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Unipartisan PAYGO Lite

January 28th, 2010 . by economistmom

An Inconvenient Tax - Official Trailer from Life Is My Movie Entertainment on Vimeo.

The Washington Post’s Lori Montgomery reports on today’s Senate passage of the required increase in the debt limit:

The Senate agreed Thursday to raise the legal limit on government borrowing to $14.3 trillion, a historic high that would permit the Treasury Department to cover the nation’s bills through early next year.

The vote fell along party lines, with all 60 Democrats supporting and 39 Republicans opposing a plan to increase the cap by a record $1.9 trillion. The 40th Republican, Sen. Mike Enzi of Wyoming, said his no vote was accidentally unrecorded. If lawmakers had approved a smaller increase, Democrats would have had to revisit the deeply unpopular topic of the soaring national debt before facing voters in November.

Along with the debt limit increase, however, the Senate passed a statutory version of pay-as-you-go budget rules, which in general is a good way to promote bipartisan fiscal discipline, except that this endorsement of PAYGO was far from bipartisan, and this form of the PAYGO rule far from highly disciplined:

Even as they extended Treasury’s authority to borrow, Democrats moved to rein in large budget deficits that are projected to drive the debt to dangerous levels by the end of this decade. As part of the debt limit bill, the Senate voted again along party lines to revive pay-as-you-go budget rules that bar lawmakers from increasing future deficits through tax cuts or new entitlement spending. The House is expected to take up the legislation next week.

A similar rule helped the nation balance its budget in the 1990s, but the new version would carve out $1.6 trillion in exceptions so Democrats could extend tax cuts for the middle class and avert a scheduled pay cut for doctors who treat Medicare patients without finding ways to offset those costs.

Why didn’t any Republicans support the PAYGO provision?  As Sam Stein explains, it’s probably mostly because the PAYGO rule would apply to tax cuts as well as mandatory spending increases.  Both would have to be paid for with offsetting tax increases or spending cuts…. well, unless you’re talking about the ever-deficit-financed Bush tax cuts–or the “doc fix” which proliferated during the Bush Administration as well.

So much for a renewed concern for fiscal responsibility bringing the parties together to meet in the center.  As I spoke of in this NPR story today, until President Obama starts leveling with the American people and talking with them about the tough choices that need to be made on both the tax and the spending sides of the budget, none of the members of Congress are going to work that hard at compromising and coming together with the other side.  And why should the Republicans have to give up their deficit-financed tax cuts when President Obama himself is proposing to continue them?

No policymaker likes to admit that tax cuts are no better than spending programs–well, because they are better to a politician, because they don’t get scrutinized the way direct spending programs do, they look like they reduce the economic burdens on current Americans, and if deficit-financed will merely shift the economic burden onto those future generations who don’t yet vote.  The naivety that most people have about tax policy is a big problem and is the motivation for the new documentary featured above (to be released on April 15th).  This naivety encourages the President to avoid talking about (let alone proposing) fiscally responsible tax policy, which I believe in turn leads to the sort of (”lite”) PAYGO rule and (”unipartisan”) vote we’ve seen today.

31 Responses to “Unipartisan PAYGO Lite”

  1. comment number 1 by: Brooks

    …if deficit-financed will merely shift the economic burden onto those future generations who don’t yet vote.

    I can’t resist linking to my translation of a portion of Obama’s State of the Union speech:
    http://economistmom.com/2010/01/the-presidents-sotu-speech-specific-on-tax-cuts-not-so-specific-on-how-to-reduce-the-deficit/#comment-6585

  2. comment number 2 by: SteveinCH

    Diane,

    I’m sorry to be a nudge, but there’s two other substantial issues with the PAYGO version passed by the Senate as I understand it having just tried to puzzle my way through the legislation. The legislation does not intend to apply to all tax increases. In fact, it pointedly excludes middle class tax increases as well as fixes for the AMT. Second, it does not cover all spending. It’s beyond me to sort through all the drivel in the bill because I don’t easily understand all the antecedent legislation but it’s clear that other things are excluded.

