GDP's ObamaCare Downgrade

Wall Street Journal ^ | June 26, 2014

[Brad from Tennessee]

Financial markets shrugged off Wednesday's punch-in-the-stomach report that first quarter GDP shrank by 2.9% on an annual basis, far more than earlier estimates and the worst quarterly decline in five years. Optimists blame the weather and point to faster growth in the current quarter, which is reasonable but still shouldn't overlook ObamaCare's role in nearly sending the economy back into recession.

January saw the formal launch of the Affordable Care Act, and its attempt to transform U.S. health insurance and medical practice. So it's notable that a major cause of the sharp downward revision in first-quarter GDP was a decline in consumer spending on health care. Lower exports and investment also played a role, but the overall decline in health spending from the previous quarter was a startling 6.4%.

Health spending is nearly always a positive contributor to GDP, and in the fourth quarter of 2013 it contributed 0.62%. But health spending fell so sharply in the first quarter that it subtracted 0.16% from economic growth. The Bureau of Economic Analysis, which calculates GDP, hadn't been able to capture the magnitude of the health spending decline in its two previous estimates of first quarter growth. . .

[skeeter]

I don’t get it... I’m spending far more on healthcare insurance than last year because of the ACA. Far more.

[Carry_Okie]

I don’t get it... I’m spending far more on healthcare insurance than last year because of the ACA. Far more.

What makes you think a healthcare insurance company invests its cash flow on healthcare? Their business is to control expenditures and play that money in the markets for all they can get.

[skeeter]

Aren’t expenditures for healthcare insurance factored into GDP?

[fhayek]

I am no economist, but I do not feel that healthcare spending is a great indicator of the health of an economy. Think of it this way, if you spend $40,000 on a car this year, you feel better, wealthier than you did last year, when you finished paying off that $6,000 clunker. BUT, if you spend $100,000 in medical expenses this year, compared to $1,000 last year, are you better off? Are you wealthier? No, you are sicker. Health care consumes wealth, it does not create it. Don't be fooled into thinking that more health care spending is good for an economy. Building a bigger house increases wealth. New cars increase your wealth, Even new roads and bridges increase the economic strength of an country. More health care spending, especially health care spending financed by public debt, decreases the wealth of a country.

Now, I am not saying that health care spending is worthless, especially to the people who benefit from it, but it does not HELP the economy. A store that has to hire additional security because they are being robbed blind does so because they HAVE to. The extra spending hurts their bottom line. So it is with health care.

[Will88]

But health spending fell so sharply in the first quarter that it subtracted 0.16% from economic growth. The Bureau of Economic Analysis, which calculates GDP, hadn't been able to capture the magnitude of the health spending decline in its two previous estimates of first quarter growth.

Some lousy reporting on whatever impact Obamacare and supposed lesser spending on healthcare had on 1st quarter GDP. I've read several stories on this and have yet to read one that provides anything but generalities. None seem to know exactly what happened, if anything.

And I read one story that said this might flip/flop and produce a 5% growth in the second quarter.

[DAC21]

I really don’t have a grasp on this, one would think less Healthcare spending would be a good thing, but the Odinga Administration would be shouting this from the rooftops of how great the ACA is working. THEY ARE NOT.

[Alberta's Child]

You're absolutely right. Dramatic increases in health care spending would actually result in higher GDP figures. The 2.9% decline in the U.S. GDP in the first quarter is related to something else entirely. My suspicion is that we're starting to see the consequences of large numbers of U.S. residents (citizens and non-citizens alike) simply checking out of the economy and living with considerably less material consumption these days.

[Brad from Tennessee]

[I don’t get it... I’m spending far more on healthcare insurance than last year because of the ACA. Far more.]

So are many others and that may be the problem. Consumers are more aware of a correlation between doctor visits and the rise of premium prices. Millions of ACA policy holders are stuck with deductibles so high that their plans are virtually worthless unless they suffer a catastrophic health
crisis. Many of these people have cut back. And millions dumped into state Medicaid programs are likely still waiting in line.

[xzins]

people didn’t buy obamacare so they didn’t pay

they’re waiting to pay the penalty

[Senator_Blutarski]

Millions of Americans are sorting through their new Obamacare health insurance policies and are trying to figure out what is covered. They are facing larger deductibles and greater out-of-pocket expenses. I suspect many Americans are avoiding going to the doctor to avoid running up out-of-pocket expenses they can't afford.

Other Americans are struggling to find new doctors under their new healthcare plans.

I'm sure a significant number of people are overwhelmed by the bureaucracy and confusion associated with Obamacare.

Finally, we all know there are people who lost their healthcare insurance because of Obamacare.

A negative contribution to GDP by healthcare is not surprising.

[Bluestocking]

Until the government can produce quarterly GDP numbers that don’t change by 300% from one revision to the next, the numbers will be meaningless; and it will make no sense to take seriously any interpretation of those numbers, even by the most brilliant financial analysts.

How can the Federal Reserve create monetary policy based on ever-shifting numbers that prove mistaken from month to month? What does Janet Yellen think when the minus-1% decline in GDP that she originally based her bond-buying and money-printing decisions on, turns out to have really been a minus-2.9% decline?

If the cause of our big first-quarter GDP decline was the weather, then Janet Yellen should be replaced by a meteorologist. Until then, she should spend most of her time looking out the window so she can make reasonably informed economic decisions.

[RetiredTexasVet]

The only thing the BLS is consistent on is their consistency of being wrong. They are always wrong and when they are really wrong they sneak back silently and adjust their figures. In any other industry they would have been fired for incompetency long ago.