The Wall Street Journal is Telling Awful Lies about Bernie Sanders
by Benjamin Studebaker
Over the last few days, I’ve seen a deeply misleading claim circulating around the internet–that Bernie Sanders is supposedly going to increase government spending by $18 trillion over 10 years. This claim originates in a Wall Street Journal article by Laura Meckler. The article is so deeply misleading that Gerald Friedman, the economist cited by the WSJ, has felt compelled to come forward and explain that his research does not at all support the WSJ’s conclusion. Indeed, Friedman claims that Sanders’ plan will actually save money. To understand how, we need to know just a little bit about healthcare economics.
Of the $18 trillion, $15 trillion comes from healthcare spending. Sanders wants to create a single payer healthcare system by expanding Medicare and making it universal. This would dramatically increase government spending by $15 trillion, but what the WSJ won’t tell you is that this $15 trillion replaces an even larger amount of money we are currently spending on private insurance. In his rebuke of the WSJ, Friedman explains it this way:
the additional $14.7 trillion in federal spending brings savings to the private sector (and state and local governments) of over $19.7 trillion.
This means that Medicare for all actually saves Americans $5 trillion. It’s just that instead of paying insurance companies for our healthcare, we’ll be paying into Medicare. Government healthcare spending will increase, but total healthcare spending will be sharply reduced. Here’s Friedman’s full breakdown of the savings (the numbers are in billions, so $5,081 is $5.081 trillion):
I want to draw attention to the fact that this is what the WSJ’s handpicked economist and handpicked research says. The numbers might be even better than what Friedman suggests. We have known for a very long time that Medicare outperforms the private system on cost control by a very large margin:
This has been the case even though Medicare has been limited to seniors. Seniors have the highest per capita medical expenses and cost more than any other patient pool. By allowing young and healthy Americans into Medicare, the potential savings could be significantly higher than even these numbers have suggested. We know that other countries with systems more similar to Medicare for all spend far, far less per capita than we do:
Medicare for all can make these massive savings because the universal pool gives the government monopoly power over healthcare costs, allowing it to use its leverage to dictate prices far better than any insurance company. It also eliminates the need to sustain all these duplicate bureaucracies–each insurance company has its own management and administration, and there is a lot of redundancy.
If the WSJ’s handpicked economist is correct and Sanders’ healthcare plan will save $5 trillion over 10 years, this means that Sanders’ healthcare policy will save enough money to pay for the remaining $3 trillion over 10 years that Sanders plans to spend, with an extra $2 billion left over. Alternatively, most of the $5 trillion can be used to cover the people who remain uninsured under Obamacare, with about $500 billion left over:
But wait, there’s more. Many of the other programs Sanders wants to spend money on are analogous to healthcare in the sense that they have the government pay for things that we currently pay for out of pocket, with potential net savings for us. Take education, for instance. Sanders wants to make university tuition free for all to make it much easier for poor and middle class people to afford to go to the best universities they can get into. This means a significant increase in government university spending, but this spending will replace the extant tuition we pay. Again, as the single payer of tuition, the government acquires quite a bit of leverage which it can use to reduce college costs and prevent them from rising in the future. Again, this eliminates a lot of unnecessary, redundant administrative bureaucracy. This means that there is likely even more savings in Sanders’ plan outside of healthcare.
So if the WSJ had an interest in telling the real story, the headline would have read something like “Sanders’ Plan Will Save $5 Trillion in Healthcare Costs” or “Sanders’ Plan Will Cover the Uninsured At No Additional Cost” or “Sanders’ Plan Will Cover the Uninsured and Save $500 Billion”. Each of these statements is a true reflection of the research the WSJ referred to.
