The Baby Boomer Bomb

it is now my distinct pleasure to introduce professor robert rice chancellors professor of public policy at the Goldman School of Public Policy professor rice is one of the nation's leading experts on work and the economy as you will hear he brings expertise care and humor to the discussion of the critical issues of our time he is careful with his statistics as he has noted the risk scan averages by observing that on average he and Shaquille O'Neal recently retired 7 foot 1 inch LA Lakers Center are both 6 foot 2 inches tall he has served in the three national administration's most recently as Secretary of Labor under President Bill Clinton notorious commentator Bill O'Reilly has said that robert rice is a communist who secretly adores karl marx a secret that somehow only O'Reilly knows we fellow travelers especially at Berkeley know that rice is no communist but rather a proponent of public deliberation and debate that are essential to balancing demagogues offering simple answers in scapegoats Time magazine named professor rice is one of the 10 most effective cabinet secretaries of the last century he has written 13 books including his latest bestseller aftershock the next economy in America's future which he has graciously signed for our raffle later today and his most recent ebook exclusive beyond outraged you have a flyer about that ebook in your conference packet as well as a raffle ticket his syndicated columns television appearances in public radio commentaries reach millions of people each week he is a founding editor of the American Prospect magazine and chairman of the Citizens group common cause his widely read blog can be found at wwth org he received his BA from Dartmouth College his MA from Oxford University where he was a Rhodes Scholar and his JD from Law School we are at a time of transformation and we can all play a role join me now in welcoming professor Robert rice who will address the baby boomer bomb and how the older population as individuals and as a collective entity can leverage the formidable political clout wisely and a manner befitting future generations professor rice well thank you thank you very much Patrick and rich and Angie thank you for your part in making this possible as you can see the bad economy has worn me down we're supposed to be in a recovery but I haven't recovered yet I've always been told and I always thought that retirement meant doing more of what you want to do and less of what you don't want to do and so I've been retired since I left the Clinton administration in 1996 those of you who are here thinking that I'm going to give you some financial tips will be disappointed sorely my financial practice over the last well really over the last 35 years and philosophy has been very simple it's to buy high and sell low I bought a house in Berkeley when I came out here in April of 2006 now actually I don't know how many of you actually followed the housing market but April of 2006 was the month where the Berkeley housing market reached its zenith never to be seen again I want to talk to you about key issues having to do with retirements they really have to do with wages and jobs and also demographics and I'm going to try to leave about hopefully 15 or 20 minutes for your questions because I want to make sure that I respond to your questions we have all told no more than well we've got to get out of here or I've got to get out of here at 10 o'clock so I will try to make this at least my formal presentation relatively brief there are two major trends underlying where we are right now with regard to our retired and soon-to-be retired violation one trend we know about or we should have known about the other one came as something of a surprise I'll start with the surprise we assumed in the late 40s after the Second World War and in the 1950s in the 1960s and in the early 1970s we assumed that the economy that we had in those first three decades after the Second World War would continue to do something for the next three decades that it had done for those first three decades after the war that is generate higher and higher median wages median wages that tracked perfectly the increase in per person productivity you see after the Second World War for three decades that's exactly what happened the median wage went up exactly or almost exactly as per person productivity went up those were very productive years the United States economy increased its productivity by an average of roughly three percent a year and the median wage went up at about three percent a year adjusted for inflation but not only did the median go up but almost every segment of the population saw a similar wage increase in fact the bottom 20 percent saw their wages increase faster than the top 20 percent during those three decades now very few people who were children or young people in the 1950s or even late for 1940s were planning their retirement nevertheless if anybody talked about retirement or anybody thought deeply about retirement and assumed that that trend toward higher and higher median wages and also trend toward greater and greater equality would continue one would have assumed that by the time the baby boom was ready to retire that everyone would have enough savings and standard of living for most people would be fairly high to begin with but here's what happened that surprised us beginning in the late 1970s and continuing with a vengeance in the 1980s and then increasingly in the 90s and over the last 12 years instead of that early 30 year period continuing we saw a great u-turn in the American economy starting in the late 70s the median wage adjusted for inflation started to flatten and since 2000 the median wage has actually started to drop adjusted for inflation now that flattening first occurred with regard to male wages the wages of men in late 70s most of the people in the workforce were men their wages and particularly this is true of the hourly wage worker 80% of American workers are on an hourly wage male hourly wage workers beginning in the 1970s saw almost almost overnight but again for a reason I'll get to nobody paid much attention to this their wages actually starting to fall now in response to this major change in the economy which by the way has a lot to do with globalization with technological change I'll get to that in just a moment but in response to all of this American families did three things to keep their standard of living rising the first thing they did was women went into paid work they went into paid work in very large numbers beginning the late 1970s increasingly in the 1980s and 1990s in the 1970s only about 12% of women