Capital Gains and Games

This morning, Fed Chair Ben Bernanke spoke on health care at the Senate Finance Committee Health Reform Summit.  His prepared remarks cited the extraordinary growth of health care spending as unsustainable, but he cautioned against harming innovation amidst the efforts to curtail health care costs.

It's always noteworthy when a Fed Chair steps outside the confines of monetary policy.  The Fed Chair invariably sees straying afield as necessary to curtail policies that could harm the economy and put too much pressure on monetary policy as the last resort to save the economy.  Only two months ago, Mr. Bernanke justified the first Fed bailout of an investment bank, Bear Stearns, since the Depression.  He drew harsh criticism from former Fed Chair Paul Volcker.  Seven years ago, Fed Chair Alan Greenspan, famously concerned about what Uncle Sam was going to do with all those budget surpluses, endorsed tax cuts.  Funny thing, large deficits materialized almost overnight.

Rather than opining to save health care innovation, Mr. Bernanke's formal remarks would have had much more policy impact if they focused on the implications for fiscal and monetary policy of unchecked health care spending. Leaving it to the Q&A, as noted by Stan Collender below, is better than nothing, but it doesn't cut it.