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Health Care: The Lost Opportunity

It’s difficult for me to say how much the blame for this should be allocated to President Obama and how much the blame belongs to people in Congress, but Brian Beutler makes the excellent point that the Affordable Care Act was arguably a huge missed opportunity for fiscal stimulus:

In early 2009, Obama turned from stimulus to health care, and by insisting the reforms reduce deficits he locked his most effective recovery tools in a policy shed and handed the key to his political enemies. They were famously unpersuaded by the gesture, and instead (falsely) portrayed the bill as a budget buster — an early salvo in a campaign to blame Obama and Democrats for soaring deficits, which of course were almost entirely attributable to the Bush-era recession.

By late October 2009, according to Gallup, 14 percent of the public thought the President’s top priority should be the deficit, double what it had been at the end of Bush’s term. The same poll found 41 percent of the country thought the economy should be his top priority — down from 64 percent in 2008, before the stimulus had helped end the country’s employment free fall. The wars in Iraq and Afghanistan and health care also bested the deficit. Other polls showed similar figures, though many asked questions in different ways, and still others asked respondents to name their top economic priorities. Jobs always trounced the deficit, but public concern was starting to bud. Prior to about 2009, the deficit wasn’t even listed as an option on similar polls.

A few points on this that are important. Obama and the White House not only insisted that the health care bill be (mildly) deficit-reducing in the long-run (a good idea) and “bend the curve” on long-term health care cost increases (a good idea) but also that it be deficit-neutral within an arbitrary CBO 10-year scoring window. This last thing was a purely political conceit, designed to bolster the political fortunes of the bill and its proponents. Nothing wrong with that — you can’t take the politics out of politics. But a smarter Democratic Party would have recognized that the political impact of 10-year CBO scoring windows is tiny compared to the political impact of short-term macroeconomic fluctuations and decided to set 10-year CBO scoring window concerns aside in favor of using the bill as a vehicle for fiscal stimulus. The simplest way to do that would probably have been to put a large temporary Medicaid bailout in the bill, which would have sharply reduced the need for cutbacks in other areas. Or to get more clever, the appropriations to help states set-up insurance exchanges could have been way higher than states would actually need, combining macroeconomically useful state fiscal assistance with a hefty bribe to governors to actually do implementation. You can probably think of other ideas.

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Now failure to do this isn’t, I think, “Obama’s fault” in the sense that he could have just snapped his fingers and made it happen. But it was a collective blunder on the part of the administration, the congressional leadership, and the members themselves and there’s no sign I’m aware of that anyone in the White House ever tried to move the needle on this.