OP-ED

The Super Committee Failure—What’s Next?

The stock market today was shocked, simply shocked, that the Super Committee didn’t come up with a debt deal.

I don’t know why. Republicans can’t vote for more taxes unless they’re willing to get “primaried” from the right and risk losing their seat. Ditto for Democrats who would face the same punishment from their base if they voted to change the sacred defined benefit entitlements without at least getting tax concessions from the Republicans.

Obviously, neither side has a lot of statesmen in their ranks who would actually be willing to compromise.

In this hyper-partisan environment, where both parties are effectively in the control of their far left and far right bases, it is simply not possible for any meaningful bipartisan compromise.

Some time ago on this blog, I said that we wouldn’t get any meaningful effort to deal with the federal debt and entitlement challenge until there was a bond crisis—when investors would no longer be willing to lend to the U.S. government at reasonable rates without our first getting our unsustainable debt under control. Right now the U.S. government is borrowing about forty cents of every dollar it spends!

We are now watching just such a bond crisis force government into action. But it isn’t our government—it’s happening before our eyes in Europe.

Ironically, and it’s a huge irony, U.S. government bond prices continue to rise and interest rates continue to fall because as bad as our problems are, Europe looks worse. But with the latest American failure to govern, how long will that last? The flight to American “quality” that is propping up our deficit spending is as irrational and unsustainable as any of our other recent economic “bubbles.”

To fix the American debt crisis we will need to fix our entitlement problems. To do that, there will have to be major changes to the biggest entitlement driver—health care costs in Medicare, Medicaid, and even federal employee benefit costs.

As long as we have a divided government we are stalemated—not only over what to do with Medicare and Medicaid but over what we will eventually do about implementing the Affordable Care Act as well.

All of this will now effectively be on hold waiting for the results of the 2012 elections. If the outcome of those elections continues to be a divided government it is hard to see how we’ll have a solution even after 2012—short of an American bond crisis forcing things to change.

I can’t realistically see a Democratic sweep in the next election—that they recapture the House and hold the Senate and the White House.

But it is possible that Republicans will win all three. That would end the deadlock and likely mean the effective repeal of the Affordable Care Act (at least 51 votes in the Senate could gut it), as well as serious efforts toward the Republican “solution” to the entitlements and the under-age-65 health insurance market along the lines of the Ryan defined contribution proposals.

It is also possible that Obama could be reelected and have to face a Republican House and Senate—and even more political confrontation with a Republican Congress sending a Democratic President their health care and debt fixes. Maybe, after the election, both sides would be willing to deal. Maybe not, the current political environment that abhors compromise would have to change dramatically.

Layer on top of all of this the sharp cuts the defense and homeland security budget will now get because of the debt deal fallback provisions—defense will have to sustain $600 billion in cuts. I don’t consider myself a deficit hawk but it is hard to see how these defense cuts can be implemented. Combat forces are already at half of 1990 levels and the defense budget spending is already on its way to the lowest level as a percentage of GDP since 1940.

That the defense cuts are unsustainable likely means the Congress will find a way to reverse them and make the federal debt situation even worse than it is today.

This country is facing one of the greatest domestic political and economic challenges in its history—our debt level as a percentage of GDP is double what it was at the end of the Great Depression! The modern economic way of life we have become accustomed to is literally hanging in the balance. But our political institutions are now clearly unable to confront the problems. The 2012 elections could finally give one side or the other the ability to confront these issues in a way that is starkly different than the way the other guys would have. Or, the election could just give us another divided government still unable to deal with the growing crisis.

More stalemate would leave only one outcome I can foresee—a global U.S. bond crisis that would literally stop the federal government in its tracks and the entire American economy with it. Such a sobering crisis could well force political moderation and compromise—hopefully before it was too late.

The 2012 elections are a big deal. But it will likely take even more—lots of something we haven’t seen in a long while—statesmanship.

Robert Laszweski has been a fixture in Washington health policy circles for the better part of three decades. He currently serves as the president of Health Policy and Strategy Associates of Alexandria, Virginia. Before forming HPSA in 1992, Robert served as the COO, Group Markets, for the Liberty Mutual Insurance Company. You can read more of his thoughtful analysis of healthcare industry trends at The Health Policy and Marketplace Blog, where this post first appeared.

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Marx TalkingtonTGary O.DeterminedMDBobbyG Recent comment authors
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Marx Talkington
Guest

Hola, Jacob de UCT Sudáfrica, estoy haciendo una investigación sobre este campo para el proyecto de mi Maestro. Yo sería feliz si me lo permite citar este artículo en mi tesis.

Gary O.
Guest
Gary O.

Even large majorities of Republicans and self-identified conservatives oppose cuts to Social Security and Medicare. In fact, almost no one other than the Wall Street gang, who were supported with trillions of public money, want cuts to these programs. Now we see MD as Hell and Determined MD siding with the plutocrats of Wall Street and their Washington enablers. Thanks for revealing where your heads are.

DeterminedMD
Guest
DeterminedMD

Yeah, where are our heads? Not up our rectal canals like those who spout repetitive platitudes of why allegedly medicare and social security are as sacred as the cows that walk the streets in India. You know who screams the loudest to not touch those programs? Those who benefit from them the most at others’ expense. Now you know why we have the crappy representation we witness day in and out of late from DC. That’s right, the population over 50 vote the most, because they in general don’t care about anyone else at the end of their lives, as… Read more »

Gary O.
Guest
Gary O.