with young children were in the paid work force by the 1990s about 40% of women with young children were in the paid workforce I wish I could tell you that the reason women went into paid work in such vast numbers beginning in the late 70s was because of all the wonderful professional opportunities open to women but that was not the major reason there were more professional opportunities open to women but the major reason women went into work was to prop up family incomes that were suddenly under assault because male wages especially hourly workers wages were actually declining but that strategy could not continue forever there was a second strategy there families used there's only a limit to how many workers how many women with young children could be at work that limit obviously was reached when the cost of outsourcing childcare and doing everything else that women had to do for their unpaid work was going to cost more than the return on the paid work so the second thing families did was work longer and work harder very often both husband and wife both parents worked harder and longer by the time the 1990s came around I was secretary of labor I was reviewing the data and was amazed how long how many hours men workers male workers were put again but also female workers I mean in fact it was almost as if there were not enough hours in the day for men working and women working and childcare and homecare there was no way it could all be done I used to I came up with a demographic term for these families called dins di NS double income no sex that's one reason our level of child increase of slowed-down but there was also another issue there is no way that that could continue that second coping mechanism obviously was going to be exhausted fairly quickly and then luckily just in time we had a housing boom and housing prices in the late 1990s and certainly through the subsequent seven eight years started to rise even faster than the housing prices were rising before and that enabled families to use what might be called a third coping mechanism to keep up their incomes and that was borrowing usually against their homes very often with regard to home equity loans or often with regard to refinancing their homes many people looking forward to retirement said I don't really have to worry because my home value is going to be increasing so much that I can simply cash in my home as I'm now starting to cash it in to maintain my living standard well all of that came crashing down as we all know in 2008 because you see there is a limit to how much we can borrow and there's a limit to how much housing prices will go up it was a speculative bubble and the borrowing also was something of a bubble we now know there were many voices out there telling us not to be irrationally exuberant Alan Greenspan however did very little as a practical matter to stave off this bubble you may recall that the Federal Reserve Board in the mid decade of the first decade of the century actually reduced interest rates to about where they are today near zero but at the same time stopped looking at what the banks were doing now if you're a bank and you can borrow money basically for free and lend it out you're going to lend it out to anybody who can stand up straight and many who cannot and you're going to make money or at least for a time you're going to make money and then when you stop making money perhaps you can rely on taxpayers to bail you out we all know the ending of that story but there's a more profound ending to this story and that is that it is difficult to get out of this very profound gravitational pull of the Great Recession because there is not enough aggregate demand out there you see when so much of the income of this country is not going to the middle-class median wages are still stuck in fact the median wage continues to decline adjusted for inflation where is all the money going I I think I mentioned to you a moment ago that productivity continued to rise productivity has been rising on average about one and a half or two percent the economy has been growing about three percent a year just as it did in the three decades after the Second World War we did not dramatically change the trajectory of economic growth and productivity but when the median wage started to level off the question is where did all the gains from productivity go class well they went to the top and I you don't have to be a class warrior to talk about this people accuse me sometimes of being a class warrior I'm not a class warrior I'm a class worrier there's a difference and the difference is not just one letter and one of the things I worry about is that when so much income and wealth are going to the top there's simply not enough purchasing power and the vast middle-class to keep the economy going and that is exactly why we are having such a hard time coming out of this gravitational pull of the Great Recession I mentioned before that one of the major causes of the great u-turn in the 1970s was globalization one of those words that has gone directly from obscurity to meaninglessness without any intervening period of coherence but when I say globalization I'm basically meaning that capital can go anywhere more easily than ever around the world and earn a very good return and that technology can go anywhere around the world and very easily make people who are relatively very low wage compared to the United States far more productive than they used to be and technologies that began to come on stream in the late 70s particularly cargo ships and container ships and satellite communication technologies that linked all of it together enabled for the first time many people around the world to supplant Americans particularly American manufacturing workers hourly wage workers who therefore saw their wages under assault but that was not the only reason we also had a great deal of technology pouring into our manufacturing operations some people say all we have to do is bring back manufacturing and we'll be fine but what they don't know or haven't focused on is that you factoring today is not nearly as labor-intensive as it used to be you go into a modern factory today and what do you see you see robotics and numerically controlled controlled machine tools and a relatively few number of technicians sitting behind computer consoles making sure the whole thing works and technology and automation even before technology was taking away a lot of jobs jobs you remember when there were bank tellers a lot of bank teller you couldn't my students don't think I'm being serious when I say to them I remember a time when in order to put money into a bank or take