Why the “Doc Fix” Doesn’t Fix Health Care
October 19th, 2009 . by economistmomAs we explained in a Concord Coalition press release today:
The Senate is expected to consider a bill this week that would permanently increase physician reimbursement rates relative to the current Medicare “sustainable growth rate” (SGR) formula and exempt this “doc fix” from pay-as-you-go budget rules (PAYGO). This exemption would increase federal deficits by roughly $250 billion over 10 years.
Concord said that changes in the payment formula should be included and paid for as part of comprehensive health care reform. The issue of how Medicare reimburses physicians is central to the broader effort to get Medicare and health spending in general onto a more sustainable path…
“…If policymakers believe that the current SGR formula is unrealistic, they should replace it with a more appropriate policy and pay for the change in keeping with their pledge to reform health care in a deficit-neutral way. If paying for this SGR change means there would be fewer offsets on the table to pay for expanded coverage, then policymakers would be forced to appropriately weigh their priorities and make the necessary tough choices–either scale back other costs in the health reform package or find more ways to pay for the larger bill,” said Concord Coalition Executive Director Robert L Bixby.
If it seems odd to you that this “doc fix” is not being considered as part of the “health care reform” bills in Congress, well, you’re right. It’s actually ironic and clever at the same time. The irony is that the doc fix represents one big way in which federal policymakers want to “bend the health cost curve” in the wrong (upward) direction. (See Figure 2 in this CBO issue brief that although a few years old still well explains the SGR situation today; what Congress wants to do is follow the curve shown as “Option 3″–without offsetting the cost relative to the current-law baseline.) The cleverness is that Congress wants to keep this “fix” separate from the rest of health care reform to make it easier to keep the combination of policies that do fall under the official “health care reform bill” deficit neutral, and they know that a deficit-financed “doc fix” in a stand-alone bill will be easier to pass than a paid-for “fix” in any other bill.
This does not bode well for our ability to bend the health cost curve in the right (downward) direction in the future, especially when so much of the longer-term “bending” seems to rely on the idea of a commission forcing Congress to actually make the as-yet-unspecified, put-off-to-the-future tough choices. As my boss, Bob Bixby, puts it:
“The current SGR payment formula was originally enacted as part of the 1997 balanced budget agreement to slow the growth of physician payments. Exempting a change in that formula from PAYGO would undermine the credibility of promises now being made to restrict provider payments in the future. Why should anyone believe that Congress will enforce future promises to limit provider payments when it cannot summon the political will to enforce the limits it has already enacted?” Bixby said.
I keep wondering if some day maybe 10 to 20 years from now we’ll be dealing with the “health care reform commission fix” and still searching in vain for the external mechanism or rule that would bring us effective fiscal discipline–when the only thing that would really work is a lot more personal courage from our politicians, and a lot more encouragement and praise and votes for courageous politicians from the public.
UPDATE/Addendum: Forgot to point out that Monday’s lead editorial in the Washington Post echoes Concord’s sentiment (or we echoed theirs). I especially like their emphasis on the many “fiscal time bombs that will need defusing soon… [most significantly,] the Bush tax cuts…[which involve] huge costs…that the administration would, for the most part, prefer to assume away.”
We all knew that the promised adherence to SGR was a lie, included in the bill solely to force the CBO to endorse another lie: that the bill would not increase the deficit.
Everyone knows that Democrats were never going to let the SGR cuts take effect. That sort of dishonesty is normal in politics these days. What’s bizarre is that the Democrats can’t even wait until the health care bill passes before they start dismantling its budgetary foundation.
Dishonesty and incompetence are a bad mix for politicians. Perhaps they will be a good combination for educating the voting public.
When it comes to Congress’ concept of PayGo, “www” stands for “What We Wanna pay for as we go”
In an ideal world of rational and responsible decision-making, the decision on expansion of coverage would take place in the context of a long-term-oriented, comprehensive “Grand Compromise”, perhaps generated or stimulated by a commission such as the SAFE Commission, with tough safeguards such as a high hurdle for overriding key metrics of the deal. Yes, I realize what a bear that would be to work out, for the very reason why it would be the ultimate in rationality: all trade-offs would be considered, across and within the tax and spending sides.
