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This is a re-posting of my diary from December 2008. I hope it will serve as a useful nudge for fence-sitters in the last big push before the end of voting tomorrow.

Is there a way to actually place a dollar amount on how much conservative rule has cost America? Stirling Newberry has offered a "back of the envelope" estimate of the costs of four consequences of conservative rule the past 28 years:

over-financialization of the American economy, the waste of privatized health care, over militarization of the American economy, and the externalization of global warming.

The total cost of conservative rule, in today’s dollars, is a staggering $27 trillion, nearly twice the total output of the entire U.S. economy for an entire year.

Newberry uses a 15-year time frame, because that is the time frame former Bush White House economist Lawrence Lindsey used in a retrospective look at the costs of the Iraq War, in his early 2008 book, What a President Should Know ... but Most Learn Too Late.

Lindsey, in case you forgot, ignited a storm inside the White House back before the invasion of Iraq, when he estimated that a war with Iraq would cost $100 billion to $200 billion. Karl Rove and his wunderkind were dismayed and outraged that Lindsey would float such a "preposterously" high number, and Lindsey was shown the door just a few weeks later. Of course, Bush did go into Iraq, and burned through $200 billion is just over a year. That was nearly six years ago, and we now know that Lindsey’s estimate was preposterously low, and can now count the cost in trillions, rather than hundreds of billions.

Privatized Health Care Wastes 5% of GDP
Physicians for a National Health Program has compared U.S. health care costs with those of other countries, and has shown that

the United States performs poorly in comparison on major health indicators such as life expectancy, infant mortality and immunization rates. Moreover, the other advanced nations provide comprehensive coverage to their entire populations, while the U.S. leaves 47 million completely uninsured and millions more inadequately covered.

The reason we spend more and get less than the rest of the world is because we have a patchwork system of for-profit payers. Private insurers necessarily waste health dollars on things that have nothing to do with care: overhead, underwriting, billing, sales and marketing departments as well as huge profits and exorbitant executive pay. Doctors and hospitals must maintain costly administrative staffs to deal with the bureaucracy. Combined, this needless administration consumes one-third (31 percent) of Americans’ health dollars.

Since the U.S. spends 15% of its GDP on health care, and one third of it is wasted, that’s 5% of GDP.

But is this a cost of conservative rule? Recall the legendary 1993 memo that launched Bill Kristol into the pantheon of wrong-wing heros: from his perch as chairman of the Project for the Republican Future, Kristol intoned that the Republican party should "kill", not amend nor compromise on, the proposed Clinton health care plan. The success of the Clinton proposal, he warned, would "re-legitimize middle-class dependence for 'security' on government spending and regulation", and "revive ... the Democrats, as the generous protector of middle-class interests." Kristol's memo was widely circulated among Republicans, uniting them in monolithic opposition to Clinton's reform plan.

Financializtion: another 3% of GDP
Newberry points to a recent article on the Madoff scandal, in which Paul Krugman noted:

In recent years the finance sector accounted for 8 percent of America’s G.D.P., up from less than 5 percent a generation earlier. If that extra 3 percent was money for nothing — and it probably was — we’re talking about $400 billion a year in waste, fraud and abuse.

Krugman’s $400 billion is somewhat below the number estimated by John Bogle, founder and retired CEO of The Vanguard Group of mutual funds, but it’s in the same ball park. Bogle estimated, two or three years ago,  that the financial sector drains around $550 billion from the real economy each year.

I believe that both Krugman’s and Bogle’s estimates are far too low since financial turnover has gone from one and a half times GDP in the 1960s, to over fifty times GDP by 2000.

Bush’s Imperial Wars and Militarization: 2% of GDP
Newberry unfortunately does not offer any substantiation for his 2% of GDP for war and militarization. He links to a spreadsheet that shows federal outlays for defense have increased from 3.030% of GDP in 2000 to 3.349% in 2008. But there is a lot of fudge factor in the next component, so I’ll just take the 2% figure for now.  

Externalized Costs of Global Warming: 2% of GDP
I’ll let Newberry explain this:

The cost of global warming? Harder to say, in 2005, the mean of estimates surveyed by Tol was 93 dollars a ton.

The news has gotten worse since then, with many of the low estimates that dragged down the median already being disproved. But let's be cautious and take that number for the moment. That's 4% of GDP, but we have to take the present value of that first, since it is over a long time horizon - from that we get roughly 2% of GDP. I could easily double this number by tossing out the large numbers of estimates which rely on scenarios which have already been trashed by the facts.

Total Cost of Conservative Rule: 12% of GDP
So, simply total up these four categories, and we have 12% of GDP. Over Lindsey's 15 year time frame, that comes to 36 trillion dollars. Newberry then calculates what the present value of that $36 trillion is:

So what's the value of that, right now? Well, taking a real interest rate of 2%, that's the historical value roughly, and compounding monthly, that's a present value of 27 trillion real 2008 dollars. Or about twice the value of everything Americans are going to do this year. Ross Perot and others like to talk about the cost of unfunded liabilities, like Social Security and Medicare, running to a present future value of 40 trillion. It's the same kind of back of the envelope number as presented here - based on a present future value of estimates of a long term stream. This means that the cost, over 15 years, of conservatism to America, is two thirds of the supposed crisis in costs - out to an infinite time horizon.