money out you had to deal with a person they say really looking at me as they sometimes do as if I'm a I'm a kind of a a 19th century creation or I tell them and they don't they don't they don't believe me that in order to make a long-distance call there was a time in living memory when you had to talk to a person called a telephone operator really they say and I say and I tell them that I remember when you had to when you went to a gas station deal with somebody a person you know there was a gas station right at the end of my Road before I went down to we went down to Washington to be labor secretary and I used to take my car down there and and there was it there were people and they would ask questions remembered like do you want your oil change remember and I remember rolling them rolling rolling down my window I mean this was not this is not an Indian we're not talking about early 19th century or late night jeans or even early 20th century this was it within the memories of a lot of people how many of you remember by the way just just to check how many of you remember well let me ask the question first how many of you remember when there were not only service station attendants but there were service station attendants in uniform you are old now I'd remember that too and I and in fact uh in fact it changed even during the years when I was in Washington because when I came back went down to the same service station there was nobody there nobody nobody not a soul I couldn't find anybody it was a very lonely existential experience by the way you know what you are no longer in the cabinet when you get in the backseat of your car and there's nobody in the front seat that was the worst experience of all now what this means now there's this surprise experience for all of us a culminating in the Great Recession meant that many Americans discovered that instead of having a house that they could cash in for retirement instead of not worrying about saving because they thought they were doing reasonably well in terms of their borrowing and to incomes or whatever else they were depending on they discovered very dramatically in nineteen in 2008 and 2009 that housing values had dropped by about a third from their peak when I bought my house in Berkeley and so the major asset of most people facing retirement or most people in retirement the major asset is not their 401ks in this country the major asset is their home and for most people they can not count on their home either as a piggy bank or as a retirement nest egg that is a profound surprise and a bitter surprise it's one of the reasons by the way a new census data out last week showed that a record percentage of people over 65 are still working and even those by the way that did have 401ks were in that rude surprise that we all had most of us because we lost income for a number of years and are behind what we anticipated our income would be from our portfolios whatever the value of those portfolios was going to be and for that reason many other people are working after 65 now if you're working after age 65 and you want to work after 65 that's one thing but if you're working after age 65 and really don't want to work after age 65 remember before I defined retirement as doing more of what you want to do and less of what you don't want to do well if you are working and you really would rather not be or cannot be or physically you're doing work that is very difficult to do after age 65 and that is a significant part of the u.s. population over 65 who is working now that is not a blessing that is a huge burden and it's a huge burden not only on those people themselves but it's a huge burden on the labour market because having all those people over 65 who don't want to work working means that they are directly or indirectly taking the jobs away from younger people who would like to be working or working longer hours or getting promotions or whatever it is in fact we see that the recession took a particularly bad and hard toll on people who are in their 50s who lost jobs and many of them have joined the ranks of the semi-permanently unemployed they are unemployed for more than six months many of them over a year many of them will have a very difficult time ever getting back into the workforce and their retirements are even under greater jeopardy so if I haven't cheered you up enough let me let me go to the second trend that we did know about now remember this first trend has to do with the fall-off the sudden fall-off in the median weight and the turnaround in the late 70s that is still with us the second trend that we should have known we didn't know we had no reason not to know but we'd haven't paid much attention is a trend that really began in 1946 1946 was the beginning of the baby boom I mean I was born in 1946 Bill Clinton was born in 1946 George W Bush Laura Bush Ken Starr remember him anybody who's anybody in America was born in 1947 cher cher every every time I feel a little depressed I remember that cher was born in 1946 why were we all born in 1946 well the reason we were born in 1946 and I can speak from my own personal in a way experience is that my father was in the Second World War and he came home from the work Second World War and there was my mother demographics is not all that complicated and so we had this huge increase I mean between 1946 and 1964 we have 77 million baby boomers and we have never as a society been quite ready for the Boomers I remember when I went to elementary school when I went to kindergarten the kindergarten wasn't ready we had it we had kindergarten in the gymnasium and the gymnasium was not even a gymnasium as a whole it was divided partitioned because the school even though it knew we were coming I mean it already had five years the school was not ready and that's been pretty much the case all the way along we're not ready for the boomers and we're not ready for the boomers even now and the boomers really are not ready even if you put to one side what happened in 2008 and the Great Recession there was still a pending set of problems some of them have to do with public policy and I'll get to those in a moment some have to do with individual savings I mean I have conducted over the last few years a kind of free-floating focus group among baby boomers asking what they expect in retirement the kind of life they want to lead in retirement and what I get back from them I call a kind of a med med vision med med I use the term med med because it's it's almost a cross between in their minds their fantasy across between a club Med and a medical facility I mean snorkeling in the morning extra oxygen in the afternoon and