Krugman’s blog, 7/26/15

There were four posts yesterday.  The first was “A Note on Medicare Costs:”

Medicare is about to turn 50, and while it has brought immense benefits, it has also cost a lot of money. Why? Is it the general rise in health care spending, or some specific government-related inability to limit outlays?

Well, there’s a simple answer from the Centers for Medicare and Medicaid historical expenditure data, which among other things offers a comparison between Medicare spending per beneficiary and premiums on private health insurance. Medicare has expanded the range of things it covers, so what you want is the “common benefits” comparison that adjusts for this. And what it shows is that except during a brief period in the 1990s, as HMOs spread, cost growth has consistently been slower in Medicare than in the private sector.


Centers for Medicare and Medicaid Services

Yesterday’s second post was “Thorstein Veblen in Brooklyn (Trivial):”

I went to another Celebrate Brooklyn concert in Prospect Park last night, and had a very good time — although the usual close-up seating where you can really see the performers was given over to a throng of standing dancers, and while I may be a wannabe hipster I’m not going that far. But anyway, music aside, one thing I enjoy about these events is crowd-watching, which varies a lot by performer. Lucius was a real all-ages, all-subcultures crowd, ranging from enthusiastic teenagers to fairly sedate but equally enthusiastic senior citizens. Sylvan Esso was very hipster — which is fine; de gustibus non whatever.

I did, however, find myself wondering a bit about the economics. I’m perfectly OK with topknots and tattoos, but obviously a lot of employers won’t be. So where do all these people work? They can’t all be baristas …

But that, surely, is part of the point. Probably not an original observation, but surely one main goal of personal styling is to make it clear that the person so styled is not, in fact, part of the workaday bourgeois world, that he or she doesn’t work at a 9-5 office job during the week and put on trendy attire for the weekend. It has to be a cultural version of Veblen’s conspicuous consumption, where the point is not to display your wealth but instead to display your indie cred.

Again, I’m fine with it — and the scene is producing a lot of music I really like, so it’s all good. But sometimes I just can’t turn off my inner econonerd.

The third post yesterday was “The Disappearing Entitlements Crisis:”

A few years back elite policy discourse in the United States was totally dominated by the supposed entitlements crisis. Serious people all assured each other that history’s greatest menace was the threat posed by the unstoppable growth of Medicaremedicaidandsocialsecurity, which could only be tamed by dismantling the legacy of the New Deal and the Great Society, while of course cutting top marginal tax rates.

A few of us argued, however, not just that it was foolish to worry about long-run budget issues in a time of depression and zero interest rates, but that the long run fiscal problems weren’t really that intractable. I used to say that all we needed were death panels and sales taxes — that if we got serious about cost control on health care, the rise in entitlement spending due to an aging population would shrink to a level that could be covered by moderate increases in revenue, meaning that no fundamental dismantling of the welfare state was necessary.

Sure enough, health spending began moderating after the passage of the ACA — and as Bruce Webb points out, if you believe the reports of the Social Security and Medicare trustees, we’re basically already there.

In 2009 the Trustees projected a gigantic rise in Medicare spending, which was obviously unsupportable (although Social Security never looked like a big problem).

The view from 2009
The view from 2009

But in the most recent report most of that projected rise has gone away.

The view from 2015
The view from 2015

Bear in mind that the current US budget deficit is below the level at which the debt/GDP ratio can be stabilized, in other words poses no problem. Looking forward, population aging will expand that deficit by a few percent of GDP, but that’s well within the range that could be closed with moderate tax hikes, cuts in pointless military spending, etc.. Nor is there a big rush: nothing terrible will happen if we don’t immediately decide how we’ll pay for projected benefits in the year 2050.

The truth is that there never was an entitlements crisis. But now there isn’t even an excuse for pretending that such a crisis exists. I know that a large part of the commentariat is professionally and personally invested in fiscal crisis rhetoric — admitting that it’s no longer relevant would suggest that they have, all along, been silly rather than Serious. But next time you see someone solemnly intoning that we must destroy Medicare to save it, remember that there is no there there.

Yesterday’s last post was “Tattoos, Incompetence, and the Heritage Foundation:”

Henry Farrell — who recently said some very interesting things about Very Serious People — writes me about my musings on hipster style, and refers me to a review of a book on codes of the underworld. The book notes that tattoos and such play a role as signals of criminal identity, which work precisely because they make it hard to participate in non-criminal society.

But there’s more: criminals actively cultivate a reputation for incompetence at non-criminal business, designed to reassure both their colleagues and the victims of their extortion that they won’t break their implicit contracts by going legit. And the author, Diego Gambetta, adds a wonderful parallel: according to his account, Italian academics, who do a lot of horse-trading in appointments etc., cultivate a reputation for incompetence at actual research, again designed to reassure those with whom one deals:

“Being incompetent and displaying it,” he writes, “conveys the message I will not run away, for I have no strong legs to run anywhere else. In a corrupt academic market, being good at and interested in one’s own research, by contrast, signal a potential for a career independent of corrupt reciprocity…. In the Italian academic world, the kakistrocrats are those who best assure others by displaying, through lack of competence and lack of interest in research, that they will comply with the pacts.”

And this immediately makes me think of one of the mysteries of economic “debate” in America, namely the preference of the right not just for hacks but for incompetent hacks. Here’s what I wrote:

I suspect that the incompetence is actually desirable at some level — a smart hack might turn honest, or something,

But let me hasten to add that I am not intending to engage in slander here. I would never, never suggest that Brooklyn hipsters are anything like Heritage Foundation economists.

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