Pound Foolish

Paul Krugman has an interesting (as always) column today about how socialized healthcare, instead of bringing the country to its knees as conservatives always ominously warn it will, could actually make America more appealing to foreign industry when competing for their business. In this case, it’s about Toyota opening a new plant in Canada instead of the US, in spite of several southern states’ attempts to woo Toyota with financial incentives reportedly worth hundreds of millions of dollars. Krugman cites two concerns of Toyota’s. First, the poor level of training of the work force in the US’ southern states (for some additional insight on this issue, see here). Second:

Canada's other big selling point is its national health insurance system, which saves auto manufacturers large sums in benefit payments compared with their costs in the United States.

You might be tempted to say that Canadian taxpayers are, in effect, subsidizing Toyota's move by paying for health coverage. But that's not right, even aside from the fact that Canada's health care system has far lower costs per person than the American system, with its huge administrative expenses. In fact, U.S. taxpayers, not Canadians, will be hurt by the northward movement of auto jobs.

To see why, bear in mind that in the long run decisions like Toyota's probably won't affect the overall number of jobs in either the United States or Canada. But the result of international competition will be to give Canada more jobs in industries like autos, which pay health benefits to their U.S. workers, and fewer jobs in industries that don't provide those benefits. In the U.S. the effect will be just the reverse: fewer jobs with benefits, more jobs without.

So what's the impact on taxpayers? In Canada, there's no impact at all: since all Canadians get government-provided health insurance in any case, the additional auto jobs won't increase government spending.

But U.S. taxpayers will suffer, because the general public ends up picking up much of the cost of health care for workers who don't get insurance through their jobs. Some uninsured workers and their families end up on Medicaid. Others end up depending on emergency rooms, which are heavily subsidized by taxpayers.

So, add this to the list of reasons why we need a national healthcare program…and the list of reasons why America will continue to lose favor in the global marketplace, a list which already includes an immigration policy that is increasingly making non-American universities more attractive to and more easily accessible for international students, and an effective prohibition on stem cell research, which increasingly looks like the fertile ground from which the most important technological advancement of our future will spring. And our foreign policy isn’t exactly making us new friends, either.

In the end, which will cost us more—socialized healthcare for all Americans, or bleeding business to countries who are willing to provide it to their populations while we continue to refuse?