The Selfish Budget Or The Selfless Budget
It was refreshing to hear all those unambiguous declarations from President Obama on Wednesday. “I will not” let Medicare become a voucher program or deprive families with disabled children of needed benefits. “We will” reform government health-care programs without disavowing the social compact. “I refuse” to sign another renewal of the Bush tax cuts for millionaires. Republicans “want to give people like me a $200,000 tax cut that’s paid for by asking 33 seniors each to pay $6,000 more in health costs. . . . And it’s not going to happen as long as I’m president.”
Okay, there weren’t any lines with the simple heat of “Mr. Gorbachev, tear down this wall” or the terse power of “Make my day.” But Obama’s budget manifesto represented a significant warming of his usually cool rhetoric. He said he wanted to find common ground but instead devoted much of the speech to drawing lines in the sand.
And thank goodness. If ever there were a time when lines desperately needed to be drawn, it’s now.
Before we get carried away with praise, let’s remember that even as he gets in touch with his Old Testament side, Obama is playing defense. Republicans have already forced him to accept budget cuts that he abhors, and it’s a given that more slashing and burning will follow. Obama noted the questionableness of choking off government spending at a time when the economy is struggling for altitude. Yet he proposes doing just that — which means his GOP opponents are setting the agenda.
Let’s also remember that those tax cuts for the rich were as unjust, outrageous and totally unacceptable last fall as they are today. Which many commentators noted (ahem). Before someone caved to Republican demands and signed legislation extending the millionaires’ tax break for two more years. That someone being Obama.
The president glossed over this inconvenient history. What he managed to do admirably, however, was distinguish between his vision of America and the one sketched by Rep. Paul Ryan (R-Wis.) on behalf of House Republicans. It was, as Obama’s critics charge, a political speech — and rightly so. The questions at the heart of the battle over spending and entitlements are, after all, fundamentally political.
It’s not just a matter of drawing a graph in which the line called “expenditures” meets the line called “revenue.” The question is how this intersection is made to occur. Ryan’s plan and Obama’s plan both reduce the deficit by about $4 trillion over the next decade, but they do so in starkly different ways.
Perhaps the clearest example of the difference is how the two plans would handle Medicare and Medicaid, the chief drivers of the deficit. Obama wants to maintain both programs as entitlements. He believes, as I do, that we have a collective interest in ensuring that the elderly and the poor receive the health care they need and deserve. He sees this as a matter not just of compassion but of common sense: We’ve already fallen behind other industrialized democracies in major health indicators, including life expectancy, and we certainly won’t “win the future” by becoming an unhealthier nation.
Republicans apparently believe it’s enough to ensure that state-of-the-art medical care is available to those who can afford to pay for it. Under Ryan’s plan, Medicare and Medicaid could no longer be described as true federal entitlements. This is no exaggeration, because under neither program would adequate health care be guaranteed. Seniors and the poor would, increasingly, have to fend for themselves.
The Republican plan would turn Medicare into a voucher program that subsidizes the purchase of private health insurance. So what if an individual’s insurance premiums are not covered by the voucher? So what if health costs, and premiums, continue to skyrocket? The free market will surely take care of all that, somehow or other.
On Medicaid, Republicans want to shift the burden to the states, giving them block grants and essentially telling them to take care of the indigent however they choose. Some states would be diligent in providing adequate medical care. Some would not.
Is this the kind of America we want? How selfish are we, really? How selfless? To what extent does this churchgoing nation take the biblical instruction to “love thy neighbor” seriously?
These are the kinds of basic choices we face. There are two plans on the table now. Only one of them — Obama’s — appeals to the better angels of our nature.
By: Eugene Robinson, Opinion Writer, The Washington Post, April 14, 2011
Pragmatic Policy vs Ideological Philosophy
For some time now, Democrats and Republicans alike have been yearning for a great philosophical clash between the two parties. No more of this five percent of 12 percent of the federal budget stuff. We wanted entitlements, the role of government, the obligations that the old have to the young, that the rich have to the poor, that the powerful have to the powerless.
Paul Ryan’s budget offer exactly that sort of reconstruction of the social compact. America is a very different place before his budget than it would be after his budget. But though Obama’s speech was closer to that sort of clash of visions than anything he’s offered before — he used the word “vision” 15 times, for instance — what he offered was not philosophy. It was policy. But you have to read it closely — and know where it came from — to see that.
