the more dangerous the world becomes for Americans. Are 1,000 U.S. foreign bases really necessary? Do we still need 234 military golf courses around the world? Did we ever?
In September 2004, the military even built the Edelweiss Lodge and Ski Resort in the Bavarian Alps at a cost of $80 million. Our two million enlisted soldiers probably aren't experienced skiers or golfers, but our 1,000 generals probably are. Each general's staff and support cost nearly one million dollars per year. The consequence of this irresponsible spending is a $12 trillion debt and a $642 billion annual deficit, most of it caused by military and healthcare spending. The deficit--with its attendant demands for austerity and benefit cuts, has created a self-fulfilling prophecy of decline.
But the worst part is that this non-productive spending--by draining resources from productive uses--is strangling job creation and economic growth.
Economic growth is the key to everything--erasing the deficit and maintaining a competitive edge. The news is not good. The rate of economic growth has fallen from 4% after World War II, to 2.6% over the last 40 years and to a worrisome 1.6% over the last 12 years--in part because we have choked off the funding for education, basic research, infrastructure and growth of human capital. The stakes are enormous for the future of the American dream, which looks increasingly unaffordable and grim. This kind of "stupid spending" in unsustainable if our modern-day empire is to survive in a globally competitive world. Not that we don't have a myriad of other problems looming ahead: Social Security, Medicare and Medicaid will begin to run out of funds by 2025, our aging population needs more care, and our infrastructure is crumbling. But none of these other problems can be addressed, or paid for, unless we curb excessive spending in health care and on the military budget. This spending "is like a tapeworm eating at our economic body," according to Warren Buffet. How did we fall into this abyss?
And with this waste so well known, why has nothing been done to fix it? The answer is that our country is being strangled by powerful, monied interests that control our politics and prevent us from reining in this wasteful spending. It happens every day in subtle and not-so-subtle ways. When Obama tried to impose a modest 2.3% tax on medical devices to help pay for healthcare for the poor, the vote was 70 to 30 against it--with 30 democratic senators, who were heavily lobbied by the industry, voting against it. Even the principled Elizabeth Warren succumbed to pressure from mass medical industry lobbyists in Massachusetts. The facts are no secret, and the corruption of politicians, internal decay and overreach is not at all unusual and has led to the downfall of many empires in the past: Greece, Rome, medieval China, Spain, The Dutch, and 19th century Britain.
For both Democrats and Republicans, health care and military spending cuts are like the third rail in a New York Subway: touch it, and you die. The left says we cannot cut health care spending, and the right insists that military spending is sacrosanct. But, who could oppose good health? Who could oppose adequate defense? But, the total spending in these areas has grown to outrageous proportions. It is not a question of spending more on this or of spending less on that. It is not a zero-sum game. It has to do with the disfunctionality of the system--the crony capitalism of the military industrial complex and the health care industry. Much of this excess spending is promoted in the name of the free market... when nothing could be further from the truth. It's a fixed and manipulated market all the way.
How did we get this way?
In part, voters and ordinary citizens are kept in an ongoing state of terror and trepidation by monied special interests that exploit and profit off of a generated anxiety regarding health and safety.
Market forces do not apply when it comes to spending on health care.
Consumers are largely ignorant and lack the skills to differentiate their best choices, which makes it so easy for powerful interest groups to gouge the public and the government. When you are sick, you don't want to ask how much it costs. You just want it to get better. The medical professions--doctors, hospitals, and drug companies--profit off this anxiety. The New York Times reported a story of a man named Angel Gonzalez who woke up with searing chest pains and went to the local emergency room in Long Island. The surgeon removed Mr. Gonzalez' gallbladder and charged $30,000 for a few hours' work, while an assistant billed an additional $30,000. In this emergency, Mr. Gonzalez had no leverage to demand a competitive price and in the end was stuck with a $60,000 debt that he couldn't help but acquire. Canada ranks consistently higher than the U.S. in healthcare, but their doctors charge half of what U.S. doctors do. If physician fees were lowered to the Canadian levels, health expenditures overall would be cut about 10%, according to Victor R. Fuchs, an economist at Stanford University. But, doctors and hospitals are not, by any means, the only cause of out-of-control healthcare spending. Drug companies and insurance companies play a large role in this national conspiracy. The nation's leading health insurance companies gave more than $100 million to help fuel the U.S. Chamber of Commerce's efforts to defeat and water-down President Obama's health care reform law according to the National Journal's Influence Alley.