Instead, the WSJ chose to publish a wildly misleading story that takes headline government costs out of context, without making any reference whatsoever to the private sector spending that is replaced or eliminated. Why would the WSJ do something like this? Either it is run by truly feckless, ignorant people or it is deliberately seeking to undermine Sanders by any means necessary because Sanders’ plans will distribute our healthcare and education costs differently. Instead of making each individual pay the cost of college tuition or the cost of health insurance premiums, Sanders intends to enact progressive taxes that will shift the burden of these costs away from the poor and middle class and onto the rich. The WSJ has “Wall Street” in the title for a reason–its primary audience is rich people and those who would like to become rich people. These people have a strong short-term class interest in maintaining the status quo even if it is far more costly to our society as a whole to do so in the long-term. Sanders’ overarching goal is the reduction of economic inequality. This sounds like anathema to the rich, but only if they fail to consider the long-term benefits. By helping poor and middle class people self-actualize, Sanders’ policies will ensure that each person is more able to make the maximum contribution to society. In the long-term, this means higher skill workers, lower crime rates, and lower welfare costs. By giving people the tools they need to succeed in life, we build a society with more success stories and fewer failures. In the big picture, this means faster economic growth and technological development. It means higher living standards. A rising tide lifts all boats. At comparatively little cost to their present lifestyles and living standards, our rich people can help build a much better society and future for all Americans, including themselves and their children.
Even Donald Trump sort of gets it:
Dumbest thing I’ve ever read
So, only thing you’ve ever read?
Better read it again. France, which has a cost of living much higher than the cost here in the US pays 40% of what we do for health care. So, why is that?
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Let’s try a typical Republican styled response — blame some one else — “Mickey Mouse said it in an enlargement with Goofy”. I’d normally blame Trump, but he is not smart enough to say it … and every body already knows the WSJ is always right, right of right in fact.
Since when has ANY government program cost what it’s supposed to? Look at Social Security, the Prescription Drug Plan, Medicaid’s Specialty Hospital Subsidy & the F22 Raptor have. The supposed $15 trillion will likely end up costing more like 35 or 40 trillion.
This happens quite often–Obamacare’s costs have come in well under the projections so far.
[…] the republican tax plans widen the deficit while Sanders’ proposed spending programs are remarkably affordable. Yet voters who are concerned about balancing budgets are far more likely to support republicans […]
The Wall Street Journal cares mostly about investors. Investors like health care richies. I wouldn’t believe the WSJ if it told me the weather report was increasing light toward morning and darkness going into night. It is a captured, biased, bullshit publication.
In any election year one of the most discouraging practices of civic duty is when an uninformed citizen votes. All to often Mary & John Q. Public sit on the sidelines and complain. They are quick to find fault and point out problems but seldom, if ever, become involved in resolving any of those issues. Truly sad commentary on what appears to be an increasing segment of our populace.
[…] payer requires a middle class tax increase (although health care economists have calculated that Sanders’ plan will yield net savings for middle class families because single payer […]
I’ve linked to this on Facebook with the comment:
Studebaker’s usual astute analysis. This young political economist is going to be famous someday.
Thanks–I appreciate that. 🙂
Let me ask you this, Ben: why do you think giving the government monopolistic control of pricing is a good thing? Especially considering that monopolistic control is a bad economic situation for ANY enterprise, when costs are concerned, and given our present situation where cronyists like Hillary support granting pay-to-play schemes. Perhaps you could consider that when the government has control of something, you seem to negate that they then play favorites in granting contracts to individuals and corporations – why would you expect that to be different with a single payer scheme?
I think your “astute analysis” is lacking in reality.
Because giving the government control over pricing has worked out very well in certain markets where demand is not responsive to price hikes because the cost of not receiving the service is unacceptable (i.e. healthcare and education–if you don’t get healthcare you can die, if you don’t get education you can be locked out of competitive employment). We see this in many other rich countries all over the world–they are able to provide similar quality of service at much lower cost because the state uses monopoly power to dictate prices. I would not recommend this in all markets indiscriminately, but when markets are chronically failing to control costs for essential services and are instead producing a price spiral, the state has to change the rules of the game.
So, with Obamacare and the state mandating policies, costs, etc – how’s that working out for everybody? Everything I show says the average cost of health insurance has skyrocketed with higher deductibles, higher premiums, and much less coverage. But now, according to your astute analysis, you’re saying that the state can dictate costs to hospitals, doctors, pharmaceutical companies, etc….Except that’s not how that’s going to work. Hospitals will complain that they’re not getting enough money. Doctors will complain. Pharmaceutical companies will whine and complain. All will either lobby for higher prices, or subsidies – and in either case, taxpayers get to pay more taxes.
