Blog #147: Housing Prices in Santa Barbara: Why is housing so expensive?


Contents:

The Price of Housing. 1

The Housing System as it is Today. 1

The Costs of Housing. 2

Alternative Policies to reduce the prices of housing. 3

Capital gains taxation.. 4

A luxury housing or wealth tax. 5

Evictions. 6

The answer is simple, even if is one many do not want to hear, for on the one side it relates to the way the housing system supports those who use the system for residence, shelter from the elements, protection from intrusions, or ability to live in a healthy physical, social, and economic environment; but on the other side those who use the housing system simply as a source of profit, for the production of financial gain.

The housing system is thus inherently full of deep conflicts of interest. Solutions equally satisfactory to those who benefit from it and to those who suffer from it are not likely to be easily found.

In housing policy debates, it is really an old and well-known conflict, as inter-relational as they come. 

The Price of Housing

It is the price—not the cost—of providing housing that ultimately is the major problem.

Housing prices are high not because the costs of providing housing to its residential users are necessarily so high, but because we allow the system to act as a source of substantial profit to multiple powerful material interests, who are able to block equity-based changes to the system.

The Housing System as it is Today

To summarize how the housing system works:

The price of housing and its components is set in a system in which housing is bought and sold for private profit, at prices determined by a minimally government-restrained market. This market is allowed by government to charge monopoly prices that maximize the possibilities for profit and political power.

 It is left to the owners and the government, generally allied with others in political power, to supply the legal and physical infrastructure on which the market depends every day. The system lets the owners take advantage of the severe shortage of existing housing prevalent in most areas of the United States, where limitations on the supply of land in desirable locations create a monopoly for its suppliers and let them set their own prices for what they supply.

The Costs of Housing

Resident users’ prices include on the one side, the true costs of production of the housing all along the production chain (that is, the costs of labor and materials needed to produce buildings and make them habitable), but on the other side also permit the price to include factors that are not only above the true costs of physical and infrastructure production but socially determined: determined by government and those in political power, over issues such as zoning, building codes, permitted use regulations, traffic laws, environmental policies, and racial policies (how to deal with racial segregation and discrimination, etc). Policies setting prices are under pressure for private profit all along the production chain.

Those socially-determined prices are put into effect as a result of public policies and governmental standards, and include monopoly premiums for scarce land.

So, prices are driven up to exceed the real costs of production—the labor and materials required for the development of housing. These socially-determined charges of course include the profit to the developer and owner, largely unrestrained by public policy.

The rent is thus only partially explained by the true costs of production. Prices are set with only very limited constraint by government or public interests, and only in part determined by the housing’s true costs.

The public actions influencing housing prices are legion. They run from building and construction codes to zoning provisions, use restrictions, public residency, tax policies, income taxes, capital gains taxes, and real estate taxes. They even occur at multiple levels of government, from local to national.

Housing’s high cost in Santa Barbara is not attributable mainly to its cost of production, but rather largely to speculation on its future market price. In particular, this is the future market price of land, generally its largest component.

Nor is the high price of housing the result of public actions for the protection of the health, welfare, and safety of the residents. The actual problem with government in the housing system is not that it is too solicitous of the good of its proposed residents, but rather that it is not solicitous enough to bring its real powers of regulation to bear on it. This renders a major section of the current stock unaffordable for a large segment of the population. Government perhaps should be blamed not for what it does to add costs to housing, but rather for what it does not do to regulate the price of it (for example, rent control).

Land’s price is largely fixed by speculation, perhaps often with only benign results for its carefully selected beneficiaries.

If one deducted the land price component from the housing price, this would change its resulting market price to the greater of the cost of housing production and its value to the resident.

If, for instance, the land was publicly owned, and valued by its use to its users, you would get a very different picture of housing prices.

The high price of land set by the market plays a major role in producing the high cost of housing in Santa Barbara.

Land can have such high prices because it is essentially a monopoly good–they don’t make more of it any more, as the saying goes. The feasibility of further desirable locations is limited—and those who control those locations are likely to make maximum profitable use of it.[i]

All this is probably not an argument likely to make affordable housing more available in the real world today, because of the power of those benefiting from the present arrangements. But the alternatives should at least be confronted by advocates and policy makers concerned with the equity implications of their actions.