Medicare and Medicaid Are Not Allowed To Bargain On the Price of Drugs Naturally, Medicare and Medicaid (unlike the veterans' hospitals and health services of most other countries) are not allowed, by law, to bargain with pharmaceutical companies for drugs.
This is why medical costs are eating up a crippling 18% of our gross national product--more than twice as much as any other nation but with much worse results. The World Health Organization says the U.S. ranks behind 36 other countries. A recent study by the prestigious National Research Council found the US ranked 17 out of 17 industrial nations measuring life expectancy, infant mortality, heart disease and other criterion. Last year, the Commonwealth Fund ranked the U.S. last when compared to six other industrialized counties. The U.S. stands out for not getting good value for its healthcare dollars, which is evident to anyone who bothers to measure results. Almost one million people in the U.S. go bankrupt every year because they are unable to pay their medical bills. In other industrialized countries, nobody goes bankrupt because they can't pay their medical bills, according to a Frontline Survey by T.R. Reid a few years ago.
It's fear fanned by special interests. Somehow, other countries have managed to put the health of their citizens ahead of the profits of special interests of the medical establishment. And, yet, we are unable to do the same in the U.S.
A CT scan in Taiwan costs $100, while in the U.S. it costs $1,200 using the same technology and machines. Health care providers have not followed best and most efficient practices, which results in disparate results and costs. For example, price-adjusted health care spending in McAllen, Texas was nearly $14,000 per Medicare enrollee in 2006, compared to a $8,167 national average. Are patients in McAllen, Texas really that much sicker than comparable populations in lower-spending regions?
We do not have to travel abroad to find efficient and cost effective ways to deliver health care. The Atlas studies out of Dartmouth documented that 20% to 30% of the nation's spending is unnecessary. At least three other groups have come to 30%-waste estimates, according to the New England Healthcare Institute.
The same fear factor, in combination with the influence of special interest money, is exploited and manipulated with decisions about military spending. When your safety is in danger, when terrorists are out killing U.S. diplomats, blowing up trains and crashing planes into building, voters don't want to think about cutting funding from the military forces. Logic does not enter into the debate.
The United States spends an average of more than $2,000 per person on the military versus a global average that is one-tenth that amount. Among the top 15 countries with the highest military expenditure, only Saudi Arabia and Australia spent more than $1,000 per person on the military.
Do we really need more than a 1,000 foreign military bases, nearly a 1,000 generals?
Are our 14 nuclear-powered aircraft carriers the right way to protect us?
It doesn't matter that China, which ranks number two in military spending, spends about one-seventh of what the U.S. spends. The reality is that wars in the future will be fought with drones piloted by operators in Tampa, and Las Vegas.
Who is our significant enemy? A few thousand terrorists? A couple of feeble outlaw nations? And, the more critical question, it seems, is that the more we spend, the more dangerous the world becomes for Americans.
Our 1,000 bases around the world seem to be provoking an anti-Americanism that's putting more Americans in danger than if they'd stayed home.
Earlier this year, an idealistic 25-year-old woman diplomat was blown to bits in Afghanistan. Johar Tsarnaev, the Boston Marathon bomber, said the reason he planted the explosives was retaliation for U.S. wars in Afghanistan and Iraq.
It is a disordered and chaotic world, and our interventions, despite good intentions, seem to be leaving us more vulnerable than ever. The idea that we should respond and intervene in every crisis, everywhere, seems to be making less and less sense. National security begins at home, as Richard Haass has argued.
Every spending cut is attacked by industry lobbyists as job-cutting, but "stupid spending" is like building a bridge to nowhere. There are more productive ways to keep jobs, "Contrary to the assertions of the arms industry, maintaining military spending at the expense of other forms of federal expenditures actually results in a net loss of jobs," according to defense expert William D. Hartung. Military spending does not create good jobs according to a University of Massachusetts study.
These two expensive areas are eating most of the Federal Budget and much of our GDP, and it's leading us down a path of national bankruptcy and future decline. The more monies we spend needlessly on health care and the military, the less resources we have to lead the world. This does not mean that health care services should be reduced or that our security should be compromised; only that excessive cost anomalies should be curbed. Minor adjustments in healthcare spending---following the lead of other advanced nations with more efficient systems and a realization of the limits of military power---will work wonders for our economy. President Obama seems to understand these two spending anomalies, and seems to be working quietly to adopt global best practices to bring the U.S. in line for more rational spending, but the political obstacles are by no means minor or easy to fix. Preserving US preeminence and influence overseas will come from restoring economic growth and curbing the pernicious, often secret, power of committed interest groups.