Boy– that was awful being disconnected for so long (even longer than during Snowmageddon!). I’ll be back posting something of substance tomorrow (Tuesday) I hope. Can’t believe I missed CBO’s (preliminary) analysis of the President’s budget. I’ll write about it tomorrow, but you won’t be surprised about what I’ll emphasize. CBO Director Doug Elmendorf already pointed it out in his blog post from last Friday (emphasis added):
Under the President’s budget, the cumulative deficit over the 2011–2020 period would equal $9.8 trillion (5.2 percent of GDP), $3.8 trillion more than the cumulative deficit projected in the baseline. Of that difference, roughly $3.0 trillion stems directly from proposed changes in policy and another $0.8 trillion results from additional interest on the public debt. By far the largest budgetary impact would stem from the President’s proposals to index the alternative minimum tax (AMT) for inflation and to extend various tax provisions contained in the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA). Over the next 10 years, those policies would reduce revenues and boost outlays for refundable tax credits by a total of $3.0 trillion. Other policies would have smaller but still significant effects on the budget and would largely offset one another.
I have a lot going on in my real (mom) life over the next few days, so I won’t be posting for awhile. I won’t even be able to moderate comments for at least the next couple days. No family emergency–just busy. (And no, this is not at all related to Charlie Rangel’s leave of absence from his Ways and Means chairmanship…)
Keep up the comments without me. (I know a few of you will.)
Oh — here’s a good post by Bruce Bartlett critiquing the idea a couple of House Republicans have for reining in spending. That is quite a contrast to Paul Ryan’s approach, which although (I believe) unrealistic, is still brutally honest. Steny Hoyer gave the proposal and its author some credit the other day when he said:
It’s also clear to me that if the commission takes a one-handed approach, it will fail, both politically and substantively. Congressman Ryan’s thoughtful budget proposal shows what an approach looks like when it relies entirely on cutting spending. He should be commended for putting together a serious and detailed plan to tackle the deficit. It doesn’t raise a single tax. But as a consequence, it significantly changes Medicare.
That strikes me, as I think it would strike most Americans, as very much the wrong solution. But Congressman Ryan deserves respect for his honesty—for being one of the few members of his party, or of either party, to tell the public exactly what he’d cut. That’s far better than pretending that the solution to higher deficits is simply lower taxes and wishful thinking. In fact, as much as his party’s leadership tries to distance itself from his plan, Paul Ryan’s program, or something very much like it, is the logical outcome of the Republican rhetoric of cutting taxes and deficits at the same time.
OK — we’re a little worried at the Concord Coalition that the harder the politicians work at finding agreement on health care reform, the more likely we’ll end up with a reform that doesn’t actually “bend the health cost curve.” From a “Tabulation” blog post by Concord Executive Director Bob Bixby:
If we learned anything from last week’s health care summit, it is that the final end game negotiations will not take place between Democrats and Republicans but among various factions of Democrats…
One casualty of the situation may be cost containment. Democrats are mostly united around coverage expansion. That’s the easy part. Their biggest difference is on the more difficult question of aggressive cost containment. The two most promising cost-containment strategies still on the table are the tax on high-cost health care plans and the Independent Payment Advisory Board (IPAB). Both were adopted by the Senate but not by the House, where they remain deeply unpopular.
If the price for securing 218 votes in the House is eliminating or neutering these provisions, the result will be a bill that expands coverage with very little prospect of controlling costs…
President Obama has already given ground on the high-cost tax. In his latest summary of proposals to bridge the gap between House and Senate Democrats, he proposes that implementation of the tax be delayed until 2018. However, while some phase-in period may be appropriate, the same forces fighting the tax now will not simply melt away over the next eight years. The projected cost savings from this provision are thus looking increasingly speculative.
The assumed cost savings from IPAB may also be in danger. The President proposed this idea last summer as an ongoing method of reviewing Medicare expenditures and proposing ways to keep costs under control. While it has been watered down, the President remains committed to the concept. However, many influential House members view it as an intrusion on their ability to set Medicare payment rates and have opposed it from the outset.
Wait — remind me: why was it we were pursuing health care reform?
House Majority Leader Steny Hoyer gave a speech on fiscal responsibility at the Brookings Institution today. He reaffirmed his strong faith in PAYGO (pay-as-you-go) budget rules as “so valuable” to the cause–although he acknowledged the large exemptions for current policy and at the same time brushed that qualification aside a little too easily (for my tastes).