I also realize that for however long it took to work out such a comprehensive deal, most of the uninsured would remain uninsured, and I realize that some may consider (in the abstract) universal coverage (or much closer to it) a priority that must be worth whatever sacrifice is needed to offset it, but until we work out some solution to the broader problem of the long-term fiscal imbalance and the trade-offs we face, I’d rather any health insurance “reform” be more modest and less expensive, probably just subsidizing (and mandating) of catastrophic/high deductible coverage.
“Clever” is not the word.
Brooks, in politics was there ever a time that the ends did not justify the means, on both sides? If so, I don’t recall it. Politicians have been ruthless since before the beginning of recorded history.
Something this whole matter of SGR-related bookkeeping and scoring shenanigans highlights is that the whole concept of “offsets” to “pay for” a new entitlement is misleading, because either those particular supposedly planned offsets won’t happen per the ostensible schedule or at all, or even if they do, sacrifices on the spending and/or tax side of that magnitude — and much more — are inevitable because of our long-term fiscal imbalance. In other words, we should consider that level of tax increases or cuts in projected spending as a given, albeit perhaps later rather than as scheduled when an official “offset”, and thus we should consider the new entitlement spending to be the only truly new element introduced to our fiscal future.
Yes, I would absolutely prefer PayGo to nothing, simply because, if actually implemented, it would mean that the inevitable increments of budgetary sacrifice (in whatever form) would occur sooner rather than later, but it’s folly for anyone to look at any new entitlement spending, even if one believes it will be fully “offset”, as “deficit-neutral” just because spending cuts and/or tax increases that are going to happen anyway are called “offsets” to this incremental spending.
AMT,
I’m not sure what you’re asking.
Brooks,
We’ve had this discussion before but this is exactly why I prefer nothing to PayGo, at least as would be implemented by Congress. In the current context, it’s left to blogs to point out the obvious disingenuousness of this whole process while Congress crows about having passed PayGo as a new level of “fiscal responsibility”. Like so many things in Washington, is style over substance and the issues are varied and complex enough that most cannot follow.
As I’ve said before, no statutory solution will work because any such solution will either be designed to be useless (the current approach) or disregardd by a future Congress (Graham Rudman or the 90s version of PayGo). As for your notion of a grand compromise, I see only 3 potential practical and long-lasting solutions: a balanced budget amendment, a line-item veto, or a dramatic reduction in the scope of the Federal government. Each of these would require constitutional changes but no other solution is likely to be stable as anything else would rely on the legislature to self-police, a most unlikely outcome in my opinion.
Brooks, I apologize for a poorly focused response to your post. My sleep-deprived point was that it’s unrealistic to expect rational and responsible decision-making from politicians. It’s just not a natural aspect of the political system.
Unprincipled pursuit of partisan ideological objectives is the natural state of affairs. Any realistic proposals, including those of the Concord Coalition, must be compatible with that natural condition. Neither Concord nor anyone else has proposed a politically viable solution.
In the absence of such a solution, I believe that a dollar crisis will force the Fed to create trillions of dollars to buy government debt, inflating the currency dramatically and creating tens of millions of angry voters who are finally willing to support massive cuts in government spending or to accept the de facto cuts that inflation made. That’s the way it happened in Argentina.
The welfare state is a luxury good, and we have been living beyond our means, with an unsustainably large set of government benefits. When the bill comes due, we will cut back on this luxury.