This is difficult advice when it comes to deficit reduction, but don’t look at the number. This plan cuts $4 trillion, that plan cuts $2 trillion, that one cuts $10 trillion. Those numbers reflect little but the internal hopes and dreams of the plan. If I say that my plan means Medicare will never spend another penny and economic growth will shoot to 8 percent — and that’s only a shade less optimistic than the assumptions and models included in the Ryan budget (pdf) — I can save an almost unlimited amount of money. My number can be anything I want it to be. The problem is I actually can’t save that much money because my math is based on fantasy. So my number is meaningless.
President Obama says his plan cuts $4 trillion over 12 years. Rep. Paul Ryan says his plan cuts $4 trillion over 10 years. If you look at the numbers, the two plans appear quite similar. But if you look at how they’d get to the number, they couldn’t be more different. And it’s how you get to the number that matters, because that’s what decides whether you’ll get to the number. It’s also, incidentally, what decides the shape of our government going forward.
Ryan’s number is the product of holding the growth of Medicare and Medicaid to the rate of inflation, which is far lower than has ever been shown to be possible. How he gets there is, on Medicaid, he tells the states to figure it out, and on Medicare, he tells seniors to figure it out. Both strategies have been tried: Various states have gotten waivers to radically remake their Medicaid program, and the consumer-driven model that Ryan is proposing for Medicare has been attempted in the Federal Employee Health Benefits Program and Medicare Advantage. None of these programs have worked, which is why we’re in our current predicament.
Obama’s number is the product of holding Medicare growth to GDP+0.5 percent — which is, in practice, a few percentage points beyond inflation, and a few percentage points behind the health-care system’s normal rate of growth. He mostly gets there through the cost controls passed as part of the Affordable Care Act, which hope to hold Medicare to GDP+1 percent. He then proposes to shave a further half-percentage point off the growth rate by introducing value-based insurance — where we pay more for treatments that are proven to work than for treatments that are not proven to work — into Medicare and giving generic drugs quicker entry into the marketplace. These programs have worked at smaller scales and in more limited pilots. We don’t know if they’ll work across the entire Medicare system, but we have reason to think they will.
Then there are taxes. Ryan’s plan pledges to make the Bush tax cuts permanent, at a cost of at least $4 trillion over 10 years, and more after that. He’d then clean out the tax code, but he’d pump the money he made from closing expenditures back into tax cuts. Obama proposes to return to the Clinton-era tax rates on income over $250,000 and then raise a further trillion through closing tax expenditures. Altogether, that’s about $2 trillion less than letting all the Bush tax cuts expire, but at least $2 trillion more than Ryan’s plan. Notably, Obama hasn’t said which expenditures he’d close to get to $1 trillion. The difference between the two tax plans — particularly when added to Obama’s decision to cut $400 billion from security-related spending, while Ryan largely exempts that category — explains why Obama doesn’t have to make such deep cuts in programs for seniors and low-income Americans.
So are we finally getting the grand philosophical debate we wanted? Not quite. Obama spoke extensively of vision — the GOP’s, which “claims to reduce the deficit by spending a trillion dollars on tax cuts for millionaires and billionaires … {while} asking for sacrifice from those who can least afford it and don’t have any clout on Capitol Hill,” and his, “where we live within our means while still investing in our future; where everyone makes sacrifices but no one bears all the burden; where we provide a basic measure of security for our citizens and rising opportunity for our children,” but he’s overselling it.
Obama’s budget is not philosophy. It is very similar to the Simpson-Bowles report, which attracted the votes of Republicans as far to the right as Tom Coburn. Few Democrats would say their vision of balancing the budget is one in which there was only one dollar of new taxes for every three dollars of spending cuts, but that’s what Obama’s proposal envisions. Obama’s budget, somewhat curiously, is what you’d expect at the end of a negotiation process, not the beginning. In fact, as it’s modeled off of Simpson-Bowles, it is the product of a negotiation process, as opposed to an opening bid. It is, in other words, policy. You could argue that this is a philosophy, and that philosophy is pragmatism, but I think that’s getting too cute. This is the sort of policy that might pass and might work.
Ryan’s budget is purer, but it is also more fantastical. It posits the government it wishes were possible, and the policies it wishes would work. It is an opening bid so ideological that it leaves little room for a process of negotiation. Every dollar it purports to raise comes from cutting spending. Not one comes from taxes. It privatizes Medicare and unwinds the federal government’s role in Medicaid. For all the philosophy in his budget — and his budget does have a very different philosophy about the proper role of government than we see in federal pllicy today — there’s neither policy that could pass nor policy that could work. And, curiously for a conservative who distrusts both government and congress, it has no answer to the question of “what if this fails?”