So what does this exercise mean? It's really very simple: we can afford a decent retirement and decent living standards, and decent medicine for ourselves and our children and grand children, or we can afford the casino games that we have played, and the massive parade ground military that we have built over the last generation. But not both. The costs of the war and bad economic policy flow all through the economy.

Originally posted to NBBooks on Mon Nov 01, 2010 at 05:45 AM PDT.

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Comment Preferences

  •  Tip Jar (6+ / 0-)

    A conservative is a scab for the oligarchy.

    by NBBooks on Mon Nov 01, 2010 at 05:45:32 AM PDT

  •  And I'm so fucking sick and tired (3+ / 0-)
    Recommended by:
    Gooserock, mightymouse, Dauphin

    of all these teabaggers shedding crocodile tears for my generation and how the Dems are supposedly selling it to China. They gave us two wars and sent thousands of my fellow millenials off to DIE in them, gave away a trillion of our dollars to the big drug companies as payback for serving as their de facto campaign managers, and gave trillion dollar tax cuts to the obscenely wealthy.

    The "lamestream media" runs with this narrative of my generation being killed by Obama and the Dems, but I can't think of one single time when they have ever asked US how we feel about it. The Baby Boomers are sucking up our Social Security and Medicare that we still pay into, and now the teabaggers want US to give up some of our promised benefits as well because they caused this fucking debt! It is so royally offensive to me that these meatheads pretend to be concerned about me and frankly, they deserve to be punched and spat upon by folks like me.

    •  Boomers Lost Careers and Pensions and Pay Double (5+ / 0-)

      into SS longer than you have so far. If boomers have their way you're going to have the same SS and Medicare to collect on as we do.

      We apologize but we liberal boomers lost a war to the Republicans 35 years ago. The Greatest Generation that so bungled the Vietnam war were much more successful when they launched the Reagan Revolution.

      We were decimated and we never got reinforcements till you showed up in 2006.

      What's happening to your generations is a crime and the liberals among us are doing what we can to contain it.

      The problem is, none of you younger than us has ever
      seen the United States governed on a path that wasn't spiraling down, so when we try to explain the last policies that had us holding ground or ascending, they sound completely unbelievable to most people younger than us.

      We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

      by Gooserock on Mon Nov 01, 2010 at 06:07:38 AM PDT

      [ Parent ]

  •  Amazing, But Ridiculous to Go Back Only 15 Years. (7+ / 0-)

    Reagan came in, deregulated finance and quickly got our first panic in half a century with the S&L's, and doubled the national debt.

    Because of all the deregulation of Reaganbush, the Clinton so-called good economy was actually the start of the Republican bubble series including high tech, stocks generally, energy and housing. All that's what fueled the Clinton economy because of the already rampant speculation, and so beginning with Reagan the entire bottom 99% of Americans made no gains in net worth. All gains were made by the top 1% and almost all of that by the top 0.01%.

    Image Hosted by

    People forget that housing reached 100 year highs before Clinton was impeached. By the time he left office adjusted housing prices were nearly triple the 100 year peaks. That was before the mortgage/investment scheme was launched under Bush.

    Basically in 1981 the United States lost a world war. The total of the Republican Revolution must be 50 trillion at least.

    We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

    by Gooserock on Mon Nov 01, 2010 at 05:59:18 AM PDT

    •  how far do we go? (0+ / 0-)

      Amazing.. I'm thinking of the line from The Matrix, where Morpheus and Neo are talking, and he says, "You take the red pill, you stay in Wonderland, and I will show you just how deep the rabbit hole goes". Conservatism is a rabbit hole--how far do we go down it to find how deep it really goes, and what the consequences are?

      I agree that Reagan's deregulation was a huge problem, but who/what was the problem before Reagan? Wan't it Santayana who said that those who fail to learn history are condemned to repeat it? If that's true, then the conservatives really haven't learned much of anything, since their policies continue to be problematic, and they want to take our country down the rabbit hole of increased militarization, further increased deregulation, and upward redistribution of wealth to corporations and the topmost .10 percent, leaving the vast majority of the country to pay the bills for its greed and recklessness. Enough is enough--further generations are at stake.

      Trying to listen to Fixed Noise is the intellectual equivalent of standing next to a jackhammer without ear protection.

      by alliehope on Mon Nov 01, 2010 at 06:21:14 AM PDT

      [ Parent ]

  •  Tired of just blaming GOP (1+ / 0-)

    the Dems had a hand in this too.  And, I vote Dem, but facts are facts!

  •  but they're the party of financial responsibility (1+ / 0-)
    Recommended by:


    (head asplode)

    An ambulance can only go so fast - Neil Young

    by mightymouse on Mon Nov 01, 2010 at 06:13:21 AM PDT

  •  I really like this (1+ / 0-)
    Recommended by:

    Putting numbers to real costs of conservativism, a manifest real world ideological failure.  Wish I'd thought of this.

    This is a great start, I think there's a lot more costs to account for that might add another 1-3% of GDP but I think we're in the ballpark of how much waste is inherent in conservativism.

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