then the problem with this med med vision although it's very attractive is it's very very expensive I mean we cannot all have a med med retirement and we certainly can't have it based upon our savings as I said even if we hadn't plunged into the Great Recession there was still not we were not going in the direction of adequate savings even if housing prices had continued to rise it would still not be enough given how many baby boomers there are and given the prevalence of this kind of vision for retirement you see the problem fundamentally is that we are not ready once again for the boomers the three pillars of retirement savings you all know one is personal savings the second pensions and the third social security private savings were not there have not been there will not be there the second pensions well many many companies use to provide what we're called defined benefits that is you retired after 40 years with a gold watch and a certitude about how much money was going to be coming in well most companies no longer do that in fact it's hard to find defined benefit plans any longer in the private sector most of those plans are now to the extent that there any plans at all are defined contribution plans would say you employee you would put up the money it will be tax deferred so there is a little bit of advantage there maybe we will match it a little bit companies matching less and less and less so it's sort of a do-it-yourself pension retirement plan a 401 K and the third part of that stool Social Security well it is fine I used to be a trustee of the Social Security and also the Medicare trust funds and what that meant was that every four or five months I would sit down with the actuaries in charge of projecting where the trust funds would be at 5 10 15 20 years from now and make sure that there was enough money there and I remember that the actuary of the Social Security trust fund was fairly concerned that there would not be enough money but when I actually quiz the actuary of the Social Security trust fund I found out that the concern was really based on a false assumption that concern was based on the assumption that the economy would not be growing nearly enough to support the baby boomers but in fact the economy even with the vast terrible slowdown and recession of 2008-2009 the economy still has plenty of money in fact Social Security is fine for the next 26 years there is not going to be a problem for the next 26 years it is flush up until last year Social Security was taking in more money in terms of Social Security payroll tax contributions than it was paying out up until last year where were those surpluses going those surpluses were going into a unified federal budget Thank You Lyndon Johnson and that unified federal budget was not separating out remember al gore's lockbox it never happened it was not separating out those surpluses that were being added from Social Security so what was happening essentially is that Social Security payments were supporting the entire rest of the government and masking the extent of the true deficit problem we had now for Social Security recipients that's really not a problem because as a trustee of the Social Security trust fund I know that the Social Security system has IOUs from the federal government that is every dollar put into that unified budget is essentially an IOU and so those have to be paid by law there is no question about it it's not as if we're competing with Medicare or military spending or any other spending those are absolute ironclad I owe use they will be spent they will be provided over the next 26 years but 26 years from now there is going to be an issue in terms of where the additional Social Security money comes from so for your maybe some of you and maybe some of your children and maybe some of your grandchildren we do have to make sure that that Social Security system is a good system why by the way why did we ever even get into an issue about Social Security not having enough money because remember maybe some of you do remember Alan Greenspan even before he was chairman of the Fed he headed up a commission and that Greenspan Commission in the early 1980s was supposed to figure out a way to make Social Security flush secure for the next 75 years and they called for increasing the retirement age and the retirement age for Social Security has increased and they also made some other adjustments to Social Security that have been made they're all put into law and you would think given all of that that the trust fund for Social Security would be fine for some five years or at least the next 60 years why is there a problem if Alan Greenspan were right here and being very honest with us he would say that the Social Security Greenspan Commission of the early 1980s did not foresee one thing they knew that the population was getting older they knew about the baby boom they figured in everything they figured in cost-of-living adjustments they figured in everything but they did not figure in one thing and that was increasing inequality the increasing proportion of total income that was going to be going to the very top that is why the Social Security limit the ceiling on the proportion of income subjected to Social Security that is now one hundred ten thousand one hundred dollars why that is not enough if we not had not had beginning in the early 1980s this huge surge toward concentrated income and wealth at the very top that ceiling would be plenty so what's the logical way of dealing with the social security problem in the future raising the ceiling or even removing the ceiling that's a much more radical you must be a communist Bill O'Reilly a couple weeks ago he did say I was a communist I challenged him publicly I said you know you don't just I mean these days it's hard to find a communist in the world there are in a very few communist you know why don't you at least debate me let's Dennis have a debate and Bill O'Reilly refuses to debate so when you next see him tell him he's a coward but my point is you Social Security can be cured yes we can increase the retirement age a little bit again I worry about doing that too much because if you're a professional increase in the retirement age is not too much of a hardship because your job tends not to be terribly physically taxing for most professionals that is but for most blue-collar workers who are actually using their bodies raising the retirement age can be quite burdensome so I would rather raise the ceiling on the proportion of income subjected to Social Security than raise the retirement age now we could means-test which are a Social Security a little bit more than we do