During the health care debate, of course, one of the major points of opposition to Obama’s health care reform was the argument that the United States has the “best healthcare system in the world.” Now, yes, we have the most expensive health care system in the world. If we spent as much on health care per capita as other developed countries, we’d be spending roughly $1 trillion a year LESS. Which would be fine if we were getting $1 trillion worth of better health care, but, ya know, we aren’t. We’re either in the middle or bottom-middle of the pack in terms of health care outcomes. But even if we were near the top of the pack, we are not getting anywhere near $1 trillion worth of extra value from our system. But see, the “best healthcare system” in the world delusion blinds us to the fact that we need real and deep structural reform in the healthcare sector.
Whenever we talk about defense spending, we get a similar delusion at work. This one is the insecurity delusion, where the United States, despite spending more on defense that the rest of the world combined, is somehow perceived to be walking a razor’s edge with regard to national survival. I never quite know if the people who promote this line of argumentation really believe it, or whether they’re ignorant, or have just been bought off. But whatever. Anyone who believes that cutting our defense budget say, 10 or 20%, will put us at risk of aggression from China, Iran, or Venezuela, is simply ignorant of the real distribution of global military power. Even the most aggressive defense budget cuts will leave us a 5-1 spending advantage over China. A 50-1 advantage over Iran. And a 150-1 advantage over Venezuela. But still, the delusion hold.
When we talk about income inequality, an efforts to address that issue are met with delusions about social mobility, as in, the claim that while we may have high levels of income inequality, we have high levels of social mobility as well. But, ya know, we don’t have that either. From Krugman (The Great Gatsby Curve):
Alan Krueger, the chairman of the Council of Economic Advisers — who is not only a colleague of mine at Princeton, but gets a lot of my mail and vice versa — gave a very informative speech on inequality last week that should have received more press than it did. Much of it was stuff that inequality mavens already know, but he had one striking result that was what I suspected but hadn’t seen demonstrated: a clear negative relationship between inequality at a point in time and intergenerational social mobility.
Below is what he dubs the Great Gatsby Curve. On the horizontal axis is the Gini coefficient, a measure of inequality. On the vertical axis is the intergenerational elasticity of income — how much a 1 percent rise in your father’s income affects your expected income; the higher this number, the lower is social mobility.
As he shows, America is both especially unequal and has especially low mobility. But he also argues that because we are even more unequal now than we were a generation ago, we should expect even less social mobility going forward.
Very illuminating — and disturbing.
I quote in full because I think this is a crucially important point. The United States is not just becoming more unequal, but this inequality is becoming increasingly institutionalized. We are becomes a class society, with the the negative consequences associated with that.
And yet, any effort to talk about income inequality outside of “quiet rooms” is met with accusations of socialism because, supposedly, trying to restore some balance to the distribution of wealth in the United States might get in the way of our vaunted social mobility. But that is a delusion. It is almost certainly the case that rising income inequality is linked to diminishing social mobility. At the very least, the correlation suggests that, and while correlation does not equal causation, lack of correlation does imply lack of causation. In other words, the fact that social mobility had not increased while income inequality has suggests that, at the very least, social mobility does not result from high levels of income inequality.
I know a lot of people are sanguine about this sort of thing, on the assumption, I guess, that sooner or later delusions come up against reality and are shown to be empty. But I don’t know about that. As a practical matter, I think it is just as likely that as crises emerge we will hold ever tighter to our delusions, many of which are simply articles of faith for the true believers. The worse our health care crisis becomes, the more people will dig in to claim we have the best system in the world. The more we turn into a heriditary aristocracy of wealth, the more people will claim we have most social mobility in the world.
I’d say education is the answer. But have you ever tried talking people off the ledge of these delusions? They just don’t want to hear it.