The Case (once again) for Universal Health Insurance

By Robert B. Reich, The American Prospect. Posted May 15, 2001.

Forget a tax cut, other than an immediate one-year stimulus that puts money into the hands of people earning less than $50,000 a year. Forget paying down the debt. Use the federal surplus for universal health insurance. Working families won't get much out of any tax cut, and debt elimination is foolish. But working families keenly need affordable health care, now more than ever.

The dirtiest little secret about the Roaring Nineties is that average working families gained almost no income, while their health care costs soared. From 1986 through 1997 (the latest year for which detailed IRS data are available), the average income of the richest 1 percent of Americans rose 89 percent, to $517,713. During these same years, the average income of the bottom 90 percent of Americans rose 1.6 percent, to $23,815. (These figures, not incidentally, are after all federal income taxes were paid.)

Meanwhile, health care costs rose faster than inflation, hitting middle-income families especially hard. By the end of the 1990s, 44 million Americans lacked health insurance; at the start, 37 million lacked it. And by the end, even those who were insured paid substantially more, through higher co-payments, deductibles, and premiums.

Now that the boom has turned busty, working families could easily get clobbered. If just one earner loses a job, family income plummets. Even if they're fortunate enough to have health insurance now, job loss may mean that their health insurance disappears.

Republicans understandably don't want to whisper a word about any of this because they want to use the surplus for a whopping tax cut mostly for the rich. Under normal circumstances, such a tax cut would be merely unfair. Given what's happened to American incomes, it's morally reprehensible.

Yet even as they criticize Bush's tax plan for going too far, Democrats are reluctant to put it into the larger context. They don't want to talk about what's happened to incomes and to health care. Partly that's because these trends mostly occurred while Bill Clinton was in the White House, and the Democrats want everyone to believe that the long expansion of the nineties lifted all boats and solved the country's most intractable problems. This is foolish politics and a disservice to the public. Democrats would be far better positioned for 2002 if they owned up to the twin failures of the Clinton years to lift median incomes and to expand health coverage.

Democrats also shy away from any mention of universal health care because they still believe that Hillary's ill-fated plan of 1994 was responsible for the Republican takeover of Congress later the same year. Their memories need jogging. Hillary Care sank of its own complex weight -- which also made it a perfect foil for right-wing demagoguery. But it didn't go down without a fight, and not without substantial public support at the start. In fact, in late 1993 and early 1994, a majority of Americans listed "universal health care" as the most important unmet public need and their highest priority for government action.

Finally, Democrats have now adopted the old-time Republican religion of fiscal austerity, a faith that wouldn't allow spending of the magnitude required for universal health care in any event. Their current litany -- pushed by the "centrist" Democratic Leadership Council -- is that the surplus should be divided into thirds. One-third should be used to eliminate the federal debt and another for a tax cut. Only the last third should be used for additional spending -- and then only to shore up Social Security and Medicare, with something of a prescription drug benefit thrown in. And, oh yes, a bit more for education.

This is patently absurd. There is no respectable economic argument for why eliminating the federal debt should take precedence over providing all Americans with affordable health care. Yes, if the debt were eliminated, federal borrowing costs would also disappear. So what? As John Maynard Keynes pointed out 60 years ago, public indebtedness per se is not a problem. In fact, some debt may be needed to maintain aggregate demand. The real issue is what the debt is to be used for. If the benefits to the public exceed the costs of borrowing from the public, it would be odd not to borrow. Recall that Bill Clinton proposed a
plan for universal health care when the nation was deeper in debt and facing annual deficits of almost $300 billion a year for as far as the eye could see.

Meanwhile, there's no principled reason why Democrats should be supporting any tax cut whatsoever. Quite the contrary. The vast accumulation of income (not to mention wealth) at the top would suggest raising the marginal rate on the highest incomes from 40 percent back to 50 percent or higher. Republicans who are fond of invoking John F. Kennedy carefully omit mentioning that he proposed his famous tax cut in 1963, when the top marginal rate was 91 percent, a leftover from World War II emergency surtaxes. The Kennedy cuts, enacted in 1964 after his death, dropped the top rate to a still robust 70 percent.

Democrats must learn that they cannot fight George W. with nothing but an admonition that he's going too far. If they hope to regain Congress in 2002, and the presidency two years later, they need an alternative vision for where the nation has been, where it should be going, and what it's capable of doing. What better time to revive the idea of universal health care than now, since the federal budget is flush and working families need it more than ever?

Reich Robert B. Reich is a founder and national editor of The American Prospect and the Maurice B. Hexter Professor of Social and Economic Policy at Brandeis University. He served as secretary of labor in the Clinton administration.

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