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posted on 10 October 2017

The Poor Make Us Rich

by Carmine Gorga, The Somist Institute

There is a reason why, after thinking and much publishing on Concordian economics for about fifty years, I never get bored.

I always find new wrinkles in this new/old paradigm of economic analysis. This is my latest surprise: The poor make us rich.

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Let me tell you how it came about.

I mostly stay away from any discussion about health care policy. It is such a tender subject.

But two weeks ago, because of the sense of urgency imposed by the proposed Cassidy-Graham Bill to "repeal and replace" Obamacare, I finally focused on it.

Gradually, I pierced through the air of unreality that, for me, envelops the subject of health care policy.

The People on the Right express a concern for the negative psychological and sociological effect of spending money on the poor. In addition, they are mostly concerned about the rich paying for such expenses and, in equal measure perhaps, they are concerned about pushing the debt ceiling through the stratosphere of the trillions of dollars already spent that the nation does not have.

The People on the Left express utter concern for the health care needs of the poor and, for them, the debt ceiling be damned.

Do you see what is happening? Both sides focus on the people - on the poor people.

Helped by the relational nature of Concordian economics, I then focused on the flow of money as it relates to all the people involved in health care - not just the poor. This is what I found.and published on September 22 in my personal blog at TalkMarkets under the title "A COMPREHENSIVE ANALYSIS OF THE CASSIDY-GRAHAM BILL, THROUGH CONCORDIAN ECONOMICS 101."

Much has been written about the steadily evolving Cassidy-Graham Health-Care Bill. One point remains to be explored.

It is quite well understood that millions of people stand to lose their health care insurance and that savings might be apportioned among wealthy taxpayers and corporations.

Let us not mince words. The concern is about money, not patients. If the concern were about people, the focus would not be on money spent or saved; the concern would simply be on people.

Who stands to gain money from an eventual implementation of the Cassidy-Graham Health-Care Bill? This much seems to be clear: wealthy taxpayers and corporations.

The point that remains to be analyzed is this: Who loses money? No one seems to ask this question.

Who stands to lose money if the Cassidy-Graham Health-Care Bill is implemented? To ask the question is to immediately find the answer.

It seems that in a superficial reading and understanding of the Bill, voters are left with the impression that the government spends money for the financial benefit of patients.

This is a large misconception.

Patients are a convenient humanitarian reason to spend money; but patients never see the money.

Even in the case of smaller co-pay and insurance subsidies, patients do not receive money. They simply spend less of their money.

Those who receive money are doctors and nurses, the administrative staffs of hospitals and the administrative staffs of insurance companies.

Who else receives money? When the accounts are closed, profits left over from yearly expenses go to the stockholders of hospitals, unless they are not-for-profit organizations, and to stockholders of insurance companies.

Unseen even in this discussion are all intermediaries engaged as suppliers and consultants to hospitals and insurance corporations who perform services unavailable in-house as well as lawyers and planners and even engineers, in case of new construction or renovation of hospitals - and nursing homes.

These are the people who stand to lose money.

Let us now revisit the issue of who gains money.

Who stands to potentially gain from the Cassidy-Graham Health-Care Bill?

Clearly, the taxpayers who are now footing the health care bill.

Lots of caveats here.

First and foremost is the determination of the category of taxpayers who actually receive money from health care expenditure.

If these taxpayers, namely all the categories of people mentioned above, doctors, nurses, etc., do not receive income in compensation for their services because fewer people have health care coverage, for them the potential benefit of a tax reduction might be a wash-up. It might be totally ephemeral.

In this context, the conversation becomes a bit obscure because we are not certain as to the source of the money that is actually spent by the government on health care. Some of this money undoubtedly comes from taxes; other money comes from borrowing - more specifically, it comes from an increase in national debt.

At this point, the conversation becomes much broader. The fact is that national debt is increasing for many reasons: repayment of past debt, administrative expenses, military expenditures, corporate welfare and then, indeed, “welfare," money spent on people.

To be open and honest, all these issues ought to be put on the balance and considered carefully. To do it in a hurry, only in relation to health care expenditures - or even in relation to Medicare - is rather shortsighted. It inevitably leads to conflict of interests.

Is this statesmanship? Is this responsible care of the affairs of the state? The affairs of our nation?

Looking at things from the point of view of Concordian economics, a new paradigm in which everything is connected with everything else, these are some of the considerations that result from a comprehensive analysis of the Cassidy-Graham Health-Care Bill.

The central point we have seen is that, since there is much inequality in the distribution of the tax burden as well as the distribution of income, some will gain more than others. But, on the whole, for most taxpayers who stand either to lose their jobs, or to receive less income, puff: All financial gains from potential taxpayers’ reductions disappear; they are balanced by all financial losses that appear from reductions in employment income and even profits.

This is the magic of true, comprehensive accounting - that is implicit in Concordian economics.

Only the pain of untreated patients remains.

Only the patients who would not be treated are the ones who would suffer a real loss.

But wait. The multiplier suggests that losses - and gains - are never equal to initial input. If the overall production process is affected, widespread losses might affect even the richest taxpayers.

And then, a random thought: No one really knows how manias and panics spread. Might the next financial crush be sparked by the sudden extraction of billions of dollars from circulation that are planned to be granted to rich people and rich corporations as tax deductions?

What to say?

The surprising end result from this analysis is that, far from "costing" the rich, it is the poor who make us rich - provided we satisfy their needs.

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