World Views | The economic myths US Democrats peddled at debate

At their debate in Ohio Tuesday night, Democratic presidential candidates emphasized what’s wrong with the economy. That’s not at all surprising: The party out of the White House typically magnifies problems, and progressives are predisposed to think that the market has created a lot of them that government can fix. Sometimes this impulse leads to the identification of real abuses by business and improvements in public policy to curb them. Sometimes, though, ideology cuts its tether to reality. That’s what happened over and over on the debate stage. The candidates peddled one myth after another.

Myth No. 1: Medical bills cause 500,000 bankruptcies a year. This line is a favorite of Senator Bernie Sanders, and he repeated it at the debate — this time saying that the half a million bankruptcies were all the result of cancer alone. But that number appears to be vastly exaggerated. A 2018 study found that medical events caused only 4 percent of bankruptcies, which would yield a number closer to 30,000 cases. And even those bankruptcies were in many cases caused more by lost work due to illness than by medical bills. Sanders’s suggestion that his Medicare for All plan would have prevented all those bankruptcies is therefore mistaken.

As Washington Post columnist Megan McArdle has pointed out, the expansion of health insurance because of Obamacare does not appear to have done much to bring the number of bankruptcy filings down. That suggests that medical bills don’t cause as many bankruptcies as Sanders believes.

Myth No. 2: We have high health care costs because of industry profits. Twice Sanders denounced drug and insurance companies for making $100 billion in profit, suggesting that their profits are responsible for our spending more on health care than other advanced countries. But Americans spend $3.5 trillion on health care each year. Those profits are less than 3 percent of total spending. In many cases, the desire for profits drives costs down. Chris Pope, a health-care analyst at the conservative Manhattan Institute, notes that private Medicare Advantage plans have lower costs and more extensive coverage than traditional Medicare plans do.

Myth No. 3: Pharmaceutical companies are responsible for the opioid crisis. Senators Amy Klobuchar and Kamala Harris, Mayor Julian Castro, former Rep. Beto O’Rourke and the businessmen Tom Steyer and Andrew Yang: All of them said the pharmaceutical companies were the bad guys here. If they had said the drug makers had contributed to the problem, especially in its early stages, they would have been on solid ground. But none of them so much as gestured toward the possibility that the industry was less than wholly responsible for opioid deaths.

(…) Most heroin users didn’t start with prescription opioids, and the proportion of those who did has been falling. The opioid crisis is increasingly about people who never got prescription opioids. But the Democratic candidates (like too many Republicans) don’t appear to understand that.

Myth No. 4: Nine in ten Americans haven’t seen a raise in 40 years. Steyer said it at the debate, and Pete Buttigieg has said it on another occasion. But the evidence doesn’t back up this depressing claim. The Congressional Budget Office has looked at income trends from 1980 to 2015 and found widespread gains. The bottom 20 percent were making 32 percent more at the end of that period, even after adjusting for inflation. Account for changes in taxes and government spending, and they were making 79 percent more. The middle 60 percent of households also saw a 32 percent gain (or 46 percent after taxes and transfers).

Our free-market economy isn’t perfect. But too much of what the Democrats think they know about it simply isn’t so.

[Abridged]

Ramesh Ponnuru, Bloomberg