    Were I in Congress, I would probably vote against such a PAYGO version whether or not it included taxes. Since money is fungible, it will be possible to pay for some things and leave other things even further unfunded. For PAYGO to matter, it needs to apply to everything. If it doesn’t, it’s simply a figleaf that irresponsible legislators can use to pretend they are being fiscally responsible.

    So while a Huffingston Post reporter (maybe not the most objective sources) may assume that he can read the mind of 40 Senators, there are certainly other reasons that one might vote against PAYGO.

    This conversation is a bit like the discussion about the commission. Is a weak commission better than nothing? I think probably yes because at least it will produce an answer to which the system must respond. Is a weak PAYGO better than nothing? I’d say no because it produces no better outcomes necessarily AND it provides cover for silly legislators to say they are responsible while they behave irresponsibly.

  3. comment number 3 by: SteveinCH

    One more thought…we need to distinguish between tax structure and tax level.

    Fiscally responsible tax structure is about minimizing negative externalities of revenue realization. Fiscally responsible tax level is about paying for our spending.

    The former is possible in a vacuum, the latter is not. To be fiscally responsible on taxes, you have to start with an understanding of how much spending you want. We lack that as a nation and, imo, PAYGO doesn’t really help.

  4. comment number 4 by: SteveinCH

    OK all, I’m actually pretty excited. I’ve got a model for all of what follows but no way to upload in case anyone wants to see it. Here’s what I did to search for balance.

    A five part assumption exercise.

    1. Eliminate all of the Bush and Obama tax cuts. This was easy to model since it’s basically the CBO revenue baseline from their last report.

    2. Make no transfer payments to the top 25% of income earners or wealth holders. At the moment, I’m modeling this by reducing SS and Medicare payments by 30% since there isn’t 100 percent overlap between the two groups and reducing the offset line in the CBO report by 25% since most of the offsets as I understand it are Medicare payments by individuals. This I think understates the impact a bit since there are other transfers that mostly go to groups that wouldn’t be eligible (think farm price supports).

    3. Reduce the costs of the wars in Iraq and Afghanistan by 50%. 50% because I think there’s fixed cost of having the forces in there that I didn’t want to take out. It amounts to about $65billion that comes out.

    4. Eliminate corporate tax loopholes. I put this in, very conservatively, at a 10% lift over the CBO baseline in corporate receipts. I suspect it’s much higher but as you will see, it doesn’t matter a lot.

    5. Hold discretionary spending constant (both military and non) until there is a budget surplus in the previous year after which it can be raised by 3% in the following year.

    I’m still playing with the model (I think it’s solid but I reserve the right to be wrong — hehe). However, what it comes out with is that these five steps, if implemented in fiscal 11 would balance the budget by fiscal 14.

    The other good news of this result is that one could likely phase the changes in between fiscal 11 and fiscal 14 and still balance the budget by fiscal 15.

    The other thing I like about this is it balances out at about 20 percent of GDP for both revenues and spending in 2019 which I think is a reasonable place to be.

    I’m looking for a sanity check here so any reactions are welcome. Diane, if there’s a way to upload files, I’m happy to upload the spreadsheet.

  5. comment number 5 by: SteveinCH

    More on point 2 above and a refinement I need to make is that I didn’t make the distinction between OASDI and SSDI since SSDI is much less likely to be impacted since it is already means tested.

  6. comment number 6 by: Brooks

    Steve,

    Re: I’ve got a model for all of what follows but no way to upload in case anyone wants to see it.

    If it’s a spreadsheet or other document, you can share it online via Google Docs, which is easy to set up — see https://www.google.com/accounts/ServiceLogin?service=writely&passive=true&nui=1&continue=http%3A%2F%2Fdocs.google.com%2F&followup=http%3A%2F%2Fdocs.google.com%2F&ltmpl=homepage&rm=false

    Let me know if you plan to do so. Otherwise I’d be interested in it and would appreciate your sending it via email to Brooksbud [at] aol [dot] com

  7. comment number 7 by: SteveinCH

    Brooks, I will try to upload it shortly and let you know when I’ve got it there

  8. comment number 8 by: SteveinCH

    OK. If I did this right, here’s the link.

    http://spreadsheets.google.com/ccc?key=0AuHayfGDLeA4dGxLS2dRLS1fcUVjRUdkWGozTy1xY2c&hl=en

    I uploaded in excel format but did it in numbers (mac). There should be three sheets, a baseline (just the cbo numbers), an assumptions sheet, and an output sheet

  9. comment number 9 by: SteveinCH

    Hmmm…this will require a bit more work. I’ll get on it over the weekend. Don’t bother looking at the link. The formulae that linked the files are all lost in translation.

