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In a recent column [ [link removed] ], I outlined a dilemma that arises when a society allocates a substantial share of its growth in both personal and national income to healthcare. After several decades of this process in the U.S., the total healthcare costs per household exceed $40,000, while insurance policies for working-age families typically cost more than $20,000. Politicians then insist that individuals should not be required to spend more than 10 percent of their income on these costs. This type of claim implies that only households earning more than $400,000 could afford to cover their share of the national health expenses. However, whether we pay through taxes, out-of-pocket outlays, lower cash wages, or government borrowing, we spend approximately 22 percent of personal income on health care. The politicians’ figures do not add up, confuse, and hamper efforts to reform this complex healthcare system effectively.
Here, I want to focus on how these healthcare cost trends impact the working class, whether white, Black, or Hispanic, who in recent decades have increasingly felt disconnected from society, alienated from government, and without a home in either political party. Part of that story is that they do not feel empowered by government transfers. Here is a summary of how this unfolds in the healthcare debate.
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Rising healthcare costs increase the reliance of most households on government support, which in turn squeezes out support for other programs in the public sector. The high costs also squeeze out cash wages for moderate-income workers receiving employer-provided insurance. This pressure hampers upward mobility and limits net income growth (after healthcare expenses) for the working class, adding to their sense of declining control over their lives.
In a piece titled MAGA’s Affordability Crisis Will Soon Get Worse [ [link removed] ], Paul Krugman got part of this argument right but left out any mention of the disempowerment taking place. His purpose was to argue that the current fight over extending some temporarily higher Obamacare exchange subsidies was “going to inflict significant political damage on the Republicans.”
After all, these increases would be significant for nearly all middle-class exchange participants and enormous for some. The Center on Budget and Policy Priorities [ [link removed] ] gives a “worst-case” example of a 60-year-old couple in West Virginia earning $85,000—just beyond a threshold where earning one more dollar would cause generous subsidies to drop to zero. That household’s insurance cost would then jump from $7,225 to $54,688. Note that $54,688 would still cover only about 70 percent of typical expenses for this middle-class household. For many other households below that threshold, the amount would be much lower but would still be thousands of dollars.
Krugman argues, correctly, in my view, that households would oppose such direct increases in healthcare costs. He cites Suzanne Mettler’s research to conclude that many people see government benefits, especially those of uncertain value, such as healthcare, as something they’ve earned. As a result, they don’t give elected officials credit for providing those benefits. Thomas Frankin made a similar Democratic Party claim in his 2004 book, when he asked, “What’s Wrong With Kansas [ [link removed] ]?” There, he argued that Americans fail to act in their own best interests by voting for Republicans.
Mettler advocates making hidden policies more visible [ [link removed] ] so officials can gain more public recognition. Krugman then adds a CODA, arguing that policies become less hidden and citizens become more involved when they see their government-provided health benefits cut. However, recent history shows that Republicans have almost always retreated when these kinds of political threats become serious. If so, Republican leaders will likely allow a few of their members to join Democrats in voting for an extension of exchange subsidies. In that case, those additional costs, like so much else today, would be financed through yet more national debt to be paid by future taxpayers.
The problem with the story isn’t its logic but its incompleteness. Specifically, Republicans have been winning the battle with the working class on the issue of empowerment, while joining Democrats in avoiding the electoral costs that would be incurred by facing up to our very huge budget problems.
And here lies the dilemma for Democrats who still can’t understand why voters don’t thank them for the transfers they receive. It’s part of the logical chain I summarized above. You see, it’s not just that voters often treat a benefit once received as an entitlement or “earned,” as Mettler claims. Many feel disempowered by a heightened sense of dependency and inability to make their own way. Many of these effects are indirect but very real. Transfers that become very large, such as in healthcare, displace much of what the government could provide to workers through programs that are more likely to enhance their productivity and take-home pay. Even for employees who receive fewer healthcare transfers because they have employer-provided insurance, high costs severely depress the cash wages employers can pay them. So, not only do workers fail to give Democrats much credit for giving them what they feel entitled to, but at times they rebel by turning to populists who tell them to blame their declining sense of control on immigrants or other government beneficiaries who receive “welfare” or foreign aid recipients.
Healthcare, of course, is only part of this story. For more information on how major budget reform requires attention to empowering people, see Abandoned: How Republicans and Democrats Have Deserted The Working Class, The Young, And The American Dream [ [link removed] ].
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