Ad Hoc Commentary – America has a healthcare problem, not a social security problem

According to a Dec 2013 Gallup poll:

“…Americans’ views of Obama’s greatest achievement and biggest failure tend to revolve around the signature healthcare legislation that informally bears his name…”
http://www.gallup.com/poll/166580/health-law-seen-obama-biggest-achievement-failure.aspx

 

The chart below shows that America has a healthcare problem, not so much a social security problem. The underlying data is from Table 8.5 and Table 8.7 of http://www.whitehouse.gov/omb/budget/Historicals

 

Chart 1: US government budget. Total Outlays from 1962 to 2013. Social Security spending as a % of total outlays had remained stable since the 1970s. Defense spending had declined from 49% to 18%, while Medicaid and Medicare had increased from 0% to 22%.

Chart 1 Total Outlay 1962 to 2013

Obama is right to target healthcare. We are not here to debate Obamacare. Yours truly believes that healthcare cost is the problem, and the objective of Obamacare to fix healthcare is spot on. However, one piece of legislation is not going to fix all of healthcare’s troubles. Probable next steps include reforming the medical malpractice system, i.e. tort reform. A system somewhere between America’s current tort system and New Zealand’s no-fault compensation system could work. Those who want to read about the NZ’s experience can do so at: http://www.ncbi.nlm.nih.gov/pubmed/16403765

 

In addition to tort reform, healthcare could benefit from some science. There are many school of thoughts on why health had deteriorated in America despite accumulation of great material wealth in the last few decades. One particularly compelling argument is brought forward by UCSF’s Robert Lustig in his book Fat Chance:
http://www.amazon.com/Fat-Chance-Beating-Against-Processed/dp/159463100X

To make a long story short, when we threw out fat and brought in sugar in the late 1970s, we made our food even less healthy because sugar is generally less healthy than fat.

 

America would be wise to fix its healthcare problem while there is still peace in our time. As Adam Smith had noted in his Wealth of Nations:
“…This constant expense [for maintaining peace in the British colonies] in time of peace, though very great, is insignificant in comparison with what the defense of the colonies has costs us in time of war…”

When hostilities break out, we cannot count on the relative decline on defense spending to make up for the increased spending on healthcare. It is probably wiser for Obamacare detractors to stop whining, and start working towards a second arrow of medical tort-reform; and a possibly third arrow of food science reform – probably centered on sugar in our food.

Good luck in the markets.