already it is very slightly means-tested but if we'd get too far in the direction of means-testing do you know what I mean by means-testing that is the more the higher your income basically the less proportionate games you get from Social Security if you do it too much than Social Security stops being a universal program that starts being a program that is thought of as more like welfare and then it's politically more vulnerable Franklin D Roosevelt created and his labor secretary the great Frances Perkins created Social Security to be a universal program and to be one that was a pay-as-you-go system why Frances Perkins in fact there's a famous line she went to Franklin D Roosevelt when she was designing the program in the 1930s and she said mr. president Why should there be these separate Social Security numbers that everybody has and and this fiction as if they are saving I mean we know it's a pay-as-you-go system so why cling to the fiction that everybody is putting money their own money into their own social security accounts and the president leaned back and he smiled and he said to her Miss Perkins we're doing it so as those bastards on Capitol Hill can never take away this program politically cunning the problem is not Social Security we can do it we can do it in any number of ways the big 10,000 billion pound gorilla is Medicare that's the problem and that's why this election is going to be fought at least to some extent not just around the vampyre of Bain Capital or around whether we increase taxes on the wealthy but it is also going to be around what the Republicans versus the Democrats Obama versus Romney wants to do about Medicare given future budget deficits now again let's be very clear as a feud as a passed Medicare trustee I want you to know the truth just as I tried to give you about the truth just now about Social Security the truth is this Medicare and it's poor cousin Medicaid they are not the problem although it is true that their increases slated for the next 10 15 20 40 years are scary and they are huge problems and they are the biggest single item in the future federal budget and are responsible for the biggest portion of the future federal budget deficits they are gigantic and they are scary but if you look closely it is not Medicare and Medicaid per se that's driving all this it's the increase in health care costs overall in the United States that are pushing up Medicare and Medicaid as they are going to be pushing up and are pushing up health insurance for individuals and for families and for businesses across the board so the real issue is not taming Medicare and Medicaid Medicare's actually very efficient the administrative costs of Medicare are very tiny compared to the administrative costs of most private health insurance systems the real challenge is taming the increase in health care costs particularly particularly when you consider that 77 million baby boomer bodies over the next 25 years are going to all be corroding together and are going to need a lot of medical attention at the same time medical costs are skyrocketing put all that together and you see the essence of the problem it's not a federal budget problem per se it's a societal problem in fact if you really understand what's going on you might take exactly the opposite position to the position taken in Washington particularly by the Republicans it wanting to turn Medicare into essentially a voucher system and shifting the costs of health care on to seniors that is not going to work because that's not going to do anything about the underlying cost structure of health care if you really want to do something about that you might want to move to a system of Medicare for all a kind of a well I didn't I didn't expect applause I I'm not running for anything but but but but quite seriously quite seriously the real problem in health care costs is that the system we have based upon private insurers many of them for profit competing against each other for profits or for larger and larger remuneration of executives is the least efficient system you can imagine because what it means is that more and more money is poured into advertising and marketing and administrative costs nurses for example spending 30 percent of their time simply filing insurance claims and making sure that certain procedures are covered and doctors doing the same and everybody drowning in paperwork and meanwhile insurers trying to avoid sick people and find healthy people I mean can you imagine a more absurd health care system based upon trying to avoid sick people a single-payer system makes far more sense and again I don't and this is not a minority view this is really becoming a majority view but politically it's very difficult to sell given the political power of the health insurers and the big pharmaceutical companies and the big insurance companies but that's what must be done in fact what we ought to have in the interim at the very least is Medicare should have the right it does not but should have the right to use its huge bargaining leverage to push down drug prices and hospital costs and to move from a system of fee-for-service to a system of fee for healthy outcomes and that is where the leverage could come from could come from Medicare and Medicaid I mean 49 percent of Americans are now insured through the federal government somehow think of the bargaining leverage if they were allowed to do that but the Medicare establishments that is the insurers and the drug companies and others will not allow Medicare to have that kind of bargaining strength preventive health care is also a key to all of this avoiding obesity avoiding heart disease early on early on prevention other countries know how to do it we don't we don't take it seriously our medical system is not designed for prevention my father when he was 80 years old began walking five miles a day he is now 98 and we have no idea where he is no that's not true we know exactly where he is and he is 98 and he is in good health and I talked with him just yesterday and I'll talk with him again today but the point is prevention is critically important we don't do it so the challenge ahead and I wanted to just spend our time together as an introduction to today you're going to have a lot of time today to talk about your own retirement issues and finance financial issues and so forth but I wanted to set the table as it were with a larger view of where the economy is and what the dangers are a hit the good news is that this country once we know what the problem is we are better than any other country probably better than any other country in history at rolling up our sleeves and