The policy that clarifies this difference is the “trigger.” Obama’s budget, aware that it might not pass and, if it does pass, it might not work, proposes to make automatic cuts to discretionary spending and tax expenditures if the promised savings don’t materialize. If Ryan’s budget falls shorts, there’s no comparable failsafe. That is to say, Obama’s budget has two plausible ways to get to its number, while Ryan’s budget has none. You don’t need a PhD in philosophy to understand why that’s a problem.
By: Ezra Klein, The Washington Post, April 13, 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
Ludicrous and Cruel: America Is Being Punked By GOP Voodoo Economics
Many commentators swooned earlier this week after House Republicans, led by the Budget Committee chairman, Paul Ryan, unveiled their budget proposals. They lavished praise on Mr. Ryan, asserting that his plan set a new standard of fiscal seriousness.
Well, they should have waited until people who know how to read budget numbers had a chance to study the proposal. For the G.O.P. plan turns out not to be serious at all. Instead, it’s simultaneously ridiculous and heartless.
How ridiculous is it? Let me count the ways — or rather a few of the ways, because there are more howlers in the plan than I can cover in one column.
First, Republicans have once again gone all in for voodoo economics — the claim, refuted by experience, that tax cuts pay for themselves.
Specifically, the Ryan proposal trumpets the results of an economic projection from the Heritage Foundation, which claims that the plan’s tax cuts would set off a gigantic boom. Indeed, the foundation initially predicted that the G.O.P. plan would bring the unemployment rate down to 2.8 percent — a number we haven’t achieved since the Korean War. After widespread jeering, the unemployment projection vanished from the Heritage Foundation’s Web site, but voodoo still permeates the rest of the analysis.
In particular, the original voodoo proposition — the claim that lower taxes mean higher revenue — is still very much there. The Heritage Foundation projection has large tax cuts actually increasing revenue by almost $600 billion over the next 10 years.
A more sober assessment from the nonpartisan Congressional Budget Office tells a different story. It finds that a large part of the supposed savings from spending cuts would go, not to reduce the deficit, but to pay for tax cuts. In fact, the budget office finds that over the next decade the plan would lead to bigger deficits and more debt than current law.
And about those spending cuts: leave health care on one side for a moment and focus on the rest of the proposal. It turns out that Mr. Ryan and his colleagues are assuming drastic cuts in nonhealth spending without explaining how that is supposed to happen.
How drastic? According to the budget office, which analyzed the plan using assumptions dictated by House Republicans, the proposal calls for spending on items other than Social Security, Medicare and Medicaid — but including defense — to fall from 12 percent of G.D.P. last year to 6 percent of G.D.P. in 2022, and just 3.5 percent of G.D.P. in the long run.
That last number is less than we currently spend on defense alone; it’s not much bigger than federal spending when Calvin Coolidge was president, and the United States, among other things, had only a tiny military establishment. How could such a drastic shrinking of government take place without crippling essential public functions? The plan doesn’t say.
And then there’s the much-ballyhooed proposal to abolish Medicare and replace it with vouchers that can be used to buy private health insurance.
The point here is that privatizing Medicare does nothing, in itself, to limit health-care costs. In fact, it almost surely raises them by adding a layer of middlemen. Yet the House plan assumes that we can cut health-care spending as a percentage of G.D.P. despite an aging population and rising health care costs.
The only way that can happen is if those vouchers are worth much less than the cost of health insurance. In fact, the Congressional Budget Office estimates that by 2030 the value of a voucher would cover only a third of the cost of a private insurance policy equivalent to Medicare as we know it. So the plan would deprive many and probably most seniors of adequate health care.
And that neither should nor will happen. Mr. Ryan and his colleagues can write down whatever numbers they like, but seniors vote. And when they find that their health-care vouchers are grossly inadequate, they’ll demand and get bigger vouchers — wiping out the plan’s supposed savings.
In short, this plan isn’t remotely serious; on the contrary, it’s ludicrous.
And it’s also cruel.
In the past, Mr. Ryan has talked a good game about taking care of those in need. But as the Center on Budget and Policy Priorities points out, of the $4 trillion in spending cuts he proposes over the next decade, two-thirds involve cutting programs that mainly serve low-income Americans. And by repealing last year’s health reform, without any replacement, the plan would also deprive an estimated 34 million nonelderly Americans of health insurance.
