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1-Page Summary of Crunch

The Income Gap Widens

The U.S.’s biggest challenge in the 21st century is to figure out how to organize its economy so that it can provide the goods and services people want and need. To accomplish this goal, governments must decide who gets what resources, as well as rectify environmental issues. There are three principles analysts use when trying to understand how power is distributed:

1. The economy is often determined by market forces, but political power can also influence the allocation of resources. For example, a politician’s decisions are rarely unbiased and they may not be logical. Even when households have two wage earners, many people cannot save enough money for their health care premiums or their children’s college tuitions because inflation-adjusted incomes have declined in recent years. Financial pundits who talk about gains in the overall economy often ignore this fact as well as other events that affect average citizens.

Inflation has been moderate in the last decade, but other costs have increased more than inflation. The American people are aware of this problem and feel stressed out about it even though there has been a rise in productivity and GDP.

Politicians avoid talking about these issues and use the same old arguments to validate their actions. For example, they claim that more education will alleviate social inequality. However, this solution is flawed because educated workers have a high chance of losing their jobs due to globalization. In addition, their incomes have stagnated while income inequality has increased since 2000.

Changes in Society

Men in the U.S. earn less today than they did a decade ago, partly due to an increase in service jobs and a decline in factory jobs. This problem is especially acute for men who aren’t college graduates because their salaries are lower and there are fewer benefits, as well as more women entering the workforce (from 40% to 60%).

Tuition, medical and housing costs have risen much faster than inflation. This has limited the spending of middle class families on nonessential items such as clothing, entertainment and travel. The consumer price index rose 30% from 1996 to 2006 but college tuition increased 80% and child care 60%. Since 2000 medical insurance premiums have increased three times faster than inflation. Employers pay a large portion of health care costs but when employers subsidize their employees’ health care benefits they are less likely to be able to offer wage increases. In effect workers pay for health care in the form of lower wages. Washington policy makers could control these costs if they were willing to battle with the “medical industrial complex.” Other nations control their healthcare costs by removing medical insurers from political processes so that market forces can’t manipulate them using lobbying efforts or advertising campaigns (or both). They consider it a right for people to get affordable healthcare regardless of income level; therefore markets can’t affect this through pricing mechanism because everyone is entitled to it.

Countries with single-payer health care systems often have a large risk pool that helps keep costs down. The majority of the people in the pool pay for most of the expenses, and they’re healthy. These nonprofit systems don’t spend money on advertising, which is why critics who focus on rationing forget to mention that our system also rations health care because it discriminates against those without coverage by charging them more for their services. In fact, 47 million Americans are uninsured and can’t get healthcare at all.