Steve's Reviews > Comeback America: Turning the Country Around and Restoring Fiscal Responsibility

Comeback America by David M. Walker
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's review
Feb 20, 2011

did not like it
bookshelves: economics
Read from February 15 to 20, 2011

If you’ve seen David Walker anywhere, you’ll remember him as a straight talkin’, former Comptroller General of the United States who is really REALLY worried about the financial deficits of the US. He’s been on 60 Minutes, written several books, has a movie (IOUSA). All of which seek to drive home the point that the US is in a huge financial hole ($56 trillion as of 2008) and we need to get serious. His solution: raise taxes and cut spending, with an emphasis on entitlement spending.

As an accountant and someone who follows this stuff fairly closely, I think Walker has identified a real problem. And ten years ago I would have probably agreed with a lot of his solutions. Dial back Social Security and Medicare a bit, raise taxes a little, and all will be well.

But, if you look at the situation more closely, you’ll notice several problems with that broad-brush approach. One, the vast majority (about 80%) of the $56 trillion hole he identifies relates to healthcare costs that the federal government expects to pay over the next 75 years. So, you’d think the vast majority of his book would be devoted to addressing that problem, right? It’s not; only one chapter. It’s not a bad chapter; he suggests an overall budget for healthcare and a “federal reserve” to determine priorities. Unfortunately 80% of the problem he identifies gets only 10% of the book. This creates problems.

One, the “fix” for healthcare is likely to be much different than the fix for other budget problems. For example, the federal government can stop buying aircraft carriers and that will be a cost savings. However, if the government stops paying for healthcare it’s likely the cost will simply be shifted to individuals or states or businesses. The feds pay about half of all healthcare costs and that’s why they have a huge budget problem. But businesses, states, and families pay the other half and, because of healthcare costs, their balance sheets aren’t looking that great over the next 75 years either. If, as some propose, we balance the federal budget by shifting more of the responsibility for healthcare costs to families and businesses, how are we better off?

So, it’s pretty clear that we need to reduce healthcare costs, not just healthcare costs paid by government. How do we do that? (By the way, I’m sorry to digress so far from the book, but the book digresses so far from the problem, what can I do?) To his credit Walker acknowledges that the US has the most expensive healthcare in the world. I wish he would have dramatized that point the way economist Dean Baker does. He has a neat little chart that shows what would happen if the US had per capita healthcare costs at the level of any developed country. Guess what. The entire budget deficit, all $56 trillion, goes away. Presto! No cuts to Social Security, defense, no tax increases. That’s how big healthcare is.

So, why can’t we get a handle on reducing healthcare costs? There’s no shortage of smart and well-meaning people who say they can do it. We’ve just been through a bruising battle in Congress trying to address the issue. My theory is that the problem starts with identifying the problem as simply $56 trillion hole. It’s only a hole from the perspective of those who pay for healthcare. To healthcare providers, however, it’s more like a $56 trillion mountain. It’s not a cost, it’s income. In other words, attempts to limit costs are also attempts limit income. Not surprisingly, with 17% of the economy at stake---$2 trillion per year--disagreements ensue. At this point it appears that the people with their eye on the mountain are more focused and organized than the people with their eye on the hole. So, kudos to Walker for trying to focus attention on the hole.

Unfortunately he has a real problem focusing on a solution. The major theme of the book seems to be a generalized cutting back on entitlements. The idea is practically a refrain ending every chapter. In the abstract that sounds good, but if we are talking about restraining healthcare costs--and remember that’s the vast majority of that $56 trillion--then the evidence suggests that… I hope you are sitting down…we should expand the entitlement for healthcare. I know this runs way way against conventional wisdom. But, remember all those countries that operate healthcare systems that would solve our budget deficit? They all have a national entitlement for healthcare. It saves them a ton of money, and by many measures they have better healthcare. Maybe they have to wait a little longer for procedures, but if it saves us trillions of dollars, I say I’d say it’s worth a serious look. As a side benefit we wouldn’t have to listen to prescription drug ads (a ban favored by Walker, by the way). So, why is Walker not on a crusade to bring that type of system to our country? I have no idea.
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Comments (showing 1-2 of 2) (2 new)

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message 1: by Donna (last edited Feb 21, 2011 07:40PM) (new)

Donna  Napier What an awesome review! Would you please write a book? No, better yet, please be our Comptroller General!

message 2: by Donna (new)

Donna I am so glad you DID digress from the book! ; ) This is really, really good. The idea of who's focusing on the hole and who's focusing on the mountain made a lot of sense. So did the part about how health care costs don't go away, they just get transferred. And . . . that's quite the amazing little chart! Wow.

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