Chairman Pallone, Ranking Member Deal, and members of the subcommittee, it is an honor to appear before you today to discuss "Treatments for an Ailing Economy: Protecting Health Care Coverage and Investing in Biomedical Research."

The U.S. economy is in a severe downturn. (Although the National Bureau of Economic Research has not yet made an official determination, it will almost certainly declare, at some point, that the economy entered a recession in late 2007 or sometime in 2008.) The severity of the downturn has prompted calls for a fiscal stimulus package to boost aggregate demand. It is far from clear, however, that a fiscal stimulus package is necessary or useful, since monetary policy and automatic fiscal stabilizers are generally better suited to serve the goal of economic stabilization. Even if a stimulus package is adopted, increases in the federal Medicaid matching rate should not be included because they are an ineffective means of boosting aggregate demand. Even as Congress addresses the current economic difficulties, it is also important to foster long-run growth through tax and spending policies that promote private business investment. . . .

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Alan D. Viard is a resident scholar at AEI.