But my favorite part was when he talked about how the politically easy choices are the economically devastating ones:
The most important lesson we can draw from the years of recklessness is this: when it comes to budgeting, what is politically easy is often fiscally deadly. It is easier to pay for tax cuts with borrowed money than with lower spending; easier to hide the true costs of war than to lay those costs before the people; easier to promise special cost-of-living adjustments than explain why an increase is not justified under the formula in law; easier to promise 95% of Americans that we won’t consider raising their taxes than to ask all Americans to contribute for the common good. Those kinds of easy choices are so often selfish choices—because they leave the chore of cleaning up to someone else. Easy choices may be popular—but the popularity is bought on credit.
Washington’s behavior will only change when the incentives change: when voters demand more responsibility, and when the political price for easy choices rises sharply. As I said, I’m hopeful that just that is happening. But the public has a responsibility, too: to educate itself about the sources of the deficit and the range of realistic solutions—not to demand that government continue to escalate entitlement payments and lower the deficit at the same time.
We can’t meet this challenge unless the public is ready to confront tough choices, and unless leaders in both parties are ready to be honest about tough choices. When deficit solutions meet resistance, which they will, and when they are painful, which they will be, it’s our job to explain why they are also correct—and essential.
“Steadfast Steny” can talk like this without being a hypocrite, as he’s taken a lot of courageous positions and votes, even in his role as Majority Leader where he’s supposed to be worried about the politics.
UPDATE Tuesday morning: The NYTimes’ Jackie Calmes points out that Steny bravely “challenged the sacred cows in his own party” by suggesting some fairly specific options to damp down spending on Social Security and Medicare. My observation is that for most in Steny’s “own party”–including the President himself–the (Bush) tax cuts for that very-broadly-defined middle class of households with incomes under $250,000 have (bizarrely) become another “sacred cow” of theirs (the Democratic Party). And that’s the problem. How can the Democrats work in a bipartisan manner with Republicans if what they would otherwise negotiate on–in terms of “I’ll give up this (entitlement spending) if you give up that (tax cuts)”–is not really bargaining for anything they really want?
Well, in this interview with CNN’s Don Lemon, the Congressmen say it’s mostly for personal reasons–wanting to spend time with their children and grandchildren–but it also seems obvious that the frustration over the partisanship and the inability to work together to get things done is what makes the difference at the margin, especially for these centrist-leaning members. And here’s another part of the interview that asks them, “Is the government broken?”
YouTube video of a GE commercial (there’s both a dancing elephant and a parrot in it–as well as other supporting characters in this unusual “Singin’ in the Rain” cast).
The “elephant” is not a reference to the GOP, but the “parrot” is a reference to health care reform… (Stay with me here…)
The Washington Post’s Kevin Huffman writes about both animals today, in the context of yesterday’s health reform summit (my emphasis added):
Thursday’s health-care summit was the latest episode in an epic battle between the elephant and its rider.
The elephant, in a metaphor originally devised by psychologist Jonathan Haidt, stands for our emotional side. It enables our capacity for love and loyalty and is behind our drive to protect our families. The rider stands for our rational side. It’s what makes long-term plans, sets the alarm clock and tells us to walk away from that pint of Ben & Jerry’s.
For the better part of the past year, Democrats have appealed to logic with health-care proposal after complicated health-care proposal, while Republicans have appealed to tea party emotion. It’s been comprehensive reform vs. the audacity of nope, and, if you believe the polls, nope is winning.
How is this possible? Well, in the fascinating new book “Switch: How to Change Things When Change Is Hard,” authors Chip and Dan Heath draw from social science research to argue that we embrace change only by bringing these oft-conflicted systems into alignment. They argue, “When change efforts fail, it’s usually the elephant’s fault since the kind of change we want typically involves short-term sacrifices for long-term payoffs.” At the same time, the rider without the elephant is prone to paralysis by over-analysis. Ultimately, the authors write, “a reluctant elephant and a wheel-spinning rider can both ensure that nothing changes.”
To me, this elephant-and-rider story is not just reminiscent of the health care debate; it’s the storyline of anything the government tries to do for the sake of “fiscal responsibility.” It’s a hard problem to solve and the “elephant” in all of us isn’t just unconvinced, but completely disengaged…disenchanted…uninspired… BORED.