    I’ll post something later however.

  10. comment number 10 by: Brooks

    Steve,
    Cool, thanks. I’ll await word on when it’s ready.

  11. comment number 11 by: Brooks

    Today yet again I was on the phone with a friend venting and lamenting that Obama talked a big, self-righteous game of the need to put the future of the nation ahead of partisanship and personal ambition without actually doing so himself, thereby blowing one of his best opportunities to change the game and make fiscal responsibility more likely.

    It’s silly, self-serving posturing for Obama (and all the other politicians using similar rhetoric) to urge other politicians to suddenly grow a conscience and jeopardize re-election by talking straight and acting responsibly. Instead, Obama needed (and still needs) to use the bully pulpit to change the public opinion that enters into politicians’ all-important political calculus. That’s why it was — and is — up to the president to boldly talk straight to the American people, telling them that:

    1. Everyone agrees that on our current policy course we are headed toward economic disaster. [Brief explanation of the causes and scale of the problem]

    2. We need to make real sacrifices to avert economic disaster. Just as Americans make sacrifices in our personal and family lives for the sake of our own futures and those of our children and grandchildren, we must face the reality that we have to do the same with our national finances and we must demand that Washington do the same on our behalf rather than continue to lead us toward a cliff while avoiding telling us what we’d rather not hear. The sacrifice must be shared broadly, and we cannot object and try to obstruct any sacrifice that affects us personally because the result of everyone doing that will be that nothing substantial will get done to solve this problem.

    3. Despite the misleading messages being constantly delivered by some professional hyperpartisans in the media and in politics who exploit their audiences to make a buck or get re-elected, neither pure, ideologically extreme approach (of left or right) to our long-term fiscal imbalance has any chance of becoming reality because neither comes anywhere close to having enough political support to . Neither will make it through our political process. Some on the left say we should solve the problem entirely by taxing “the rich”, cutting Defense spending, and supposedly saving tons of money in healthcare spending without harming the quality of healthcare. Some on the right say we should solve the problem entirely through cuts in projected social spending. Not only do many of those people fail to really consider the consequences of those approaches, but the reality is that neither has any chance at all of passing a Congress filled with a variety of preferences of left, right, center and points in between, just like Americans across this country. The only politically realistic approach is compromise — a combination approach that includes some degree of increases in taxation, including some additional taxation of the middle class, along with reductions in projected spending across the budget, including Social Security, Medicare, and Defense to the extent possible while protecting our nation and vital interests.

    4. Therefore, those who continue to insist on some pure, ideologically extreme approach and who continue to block any efforts at compromise — such as the bipartisan budget commission that the Senate recently rejected even though most Senators voted for it — are preventing us from changing course and keeping us heading for that cliff.

    5. As I mentioned before, there are professional ideological hyperpartisans in the media and in politics who will keep telling you that compromise is not necessary. They will tell you that because misleading you in that way is how they make a living — in some cases a very, very good living. They present to you a nice, neat, convenient, ridiculously oversimplified and innacurate picture of what kinds of solutions are possible. They know that a lot of people would rather hear that than hear that real sacrifice and compromise are necessary, so that’s what they tell you, because they are in the business of selling you whatever they think sells best. It’s up to you not to buy it. Don’t be exploited by these professional hyperpartisans. Don’t let this “partisan-industrial complex” prevent America from solving a problem that will end in extreme economic pain if we continue on our current course.

    6. And let your Congressman and your Senator know that you want them to work on a realistic, compromise solution, maybe skewed toward the approaches you prefer, but with the compromise necessary to get something done that will truly solve this problem. Go online to Senate.gov and House.gov, choose from their lists your senator and congressman, go to their websites and send them an email through their websites. Tell them you insist on a solution and you are willing to accept necessary compromise to achieve it. You can make the difference. It’s up to you.

