In the early 1980s, when I was a senior economist at President Reagan’s Council of Economic Advisers (CEA), we put out one publication annually for the public: The Economic Report of the President. The rest of the time, we spent our time analyzing and arguing about economic policy. So, for example, as the senior economist for energy from 1983 to 1984, I argued against re-imposing price controls on oil and gasoline, for allowing Alaskan oil to be sold to foreigners, and against increasing the stringency of the fuel economy standards for cars and trucks.
But with the all-pervasiveness of the web, it was only natural that at some point, CEA economists would want to bring their economic thinking to the public without waiting for the annual report. Former President Obama’s CEA economists published reports on the web a fair amount in his second term. And President Trump’s CEA economists followed suit. Their latest is a fact-filled, well-footnoted report published last week, titled “The Opportunity Costs of Socialism.” Why now? Probably because over half of Democrats have a positive view of socialism, and economists have a lot to say about socialism. The tone is calmly passionate, yet academic in the best sense of the word. I challenge anyone to read it open-mindedly and conclude that socialism, whether extreme or moderate, is a good economic system.
These are the opening two paragraphs of my largely positive review of the CEA’s recent study, “The Opportunity Costs of Socialism.”
One highlight:
It’s easy to show that our mixed economy in the United States performs way better than the horrible socialist economies of Lenin’s and Stalin’s Soviet Union, of Chairman Mao’s Communist China, and of Fidel Castro’s Cuba.
For that reason, you might think that such a demonstration is unnecessary. But they point out that in 1989, U.S. Nobel Prize winners Paul Samuelson, who won in 1971, and William Nordhaus, who won this year, wrote that “the Soviet economy is proof that, contrary to what many skeptics had earlier believed, a socialist command economy can function and even thrive.” If it’s worthwhile to correct the fuzzy thinking of two leading American economists, it’s definitely worthwhile to point it out to the American public, many of whom learned economics from the textbook in which that quote appeared.
Another:
Although the CEA does a great job of analyzing socialized medicine, it would have done an even better job if it had brought the same skepticism to our two major socialized health-care schemes: Medicare and Medicaid. Also, you don’t need to be a fan of government medical care to realize how badly the current U.S. system is distorted by the tax code and heavy regulation on both the demand and supply sides, something on which the CEA report is completely silent. My guess is that they didn’t want, for obvious political reasons, to tread in that dangerous territory.
Given his particular interests and strengths, I think Casey Mulligan, the chief economist of the CEA, who is on leave from the University of Chicago, is the lead author.
Both my review and the much-longer CEA report are well worth reading.
READER COMMENTS
Alan Goldhammer
Nov 5 2018 at 8:44am
David – Nice review of the CEA report. A couple of quibbles from your sometime sparring partner. I believe all the Nordic countries have VAT whch is an EU requirement (don’t know about Norway as they are not an EU member). This makes it much easier to adjust individual and corporate income taxes while still generating the same level of income for governmental services. I am no fan of corporate income taxes as they continue to generate a much smaller share of tax revenue here in the US. I would much rather see a VAT and zero out the corporate tax.
I am constantly amused when commenters group Medicaid and Medicare under the same rubric. These programs are dramatically different. Medicaid is largely free to those who cannot afford health care; Medicare costs the recipient with monthly premiums, deductibles, and co-pays (necessitating the purchasing of Medigap coverage to keep costs under control). Medicare is also means tested such that if you have successfully saved for retirement you may end up paying a significant monthly premium for your Medicare insurance based on your AGI (this applies only to Parts B & D; Part A which covers hospitalization is free and this is the one that is causing Medicare solvency problems as it is only covered by the payroll tax). I don’t look at this as ‘socialized medicine.’
European countries all have different approaches for providing health coverage to their citizens and Scott Sumner had a recent blog entry on this topic arguing that European style health care ‘might’ better than the US. I posted several comments and would urge you and others to read TR Reid’s fine book “The Healing of America: A Global Quest for Better, Cheaper, and Fairer Health Care” (a good review of the book is here). Not all the Euro models are single payer as is the NHS in the United Kingdom and several rely on regulated insurance that is compulsory. The final point I would make is that pharmaceutical prices are heavily regulated in Europe as compared the the US.
Personally I found the CEA report to be highly political and, in terms of healthcare, not reflective of the external realities in many other countries.
David Henderson
Nov 5 2018 at 6:26pm
Alan,
You wrote:
Thanks.
You wrote:
Yes. I pointed that out in my review.
You wrote:
I do. It’s a matter of degree. If it’s not socialist because there’s an element of private production in there, then a more-correct term would probably be “fascist.” I’m guessing that you wouldn’t like that replacement.
Thanks for the T.R. Reid reference. I met him at the 1981 Libertarian Party convention in Denver in September 1981 and we had a really fascinating conversation.
You wrote:
True.
You wrote:
Interesting. I didn’t find it that political and I thought the sections on medical care were among the strongest.
Mark Z
Nov 7 2018 at 5:54pm
“Medicare is also means tested such that if you have successfully saved for retirement you may end up paying a significant monthly premium for your Medicare insurance based on your AGI”
This sounds a lot like “from each according to his ability, to each according to his need” to me.
Bruno Rossi
Nov 5 2018 at 7:55pm
Messrs. Goldhammer & Henderson, re Medicare being Fascistic or Socialistic, it is both since Fascism is just one form of the broader umbrella of Socialism.
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