getting on with doing whatever has to be done to solve the problem we are very pragmatic we are not ideological contrary to what you hear and see on television we're not ideological I was on a show recently and I was debating a conservative economist and ins the station break the producer in my earbud said be angrier I said I don't want to be angrier we're actually having a pretty good discussion and I thought we were getting someplace you said you have to be angrier I said why she said because people are surfing through hundreds of channels these days and they will stop only when they hear a real gladiator like contests people shouting at each other and I said well I don't want to do that that's bad for the country it sets a very bad example she said you must we have 10 seconds and at that point I lost my temper but we are not an ideological country we're very pragmatic when we understand the nature of a problem and we will the other good piece of news is that we're not the only country that's aging very rapidly in fact other countries are aging even more rapidly Europe is aging more rapidly than we are Japan and China are aging very very rapidly now what are these aging rich countries and I'll include China because Chinese becoming rich but what are aging rich country is going to do over the next 25 or 30 or 40 years well I'll tell you what they're going to do because simultaneously in this world we've got a lot of poor countries that are very young where their median age is very very low now when you've got one set of countries where the median age is very very low where you have a lot of young people and those young people desperately want to get ahead and you've got a bunch of rich countries where the median age is very high and they are graying and getting older very fast what happens what happens is called immigration whether you like it or you don't like it whether you think it should be or not whether it's legal or it's illegal that's what happens and when it comes to immigration there is no country that does it better because almost all of us are immigrants or the descendants of immigrants than the United States other countries don't really know how to do it because for a thousand years or more they have not had all that many immigrants we do we will have even more and that will ultimately be the answer to a lot of the baby boom bomb problem on those two upbeat notes I will leave you be thank you very much but but I'm not but wait a minute I'm not really I'm not really going to leave you because we've got 15 minutes left for your questions and I hope that I've prompted at least at least some questions and there are two microphones one there and one right here I should say while you're thinking about your questions and coming up to the microphones that I feel so deeply privileged to be here teaching at the best public university in the world I came to Berkeley in 1996 I should have come here years and years and years ago I made a terrible mistake I came to actually I came to this University in 1968 for the first time for the summer of 1968 some of you may remember I was here not as a demonstrator I was here because I was actually hired to be a research assistant by a professor of architecture think about weird that was I wanted to be an architect and and this professor thought highly of me but I remember the first time I I drove up in my almost iconic Volkswagen drove up University Avenue for the first time in June of 1968 and I and I took in a breath of that aroma of eucalyptus mixed with marijuana and tear gas there was I I was intoxicated and I thought I thought I should stay here for the rest of my life fine it took me it took me more than 40 years to get back a mistake mistake anyway yes sir would you return to Washington why or why not well if the president wanted me to return to Washington I would definitely return to Washington I would feel it was my obligation to do it I wouldn't love it Washington is a very hard place to get anything done in but if you get anything done it has an effect on huge numbers of people so there is high leverage in Washington it I you know I worked when I was there I served under three administrations Bill Clinton was the last administration and I worked 18-hour days saw very little of my family it was not fun but I would certainly do it again and I think everybody in this room would if a president wanted you you would you would come yes sir um folks like you and Bill Moyers have pretty clearly described the situation we're in and I totally agree with everything that you're saying what I can't figure out is what do we do about it how can we as individuals as people sitting at these tables what can we do well you can do several things number one you can stop complaining number two you can stop talking to your friends and getting yourselves all into a lather number three you can get out of the bubble called East Bay or the Bay Area and talk to friends or relatives or people you know who are in different kinds of states and different environments who disagree with you talk to people who disagree with you very important get out of the bubble join organizations like the one that I'm chair of common cause dedicated to getting big money out of politics get involved in to the extent that you can in any kind of political campaign I don't care whether it's state or local or national and I don't mean just by money with money I mean that's to me money is may be useful and necessary it is useful but that's not participation that's not the essence of democratic participation it means basically and requires time and energy and activism and retirees to the extent that we are retired and we mean by retirement doing more of what we want and if we are dedicated to improving the country for our children and grandchildren then we have an obligation to spend two or three or four hours a day as activists thank you yeah I think you've partly answered my question because it's around Medicare and getting single-payer what is the I mean clearly activism is what you've said how specifically can we drive that agenda towards Medicare as a single payer towards a single-payer um country well I believe that for the reason I stated before that is both single-payer is much more efficient it's the only way of keeping healthcare costs under control and spreading and making sure that everybody has health care we're going to pay for everybody anyway might as well get it preventive rather than wait until they show up in emergency rooms so it's going to happen the question is how soon we wake up to that it may be sooner than later the Supreme Court maybe in fact it may have already done