Former Sen. Alan Simpson, R-Wyo., recently told CNN that budget-cutting efforts have been the equivalent of "a sparrow belch in the midst of the typhoon." Unless Washington was willing to confront the "big four" -- Medicare, Medicaid, Social Security and defense -- Simpson added, there wouldn't be much federal cutting.
Simpson should have learned by now that merely hurling colorful phrases and insults is not an effective budget-cutting strategy, either. Yet in terms of dollar numbers, he has a point: Those four categories alone account for almost two-thirds of federal spending.
And yet there's a basic reason why all federal spending is so hard to cut: Baumol's Law, sometimes called Baumol's Cost Disease. Decades ago, William Baumol, a New York University economist, observed that cost savings rarely occur in labor-intensive industries.
The example he used was classical music: A piece written 200 years ago for a quartet still takes a quartet today. In other words, if something is labor-intensive, it will be expensive.
Let's take health care as an example. Some 14.3 million people work in the health care sector, yet which political party wants to start laying off health care workers? Even Sen. Jim DeMint, R-S.C., has said he doesn't want to cut Medicare.
And the Medicare-voucherizing "road map" of Rep. Paul Ryan, R-Wis., is not exactly front-and-center on the GOP agenda.
But there's a cure for Baumol's Law, which Baumol himself identified: It's called "industrial revolution." For centuries, the American economy has advanced because technology displaced human labor, both cutting costs and freeing up labor for new and more productive uses.
In his 2002 book, "The Free-Market Innovation Machine: Analyzing the Growth Miracle of Capitalism," Baumol calculated that 90 percent of the gross domestic product of America today can trace its origins to the innovation and productivity gains of the last three centuries.
Today, we can look around our society and see the difference in cost between "revolutionized" sectors, such as manufacturing, and "craft" sectors, such as health care, which is still labor-intensive, with lots of doctors doing their Hippocratic thing, patient by patient, lots of labor-intensive hospitals and other care facilities.
So can we industrialize medicine, replacing the kindly general practitioner with a robot? Probably not. Thus we need to find other ways to inject technology into the health care sector. One way is through medical cures; the polio vaccine, after all, obviated the need for many physical therapists and iron-lung tenders.
Today, what's the parallel opportunity that is both health-giving and labor-saving? We might consider the case of Alzheimer's disease, which costs $172 billion a year; both incidence and costs are rising fast.
If we could find a cure for Alzheimer's, or even push back its onset by a few years, we would not only save on Medicare, but we might also be able to raise the retirement age, another huge win for the treasury.
So a crash effort against Alzheimer's could pay for itself, by curing not only Alzheimer's disease, but also Baumol's Disease, and thereby reducing the need for labor-intensive nursing homes.
But could we really make scientific progress against Alzheimer's? There's no guarantee, but our track record as a nation -- not only in polio, but also in AIDS -- suggests that we could solve such problems.
And besides, we don't have a choice other than to try: Simpson's angry verbiage aside, if people get sick, we will pay for their sickness, out of one pocket or another. So let's industrialize medicine in a humane way by mass-producing new cures.
James P. Pinkerton was a domestic policy aide to Presidents Reagan and Bush 41 and now is a Fox News contributor and editor of SeriousMedicineStrategy.org.
James P. Pinkerton was a domestic policy aide to Presidents Reagan and Bush 41 and now is a Fox News contributor and editor of SeriousMedicineStrategy.org.
