I’m going to try something different with this column, giving readers some rarely discussed information about where our American money goes and how that compares to other nations. I’ve chosen health care and defense because they are very large components of our spending. In business, this technique is called benchmarking. It tells us how well we are doing compared to competitors so that we can see where we have opportunities for improvement. That is important in a global economy where jobs are easily moved to places where goods and services can be produced inexpensively. The information can be useful in setting goals for our future. The choices to be made depend on our values, but if we all start with the same facts then agreement about goals may come easier.

First let’s look at health care. If you add together all of our health care spending, it is about 17% of our total economy. That includes taxes, insurance premiums, out of pocket expenses…everything. It amounts to $7960 per year for every man, woman and child. The second most expensive nation in the world at present is Norway. Their mix of insurance, personal expenses and taxes provides some form of coverage for everyone and they spend $5352 per person. If we can find a way to tie Norway for the most expensive health care and to match them by covering everyone, we would reduce our spending by $2608 per person. Multiplied by our population of 313 million people, that adds up to $816 billion in savings in one year. Savings would come in the form of reduced government spending, reduced insurance costs and reduced out of pocket spending. All savings would benefit families in one way or another. To get that gain, we have to tie Norway for most expensive in the world. Data to demonstrate this are available for download at http://www.oecd.org/dataoecd/52/42/49188719.xls Those who look it up will find that most developed nations spend less than Norway and that their health outcomes are equal to or better than ours.

Second, let’s look at defense spending. It is probably no surprise that we are number one in defense spending, but you may be surprised to learn the size of our lead. Our annual defense budget is estimated to be $711 billion. That is 4.7% of our total economy (GDP) and it is 41% of the military spending for the entire world. Number two is China, which spends $143 billion, 2.1% of their GDP.   If we were to reduce our defense spending so that we are only tied for spending the most, we would have $568 billion available for other priorities. To demonstrate what a competitive burden this is for our economy and our families, let’s look at it on a per person basis. There are a lot more Chinese than there are Americans. We spend $2273 per citizen (men, women and children) on defense. The Chinese spend $106 per citizen. That is one reason why it is often cheaper to make things in China. Defense spending data are from http://milexdata.sipri.org/ and more information at http://www.sipri.org/

Add $816 billion to $568 billion and we save $1 trillion, 384 billion. If we were to set and achieve those two goals, the savings would be sufficient to eliminate the federal deficit and possibly begin repaying the debt. If we want to leave defense spending and health care as they are, then we must pay for them. The annual cost will be about $10,233 per person and that is $4422 more than if we match Norway and China.

It appears that our general alternatives are:

1. Leave health care and defense alone. That decision costs $4422 more per year for every man, woman and child or $17,688 per year for a family of four. Pay for it through reduced spending on other priorities and increasing our national debt (which someone is supposed to pay back some day). It requires drastically cutting spending on education, public safety, infrastructure and social security along with covering fewer people under Medicare and Medicaid. In essence, it will require telling many of the middle class and all of the poor that if they can’t pay for health care and first class education then they can’t have those things. Some of our elected officials are leading in that direction.
2. If we leave health care and defense alone, the other alternative is a massive increase in taxes to pay for them.
3. The third alternative is to adopt ideas from other developed countries which have learned to provide good health care for all of their citizens and keep themselves secure from invasion or attack for far less money than we are spending.

The comparative benchmarks are not world-wide norms. They merely tie us for being the world’s biggest spender on both health care and defense. We have not even addressed whether we can afford to be tied for most expensive in both of these categories.

One way to frame up the discussion is to ask, “Are we sufficiently committed to our current systems for defense and health care that we are willing to pay $4422 more than the second most expensive nations every year for every American?” What would you decide, knowing that you will have to write the checks?

Another way to discuss it is to ask, “If we could eliminate our entire deficit in exchange for accepting Norwegian health care and being as secure from attack as China, would we do that?” Then we would not have to write the checks and we would not be forced to cut other spending or raise taxes to balance our budget.

The numbers are plain. It is 6^th grade math with a whole lot of zeros added. The hard questions are about values. Who are we as Americans, and who do we want to be? Those are questions for individual consciences and for public debate. We can take our answers to the polls.