EconomistMom.com
…because I’m an economist and a mom–that’s why!

EconomistMom.com

What Has to Be on the Budget-Cuts Table? Everything.

January 5th, 2011 . by economistmom

Even defense spending, even tax expenditures.  I did this opening segment of Tuesday’s PBS Newshour broadcast, with my 12-year-old son Johnny watching me in the makeup room and from the “green room”–which made it all the more special.  One of my standard favorite lines I didn’t get to squeeze in about the politicians’ take on fiscal responsibility and reducing the deficit:  “It seems like a good idea…until you get right down to it”–i.e., it’s always easier in abstract theory than in specific practice.

As both Jim Horney (of the Center for Budget and Policy Priorities) and I emphasize in the interview, everything should be on the budget-cuts table, and in fact, many in Congress like to use that line.  But then you listen more carefully and you find Republicans taking revenue increases and defense/national security cuts off the table, and Democrats taking most other types of spending off the table (whether for short-term or longer-term reasons), and you soon realize that what’s really left on the “bipartisan deficit-reduction table”–at least within the current Congress–is really close to nothing.  And that’s a huge problem: the contrast between what non-politician budget experts from both the left and the right agree on, and what Congress can’t agree on.

13 Responses to “What Has to Be on the Budget-Cuts Table? Everything.”

  1. comment number 1 by: B Davis

    One of my standard favorite lines I didn’t get to squeeze in about the politicians’ take on fiscal responsibility and reducing the deficit: “It seems like a good idea…until you get right down to it”–i.e., it’s always easier in abstract theory than in specific practice.

    Still, you did a very good interview! I also thought Jim Horney did well. That doesn’t surprise me since I’ve been impressed with much of the research I’ve seen on the Center for Budget and Policy Priorities site. The first comment at the link you gave seems to agree. It states:

    Wrong transcript. Please put in correct transcript ASAP. This was one of the best intervews by Gwen Ifill that I have ever seen.

    I did find a transcript at this link and posted it in reply. Your interview runs from 6:35 to 15:07. I saw that you came close to the favorite line that you mention when Gwen asked at 12:05 “Do americans have the stomach for those kinds of cuts?” and you replied:

    I actually don’t think they have the stomach for it. I think a lot of americans don’t realize everything that the federal government provides to us now. They don’t realize the tough choices that are ahead that we can’t just say smaller government in the abstract.

    I thought that was a much better reply to what some might suggest that americans are ready to make the touch choices once they are presented with them. I certainly believe that they can develop the stomach but it will likely be a difficult process. The first step, of course, is to get the public as informed and engaged as possible, as both you and Horney suggested.

  2. comment number 2 by: Gipper

    Count on Gwen Ifill having a biased “analysis” roundtable. We had left of center and further left on that panel.

    Here’s the problem with Economistmom’s take on wasteful spending: “There’s waste in defense spending as much as in other parts of the budget.”

    The reason that’s such a lame comment is that Defense can only be performed by the federal government. State governments cannot operate the Navy, Air Force, and Army.

    In contrast, Housing, education, medicare care, aid to the poor, agriculture, etc. have no inherent need to be performed at the federal level. State government currently perform overlapping functions in all these areas with the federal government.

    So if someone recommends eliminating the Department of Education, that’s not necessarily a cut to education — unless, the voters at the state level decide not to increase their tax burden to pay for federal funds that go missing. Ditto for Medicaid, agricultural subsidies, etc. Republicans are really talking about shifting priorities and responsibilities. Democrats, like Diane and James Horney cast the debate as one of cutting what government does globally, which is not necessarily true.

    Excluding defined b

  3. comment number 3 by: Gipper

    continued………..

    Excluding defined benefit plans, state governments basically have sound balance sheets because they are forced to balance their budgets over the short run.

    We should drive as much government as possible to the state level and let Republicans and Democrats fight their ideological battles in an arena where they must be fiscally sound.

    Yeah, yeah, I know about the automatic stabilizer arguments put forward by the Keynesians. So let unemployment insurance become a federal instead of a state program. Run deficits in a recession. Those policies could still continue.

    To address the budget problems you first have to fight about the proper roles and scope of the federal government. It’s not just numbers. It’s ideology. The fact is that the New Deal and Great Society are fiscally unsound. They are Ponzi schemes designed to optimize political allegiance rather than sound program design.

    Medicare and medicaid expenditures are more than half of the US healthcare market. Our government’s policies are at the root of what has distorted this market and will continue to drive costs sky high.

    Economistmom won’t admit it, but she knows that we’re headed for Canadian or UK style health systems with federal revenues north of 30% of GDP. If she and others on the left came out with their “long-run” solutions, then the voters would truly recoil at spending for these “essential” spending programs.

