Tag: national deficit

Are Entitlement Spending Cuts Bad for Young People?

Jul 1, 2018

By John Goodman

Almost everyone agrees that without significant entitlement program reform, there is little hope for a solution to the looming decade of out-of-control deficit spending. That said, there is little agreement on how to do so. The inclination on the right is to cut spending; the inclination on the left is to raise taxes.

Critics of proposals to reduce spending claim that younger workers will be short-changed. For example, when Paul Ryan proposed to reform Medicare by making the federal government’s contribution (“premium support”) grow less rapidly than the rate of medical inflation, critics charged that this would shift costs to future retirees.

What the critics missed: If future Medicare benefits are smaller, then the taxes and premiums needed to pay for Medicare will also be smaller. In other words, Medicare benefit cuts produce partly offsetting taxpayer gains. Take the cuts in Medicare spending already enacted as part of ObamaCare. According to a National Center for Policy Analysis report by our colleagues Courtney Collins and Andrew Rettenmaier, lower taxes and premiums will offset about one-fourth of the benefit cuts for today’s 65-year-olds. They will offset almost one-half of the benefit cuts for 45-year-olds.

Save the Country with Preventive Care

May 23, 2012• 36

By Joe Flower

We are entering the season of presidential politics, of bunting and cries of “What about the children?” and star-spangled appeals to full-throated patriotism.

So here’s mine: Do you count yourself a patriot? Do you care about the future of this country? (And while we are at it, the future of your hospital.) If so, bend your efforts to find ways to care for the least cared for, the most difficult, the chronically complex poor and uninsured.

“But we can’t afford compassion!” Wrong, brothers and sisters, we cannot afford to do without compassion. “But why should we pay to take care of people who can’t take care of themselves?” Because we are (you are) already paying for them — so let’s find the way we can pay the least.

The problem of the overwhelming cost of the “frequent fliers,” people with multiple poorly tracked chronic conditions, has always been that the cost was an SEP — “somebody else’s problem.” Now, increasingly, hospitals and health systems are finding that they are unable to avoid the crushing costs of pretending it’s not their problem, are not being paid for re-admits, and are finding themselves in one way or another at risk for the health of whole populations. They’re also facing more stringent IRS 990 demands that they demonstrate a clear, accountable public benefit.

At the same time, employers and payers are realizing that they end up paying the costs of the uninsured as well as those of the insured who are over-using the system because they are not being tracked. These costs become part of the costs of the system, and the costs are (and must be) shifted to those who do pay. There is no magic money well under the hospital.

Inoculate the Budget Deficit From Healthcare Reform

May 9, 2012• 1

By William G. Gale

The United States faces large federal budget deficits over the short-, medium-, and long-term. Although perhaps subject to the greatest public attention, the short-term deficits are generally thought to be helping the economy recover. In contrast, medium- and long-term deficits projected for years after the economy returns to full-employment are a source of concern: these deficits will create growing and serious burdens on the economy even if they do not lead to an immediate crisis. Economists of all political stripes agree on this point.

While extending the Bush tax cuts, if that occurs, will play a big role in making the medium and long-term deficit problems worse, economists agree that a key driver of the long-term deficit problem is growth in government spending on health care. Medicare and Medicaid, our two largest health spending programs, currently account for 23 percent of federal spending, or 5.6 percent of GDP. Under current law and optimistic assumptions for health spending, the Congressional Budget Office (CBO) estimates these programs will represent 30 percent of total federal spending (6.8 percent of GDP) by 2022 and will continue to grow thereafter.

The prospect of health-driven deficits has produced a burst of proposals for reform. Sadly, the simple truth is that we do not yet know how to reform government health programs to both rein in costs and maintain or improve quality and access.

In Defense of Paul Ryan’s Budget Plan

Mar 21, 2012• 5

By Isabel Sawhill

I once called an older version of Paul Ryan’s budget plan “voodoo economics.” But you have to admire him. He has just released a new plan that slashes the deficit from 8 percent of GDP to around 1 percent by the end of the decade while simultaneously keeping revenues at 18 percent of GDP over the decade, very close to their historical average. To be sure, the specific policies required to get there are not well specified and there is much that I don’t like, such as the assumption that we don’t need new revenues to close the fiscal gap; still, after reading the “Path to Prosperity” I came away with a sense that there is food for thought, worthy of further discussion and debate, in this document.

I came to this conclusion after reading the section of the document called “repairing the safety net.” I had figured out that a lot of the savings in this plan had to come from slashing programs for the poor so I expected to be horrified by what I read. I am not in favor of cutting programs for the poor, especially in a plan that reduces taxes for the wealthy and leaves Social Security virtually untouched. Instead, I found myself at least intrigued with the arguments that I found in this section of the plan. They are thoughtful, well-articulated, and worthy of further debate.

One argument is that federal subsidies for safety net programs encourage states to spend more than they otherwise would. Another argument is that federal dollars come with federal prescriptions and paperwork that stifle state innovation and efficiency. A third argument is that these programs undermine efforts by civic or faith-based groups to play a stronger role. A fourth argument is that some of these subsidies (for example, Pell grants) simply bid up prices (for college tuition). A fifth argument is that we have too many overlapping and complex programs with similar purposes (job training being a great example). A sixth argument is that assistance should be made conditional on personal responsibility—for example, being engaged in work or job training if you are receiving government assistance. This model of conditional assistance was a key element in the largely successful 1996 welfare reform law and could be expanded to other programs. Finally, the plan emphasizes the importance of upward mobility—a goal which I think many can embrace.

The Return of the Ryan Plan

Mar 21, 2012• 1

By Robert Reich

In announcing the Republicans’ new budget and tax plan Tuesday, House Budget Committee Chairman Paul Ryan said “We are sharpening the contrast between the path that we’re proposing and the path of debt and decline the president has placed us upon.”

Ryan is right about sharpening the contrast. But the plan doesn’t do much to reduce the debt. Even by its own estimate the deficit would drop to $166 billion in 2018 and then begin growing again.

The real contrast is over what the plan does for the rich and what it does to everyone else. It reduces the top individual and corporate tax rates to 25 percent. This would give the wealthiest Americans an average tax cut of at least $150,000 a year.

The money would come out of programs for the elderly, lower-middle families, and the poor.

Seniors would get subsidies to buy private health insurance or Medicare – but the subsidies would be capped. So as medical costs increased, seniors would fall further and further behind.

Other cuts would come out of food stamps, Pell grants to offset the college tuition of kids from poor families, and scores of other programs that now help middle-income and the poor.

The plan also calls for repealing Obama’s health-care overhaul, thereby eliminating healthcare for 30 million Americans and allowing insurers to discriminate against (and drop from coverage) people with pre-existing conditions.

The plan would carve an additional $19 billion out of next year’s “discretionary” spending over and above what Democrats agreed to last year. Needless to say, discretionary spending includes most of programs for lower-income families.

A Promise Made to Be Broken

Jan 23, 2012• 8

By David Dranove

In last week’s Wall Street Journal, Princeton economist Alan Blinder exposes four myths about the federal deficit. He saves the most important myth for last. After noting that the long term deficit problem does not cut across all areas of spending, he observes that the problem is almost entirely rooted in the need to fund Medicare and Medicaid. If we base future spending projections on past trends, then Blinder is absolutely correct. Spending growth on Medicare and Medicaid nearly always outstrips the growth in tax revenues. The main contributors to spending growth – demographics, labor costs, and, especially, technology – are likely to keep this trend alive indefinitely. Blinder challenges us to focus the debate about the deficit on the key facts, which essentially means that we should focus on Medicare and Medicaid spending. Let me take up his challenge.

Let’s start with the obvious debating points. There is a lot of fat in both programs. CMS just acknowledged that as much as 10 percent of spending in Medicare and Medicaid is “improper.” This does not include spending on defensive medicine, unnecessary services demanded by fully insured patients, unwarranted variations in practice, and all the other usual suspects. Nor does it reckon with all the waste due to poor health behaviors, although eventually the grim reaper will have his say and dying is usually very costly no matter how well you have pampered your body along the way.

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