Tuesday, April 12, 2011

Liberal deficit reduction: cut defense and tax, tax, tax

16 comments:

TJE said...

MC is back in the game!

PBM said...

I think it's more reasonable and fair than Paul Ryan's budget.

If we want all the services government provides, which a majority of people do, then we should be taxed more to pay for those things. If we don't want any of the services government provides, which the tea party doesn't, then we have the flexibility to have low taxes. But our country can't go on having it both ways, with the lowest tax rates in modern times coupled with the largest federal government in modern times.

PBM said...

Also, on the defense, I think we can afford to make huge cuts without "gut[ting] the United States' ability to defend itself, today and long into the future."

http://www.washingtonpost.com/blogs/ezra-klein/post/americas_military_spending_in_graph/2011/04/11/AFBVZRMD_blog.html?wprss=ezra-klein

We spend almost an entire stimulus on the military every YEAR.

TJE said...

The lunch summit didn't produce a meeting of the minds?

Patrick_L said...

Isn't it disturbing to anyone that the House Republicans as a whole are as extreme, or even more extreme, than the most liberal 40% of the House Democratic caucus? From what we know about the CPC's budget so far, it offsets spending increases with lots of tax increases to get minimal deficit reduction for years. Paul Ryan takes the opposite tack, offsetting spending cuts with lots of tax cuts for minimal deficit reduction in the first decade. He then depends on changes to Medicare that even conservative economists and commentators have already panned as economically unsustainable and politically impossible- essentially a giant magic asterisk! Oh, and he essentially reduces the government by 2050 to just Defense, Social Security, and the health entitlements. The only difference between the two proposals is really the distributional impact and setting of priorities (CPC: cut defense, raise taxes on middle class and rich in particular, provide programs for middle-class, investments in infrastructure and education. Republicans: do nothing to defense, cut taxes on the middle class and rich in particular, cut programs for the middle-class, no investments in infrastructure and education). They both do little to address the nation's pressing problem- the debt burden. The mainstream House Republican position is essentially equivalent to the minority position within the House Democratic caucus, just a reversal of which side they extremely lean on.

If that’s the mainstream Republican position, what's the minority House Republican position (a true comparison for the CPC's budget)? I guess that would be the Republican Study Committee, though they actually represent 70% of the House Republican caucus so they're hardly a minority position in the party. Anywho, they actually get significant deficit reduction...by dramatically increasing their spending cuts to over $9 trillion in a decade and doing the same tax cuts while cutting even more heavily into the health entitlements and non-security discretionary spending (which is hard to imagine considering how much Ryan is already doing- doubling out-of-pocket expenses for Medicare beneficiaries, eliminating most of the rest of government, etc.) The Republican Study Committee also includes all of the Welfare Reform Act of 2011 ideas- requiring the largest cuts to anti-poverty programs in the U.S. history.

And then there is the Balanced Budget Amendment in the Senate, which all 47 Republican Senators have expressed support for. Of course, Paul Ryan's budget proposal is actually unconstitutional by this BBA because it isn't extreme enough.

Craziness is split between the parties, but it's hardly distributed evenly.

PBM said...

Megan bailed on me, TJE, so as of now there is no consensus.

Megan said...

To Patrick- Wish I had more time to respond but I will respond more fully later. What strikes me about both approaches is that one will work in the long term and one will not. Funding the current government through taxes and defense cuts will not work even if we eventually deplete every single person's capital and our entire military. Entitlement reform even when paired with lower taxes is the only way to reduce the deficit in the long term.

Megan said...

WHERE is the left's entitlement reform plan?

Megan said...

And sorry for ditching out lunch date PBM

Patrick_L said...

Health care reform is the left's entitlement reform plan! Ryan repeals most of the provisions of PPACA (including the cost-control measures- he keeps those Medicare savings he decried as never going to happen), while enacting a Medicare reform that actually increases system costs by pushing the elderly out of the cost-efficient Medicare program into more costly and systemically dangerous (in terms of adverse selection concerns for an elderly, sick, and often disabled population) private insurance. He repeals the health insurance expansion in PPACA, as well as the exchanges-model he now seeks to use to get coverage to a much sicker, older, and riskier population pool that is far harder to insure.

Without bending the cost curve, Ryan allows systemwide health care costs to increase until infinity as it consumes a great portion of our national income, as more businesses can't provide employee health insurance (even with the government's subsidies via the tax code). He massively cuts Medicaid with his "look-ma! no hands" block grants- likely worsening the insurance coverage or access of these programs (increasing underinsurance problem). States may also reduce enrollment in these programs with a block grant, increasing uninsurance rates. He also changes the age eligibility for Medicare from 65 to 67, most likely increasing the rolls of the uninsured because these people are often walking pre-existing conditions who can never be insured.

In total, Ryan massively worsens the country's health care system, does nothing to bend costs, and increases the % of Americans either underinsured or completely lacking in health insurance. All of this means that the elderly will see their out-of-pocket costs for Medicare quickly consume a majority of their very modest incomes (at the same time Republicans would just love to cut Social Security benefits to fix the program's insolvency problem). He will likely indirectly increase the cost-sharing of patients on Medicaid as well, including many disabled people suffering from multiple physical and mental infirmities. More families will see their financial situations ruined as health care costs as a share of their income dramatically increases and as more American families are exposed to full financial risk of medical care costs as their insurance coverage declines or disappears. More Americans won't seek preventative medicine as private insurance companies raise cost-sharing measures as the firms desperately try to maintain their economies with declining enrollments of healthy working people

Patrick_L said...