Thuggish, bullying remarks should not be tolerated on this blog. Let’s get it right about Social Security. It is a myth that it is a drain on the budget (the subject of Mr. Laszewski’s post). It currently holds $2.6 trillion in U.S. Treasury notes from money paid by a tax on workers. Social Security benefits are modest, yet vitally important. The myth about Social Security is perpetrated by those of the 1% who have for a long time wanted to eliminate it and keep the trillions for themselves, even if it would mean pauperizing the 99%. (See Media Matter articleWash.… Read more »

BobbyG
Guest

“Thuggish, bullying remarks”?

Please. How precisely are you “bullied”? Not that I agree with much that he says, but, that’s pretty whiny.

DeterminedMD
Guest
DeterminedMD

“Now we see MD as Hell and Determined MD siding with the plutocrats of Wall Street and their Washington enablers. Thanks for revealing where your heads are.” You start this sound off with that comment, when you obviously do not read what I have been preaching about here for the duration, that being I have no interest in a for profit agenda in health care, nor do I have an interest in medicine being run as a business model in the first place. Earlier you wrote “To pay for a stimulus to get people back to work, raise taxes on… Read more »

MD as HELL
Guest
MD as HELL

Gary,

If your way worked, we would not need to reform this or any other part of our way of life.

It is exactly your way that has led us to insolvency.

If your way works, then I am for it. B

But it does not work.

Gary O.
Guest
Gary O.

Mr. Laszewski, stop this nonsense that the market has been reacting to “the Super Committee [not coming up] with a debt deal.” According to yesterday’s Bloomberg news article The market was not concerned with U.S. debt, it was concerned that “the U.S. government will be forced to submit to $1.2 trillion in automatic spending cuts,” thus eliminating any chance for further fiscal stimulus. Debt is not the immediate problem. There is no debt crisis, except in your head and those who want to “The supercommittee was expected to pave the way to extend the stimulus that is in the system,”… Read more »

MD as HELL
Guest
MD as HELL

Wrong.

Leave taxes alone.
Cut all the red tape.
Eliminate the EPA.
Drill
Build a refinery or two.
Build a nuclear power plant
Tax at current rates the increased flow of real economic production.
Cut spending.
Cut spending.
Cut spending.

DeterminedMD
Guest
DeterminedMD

How the hell do you deal with a deficit/debt that this country owns with the role that Medicare and social security plays and howl this outrage to even suggest cuts to the programs? Wow, it is nothing less than both incredible and disgusting how dependency and entitlement rule public choice these days. We are nothing more than a bunch of whining, arrogant, and weak people in this country. And as a whole can’t face death when it is the reality at hand. Face it people, you vote the same, lame incompetent incumbents to stay in office for DECADES and then… Read more »

DeterminedMD
Guest
DeterminedMD

How about reading this little gem from the AMA, why they sent it to me when I am not a member I have no clue, but, even random chance for 1 out of 20 has it’s positive moment: “Nov. 21, 2011 Supercommittee failure leaves 27 percent Medicare payment cut in place With the Joint Select Committee on Deficit Reduction failing to reach agreement on a deficit-reduction proposal, physicians still face a 27 percent cut in Medicare physician payments scheduled to take effect Jan. 1. Congress has missed an opportunity to address the nation’s fiscal problems, stabilize the Medicare program and… Read more »

BobbyG
Guest

“shocked, simply shocked”
__

Did you inadvertently omit the snark tag?

Yeah I was SO shocked.

Anyone who took the trouble to actually read the 11th hour “Budget Control Act” and followed the subsequent Junta — oh, uh, Deficit Committee — had to know that this was just a Kabuki Dance. As are the “looming catastrophic DoD cuts” (which, like domestic cuts, won’t ensue until 2013 — if EVER).

This is all about trying to Necklace Obama in 2012.

Margalit Gur-Arie
Guest

I would just like to point out that the several and official Democrat proposals to cut said entitlements were miles to the right of what most liberals consider acceptable, and light-years to the right of lefty-liberals aspirations.
I have not seen any Republican proposal deviate an inch from the radical right.

Compromise cannot be defined as having those who you don’t agree with lay on the ground face down.

MD as HELL
Guest
MD as HELL

Sounds like Greek to me. Oh, it was not about Greece?

Better buckle up. I doubt there is any real money left in the world to be borrowed. That will bring hyperinflation and depression.

Bye-bye, MediCare. Bye-bye dialysis. Bye-bye lift chairs and scooters and feeding tubes and home health. Bye-bye government spending at all levels. Time to get out of the way.

Compromise is not going to happen. Time to cut out 40% of the budget.

God help us.

DeterminedMD
Guest
DeterminedMD

Surprise, surprise, to hear from me this following comment: watch another 30 or more % of physicians drop Medicare patients from their practices by early 2012 if this cut below I mentioned in separate comment comes to fruition. And, maybe this issue will finally bring to the forefront what the 800 pound gorilla has been wildly gesticulating with his 8 foot poster board comment of “can’t live forever folks, get a life while you have the time!” The separate post about Andy Rooney’s death really shows what the crowd who wants heads is about. 92 year old people having surgery,… Read more »

T
Guest
T

On March 23, 2010 The Affordable Healthcare Act became a law. President Barack Obama created a healthcare plan that would be offered to 95 percent of Americans at an affordable rate. A lot of Americans are disagreeing with this act. They believe it will hurt our economy causing the US to go bankrupt. Though it os controversial, The Affordable Healthcare Act is an excellent way to provide healthcare to most of the American people and not be costly. This plan will ensure low cost coverage to individuals and small businesses, allows you to keep previous insurance, provide insurance security, require… Read more »