Here’s another reason why the “fix” doesn’t fix, via Andrew Biggs: The Baucus plan is not only a “classic” raid on the Social Security trust fund, but prehaps the classic raid. Quoting:
So it works:
Create new SS wages and tax revenue and thus new SS obligations (by converting currently nontaxable benefits to taxable wages), then
Spend the new SS taxes on health care now to declare Obama/Baucus care “deficit neutral” over 10 years, while leaving all the new SS obligations unfunded, then
After the 10 years pass, finally face the debt “incurred to oneself” above. (Either by increasing income taxes by even more than they are on course to be raised now [50% by 2030] to “repay” the debt incurred to the SS trust fund for all the money taken from it within the 10 years to cover the health plan … Or by not raising taxes and letting the govt’s credit rating crash that much sooner.) Meanwhile …
Because the debt that must be covered won’t appear “on the books” until after the 10 years pass, declare the objective of passing a fiscally responsible, deficit neutral health plan “achieved”! …
Even though the debt that hits after 10 years was in fact incurred within the 10 years but kept “off the books” through the ploy of borrowing from oneself for the 10+ years.
So that in fact, using real accounting, SS in particuilar and the govt in general go deeper into the fiscal hole the minute this plan goes into effect in the first 10 years.
Which should leave Obama and Baucus very happy that they get to use governmental accounting. Because if as a CEO and CFO they ever tried to use this ploy anywhere outside of govt, they’d wind up in the cell adjacent to the ones holding the guys from Enron.
It continues to be a mystery of human behavior to me: Why do we all en masse accept behavior on the part of politicians and government on a level so much below the lowest we would ever accept in the private sector — even as we all rush to them to save us from the private sector?
Jim,
Are you saying that a higher SS “trust funds” balance means we must spend more (over the long-term) on SS? Or that it means we are highly likely to spend much more on SS? In other words, to what extent are you saying that these incremental SS revenues either must or likely will translate into higher SS spending over the long term?
Or are you just saying that it means higher projected spending based on the (questionable) assumption that benefits are provided per current law (and funded with increases in the FICA SS tax rate and/or applicable income or supplemented from general fund revenues, since presumably there will still be a long-term gap)?
It seems to me you and Ezra are being quite modest about what the Democrats are trying to achieve here. And what’s the virtue of modesty in situation like this?
I’m trying to see what is wrong with this observation. (Indeed, it’s been described as “clever” right here, a couple posts ago.)
But Ezra Klein sees the fallacy in this view that the “doc fix” is some kind of new gimmickry that Democrats just came up with; he very appropriately labels it a “proud bipartisan tradition.” …. passing major pieces of legislation that on paper are scheduled to end yet in practice never do … Bush tax cuts… etc.
Well, it’s always nice to see people like Ezra adopt the defense, “We’re no worse than the Bushies!”
That said…
#1) I don’t see where either article says today’s Democrats “invented” budget gimmickry such a fiscal legislation scored as having expiration dates — which also is not the nature of the legislation at issue here.
So this argument seems to be sort of a red herring intended to distract from the real point. That point being…
#2) This particular ploy is, in fact, historically pretty much unprecedented both in scale and BRAZENNESS. I’d like to be wrong about this, so feel free to correct me, but…
[] The thing about fiscal legislation with an expiration date is that it actually expires. The original enactors may hope it will be renewed, but that is not up to them.
E.g: Since forever there have been a bunch of items such as the R&D tax credit known as the “extenders” because they are perpetually about to expire and need to be extended (also known in some legislative circles as the annuity providers, since they bring the same lobbyists back with campaign contributions on the same issue every few years) — but they actually have expired and been re-worked on occasion. There is always the choice to do so.
Take the Bush tax cuts. Qualitatively there is a big difference between first enacting them in a world of projected surpluses (where they are plausible enough to have been supported by Friedman and a significant list of other first-tier economists one could name) … and then, after they expire, renewing them at a much later date in a different fiscal world where the smallest projected deficits in the future are bigger than the biggest of the horrible, horrible Bush deficits of the past.
As these Bush cuts now come up for renewal, ’tis a pity that Krugman, Ezra, and their kind have lost the courage they once had to protest those tax cuts. But that is their free choice and decision to make, as a matter of policy going forward.
Be that as it may, what the WSJ and WaPo are talking about is a very different thing…
[] A President and Democratic leadership proclaim:
“Read our lips: This health care program will cover its costs to the dollar and not increase the deficit at all. We promise!
