A Blip in the Economy
Dean Baker is an economist and co-director of the Center for Economic and Policy Research.
It is difficult to take the alarm over the projected cost of the health care bills being debated in Congress very seriously. In spite of the hyperbole, the sums are not very large in the terms of the overall budget or the economy and some of the alleged cost is simply an accounting question. In this vein, whether or not we fill a projected shortfall with a tax on the rich will not make very much difference to either the economy or the people facing a larger tax burden.
Starting with the accounting question, the baseline budget calls for large cuts over the next decade in doctors’ reimbursements under Medicare. Congress has always voted to waive these cuts. The health care reform bill will make this waiver permanent at a cost of more than $200 billion. It is disingenuous to get outraged over this expense, since we always knew that Congress would not allow the baseline cuts to go into effect.
Congress should focus on fixing the health care system, not on the comparatively minor deficits.
More generally, if we end up with a gap of $300 billion over a decade, as the scoring of some bills imply, this would be roughly equal to 0.15 percent of gross domestic product over this period. By comparison, the increase in defense spending associated with the wars in Iraq and Afghanistan was more than 1.0 percent of G.D.P. If the former cost is enormous, then how do we describe the cost of these wars?
Of course, the real story is that we need to contain health care costs, not just for the budget, but to protect the economy. If the health care bill includes a strong public plan, it will have put in place a mechanism to contain costs. If we let health care costs continue to expand at their baseline rate, that spending will bankrupt the economy even if we shut down the government health care programs altogether. Fixing the health care system should be the main focus of Congress, not the comparatively minor deficits that may result from efforts to extend coverage. |
