Some conservative economists from the University of Chicago decided to get their name in the New York Post by claiming that 20% of last quarter’s GDP growth was because of the consumption of Obamacare, thus blaming health insurance for conflated numbers. There’s one problem with this analysis: it simply isn’t true in the data. In fact, what is true in the data is that Wall Street is accounting for 21.1% of GDP growth through value-added accounting.
Here’s how “value-added” is supposed to work on a national level. If I own a factory that makes cars, and the price I pay for intermediate goods (steel, rubber, plastic, etc) is LESS than the price I am able to sell the car for, then not only did I make profit, but I “added value” to the economy. The finished car is more valuable than the goods it took to make the car.
Wall Street works the same way. The price of Apple Stock is more today than it was three months ago, so Apple has “added value” to the NASDAQ,, which also adds value to the national income accounting in GDP (GDP=C+I+G+(NX)).
The problem with the national income accounting is that health insurance is lumped in with finance in the data. The Bureau of Economic Analysis classifies it as: “Finance, and Insurance.” It is possible however, to break the numbers down.
First the healthcare: the World Bank says that there was a slight uptick in healthcare spending after Obamacare, but it wasn’t anything already grotesquely out of line historically, when compared with the rest of the world.
This increase in healthcare spending is about right according to current (2014) projections by the Federal Reserve and BEA, which shows a 0.76% increase in annualized personal health care expenditures (what you and I pay for healthcare services).
So what does account for that big “Finance and Insurance” bar in the BEA chart? Wall Street. In that quarter, the Dow was up 6%, the S&P was up 5%, and the NASDAQ was up 7% – just for that quarter! Just the three major markets accounts for 18% of the 21.1% of the value added to the GDP of the economy.
The question of whether or not value has actually been added to the national economy is a philosophical one. Certainly, most people do not benefit from the added value of Wall Street (a.k.a. rentier profits). There is however, another philosophical question of whether or not we should continue to include healthcare in our national accounting. After all, we do not include food in accounting for consumption, because everyone has to have it, and everyone has to buy it, regardless of who pays for it. If we hope to have our finger on the pulse of the economy, health insurance has to be removed from the data mix, since it is the law of the land now that everyone has to have it; regardless of who pays for it.
So while the University of Chicago economists (neoclassical by nature) would like to blame Obamacare for GDP growth, if we were to take that data line out entirely, Wall Street would account for 18% of the loss in the national income accounting.