Economic public panel
Lerner College professors debate US economic policies
10:26 a.m., April 26, 2013--Tensions ran high amongst participants in a panel discussion on the economy last week as four experts from the University of Delaware’s Alfred Lerner College of Business and Economics debated U.S. policies concerning jobs and unemployment, the federal budget bulge and Social Security.
The event, titled “A Clash of Views: A Debate Over U.S. Economic Policies” and held April 16 in Purnell Hall, was sponsored by the Department of Economics and featured two teams of two – professors Burt Abrams and William Poole versus Saul Hoffman and Larry Seidman, all of the department.
For the Record, July 25, 2014
Moderated by James Butkiewicz, department chair, the teams were given five minutes each for opening statements, then 10 minutes to debate their contrasting views on how the U.S. should manage its economy.
Jobs and unemployment: What now?
Seidman said that in 2007, the unemployment rate fell below five percent, but peaked in the midst of the recession in 2009 at 10 percent. Since the beginning of the economic recovery in 2011, he said progress has been weak, with unemployment rates currently at 7.6 percent.
In order to lower unemployment rates, the government must stimulate the economy, Seidman said. The best way to do that, he said, would be to provide set amounts of money to each adult and child, injecting approximately $300 billion into the economy, raising the gross domestic product (GDP) by 2 percent and reducing unemployment by one percentage point.
“Commerce should enact a tax rebate for households,” Seidman proposed. “The U.S. Treasury should send checks this summer to each household, $1,800 per adult, $600 per child.”
Poole said Seidman’s plan provided “a medicine without diagnosing what the disease is” and emphasized the importance of completely understanding the problem before prescribing any cure. He said the reason for the slow employment recovery is primarily because of the low participation rate for jobs.
“There are a variety of reasons, but I believe an important part of the story is that there are all too many disincentives to work, incentives to stay out of the labor force,” Poole said.
Poole cited a high rate of disability payments as a significant reason why unemployment rates are so high. He said once an individual is on disability, they are more likely to be hesitant to give it up, as it is a permanent support until retirement. He said this must be fixed in order to get the economy back to its previous position.
Battle of the federal budget bulge
Abrams said the administration of President Barack Obama has made it clear they want a large, redistributive government in order to manage the federal budget. He said the president’s Affordable Care Act, also known as “Obamacare,” will tack on several hundred billion dollars to annual expenditures and citizens need to come together in order to decide if this is the type of government system they want.
“This is purely a value judgment of what kind of society do you want to live in,” Abrams said. “Consequently, there’s no right or wrong -- it just depends on what kind of society do I want. Do I want a society where there’s a large government that takes a large chunk of your income that you earned and spends it on the way the government decides it should be spent, or do you want a government that’s small, that allows individuals be free to choose how they allocate resources in the society?”
The aging of the population is also taking a toll on the economy. Abrams said that as the federal budget expands, the government will take over a greater part of the country’s GDP and things are going to get worse economically as Obamacare kicks in. He predicted that it will not be too long before entitlement programs like Social Security and Medicare take over everything the country is currently spending.
Hoffman argued that investments that increase productivity in the long run are a benefit for the future generations, not a tax. He claimed that although the budget may seem steep now, it is the best option for the U.S. in order to keep things running in the future.
“The Obama budget combines real spending cuts, including programs like Social Security that no Democrat has ever touched, with reasonable and equitable revenue increases on the tax side,” Hoffman said. “It does have big spending, yes, it does have spending for universal preschool, which is estimated to have the highest rate of return of any investment in U.S. capital.”
Are Social Security and Medicare at risk?
According to Seidman, Social Security and Medicare are not at risk. He said that while opinion polls among students show they believe there will be few Social Security benefits left for them when they reach retirement, as long as there are substantial payroll taxes, there will be substantial benefits.
“There has been too much irresponsible talk about collapse and bankruptcy,” Seidman said. “It’s false and you won’t be able to make good public policy decisions if you’re misled about what’s going to happen down the road.”
Poole said that while he did not disagree with Seidman’s stance on Social Security, he has doubts about the future of Medicare. He said the Medicare funding system has worked when the percentage of the population over 65 has been smaller but that percentage is currently rising.
“The thing you have to understand about Medicare is that it is a system of central planning,” Poole said. “It is a system of central planning, where the government sets the prices and the government is increasingly setting the allocations.”
He said it is not a system that can survive in the long run, as it disallows physicians from charging more than the allotted rate, thus leading them to refuse Medicare and Medicaid patients.
The topic of health care price control sparked debate with members of the panel.
Hoffman said there is a health care cost problem, but not a government health care cost problem. He said the Affordable Health Care Act addressed only one of two major problems, expanding medical accessibility for citizens.
“There needs to be more future planning in order to support medical expenses,” said Hoffman.
Poole argued that while he does not believe central planning will cause American health care to collapse the way it did in the Soviet Union, he thinks a move by the U.S. toward the system most European nations favor could be detrimental to the quality and efficiency of medical care.
“We’re going to go to a centrally planned, centrally paid for health care system and it’s going to be rationed,” Poole said. “The services will be just like in Canada, where you have to wait two or three years for your hip replacement and the quality of care will deteriorate. That is the only way they’re going to be able to make this affordable.”
Seidman said although he is against central planning, he does not think having a health care system modeled around the Europeans is necessarily a bad thing. He claimed that health care has specific problems separate from other economic issues and there needs to be a different mechanism in place in order for it to thrive.
“Ask the French and the Germans how they feel about their health care systems, which have greater government involvement, greater regulation of what the providers can charge and so on,” Seidman said. “They give very high marks to their system and their costs are significantly lower than the U.S.”
Article by Rachel Taylor