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Is Healthcare Overstating US Growth?

When Mr. McCormick originally wrote this article back in 2014 he stated that back In mid-2014 Americans were suffering.  Wages were stagnant and inflation had begun to impact food prices and transportation (dairy up 4.4% and meat up 7.7% and transportation costs up 5%).  With a new administration in 2017 and renewed vigor in the market - are we still overstating US growth?

 

No wonder the average American feels the Federal Reserve’s rosy pictures of a "recovery under way" are out of touch with Main Street.

The situation for the US however may be far worse that we assume. The reason is that the US counts growth in "health services" as part of economic growth numbers. However if the US's private health insurance system costs more than a public system but does not yield truly superior quality (as comparisons between the US and Europe suggest) then GDP will be artificially over valued in countries that rely on private insurance. The "over valuation" is exacerbated by the fact that return on public capital such as hospitals is not included in European numbers while in the US because most hospitals are private they are!

This point was illustrated in Thomas Piketty's "Capital in the 21st Century" page 92. Also according to PBS http://www.pbs.org/newshour/rundown/health-costs-how-the-us-compares-with-other-countries/
 

In the United States:
 

There are fewer physicians per person than in most other OECD countries. In 2010, for instance, the U.S. had 2.4 practicing physicians per 1,000 people — well below below the OECD average of 3.1.

  1. The number of hospital beds in the U.S. was 2.6 per 1,000 population in 2009, lower than the OECD average of 3.4 beds.

  2. Life expectancy at birth increased by almost nine years between 1960 and 2010, but that’s less than the increase of over 15 years in Japan and over 11 years on average in OECD countries. The average American now lives 78.7 years in 2010, more than one year below the average of 79.8 years.

  3. Life expectancy at birth increased by almost nine years between 1960 and 2010, but that’s less than the increase of over 15 years in Japan and over 11 years on average in OECD countries. The average American now lives 78.7 years in 2010, more than one year below the average of 79.8 years.

 

 

Healthcare is now almost 18% of the GDP compared to about 8% on average for the OECD. In the US we spend almost $8,000 pere person per year on healthcare between private and public spending.

 

If we were to "subtract" growth in healthcare spending from our GDP figures real US growth would be more like 1% than 1.5% over the last twenty years or so. What is even worse is that healthcare costs have increased even as median income has stagnated. In other words "Average Americans" have not benefited from GDP growth at all over the last 20 years.

 

 

 

The inevitable conclusion is that US growth has been significantly over-sestimated with respect to other countries. In addition whatever growth has been happening it has not "reached" the average American.

 

There is no doubt that US macro-economic policy is out of sync with average Americans. The result will be increased political deadlock and the potential for significant political crisis in the US in the not too distant future.

 

 

 

 

 

 

 

 

 

 

 

 

 

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    Is Healthcare Overstating US Growth?

    April 23, 2017

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