We turn below to what the feasible alternatives might be.

Alternative Policies to reduce the prices of housing.

Alternatives to unrestricted market pricing for land and housing are actually very substantial Some are suggested below.

Increased demand for housing from population growth indeed drives up the market price of housing. However, that is not because of increased cost of production. Increasing taxes on land will drive down the price of housing if those taxes are seen as only needed to cover the true cost of labor and materials, physical production, and is certainly desirable if reducing the true cost of occupancy is indeed a goal.

Real-property taxes are levied to raise the funds for what is provided by society generally, from police protection to education to health care. It should not be focused on the need to cover just the cost of housing production.

Alternatives to an unrestricted market pricing system are substantial. Some of the them are suggested below.

Capital gains taxation

PROS AND CONS OF CAPITAL GAINS TAXES

A high capital gains tax would discourage flipping of homes by real estate operators and profit-seekers from the practice;

Discourage threats to community building and solidity because of temptations for more profitable sales. By multiple sages and moves in and out by temporary residents.

Produce ability of residence.

Entourage more self-help home improvement by mobile residents. As     making use of reductions on such taxes.

Encourage resident investment in residential improvements

Thus strengthen social peace

Not encourage investment and economic growth unless profits from speculative-motivated sales are invested in labor and building. or other development activity, for which there is little evidence.

Discourage indolence by avoiding fear of taxes to which self-improvements in value are not subject,

Taxes, Inflation and potential dangers of an article of Paul Krugman’s analysis

Paul Krugman’s recent Opinion column in the New York Times (in August 2021) may give the unwary the impression that increases in city housing prices are simply the result of economy-wide inflation. But that argument is fraught.

Such an argument,[1] which Krugman himself should not be accused of espousing, can however be read as arguing that that taxes on real estate price gains should not be treated differently from taxes on gains generally. Housing price increases, by this is argument, may be considered simply to be following a national trend, and one that has its healthy as well as painful sides. If Krugman were to extend his argument to argue that price increases in housing have no special relation to housing markets or urban development, that would be an important mistake, with harmful real-world consequences.

The increase in prices in housing and real estate is largely the result of simple speculation in the market price of housing in a prime location, not any investment in the production or movement of housing. Given an absolute shortage of housing in most areas, price increases are the result of speculation grounded in rational expectations of increasing demand and monopolistic supply of land, the largest component of most housing payments. The consequences of speculation are that those prices will continue to increase. The increases are not from investment in the construction or improvement of housing but rather from the particular monopolistic character of land and its monopolistic locations. Such investment is not a net contribution to the economy, and should not be welcomed by unwary, self-interested, or socially-motivated readers because it seems to replace the theoretical inflation-created availability of more funds for affordable housing for those actually in need of housing within their means.

Where the increased price of a housing unit is the result of increased production or necessary maintenance, that is one thing. Where it is simply the result of watching a growing demand trigger profits to be made from an initial investment, that is another thing. The increased prices for housing are not the result of the healthy inflation which Krugman optimistically writes about.

As a side note, it is likely a false hope that increased profits from speculation will in turn produce funds to improve needed and affordable housing. Profits from such investments might more likely be used cynically by speculators to enjoy of fancy dinners and vintage wines in the neighborhood.

High-level capital gains taxes applied to all monetary gains from transactions in real estate, should exempt gains resulting from seller’s own labor and contribution of materials and actions such as physical improvements, but should capture all gains resulting from mere speculation in changing market values and prices. The result of high taxes should thus be to minimize speculation but reward improvements.

A luxury housing or wealth tax

 A wealth tax or luxury housing tax, or strategic use of capital gains and land taxes, should be used to reduce inequities of income. This will also help to finance the necessary real costs of maintenance and quality and amount of needed housing throughout the system. There should be basic recognition of the fact that the guarantee of decent housing for all is not going to take place without substantial ongoing subsidies from different levels of government, but at a level only the national economy can provide. Current national debates about subsidies in the trillions suggest that, however formulated, our economy can sustain such a burden.

