All of Sweden’s families have access to affordable high-quality day care, which is publicly provided. This enables mothers to work without leaving their children behind in an unsafe environment. Female heads of household, a group marked by a high rate of poverty in the United States, are not poor in Sweden. Remarkably, their poverty rate in Sweden, according to Esping-Andersen, is only 4 percent, compared with the United States, where the Census Bureau recorded a 30 percent poverty rate in 2009.16 Similarly, all of Sweden’s children are afforded high-quality preschooling.
The main point, according to Esping-Andersen, is that it is the provision of public services, notably the universal access to affordable day care, even more than income support to families, that is key to the elimination of poverty among families with children. Sweden’s public services, of uniformly high quality, ensure a decent start for all children.
Sweden’s public financing for child care, preschool, and preprimary school amounts to 1 percent of GDP, compared with just 0.4 percent of GDP in the United States.17 The needs in the United States, of course, are even greater than in Sweden, given the vastly higher proportion of children growing in poverty. Yet in the United States, at least half of those needs are likely to be met by middle-class and rich households out of their own incomes, rather than through comprehensive public coverage. Let’s pencil in an additional 0.5 percent of GDP as of 2015 as a very rough estimate of what will be needed to ensure comprehensive early childhood development programs in the United States. Once again, the precise budgeting will require extensive learning by doing and the step-by-step scaling up of successful models.
Real Health Care Reform
Low- and middle-income Americans have suffered from stagnant wages and been pressed down by international competition and rising health care costs. The relentless rise of health care costs in the past couple of decades occasioned the nearly sixteen-month saga of health care reform at the start of the Obama administration. Yet though the reform accomplished two important goals—expanding coverage to the poor and protecting coverage of those with preexisting health conditions—there is very little in the legislation that will slow the increase in health care costs for a given amount of real health care delivery. In fact, health care costs are likely to rise, not fall, in the coming years as the new measures are implemented. What happened is clear enough. The private health care insurance industry, the pharmaceutical industry, and the American Medical Association blocked the deeper reforms that could have brought cost inflation under control. As one leader in the industry has put it, “health care will not reform itself,” since the vested interests are too powerful.18
Several careful studies have shown how the private-sector interest groups in the health care sector hike up their costs and prices, knowing that they will be reimbursed by the government (in the case of Medicare and Medicaid) or by private purchasers of health care insurance, who have no real alternative. According to one study, the excess costs of U.S. health care in 2003 amounted to an estimated $1,645 per person, or roughly 4 percent of GDP.19 The study found that excessively high costs permeate the entire health care system, including hospital care, outpatient care, drugs, and health care administration. Doctors’ salaries in the United States are far higher than in other countries; so, too, are drug prices. Privately owned outpatient clinics have high costs and excess capacity. And the costs of health care administration and health insurance (such as the handling of claims) are estimated to be around six times as much as the median in the OECD (high-income) countries!20
The Scandinavian countries run their health care systems at roughly half the cost of the United States and with much better results in life expectancy and reduced child mortality. They do so by emphasizing a “systems approach” to health. Health care is publicly financed but privately provided. One systemic difference with the United States is Scandinavia’s much greater attention to primary care, which heads off expensive and chronic conditions that arise and intensify when they are ignored until too late. Primary care doctors are the “connectors” between patients and specialists. Management of the overall health care system is much more transparent. Billing and administration are not bureaucratic nightmares involving private insurance companies. And doctors work more seamlessly together on complex cases, avoiding a massive duplication of administration and of expensive medical tests.
As Obama himself noted during the health care reform debate, there are examples of such successes in the United States, including Kaiser Permanente and the Cleveland Clinic. He even visited the latter to make the point. Yet the reform legislation gave barely a nod in that direction. The lobbyists had won long before the visit by promising to support the legislation (or at least not fight against it) as long as the basic structures of the overpriced health care system were not touched.
A Pathway to Energy Security
The greatest infrastructure challenge of the coming decades is to wean America from its dependence on fossil fuels, both to reduce greenhouse gas emissions and to cut the country’s dependency on rapidly depleting and highly unstable energy supplies. This is a complex challenge with four goals: national security, energy security (plentiful, low-cost energy), environmental security, and industrial competitiveness. There is currently no national plan to date on how to achieve even one of these goals, much less all four simultaneously. Comprehensive strategies will involve several types of energy (solar, wind, nuclear, fossil fuels with carbon sequestration), several new types of energy use (hydrogen fuel cells, battery-powered vehicles), and new types of urban design.
There are bottlenecks in every direction. In the original creation of much of the nation’s infrastructure, federal and state governments used eminent domain to acquire the land and other resources needed to provide the public goods. That has become considerably harder over time. The right of individual landowners and communities to stall projects has stopped abuses but also made it much harder to modernize the infrastructure. Environmentalists are blocking not only coal-fired power plants but low-carbon energy technologies as well. In recent years, environmentalists have fought wind power off Cape Cod, solar power in the Mojave Desert, high-voltage transmission lines to bring renewable energy to New York City, underground sequestration of carbon dioxide at several proposed sites, and nuclear power plant licensing throughout the country.
