Monday, October 22, 2007

A Dangerous Obsession Redux

A smart economist I know once called international competitiveness a dangerous obsession. In today's NY Times, the paper's editorial goes from that obsession to the need for tax increases and national health insurance:

the meager tax take leaves the United States ill prepared to compete. From universal health insurance to decent unemployment insurance, other rich nations provide their citizens benefits that the United States government simply cannot afford.

The consequences include some 47 million Americans without health insurance and companies like General Motors being dragged to the brink by the cost of providing workers and pensioners with medical care.

Employer-provided health insurance is just a form of compensation that happens to be provided in kind rather than in cash. What the Times seems to be saying is that because companies like General Motors have promised levels of compensation too large to make them competitive in the international marketplace, we should shift the responsibility for some of that compensation from the companies to the taxpayer.

An alternative approach is for the companies to reduce compensation to levels they can afford. One might respond that reduced compensation would be hard on workers. But so would the higher taxes needed to pay for the national health insurance the Times is lobbying for. There is no free lunch here.

Reasonable people can disagree about the case for national health insurance. But in that important discussion, concern about international competitiveness is at best a non sequitur.