Community land trusts can combine local democracy and community life with legal controls and resident democracy. For example, the University of California, Santa Barbara has set price controls on the housing it provides for sale to its faculty.[ii]

Evictions

A ban on evictions except for cause (e.g. waste, damage, or harm to others) would ensure a resident the security of continued residence, and help provide protection[2] to those who are most likely to need it, avoiding homelessness.

Public Housing

Public housing owned and managed by a public authority builds on long existing experience: see “Convert the City Golf Course Into Public Housing”.

The Santa Barbara Tenant’s Union supports the City of Santa Barbara converting local municipal golf courses into high quality public housing.

Public ownership of land, with a knowledgeable public authority, carefully and transparently makes decisions as to use, distribution, new construction, and privacy rights.

However, it may be argued that placing land in a public trust for affordable housing takes land off the tax rolls, but tax revenues are needed for the normal operation of government. Nevertheless, that’s exactly the point: reducing the use of housing as an income-producing economic asset, whether for public or private use, should make it available free or at affordable prices to all who need it, not only for shelter, but also for personal development, security, or enjoyment.


[1] The New York Times, August …..

[2] See the book EVICTED by Mathew Desmond and colleagues.

[3]        The Costa-Hawkins Law now says:
Notwithstanding any other provision of law, an owner of residential real property may establish the initial and all subsequent rental rates for a dwelling or a unit (with a few minor exceptions.)
“Notwithstanding any other provision of law” effectively means notwithstanding what community residents want or need.

[4]   See discussion at 10.D. and E. bellow.


[i] Of course, given modern technologies, more land surfaces can be brought into use for housing than in earlier times, but the costs are correspondingly high.

[ii] The relevant A passage in a housing complex’s Declaration of Covenants, Conditions and Restrictions reads:

     2. Purchase Price and Terms. The purchase price of any Residence offered or sold pursuant to this Article XII shall be the lesser of:

     (a) The fair market value of the Residence as mutually determined by the Owner and Declarant; or

     (b) The sum of: (A) the purchase price of the Residence paid by the Owner, plus (B) the product of the purchase price of the Residence paid by Owner and the fractional change in the Consumer Price Index (as defined below), if greater than zero, as published for the month immediately preceding the date on which the Owner purchased the Residence and said Index as published for the month preceding the date of the offer made pursuant to Section 1 of this Article, plus (C) the cost of all capital improvements to the Residence made by the Owner, but only to the extent that each such capital improvement exceeded $1,000 in cost and was certified by the Association and Declarant at the time such improvement was completed following submission by the Owner of cost documentation in such form as Declarant or Association may prescribe, which documentation shall be subject to audit and proof loss (D) the reasonable cost (calculated as of the date of the sale) to cure any destruction of or failure to maintain the Residence in excess of normal wear and tear. As used in this Section, “Consumer Price Index” means the National Consumer Price Index (all items) as published by the United States Department of Labor, Bureau of Labor Statistics, or, if such index ceases to be published, then any comparable successor index which measures changes in the prices of consumer items.

[iii] I wrote this first during the debate on Proposition 10 in California, and expanded it since.

This is a draft, which i hope will elicit comments, and critical ones. Please ignore placement of footnotes thus far. And point out possible logical fallacies….

Blog #146 Why are housing prices in Santa Barbara so high? And what can be done about them?


Main points dealt with:

  • The role of government;
  • The distinction between cost of production and maintenance costs
  • The recognition of both the social costs and the social benefits of good housing
  • The role of existing taxes affecting housing
  • The wide range of alternative tenures available to shape policy.
  • The interconnection of other problems with those confronting housing and its prices.
  • The key role of land and its ownership in affecting the price of housing

In blog #147 and those that follow it, on which I am still working, I try to deal with the main points above, knowing that more of both thought and action are required to advance serious resolutions I hope the discussion here will move us towards meaningful conclusions, which will be set forth in the final Conclusions Blog.

