Raising Women’s Voices

How Obama can save the US economy What’s the best way for the government to stimulate the US economy? Spend money on healthcare

Posted in Uncategorized by raisingwomensvoices on November 6, 2008

Few presidents will come into office having generated the sort of expectations Barack Obama created over the course of his campaign. The country’s economic crisis poses substantial dangers but it also presents enormous opportunities. If President Obama is prepared to seize these opportunities, he will establish himself as one of the countries truly great presidents, alongside Lincoln and Roosevelt.

Specifically, Obama can take advantage of the current economic crisis to announce plans to jump-start national health insurance. Extending health insurance can be an effective stimulus that will provide an immediate boost to the economy. More importantly, it will provide the same access to healthcare that people in other wealthy countries have long taken for granted.

The backdrop is straightforward. Economists from across the political spectrum are now calling for a large stimulus package to limit the economy’s decline and the rise in unemployment. The consensus is in the range of 2.0-2.5% of GDP, or $300-400bn a year.

This level of agreement among economists is encouraging, but the reality is that it is difficult to spend $300-400bn a year on short notice effectively. There are some no-brainers that belong in any stimulus package: aid to state and local governments, extended unemployment benefits and extra money for food stamps and home heating oil assistance. This is money that will be quickly spent, boosting the economy, while helping those hit hardest by the downturn.

A stimulus should also include increases in infrastructure spending, which will come about by moving plans forward for projects already on the books. There should also be a substantial green component, involving retrofitting homes, businesses and other buildings, which will reduce our energy use.

However, after we get through this list, the sum total for the stimulus package is probably still in the neighbourhood of $150bn a year, at best half of the targeted sum. This is the gap that will be filled by extending healthcare coverage.

As a basic outline, the government can give a substantial tax credit (eg $3,000) to employers who cover workers for the first time in 2009 and 2010. It can also offer a tax credit covering most, or all, of any additional payments by employers who increase their coverage.

This means that an employer who picked up the workers’ share of insurance payments, or got a better plan, would have much of the cost reimbursed by the tax credit. Credits can also be given to individuals who are self-employed, unemployed or not otherwise covered through their employer.

If 20 million workers get coverage through this tax credit, that would cost $60bn. If another 60 million get an average of $1,000 in additional healthcare benefits, this would cost another $60bn. If we also throw in funding to reduce the healthcare burden for Medicare beneficiaries, for example by $1,000 each, this will cost roughly $40bn. The total cost would be $160bn a year, a reasonable target for the stimulus package.

At the same time that this health stimulus is enacted, we should open up the Medicare system, allowing all employers and individuals the option to buy into a Medicare-type plan. This is important, because a well-working public sector plan will be important to controlling costs over the long-term.

After 2010, the tax credits would be cut back, with the goal being a system of subsidies that pay the full cost for low-income people, but phase out at higher income levels. It will also be important to use the Medicare-type plan and other tools to squeeze waste out of the system, since controlling healthcare costs is essential to sustaining a healthy economy over the long-term….

For the complete story, please visit:

http://www.guardian.co.uk/commentisfree/cifamerica/2008/nov/06/obama-healthcare-us-economy

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