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The Economy - February 24, 2008

Posted Aug 25 2008 4:12pm
At times, articles randomly perused give the appearance of deeper linkages. Such is the case when comparing two front-page articles on Sunday February 24 from the St. Louis Post Dispatch and the New York Times. The Post's article is entited "Recession resilient: why we may be able to bounce back faster this time around." It's sub-title in the back pages sums up the picture: "More jobs in service sector weather a downturn." It highlights a wide range of individuals who are pursuing careers in nursing .

The New York Times front-page article is entitled "Once immune, Utah is feeling economic dip." This article mentions that Utah's relatively lower rate of retiree emigration anti-recessionary "non-wage" spending patterns of this demographic. Utah also recently cut its 2008 job projections by a third (to 2% annual growth). But the treatment of health care is the most compelling contrast to the St. Louis Post article. Quoting:

"And in what is perhaps the cruelest paradox of all, Utah spends less on health care than its neighbors, according to Headwaters, with health habits, fewer old people, and abstention from alcohol and tobacco by practicing Mormons the biggest factors. Health care spending is usually one of the most stable sectors of all in a downturn."

A table created from the St. Louis Post and other sources summarizes the change in the St. Louis economy. Several things are apparent about the St. Louis picture. First, manufacturing has diminished. The acquisition of McDonnell Douglas by Boeing is but one indicator. Similarly, one sees consolidation of some industries (groceries, telecommunications, retail) and dispersal of others (Unity health system). The percentage growth rates are also of interest, but difficult to interpret without some unit of output. It may be rather easy to calculate the efficiency per worker of a McDonalds or Wal-Mart, but more difficult for BJC and Washington University.

What does this all mean? Extrapolated to an extreme, we may some day be a country where the economy can best be described a population of health care workers employed caring for a population of agricultural and fast food workers. Extrapolated to an extreme, we become a country that not only makes fewer things but given the relative diminution in engineering and scientific talent also realizes fewer ambitions and ideas .

Looking at the recent issue of Health Affairs also emphasizes the degree of direct financial input by government. We are told that in 2005 Medicaid paid for 20% of the 39 million hospital stays in that year. Adding Medicare almost doubles that. Adding Medicaid managed care adds 25 - 50% to the Medicaid spend. Entitlements and defense, it seems, drive the country's economic engine, all fueled by bonds held by others. Sobering stuff.
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