{"text":[[{"start":6.65,"text":"Karthik Sankaran is a senior research fellow, geoeconomics in the Global South program at the Quincy Institute for Responsible Statecraft."}],[{"start":16.700000000000003,"text":"In 2025, China’s goods surplus reportedly came in at around $1.18tn. The US goods trade deficit that year was $1.24tn. That these two numbers are almost equal to each other has led to a widely shared conclusion that global imbalances stem from Chinese surpluses and American deficits, and an active debate on the causes. But a third number, $1.5tn, or the annual excess of US healthcare spending relative to its developed country peers, has not received as much attention. Perhaps it should."}],[{"start":49.25,"text":"One view is that the imbalances are entirely China’s fault, as articulated by Michael Pettis. He has insisted for years that China’s industrial competitiveness (and by implication, its trade surplus) is a consequence of policies favoring low wages relative to productivity and thus a low consumption share of GDP. The other, more orthodox, side of the debate, exemplified by Maurice Obstfeld, argues that “the bottom line is that the [US] government’s deficit is a main driver of the trade deficit.” And this is where the dispute has mostly stalled out."}],[{"start":87.05,"text":"For China at least, the debate does drop from 30,000 to 20,000 feet by mentioning not just broad aggregates but also sectoral considerations. Poor healthcare coverage is seen as a major factor behind an overly high precautionary savings rate that constrains consumption. There is thus a seeming causal chain that connects low healthcare spending (7 per cent of GDP), with excessive savings, insufficient consumption, and a consequent trade surplus. (Note, however, that Arvind Subramanian has just argued that even if China’s consumption share of GDP is low, consumption has been rising at a steady clip over the years.)"}],[{"start":126.25,"text":"In its report on global imbalances, the IMF also makes an unnamed yet clear reference to China on page 24, noting that “in practice financial repression is often combined with forced saving policies that shift the desired saving curve to the right. Examples of these measures are low provision of a social safety net ... . ” "}],[{"start":147.15,"text":"The IMF’s examination of the US counterpart deficit stops at a pro forma declaration that the US should lower its fiscal deficits and a tepid call for the US to contain health-care costs on page 38."}],[{"start":160.70000000000002,"text":"But it might help to be clearer. If persistent surplus countries are under-consuming, persistent deficit countries are likely to be over-consuming. And what the biggest deficit country in the world is consuming at a massive scale is healthcare. "}],[{"start":174.20000000000002,"text":"At roughly 17 per cent of GDP, the US spends at least an “extra” 5 per cent of GDP on health care compared to some of its closest peers, but with worse outcomes in both coverage and results. Around 27mn Americans are uninsured, and average US maternal mortality rates across all groups are multiples of those seen in the UK or Germany."}],[{"start":null,"text":"
"}],[{"start":197.05,"text":"If insufficient healthcare spending in China is considered a major contributor to global imbalances, should “excess” US spending of $1.5tn annually be considered in a similar light? "}],[{"start":209.4,"text":"This is not just about inferring causality from the equations that tie consumption, investment, savings, and external balances together (a trend that might be termed “accounting identity politics”). For one thing, the basic economics of a massive and inefficient non-tradeable sector on the overall economy will tend to raise the real effective exchange rate, making exports more expensive and imports cheaper."}],[{"start":235.25,"text":"But beyond this, there is also the factor of how healthcare costs are distributed, with the US having a uniquely high reliance on employer-provided health insurance plans. Data from the Kaiser Family Foundation shows that roughly half of all Americans receive healthcare plans from an employer health-plan at an annual cost or roughly $27,000 per year, of which $20,500 is picked up by employers."}],[{"start":261.75,"text":"High insurance costs are a function of extremely high hospital and procedural costs. In a recent essay, Dr Zack Cooper, an associate professor at Yale’s School of Public Health and its Department of Economics, noted that hospitals earn $29,000 for a hip replacement covered by private insurance, and $16,000 for one covered by Medicare. Meanwhile the German system pays hospitals $9,400 for the same operation. So for all the complaints about a runaway fisc, America’s age-restricted single payer system, in this instance at least, is delivering healthcare costs about 50 per cent lower than private alternatives but at 165 per cent the cost of that in other industrialized peers. The organization of US healthcare also leads to high administrative costs, which in 2021 were $925 per person annually versus $245 in peer countries. There is no end to numerical evidence of this kind."}],[{"start":321.75,"text":"And to add insult to injury from the point of view of less wealthy countries in the global south at the receiving end of US tariffs, the American political system’s inability to fix intractable issues in nontradeable sectors like housing and healthcare seems to have led to a displacement of this anger onto trade. "}],[{"start":340.5,"text":"An example of this rhetorical sleight of hand can be found in this week’s op-ed by America’s Treasury secretary. The cost of this political strategy is evident in the deterioration of US relations with a range of countries in the global south. As countries like India and groupings like ASEAN suffer trade-policy whiplash emanating from Washington, they remain far less skeptical about trade and are seeking alternative trading arrangements."}],[{"start":368.45,"text":"Political path dependence makes it staggeringly unlikely to happen, but as a thought experiment proceeding from the above litany on American healthcare costs, one might imagine a national single-payer healthcare system funded by a Value Added Tax that delivers universal coverage at roughly 12 per cent of GDP. From the point of view of global imbalances, such an outcome could lower the consumption share of US GDP (thus “allowing” a smaller trade deficit via the accounting identities). At the same time it would reduce non-wage employee costs in the tradeable sector, acting as a tax measure that replicates the effects of a weaker currency."}],[{"start":408.25,"text":"The above might never happen, but at the very least, it might be worth considering that a largely unremarked outsized combination of expense and inefficiency in the single largest sector of the US economy is the “dark matter” of any debate on global imbalances. "}],[{"start":428.6,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1778059799_1695.mp3"}