Peter Marcuse         
Vista del Monte, Santa Barbara, California
September 5, 2021

Blog 145: From Gerrymandering to Social Mandering: Ending the Danger of Gerrymandering


Purpose:  To integrate the existing land use, zoning, and master planning powers, which almost all local communities have in California. into the Congressional Redistricting process now discussed in many jurisdictions. by producing lines for the newly required   districts. This would   contribute in a positive manner to the social and economic development of communities by utilizing readily available professional planning resources and institutions and community advocates to avoid any danger of gerrymandering by creating  an integrated and  democratic participatory planning process.   

Call it “social-mandering.”

The full text, 2 1/2 pages, can be gotten by clicking on the following link to the Progressive Planners Network blog: 
<https://www.progressivecity.net/single-post/from-gerrymandering-to-social-mandering>

However, that is only the main text, without my references. The missing references are listed here, if anyone is interested.

  • See Nick Corasaniti, “Pennsylvania G.O.P.’s Push for More Power Over Judiciary Raises Alarms,” The New York Times, (Feb. 15, 2021), p. 1: “Democrats are now mobilizing to fight the effort, calling it a thinly veiled attempt to create a new level of gerrymandering, … to change the entire way that judges are selected in Pennsylvania … [to] empower rural, predominantly conservative areas to rewire the State Supreme Court.”
  • See https://en.wikipedia.org/wiki/Redistricting_commission, and https://en.wikipedia.org/wiki/Gerrymandering#Changes_to_achieve_competitive_elections.
  • In: Andrea Kahn and Carol J. Burns (eds.), Site Matters: Strategies for Uncertainty through Planning and Design (New York: Routledge, 2020), pp. 252-266.
  • Village of Euclid v. Ambler Realty Co., 272 U.S. 365 (1926). Details about this decision can be found on its Wikipedia page: https://en.wikipedia.org/wiki/Village_of_Euclid_v._Ambler_Realty_Co.
  • On the issue of motivation versus impact under the equal protection clause, see the discussion of “Testing Facially Neutral Classifications Which Impact on Minorities” in the Fourteenth Amendment, in: Mobile v. Bolden, 446 U.S. 55 (1980), 61–65. Justice White appears clearly to agree that purposeful discrimination is a necessary component of equal protection clause violation, and may have agreed as well that the same requirement applies under the Fifteenth Amendment. Id. at 94– 103. Only Justice Marshall unambiguously adhered to the view that discriminatory effect is sufficient  to condemn a plan.. Id. at 125. See also Beer v. United States, 425 U.S. 130, 146–49 & nn.3–5 (1976) (dissenting).

BLOG 143: TOWARDS A NEW VIEW OF POLICING


DEFUNDING THE POLICE, PRO AND CON

This blog makes five arguments that will be developed in subsequent posts:

  1.  Conventional policing fulfills many types of important positive social functions, as well as some less socially and perhaps even personally dubious ones. Certainly after George Floyd’s killing policing requires serious rethinking and reform. The five very different components of policing need to be considered individually. The whole has very different parts; the parts often contradict each other.
  2. Uniform one-size-fits-all reforms, such as totally defunding whole police departments, are inappropriate, considering the five different functions the police now perform. They require careful attention, reflected in varied approaches to the allocation of budgetary funds. in which the constructive involvement of the police themselves is important.  
  3.  Violence is appearing with increasing frequency on the streets and public places of our cities, reflecting deep divisions in our societies. The need for rethinking of institutional relationships between residents and police may also be required, if majoritarian democracy is to be preserved.
  4. Police reforms are increasingly vital out of direct self interest, not only for the classic victims of racism, disproportionally black and minority, but also for the presumably safer white majority. The context are the changes taking place at the global and national as well as local levels, with an organized violence–susceptible political right not committed to majoritarian democratic values. The future of the majority as well as of all minorities is at stake in resolving issues of policing today.
  5. A rethought and reformed police must be affirmatively involved with the peaceful majority in finding solutions to problems in maintaining a just and peaceful society. The solutions must be crafted so that the police are not “others” whose conduct must be controlled, but “partners” on the side of all seeking peaceful solutions to common problems, racism high among them.

The police need both adequate funding, and restraint. Increasingly the majority of civilians need a constructive police. The class position of the police, sharing both, must be thought through.

