On Stimulus, Health Care: "We Have to Keep Going"

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We have to keep going. The most important component -- besides the sitmulus measures that are already extending unemployment benefits and Medicaid and COBRA benefits --  is to shore up the capabilities of state and local governments to maintain their staffing levels. We can't do it 100 percent. But what happened last year is that we cut the potential state/local government staff reduction in half. I think states and localities have a long way to go. Long after the private sector has turned a corner, they're going to be cutting back. It's appropriate to impose some pressure on them. It's true of course that some states and localities were a tad fat before the recession, but it's important to make these adjustments less dramatic in the short run. 

Do you have any idea what this is going to cost, what dollar amount we should be holding out for?  

No I don't know what it's going to cost. But I wouldn't be surprised if it doesn't average out to an additional $100 billion a year for the next two years. 

Let's talk about health care reform. Even though you expressed doubts about the cost-saving of Clinton's health care reform when you were at the CBO, you told the Washington Post's Ezra Klein that you would cast a yes vote on this bill. I want you to tell me why, but I also suspect, given the fact that nobody seems to consider this an ideal bill, that you have concerns. So why do you support the bill, and what are you concerns? 

I support the bill because I think we have to address the cost problem. We have to quote -- bend the curve -- end quote. While this particular peice of legislation doesn't do much on that front, and I could make a good case for why it may bend the curve in the wrong direction, it creates a platform off of which further measures to reduce cost growth can be built. We turn this down, and we have nothing. 

There's a lot of pilot programs and emphasis on the infrastructure that we will eventually need to begin cutting back the growth of health care spending. That, together with the fact that you're going to cover 30 odd million uninsured people and raise the richness of the insurance packages that people get, will create a floor on which something more substantial can be built. We'll have the clear locus of responsibility for cost containment. 

If we do nothing more, then will these pilots bear fruit in the next five years? The answer is probably no. Cost growth might even accelerate. But we can have another push for health care and we'll have this foundation. We have no foundation right now. We have an inequitable landscape, and you have to bulldoze it before constructing a building. 

Granted that health care inflation is a monster without a silver bullet, what's the most important step -- either in this bill or outside this bill? 

My view is it's going to take many many things, some of which are in the bill some of which we don't even know about yet. I am an unabashed supporter of changing the tax treatment of employer sponsored health insurance. We're doing it in a clumsy way with the excise tax in the legislation. But in a sense it starts a conversation that this is an appropriate new policy.
President Obama hopes to sign both additional economic stimulus plans and a comprehensive health care bill within the next two months. To get some perspective on these two critical issues, I spoke with Robert Reischauer, the director of the Congressional Budget Office between 1989 and 1995. He is currently the president of the Urban Institute and a nationally respected expert on the budget and our entitlement system. This is the first part of our wide-ranging conversation about stimulating the economy, passing health care reform and solving our long term debt crisis. Part Two comes on Monday.

With the $15 billion jobs bill passing the House and Senate and another $150 billion stimulus bill proposed by Sens. Reid and Baucus, we're heading back to a very public debate about more stimulus. Is it time to pull back or is it time to keep going? 

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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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