Let me recommend again Ed Luce’s excellent weekend article on the crisis of the American middle class. Something it reminded me of, though it’s not explicitly mentioned, is Peter Orszag’s old presentation on “The Case for Reform in Education and Health Care.” As Luce notes, one striking thing about the anxious American middle class is that in many respects it’s so comfortable. He writes of Mark Freeman:
The 52-year-old lives with his family on a tree-lined street in his own home in the heart of the wealthiest country in the world. When he is hungry, he eats. When it gets hot, he turns on the air-conditioning. When he wants to look something up, he surfs the internet.
Talk of wage stagnation since 1970, similarly, obscures some major improvements in quality of life driven by technological progress and new goods. Everyone’s ability to purchase information and media goods in 2010 is drastically better than it was forty years ago and these same advances have driven an overall improvement in the quality of private consumer goods.
But when you look at the enormous challenges that exist, they loop back overwhelmingly to the fact that the health care and education sectors have not seen these kind of impressive productivity improvements. Consequently, any family that experiences a serious medical malady winds up in serious economic difficulty and families that aren’t in this boat worry that they might be. But while nobody wants to refuse to pay for health care that doctors say their family needs, the actual spending is a bit of a black hole and the relationship between outlays and outcomes is unclear:
Meanwhile, the cost of providing for health care is steadily increasing its strain on state and local budgets leading to declining investment in other public services. On the educational front, the K-12 schools fail too many kids from modest backgrounds while at the higher education level college is more important than ever but the cost is skyrocketing far faster than anyone’s ability to pay:
While incomes in America are stagnating, the cost of education is soaring. Since 1990, the proportion of Americans who are paying off more than $20,000 in student loans a decade after they graduated has almost doubled. Lawrence Summers, Obama’s chief economic adviser, who has long worried about the growth of what he calls America’s “anxious middle”, points out that of the major economies, the US has the highest share of graduates in the workforce. But if you take the 25–34-year-old age group, America is not even in the top 10.
Over the long run, this trend is going to drive health costs up even more as we fail to produce the growing cohorts of medical professionals that could increase competition and drive down prices.