“And to show we mean this promise, we are cutting a quarter trillion dollars in health care payments to Interest Group X, to make this health plan balance. How about *that* for being fiscally responsible!
“AND ALSO to show that we keep all our promises — particularly our promise to Interest Group X that enacting our health care plan will not result in any reduced payments to it — we are simultaneously passing separate legislation to increase payments to Interest Group X by that very same quarter trillion dollars!
“Does this not show we keep our promises to everybody!?? Our health plan’s finances are balanced by cutting its payments to X by a quarter trillion dollars — without cutting payments to X at all!!”
Again, I’d be happy to be wrong. So can anybody show me an example of the Bushies or anyone else proclaiming that they’ve met a fundamental budget promise they’ve made by cutting expenditures through law A by $Z billion, while simultaneously increasing the very same expenditures through law B by $Z billion — on a scale of a quarter trillion dollars?
If not, then we must admit the Democrats really have innovated something significant here.
But even if so … is that really an excuse, Ezra??
The Bushies are receding ever further back in the rear view mirror, and the surviving Repubs are far from power.
Sooner or later Ezra and his friends are going to have to take ownership of their own policies — and stop excusing themselves with “Just think of the Bushies, the Bushies, the Bushies…”
If you are using an unprecedentedly (or even precedentedly!) brazen ploy to have it both ways simultaneously on the budget, to the tune of a quarter trillion dollars, don’t shyly somehow push credit for what you are doing onto the Bushies of days gone bye.
Be proud. Have the courage to take full credit for what you are doing yourself. You deserve it!
Drat. The prior comment obviously was posted in the wrong thread.
That’s the problem with having two windows open at the same time, both to posts with “Doc Fix” starting off the title.
Jim
Re: the Bush tax cuts, first of all, citing Friedman’s approval of any particular tax cut is fairly meaningless, since he made it pretty clear that he favored tax cuts under darn near any circumstances because his overriding objective was substantially reducing spending and he had strong faith in “starve the beast”. In fact, he considered deficits a good thing for that very reason, so it doesn’t make much sense for you to say that “projected surpluses [were] plausible enough [for the tax cuts] to have been supported by Friedman” as if Friedman would have opposed tax cuts unless he was confident we were in “a world of surpluses”.
Second, I know you’re not politically naïve. You know darn well that the sunsets of the Bush tax cuts were just a disingenuous budgetary gimmick to reduce the ten-year adverse impact on the budget, and you know darn well that what could be called “clever” about the sunsets is that (1) they enabled passage of the legislation by artificially lowering the ten-year impact and (2) they would put any politician opposing extension of the tax cuts in the politically costly position of looking (accurately) like he was pushing for a tax increase, which you know is more politically costly than just opposing a tax cut. So it’s silly for you to present the sunsets as sincere and designed to be (and actually being) sensible, and, while those favoring extension of most of the Bush tax cuts should indeed be taken to task (as Diane has done repeatedly with regard to the Obama administration, to her credit), it’s quite an omission when you to attack Democrats as complete hypocrites while ignoring the tough political spot the sunsets put them in.
And as for that projected “world of [multi-year] surpluses”, something that was considered far from a certainty among serious folks at the time, obviously an alternative, much more prudent approach could have been to wait to see if the surpluses actually materialized and use them to pay down debt, precisely because of those projected long-term deficits that you mentioned (and then some). Yes, I realize that some/much of a given year’s surplus could have led to incremental spending rather than debt reduction, but if that seemed to be happening to an excessive extent, tax cuts could have been implemented at that time (i.e., after giving a shot at Congress using them for debt reduction). And yes, I’m aware of Greenspan’s 2001 expression of concern about our paying down ALL of our debt and leaving financial markets without Treasuries yadda yadda, but (1) he added qualifiers intended to promote caution and course-correction in case surpluses didn’t materialize, (2) it didn’t seem (to me and to many others much more knowledgeable) to make much sense to start solving this potential nice problem to have long before it was clear that it would occur, at risk of things going poorly, and (3) he was probably self-servingly seeking to keep his job, which depended on Bush.
