Fiscal Stimulus

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Did the Stimulus Hurt the Economy?

March 11, 2011 in Economics - General | No comments

Although the stimulus money may have helped the economy in the short run (1-2 years), in the near-term it seems to have exacerbated problems by bloating state government spending and postponing necessary cuts.

“As part of the 2009 stimulus package, Washington gave the states $150 billion. The states became dependent on a higher level of federal aid — 35 percent of their budgets, compared with about 25 percent before. But the stimulus is ending, and the states will have to cut.”

I would guess that there are asymmetric costs to increasing and decreasing the budget.  Increasing the budget is easy and generates short-term jobs.  Cutting budget, however, produces significant administrative costs as interest groups fight to maintain funding.  Further, more creative solutions to spending shortfalls are postponed when the Feds inject stimulus money for states.

Consider Vallejo, CA in the Bay Area.

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Explaining the Stimulus Bill’s affect on Medicaid

June 8, 2010 in Medicaid, Medicaid/Medicare, Public Policy | No comments

The Stimulus Package, also known as the American Recovery and Reinvestment Act (ARRA), key goal was to boost a flagging economy.  A number of the provisions in the $787 billion package went towards health care provisions.  The Kaiser Family Foundation notes that “the Act includes $149 billion in health spending of which $87 billion is for a temporary increase in the federal share of Medicaid costs, $25 billion for temporary COBRA subsidies, and other spending for health information technology (HIT), the National Institutes of Health and for Community Health Centers.”

To summarize the impact of ARRA on Medicaid funding, I have made the following table.

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Anti-depressants and Fiscal Stimulus

May 13, 2010 in Economics - General, Pharmaceuticals | 7 comments

Conventional wisdom holds that physicians can use anti-depressants to treat long term depression.  Many patients, however, spend years or even decades taking these drugs.  Is this how the inventors of anti-depressants believe they would be used?

Author Robert Whitaker believes not:

You find that even with major depression, in the pre-antidepressant era – and this is depression so severe people were hospitalized – they could expect to get better. The episode would eventually pass.

… So when antidepressants were introduced, the thought was okay, we really can hope to improve on this sort of natural recovery, but maybe we can help people recover quicker? So that really was the rationale for the use of antidepressants.

But it’s really interesting if you follow this course through, forward in history. The minute they start using antidepressants in any sort of large numbers, doctors start saying, “Well, you know, my patients may be getting better, the depression maybe lifting faster, but then we’re noticing that they’re also relapsing more frequently than before, back into depression.”

So right away you get this question: Does the drug treatment actually put people on a more chronic course than before?”

This reminds me of government “temporary” spending programs.  In times of fiscal crisis, the government often institutes temporary spending packages to revive the economy (e.g., the Stimulus Bill or ARRA).  Although these actions may help revive the economy in the short run, in the long run they often lead to reduced growth prospects.  Oftentimes, however, as the status quo changes, entrenched interests make it difficult to repeal a bill.

Similarly, giving someone anti-depressants changes the status quo from one of a non-drug user to a drug user.  Physicians become accustomed to treating the patient with drugs and many believe it stabilizes the patient.  Further, the patient often experiences withdrawal symptoms if they attempt to change their status quo from that of a user to a non-user.

Mr. Whitaker also cites a Duke University study from the 1990s examining 3 patient groups: 1) Exercise only 2) Exercise plus antidepressant 3) Antidepressant only.

“After six weeks, the drug-only group was doing slightly better than the other two groups. However, after 10 months of follow-up, it was the exercise-only group that had the highest remission and stay-well rate.”

Both anti-depressants and stimulus packages offer short run relief for the patient or economy.  Excessive use of these short run measures, however, leads to worse outcomes in the long run.

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