At yesterday’s health care summit, the President was indeed in control and acting like “commander in chief”–but more than that he was acting like “professor in chief” (as the Post’s Dana Milbank emphasizes in his front-page story and as I “tweeted” saying “Professor Obama is on a roll…”). But who was listening, and who changed their minds? Out of everything the President explained, got right, and straightened out (like the wise and commanding professor), the line that probably made (or should have made) the most impact with not just the politicians but more importantly the American public (if they were watching at that point) was this one highlighted by E.J. Dionne:
[G]ood for Obama for asking Sen. John Barrasso (R-Wyo.) if he would really rather have catastrophic care than comprehensive health coverage…But Obama then made the central point of the whole day. Speaking of the uninsured, he said: “We can debate whether we can afford to help them. We can’t say they don’t need help.”
Back to Kevin Huffman’s column, he also thinks appealing to the compassion in the politicians and Americans more generally would have been better than lecturing to them:
My unsolicited advice: a little less rider, a little more elephant. When Kathleen Sebelius talks up “pooled purchasing options,” people’s eyes glaze over. The logical arguments are good, but my elephant could not care less. Instead, try tapping into a deeper sentiment: This is America. We are the kind of country that doesn’t let a man go bankrupt because his wife or kids get sick. We believe everyone deserves a doctor. That’s who we are.
So what’s the “parrot” got to do with anything? Again from Kevin Huffman:
In “Switch,” the authors tell a story about the St. Lucia parrot — a magnificent, colorful creature that lives only on that Caribbean island. Biologists were writing the species’ eulogy when conservation activist Paul Butler found himself charged with figuring out how to save the parrot. Butler had ideas: create a bird sanctuary, license eco-tourism and muscle up the punishments for harming the parrot. But he also had a problem. Most people on St. Lucia didn’t know about the parrot, let alone care, and some people even ate the poor bird. What to do?
Instead of making an analytical case, Butler went for the emotional. He appealed to St. Lucians’ national character. The message: We are the kind of people who take care of our own. This bird is ours alone, and we must protect it. He built popular support for new laws, and today, there are seven times as many parrots happily squawking on the island.
If the appeal to “emotional side” in all of us had been emphasized at yesterday’s summit, not only would the politicians have been more likely to see the “common ground” between them in terms of the goal or the “prize,” but they also would have been more inclined to work together to find agreement about the really tough choices about how to afford to claim the prize–how to achieve what everyone actually wants to do about health care, and deficit reduction, and all the other difficult policy issues that get stuck because people care only enough to want the goodies but not enough to be willing to pay for them.
[T]he first thing the President’s fiscal commission needs to do is to start getting out there and talking with real Americans, educating them about why we even need to worry about the budget deficit, and asking them about the (hard) choices they’re willing to make (or not).
…because I have a feeling that what Paul Tsongas said was right (that we are better than what our leaders ask us to be), and we as Americans may be more willing to save the “parrot” of health care reform (or fiscal sustainability more generally) than our politicians realize. They just have to talk with us more about the parrot and all there is to love about it, rather than all there is to think about it. They have to let our elephant in us save the parrot.
Oh, boy! Are you ready for a full day of health-reform summit viewing? (Complete and live coverage will be on C-SPAN today, with extensive live coverage on CNN.)
Ezra Klein, the Washington Post’s uber-blogger and resident health policy expert (and all-around wunderkid), does a nice job summarizing what to expect from today’s bipartisan meeting of minds (…ok, probably just a meeting of bodies).
And here are some other pre-game features from this morning’s Post:
Friday morning update: Ezra’s “post-game wrap-up” is great. Visit his blog site and then scroll down for the whole day’s worth of posts–including a Skype chat with Diane Sawyer! (More from me on the summit later.)