As a note, Bush’s brilliant tax cut ideas weren’t really based on economics or the need to prevent surpluses being used mostly for incremental spending anyway; they were intended to fight off Steve Forbes in the primaries. Of course, rhetoric is another matter — Bush’s talking point, repeated ad nauseum was “The surplus is not the government’s money. It’s the people’s money”, to which I kept telling people “Yeah, and whose federal debt is it?”
Now, on the “doc fix” shenanigans, for which I think Reid et al deserve all the scorn that is being heaped upon them for seeking that incremental spending without even the pretense of “offsets” (I say “pretense” per my explanation upthread http://economistmom.com/2009/10/why-the-doc-fix-doesnt-fix-health-care/#comment-4815 ), if my understanding is correct the related ostensible projected cuts in physician payments were not offsets in the healthcare bill (because the incremental spending of the “doc fix” wasn’t in the baseline to begin with), so the degree of “cleverness” you describe doesn’t really apply. As lame and irresponsible as it is that Reid wants to commit to that incremental spending and exempt it from PayGo, what he seeks/sought is just to separate a Medicare funding matter from the matter of subsidies for getting the uninsured (obviously a different segment of the population) covered under a different program, albeit with both under the broad banner of “health”. Although, as I express upthread at http://economistmom.com/2009/10/why-the-doc-fix-doesnt-fix-health-care/#comment-4810) my ideal is a holistic, comprehensive approach or as close to it as possible, in principle I don’t see dealing with a Medicare issue and an expansion of coverage issue in separate legislation as much/any worse than, say, having separate legislation on Medicare and Social Security, respectively, simply because in the former case both relate to healthcare.
As a note, I’ll bet many members of Congress now posturing in protest at Reid’s effort are going to go along with annual “doc fixes” one at a time, just because one year’s price tag is lower and less alarming to the public than the ten-year cost.
I do see a qualitative difference here in the following sense.
1. First the President says that no HC reform will add one dime to the budget deficit.
2. We fudge the bill (e.g., 6 years of benefits vs 10 of receipts)
3. Some smart guy at CBO says it will still add to the deficit (in part b/c of the doc fix)
4. We pull the doc fix out (or do it for 1 year) and declare that we have met the objective of budget neutrality for HC reform
Brooks, I think you are reaching when you say doc fix and HC reform are as close as SS and Medicare. Medicare (and doctor payments therein) are clearly part of HC reform. In fact, the primary source of funding in the Senate FC bill is reduction in projected Medicare payments. To argue these are separable since one is a Medicare issue and the other expansion of benefits is beyond silly and, in my view, is much worse than having Medicare and SS be separate. It’s more like saying we’ll have one bill to pay the docs and another bill to pay the hospitals and another bill to pay the drug cos. Sure you could do that, but no sane person would.
In any event, I grow weary of the arguments about who is worse and who broke the rules first and who is more disingenuous than whom. We’re all stuck in the stupid place of arguing that because the other guy broke the rules, I can too. Like in the NFL, you got to throw a punch at the other guy because he threw one first. At least NFL refs throw two flags and call offsetting penalties.
Steve,
First, I think you’re wrong on #3, as I pointed out in reply to Jim upthread. I don’t think CBO scored the bill with the (ten year) “doc fix” at all. If there were a “doc fix” and it were left as part of the “reform” bill, then yes, it would have screwed up the “deficit-neutrality”, but I think CBO assumed no ten-year “fix”, and what Reid was trying to do was to pull the matter of Medicare physician payments out of the “reform” bill so that he could get the “fix” (without “offsets”) as separate legislation.
