U. professors sum up national crisis

Recovering from the current financial crisis and reforming health care are pressing issues facing the country but they come as no surprise to Eugene White and Jeff Rubin, professors for the University Department of Economics.
White and Rubin hosted a joint lecture Thursday, titled “How is Obama’s New Deal Shaping Up?” at Center Hall of the Busch Campus Center.
Rubin, who specializes in health care, said total spending in 2007 was $2.2 trillion and share of overall gross domestic product was 16.2 percent.
“I thought the numbers on health care … were just astounding,” said Paul Corkery, a local resident who attended the talk. 
White said the $2.2 trillion annual price tag exceeded the entire projected one-time cost of $1.7 trillion to clean up the financial system.
Rubin displayed the distribution of health care spending, including the top 10 percent of spenders accounting for 63.3 percent of all spending while the bottom half accounting for 3.2 percent. Also, 15.3 percent of Americans, or 45.7 million people, are uninsured, he said.
Insurance premiums grew 119 percent from 1999-2008 while wage growth slowed to a halt, Rubin said. Workers bore much of the rising costs of insurance since 70 percent of those insured have employment-based health insurance.
Rubin discussed several areas of potential reform, noting no one area would solve every health care-related problem.
He said these potential areas to change include expansion of health coverage for children, a single-payer system of coverage, introducing forms of government insurance to compete with private coverage, tax incentives, elimination of wasteful spending and electronic medical records.
Rubin said President Barack Obama’s repeated message during his campaign, which pushed for health care accessibility for all Americans, was very politically smart.
The president will have to serve as “communicator in chief” to make Americans aware of the enormity of the problems with health care, he said.
But Rubin remains pessimistic about what the government will achieve and has more hope for meaningful reform of the financial system.
“We’ve been here before,” he said. “This is not the first time I’ve had a lecture on health care reform.”
White, who specializes in financial history, then presented “Reforming the Financial System: the Key to Recovery” and concentrated on the question of whether current fears about the economy are exaggerated or realistic.
“It’s no news to any of us that we’re in very turbulent times,” White said.
Many people recently surveyed believed the nation was in or heading toward a second Great Depression, he said. The national output fell 35 percent during the worst of the Great Depression.
“No other recession comes close to that,” White said.
In addition, unemployment reached 31.7 percent during the Depression. On the other hand, forecasts predict that during this recession, peak unemployment will be 10 to 11 percent, he said.
This recession is similar in severity to the last deep recession, which happened in the early 1980s, White said. But with no projections approaching the worst numbers of the 1930s, he concluded that the country is not in a second Great Depression.
He shifted focus to how the current crisis happened, singling out the Federal Reserve’s actions. White said they erred in maintaining high interest rates through the end of 2007, which was the peak of the business cycle, and therefore the precursor to recession.
“When you have a recession, the job of the Federal Reserve is to expand the amount of money and credit,” he said.
White also criticized the Troubled Asset Relief Program, which allowed the Department of the Treasury to purchase assets from financially strapped companies.
TARP was a major component of the government’s bailout, but White said this was about as effective as sweeping something under the carpet.
He said later in 2008, the Federal Reserve finally eased monetary policy, including lowering one of their major interest rates, the Federal Funds Rate, to near zero.
In addition, he said the government’s “tough love” plan for Chrysler and General Motors, which gave the companies new loans but demanded massive corporate restructuring, is a wise policy.
The economy will begin to recover in six to nine months, and then reform must ensue, White said. Among the necessary changes is increasing transparency among banks and reforming the dysfunctional system of too many regulatory agencies.