CEPR - Center for Economic and Policy Research

Multimedia

En Español

Em Português

Other Languages

Home Publications Blogs Beat the Press The NYT Did Not Hear About the Housing Bubble in the UK, Blames Health Care for Problems

The NYT Did Not Hear About the Housing Bubble in the UK, Blames Health Care for Problems

Print
Tuesday, 25 May 2010 04:52

At its peak in 2006, the median house price in the United Kingdom was 10 percent higher than the median price in the United States, even though its per capita income is more than 10 percent lower. This bubble was driving the economy in the UK in the same way that it was driving the economy in the U.S.. The collapse of this bubble led to the recession in the UK and its financial crisis in the fall of 2008.

The bubble was completely absent from the NYT's discussion of the UK's current economic problems. Instead, it attributed fiscal profligacy for the UK's problems. In particular, it focused on the UK's public health care system, which it tells readers: "soared to 9 percent of G.D.P. from 3 percent."It also described the public health care system as " elephantine."

It was many decades ago when health care costs in the UK were just 3.0 percent of GDP. Health care costs in the UK have increased in GDP like as in all other wealthy countries. When the Labor government took office in the mid-90s, health care costs in the UK were close to 6.0 percent of GDP.

With the increase in spending, the UK is still spending only a bit more than half as much as the United States, which spends 17 percent of GDP on health care. When adjusted for the difference in per capita income, the US still spends more than twice as much per person on health care as the UK. It therefore seems somwhat bizarre to describe the UK system as elephantine, especially when life expetancy is longer in the UK than the US.

It is also worth noting that the build up of a large debt burden during the housing crash recesssion is the result of the policy decision by the Bank of England not to simply buy and hold the debt issued to finance the deficits currently needed to support the economy. If the Bank of England followed this strategy, then the debt burden would not increase as a result of the downturn.

The Bank of England created this crisis by failing to take steps to rein in the UK's housing bubble. It now appears to be compounding the crisis by failing to use appropriate monetary policy.

 

Comments (7)Add Comment
...
written by izzatzo, May 25, 2010 8:34
"When adjusted for the difference in per capita income, the US still spends more than twice as much per person on health care as the UK. It therefore seems somwhat bizarre to describe the UK system as elephantice, especially when life expetancy is longer in the UK than the US."


Any economist knows that under utilitarian principles of hedonistic medicine, buyers will always consume up to the point where marginal benefit just exceeds marginal cost. Why is this bizarre? It's only logical that if something is twice as valuable then twice as much will be consumed.

Lifespan is not the issue. It's not how long you make it, but how you make it long. Ask not what your country can do for you, but what you can do for your country. Go shopping.
In defense of the NYT
written by Josephus P. Franks, May 25, 2010 11:00
I have to say, you guys may be being a bit unfair. Given how incredibly stupid it would be to accuse the UK's health care system of being too big - given that the US has the world's undisputed most-bloated health care system - perhaps what the NYT meant by "elephantine" was that the UK health care system gives people long lives. After all, elephants enjoy lives quite a bit longer than the average in the animal kingdom. Right on, NYT!
welcome back.
written by bailey, May 25, 2010 12:30
While you were away I scoured the net for sharp, clear, independent commentary on economic "news", Welcome back.
Not the Bank of England
written by BigBadBank, May 25, 2010 1:08
I was with you up until the last two pars.

It was a policy decision of the government not the BoE, the BoE just borrowed the money.
facts
written by HARRY WEAVER, May 25, 2010 1:44
Since when have facts or truth been a factor at the NY Times or any other newspaper in the U.S..These are business entities that slant the news to justify whatever position they take.
...
written by Queen of Sheba, May 26, 2010 6:54
There seems to be a consensus building among the deficit hawks that "profligate spending" is the cause of all economic problems, both present and future, here and abroad. Funny how all this profligate spending seems to be in the areas of any social programs. Even odder is how readily a growing number of the public seems to accept such balderdash. "For the sake of the children and grandchildren" seems to be the winning assertion.
Nice takedown of a ridiculous story from the nyt
written by mwh, May 27, 2010 5:55
if the UK's healthcare system is elephantine, what is the US's (mostly still privatized)healthcare system? Ginormous? Mastodonitudinal?


Write comment

(Only one link allowed per comment)

This content has been locked. You can no longer post any comments.

busy
 

CEPR.net
Support this blog, donate
Combined Federal Campaign #79613

About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

Archives