You are using an outdated browser.
Please upgrade your browser
and improve your visit to our site.
Skip Navigation

Dynamic Duo

For the last few months, critics have warned that the economic crisis would force Barack Obama to set aside his more ambitious ideas--starting with universal health care. For some, the issue has been one of priorities. With the economy in such desperate shape, the argument goes, Obama must devote all available manpower--and political capital--to measures that would rescue Wall Street and revive growth. "How much do you want to tweak health care while dealing with bank mortgages?" asks Deloitte and Touche's Paul Keckley. For others, the problem has been the price tag: Given the realities of the budget, the federal government simply doesn't have enough money to start giving everybody decent medical insurance. Speaking for this increasingly popular point of view, the Urban Institute's Robert Reischauer noted recently, "Fiscal resources that might have been devoted to the unavoidable short run costs of health reform will be needed to stimulate the economy and shore up the financial system." To try health care reform now, he suggested, would be "difficult if not impossible."

It's a superficially logical argument--one that people like Reischauer, a well-respected budget expert, surely come by sincerely. Fully implemented, universal health insurance will require an infusion of somewhere between $50 billion and $130 billion per year. With the annual budget deficit likely to hit $1 trillion this year, where would the money come from? And, while it's important to maximize the number of people with health insurance, surely it's more important to maximize the number of people with jobs and steady incomes. But neither argument holds up that well under scrutiny. On the contrary, the economic downturn actually makes the case for universal health insurance even stronger than it was before.

Start with the present economic crisis. By now, even the most hard-core fiscal conservatives are discovering their inner Keynesians, calling for new government spending to stimulate the economy. But spending on what exactly? Infrastructure is the most obvious target, because infrastructure spending creates jobs. But recent reports suggest that the number of projects that are ready to go--that is, those that could start up as soon as money is available--would account for only tens of billions in new spending, which is just a fraction of the stimulus many economists say we need in the very near future. There's also the possibility of tax rebates. But recent experience suggests that all but the poorest tend to save the money rather than spend it--which basically defeats the purpose.

On the other hand, most proposals for universal coverage start with a federally financed expansion of Medicaid and the State Children's Health Insurance Program. That means more poor people would get health insurance right away. And, as economist Jonathan Gruber argued recently in The New York Times, expanding those programs provides a superb economic stimulus. When poor people get health insurance, they purchase medical goods and services. More important, they start spending money on other things, since they no longer have to put aside money to pay for medical emergencies. That funnels cash back into the economy, promoting growth. "Health care reform," Gruber concluded, "is good for our economy."

Some fiscal conservatives, upset that universal health care would require all sorts of new spending upfront, aren't so sure. They argue--rightly--that the rising cost of Medicare and Medicaid is the primary reason why the federal government's long-term budget picture is so scary. If we can only avoid overwhelming deficits and, by extension, a lackluster economy in the future by spending less money on these health care programs over time, surely spending more money on them now makes no sense.

But, actually, it does. The reason Medicare and Medicaid are getting so expensive is that health care, overall, is getting so expensive. (Relative to private health insurance, Medicare and Medicaid control costs a little better.) But the only rational, not to mention humane, way to control health care costs is through system-wide reforms--the kind that are a lot harder, if not impossible, to implement in the disorganized and volatile insurance environment we have today. Making sure everybody has insurance is the first step--or, depending on how you do it, the first few steps--toward creating one common system.

Universal health care can also bolster the economy's long-term health in other ways. Sometimes people stay in jobs they'd prefer to leave just because they fear losing their insurance; this phenomenon, known as "job lock," distorts the labor market and makes the economy less efficient than it would be otherwise. Making health insurance universally available would change that. And, just like investments in infrastructure, investments in health care--properly targeted--can improve productivity, whether by encouraging investments in information technology (something most reform plans would do, in order to streamline record-keeping) or simply by creating a healthier workforce. Don't forget, too, that universal health care should ultimately make life easier for businesses struggling with the cost of employee coverage. If that need doesn't sound pressing to you, check out the auto companies' latest stock prices.

As it happens, a few key people in Washington already seem to believe these arguments--not least among them, the guy who was just elected president. Asked repeatedly during the campaign which of his big priorities he planned to shelve because of the economic crisis, he said over and over again that he remained committed to health care reform--along with climate-change policy--because the rationale for each remained as imperative as before. In each case, he noted, spending money now would improve growth in the short run while making the country more productive, and prosperous, in the long run. Obama had it right then. The key is sticking to that view now.

This article originally ran in the December 24, 2008, issue of the magazine.