As GOP members of Congress frantically scramble to repeal and replace the Affordable Care Act (Obamacare) — endeavoring to reconcile the chasm between reality and rhetoric and between their constituents and donor base — most are trying to square the circle by invoking “economism.”
Economism, a term popularized by James Kwak in his recent book “Economism: Bad Economics and the Rise of Inequality,” refers to the exaggerated, simplistic portrayal of free market economics – a distillation of the teachings of Economics 101, morphed into a political ideology that masquerades as science dressed up in mathematics. Accepted as gospel by the right and even by many on the left, it fails to reflect the complex realities of the world we live in and leads to flawed public policy.
Economism has become, in effect, the most recent justification for the existence of vast disparities in wealth in society – a successor to earlier historical apologia, such as the superiority of aristocratic bloodlines, Puritan pre-destination doctrine and Social Darwinism.
Anyone who has taken an Economics 101 course is familiar with its favorite optic, the supply-and-demand curve, a graph with two sloped lines (one representing supply and the other demand) that look like crossed swords.
The supply-and-demand curve is a mathematical representation of the choices made by many buyers and sellers at various prices in a “free” market. For instance, if a seller manufactures and offers snow shovels at a price which is too high, few customers will purchase them. Do the same thing at a price which is too low, and the supplier will lose money and go out of business or simply refuse to make or sell any more shovels. At an optimal or equilibrium price level, however, one established by the “market” (the aggregate of decisions made by individual buyers and sellers), all snow shovels will all be snapped up by buyers, sellers will unload their inventory and earn a reasonable profit, and social welfare will be maximized.
While free market pricing is an undeniably efficient economic tool for allocating resources in an economic system (and is certainly far preferable to Communist central planning), the model has limitations rarely acknowledged by economism, which touts it as the solution for all society’s problems.
First, it assumes choices are made voluntarily and where parties to transactions have full knowledge of the nature and value of the products and services being exchanged. Second, it assumes parties have roughly equal bargaining power, unaffected by political machinations (corruption or influence peddling), market dominance by certain players (monopolistic power) or extreme wealth disparities (which almost always exist in a free-market economy unless moderated by progressive taxation and downward wealth transfers through social benefit programs).
The health care sector, which accounts for about one-sixth of the nation’s economy, has none of the attributes described above and, therefore, constitutes a highly imperfect market.
Its sellers (insurance companies, hospitals, health care groups and pharmaceutical giants) tend to be large and dominant. Many consumers only use health care in a medical emergency, where there is little advance warning, no choice, and restricted ability to comparison shop due to time pressures, limited availability of providers, and lack of esoteric medical knowledge. Medical prices are largely dictated by suppliers and are so expensive that, for most households, care for serious illness or injury is entirely out of reach or requires the sacrifice of other basics such as food and utilities.
Whether one considers the bill passed by the House or the proposals before the Senate to repeal and replace the Affordable Care Act, the core of the GOP’s approach is an economistic one which will leave millions of people to the mercies of this highly imperfect market. Their approach eliminates mandatory health insurance and the upper-bracket taxes which support health insurance subsidies to lower-income Americans, drastically reduces Medicaid and subsidies for the unemployed and working poor, and promotes high-deductible/high-copay health insurance policies.
Economism justifies these measures by assuring us that the free market will always end up doing right by everyone. By giving patients more skin in the game, high deductibles and copays will supposedly induce consumers to make wiser, less costly choices about services, revive insurance markets, and lower the price of policies. Slashing Medicaid rolls will give the unemployed and underemployed the incentive to go back to work or to work harder. Eliminating the ACA mandate and taxes on high earners and medical device makers will boost the economy and give more Americans jobs and access to employer health plans, reducing the need for government insurance subsidies.
The reality is that elimination of the ACA mandate will drive up the cost of insurance. A viable insurance market spreads risk over a large and heterogeneous group. In a voluntary market, younger, healthier people tend to forgo insurance for services they rarely need, while older, sicker people rush to get it, creating an expensive pool and higher premiums. A similar rationale holds for mandatory motor vehicle liability insurance. Elimination of ACA taxes — estimated at $40 billion annually — will deplete the funding sources for Medicaid expansion. As a result of these factors, according to Congressional Budget Office analyses of various GOP legislative alternatives, 22 to 24 million fewer people will have insurance. In effect, health care for lower-income Americans will be rationed.
A number of Republican legislators, particularly in blue or swing districts, understand that the bill passed by the House and the ones proposed by the Senate’s leadership will have harsh consequences for their constituents nervous about the 2018 elections. However, major GOP campaign funders, contributors to the conservative Koch donor network, are keeping their eye on the bottom line – a massive upward wealth transfer – and are exerting counter-pressure on legislators.
According to an Associated Press report, members of this highly influential coterie of super-rich Republican backers have threatened to close their pocketbooks to members of Congress seeking campaign donations until progress is made on repeal of the ACA and on tax “reform” (tax cuts).
Repeal of the ACA and its replacement with an economistic model — a reverse Robin Hood approach to redistributing wealth — would be a triumph for an economic ideology that favors the rich and an affirmation that wealthy people are the most deserving members of society.
Elliott Epstein is a trial lawyer with Andrucki & King in Lewiston. His Rearview Mirror column, which has appeared in the Sun Journal for 10 years, analyzes current events in an historical context. He is also the author of “Lucifer’s Child,” a book about the notorious 1984 child murder of Angela Palmer.
Elliott Epstein is a trial lawyer with Andrucki & King in Lewiston. His Rearview Mirror column, which has appeared in the Sun Journal for 10 years, analyzes current events in an historical context. He is also the author of “Lucifer’s Child,” a book about the notorious 1984 child murder of Angela Palmer.