What will actually be built is now anybody’s guess. Projects can take decades to reach approvals and years or decades more till the first groundbreaking. Until recently the problem was known as NIMBY, Not in My Back Yard. Yet now things are even worse. We’ve arrived at the BANANA economy: Build Absolutely Nothing Anytime Near Anything.
The glaring gap is the lack of a national strategy. There are dozens of bits and pieces of public policy strewn throughout energy legislation, the 2009 stimulus act, transport legislation, and specific tax policies for alternative energy sources and electric vehicles. They do not add up to a coherent strategy. The Obama administration has announced the goal of a 17 percent reduction of greenhouse gas emissions by 2020 compared with 2005, yet it did not announce any policy to achieve it or even a scenario of how it might be accomplished. Without that, the goals are numbers plucked from thin air, disconnected to the investments in new electricity grids, vehicles, and power plants that could actually get us there.
The transition to a low-carbon energy economy will not be free. Low-carbon energy is more expensive and often less convenient than conventional fossil fuels. Coal can, of course, be burned throughout the day and night, while solar power is available during daylight hours and the wind blows intermittently. Our electricity is currently provided by roughly 50 percent coal, 20 percent nuclear energy, 20 percent natural gas, and the rest mainly by hydropower.21 To move to an energy system that is mainly low-carbon, whether nuclear or renewable energy or coal combined with the capture of CO2 emissions, will probably require an extra $50 or so per ton of CO2 emissions avoided by shifting to cleaner energy. Back-of-the-envelope calculations suggest
that the total cost of moving to a low-carbon economy would therefore be around $200 billion per year by 2050, compared with a $30 trillion GDP by midcentury, or roughly 0.6 percent of GDP in outlays. Of course, if the low-carbon energy technologies prove to be much less expensive than now or the conventional fossil fuel energy sources rise significantly in price, the incremental costs of shifting to a low-carbon economy could be much less than 0.6 percent of GDP.
My colleagues and I have been designing a gradual transition path to get from here to there, one that would not disrupt fossil fuel—based energy systems in the short term but would enable a dramatic transformation to a low-carbon energy system by 2050.22 The idea is to levy a small tax on existing fossil fuels and use it to give a sizable subsidy to low-carbon energy (e.g., wind and solar power or carbon capture and storage at existing coal plants). Since the existing fossil fuel—based energy system is so large and the new low-carbon energy sector is so small, even a very small tax on fossil fuel could pay for a quite generous subsidy today, enough to encourage the entry of new low-carbon energy sources to the market. By maintaining suitable subsidies over time, the size of the low-carbon sector would grow. The fossil fuel tax would rise gradually over time, and the subsidy paid to low-carbon energy producers would decline gradually over time, in a manner that maintains an overall net incentive (equal to the sum of the tax and the subsidy) to keep moving toward a low-carbon energy system.
Consumers would never experience a sudden jolt in energy prices, while low-carbon energy producers would receive a predictable and generous subsidy to support the long-term transition to the new system. The system would be self-financing, since the revenues from fossil fuel taxes would cover the subsidies provided to the alternatives. Over the course of several decades, technological learning cycles (for example, of electric vehicles and solar power) would reduce the costs of low-carbon energy systems compared with today’s fossil fuel—based technologies. It’s also possible that the market prices of coal and oil might become so high because of rising scarcity that low-carbon renewable energy systems such as wind and solar power would become the market-based low-cost alternatives even without public subsidies to help get them started.
Ending Military Waste
The biggest single item in the budget is the military, which claims at least 5 percent of GDP, around one-fourth of total federal outlays, and the preponderance of U.S. foreign policy attention. The magnitude of these outlays is enormous and their rationale is highly questionable. Military spending will be around $738 billion in fiscal year 2012, not including another $250 billion or so for homeland security, intelligence gathering, veterans’ benefits, and other military-related outlays. The total budget directly or indirectly attributable to the military is thus a staggering $1 trillion or so per year.
Around $150 billion per year relates directly to the Iraq and Afghanistan wars, both of dubious if any value to American security. Another large part relates to the maintenance of thousands of nuclear warheads without any obvious purpose, since a tiny fraction of this number would ensure the deterrence of any attack. A staggering $200 billion involves missile defense, other procurement programs, and research and development.23 In many cases, the generals themselves have declared that they do not need the proposed weapons systems, but powerful lobbies and supportive members of Congress keep the systems in place.
Ending the wars in Iraq and Afghanistan, closing many of the hundreds of military bases around the world established since World War II, and canceling some of the high-cost and dubious weapons systems would allow massive savings of $300 billion or more from the bloated Pentagon budget. Of course, that is picking a fight with America’s leading industry and perhaps still most powerful lobby (in close competition with oil, coal, banking, and health care). The military contractors have the advantage of employing workers in virtually every congressional district in the country. Jobs rather than defense has for decades been the watchword of the military-industrial complex, a network so powerful that even the end of the Cold War barely dented the military budget as a share of national income.