The markets ARE NOT failing to control costs. The CRONYISTS (like Hillary, Sanders, and the vast majority of politicians from BOTH sides) ARE failing. You seem to think that when the government is in control of something, everything automatically becomes a Utopian dream. Except, reality. See, politicians care about one thing and one thing only: getting re-elected. And they get re-elected by gaining campaign contributions and lying to everyone about what they’re going to do or whatever nonsense is the topic of the year (like free college and free healthcare). They get campaign contributions from corporate sponsors, who in return, get granted certain contracts, regulations, and even laws designed to make it more difficult for smaller competition firms to compete.
In short – it’s not the market that is the problem. It’s the rules being submitted by the cronyist politicians. Let the market truly be a free market without government protections and we competition driving costs down, with more jobs for everyone, with increased pay scales even. Why is that people like you who claim to study economics so astutely, fail to comprehend the very basic problem with giving too much control to government? Seriously – that’s a real question.
Obamacare is not a single payer system and doesn’t even contain a public option. It’s not remotely the kind of system we’re talking about here. That said, I would feel remiss if I didn’t point out that Obamacare costs are currently BELOW the projections:
In the various countries that do have single payer, lots of people complain and lobby, but they don’t succeed in forcing governments to charge comparable amounts of money. In the UK, healthcare spending is less than 8% of GDP compared to 17% in the US, yet British life expectancy is about 2 years longer. Britain is a democracy just like the United States and its MPs are subject to the same perverse incentives as members of congress, but they’re getting longer life expectancy for half the cost per capita because they have a system that takes advantage of the state’s negotiating leverage.
In a society in which healthcare were completely deregulated, patients would all go bankrupt because people are willing to pay any amount of money to not die and providers know this. This is why unregulated markets are inevitably inadequate at providing quality universal coverage.
Did you read that article for understanding or just to show me some bs? It’s comparing “estimated” forward costs of healthcare via medicare/medicaid/private insurance vs actual costs, with the actual costs going down because PEOPLE CAN’T AFFORD TO USE IT. In other words, rather than spend their already hard earned money on more out of pocket expenses because their insurance is crap, they are NOT utilizing health care. Of course it’s not costing the government as much – middle class taxpayers are picking up the burden in the form of higher premiums and higher deductibles. You would be remiss if you actually took the time to attempt to understand WHY the governments costs are lower….so I guess you’re still remiss. And not to mention the spin of statistics – what is within that life expectancy? All deaths? Early deaths? Deaths while in hospital care? Death by Hillary? Do you know? Or are you attempting to use a totally arbitrary and baseless statistic to attempt to persuade that somehow the life expectancy being less in Chicago is more due to improper health care rather than the unbelievably high rate of black males dying from gunshot wounds before they’re 21st birthday? Did you verify that?
You seriously think life expectancy has something to do with healthcare is perhaps one of the most unhealthy countries in the world when it comes to doing everything in their power to stuff themselves with mcD’s, smoke cigarettes till their blue, and the 9 bazillion other ways to die early in this country? Seriously? Where would you rather get a heart transplant – the UK or the US? Where would you rather get treated for a cancerous tumor? Or a rare disease? US or some generic country in Europe that has a single payer system?
The US is THE medical center of the world. If you want the best – you come to the US. And you somehow think that should cost less than not quite as good care? Are you failing economics?
“Patients would all go bankrupt.” That’s your argument? It’s not like we didn’t already realize your lack of understanding of the free market – you didn’t have to go all out and remove any lack of doubt about it.
A free market provides competition. That means, if hospital A charges more than hospital B – then more people are going to use hospital B. And if hospitals A&B both charge too much, a totally free market would provide the room for hospital C to start up and undercut them both to gain market share. People are NOT willing to pay anything not to die. My grandparents both passed away from cancer and both refused chemo because they chose to pass on a quality of life that was somewhat demeaning. Don’t attempt to tell me some fear fallacy argument based on garbage speculation that an unregulated market would over-inflate costs when the reality and the known FACTS show that increased competition and deregulation drives costs down in ALL instances.
I cannot believe you have wasted this much time on your education and this is the best you can come up with – some pamphlet democrat hoopla from hillaryclinton.com? Get your money back.