How exactly is Paul Ryan's "entitlement reform" the responsible option? He tackles American health care as if it’s a financing problem. As you very well know Megan, the American health care system's problems are not a financing problem. The entire system is fundamentally flawed and the situation was rapidly deteriorating for years. PPACA seeks to stop and reverse that trend, improving the system which will positively impact Medicare and Medicaid's finances. Ryan just tries to get the problem off the government’s books, cost-shifting everything to the Americans who would have participated in Medicare, Medicaid, CHIP, and PPACA’s expansion of insurance coverage. As all health economists know, every health care reform option relies on rationing- they just vary in how they do it (The U.K.’s system for instance relies on rationing by need and cost-effectiveness). Ryan’s plan will increase the already significant rationing of health care in this country- which is done by income and health status. This will lead to a worsening of health outcomes for the many people Ryan cuts from these government programs.

Lastly, I’ll quote Henry Aaron from the Brookings Institution discussing just one of the elements of Ryan’s brilliant and brave entitlement reform proposals:

“There’s one provision of the Ryan bill that stands out as being hands-down the worst, and that is giving the seniors who are poor enough to also be on Medicaid a medical savings account. Does he know who these people are? They’re very sick, they’re very poor and many of them have cognitive as well as physical problems. They would be asked to cope with the inevitable headaches of dealing with private insurance and managing a personal checking account to pay periodic bills. This is not a sensible proposal.”

Btw, conservative economists like people from the Mercatus Center have panned Ryan’s health care proposals- pointing out that it will do nothing for national health care costs. People from the National Review have panned Ryan’s proposed Medicare changes as politically impossible. Ryan’s “entitlement reforms” rely on things that will never happen and never could happen if people in this country acted rationally (voicing outrage when people just one year older are paying entire magnitudes of less money on health care costs). Ryan’s proposal isn’t serious because it could never happen. It’s just as “serious” as a liberal alternative to raise taxes for infinity to cover the costs of increasing health care expenditures. Both are implausible- neither are real entitlement reforms. PPACA is an example of true entitlement reform- you can disagree and say it won’t work- but it is already enacted into law and working as an entitlement reform option.

Megan said...

How is Democrats' reliance on the cost control methods in the PPACA any different than Republicans' reliance on the market forces cost control that Ryan proposes?

We have no idea if either one will actually work.

And most Republicans advocate additional cost controls on top of Ryan's Medicare and Medicaid proposal, and many Republicans are not backing Ryan's plan.

PBM said...

Megan, firstly, Ryan's plan is going to pass the House on Thursday or Friday with most if not all Republicans voting yay. The party's views are not as diverse as you seem to think.

Two, Ryan's plan doesn't have cost controls. It just transfers medical costs to patients instead of the government, which would reduce the government's debt. The cost of services would be the same, which would force patients to pay more.

Megan said...

Cost sharing and market forces are the cost controls in Paul Ryan's plan.

Most Republicans agree that additional health care reform is needed. Paul Ryan's plan is a budget not a health care bill.

Patrick_L said...

Increasing cost-sharing for anyone is a suspect form of cost-control. Most medical costs are highly concentrated among a few people with a great many conditions, including large cost concentrations for end-of-life care. You will never be able to structure a program where these people will pay out the hundreds of thousands of dollars necessary to cover even a fraction of their health care costs- most medical decisions are not made at a marginal point (but that extra twinkie or not- most costs are you are either sick or not sick). Increasing cost-sharing will never impact this majority component of health care costs (highly concentrated among a small % of sick people), so already cost-sharing starts limited. Also, health care is so expensive that millionaires could find their entire fortunes exhausted in just several months- let alone over the many years they may be enrolled in the program (Medicare and then onto Medicaid). While some increased cost-sharing for higher-income individuals and households is possible, most Medicare beneficiaries have very modest incomes so there are very low ceilings as to how much cost-sharing they will ever be able to do. This means that there will be even more limited opportunities for cost-sharing to have an impact.

Ryan actually increases Medicare costs by introducing a middleman and highly inefficient private insurance entity. This will offset any cost savings from increasing cost-sharing for Medicare beneficiaries. That's why economist Tyler Cowen, libertarian economist and general director of the Mercatus Center, said (in reference to Ryan's budget proposal) "The vouchers idea won’t help cut health care costs."

Cost-sharing is a particularly troubling idea for those populations enrolled in Medicare and Medicaid, including the elderly and disabled. Aren't you concerned that that the health of individuals with certain chronic illnesses included in the RAND Health Insurance Experiment was harmed by increased cost sharing? The RAND HIE did not include the elderly, but more recent work here http://papers.ssrn.com/sol3/papers.cfm?abstract_id=971606 has shown that increased cost sharing for Medicare beneficiaries can lead to adverse outcomes and doesn’t necessarily save taxpayers money.

Most of the marginal decisions you can make about health care (see the doctor, get this pill, etc.) are examples of preventative medicine that can often be highly cost-effective. Increased cost-sharing, even seniors and most health care costs are even sensitive to limited variations in price through cost-sharing, is most likely to affect these kinds of medical decisions which can have disastrous long-term health care cost impacts.

Patrick_L said...

Finally, much of the point of PPACA is to get providers, insurers, and consumers (i.e. patients) to all have the right incentives at making medical decisions. Do you remember the Duke example where the hospital actually lost money when they implemented best practices for heart (surgery/conditions?), improved the quality of care, but lessened the need for repeat customers and so lost the medical system money? This is the kind of currently-existing PPACA “market” which you hope will introduce significant cost-savings if we just let it run free.

Lastly, cost-sharing is designed to get people to be price-sensitive- aware of price because it’s an important market signal between firms and consumers- or in this case providers and insurers/patients. But the Duke example provides an instance where price isn’t a good signal of quality or outcomes or process going into the medicine. In health care price isn’t a very good signal of quality or anything really about the good of firm providing the good- it might be a bad thing to make consumers more aware of price.