Social Contract Budgeting: Prescriptions from Economics and History

By Peter H. Lindert, Distinguished Research Professor of Economics, University of California – Davis
New America Foundation, December 2012

America has yet to accept the insurance solution that has worked relatively well in other countries: let the government serve as a dominant payer, with mandatory universal coverage and mandated pure community rating. (Note that international experience recommends single-payer insurance, but is indifferent to government provision of health care.) Instead, American state and federal insurance systems embody an unavoidably messy political compromise, one in which the public is forced to buy coverage choosing from a menu of private insurers. As it stands, the government will act as single regulator, not as single payer. This has the political advantage of keeping government budgets from raising taxes to cover insurance, but the disadvantage of perpetuating, and still subsidizing, a costly private insurance industry.


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This statement implicitly supporting single payer is of great importance because of its source. The New America Foundation was established to move beyond partisan politics. “The foundation’s mission is animated by the American ideal that each generation will live better than the last.”

In his article, “Social Contract Budgeting,” UC Davis Professor Peter Lindert discusses four fronts: education, health insurance, pensions, and broad taxes. Although he attempts to move beyond politics, most of us will still reflect on his concepts under the cloud of our own biases. As an example, although some of us are uncomfortable with the concept of a VAT (value added tax, a consumption tax), he discusses a variation in which the VAT can be progressively redistributive.

For those of us who have campaigned so long and so hard for health care justice, Lindert states what we perceive to be the obvious: we need to move beyond politics and “accept the insurance solution that has worked relatively well in other countries,” noting that “international experience recommends single-payer insurance.”