Dean Baker at Middlebury Institute of International Studies I
By David Henderson
On Wednesday evening I attended a talk given by Dean Baker at the Middlebury Institute of International Studies (MIIS). You might think it’s in Middlebury, Vermont. It’s not. It’s in Monterey, California. Dean is co-founder of the Center for Economic Policy Research. His topic was “Health Care and the Future of the National Deficit.” In his talk he showed that if we had German-level per capita spending on health care, our federal budget in the future would move from deficit to surplus over a number of years. (I’ve forgotten how many. I took detailed notes but somehow forgot to write down dates.) I don’t know if he was saying we would also need German-level increases in per capita spending and, if so, I don’t know where he got his data on projected German-level increases.
A large part of his talk was about how to get to lower health care spending and lower growth of spending. In each case, though, he didn’t use the word “spending” although that’s what he was clearly talking about. He used the word “cost.” There’s an overlap, but they are different. He advocated a number of policies:
. Letting in more doctors from other countries.
. Allowing nurse practitioners to do more procedures on which doctors now have a monopoly.
. Having the government negotiate drug prices, just as governments in other countries do. (He didn’t say whether he would have price controls but I think he used that terminology at one point.) He would also end patents on drugs.
He also argued that even though it would be hard to get Medicare For All past the Supreme Court, it would be desirable. He compared administrative costs for Medicare (about 2% of the Medicare budget) with administrative costs for private insurers (about 19% of premiums.) He didn’t mention that the amount of fraud in Medicare is huge and that having more spent on administration would almost certainly reduce fraud.
How would we get more drugs if we didn’t have patents? He at least recognized the problem. His solution would be to have the feds spend $10 billion to $15 billion a year on research. Whatever they came up with would be patent free and would be revealed on line so that anyone could manufacture it. He didn’t say why you could trust the government to choose the right things to spend on and the right people to fund. He seemed to think that would be straightforward, but I don’t why he thinks that.
In Q&A, I said that I agreed with him on reducing barriers to immigrating doctors, but that he had left out another major barrier. I pointed out that the major cause of the huge time it takes to get a drug to market and the cause of many hundreds of millions of dollars spent is due to the 1962 Kefauver Amendment (I had forgotten that it is actually the Kefauver Harris Amendment) to the Federal Food, Drug, and Cosmetic Act. That Amendment requires that the drug company show proof of efficacy; previously the company had had to show only proof of safety. (Ironically, the incident that triggered the Amendment was the thalidomide tragedy, which was not at all about efficacy but about safety.) I asked him if he would also favor repealing that law. He said he recognized the point but wouldn’t want to repeal it as long as we have drug patents, because drug companies have incentives to ignore safety and would aggressively market their drugs in spite of safety considerations. He gave Vioxx as an example. He said, though, that if we got rid of patents, he would be fine with repealing the Kefauver Harris Amendment. That’s a victory of sorts, I guess.
Seeing him caused me to dig up my review of his 2010 book, Taking Economics Seriously. I think my review, “Taking Dean Baker Seriously,” stands up well. (And I have no idea why FDA shows up, each time, as fda.) A lot of what he said in the book was in his talk.
Here’s one of my opening paragraphs in that review:
I take Dean Baker seriously. Why? In part, because many on the left do. But mainly because he is a thoughtful economist who has flashes of wisdom and often an independent take on policy issues. Taking Economics Seriously shows some of this wisdom. Some of his proposals for health care, for example, are refreshingly pro-free-market, and he backs them up well. It also, however, shows his tendency to set up policy issues by excluding certain free-market options. The result is that, with some exceptions, he plays economics between the 40-yard lines.
Two more thoughts.
First, one thing that was off-putting was the introduction of Dean Baker by MIIS economics professor Jason Scorse. Scorse’s introduction of Dean was fine but in discussing Dean’s topic, he said there are two major political parties in the United States and one of them, which he didn’t need to name, advocates dealing with future cost increases by taking away people’s health care. That made me wonder how he would treat students in his class who have different views; would he mischaracterize their views as badly as he mischaracterized the Republican Party’s views?
Second, I had always wondered why Dean, in various blog posts over the years, thinks that mainstream reporters on economic issues are very conservative. That point came up Wednesday night in the discussion between Baker and Scorse. I hadn’t realized, until I checked Wikipedia, that Dean wrote his Ph.D. dissertation under Marxist economics professor W. H. Locke Anderson. I think I understand Dean’s baseline better now.
There were some new facts in his talk, though. Some were really interesting points about health care; one was about loss of jobs due to trade with China. He also slammed generational accounting. I’ll deal with these in a subsequent post.
Final mention. Before the talk, I went up and reintroduced myself to Dean, reminding him that he, Michael Boskin, and I had discussed Social Security reform in this 1998 episode of Peter Robinson’s TV show, Uncommon Knowledge.