Senate Democrats unveiled last week a sweeping budget reconciliation package, which they’ve misleadingly dubbed the Inflation Reduction Act of 2022. Although many economists are obsessing about inflation impacts, its most damaging component by far remains its impact on health. The health care provisions would induce U.S. longevity losses valued very conservatively at more than $66 trillion over the next 17 years, dwarfing all other economic effects including inflation impacts, even if beneficial, as well as deficit reduction.
Economic evidence shows that growth in life-expectancy is as important as GDP growth in lifting U.S. well-being. Put differently, few people would give up a year of their lives in order to gain an inflation-free year with marginally higher growth. Emphasizing the reduced economic effect of the so-called Inflation Reduction Act is akin to rejoicing that a hurricane spared the house, even though its owners died.
The new deal would use the “savings” from imposing price controls on drugs to extend the already-enhanced Affordable Care Act (ACA) subsidies, which took effect last year. This would lead to a massive loss of life, due to foregone medical innovation, and a reduction in the quality of care, due to the government gaining more control over people’s insurance coverage.
