Robert J. Barro

On Friday, July 23, Harvard economist and AEI visiting scholar Robert J. Barro presented research on the government's recent stimulus package and its impact on private spending. In his study, Barro used long-term macroeconomic data to estimate the size of government spending and tax multipliers and their isolated effects on real GDP. Although he finds the overall effect to be positive, a ratio less than 1:1 suggests that private spending is being crowded out, particularly in investment and the purchase of consumer durables. Thus, Barro predicted that over a five-year period a new stimulus package of $600 billion would deter nearly $900 billion in private spending, a loss that an already-destabilized and largely indebted economy cannot afford. [READ MORE]

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Darius Lakdawalla

Darius Lakdawalla, director of research at the Leonard D. Schaeffer Center for Health Policy and Economics at the University of Southern California, recently spent time at AEI as a visiting scholar. Lakdawalla co-wrote the July 2010 Health Policy Outlook with University of Chicago professor and fellow AEI visiting scholar Tomas J. Philipson and the University of Southern California's Dana Goldman. Titled "Addressing Geographic Variation and Health Care Efficiency," the Outlook argues that to reduce spending and more appropriately limit geographic variation in utilization among Medicare beneficiaries, the program should consider the utilization-management techniques employed in the private sector as a model. [READ MORE]

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Overspending on Multisource Drugs in Medicaid
By Alex Brill
AEI Working Paper, July 2010

Policymakers and academics have become increasingly aware of wasteful spending within the Medicaid program through the purchase of costly brand products over equivalent generic substitutions. In this working paper, Alex Brill (AEI) analyzes a large subset of 2009 Medicaid drug data from the Medicaid Drug Rebate Program and identifies a number of drugs for which there are significant cost differences between the brand and generic versions. His results estimate a $271 million loss as a result of failing to substitute generic for brand-name drugs. Had Medicaid fully substituted brands for generics, total spending could have been reduced from $1.76 billion to $1.49 billion. In light of rising pressure on states’ fiscal budgets, these findings corroborate previous evidence of wasteful spending in Medicaid, a growing problem that requires prompt action by policymakers. [READ MORE]

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AEI's Alex J. Pollock writes that rather than postponing reform for Fannie Mae and Freddie Mac, the Democratic Party should follow the lead of Andrew Jackson, who confronted the government-sponsored enterprise issue of his day by disbanding the Second Bank of the United States. [READ MORE]

AEI's Andrew G. Biggs and the Heritage Foundation's Jason Richwine argue that even after accounting for numerous controls including education, race, and gender, there remains a 12 percent federal wage premium, suggesting that, combined with the generosity of federal benefits, total compensation for federal workers could exceed that of similar private employees by over $14,000. [READ MORE]

The Battle Over Battle Fatigue
By Sally Satel
Wall Street Journal, July 17, 2010

The diagnosis of post-traumatic stress disorder (PTSD) has grown alongside a new sensitivity to the causes and consequences of being afflicted with it. AEI resident scholar Sally Satel warns that broadening the diagnosis of PTSD to include the anxious anticipation of a traumatic event that never materializes will force us to put more weight on personal vulnerability, rather than trauma itself, as the cause of PTSD. Veterans can attain a higher prospect of meaningful recovery through high-quality, personalized treatment and rehabilitation rather than a broad diagnosis of PTSD. [READ MORE]

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Photos: Harvard University, University of Southern California, iStockphoto/dra_schwartz, U.S. Army/Department of Defense, and AEI.