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R.I.P. to Employer-based Health Care: Author Matt Miller Talks to RW

Has America has been in the thrall of “Dead Ideas”? That’s how Matt Miller sees it, and his book is a showdown with conceptual baggage that weighs us down. The Tyranny of Dead Ideas exposes outdated ways of thinking, from the notion that companies should provide health care and pensions for workers to the modern antitax obsession. Some of these Dead Ideas were born during an era when American businesses faced little global competition. Others grew out of the self interest of a small number of people who don’t want to share society’s resources. Miller, a leading business and political thinker and author of The Two Percent Solution, talks to Recessionwire about “Dead Ideas” we need to chuck and “Destined Ideas” we ought to embrace.

RW: Which Dead Idea do we most urgently need to get rid of?

MM: That’s a tough one, because they’re all urgent. If I had to pick, it would probably be: “Your Company Should Take Care of You.” This idea is out of tune with modern reality, especially now as people are losing their jobs. Each time there’s a job loss, there’s a good chance that someone has either lost their health care or faces COBRA payments they can’t afford. The idea that we leave so many people vulnerable is shameful. Leaving healthcare to employers hurts entrepreneurship because talented people stay in bad jobs. They can’t go out on their own because of concerns about healthcare.

RW: What do you say to people who raise the specter of socialized medicine?

MM: That’s a big phony argument. There are plenty of ways to do market-based health care. Just look at the Holland and Switzerland models. Holland combines mandatory universal health insurance with competition among private health insurers. It doesn’t have to be all state-based. Canada and the UK are not the only models. The notion that you can’t do it in a way that’s market-based is a canard.

RW: Is the notion of American exceptionalism a Dead Idea?

MM: I still think America is a special country – we’re still a beacon of freedom to people all over the world. We’re special, but we need to undergo a psychological adjustment in order to understand that we are still subject to certain economic forces just like every other nation. We’ve had a great run 50 or 60 years, but that’s partly because our businesses haven’t faced a lot of competition. That’s over now. The challenge for narcissistic personalities is to come to terms with their own ordinariness, and in a way that’s what we have to do as a country.

RW: You name “Money Follows Merit” as a Dead Idea. How do we move in the direction of a meritocracy?

MM: A good start is to change the way top executives get compensated. Banking leaders who walked away with 100 million dollars have helped to put us into a recession. The CEOs of banks like Washington Mutual gutted their firms and caused people lower down on the economic ladder to suffer. What was their merit? Did they deserve the vast sums of money they took with them? George Bernard Shaw said that “Nothing hides the difference in merit between one person and another so much as a difference in income.” I love that line.

RW: What about the kids of all these overcompensated CEOs? Will they also be a drag on the  economy when they inherit huge sums?

Yes, you could say that. These CEOS are going to leave vast sums of money to their children, which will further divide money from merit. The kids will be wealthy, but they’ll have no reason to work hard. They’ll get good educations, but they may not develop the talents that could help push our economy forward. Meanwhile, some deserving kid won’t have a chance.

RW: Why has our romance with the idea of free market self-regulation lasted so long, when so many were left behind?

MM: Well, the pendulum swings. In the 60s and 70s, people felt that LBJ’s Great Society had not delivered on its promises. The economy was in stagflation. Reagan was right about the 70% marginal income tax rates that applied before he took office, which were too high. During that time, the pendulum swung strongly towards free markets. But now, even some conservatives have realized that the antitax idea is doomed. The pendulum is swinging back.

RW: In your chapter on free trade, you refer to the “mystical wisdom” of economists. What’s wrong with this profession? Are economists too much influenced by prevailing thinking (and attachment to Dead Ideas) to be as objective as we need them to be?

MM: [Laughing] Some of my good friends are economists, but on the whole, the profession has not served the country very well. Think of how little they had to say when the phony boom was going on. Very few were saying, “Wow, time out.” Right now they aren’t saying a lot about the most effective way to design a stimulus package. So much of economics has focused on the narrow mathematical modeling of trivia. There are some, such as Paul Krugman, who have been thinking in bigger ways, but not enough. In some cases economists wanted to be politicians and crossed the line by getting into politics. Since their goals are to make sure that benefits of trade are shared widely, economists need to focus more on advocating changes in the way we compensate those who end up losers from free trade. That’s always been their throwaway line, but it’s not good enough anymore.

RW: You seem sure that we will not enter anything like the Great Depression. Why not?

I think the good news is that unlike in1929, when it was three years or so before the government intervened, today we’re ready to act. The government may have been slow to respond at first, but now we’re committed to doing something. We’ll keep throwing spaghetti against the wall until something sticks.

RW: Which Destined Idea will be the most difficult for Americans to accept?

The idea that “Only Higher Taxes Can Save the Economy (and the Planet)” might be one. The reality is that higher taxes inevitable. But another reality is that the economy will be just fine with increases. These notions are difficult for people to swallow. A bigger federal role in schools is another tough one. There’s a tradition of local control that masks a great injustice in how we fund our school. People have not yet realized that our children are not getting an education that will make them competitive in a global economy. We can’t afford this anymore.

Tags: economy, trends