Further thoughts along these lines are in formulation and will be posted.
Comments welcome,

Peter Marcuse

Biden Limerick


Blog #133

There once was a  seeker of  office  named Biden

Who thought he was qualified  for offices because he had already tried them

But when it came time for time for him to get up and to speak

The Corona virus had just hit its peak,

And when they looked all  over for him they just couldn’t find him.

The other candidate for the same office was named Donald Trump

Whose wits were stuck together in a bit of a lump

His  only claim to high  office was his family  and dough

When they heard what he had to say, though,

They directed him swiftly right  to the dump..

So when neither candidate for office was found to be appealing

They thought about  the harm caused by that old-fashioned glass ceiling

And decided to limit entries to the big time race

Only to women who had earned a high place

A decision that  left all  the other candidates reeling.

When the country then looked at the result in perspective

It decided that decision had been quite effective,

That  really women  had rendered to all a great service

And when the men stopped being so nervous

They  would have to concede:  the old system was defective.

So the women  opened the door to all under-represented,

And let more faces and colors for top positions be presented.

They challenged the white-men-only system of old.

With ideas that  were positive and that were bold.

And they had candidates aplenty, all ready to go/

All fully prepared, and quite in the know.

.

Not everyone was pleased with all the new voices;

But most  were at least happy  to now have  more choices.   

Then the Corona virus came along, and revealed a hard truth,

New leadership was needed, and for immediate use. .

For many, sadly that  lesson came too late,

And now many are left to a very sad fate.

                                    When will we ever learn?.     When will we ever learn?

Blog #141 – What’s a Limerick anyway?


                        What’s a limerick, anyway>

A poem with  a particular trick

Is called by its friends a lim-er-ick

It needn’t be profound,,

But in  the end, must come around

To its  starting, to make a limerick tick.

The first line has to rhyme,

With the second, all the  time,

The third and fourth can go free

To please you and me, ,

But the fifth must rhyme with the first, we opine.

The best limerick is still the classic:

There once was a lady in Niger

Who smiled as she rode on a tiger

They came back from the ride

With the  lady inside

And the smile on the face of the tiger.

Blog #140 – On the Uses of Limericks


Blog #140 –     On the Uses of Limericks

A Would-be Poet Faces Reality

There once was a poor poet liking to rhyme

Who would do limericks whenever he had time.

But he was told instead  of trivia on  rthe page,

He needed to pick important topics and be  sage

But his smart  stanzas never brought him a dime.

So he decided to do topics of the day,

And see if his rhymed comments would pay,

But the news was always either too grim or untrue,

And the outcomes invariably ones we would rue,

That  he decided to let that  sad effort lay.

So he went back to verses of the heart,

In which each emotion could  play an appropriate part

But before the first line was out of the gate

He couldn’t figure out how  to deal with all of the hate,

And decided he better pick another topic for a start.

So: in Santa  Barbara the weather is always fine.

Of the world’s troubles there need nary be a line.

But: the nice climate may not last.

We might  all be blown up in one nuclear blast,

Better dilute the poems with some wine!

And turn to some more useful occupation while there’s time!

Blog 131 – the Impeachment Trial’s Indigestible Rules


Blog 131 – The  Impeachment Trial’s Undigestible Rules

How to evaluate the rules that  the Republican Senate will  impose on  the impeachment trial of President Trump will look when operational is not yet clear.  How might we evaluate them from what we know of them right  now?

One way might be to do it by  an analogy.

Suppose one tried to evaluate what might happen if the President decided, out of his insecurity in the outcome, to support the establishment of  a new restaurant in  New York, using the same rules that  his party has pushed through the Congress for the Impeachment trial, and named his son Donald Trump Jr. to manage it.  How might it be run, with the Impeachment rules as we know them thus far?

Imagine a visit in the  early weeks of its opening.  We go to  see how it might run, having been told  that  the rules insisted on as fair and efficient for the Impeachment trial will be  applied in a different setting

.*****

We would of course drive there, and be able to see  it already  from a distance, with its glowing neon sign boasting DONALD TRUMP’S HIDEOUT: THE GREATEST NEW RESTAURANT IN  THE USA SINCE THE SECOND AMENDMENT.  

