Basket Cases

Most Americans can be forgiven if they have lost the thread of today’s debate over the government shutdown—it has shifted radically in a pretty short time. Just a few weeks ago, the budget debate was primarily over the automatic spending reductions, known as sequestration. The administration and most congressional Democrats want to cancel the sequester for the next two or three years to keep fiscal policy from dragging too heavily on the still-fragile recovery. The Congressional Budget Office projects that canceling the sequester for 2014 could increase GDP by 0.2 percent to 1.2 percent, and employment could be 300,000 to 1.6 million higher. Republicans, on the other hand, want the sequester to remain in place (though they do want a special carve-out to keep it from cutting defense as heavily as its projected to in 2014). They also want to reduce mandatory spending (a category dominated by Social Security, Medicare and Medicaid, though which also includes a number of other income support programs like unemployment insurance). House Republicans have already voted for a five percent reduction in spending on SNAP, the nation’s most important nutrition program for low-income adults and children.

As the end of the 2013 fiscal year approached not a single appropriations bill had been passed. While both the House and the Senate passed budget resolutions this year, the Republican leadership in the House refused to allow a conference committee to reconcile differences between the two to proceed. Given the failure to pass an appropriations bill, a continuing resolution (CR) was needed to temporarily fund the government or the government would shut down. On the first day of the new fiscal year, the government shut down because no CR had been enacted.

However, the debate over the CR, however has moved rapidly away from a debate over spending levels—House Republicans have shifted the debate to defunding Obamacare. Democrats have universally signaled a willingness to vote for a “clean” CR that would keep the jobs-killing sequester in place for the rest of calendar 2014. In essence, the Republicans have already won that first debate over funding levels. But Republicans not only want to keep the jobs-killing sequester, they now also want to overturn an established law that will provide tens of millions of Americans with the chance to obtain affordable health insurance coverage, starting in 2014.

Obamacare, or more formally, the Affordable Care Act, was enacted to expand health care coverage to the 50 million uninsured Americans, and to reduce the growth rate of U.S. health spending. In the back and forth between the House and the Senate over the CR, house Republicans have reduced their demands over Obamacare from outright repeal to delaying the individual mandate for one year. My colleague Josh Bivens has written about the importance of the individual mandate in expanding health insurance coverage and reducing health costs.

I think it is instructive to take a further step back and look at why the status quo U.S. health care system before the ACA was passed was totally unacceptable. This table compares the U.S. health care system with that of Italy, which is often described as one of the economic basket-cases of Europe. Italy’s gross domestic product is shrinking, their debt-to-GDP ratio is over 100 percent (compared to less than 80 percent for the United States), and the Italian government seems to be in a perpetual state of crisis. Yet they have a better run health system that covers all Italians.

A smaller share of national income is devoted to health spending in the Italy than in the United States, and Italy’s per capita health spending is almost a third of what it is in the United States Furthermore, U.S. per capita health spending is more than double than per capita health spending in Italy. Health outcomes are uniformly better in Italy than in the United States (higher life expectancy, lower infant mortality rates, and lower suicide rates). Further, the lower costs are not driven by denial of resources—Italians spend considerably less for their health care system but have more hospital beds and physicians per capita than Americans. And to be clear, comparing the United States to Italy is not unfair cherry-picking— in terms of international comparisons of health care systems, the United States is a clear outlier in spending more than any other nation in the world, and yet is middle-of-the-pack at best in terms of outcomes. In terms of health care, the United States is the basket case, and it seems odd to be willing to shut down the federal government in the name of making sure it is not improved.

Obamacare is not going to turn the U.S. health care system into a version of the Italian health system with Italian health outcomes, but it will improve access to health care for tens of millions of Americans, which can’t help but improve health outcomes, and reduce the high growth rate of health spending. House Republicans have shut down the government and appear willing to risk economic catastrophe by refusing to raise the debt ceiling so they can dismantle Obamacare. They are offering a bad choice: either the United States continues as a health care basket case or they’ll turn the United States into an economic basket case.


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