Re: I think you are reaching when you say doc fix and HC reform are as close as SS and Medicare
My point wasn’t that it was necessarily exactly the same in proximity, only that I don’t see the linkage — in terms of rational budgeting, meaning viewing choices among trade-offs together based on some practical relationship or interaction or effect — as much stronger in the case of Medicare physician payments vis a vis subsidies to the uninsured to get coverage than in the case of Medicare vis a vis Social Security. And a reasonable argument could be made that the latter two are more closely linked since they relate to the same segment of the population and perhaps we should think holistically in terms of spending on that segment, with, say, a Medicare drug benefit offset by some reduction in projected Social Security spending. See what I mean? I’m not saying that’s the only way to determine what categories of spending should be packaged together in a bill, whether the bill needs to be “deficit-neutral” or not, just that it would be a reasonable view and approach. Alternatively, we can lump things together in a “deficit-neutral” bill with incremental spending here and “offsets” there in a way that essentially “costs” one segment to provide some “benefit” to another, as is the case with, in effect, taking away Medicare Advantage benefits from seniors to provide subsidies for uninsured non-seniors. I suppose one can argue (and this may be what you’re saying) that, having made seniors sacrifice in that way to “fund” those subsidies, they should be “compensated” with the “doc fix” and that any such “compensation” should be factored into the overall deficit impact (since, per that argument, it was the sacrifice imposed on them [losing Medicare Advantage benefits] that compelled this “compensation”) and thus should be included in the bill that must be “deficit-neutral”. That’s a fair argument. But the strength of that argument hinges on the fact that the segment in question was made to sacrifice as an “offset”, not in the relationship between Medicare physician payments and subsidies for the uninsured per se. (And I don’t get your argument that “It’s more like saying we’ll have one bill to pay the docs and another bill to pay the hospitals and another bill to pay the drug cos. Sure you could do that, but no sane person would.” Medicare Advantage relates primarily to payments to insurance companies.)
Steve,
Just to amend that last part of my prior comment, I realize the Medicare Advantage cuts aren’t the only (supposed) spending cuts included in the bill as “offsets”. I need to check on the other categories and the proportions. But in any case, I don’t see what your argument is regarding how much we pay whom for what.
Brooks,
If you look at the bills, one of the House bills scored by the CBO had the 10-year doc fix in and came in at $1.5 trillion I believe which led to all of the mess around the doc fix to begin with. My point is the cuts extend well beyond Medicare Advantage (by my understanding less than half of the cuts are from that). There are reductions in the rate of growth of the core Medicare program and remember, the bundling of HC reform with Medicare reform is being done to make HC reform look deficit neutral.
In fact, we could just use the Medicare cuts to reduce the deficit if we wanted to. My point is the government is in the business of selective bundling and Medicare is part of HC. Thus, to have an omnibus HC reform bill that excludes a crucial part of Medicare funding seems totally strange to me.
Your point about target populations is interesting but by that logic, we would bundle farm bills and highway bills for MW states and have a separate bill for Southern states across issues. We can agree to disagree but for the national government, an issue segmentation, HC, makes more sense that a people segmentation, elderly. I don’t know whether you’re making the argument in response and saying the concern on linkage is feigned outrage. I suspect this is partially true (meaning it is in part feigned as is everything in Washington)
Best
Steve,
I assumed we were talking about the Baucus bill — the Senate bill, since that’s the bill from which Reid was seeking to strip out the doc fix, but since there are, as you say, House bills as well, and I think you’re correct that the doc fix is contained therein, and ultimately bills from the chambers must be reconciled, your raise a legitimate point. I don’t know whether or not that’s what led to Reid’s move, but it certainly seems plausible.
Re: the matter of what categories of the budget are included vs. excluded in a given bill that must be deficit-neutral, my prior argument still applies (and I’m not saying one approach or the other — grouping by some similarity or relationship within type of spending vs. grouping by impact on population segment — is necessarily better, just that reasonable arguments can be made for either, probably varying in strength on a case by case basis). Yes, I see a legitimate argument for a need to include the Medicare doc fix in a “deficit-neutral” healthcare “reform” bill because Medicare beneficiaries have been (ostensibly, at least) made to sacrifice already (loss of Medicare Advantage benefits, and probably more), not simply because Medicare physician payments and subsidizing insurance for uninsured non-seniors happen to both relate to healthcare. Yes, both changes affect healthcare providers and that could be part of some argument for bundling them into the same bill, but the argument would have to be made as for why such bundling is imperative or more so than some other bundling of incremental spending with some “offsets”.