I do like that Senators Wyden (D-OR) and Gregg (R-NH) have worked together in a bipartisan manner to come up with a tax reform plan that lives up to the term “reform” (as in “improvement”) by actually broadening the tax base and eliminating some tax expenditures that seem to have little economic justification. But a read through their own op-ed in today’s Wall Street Journal suggests how they chose which particular tax expenditures to eliminate and which to keep (emphasis added):
By streamlining and modernizing the outdated tax code, our proposal would eliminate many of the specialized tax breaks that currently benefit one group of Americans over another. The changes we propose will create policies that benefit everyone. They include: fiscally responsible middle-class tax cuts, business tax breaks to help American companies compete globally and create jobs, and a fairer and simpler tax system for all Americans…
We make fiscally responsible tax reform possible by eliminating many of the specialized tax breaks strewn throughout the tax code. Our legislation maintains the most popular tax breaks like the mortgage interest deduction and the health-care tax exclusion, while eliminating specialized exemptions such as a company’s ability to deduct as a business expense punitive damages resulting from lawsuits.
Our legislation also eliminates tax incentives that encourage American businesses to keep more of their foreign earnings overseas and export jobs by repealing the rule that allows U.S. companies to defer taxes on foreign income. And we take a hard line on corporate welfare by directing the Congressional Budget Office to examine the roughly $90 billion that the federal government spends to subsidize businesses directly and indirectly each year. These steps not only make the tax code simpler and fairer for everyone, they reduce opportunities for individuals and businesses to cheat the system and avoid paying their fair share…
The pattern is familiar: even in base-broadening tax reform, avoid raising taxes on “real people” and instead reduce tax preferences that currently benefit “evil corporations”–or otherwise attack things that seem to fall under the “waste, fraud, and abuse” category. Note that the proposal only directs CBO to “examine” tax expenditures, and only the corporate ones at that. Wyden and Gregg make a point of preserving the “most popular” tax expenditures and specifically point out their keeping the mortgage interest deduction and the health-care exclusion. Just because these are “popular” doesn’t mean they’re (economically) “smart.” The two examples touted are in fact the two single largest tax expenditures in the federal budget–the mortgage interest deduction costing more than $100 billion per year, and the health care exclusion more than $150 billion per year (each more than the value of all corporate tax expenditures combined). Eliminating the health care exclusion alone would be enough to get the 2015 deficit down to the Administration’s goal of 3 percent of GDP and would promote greater efficiency in the health care market by bringing out of pocket prices more in line with the true cost of health care (thus helping to damp down excess demand and ultimately bring down health costs). But any good politician would ask: why would we want to do that if it means so obviously raising taxes on real people–even if it would work to reduce health costs over time?…
And that’s why it’s hard to be popular and smart at the same time. And if politicians propose a “bipartisan” tax reform plan you can be sure it looks like it gives more away than it takes and probably doesn’t do as much to truly “reform” the tax system as is advertised. The Wyden-Gregg proposal is a step in the right direction, but it’s not that bold a change and doesn’t really make any tough choices. It’s a familiar pattern.
The White House presented their proposal for health care reform today with a good deal of virtual fanfare on their very impressive webpage devoted to the much-hyped “health care meeting.” (For the real live show and audience participation/crowd reaction, we’ll have to wait until Thursday.)
The proposal is supposed to be somewhat a compromise between the House and Senate versions of health reform. But it’s a very familiar kind of compromise in that instead of encouraging both sides to give up something that they want (but is costly), it trims the fiscally responsible pay-fors that make the most economic sense but that politicians (on both sides of the aisle actually) would rather not swallow. In the case of health reform, the number one smartest thing to include is the higher taxation of employer-provided health benefits. The Senate proposal included this feature via an indirect excise tax levied on insurance providers, which was already somewhat of a “second best” solution from an economic perspective because it didn’t allow the tailoring to households’ ability to pay that a tax levied directly through the personal income tax would. The Senate’s indirect tax, in an attempt to look like it didn’t burden anyone who wasn’t truly rich, had already been diluted by exempting all but the most expensive insurance policies, and it wouldn’t take effect until 2013. But the President’s proposal reduces the tax further by delaying the tax another five years, to 2018.
If you look at the section on the White House’s health meeting webpage that highlights the “Republican Ideas” the Administration supports/includes and compare it with the subsection on the aspects of the President’s proposal for “Ensuring Fiscal Sustainability” (implying the proposals that actually lower the deficit), you’ll find no overlap. That’s because the only thing both sides agree on is in cutting things that sound like they’re just “waste, fraud, and abuse”–which doesn’t get us far enough to count as “ensuring” “fiscal sustainability.”
Given what the White House reveals/admits on their health meeting webpage, we shouldn’t expect to be dazzled by all the “bipartisan fiscal responsibility” we’ll see on Thursday.
