The Price of Civilization: Reawakening American Virtue and Prosperity (27 page)

Another key finding is that our failure to invest in our children at the crucial stage, ages zero to six, can be very hard to compensate for later on. If a skyscraper stands on shaky foundations, extra efforts
on the higher floors are never going to make the building secure! This means that many of our educational efforts in the United States, for example in reforming high schools, are coming far too late in the day. We might be able to help some kids along through compensatory actions and should surely try to do so, but we will be much more successful if we start at the start, ensuring healthy early childhood development for all kids.

In a brilliant essay, Gösta Esping-Andersen, the leading expert on Sweden’s social welfare state, asks why social mobility is now so much higher in Sweden than in the United States.
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He notes that in all high-income countries, the parents’ socioeconomic status shapes a child’s educational and earnings prospects, but much less so in Sweden than elsewhere and much more so in the United States. In Sweden, even a child growing up in relative poverty has almost the same education and earnings prospects as a child growing up at the top of the income curve. Esping-Andersen suggests convincingly that Sweden’s distinction lies not in its support for public education, which is roughly matched by other countries, but in its public support for
families and their children from the earliest age
, even before formal schooling.

All of Sweden’s families have access to affordable high-quality day care, which is publicly provided. This enables mothers to work without leaving their children behind in an unsafe environment. Female heads of household, a group marked by a high rate of poverty in the United States, are not poor in Sweden. Remarkably, their poverty rate in Sweden, according to Esping-Andersen, is only 4 percent, compared with the United States, where the Census Bureau recorded a 30 percent poverty rate in 2009.
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Similarly, all of Sweden’s children are afforded high-quality preschooling.

The main point, according to Esping-Andersen, is that it is the provision of public services, notably the universal access to affordable day care, even more than income support to families, that is key to the elimination of poverty among families with children.
Sweden’s public services, of uniformly high quality, ensure a decent start for all children.

Sweden’s public financing for child care, preschool, and preprimary school amounts to 1 percent of GDP, compared with just 0.4 percent of GDP in the United States.
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The needs in the United States, of course, are even greater than in Sweden, given the vastly higher proportion of children growing in poverty. Yet in the United States, at least half of those needs are likely to be met by middle-class and rich households out of their own incomes, rather than through comprehensive public coverage. Let’s pencil in an additional 0.5 percent of GDP as of 2015 as a very rough estimate of what will be needed to ensure comprehensive early childhood development programs in the United States. Once again, the precise budgeting will require extensive learning by doing and the step-by-step scaling up of successful models.

Real Health Care Reform

Low- and middle-income Americans have suffered from stagnant wages and been pressed down by international competition and rising health care costs. The relentless rise of health care costs in the past couple of decades occasioned the nearly sixteen-month saga of health care reform at the start of the Obama administration. Yet though the reform accomplished two important goals—expanding coverage to the poor and protecting coverage of those with preexisting health conditions—there is very little in the legislation that will slow the increase in health care costs for a given amount of real health care delivery. In fact, health care costs are likely to rise, not fall, in the coming years as the new measures are implemented. What happened is clear enough. The private health care insurance industry, the pharmaceutical industry, and the American Medical Association blocked the deeper reforms that could have brought
cost inflation under control. As one leader in the industry has put it, “health care will not reform itself,” since the vested interests are too powerful.
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Several careful studies have shown how the private-sector interest groups in the health care sector hike up their costs and prices, knowing that they will be reimbursed by the government (in the case of Medicare and Medicaid) or by private purchasers of health care insurance, who have no real alternative. According to one study, the excess costs of U.S. health care in 2003 amounted to an estimated $1,645 per person, or roughly 4 percent of GDP.
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The study found that excessively high costs permeate the entire health care system, including hospital care, outpatient care, drugs, and health care administration. Doctors’ salaries in the United States are far higher than in other countries; so, too, are drug prices. Privately owned outpatient clinics have high costs and excess capacity. And the costs of health care administration and health insurance (such as the handling of claims) are estimated to be around six times as much as the median in the OECD (high-income) countries!
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The Scandinavian countries run their health care systems at roughly half the cost of the United States and with much better results in life expectancy and reduced child mortality. They do so by emphasizing a “systems approach” to health. Health care is publicly financed but privately provided. One systemic difference with the United States is Scandinavia’s much greater attention to primary care, which heads off expensive and chronic conditions that arise and intensify when they are ignored until too late. Primary care doctors are the “connectors” between patients and specialists. Management of the overall health care system is much more transparent. Billing and administration are not bureaucratic nightmares involving private insurance companies. And doctors work more seamlessly together on complex cases, avoiding a massive duplication of administration and of expensive medical tests.

As Obama himself noted during the health care reform debate,
there are examples of such successes in the United States, including Kaiser Permanente and the Cleveland Clinic. He even visited the latter to make the point. Yet the reform legislation gave barely a nod in that direction. The lobbyists had won long before the visit by promising to support the legislation (or at least not fight against it) as long as the basic structures of the overpriced health care system were not touched.

A Pathway to Energy Security

The greatest infrastructure challenge of the coming decades is to wean America from its dependence on fossil fuels, both to reduce greenhouse gas emissions and to cut the country’s dependency on rapidly depleting and highly unstable energy supplies. This is a complex challenge with four goals: national security, energy security (plentiful, low-cost energy), environmental security, and industrial competitiveness. There is currently no national plan to date on how to achieve even one of these goals, much less all four simultaneously. Comprehensive strategies will involve several types of energy (solar, wind, nuclear, fossil fuels with carbon sequestration), several new types of energy use (hydrogen fuel cells, battery-powered vehicles), and new types of urban design.

