David Brodwin is a cofounder and board member of American Sustainable Business Council. Follow him on Twitter at @davidbrodwin.
Last night, the professor in chief defended his record against the would-be dismantler in chief. But for all the wonkishness on display, the debate ignored crucial economic questions. Some of these questions were dodged because neither side has a very good answer. Others were dodged because the answer, while straightforward, is politically unpalatable. In the end, the performance was little more than a Full Employment Act for the fact-checkers. Voters deserve better.
The moderator Jim Lehrer should have pushed the candidates harder on the key decisions that will determine America's competitiveness for decades. Here are three questions he should have asked:
No. 1: What will you do to get America's healthcare costs in line with world standards?
America currently spends about 18 percent of GDP on healthcare compared to 10-12 percent in most other developed countries, with no better results to show for all the extra money we spend. If our system cost 12 percent of GDP instead of 18 percent, we'd save $900 billion every single year. Scary Medicare deficit projections would vanish overnight.
Neither candidate dealt honestly with this fundamental problem, which burdens American companies (particularly exporters) and holds down American standards of living. Romney argued for relying on private sector competition to cut healthcare costs—even though we've been doing just that for the past two decades and it hasn't worked yet. (The private sector Medicare Advantage plans can't match the affordability of Medicare without an extra 12 percent subsidy from the government, a subsidy that totals $700 billion each year.) But Obamacare doesn't solve the cost problem either. It extends coverage to 50 million uninsured Americans, but it does not address the root cost of soaring healthcare costs. Overutilization remains a "third rail" that no one will address.
No. 2: What will you do to keep America safe from foreign threats at a price we can afford?
The United States spends about 6-7 times as much on military as the country with second largest military budget (which is China.) The difference is about $550 billion a year. We spend twice as much on military as the next four countries combined. (How likely is it that China, Russia, the United Kingdom, and France are going to gang up on us?) If we Americans are as smart, creative, and innovate as we claim, shouldn't we be able to keep ourselves secure while "only" spending twice as much as China? Are we really so bad at designing and building weapons systems that we need to spend five times what they spend just to deter them?
Unfortunately neither candidate is willing to ask these questions. It's way too easy to posture as a tough-guy by clamoring for more defense spending. Worse, both political parties are held hostage by our system of defense contracting which spreads the pork around all 50 states. This makes weapons programs politically unkillable, even when the military doesn't want them.
No. 3: What will you do to stabilize the financial system to prevent future collapses and bailouts?
For all the high-profile investigations into the mortgage boom and subsequent collapse, America still doesn't have a stable and healthy financial system. The Dodd Frank bill was passed, but implementation is incomplete. Giant "too big to fail" banks continue to wield an advantage over smaller banks that provide liquidity to Main Street businesses. Too little has been done to prevent banks from gambling with federally insured depositors' money.
The steps taken so far are insufficient to prevent another major financial crisis. These crises happen with fair regularity and they are expensive. (The Trouble Asset Relief Program cost taxpayers about $400 billion. The stimulus package, which was needed to stabilize the economy after the housing bubble burst, cost about $800 billion.) The indirect cost of these crises was much higher, at least twice the direct cost of the steps taken to clean up the mess.
Both candidates gave evasive answers. Romney acknowledges that banking needs "some regulation" but proposes to repeal Dodd Frank and replace it with something new he won't explain. For his part, Obama can't justify the kid-gloves treatment his administration has given to those who played key roles in causing the crisis. Without a real solution, we're in for more trillion dollar shocks that kill jobs, shrink retirement savings, and wreck the federal balance sheet. Financial crises like these occur roughly once a decade, so it's fair to say we spend on average at least $250 billion a year as a cost of ongoing financial instability.
A billion here, a billion there…
These three areas represent enormous potential savings if politicians muster the will to address them. The excess healthcare spending is about $900 billion a year. The excess military spending is about $550 billion a year. The ongoing cost of instability in our financial system is probably at least $250 billion a year. These three areas alone total $1.7 trillion annually. By comparison the cost for the entire K-12 public education system in the United States is less than one third as much, around $600 billion in federal, state, and local spending combined.
With some political courage in these three areas, America could offer every student in the United States an education on par with the best private schools in the world. And we'd still have some money left over for deficit reduction and tax cuts. Think about what that would do for U.S. competitiveness.