A More Rational Economy
Posted on August 8, 2016
Imagine a US in which political power was divorced from wealth, and we realigned the economy more rationally. Then I suggest:
1. Medicare for all plus some drug marketing reforms would take health care from 17% of GDP to 12% (which is what countries with better health care than ours pay)
2. Financial sector reforms would take finance and insurance from 8% of GDP to 4% (which is what it was a few decades back, with no detectable difference in efficiency)
3. Communications reform would provide everyone with a single, free, high speed data pipe to replace cable internet and phone, saving maybe 1-2% of GDP (I don’t know of any country that has got the model for this right yet, but this is a textbook case for subsidized regulated monopoly and/or direct public provision)
4. Military and foreign policy reforms would take the military and foreign aid budget from 6% of GDP to 3% with no appreciable loss of security (assuming we disassembled the military-congressional-industrial complex, though I grant that the relationship of expenditures to national security is a complex question).
5. A living minimum wage of $15/hr would redistribute income somewhat, but have little short-term effect on GDP. In the long term it would reduce social welfare costs.
6. Abolishing the war on drugs would save only a fraction of 1% of GDP in the short run, but there would be significant long-term social cost savings.
7. Land price and housing price reform also needs to be addressed, but I’ll leave that for another time.
That would give us maybe 14+% of GDP to put into early education, full year education, free college, infrastructure repair, and expanded social services. We could even think about a guaranteed minimum income.
The private share of the economy would be almost the same as it is now.
Median real standard of living would something like 1/3 higher than it is now.
The tax structure would need some modifications, but not a drastic confiscatory tax on the rich (however, it might be that we can’t divorce political power from wealth in the first place without imposing severe taxes on the rich).
There is no term describing the kind of political democracy this model assumes (and actually, no real political model describing how to make it happen).
There are some not very persuasive terms describing the kind of economy this model assumes: social welfare state, Scandinavian democratic socialism.
There is no very persuasive term for the political tendency that would support this program.
Without good language, you cannot have good politics.