so today either today or tomorrow or sometime very soon is either going to strike down the individual mandate in the new Obama health care law or it's going to strike down the entire law or it conceivably could uphold the whole law but this is going to happen very soon if it does strike down the individual mandate which i think is the most likely of all of the outcomes then that creates a political opening because insurance companies will then storm Capitol Hill they will say there's no way we can insure people with pre-existing conditions and at the same time not have an individual mandate requiring young and healthy people and other health people to get insurance and so insurance companies will lead the charge reopening the law and that is an opportunity for the Obama administration and for others to say to the insurance companies we'll make a deal and the deal was essentially you don't have to do pre-existing conditions but you do have to support Medicare for all or something like that but ultimately it depends on people being mobilized which goes back to the question we just had because you know good people in Washington don't guarantee good results as we've seen over and over again the only way you get good results in Washington is if good people outside Washington are mobilized and organized and energized to push good people inside Washington to do the right thing yes this is related on assuming the health care reform law survives to what extent are any of the provisions to actually reduce health care costs that are built into that law how far do they go in solving that problem little ways big ways how meaningful well at the health care law as it's now written does not do very much to control the increase in health care costs it creates the possibility for some controls that is it has in it for example health care exchanges which allow at the very least consumers to compare prices of various insurance company and the benefits of various insurance it's going to therefore arguably push insurers to provide better value certain states could turn those exchanges into Medicare for all Vermont that's what it's doing Vermont is actively working to create a medicare-for-all system out of the medical exchanges that are in the new law kind of a way of doing what Massachusetts has done but more easily California could do the same so that law does provide some opportunities and there's also in that law a lot of opportunities for experiments to be done seeking to find out how we can achieve more value for every dollar that is spent for medical insurance and that's good too but overall the law is not going to really control the trajectory of Medicare costs medical costs yes ma'am it seems to me that you have very clearly demonstrated that prevention is the way to control medical costs but on the other side of that is our increasing perception that we deserve to have replace joints and opened up hearts and all kinds of medical procedures that are very expensive increasingly expensive tell me something about how we change our perception besides just talking to people who don't agree with this well when you say the word deserve is a loaded term the fact of the matter is if we had a much more efficient healthcare system we would have more money available to do a lot of procedures that need to be done to prove to improve people's quality of life and I don't care how old you are if medical science and medical technology is good at doing something and the two things that it does extremely well are dealing with glaucoma and dealing with hip replacements those are the kind of two things that we know medical science can do because it's doing a lot of it and doing it a lot of it well but there many other things too a more efficient system provides more license to do that I mean Canada I mean for example Canada you may wait a little bit longer for a hip replacement in Canada than the United States but Canada is spending when I last looked 8 percent of its GDP on healthcare we are spending close to 18% on healthcare and we're not getting nearly the health care results that Canada is getting and as known as if Canada is a foreign foreign foreign culture I mean they they speak the you know that would summer they say what do they say they say roof ruff maybe one or two words sound Canadian but otherwise it's hard to tell the difference they are not that different they live just across the border I mean if you're talking about it's very hard to make the case with when you talk about about Dane Denmark or Sweden or France but Canada you know III again III think that we will move in that direction eventually now if you're saying if you're if your question really is saying something else and you maybe as I as I think about it are we going to be able to prolong life at any expense and there you get into some very tricky ethical issues I remember I was teaching a political science class here a few years ago and I gave a spoof of a candidate who was going to be telling the truth a kind of truth-telling candidate and was satirical and I went through all kinds of issues and I said by the way if you are very very very old we're going to have to let you die well what the unbeknownst to me somebody was recording that and I can't tell you how many times that tape has appeared on Rush Limbaugh's show as evidence of the truth of death panels being in the Obama bill but there really are complicated ethical questions about about what we do at so-called end of life and friend of life care but that's a different subject what we're talking about is really how we make the system far more efficient yes you're in touch with our students and they're attending your classes what is their response to politics right now do you feel that they are do you get the chance to engage them in this kind of discussion that we have had today and do you have a sense of what their responses yes I talk to them quite a lot about these kinds of issues informally not so much formula because I don't want to you know I take a position in my classrooms that what I believe is not important in terms of teaching I want them to learn to think hard about public policy issues so I don't want them to even know what I believe but I do engage them informally about just probing their values and their what they expect of the future what they want to do how they feel about the United States and so forth and their own countries some of them are not from the United States and what I get is a generation and I've been teaching for 35 38 years not at Berkeley but before that a Brandeis at Harvard but what I get is more dedication to public service than I've ever found before