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Wednesday, November 05, 2008

Will the Financial Crisis Crowd Out Health Care Reform? Should It?

Ezra Klein says the financial crisis should not get in the way of health care reform. In fact, the crisis helps to clarify the need to find a way to reduce the growth in health care costs if we want to continue to have the flexibility to respond to financial and other economic crises:

You've Won! Now Don't Do Anything!, by Ezra Klein: Bloomberg lays out the case for why the financial crisis should prevent Barack Obama from doing anything about health care reform. As the argument goes, health care is the most severe fiscal threat facing the nation, so it should be allowed to fester, trash the government's long-term solvency, and ensure that we face a far more severe financial crisis a few decades into the future, and we face it without the sort of solvency that enables large-scale government intervention. Oh, wait. That's not how the argument goes. That's the part of it that is always somehow oddly left out. So rather than read the Bloomberg article, folks should listen to Peter Orszag on these matters:

While I’m on the topic of health care, I’d like to make a point related to the current turmoil in financial markets. Many observers have noted that addressing the problems in financial markets and the risks to the economy may displace health care reform on the policy agenda — and that may well be the case for some period of time. ...

Although it may not seem immediately relevant given our current difficulties, it will be crucial to address the nation’s looming fiscal gap — which is driven primarily by rising health care costs — as the economy eventually recovers from this current downturn. Indeed, our ability to address our current economic difficulties (through both financial market interventions and potential additional fiscal stimulus) would be severely impaired if investors were not so willing to invest substantial sums in Treasury securities without charging much higher interest rates. That willingness reflects the (currently accurate) view among investors that Treasury securities are extremely safe investments.

If we fail to put the nation on a sounder fiscal course over the next few decades, though, we will ultimately reach a point where investors would lose confidence... If that were to occur, we would lack the kind of maneuvering room that we currently enjoy to address problems in the financial markets and the economy. So if you think the current economic crisis is serious, and it is, imagine what it would be like if we didn’t have the ability to undertake aggressive and innovative policy interventions because creditors were effectively unwilling to lend substantial additional sums to the Federal government…

Orszag, of course, is head of the Congressional Budget Office and one of the individuals who has been most immersed in the impact of the financial crisis on federal priorities. And he speaks the truth. Leaving our health care problem to worsen is the height of fiscal irresponsibility. It cannot be said more clearly than that.

Update: See also What Should Obama Do First? Health Care Reform by Andrew Samwick.

    Posted by on Wednesday, November 5, 2008 at 01:44 PM in Budget Deficit, Economics, Health Care, Policy | Permalink  TrackBack (0)  Comments (50)

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