Foreign interest in US health care debate
Global investors are watching the American health care debate closely to determine its economic impact.
President Barrack Obama's push for health care reform continued with a trip to Ohio. But back in Washington, there are signs Mr. Obama is not getting what he wants from Congress. The president has been urging the House and Senate to vote on a bill before their August break. Senate Majority leader Harry Reid said that's unlikely to happen.
President Obama is spending a lot of political capital on health care. At his televised news conference, he urged Americans to look at the big picture, "Even as we rescue this economy from a full-blown crisis, we must rebuild it stronger than before. And health insurance reform is central to that effort."
The president said controlling the skyrocketing cost of health care in America is crucial to the country's economic recovery. Well, it's not just Americans who have a lot at stake in this health care debate. Global investors are also watching the debate closely. That's according to Simon Johnson, an economist at MIT's Sloan School of Management.
"If you look down the road 20, 30 years, the budget either fails or succeeds on whether or not we control Medicare costs," said Johnson. "So if you're an international investor, and you're thinking, where should I put my money? Should I buy dollars? Should I buy US treasuries? You have to look down that road and think, is the American political process going to control health care costs? Very little else matters."
China is one such interested investor says Johnson, "You saw this very clearly on Mr. [Timothy] Gidner's recent visit to China, where the Chinese University students actually expressed some skepticism that the US had its fiscal health in order. China has big claims on the US, they bought a lot of our government debt -- will they continue to hold it? On what basis? What kind of interest rate do they think is reasonable? It's not just about China, but they're definitely in the mix."
Timothy Gidner, the US treasury secretary, was in China and also in the Persian Gulf, trying to boost confidence in the United States.
Other countries are more open about their health care issues Johnson said, "Yes, it's a delicate matter, and it's a little bit of an unpleasant truth. But richer societies, you know -- with the exception, almost except for the United States -- have had a bigger, more open debate about this so far, and have got more cost control in place. I would not say that anybody's out of the woods on this, by the way. It's a demographic issue, and it's a technology issue that confronts us all. And I think what we're seeing right now is a lot of catch up in the American political system."
He says this is because Americans are more skeptical of their government, compared to people in other developed countries, "What it means is that we're more comfortable believing that the state should stay out of things, and the government shouldn't do things, and private individuals should do them. But, you know, on home health care you reach a level of costs, and a level of commitment on the part of the entire economy, that is, you know, can only be dealt with by the state. And so that makes it a bit more uncomfortable, and I think it's delayed the conversation in the United States."
As for why Americans should care whether foreign investors like what's happening in health care in the US, Johnson says it comes down to economics, "Oh it's obviously much more nebulous than vague, but it does affect interest rates, it does affect how much the government can borrow, it affects what the government can spend on other programs, and it limits our choices if we get this wrong. If we lose our credibility, and if people feel that America cannot fix its own problems, than that's an issue for all of us."
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