So the pundits who praised this proposal when it was released were punked. The G.O.P. budget plan isn’t a good-faith effort to put America’s fiscal house in order; it’s voodoo economics, with an extra dose of fantasy, and a large helping of mean-spiritedness.
By: Paul Krugman, Op-Ed Columnist, The New York Times, April 7, 2011
GOP DeathWish?: Republicans Pushing To Revamp Medicare Could Find Themselves Voted Out Of Office In The Next Election
One of the biggest and most frequent mistakes in politics is for a party to misread its mandate. When it happens, independent and swing voters get angry and punish a candidate or a party on Election Day. Because American politics is a zero-sum game, punishing one party means rewarding the other party—even when the latter is not necessarily deserving of support. Frequently, the party that benefits from the spanking mistakenly interprets it to mean that the public is embracing every aspect of its agenda. Republicans shouldn’t forget that their party had dismal favorable/unfavorable poll ratings last fall. They won because they weren’t Democrats.
There is no question that the Republican base, conservatives, and supporters of the tea party want to take a meat ax to government spending. When Republican congressional members return home and meet with their constituents, they are encouraged to vote against continuing resolutions and for deep spending cuts. These supporters have intensity, and they adamantly oppose any compromise with Democrats.
It would be a blunder, however, to think that such views drove the election. Republicans, conservatives, and tea partiers did not throw Republicans out of their House and Senate majorities in 2006, and they did not vote to increase the size of the Democratic majorities and elect Barack Obama president in 2008.
Independent voters were the ones who cast their ballots for Democrats by an 18-point margin in 2006 because they were mad at President Bush and upset about the war in Iraq, not to mention Republican scandals and the general performance of the GOP Congress. Two years later, these same voters were still angry at the president, were afraid of the financial crisis, and didn’t care for GOP presidential nominee John McCain.
In 2010, these independent voters were unimpressed by the economic-stimulus package, didn’t like cap-and-trade environmental regulation, and really didn’t like the Democratic health care package. Those over or approaching 65 years of age also feared that health care reform would erode Medicare benefits. Even those unaffected by the reforms rallied to defend Medicare.
Polling is very clear. Most voters want to see the federal budget balanced and spending cut. However, they don’t want Social Security, Medicare, or Medicaid touched, and, oh yes, they don’t want taxes increased. Now, anyone with an IQ over room temperature knows that all of this is impossible. Spending on Social Security, Medicare, and Medicaid, along with interest on the national debt, amounts to approximately half the federal budget.
There is no doubt that significant budget cutting is necessary and that Medicare and Medicaid must be reformed. No one can doubt the courage or sincerity of House Budget Committee Chairman Paul Ryan, R-Wis. But it’s little short of suicidal to drop a Medicare reform package—even a voucher plan that would be optional for those currently older than 55—into tough budget negotiations stymied over Republican demands for deep spending cuts. Democrats have some experience with older voters going ballistic, even with changes that wouldn’t affect them.
For many seniors, doing anything to Medicare that can’t be portrayed as an increase is essentially a cut, and they will fight it to their last breath. From a political standpoint, Medicare reform is very dangerous territory. House Republicans are not just pushing the envelope—they are soaking it with lighter fluid and waving a match at it.
One can understand why Republicans are pushing so hard. Their base is demanding that they do so. And if congressional Republicans resist, many of them can look forward to primary opposition next year. But it seems that GOP members of Congress have become so consumed with pleasing their base that they are ignoring general-election voters and the independents who drive the wild gyrations in American politics.
Congressional Republicans would be well advised to pay attention to the results of the latest Pew Research Center poll (conducted March 30 to April 3 among 1,057 adults) that asked Americans whether they would prefer that their lawmakers stand by their principles even if it meant that the government would shut down, or whether they would rather have their lawmakers compromise on a budget even if they didn’t agree with it. Among Republicans and Republican-leaning independents who agree with the tea party movement, 68 percent said they would rather have a lawmaker who stands by his or her principles. But among all Republicans, only 50 percent said stand by their principles, while 43 percent said compromise. Among all adults, 55 percent said compromise; among independents, 53 percent said compromise, with 36 percent siding with the principles option.
The bottom line: GOP primary voters are very different from general-election voters. It would be a very shortsighted strategy for Republican members—especially those in swing districts—to focus too much on primary voters. A lot of Democrats did the same thing in 2009 and 2010. Many are now former members of Congress.
By: Charlie Cook, National Journal, April 7, 2011
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