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Friday, April 01, 2005


The pro-business case for socialized medicine

posted by Aziz P. at Friday, April 01, 2005 permalink View blog reactions
I am a relatively recent convert to the idea that we should have socialized medicine. The trick is justifying it on more than humanitarian grounds, and answering the real critique about whether it would degrade the quality of care. I want to address the first point, on the grounds of economic development. Here's a perfect case study: Toyota's competitive advantage in the global marketplace over GM. Read on...

Imagine how much stronger General Motors would be if it launched three additional new-model programs every year, each costing about $1 billion.

It could, if it didn't have to pay for its retirees' health care.

That is one of the most fundamental differences between GM and Toyota Motor Corp. GM pays for the health care of 339,000 retirees - and the number grows every year. In contrast, Toyota pays for fewer than 3,000 retirees' health care in Japan, a number that remains fairly stable.

That difference gives Toyota and other Japanese carmakers a massive advantage over their American rivals.

"The cost of health care in the U.S. is making American businesses extremely uncompetitive vs. our global counterparts," says GM CEO Rick Wagoner.

Toyota and other Japanese carmakers benefit from a national health care plan that reduces its obligations to retirees to almost nothing.


Toyota pays health care costs for its employees in Japan in the form of premiums for medical insurance. But it does not continue to pay those costs for retirees. Former employees of Nissan Motor Co. and Honda Motor Co. also turn to the Japanese government for health care coverage.

The American Big 3 pay - and pay and pay - for their retirees' health care.

GM covers the health care costs of approximately 125,000 active employees and 339,000 retirees. Health care costs for those retirees amounted to approximately $3.6 billion last year.

That's more than two-thirds of the $5.2 billion GM spent on health care and medical-insurance premiums last year. GM also contributed about $9 billion in 2004 to a trust fund set up to pay for health care costs.

In 2004, Ford Motor Co. spent $2.0 billion on health care for U.S. retirees.

The Chrysler group last year spent $1.3 billion on retirees' health care.

$1,525 per vehicle

GM says that its payments for retirees' health care - more than what the company spent for steel - add about $1,525 to the cost of every vehicle the company sells.

In contrast, Toyota must contribute to health insurance payments for only about 64,500 active workers in Japan.

Removing the burden of employer-funded healthcare would free up enormous capital - and that would be a rising tide that floats all boats higher. I think that this is ultimately the key to answering the second critique about quality of care.


That deserves a free market response.

First, others follies do not mean we should follow. Europe and Japan have much worse overall economic growth and unemployment. Their welfare state and retirement security plans are under more stress than ours. Economically, they are not the best models.

Second, pro-business and pro-market are two different things. As a conservatives, I am strongly pro-market. I do not favor corporate welfare. I don't think we should subsidize industries and our farm subsidies are some of the worst examples of inhumane vote-getting policy in effect today. Adding on a huge corporate welfare subsidy for businesses doesn't sound very liberal to me, nor does it sound very appealing.

That being said, when Republicans jumped ship and passed higher Medicare spending, the AARP supported it. If Democrats push for a huge corporate welfare check, I'm sure the Chamber of Commerce will be happy to do some of the lifting. And in both cases (as always seems to be the case), government will grow and certain people will receive "free" benefits from the government. When you rob Peter to pay Paul, you can always count on Paul's vote.


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Nation-Building was founded by Aziz Poonawalla in August 2002 under the name Dean Nation. Dean Nation was the very first weblog devoted to a presidential candidate, Howard Dean, and became the vanguard of the Dean netroot phenomenon, raising over $40,000 for the Dean campaign, pioneering the use of Meetup, and enjoying the attention of the campaign itself, with Joe Trippi a regular reader (and sometime commentor). Howard Dean himself even left a comment once. Dean Nation was a group weblog effort and counts among its alumni many of the progressive blogsphere's leading talent including Jerome Armstrong, Matthew Yglesias, and Ezra Klein. After the election in 2004, the blog refocused onto the theme of "purple politics", formally changing its name to Nation-Building in June 2006. The primary focus of the blog is on articulating purple-state policy at home and pragmatic liberal interventionism abroad.