Tyler Cowen on Health Care

He makes a very strong data case that Medicare costs have never been under control, in spite of bad reports cited by Yglesias. What we have is wishful thinking on the part of progressives and realism on the part of investors, the result will be a severe inflation/deflation cycle, a Double Dip.

Romer worries about a repeat of the 1937 change in circumstance. That second dip came in 1937 becaue government changed its product mix substantially, switchin to wartime production. Healthcare reform will look like a Double Dip trigger when we are done. Something which was not a current constraint in the economy, now becomes one.