Is Pelosi right on health care and jobs?

Charles Lane
Copyright 2010
Monday, March 1, 2010; 6:11 PM

Was anyone else struck by House Speaker Nancy Pelosi???s argument in favor of health-care reform at the summit meeting last week? To hear her tell it, it???s all about, well, jobs, jobs, jobs: ???In its life,??? Pelosi asserted, reform ???will create 4 million jobs, 400,000 jobs almost immediately. Jobs, again, in the health-care industry but in the entrepreneurial world as well.??? Now that???s a novel view: health-care as economic stimulus! Let???s put Americans to work puncturing one another???s veins and cleaning bedpans. Actually, though, Pelosi was making a different, more sophisticated, point, even if she did not express it very clearly. To the extent the cost of providing health insurance is a deterrent to hiring, reducing that cost would enable private sector employers to do more hiring -- other things being equal. And, so, if health reform lowered costs, it would boost jobs. Pelosi???s claim was based on a study by the Center for American Progress, which assigned a notional value of savings to the health-care plans on the table as of early January, and then derived from that a range of 250,000 to 400,000 additional jobs per year over ten years. That???s pretty modest compared to a total labor force of more than 150 million, and even these small numbers probably suffer from the spurious precision inherent to all such estimates -- but the underlying theory is plausible. In fact, a main reason to worry about health-care costs at all is that the ever-growing share of Gross Domestic Product devoted to health care diverts resources from other productive endeavors. We don???t want the whole country to go the way of General Motors, which went bankrupt largely because its revenues from making autos could no longer fund health benefits for union workers and retirees. Here???s my problem, though: For Pelosi???s scenario to pan out, health-care reform must actually produce substantial cost savings. And that is more doubtful now that President Obama has offered a version that postpones the strongest cost-containment provision in the Senate bill -- the ???Cadillac tax??? on high-value insurance plans -- until 2018. That???s like postponing it this long. The president did this largely to appease organized labor and their allies in the House Democratic caucus -- led by Speaker Nancy Pelosi.

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