[Separate note: there are one or two comments of yours on threads that I've been remiss in not replying to. I'm behind on blog replies and email replies in interesting discussions I've been having with some of my favorite commenters (e.g., you) and email discussion/debate acquaintances. Not that I presume it's a big deal to anyone, but I hope to catch up, if/when I do reply I'll let you know on a new thread and provide link back, and sorry for the delay.]
Thought of an analogy for my point re: “offsets” (comment number 5 upthread).
We’re in a boat with a hole in it, water is gradually flowing in and the boat is gradually sinking. We now must start bailing out water from the boat at a rate of X buckets per minute to avoid sinking much further. Some passenger who has gone nuts proposes punching another hole in the boat and says “Don’t worry. The second hole will have no net impact on the amount of water coming into the boat, because we will ‘offset’ the water coming in through the second hole by bailing out X buckets per minute.”
Since bailing out X buckets per minute was something we are going to have to do anyway, the only change to our boat’s buoyancy outlook would be the additional inflow of water from the second hole — and thus the need to increase our bailing out rate to 2X.
Interesting Brooks but let me take your analogy further. It’s actually the case that water is flowing into the boat at the rate of Y per minute and we are bailing at X and Y is greater than X. Then we punch as new size A hole in the boat and say “don’t worry, I’ve got a bucket that can bail A out of the boat so it’s not a problem that I punched the hole.” Of course I could have used my bucket to help close the gap between Y and X rather than to offset my new size A hole. If you buy that adjustment, it suggests we might think about something interesting to suggest to our colleagues at the CBO.
When the budget is in deficit (isn’t is always), a bill should be *scored* solely on the basis of its cost unless the funding sources exceed the size of the current projected deficit in any given year. Doing it this way takes care of your another hole in the boat problem.
There should probably be an exception for cost improvements or revenue raisers that can only exist as a consquence of the bill. To take a non health care example. A cap and trade bill could count auction revenues from selling permits (since there would be no opportunity to do this without the bill) but other revenue raisers (e.g., fees) should not be counted.
To take it to healthcare now, most of the funding sources that are currently being counted shouldn’t be since they could be used in any event. In this regard the true cost of health care is the cost associated with the bill not the net cost after offsets because the actual impact on the deficit is the cost added assuming we could use the funding sources in any event. This would be a lot more realistic way of looking at it in my view.
This thought might almost get me agitating a representative or two.
Have a great day
Steve,
Yes, I generally agree with your comment. Of course, Harry Reid is the one right now who deserves most to “have a new A hole punched”.
One note. Re:
When the budget is in deficit (isn’t is always), a bill should be *scored* solely on the basis of its cost unless the funding sources exceed the size of the current projected deficit in any given year. Doing it this way takes care of your another hole in the boat problem.
Even that may be going too easy. Given that deficits are projected to grow tremendously under current policies due to powerful forces (demographics and excess cost growth of healthcare), which would argue for the need/desirability to run surpluses now, perhaps an even higher standard should set for considering “offsets” real rather than illusory. Perhaps the standard should be as high as the surplus needed to close the “fiscal gap” (see Figure 1-4 at http://www.cbo.gov/ftpdocs/102xx/doc10297/06-25-LTBO.pdf and related discussion in that document), which is a standard we’re unlikely to meet at least in the foreseeable future.
When will the government run out of money or be unable to borrow? At what level will federal deficits cause inflation or recession, replace private borrowing, be paid for by our grandchildren or hurt the economy in some other way?
Anyone have any specifics?
P.G.
The short answer is nobody knows the answer. A good column by Robert Samuelson to that effect today or yesterday. What we probably can think about fairly practically is the impact of debt on the budget. To wit, Samuelson quotes the Obama budget outline as saying that interest on the debt will approach $1 trillion by 2019. That’s interest. Even accounting for reasonable growth in the economy and therefore the budget by that point in time, it’s probably greater than 20% on debt service. That seems a major issue ot me