I am a semi-retired mathematics professor (at the University of Nebraska at Omaha) who has developed a big interest in U.S. fiscal and economic policy in the past few years. In fact I write a regular blog on these issues.
I am currently reading the book, “American Amnesia” by Jacob Hacker and Paul Pierson. Even though they are progressives, and I am a fiscal conservative, their presentation is sufficiently objective that I can learn a lot from it. According to these authors, three of the biggest impediments to American progress are new robber barons in three parts of the American economy: health care, finance and energy.
- The cost of health care. Why do Americans spend 18% of GDP on healthcare, both public and private, almost twice as much as any other developed country? It is because of the ability of medical professionals, health insurers, pharmaceutical companies and hospitals to charge high prices. Either we figure out how to control and limit medical costs or we will inevitably end up with a government run single payer system.
- The financial industry. Large financial institutions hurt the economy because they can beget big financial crises. The Dodd-Frank Act has made large banks less likely to fail but is also a big burden for community and regional banks. The solution is to relax complicated regulations in favor of higher capital and equity requirements.
- Energy. The authors point out that the world’s average temperature would rise by 16 degrees Fahrenheit if all fossil fuel resources on earth were consumed. Such a catastrophe is, of course, very scary but also highly unlikely. More and more Americans now accept that global warming is real. The best way to address it is with a (revenue neutral) carbon tax and it is likely that one will be adopted in the near future.
Conclusion. Health care costs, high finance and uncontrolled carbon emissions are indeed threats to our future prosperity. But, one way or another, we are on track to solve these problems.