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Policy: Economy

It doesn't matter if health care spending is up, down: The White House says it's all good news

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Beltway Confidential,Opinion,White House,Economy,Jay Carney,Spending,Josh Earnest,GDP,Becket Adams

The Commerce Department announced Wednesday that the U.S. economy contracted at an annual rate of 2.9 percent in the first quarter of 2014, one of the worst declines since the start of the Great Recession in 2007.

As it turns out, part of the reason that the initial figures were revised lower is because federal officials were overgenerous with their health care spending estimates.

So when news that the economy contracted broke, we wondered how the White House would respond.

See, when initial reports first estimated that health care spending would contribute to modest first-quarter growth, the Obama administration was quick to take credit, praising the Affordable Care Act for being such a great benefit to the economy.

So how did the White House respond to news that the economy actually contracted?

In short, the White House has done a 180 and is now saying that the lower health care spending figures could be a good thing because it means companies now have more money to hire people.

“Today's report thus shows that the historically slow growth in health care prices and spending seen in recent years, which is thanks in part to the Affordable Care Act, continued through 2013 and into early 2014,” Jason Furman, chairman of the Council of Economic Advisers, said in a blog post.

“Slow growth in health care costs is making it easier for businesses to hire workers or pay a good wage and improving the nation’s fiscal outlook,” he wrote.

Again, recall that former press secretary Jay Carney hailed the original estimates as proof that Obamacare was helping the economy grow.

“The fact of the matter is, and the GDP report makes it clear that it was consumer spending on health care that helped drive economic growth in the first quarter, and that is directly related to the increase of people who have insurance because of the Affordable Care Act,” Carney said in a press briefing earlier this year.

Well, I guess that spin doesn't work now, does it?

Anyway, let’s make this easy and turn to someone who actually knows what he's talking about. Here to help explain what happened in Wednesday’s Commerce Department report is Scott Lincicome, international trade attorney and Cato Institute adjunct scholar:


And that's it in a nutshell: Rosy predictions regarding health care spending failed to live up to expectations, resulting is a disappointing final GDP figure.

The downward revision in GDP was also helped along by a “downturn in the percent change in real GDP primarily reflected a downturn in exports, a larger decrease in private inventory investment, a deceleration in PCE [personal consumption expenditures], and downturns in nonresidential fixed investment in state and local government spending,” according to Commerce.

Final thought: We can appreciate and understand the White House's about-face on health care spending. They need to keep up appearances. We're just grateful they didn't resort to blaming the decline on the weather again.

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