    The above is just a rough, quick take on the message I think Obama needs to deliver, coupled with a related P.R. effort — interviews, follow-up speeches, press releases, White House website info and use of social media, etc., etc.

  12. comment number 12 by: Brooks

    Oh, and I should add the following to what should be Obama’s position and message. This would go between my #5 and the “call to action” #6:

    5.5 And to ensure that the sacrifices Washington chooses reflect a fair political process, we need to reduce the influence of big money in politics. We can do that without infringing on anyone’s First Amendment rights. We can do it by enacting the Fair Elections Now Act that will provide more public financing for elections so candidates aren’t so dependent on big money contributors who represent special interests. And this additional public funding would be the best investment taxpayers have ever made, because the public funding provided would the much, much less than the amount of savings to taxpayers. By reducing the influence of special interest money, taxpayers would save tens of billions of dollars every year because Washington wouldn’t be providing those special interests subsidies, special tax breaks and other costly favors.

  13. comment number 13 by: Brooks

    I should also add that he should make clear that reductions in projected spending on Social Security and Medicare will be phased in very gradually, and will take into account the wealth and income of the seniors who are affected in the future as changes are phased in.

  14. comment number 14 by: Brooks

    And in my #1, the discussion of the scale of the problem should include a description of the eventual consequences if we continue on our current course. Something like:

    Eventually so much of our taxes will go just to paying interest on our debt that we won’t be able to provide much support for seniors, to protect our nation, to educate our children, or to keep our infrastructure functioning. And eventually we will not be able to borrow further without paying sky high interest rates that will choke our economy and trigger permanently high unemployment even more severe than what we see today.

  15. comment number 15 by: Jason Seligman

    This is a great post Diane and I have enjoyed the comments as well.

  16. comment number 16 by: Brooks

    Stan Collender over at Capital Gains and Games is once again doing his hyperpartisan spin thing, but this time his post is particularly puzzling, given his prior posts.

    He seems to be implying that it is only — or at least mostly — Republicans who are to blame for Washington’s lack of fiscal responsibility.

    In his post entitled GOP Doesn’t Do Fiscal Responsibility http://www.capitalgainsandgames.com/blog/stan-collender/1454/gop-officially-demonstrates-it-not-party-fiscal-responsibility, Stan writes:

    Item 1. The Conrad-Gregg commission…would have been adopted 60-39 if all of the GOP senators who co-sponsored the amendment voted for it.

    So the commission that Stan not only opposed but repeatedly went out of his way to ridicule along with its supporters was defeated, and as he wrote just a few days ago (correctly, but as misleading spin) “The defeat was absolutely bipartisan: 22 Democrats plus Independent Bernie Sanders (VT) and 23 Republicans voted against it”, yet now he portrays it as clear evidence that the GOP (as opposed to both parties, by implication) “Doesn’t Do Fiscal Responsibility”. I’m completely disgusted by those 7 Republican senators, as I expressed the day after the vote — see http://economistmom.com/2010/01/proud-of-my-senators-for-their-votes-on-the-fiscal-responsibility-amendments/#comment-6560 — but I don’t think its legitimate or helpful for Stan to engage in hyperpartisan spin by pinning the blame on the Republicans as opposed to those at the ideological extremes of both parties (and “extreme” these days seems to refer to a substantial portion).

    In another “Item”, Stan also writes:
    Republicans have been heavily critical of the commission the Obama administration may create by presidential order…The stated reason for the GOP opposition is that there’s no guarantee that a presidential commission’s recommendations will be taken up by Congress even though there’s even less of a chance if it’s not created.

    First, I’m not sure that’s the stated reason of Republican opponents in general, although it is Gregg’s stated reason and perhaps that of others who supported the statutory Congressional commission — and Conrad, the Democrat behind the push for the Conrad-Gregg commission amendment also vigorously opposed a presidential commission as a substitute for the statutory commission he sought precisely for that reason (the lack of guarantee that the commission’s recommendation would come to a vote, in particular an up-or-down vote), and he says he only voted for the increase in the debt limit because he received written assurances from Pelosi and Reid that it will come to a vote [see link in my next comment].