There are bottlenecks in every direction. In the original creation of much of the nation’s infrastructure, federal and state governments used eminent domain to acquire the land and other resources needed to provide the public goods. That has become considerably harder over time. The right of individual landowners and communities to stall projects has stopped abuses but also made it much harder to modernize the infrastructure. Environmentalists are blocking not only coal-fired power plants but low-carbon energy technologies as well. In recent years, environmentalists have fought wind power off Cape Cod, solar power in the Mojave Desert, high-voltage transmission
lines to bring renewable energy to New York City, underground sequestration of carbon dioxide at several proposed sites, and nuclear power plant licensing throughout the country.

What will actually be built is now anybody’s guess. Projects can take decades to reach approvals and years or decades more till the first groundbreaking. Until recently the problem was known as NIMBY, Not in My Back Yard. Yet now things are even worse. We’ve arrived at the BANANA economy: Build Absolutely Nothing Anytime Near Anything.

The glaring gap is the lack of a national strategy. There are dozens of bits and pieces of public policy strewn throughout energy legislation, the 2009 stimulus act, transport legislation, and specific tax policies for alternative energy sources and electric vehicles. They do not add up to a coherent strategy. The Obama administration has announced the goal of a 17 percent reduction of greenhouse gas emissions by 2020 compared with 2005, yet it did not announce any policy to achieve it or even a scenario of how it might be accomplished. Without that, the goals are numbers plucked from thin air, disconnected to the investments in new electricity grids, vehicles, and power plants that could actually get us there.

The transition to a low-carbon energy economy will not be free. Low-carbon energy is more expensive and often less convenient than conventional fossil fuels. Coal can, of course, be burned throughout the day and night, while solar power is available during daylight hours and the wind blows intermittently. Our electricity is currently provided by roughly 50 percent coal, 20 percent nuclear energy, 20 percent natural gas, and the rest mainly by hydropower.
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To move to an energy system that is mainly low-carbon, whether nuclear or renewable energy or coal combined with the capture of CO
₂
emissions, will probably require an extra $50 or so per ton of CO
₂
emissions avoided by shifting to cleaner energy. Back-of-the-envelope calculations suggest that the total cost of moving to a low-carbon economy would therefore be around $200 billion per year by 2050, compared with
a $30 trillion GDP by midcentury, or roughly 0.6 percent of GDP in outlays. Of course, if the low-carbon energy technologies prove to be much less expensive than now or the conventional fossil fuel energy sources rise significantly in price, the incremental costs of shifting to a low-carbon economy could be much less than 0.6 percent of GDP.

My colleagues and I have been designing a gradual transition path to get from here to there, one that would not disrupt fossil fuel—based energy systems in the short term but would enable a dramatic transformation to a low-carbon energy system by 2050.
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The idea is to levy a small tax on existing fossil fuels and use it to give a sizable subsidy to low-carbon energy (e.g., wind and solar power or carbon capture and storage at existing coal plants). Since the existing fossil fuel—based energy system is so large and the new low-carbon energy sector is so small, even a very small tax on fossil fuel could pay for a quite generous subsidy today, enough to encourage the entry of new low-carbon energy sources to the market. By maintaining suitable subsidies over time, the size of the low-carbon sector would grow. The fossil fuel tax would rise gradually over time, and the subsidy paid to low-carbon energy producers would decline gradually over time, in a manner that maintains an overall net incentive (equal to the sum of the tax and the subsidy) to keep moving toward a low-carbon energy system.

Consumers would never experience a sudden jolt in energy prices, while low-carbon energy producers would receive a predictable and generous subsidy to support the long-term transition to the new system. The system would be self-financing, since the revenues from fossil fuel taxes would cover the subsidies provided to the alternatives. Over the course of several decades, technological learning cycles (for example, of electric vehicles and solar power) would reduce the costs of low-carbon energy systems compared with today’s fossil fuel—based technologies. It’s also possible that the market prices of coal and oil might become so high because of rising scarcity that low-carbon renewable energy systems such as wind and solar power
would become the market-based low-cost alternatives even without public subsidies to help get them started.

Ending Military Waste

The biggest single item in the budget is the military, which claims at least 5 percent of GDP, around one-fourth of total federal outlays, and the preponderance of U.S. foreign policy attention. The magnitude of these outlays is enormous and their rationale is highly questionable. Military spending will be around $738 billion in fiscal year 2012, not including another $250 billion or so for homeland security, intelligence gathering, veterans’ benefits, and other military-related outlays. The total budget directly or indirectly attributable to the military is thus a staggering $1 trillion or so per year.

Around $150 billion per year relates directly to the Iraq and Afghanistan wars, both of dubious if any value to American security. Another large part relates to the maintenance of thousands of nuclear warheads without any obvious purpose, since a tiny fraction of this number would ensure the deterrence of any attack. A staggering $200 billion involves missile defense, other procurement programs, and research and development.
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In many cases, the generals themselves have declared that they do not need the proposed weapons systems, but powerful lobbies and supportive members of Congress keep the systems in place.

Ending the wars in Iraq and Afghanistan, closing many of the hundreds of military bases around the world established since World War II, and canceling some of the high-cost and dubious weapons systems would allow massive savings of $300 billion or more from the bloated Pentagon budget. Of course, that is picking a fight with America’s leading industry and perhaps still most powerful lobby (in close competition with oil, coal, banking, and health care). The military contractors have the advantage of employing workers in virtually every congressional district in the country. Jobs rather than
defense has for decades been the watchword of the military-industrial complex, a network so powerful that even the end of the Cold War barely dented the military budget as a share of national income.