As entered and a waiter showed us our seats, a  waiter brings us a streaming dish of hard-to-identify provenance. Asked what it is, we are told, ”our specialty for the day, selected for your pleasure by Donald Trump himself.”  

We ask, “may we see what else is on the menu?” Certainly,” we are told. “But  our rules provide that  we serve you the dinner of the day first, and show you the menu after you’ve eaten our specialty of the day,  so we can see if you  like it”.”

 “0h, all right , we said, “but what if we don’t like it? May we see the menu then”?

“Certainly , our pleasure,” he replied, and gave us a very large and attractive printed menu.

We considered, selected, and motioned the  waiter back to give him our order.

When we told him  what we wanted, he said, “I’m very sorry, but we don’t have that  dish today.”

“Well, it’s on the menu,” we said.

“ No,” they  said, “that  was yesterday’s menu. What you want isn’t on today’s  menu. And we only keep menus one day, so you can get a fresh one every day. That ’s the rule.”

“So couldn’t  you change the rules, to help folk like us who like to see what we might get  before we order? You can change your own rules, you know.”

“We’d be happy  to. . Just tell us what you’d like changed, and for when.”

“Why, for right a way, or course. We want to see the menu now, so we can order from it.”

 “Sorry, we can’t change rules that  quickly. We have to see  how the existing  rules work first, and that  takes time. Have you  any evidence that  the rules need to be changed?”

“Evidence? Why, yes,, not just everyday observation and personal experience, but also  a mountain of documents, tape recordings, and   witnesses that  can testify to their own preferences and to thee question of whether offerings are digestible or not. ” etc.  Just let us know what witnesses you want called, what  they would testify to, and when you want the witnesses called. We’ll  let you know what’s appropriate, after due deliberation.”

 (Sticking with the  analogy to  the Impeachment rules, of course.)

“It will take some time, however, they say. We don’t want to change rules hurriedly. And having all those witnesses testify, would just delay your dinners even  longer, and we don’t want them to get cold. Better wait for the witnesses till after diner and some debate. . The rules provide for that .  We hope  you all  will enjoy your dinners. We’ll  be in touch with you later. Thank you for your interest.”

“Oh. Well, perhaps we should  go elsewhere then, rather than waiting,“ we said.

“All right “, they said.”  “But before you go, here’s the bill for what you already  ate. Preparing these meals is expensive, you know. And printing new menus every day isn’t cheap either. And it takes time to explore a rule change.””

  “Oh, we said to each other, as we left, “ “the lesson seems to be: we need a new rule on how to change the rules. We better get at it quickly, if we want to have something other than what  Donald Trump has picked out for us. That  seems indigestible to us, so far..

*****

Or maybe the restaurant needs a new owner?

Blog#130 Nobel Economics Intro


Blog 130 – Nobel Prize Economics Introduction

“This research could reduce global poverty” claimed Jakob Svensson, member of the Prize Committee  as the Nobel Prize in Economics was announced. [1] The  only problem is, the work it celebrates can do no such thing. It is substantively myopic, ideologically  conservative,  technically weak, and probably net harmful in dealing with the serious real problems it addresses. wrong and harmful.

The biggest problem — and perhaps it  is a problem as much of the Nobel Prize committee and jury as of the recipients of the prize—is the hoopla that  celebrates  the work for which this prize was offered as making a big contribution to solving a big social  problem, the problem of poverty. The author’s’ work does indeed talk of “alleviating the problem of poverty ,” the problem of poverty the prize was won for [2]for their experimental approach to alleviating global poverty.”-but the work is dealing with it in an extremely superficial way, looking at some of its undesirable effects on its victims , proposing to rationalize ;and make more efficient small steps designed at best to ameliorate the  consequences of poverty, it doe not in any way address its  causes. In announcing the Nobel Prize award in economics, the prize jury said, “This year’s laureates have introduced a new approach to obtaining reliable answers about the best ways to fight global poverty,” the jury said. “The authors found efficient ways of combating poverty by breaking down difficult issues into smaller, more manageable questions, which can then be answered through field experiments, the jury said.”pp 78.