    Second, if not for the opportunity to use this matter to bash Republicans, Stan would almost surely have used this lack of a statutory guarantee that any recommendation will come to a vote to once again ridicule the idea of a budget commission — as yet another sign that there is supposedly no chance of any (or any meaningful) legislation resulting from a budget commission.

    I guess Stan sees his role on CG&G as the official hyperpartisan spinster and shill of the Democratic Party and/or the ideological left. It’s hard to see any other explanation for his consistent distortions, puzzling argumentation and “selective prosecution” (so to speak) of Republicans, not to mention (but I will) the practice he copied from other hyperpartisan bloggers (of extreme left and right) of blocking comments that challenged/refuted his own (about half my comments have been getting posted as of about a week ago, up from zero during the prior several weeks after I challenged/refuted Stan’s arguments against a budget commission*)

    * Perhaps that half have been posted by other contributors or perhaps they were Stan’s token postings of my comments, given my public airing of his apparent censorship and private inquiries directly and via other CG&G contributors, none of which yielded any answer from him.

  17. comment number 17 by: Brooks

    Here’s that last link: http://dmarron.com/2010/01/28/the-debt-limit-is-a-tax-on-the-majority/#comment-1780

  18. comment number 18 by: Brooks

    heh, I just saw/heard David Walker on CNN refer to those 7 senators as “profiles in cowardice”. I won’t flatter myself by assuming he picked up that idea (of using a twist on Kennedy’s book title “Profiles in Courage” to mock those senators) from me http://economistmom.com/2010/01/proud-of-my-senators-for-their-votes-on-the-fiscal-responsibility-amendments/#comment-6560 but I’ll let myself think it’s possible.

    By the way, I heard Walker do an excellent job (he always does) on the radio with Michael Medved yesterday. I’d like to see Walker run as an indpendent for President in 2012 (as a sane, better informed, and more politically savvy version of Ross Perot) to at least force the issue of fiscal responsibility on the major party candidates (and on other candidates for federal office).

  19. comment number 19 by: SteveinCH

    Brooks,

    For fun, I posted the following on Stan’s blog. Let’s see if he lets it through.

    . Maybe the 7 Republicans bought your argument here

    http://capitalgainsandgames.com/blog/stan-collender/1432/brad-delong-gets-it-when-it-comes-commission

    2. The “certain exceptions” in the PAYGO law among other things exclude most of the Bush tax cuts, the AMT, and a host of spending items. It is possible to conclude that this version of PAYGO is more a Congressional fig leaf than a serious budget exercise.

    3. See 1. If you are going to make these arguments, it would be appropriate to admit that you’ve changed your own mind regarding a commission. And if you want to argue “growing indications” and be taken seriously, you might want to say what those indications are. For a while, there were “growing indications” that President Obama was going to pivot to the center. I didn’t see that happen, did you?

    4. The Republican behavior on Medicare cuts is reprehensible but no more so than the behavior of Democrats around SS reform when it was tried or the behavior of the out of power party any time any reductions in spending are in play.

    It’s infuriating to me so see you say the GOP is blocking budget process changes. They blocked PAYGO and, in my opinion, that was right. It’s a piece of swiss cheese and PAYGO on part of the budget is useless. The commission vote, with which I disagree but I would have thought you would have liked, was a bipartisan rejection.

  20. comment number 20 by: Brooks

    Steve,

    Yeah, let’s see if he posts your comment. Just prior to submitting my comment upthread here I submitted the same comment on CG&G — minus the first and last paragraphs and asterisk and addressed to Stan rather than speaking of him in the third person (since the latter could be seen by some as a bit rude…if, that is, it is seen by any).

    The thought crossed my mind of pointing out a couple of particular major elements of Democratic fiscal irresponsibility in general, but I left it at the points I made, focused mainly on his puzzling apparent self-contradiction and double standard related most directly to his post.

