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Testimony of Peter R. Orszag, Director of the Office of Management and Budget Before the Committee on Finance, U.S. Senate March 10, 2009

The President is eager to work with Members of Congress to develop a comprehensive health care reform proposal that will provide high-quality, affordable health coverage to all Americans while addressing long-term drivers of health spending in public and private health programs. Many promising approaches to health reform have been proposed by many different people, and the President looks forward to developing a health reform approach through an open and inclusive process that explores all serious ideas that achieve the common goals of expanding coverage, improving quality, and constraining costs. To get a sense of what elements the Administration believes are key pieces to include in any health reform proposal, I want to summarize the Administration’s eight guiding principles for health reform.

Approach to Health Care Reform

1. Protect Families’ Financial Health.  The plan must reduce the growing premiums and other costs American citizens and businesses pay for health care. People must be protected from bankruptcy due to catastrophic illness.

2. Assure Affordable, Quality Health Coverage for All Americans.  The plan must put the United States on a clear path to cover all Americans. The plan must reduce high administrative costs, unnecessary tests and services, waste, and other inefficiencies that consume money with no added health benefits.

3. Provide Portability of Coverage.  People should not be locked into their job just to secure health coverage.

4. Guarantee Choice of Doctors.  The plan should provide Americans a choice of health plans and physicians. Also, they should have the option of keeping their employer-based health plan.

5. Invest in Prevention and Wellness.  The plan must invest in public health measures proven to reduce cost drivers in our system—such as obesity, sedentary lifestyles, and smoking—as well as guarantee access to proven preventive treatments.

6. Improve Patient Safety and Quality Care.  The plan must ensure the implementation of proven patient safety measures and provide incentives for changes in the delivery system to reduce unnecessary variability in patient care. It must support the widespread use of health information technology and the development of data on the effectiveness of medical interventions to improve the quality of care delivered.

7. End Barriers to Coverage for People with Pre-existing Medical Conditions.  No American should be denied coverage because of preexisting conditions.

8. Reduce Long-term Growth of Health Costs for Businesses and Government. The plan must pay for itself by reducing the level of cost growth, improving productivity, and dedicating additional sources of revenue.

• First, world demand is in freefall — Stimulus
• Second, governments must take responsibilty for dealing with their financial systems — bank capitalization and dealing with toxic assets
• Third, governments must agree to put aside more money for the IMF — contain the crisis and prevent it from spreading to Asia and other emerging markets

—FT on Tuesday

The Democratic response to the economic crisis has its problems, but let’s face it, the current Republican response is totally misguided.

They’ve apparently decided that it’s easier to repeat the familiar talking points than actually think through a response to the extraordinary crisis at hand.

—David Brooks: NYT

The implicit faith in the wisdom of the stand-alone market economy, which is largely responsible for the removal of the established regulations in the US, tended to assume away the activities of prodigals and projectors in a way that would have shocked the pioneering exponent of the rationale of the market economy.

The economic difficulties of today do not, I would argue, call for some “new capitalism”, but they do demand an open-minded understanding of older ideas about the reach and limits of the market economy.

—Amartya Sen: FT

We have learned that no one becomes mature without living through the pains and confusions of maturing experiences.

—Professor Elder, UC Berkeley

There are neighborhoods around the country as bad as anything in Cleveland. Cleveland is a bellwether. It’s where other cities are heading because of the economic downturn.

—Dan Immergluck, a visiting scholar at the Federal Reserve Bank of Atlanta and an associate professor in the city and regional planning program at Georgia Tech

This crisis was triggered by foreclosures, and a lot of those were in a very small number of areas

—William Lucy, University of Virginia

The industry publication, Inside Mortgage Finance, shows that subprime lending grew from approximately $35 billion in 1994 to $665 billion in 2005. We now have a flood of credit, much of which is structured to the detriment of the borrower and to the benefit of the credit arrangers. This flood of credit is distorting housing markets and causing negative spillovers from directly impacted borrowers onto neighbors and communities.

…

Property appreciation that is built upon financing gimmicks and short-term teaser rates is not real, sustainable appreciation and, in the long run, discourages the smooth functioning of housing markets and neighborhood economies.

—Dan Immergluck testifying before congress, 21 March 2007

Robert Shiller inaugurates the Capitalism blog at the FT

Tonight I sit alone

unattended by friends or the sounds

of muted city streets

in August.

Tomorrow our boys will be born,

if science and God’s good grace

and my wife’s fortitude

hold out

for a little, so that they

will grow, have children or not

have children, also find love

or not,

live long or briefly and fuse

someway into generations,

a future they already bequeath

to us. 

—“Vigil,” David Yezzi: from his new book, Azores

We need to react in real time to a growing crisis that is hurting people in developing countries. This global crisis needs a global solution and preventing an economic catastrophe in developing countries is important for global efforts to overcome this crisis. We need investments in safety nets, infrastructure, and small and medium size companies to create jobs and to avoid social and political unrest.

Debt issuance by high-income countries is set to increase dramatically, crowding out many developing country borrowers, both private and public.

—Robert Zoellick, World Bank President, announcing finance gaps and a recessionary forecast for the global economy

This crisis is the first truly universal one in the history of humanity. No country escapes from it. It has not yet bottomed out.

—Michel Camdessus, former IMF Managing Director, at an ADB forum in Manila, 9 March 2009

Asia is mainly suffering a cyclical slowdown because of problems in the developed economies, it is not suffering a structural economic breakdown. There is no reason to think that the growth engines that have been unleashed in many parts of Asia are likely to weaken.

—Manu Bhaskaran, head of economic research at Centennial Group

The loss of financial wealth is enormous, and the consequences for the economies of the world will unfortunately commensurate. There are serious economic and political stumbling blocks that may well cause the recovery to be costly and slow to consolidate…There is no room for denial or populist policies. Otherwise the crisis will become even deeper and harder to reverse.

—Claudio Loser, president of strategic advisory firm Centennial Group

Clearly, fiscal resources do have to be injected in rich countries that are at the epicenter of the crisis, but channeling infrastructure investment to the developing world where it can release bottlenecks to growth and quickly restore demand can have an even bigger bang for the buck and should be a key element to recovery.

—Justin Yifu Lin, World Bank Chief Economist and Senior Vice President, London, 9 March 2009, on reconciling investment in rich countries in the face of the immediate effect on poorer nations.

There is a part of everything which is unexplored, because we are accustomed to using our eyes only in association with the memory of what people before us have thought of the thing we are looking at. Even the smallest thing has something in it which is unknown.

—Maupassant, “The Novel,” preface to  Pierre and Jean (1888)