In March, the US House of Representatives passed a landmark legislation to overhaul the nation’s healthcare system, the first such reform in several decades. The legislation has substantial symbolic significance. Unlike in the post-War years, when a number of laws were passed, such as the interstate transportation Bill, the GI Bill that provided for education for returning World War II servicemen (commonly known as GIs), and social security/Medicare legislation, relatively little social reform has taken place in the US in recent years. Since the passage of the Medicare Act in 1965, public thinking and policy appears to have veered gradually away from state intervention and more in favour of private intervention. The consequence of this was that the focus moved away from any meaningful social welfare legislation. This period has corresponded with increased inequality in the US, as demonstrated by the fact that the top 5% of US households are less taxed and more rich today than they were 30 years ago, while almost everyone else has seen their incomes grow at a very slow pace.
One would expect that following the general revulsion at the banks’ bailout, the climate would be in favour of bipartisan support for any Bill ameliorating the conditions of the poor in America. Strangely this has not been the case. In fact, the Bill on healthcare finally passed with virtually no support from the Republicans, making it one of the few completely polarized pieces of legislation in recent times.
That the government pushed through this Bill under the circumstances is particularly symbolic. At its core, this Bill appears to fire a shot at income inequality and will help a large number of Americans who today cannot obtain insurance. President Barack Obama believes that the richest country in the world cannot have 40 million people living with uncertain levels of healthcare and is seeking to make it available to this group through a combination of higher taxes on others. Opponents argue that citizens above the age of 65 and the very poor are already covered by Medicare and Medicaid, respectively. They also cite various polls showing that nearly 80% of Americans appear fairly satisfied with their level of healthcare and may be unwilling to pay more either in the form of insurance premiums or taxes.
Also Read | Earlier columns by Govind Sankaranarayanan
By running the risk of alienating a large proportion of its population to provide healthcare to between 10% and 15% of its people, the Obama administration seems to have indicated its stronger commitment to an equal society. Through this legislation, the US government is signalling that it believes individualism and free enterprise cannot be an all encompassing and exclusive goal, and that the have-nots in its society need a fairer deal. This legislation is indeed historic because it is a feather blowing in the wind, showing that American polity could be taking the first steps towards a slightly more welfarist ethos.
The effects of such a trend are far from clear. On the one hand, the multiplier effect of higher incomes and wider opportunities provided to less privileged people can sometimes be much greater than that provided to those who are already wealthy. The sense of optimism and confidence that will be built for the 45 million Americans who benefit from this Bill will hopefully reinvigorate the US economy as it comes out of the downturn.
At the same time, many will be worried at any shift from the value system of individualistic success that has worked so well for America in the past. Companies around the world might want to examine this space closely.
Govind Sankaranarayanan is chief financial officer, Tata Capital Ltd. He writes on issues related to governance. The views expressed in this column are personal. Write to him at firstname.lastname@example.org