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Stimulus Watch: More Federal Spending On Health Care Will Create Jobs

By Igor Volsky

"Stimulus Watch: More Federal Spending On Health Care Will Create Jobs"

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Just as the New York Times reported that “Medicaid rolls are surging, by unprecedented rates in some states,” Republican strategist Jennifer Millerwise Dyck appeared on MSNBC this afternoon to argue that extra federal funding for health care initiatives (expanding Medicaid, subsidizing COBRA) would not create jobs and should not be part of the Democrats’ economic stimulus package:

There is money in there getting us prepared for universal health care. I mean, this is supposed to be a stimulus package that gets people into jobs, that gets the economy moving, gets money back into the pockets of the people and I think this is ideologically where you see a real difference between Republicans.

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In fact, investing federal dollars in Medicaid, as House Democrats have proposed, is far from an “ideological divide”; it actually generates business and “gets people into jobs.”

A recent report by Families USA, for instance, found that “every dollar a state spends on Medicaid pulls new federal dollars into the state—dollars that would not otherwise flow into the state. These new dollars pass from one person to another in successive rounds of spending”:

For example, health care employees spend part of their salaries on groceries, which adds to the income of grocery store employees, enabling them to spend part of their salaries on new shoes, which enables shoe store employees to spend additional money on home improvements, and so on. The new dollars pass from one person to another in successive rounds of spending, generating additional business activity, jobs, and wages that would not otherwise be produced. Economists call this the “multiplier effect.” The magnitude of the multiplier effect varies from state to state, depending on how the dollars are spent and on the economic structure of, and conditions in, the state.

Moreover, health insurance protects families from medical bankruptcy and allows healthy individuals to keep looking for employment.

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