There are a variety of reasons given in the article for slowing spending, and your summary of “people are spending less on healthcare because they can’t afford it” is reductive and doesn’t reflect the complexity. A lot of the savings are coming out of changes made to the way Medicare pays doctors, some of which come from Obamacare and some of which comes from the sequester:
Those life expectancy statistics are comparable across countries. Here’s a source if you want one:
The fact of the matter is that if you’re choosing which country to be born in and you want to live as long as possible, you’re better off choosing the UK. You can argue that specific UK services would be improved with an increase in health service funding–if the British people agreed, they could elect a government that would fund it at a higher rate than 8%. The 8% level is a political choice by the government, which is enabled by single payer to dictate how much to invest in the service.
Why should any hospital or doctor ever lower prices? There’s never enough healthcare to go around, so doctors and hospitals never struggle to drum up business and never need to compete with each other. You could lower the barriers to entering the medical field to try to increase the supply and create more competition, but that lowers the standard of care and leads to malpractice. Nobody wants that. What we need is a way to stop the healthcare sector from dividing the population up into territories and extracting every penny from them without undermining quality of care, and state monopoly power is the only way to do it. You can argue that some people would rather die than hand their money over for chemo, but the history of medical cost increases in this country shows that’s the exception, not the rule. In an unregulated market, hospitals and and doctors will spread themselves widely over territory and use the threat of death to extract people’s life savings.
I find it curious that you feel the need to pepper your comments with pot shots and insults. I know you’re intending to project competence or confidence in your view, but to me that kind of communication always comes across as insecurity. I advise against it in your future arguments with people if you want to be taken seriously.
Again, you use a fear fallacy to “justify” your argument. “There’s never enough healthcare to go around.” That’s probably true – regulations drive up the costs of hospitals as well as local doctors offices. Your attempt to equate “lower standard of care” with a more competitive industry is ridiculous and yet another example of your fear fallacy. Sorry, but “the sky will fall” is not going to win you any points in this discussion.
What people want is affordable health care without the bureaucracy created by a regulatory force bent on squeezing every last penny from them. What they want is for the government to get out of the way of competitive market forces working to lower the overall costs of healthcare – including more hospitals, offices, and pharmaceuticals. Right now, you’re professing that a monopolistic control by the state will resolve all these issues, which is a circular analysis where you’re attempting to resolve the issues created by the state by increasing the regulatory nature of the state. In other words, you’re throwing gas on the fire.
I hate to tell you this, but nobody is ever getting out of this life alive. Will people fight for every second of life they can get? Certainly, many will. It becomes a question of quality of life – that’s not an argument. What people want is a competitive market force – less protection for situations like Epipen, who uses the government to forbid any competition. All of the major drug companies do this, as well as many of the makes of hospital equipment. What people want is to be rid of the subsidy that is insurance (all insurance is technically a subsidy – another factor in inflationary pricing).
Do you know why I throw potshots in? It’s because of your smug condescending tone, as if you’re being a student qualifies you to tell everyone else who’s already been there and done that how it’s supposed to be. It’s obvious to me that you have a need to be right, rather than an ability to open your mind to different methods of achieving a better result. You’ve decided that a state monopolistic run health industry would be better, and you’ll disregard any and all information that contradicts your end result. Seriously – if YOU want to be taken seriously, perhaps you should read for actual comprehension of what and why something is being said, rather than misreading it into something you simply want to believe. You’re never going to learn if all you do is reinforce the wrong answer you’ve already come up with.
I’m not really interested in continuing–at this point you’re dismissing substantive claims as “fear fallacies” without providing a counterargument. But thank you for your engagement.
Your entire argument against a free market is based upon speculative fear – “costs would skyrocket, people would spend their last penny trying to stay alive, increasing competition would decrease level of care, etc, etc, etc.”
I did provide a counter argument – that being, there isn’t a substantive reason to fear a free market where competition drives down costs. Ever.
P.S. I’d quit to if I was basing my entire argument on speculation and fear.
[…] care about would likely be net beneficiaries. In most cases that answer was “yes”. This played out in the papers–the Wall Street Journal ran a story claiming single payer would cost $18 trillion, and the […]