Federal Reserve Chairman Ben Bernanke gave a speech in Dallas yesterday where he inadvertently discredited claims that ObamaCare would reduce health care costs and the federal deficit. According to The Washington Post:
Federal Reserve Chairman Ben S. Bernanke warned Wednesday that Americans may have to accept higher taxes or changes in cherished entitlements such as Medicare and Social Security if the nation is to avoid staggering budget deficits that threaten to choke off economic growth...
While the immediate audience for the speech was the Dallas Regional Chamber, his message was intended for Congress and the Obama administration...
Bernanke has urged Congress to address long-term fiscal imbalances in congressional testimony before, but usually only when he is asked about them by lawmakers. His speech Wednesday aimed to reach a broader audience, steering away from technical economic speak and using plain, sometimes wry, language -- a rare thing for a Fed chairman.
The non-partisan Congressional Budget Office projects the annual federal deficit will be at least $700 billion in each of the next 10 years. Deficit spending is a form of taxation without representation, because it increases the tax burden of generations who cannot yet vote (often because they are as yet unborn). Bernanke wants us to end deficit spending. Kudos to him.
But consider the timing of his speech. Why wait until April 7, 2010, to deliver that message directly to the public? Why not give that speech in January? Or February? Or any time before March 21?
The reason is obvious: Bernanke held back to appease his political masters.
Until three weeks ago, the nation was locked in a debate over whether Congress should enact ObamaCare, the most sweeping piece of social legislation in American history. That law includes two new health care entitlements -- the very type of government spending driving the federal budget further into the red. Democrats rigged the bill so that the CBO was obliged to score it as deficit-reducing, but 87 percent of the public weren't buying it.
If Bernanke really wanted to warn the American public about the dangers of rising budget deficits, then a congressional debate over creating two new entitlement programs would be the most important time to deliver that message. Democrats would have responded that ObamaCare would reduce the deficit. But since voters believe ObamaCare to be a budget-buster, Bernanke's warning would have dealt ObamaCare a serious blow.
Had Bernanke delivered his populist warning before January 28, it could have jeopardized his confirmation by the Senate to a second term as Fed chairman. Had he done so between January 28 and March 21, he would have suffered a storm of criticism from Democrats (and possible retribution when his term came up for renewal in 2013) because his sensible, responsible warning would have made moderate House Democrats more skeptical about ObamaCare's new entitlements.
So Bernanke pulled his punches. As Dick Morris would put it, anyone who doesn't think that political concerns affected Bernanke's timing is too naive for politics.
Bernanke's behavior thus reveals why ObamaCare's cost would exceed projections and would increase the deficit.
Knowledgeable leftists, notably Tom Daschle and Uwe Reinhardt, recognize that Congress is no good at eliminating wasteful health care spending because politics gets in the way. (Every dollar of wasteful health care spending is a dollar of income to somebody, and that somebody has a lobbyist.)
The Left's central planners believe they can contain health care costs by creating an independent government bureaucracy that sets prices and otherwise rations care without interference from (read: without being accountable to) Congress. ObamaCare's new Independent Payment Advisory Board is a precursor to what Daschle calls a "Health Fed," so named to convey that this new bureaucracy would have the same vaunted reputation for independence as the Federal Reserve.
Yet Fed scholar Allan Meltzer reports, and Bernanke's behavior confirms, that not even the hallowed Federal Reserve can escape politics:
In reading the minutes of the Fed and watching what they do, the Fed has always been very much afraid of Congress...The idea of having a really independent agency in Washington, that’s just not going to happen...[The Fed] is very much concerned — always — about what the Congress is doing, and doesn’t want to deviate very far from that.
Politics affects Bernanke's behavior and the Fed's behavior. Politics will defang the Independent Payment Advisory Board, and many of ObamaCare's other purported cost-cutting measures. ObamaCare's cost will outpace projections. The deficit will rise.
Repeal the bill.