Berkeley has even as a baseline more dedication to public service than any other place but even in the six years seven years I've been here I've seen more and more talk about I want to do more work in public service however much more cynicism about politics that is public service does not mean politics and for many of the US and I include myself this is it's a puzzle because when I was in my formative years it was John F Kennedy and Martin Luther King and then Robert Kennedy and Eugene McCarthy and I you know I I always thought about politics as the agent of change in America that it was not dirty certainly there were dirty aspects to it but to me it was a noble calling and that's not the case for these young people who don't have any direct memory of all of that they remember what they remember if not very much but they were in fact I'm astounded I'm teaching students who were born in the Clinton administration how is that possible yeah we time for two questions yes sir yeah I want to I want to thank you for retaining your sense of humors are all this and I remember your definition of politics from a previous speech I don't laughing yet one night I thought that was pretty good but I just wanted to ask about one one small paradox which is we've attacked something which is 18% of the GDP as an industry doesn't almost all that money resolve itself as wages and much of it to the 80% in the early class what do you think about that yes well undoubtedly it's like it's like when we ended World War two we would have to have a conversion program that is if we were going to do something dramatic suddenly about reducing health care costs and it was much more efficient we would have an unemployment problem because as you've just suggested we've got huge numbers of health care workers and we would have to make sure that we did not find ourselves back in a recession but the chances of that happening aren't nil really what we're what I'm talking about is slowing the growth of health care costs and that eventually particularly as the boomer generation moves through its life cycle then maybe getting more control and reducing healthcare costs as a percentage of total GDP so it we're not talking about a sudden mass layoffs of anybody yes I come into contact quite often with students from the integrative biology and MCB programs and I'm very much concerned about their lack of political engagement they as you say they have basically no knowledge and I think part of it is complicated by this whole myth of American exceptionalism there's an excellent film I don't know if you're familiar with it's called sick around the world have you seen it it goes into five different countries including Taiwan and Japan and I believe Germany and they talk about the fact that in those countries like for instance in Japan a cat-scan cost 98 dollars because the country gets together every year with the providers and sits down and negotiates the cost and I'm wondering what do you think about this whole myth that most Americans have and believe deeply that American medicine is the best in the world because we're Americans well there is that that mythology that American medicine is somehow different and of higher quality and it's not entirely wrong I mean American our research institutions are great hospitals that research parts of research universities are doing a break kind of mind-boggling of kind of new discovery that's our laboratories are doing wonderful things our hospitals are very good hospitals and they continue to be overall overall some of the best in the world but you are absolutely right that we do have a misplaced view of somehow health care in the United States is is leaps and bounds better than any other place and but I don't think that's really the impediment to change that quad star healthcare costs are rising so quickly for households themselves that there's no change has to it will come I mean the political pressure for change is going to come very very rapidly the question is is it going to be constructive or destructive is it going to impose costs on poor people and others who really have the least ability to deal with those costs or are those costs going to be spread is it going to be efficient or is it going to be terribly inefficient it's not is change coming it's what is the nature of change and I should meant and because this is the last question I will take this privilege and thank you for that to just wind up what I have to say here this morning by saying this we've got to be very careful over the next couple of years that we not find ourselves by virtue of just anger that's being generated in our political system frustration and anxiety generates anger anger generates a kind of divisive Nasseri dangerous for our politics and the divisive nasai am particularly concerned about and particularly concerned about given this audience is a divisive 'no step it's the elderly against the young now I say that simply because the budget battles that are going to start in earnest once again in a few months our battles over on the one hand Medicare and Medicaid and to some extent Social Security but on the other hand battles over domestic discretionary spending that includes everything from education title 1 Pell grants Head Start food stamps a lot of programs for the poor and for the young and at the state level we've already seen how a very very constrained and terrible budget situation in Sacramento can lead toward ridiculous processes of pitting certain groups against other groups in which we are sacrificing public education bit by bit we must not allow divisive nasaw of the large question we continue to be the richest nation in the world we are richer than we ever have been in history those who say we cannot do it are often those who don't want us to think either outside the box or who want to preserve the privileged position of the insurance companies or the medical providers or the military contractors or those who want us not to even consider raising taxes on the wealthiest Americans at a time when not only are the wealthy wealthier than they ever have been in history and taking on a larger share of total income than they've taken home in 80 years in this country but are paying a marginal tax now effectively that is the lowest in over 60 years so we are capable of doing much more than we are doing and we've got to beware of divisive nests anger and the kind of petulance that we are seeing as witnessed by that voice in my earpiece saying be angrier thank you very much

Channel: UC Berkeley Events

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Length: 72min 25sec (4345 seconds)

Published: Tue Jun 19 2012