  4. comment number 4 by: Robert H. Dugger

    I agree with Ms. Rogers enthusiastically. Everything should be on the table. But in establishing such cuts, it is important our government leaders establish a sense of principles that will guide their decisions. Absent such chosen principles, decisions will be made on the basis of raw political power and resources allocated this way rarely unify voters or strengthen the economy.Principles need to make practical sense to families, businesses and government leaders and be applicable in pragmatic ways across all tax, spending and regulatory policies.

    Some principles for government resource allocation should include the support of:

    (1) Human Capital – To achieve economic growth and fiscal sustainability, government should emphasize strengthening the skills and capacities of America’s workforce.

    (2) Young Children – In developing human capital, our nation should focus especially on children, from before birth to five years of age, and their families.

    (3) Evaluation – Return on investment should be a key consideration in public resource allocation decisions.

    (4) Transparency – Government should enable citizens to understand and participate in the assessment of revenue and spending decisions.

    (5) Sustainability – State and federal budgets should be viable over the long term.

    If we are truly looking for economic growth, not merely an escape from the recession, such principles are not only needed, they are a requirement for success.

  5. comment number 5 by: Arne

    Medicare 3.6%
    Medicaid 1.9%

    Healthcare 17.3%

  6. comment number 6 by: AMTbuff

    >(1) Human Capital
    (2) Young Children
    (3) Evaluation
    (4) Transparency
    (5) Sustainability

    Item 3 may end up contradicting items 1 and 2. On the job training (e.g., apprenticeship) beats classroom training every time. I have yet to read a study that proves conclusively that programs such as Head Start improve adult outcomes enough to justify their cost.

    Item 5 favors elimination or at least dramatic reduction in the government’s role in health care, where costs are growing unsustainably.

    Item 4 does not conflict with any of the other goals. Fooling the voters may be essential to irresponsible policy, but it’s not necessary when the policy is responsible.

  7. comment number 7 by: AMTbuff

    >Medicare 3.6%
    Medicaid 1.9%

    Healthcare 17.3%

    I doubt that these numbers accurately account for cost shifting to private payers from Medicare, Medicaid, and uncompensated care.

  8. comment number 8 by: Gipper

    Arne,

    Good catch. I omitted the value of tax-expenditures for the deductibility of employer-provided health plans. With that added in, it gets closer to 50%.

    My economic point was that each of these policies and programs drives a wedge between the patient and the health care provider. Having a 3rd party paying the bills introduces the worst possible incentives for demand and supply of services. It’s government policies that have created this mess. Health care market worked very well at controlling costs prior to introduction of Medicare and Medicaid because out-of-pocket expenditures were a much higher proportion than today. I.E., patients were most often directly aware of what the doctor was charging, and made decisions based on that knowledge, essential to any well-functioning market.

  9. comment number 9 by: Arne

    “Having a 3rd party paying the bills introduces the worst possible incentives …”

    So you would like to get rid of the insurance business as well as Medicare and Medicaid?

  10. comment number 10 by: SteveinCH

    I’d love to give the insurance business the freedom to offer policies that are more like auto insurance than the current model. But hey that’s just me. I’d also like to end the current restrictions on competition at the state and interstate levels.

  11. comment number 11 by: Gipper

    Arne,

    Insurance has harmful moral hazard effects so it should be applied sparingly. Insurance was designed to pay for catastrophic expense that have some predictable distribution over a large number of people. Because of the moral hazard problems, it should be used infrequently — that is for catastrophic events like car crashes, not oil changes.

    In healthcare, people think their insurance should pay for oil changes, that is routine maintenance that is not catastrophic. It’s a misnomer to call it longer insurance. Health insurance has become a welfare program administered by private companies.

    I’m for safety nets for the poor. Medicare expenditures for rich seniors is stupid. But Medicare and Social Security were specifically designed by Democrats to foster widespread dependence on government to maximize political allegiance. These programs certainly weren’t designed with efficiency and fiscal soundness as core objectives.

  12. comment number 12 by: STDog

    I’m with you Steve.

    And look back at how health care benefits ended up coming through the employer. Government salary controls that limited what employers could pay directly. Then the unions got hold of the idea. Next thing you know employers practically have to offer that benefit.

    The proliferation of the benefit led to government controls on the industry. Coverage requirements and each state have different rules.

    I’d much rather employees get paid the money than have employers spend it for them. Remove all the government requirements and restrictions on plans and let people choose plans that meet their needs.

    HSAs and HDHCPs attempted to bring the true cost back in view, and encourage thrift, but the government rules continued to limit the effectiveness (minimum deductibles, maximum contributions, required coverages, etc.)

  13. comment number 13 by: Arne

    “Insurance has harmful moral hazard effects …”

    You have a point, but how do I weigh that against the realities that
    1) Paying for preventive care provides an incentive to get that right.
    2) Not paying for anything provides an incentive to use the Emergency Room for routine care.