A senior economist and adviser in the research department of the Federal Reserve Bank of Dallas, Jason Saving, has a new "Economic Letter" out, issued by the Fed, warning that the cost savings promised by ObamaCare are illusory. He writes, "The law certainly will provide insurance for millions of currently uninsured Americans. However, it is unlikely to simultaneously 'bend the cost curve.'" He explains, in part:
Under the assumptions embedded in the CBO analysis, health care reform would modestly reduce government debt relative to what otherwise would have prevailed. However, several assumptions are unlikely to hold....
the analysis assumes that a long-delayed physician-reimbursement reduction for Medicare will be permitted to take effect this year, even though policymakers have not allowed similar reductions in past years and appear poised to continue that tradition. The 23 percent reduction scheduled to occur Dec. 1, 2010, would have brought physician reimbursements in line with a growth path agreed to in 1997 as part of the "sustainable growth rate" initiative—a previous attempt to bend the cost curve. But policymakers have balked at that growth path since its inception, creating an ever-larger divergence between what doctors actually receive and what was deemed necessary to control medical costs. With physician groups warning that queues to see doctors could lengthen dramatically if reimbursements fell, Congress again postponed implementation of this cut and made clear it would likely never be allowed to happen. If this "doc fix" remains in place throughout the decade, the 10-year cost would be roughly $210 billion.
It's nice to see a Federal Reserve official saying what lots of Republicans and free-market oriented commentators on health care have been saying for years, but it also raises the question of whether we really need the Fed to tell us something we already knew. It also highlights the unusually murky constitutional (or unconstitutional) status of the Fed. Government employees have an obligation to the public, but those in the executive branch are also at least theoretically accountable to the president. The president may have an interest in free debate and in hearing points of view that dissent from his own, but he might also prefer that such dissent be voiced privately rather than publicly so as not to embarrass him by pointing out to the American public that the signature domestic policy "achievement" of his administration was passed on the basis of a false pretense. Does the vaunted "independence" of the Fed, widely, though not universally, defended in the case of monetary policy, also extend to commentary on health care finance policy?
If President Obama tried to fire Jason Saving, some right wingers would probably complain because they agree with Mr. Saving about the health care law and don't want him punished for telling the truth. But on the constitutional point, Mr. Obama might well get Justice Scalia and Richard Cheney to defend him on the basis of the unitary executive theory.