I.O.U.S.A. is a documentary that purports to explain why America is drowing in debt, both public and private. Unfortunately, it tells something of a one-sided story that leads viewers towards right-wing economic conclusions, as the Center for Economic Policy and Research points out, minute by minute.

The issue here for me is less the symptoms (though the facts used are, as noted above, one-sided), it’s the solutions that are proposed and implied. I.O.U.S.A. presents the facts in such a way that huge cuts across the board to government programs and spending, coupled with intense privatization, seems like the only answer. And that’s where I.O.U.S.A. gets way off base.

CEPR has put together a handy deficit calculator to explain things:

The enormous budget deficits projected for future years have the starring role in the documentary IOUSA (see CEPR’s analysis of the film). However, the simple fact that the film conceals is that these scary deficits are driven almost entirely by projections of exploding private sector health care costs.

The government pays for approximately half of the country’s private sector health care through programs like Medicare and Medicaid. Therefore, if the projections of exploding private sector health care costs prove accurate, then the government will face a serious deficit problem. However, if health care costs can be contained, then the budget problems are easily manageable.

Got that?

The huge budget deficit America is facing in the near future isn’t caused mainly by the housing market’s collapse, the plummeting dollar, the financial bailout, or programs like Social Security. It’s driven primarily by rising costs of Medicare and Medicaid.

Now, the conservative answer to this problem is simple: Cut Medicare and Medicaid and your budget deficit is gone. But that really doesn’t solve the problem. Cutting Medicare and Medicaid would put the nation’s poor and elderly into the free market for health insurance. Given that the nation’s #1 cause of bankruptcy right now is health care costs, we can see how private health insurance is already a huge burden on regular people. Cutting Medicare and Medicaid might stave off the “bankrupting” of our government by transferring that bankruptcy to individuals. Clearly not good for the economy.

Instead, as CEPR’s calculator clearly shows, if we get health care costs in line with our GDP, the budget deficit disappears, and no cuts are necessary. If we get our health care costs more in line with what other countries pay, our deficit actually starts to go down.

That is the real solution. But how do we get there?

As I’ve argued before, controlling costs starts with a few basics:

• Getting more people covered so hospitals, communities, and the insured don’t pay extra to cover the uninsured
• Sharing risk fairly so private insurance companies can’t cherry-pick profitable customers and let government pay for the rest
• Mandating standard levels of care so preventative medicine becomes the norm

Without controlling health care costs, we’re in for a rough ride. This is the main reason why health care reform like that envisioned by Barack Obama and Health Care for America Now needs to be done in 2009. The deficit problem is coming, and it needs to be averted.

(originally posted at the NOW! blog)

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