Our Ultimate Economic Goals
It is easy to lose sight of the ultimate purpose of economic policy: the life satisfaction of the population. That ultimate goal should be unassailable for a country founded precisely to defend the inalienable right to the pursuit of happiness. Yet not only do we miss myriad opportunities to promote happiness through our collective undertakings, we even miss the opportunities to measure happiness so that we can gauge how we are doing as a nation. Our fixation on GDP/GNP crowds out our attention to more important indicators. As Robert F. Kennedy, Jr., put it:
For too long we seem to have surrendered personal excellence and community value in the mere accumulation of material things. Our gross national product now is over 800 billion dollars a year, but that gross national product, if we judge the United States of America by that, that gross national product counts air pollution, and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for people who break them. It counts the destruction of the redwoods and the loss of our natural wonder in chaotic squall. It counts Napalm, and it counts nuclear warheads, and armored cars for the police to fight the riots in our city. It counts Whitman’s rifles and Speck’s knifes and the television programs which glorify violence in order to sell toys to our children. Yet, the gross national product does not allow for the health of our children, the quality of their education, or the joy of their play; it does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country; it measures everything in short except that which makes life worthwhile. And it can tell us everything about America except why we are proud that we are Americans.24
There have been growing efforts to expand the range of indicators to measure better what’s important for our well-being. The World Values Survey and Gallup International have each pioneered various measures of subjective well-being, which psychologists and economists have found to be stable, slowly evolving, and useful for social diagnostics. The Human Development Index (HDI) is another well-known attempt to combine economic indicators with social indicators (literacy, school enrollment, and life expectancy) to give a more rounded picture of well-being. The American Human Development Project has recently extended the HDI to American states, counties, and congressional districts, an enormously helpful contribution to assessing the diversity of America’s economic and social conditions.25
No country has taken the challenge of measuring, and raising, happiness more seriously than the Himalayan Buddhist Kingdom of Bhutan. Back in 1972, the country’s fourth monarch, Jigme Dorji Wangchuk, called for the country to orient its policies to promote the gross national happiness rather than the gross national product. This challenge has not been taken lightly or figuratively. The government of Bhutan established the Gross National Happiness Commission to oversee a series of metrics that would quantify and track the changes in national happiness.26 GNH is measured in nine domains:
Psychological well-being
Time use
Community vitality
Culture
Health
Education
Environmental diversity
Living standard
Governance
Each of these is measured by a series of quantitative indicators. What is notable is the combination of relatively standard economic measurements such as household income and education with measures of cultural integrity (e.g., the use of dialects, engagement in traditional sports and community festivals), ecology (e.g., forest cover), health status (e.g., body mass index, number of healthy days per month), community well-being (e.g., social trust, kinship density), time allocation, and general mental health (e.g., indicators of psychological distress).
/> The worldwide movement to measure happiness and the quality of life is now expanding very rapidly. The OECD launched a Global Project on Measuring the Progress of Societies in 2004, and the European Commission is moving forward on its own set of integrated indicators. There have been countless recent attempts to correct GNP to account for its many anomalies (subtracting various “bads” such as pollution, congestion, and resource depletion from the standard GNP accounts), starting with the Measure of Economic Welfare (MEW) pioneered by William Nordhaus and James Tobin. The Genuine Progress Indicator (GPI) is a similar initiative to correct GNP for several factors such as inequality, congestion, and pollution. In 2005, the Economist Intelligence Unit demonstrated that “quality-of-life” across countries is reasonably well explained statistically by a combination of measurable economic, political, health, job security, and community indicators. Many scholars have confirmed similar results in recent academic studies.27 Recently the French government convened a commission headed by Joseph Stiglitz and Amartya Sen to propose a new set of indicators, and in 2010 the U.K. government announced that it would directly monitor subjective well-being in annual surveys.28
It is time for the United States to take seriously the measurement and monitoring over time of Americans’ well-being. Two key facts—that self-reported happiness has been stuck or even declining as income has grown and that the United States is falling behind many other countries in happiness and its underlying determinants—make this new effort especially urgent. Table 10.2 illustrates the kind of well-being measures that would be collected each year in addition to the standard national income accounts. Gallup International, for example, uses opinion surveys to assess the average “life satisfaction” in 178 countries by asking “All things considered, how satisfied are you with your life as a whole these days?” The OECD has created an index of child well-being that aggregates over six dimensions: material conditions, housing, education, health, risk behaviors, and quality of school life. Other indicators might include variables such as life expectancy, student test scores, and the poverty rate, all shown in the table. Clearly, the United States has its work cut out for it to raise its standard of average well-being compared with what other high-income countries are achieving.
The Price of Civilization Page 19