    And you shed light on another apparent contradiction in Stan’s general view of process approaches to making fiscal responsibility more likely: Why is it that he thinks the overwhelming (or only) factor to consider as he rejected and ridiculed the budget commission and its supporters is that the odds were against it being highly effective and it would supposedly be better to prevent the politicians from creating the false appearance that they are moving toward fiscal responsibility this year, yet he castigates Republicans (and only Republicans in this case, even though he said opposition was clearly bipartisan in that prior post to which I linked) not only for rejecting the budget commission, but also for opposing a very weak version of PAYGO (that “swiss cheese”) that arguably is also likely to have limited effect at best.

    I guess it’s hard for a guy to even stay consistent with himself when good faith representations and argumentation aren’t a priority or even necessarily a goal. It sure seems that Stan is playing the role of hyperpartisan advocate, as spinster, rather than as a blogger offering good-faith analysis coupled with advocacy based on that good-faith analysis. Either that or his mind has been so overtaken with partisanship (ideological and/or party) that he views these matters with extreme bias to which he is completely oblivious. In either case, his posts are an odd fit with those of the other contributors, who are excellent. I often get the impression that Bruce unduly picks on Republicans more than Democrats, and gives the latter much more benefit of the doubt, perhaps all due to a grudge from the shabby way Republicans/conservatives treated him after Imposter, but any such bias or agenda is minor compared to the degree of partisan spin that is regularly coming from Stan.

  21. comment number 21 by: SteveinCH

    Both comments are up Brooks, but, in the make my blood boil column we have

    http://corner.nationalreview.com/post/?q=ZjZmOWU0MGUxMDRkNWU4ZDI1Nzc5MWY2ZGY3ZTM4YmQ=

    Let’s have a debate about who’s fault the deficit is. I actually heard that part of the Obama/Republican two-step and it was silly. To waste time and energy “fact checking” a stupid discussion is stupid.

    Even if little green men from Mars were responsible for the deficit, what difference would it make? Too bad, there’s no place for comments on their stupid site.

  22. comment number 22 by: SteveinCH

    Simply wow.

    I don’t know if anyone has had a chance to look at the President’s budget but here are two numbers that jumped off the page for me.

    2020 spending $5713 billion (vs. $5248 in the latest CBO projections)

    2020 receipts $4710 billion (vs. $4562 from CBO)

    My question is how is it possible that the administration generates more revenue than CBO projects. I need to dig into the text I’m sure to find it but the headline I heard was that they were only ending the tax cuts for the “rich”. I don’t see how this squares. Maybe it’s the growth assumptions but they don’t seem so different.

    Second, how is it possible to justify an incremental half trillion dollars in 2020 expenditures from the already insane baseline projections in the CBO doc?

    Finally, I’ll just note in passing that the OMB uses the same ridiculous inflation assumptions (nearly) that CBO uses (about 2% per year for the next decade). Having checked the history, it is worth noting that such a thing has never happened in the history of the country. Nor, outside of the depression has inflation ever averaged anywhere near 2% compound over a 10 year period.

  23. comment number 23 by: SteveinCH

    Just a quick update. A lot of the difference on assumptions is inflation and GDP (admin forecast is about .3% higher per year on both). I’m still trying to figure out the tax thing. I think it’s the phase out of a bunch of tax treatments that are unlikely to go away (e.g., LIFO) that is driving the administration revenue projections up without doing anything to the “middle class” taxes. There are also assumptions about the treatment of exemptions and deductions that I’m not sure were part of the CBO baseline.

    Still doesn’t change the fact that admin budget retains revenue in excess of 23 percent of GDP throughout the forecast period.

  24. comment number 24 by: Brooks

    Steve,

    I’m assuming you’re looking at CBO Baseline Scenario projections, which assume current law remains and is actually implemented — AMT is not “patched” or changed and all Bush tax cuts expire as scheduled — so I think those would be good starting points in trying to account for the differences in projected revenue dollars. I haven’t delved into the reports (yet).

  25. comment number 25 by: SteveinCH

    That’s kind of my point Brooks. CBO assumes no AMT fix and the ending of all Bush tax cuts and they wind up with less revenue than OMB does.

    I think it’s a combination of different GDP assumptions and a whole host of (very unlikely) tax changes in the administration budget.