Thus, while doing what it does do may make a relatively small contribution to some minor obstacles to reducing poverty a little, it should not be allowed to detract from the attention needed to tackle the real causes of poverty. To present, as a proposal to alleviate children’s poverty, a proposal to put surveillance cameras in classrooms as a way of reducing teacher absenteeism on the theory that it reduces the effectiveness of their teaching  and thus their students’ ability to cope with poverty, really requires some thought about the other implications such a course might have. Attention to examining teacher’s pay, or  their working conditions, or their  teaching supplies or administrative support, working conditions, should  certainly deserve some thought as well. Is surprising us by proving that deworming children leads to improved attendance at school really “a new approach to obtaining reliable answers about the best ways to fight global poverty?,”


[1] Prize announcement. Nobel Prize.org. Nobel Media AB 2019. Tue. 29 Oct 2019. <https://www.nobelprize.org/prizes/economic-sciences/2019/prize-announcement/

[2] “The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2019 was awarded jointly to Abhijit Banerjee, Esther Duflo and Michael Kremer “

Blog #129 – Medicare and Beyond — For a Secure Health System


Blog #129 MEDICARE AND BEYOND – FOR A SECURE HEALTH SYSTEM

Beyond Medicare. How about a Secure Health System, analogous to the existing Social Security System?

We are a better country than we often want to acknowledge. We have a Social Security system, out of concern that old age should be secure and free of financial worry. We have an Unemployment Insurance system, out of concern that workers unable to find work in the open market should not be left in poverty or indigence. And we have Medicare, which can be seen as a fumbling step towards a health security system. We recognize, though we don’t often say so, that the Declaration of Independence’s call for government to provide for the security of life, liberty and the pursuit of happiness as inalienable rights is an appropriate, indeed indispensable function of government, that that means measures guaranteeing all members of society security in having at least minimum access to what it takes to make those rights meaningful.

Wouldn’t a Secure Health Care system fit right into that pattern? Isn’t ill health, like old age, like joblessness, like physical vulnerability, a cause of painful insecurity that  we would like no one to have to suffer from – need we doubt the parallel appropriateness of police protection for all, or environmental protection for all?

Doesn’t every civilized country care, both practically and legally, for the health and welfare of its citizens, and directly implement minimum standards for what that entails?

What, then, would a “Secure Health System” in the United States mean? – a system in which every person can count on the fact that , if  they become ill, they will be taken care of, will receive the  treatment and the care that  they need??  

It would mean the setting of minimum standard of health care to which all are entitled, without regard to incomes or health problems, the treatment, the medications, the comforts, that their condition requires. If individuals are able to provide that for themselves without government assistance, good and fine, let them; do so, but whether or not they can do so on their own,  all are entitled to security in having the minimums, no questions asked. We don’t deny the rich police protection because the can afford private security, nor deny the children of the rich public education because they can afford private schools. Beyond that, if they want and can afford more, more power to them. We don’t ask social security recipients it they have better pensions, children if their parent can afford better schools, home owners if they have private security systems. All members of society are entitled to security in obtaining the benefits of civilization, period.                                                                 

Why should health care be any different? It shouldn’t. Yet it involves one of the few necessities of life in which direct provision by government is now very limited, in which major provision is by private entities and personnel, by and large, by the private sector, with  an interest in high  prices for their  own benefit.

Health care in the U.S. needs fundamental change today.  

What might a system providing Secure Health in the United States look like? It would not deal with insurance companies or facilitators. Doctors and hospitals and drug companies would submit their bills to it, and be paid, verifying only that the services billed for were actually rendered. The plan would be financed by a small tax akin to a payroll tax, levied on all adults. If proceeds were insufficient to cover all claims, the national government would keep it solvent, just like social security.

If necessary, some of Elizabeth Warren’s revenue proposals might be adopted as needed. The savings from eliminating paper-work and enhanced bargaining-power with providers, i.e. pharmaceutical companies, private hospitals, should produce major savings in cost – and annoyances..

              For more limited improvements in the current Medicare system,               see        Pmarcuse.wordpress.com, Blog #128, Solving the Fake Medicare Opt-out problem: