“I’m Not A Politician So Let Me Be Perfectly Clear”: Raise America’s Taxes!
President Obama in his speech on Wednesday confronted a topic that is harder to address seriously in public than sex or flatulence: America needs higher taxes.
That ugly truth looms over today’s budget battles, but politicians have mostly preferred to run from reality. Mr. Obama’s speech was excellent not only for its content but also because he didn’t insult our intelligence.
There is no single reason for today’s budget mess, but it’s worth remembering that the last time our budget was in the black was in the Clinton administration. That’s a broad hint that one sensible way to overcome our difficulties would be to revert to tax rates more or less as they were under President Clinton. That single step would solve three-quarters of the deficit for the next five years or so.
Paradoxically, nothing makes the need for a tax increase more clear than the Republican budget proposal crafted by Representative Paul Ryan. The Republicans propose slashing spending far more than the public would probably accept — even dismantling Medicare — and rely on economic assumptions that are not merely rosy, but preposterous.
Yet even so, the Republican plan shows continuing budget deficits until the 2030s. In short, we can’t plausibly slash our way back to solid fiscal ground. We need more revenue.
Kudos to Mr. Obama for boldly stating that truth in his speech — even if he did focus only on taxes for the very wealthiest. I also thought he was right to say that we need spending cuts — including in our defense budget. Mr. Obama didn’t say so, but the United States accounts for almost as much military spending as the entire rest of the world put together.
As I see it, there are three fallacies common in today’s budget discussions:
• Republicans are the party of responsible financial stewardship, struggling to put America on a sound footing.
In truth, both parties have been wildly irresponsible, but in cycles. Democrats were more irresponsible in the 1960s, the two parties both seemed care-free in the ’70s and ’80s, and since then the Republicans have been staggeringly reckless.
After the Clinton administration began paying down America’s debt, Republicans passed the Bush tax cuts, waded into a trillion-dollar war in Iraq, and approved an unfunded prescription medicine benefit — all by borrowing from China. Then-Vice President Dick Cheney scoffed that “deficits don’t matter.”
This borrow-and-spend Republican history makes it galling when Republicans now assert that deficits are the only thing that matter — and call for drastic spending cuts, two-thirds of which would harm low-income and moderate-income Americans, according to the Center on Budget and Policy Priorities. To pay for tax cuts heaped largely on the wealthiest Americans, Republicans in effect would gut Medicare and slash jobs programs, family planning and college scholarships. Instead of spreading opportunity, federal policy would cap it.
• Low tax rates are essential to create incentives for economic growth: a tax increase would stifle the economy.
It’s true that, in general, higher taxes tend to reduce incentives. But this seems a weak effect, often overwhelmed by other factors.
Were Americans really lazier in the 1950s, when marginal tax rates peaked at more than 90 percent? Are people in high-tax states like Massachusetts more lackadaisical than folks in a state like Florida that has no personal income tax at all?
Tax increases can also send a message of prudence that stimulates economic growth. The Clinton tax increase of 1993 was followed by a golden period of high growth, while the Bush tax cuts were followed by an anemic economy.
• We can’t afford Medicare.
It’s true that America faces a basic problem with rapidly rising health care costs. But the Republican plan does nothing serious to address health care spending, other than stop paying bills. Indeed, Medicare is cheaper to administer than private health insurance (2 percent to 6 percent administrative costs, depending on who does the math, compared with about 12 percent for private plans). So the Republican plan might add to health care spending rather than curb it.
The real challenge is to control health care inflation. Nobody is certain how to do that, but the Obama health care law is testing some plausible ideas. These include rigorous research on which procedures work and which don’t. Why pay for surgery on enlarged prostates if certain kinds of patients turn out to be better with no treatment at all?
Ever since Walter Mondale publicly committed hara-kiri in 1984 by telling voters that he would raise their taxes, politicians have run from fiscal reality. As baby boomers age and require Social Security and Medicare, escapism will no longer suffice. We need to have a frank national discussion of painful steps ahead, and since I’m not a politician, let me be perfectly clear: raise my taxes!
By: Nicholas Kristof, The New York Times, April 13, 2011
Gut Punch To Seniors: Republicans Are Done Pretending
“Should Congress have cut Medicare half a trillion dollars to pay for ObamaCare?” asked a 2010 ad for Republican newcomer Renee Ellmers in North Carolina’s 2nd congressional district.
That theme — “Obama’s coming for your Medicare!” — helped Ellmers and GOP candidates across the nation consolidate the senior vote, winning that crucial voting bloc by a 59-38 margin. In 2008, Democrats won seniors by 49-48. The dramatic shift was a massive component of the GOP wave.
It was a dishonest attack, of course. The Democratic healthcare law cut $126 billion from Medicare Advantage over 10 years, not half a trillion. And Medicare Advantage, which allowed seniors to get healthcare via private insurers, was an inefficient and wasteful experiment to see whether private companies could deliver health services more efficiently than the government. It failed. In fact, Medicare Advantage cost 11 percent more to run than standard Medicare for identical services.
Yet “fiscally responsible” Republicans successfully demagogued the issue all the way to a majority, winning precious senior support with promises to “protect Medicare.” Those promises are now officially history. Republicans are now rewarding seniors for their vote by punching them in the gut.
GOP Rep. Paul Ryan (Wis.) has fired the first shot in a new war to destroy the benefit structure that seniors paid for throughout their working lives. Under his plan, seniors will no longer enroll in Medicare, but rather receive vouchers to try and secure care through private insurers. Ryan’s plan delays implementation for 10 years to ward off the wrath of current seniors, but the end result is the same — the elimination of a program Republicans pretended to protect.
After all, if the plan is so great for seniors, why wait until 2021 to implement it?
Ryan’s plan would cap the growth of vouchers to a hair over the rate of inflation. However, the cost of medical services has far outpaced inflation. So what happens when the vouchers aren’t enough to cover the cost of expensive life-saving medical procedures? If Republicans won’t bargain with drug companies or limit reimbursements to doctors (and they won’t), the only thing left would be real-world death panels.
In other words, seniors would die, needlessly and prematurely.
It is no coincidence that Republicans are using this moment to try and discredit the AARP, which will undoubtedly push back against this irresponsible plan. The House Ways and Means Committee has launched an investigation into the organization’s finances, arguing that its support for last year’s healthcare reform measure should invalidate its tax-exempt status. “Republicans are desperate to try to break the trust that America’s seniors have in AARP,” said Rep. Pete Stark (D-Calif.) during the committee hearings. “They need to do so before they announce their budget that will devastate Medicare, Social Security and Medicaid.”
If Republicans were serious about containing healthcare costs, they would take a fresh look at a public option, allowing Americans to choose government-run insurance that would compete against private insurers. But Republicans don’t really care about providing quality care at reasonable prices — they care about enriching their insurance lobbyist friends.
Seniors allowed themselves to be taken in by the GOP in 2010. But their choice now is obvious. Republicans are done pretending.
By: Markos Moulitsas, The Hill, April 5, 2011
The Democrats Have A Plan For Controlling Health-Care Costs, Paul Ryan Doesn’t
There’s increasingly an understanding that the mixture of cuts and taxes in Paul Ryan’s budget aren’t quite fair, and the underlying assumptions it uses don’t quite work. But it’s left people hungry for a budget that does work, and annoyed that Democrats haven’t provided one. “If Democrats don’t like his budget ideas, they should propose their own,” writes Fareed Zakaria. “The Democrats and Obama now have to offer a response,” warned Andrew Sullivan. “As of this evening, the Democratic policy plan consists of yelling ‘You suck!’” complained Megan McArdle.
I’ve made similar comments. And I think those comments are mostly right. Democrats need to step up on taxes, on defense and non-defense discretionary, on Social Security, and on energy. But there’s one huge, glaring exception: controlling health-care costs. There, the reality is that Democrats have a plan and Ryan doesn’t. But the perception, at this point, is just the opposite.
At the heart of Ryan’s budget are policies tying the federal government’s contribution to Medicare and Medicaid to the rate of inflation — which is far, far slower than costs in the health-care sector typically grow. He achieves those caps through cost shifting. For Medicaid, the states have to figure out how to save the money, and for Medicare, seniors will now be purchasing their own insurance plans and, in their new role as consumers, have to figure out how to save the money. It won’t work, and because it won’t work, Ryan’s savings will not materialize.
Even Ryan’s fans agree you can’t hold health-care costs down to inflation. But even if you grant that Ryan’s target is too low, his vision for reforming Medicare would like miss a more reasonabke target, too. Consider the program Ryan names as a model. He said his budget converts Medicare into “the same kind of health-care program that members of Congress enjoy.” The system he’s referring to is the Federal Employee’s Health Benefits Program, and cost growth there has not only massively outpaced inflation in recent years, but actually outpaced Medicare, too. Ryan’s numbers are so fantastic that Alice Rivlin, who originally had her name on this proposal, now opposes it.
Democrats don’t just have a proposal that offers a more plausible vision of cost control than Ryan does. They have an honest-to-goodness law. The Affordable Care Act sets more achievable targets, and offers a host of more plausible ways to reach them, than anything in Ryan’s budget. “If this is a competition betweenRyan and the Affordable Care Act on realistic approaches to curbing the growth of spending,” says Robert Reischauer, who ran the Congressional Budget Office from 1989 to 1995 and now directs the Urban Institute, “the Affordable Care Act gets five points and Ryan gets zero.”
The Affordable Care Act holds Medicare’s cost growth to GDP plus one percentage point, which makes a lot more sense. It’s the target Ryan’s Medicare plan originally used, back when it was called Ryan-Rivlin. But the target is not really the important part. The important part is how you achieve the target. And the Affordable Care Act actually includes reforms and new processes for future reforms that would help Medicare — and the rest of the medical system — get to where the costs can be saved, rather than just shifted.
The Affordable Care Act’s central hope is that Medicare can lead the health-care system to pay for value, cut down on overtreatment, and cut out treatments that simply don’t work. The law develops Accountable Care Organizations, in which Medicare pays one provider to coordinate all of your care successfully, rather than paying many doctors and providers to add to your care no matter the cost or outcome, as is the current practice. It also begins experimenting with bundled payments, in which Medicare pays one lump-sum for all care related to the successful treatment of a condition rather than paying for every piece of care separately. To help these reforms succeed, and to help all doctors make more cost-effective treatment decisions, the law accelerates research on which drugs and treatments are most effective, and creates and funds the Patient-Centered Outcomes Research Institute to disseminate the data.
If those initiatives work, they head over to the Independent Payment Advisory Board (IPAB), which can implement cost-controlling reforms across Medicare without congressional approval — an effort to make continuous reform the default for Medicare, even if Congress is gridlocked or focused on other matters. And if they don’t work, then it’s up to the Center for Medicare and Medicaid Innovation, a funded body that will be continually testing payment and practice reforms, to keep searching and experimenting, and when it hits on successful ideas, handing them to the IPAB to implement throughout the system.
The law also goes after bad and wasted care: It cuts payments to hospitals with high rates of re-admission, as that tends to signal care isn’t being delivered well, or isn’t being follow up on effectively. It cuts payments to hospitals for care related to infections caught in the hospitals. It develops new plans to help Medicare base its purchasing decisions on value, and new programs to help Medicaid move patients with chronic illnesses into systems that rely on the sort of maintenance-based care that’s been shown to successfully lower costs and improve outcomes.
I could go on, but instead, I’ll just link to the Kaiser Family Foundation’s excellent primer (pdf) on everything the law does. The bottom line is this: The Affordable Care Act is actually doing the hard work of reforming the health-care system that’s needed to make cost control possible. Ryan’s budget just makes seniors pay more for their Medicare and choose their own plans — worthy ideas, you can argue, but ideas that have been tried many times before, and that have never cut costs in the way Ryan’s budget suggests they will.
That’s why, when the Congressional Budget Office looked at Ryan’s plan, they said it would make Medicare more expensive for seniors, not less. The reason the deficit goes down is because seniors are paying 70 percent of the cost of their insurance out-of-pocket rather than 30 percent. But that’s not sustainable: We’ve just taken the government’s medical-costs problem and pushed it onto families.
No one who knows health-care policy will tell you that the Affordable Care Act does everything we need to do in exactly the way we need it done. That’s why Resichauer gave it a five, not a 10. But it does a lot of what we need to do and it sets up systems to help us continue doing what’s needed in the future.
Ryan’s proposal, by contrast, does almost none of what we need to do. It appeals to people who have an ideological take on health-care reform and believe we can make Medicare cheaper by handing it over to private insurers and telling seniors to act like consumers. It’s a plan that suggests health-care costs are about insurance, as opposed to about health care. There’s precious little evidence of that, and when added to the fact that Ryan’s targets are so low that even his allies can’t defend them, the reality is that his savings are largely an illusion.
The Affordable Care Act has taken a lot of hits. It’s not popular, and though very few of the political actors confidently attacking or advocating it can explain the many things it’s doing to try and control costs, people have very strong opinions on whether it will succeed at controlling costs. But the irony of everyone demanding Democrats come up with a vision for addressing the drivers of our deficit in the years to come is that, on the central driver of costs and the central element of Ryan’s budget, Democrats actually have something better than a vision. They have a law, and for all its flaws, their law actually makes some sense. Republicans don’t have a law, and their vision, at this point, doesn’t make any sense at all.
By: Ezra Klein, The Washington Post, April 8, 2011
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