  26. comment number 26 by: Brooks

    Steve,
    My mistake. I see your point.

  27. comment number 27 by: Brooks

    PBS NewsHour tonight discussed the president’s budget and the fiscal imbalance issue with CRFB’s Maya MacGuineas (who is always on target) and Robert Greenstein, executive director of the Center on Budget and Policy Priorities, which the NewsHour failed to note was a liberal group. (transcript at http://www.pbs.org/newshour/bb/business/jan-june10/budget_02-01.html)

    Greenstein says:

    If you look at the long-term fiscal problems facing this country, the single biggest driver is rising health care costs. The single most important step we can pass, we can take, is to pass the health care legislation.

    It has some deficit reduction in it itself. But, more importantly, that legislation launches a new generation of comparative effectiveness research, demonstrations and pilots, to learn what we don’t now know, which is, what are the big next set of things to do to slow the growth of health care costs, without compromising health care quality?

    In addition to perpetuating the Obama-inspired “blue pill” myth that we can achieve adequate savings in federal healthcare spending “without compromising health care quality”, Greenstein is also using Obama’s well-worn “rock soup” rhetorical tactic that I explained at http://economistmom.com/2009/07/the-cant-we-do-better-blue-dogs/#comment-3110 (I added my “bacon, sausages, and orange juice” analogy in the comment following the comment at that link). In short, the idea is to say we need this package because it contains elements A and B that are very important for eventual cost-reduction (e.g., comparative effectiveness research, medical IT, experiments with different provider payment structures, etc.), even though we could get those elements without taking the whole package and incurring the bulk of the package’s costs which are essentially unrelated to those important items.

    Steve – another important note is something Greenstein said and with which MacGuineas concurred:

    The last time we had a successful commission was the Greenspan commission on Social Security in ‘82 /’83. If Ronald Reagan, the president, or Tip O’Neill, the Democratic speaker of the House, had put on the table at the beginning of 1982 the various Social Security changes that commission ultimately successfully recommended, they would have been shot apart.

    Members of Congress would have gone on record saying, I will never vote for X or Y. And the Greenspan commission probably would have failed.

    So, the president put on the table a lot of deficit reduction here that, unfortunately, is probably beyond what the current Congress, with all the filibusters, will achieve. The next step is going to have to come out of this commission. That’s — and that is what I think is envisioned here.

    [skip to his response to subsequent question]

    Is it enough? No. Do we need to go much farther? Yes. But here’s, to me, the interesting part. As a bit of a deficit hawk, I find myself thinking that it was a good decision that the president didn’t go even farther on deficit reduction in this budget, even though we need it, because, had he put even more controversial proposals in the budget, they would have had gotten shot apart by all the interest groups.

    MacGuineas, after stating that “We need to be talking about reforming entitlements, Social Security and Medicare, in big ways, talking about raising the retirement age, maybe means-testing. We need to be talking about tax reform in a way that would raise revenues, perhaps a new tax, energy taxes, or consumption taxes”, concurred with Greenstein on the above point, saying:

    I think Bob’s point is right, which is that, if the president came out in this budget and put all of those things, what you would do is, you would actually make a lot of good ideas politically impossible.

    So, instead, what I think the president needs to do is, he’s the president. He’s going to have to lead on this. He has to set the stage and start preparing the country that spending freezes, again, a step in the right direction, but they’re not nearly going to be enough to tackle the challenges we have.

    I mention the above not only for the value it has in itself, but also because it relates to our discussion (on 12/30/09) of whether or not the Peterson-Pew Commission’s report should have included particular large, politically extremely problematic sacrifices to solve our long-term fiscal imbalance problem. As I said then:

    including a recommendation of specific, huge budgetary sacrifices in the Peterson-Pew report would have made members of Congress avoid it (avoid commenting favorably on it) like the plague, lest they be accused by constituents (probably on both ideological sides) of concurring with those recommendations, thus killing chances at even getting to the initial steps they recommend

    [skip to other comment]

    I see the report as intended to be just a starting point, going as far as possible without saying things that would lead politicians to reflexively distance themselves from it, increasing focus on the issue (at least a bit) among members of Congress and the White House, trying to reign in debate to at least politically and economically plausible bounds by emphasizing that we will need both reductions in projected spending and reductions in projected spending, offering itself as a resource that can help in developing solutions, and apparently at later points offering some specific ideas.

  28. comment number 28 by: Brooks

    Regarding the MacGuineas’ assertion at the end of that point…

    what I think the president needs to do is, he’s the president. He’s going to have to lead on this. He has to set the stage and start preparing the country that spending freezes, again, a step in the right direction, but they’re not nearly going to be enough to tackle the challenges we have

    …following her specifying things that will be needed include…

    We need to be talking about reforming entitlements, Social Security and Medicare, in big ways, talking about raising the retirement age, maybe means-testing. We need to be talking about tax reform in a way that would raise revenues, perhaps a new tax, energy taxes, or consumption taxes”

    That’s why I say the president needs to give the speech I laid out at http://economistmom.com/2010/01/unipartisan-paygo-lite/#comment-6608 (along with refinements in subsequent comments).

    Although I wish Obama had gone a bit farther in his budget, I have to concur that Obama must do more to lay the groundwork with public opinion (per something along the lines of my suggested message and accompanying P.R. effort) with real straight-talk instead of more of his phony, vague straight talk about “tough choices” and more of his absurd, “all-gain, no pain” “blue pill” talk about huge healthcare savings without any adverse quality impact and supposedly large savings by eliminating “programs that don’t work”. I wish Obama hadn’t waited a year and counting to get started on this straight talk (we’ll see if he ever gets to it), but he needs to get to it now, as his commission (if established) develops a recommendation.

    As a side note (and I mean this neutrally not in terms of ideology or preference on this issue) one potential benefit of the delay in passage of the large, new entitlement in healthcare “reform” is that perhaps now any such spending commitment will take place in the context of a broader/comprehensive view of the fiscal imbalance problem, potential solutions, and related prioritization. If so, it will become at least somewhat clearer that incremental spending to cover the uninsured means even greater cuts elsewhere and/or even higher taxes than those we would already face even without this new category of spending. From the perspective of rationality in our approach to fiscal choices, having this context is preferable.

  29. comment number 29 by: Brooks

    Steve,

    Excellent op-ed by Len Burman on “tax expenditures”, those spending subsidies masquerading as lower taxes http://www.washingtonpost.com/wp-dyn/content/article/2010/02/01/AR2010020103072.html

  30. comment number 30 by: SteveinCH

    Brooks,

    Thanks for the post. I get it conceptually but I don’t really believe that Obama is serious about deficit reduction. Let’s break the deficit into its component parts. It’s possibly true that he didn’t have to get serious about large scale deficit reduction, but it’s equally true that he didn’t have to submit a budget that has spending a full $500 billion over the CBO baseline by 2020.

    On the taxes side, he proposed a bunch of nonstarter tax increases that he has to know are nonstarters, given the number of times they’ve been proposed and rejected in the past. He also allowed a set of growth assumptions and inflation assumptions that are defensible but advantageous to the overall picture.

    Finally, he punts the ball to a commission that isn’t designed appropriately while signaling that he is not really open to cutting spending, a necessary component of the type of action that will be necessary to address our fiscal problems.

    BTW, expecting PBS to identify a group as liberal is something I’ve never seen.

  31. comment number 31 by: Brooks

    Steve,

    I share your skepticism about how far Obama is really willing to go on fiscal responsibility even if he thinks he may be able to achieve real progress. Hard to know if someone is following a clever strategy of delay or just delaying unjustifiably for other reasons, perhaps even counting on the misperception that he’s doing the former. We’ll probably know by this time next year — for one thing by observing this year how much Obama uses the bully pulpit for real straight talk to try to move public opinion and pave the way for some compromise approach — but I can’t even say that with certainty.

    After seeing your last point, I went to the PBS NewsHour website and searched on “liberal” and “think tank” and the first item was a link to this reference to Center on Budget and Policy Priorities (coincidentally the same organization) as “a liberal-leaning think tank” http://www.pbs.org/newshour/updates/health/july-dec09/affordability_09-22.html