Potomac Fever is the blog of the Hamilton College Semester in Washington Program.
because Ryan's proposal to have low-income and disadvantaged Americans disproportionately carry the burden of deficit reduction is so politically courageous. It’s great that Ryan and Republicans now how to take on the politically powerful and make them contribute. At the same time, Ryan & Co. exempt Social Security, Defense, and Medicare for anyone over the age of 55 while cutting the top tax bracket from 39% to 25%. If that isn’t pandering to one’s political base, I don’t know what is. It’s also courageous that Paul Ryan and House Republicans bend the health care cost curve up. But hey- they get nearly all of those costs of the government’s books, so they don’t have to worry about it. They way Republicans account for things, it’s like the cost-increase doesn’t even exist. In case people haven't noticed, Obama's proposals take on everyone- changes to Medicare that piss off the elderly, he takes on the Military-industrial complex and pork-barreling Congressman with Defense cuts (which are still significantly less than any fiscal commission has proposed), $350 billion in cuts to other mandatory programs (those besides the big three)- which include many programs vital to low-income Americans, and restoring tax levels for high-income Americans (who are benefited from a spending-cuts only approach that preserves their government handouts through the tax code). Compared to the House Republican approach, Obama's proposal is far more similar to any of fiscal commission reports or bipartisan frameworks that have achieved support from many prominent Republicans, including 3 of the most conservative Republicans in the Senate- Coburn, Crapo, and Chambliss. For instance, Obama's proposal differs from Bowles-Simpson proposal in that it doesn't touch Social Security (which the commission does through spending and revenue changes totaling $300 billion [all #'s refer to first decade]), doesn't cut health care as much ($250 billion), doesn't cut defense as much ($600 billion, a number far less than what the Rivlin-Domenici commission and others have suggested), and raises taxes by $450 billion less (but does it in a way that almost entirely hits the top 25, versus hitting the upper-middle class). Republicans aren't brave- they're cowards who only seek changes to government that don't affect their political base. Just like underfunded pensions being used by state-level Republicans to attack unions (even though intelligent conservative experts acknowledge they have nothing to do with states' short-term fiscal problems), Republicans at the federal level are targeting their political enemies across the country by using deficit-mania- deficits that are predominantly the result of their profound economic and fiscal mismanagement for decades.
But where's the beef?
Where’s the beef from Republicans? In terms of specifics, all we know is they repeal PPACA (increasing the ranks of the uninsured by 30 million), block grant Medicaid (what do they expect to happen at the state level when the federal government withdraws $700 billion in funding? Republican silence…), they cut food stamps by $127 billion (20%), extend the Bush tax cuts for everyone, and on-top-of-that they lower the top corporate and individual tax rates to 25% (to be paid for by closing middle-class tax expenditures which they’ll name…later). That’s the only specifics they’ve come out with and voted for. If you add up the specific things Ryan has released, he’d actually INCREASE the deficit from any baseline. The only other things Republicans say they are going to do is change Medicare… but only in 10 years… outside any framework that allows them to actually make that change. They do so by radically changing the program for people separated in age by days, doing so in a way conservative economists and policy experts say isn’t politically or economically feasible. The current Republican plan would double the individual contribution for people born just days after those currently over 55, who would be locked into the program. That isn’t a program change that could ever happen, because it is so radical for people separated in age by literally days! It creates the conditions for a political riot.
I agree with TJE and the author here. Obama seemed to be taking a play out of the GOP 2010 playbook by naming numbers but not actual program cuts. I think he will get to some of the stuff Samuelson is talking about once negotiations on the 2012 budget start. Patrick, I do hate the Ryan plan, but I think TJE has a point here in that Obama hasn't really been that specific other than raising taxes on the rich and strengthening the IPAB
And I'm just pointing out that Ryan and & Co. haven't been very specific either, and many of their specifics (proposed formulas to get certain amount of savings) have actually turned out to be wrong. A pox on both their houses. Hence, my favoring the "Gang of Six" approach. However, my suspicion is that McConnell will sabotage that in the Senate, and it certainly won't fly in the House. Leading to brinkmanship on the unrelated matter of the debt ceiling- a very scary proposition.
Gotta love the GOP. You can always count on them to bring some serious crazy and unreasonable to the table.
Fact: The Republican bends the cost-curve up, making it worse than doing nothing. Doing nothing is sadistic policy, but Republicans actually make the systemwide problem worse by repealing specific cost-saving provisions of health care reform (including those elements liked across the political spectrum of policy experts and health economists) while keeping all of the fees and burdens on the system (because Ryan needed the revenues). He makes Medicare worse by not only increasing cost-sharing, but doing so by shifting beneficiaries from traditional Medicare to private health insurance providers. Holtz-Eakin somehow neglects to mention that change. Republicans should remember the medical ethics maxim- First, do no harm. With this Republican proposal, they completely ignore that precept. Once again, conservative tout the virtues of consumer control. First, they ignore the many theoretical problems with this idea applied to health care. Ryan’s approach rests on the argument that we need to make patients more cost sensitive with their medical decisions, which first of all ignores the fact that a significant portion of medical treatment is absolutely necessary-non negotiable (necessary, time-sensitive treatment like a heart attack) and that the current system provides patients with little or no evidence on which to evaluate providers (similar to the quality of goods that consumers keep in mind when considering price). Also, health care costs are incredibly concentrated among a small sub-set of the population who will never be cost-sensitive in their medical decisions because their bills run in the hundreds of thousands of dollars almost instantly- none of that is exposed to cost-sharing because no one would hold anyone but the uninsured (the ranks of which Ryan increases by at least 30 million) to such massive liabilities. (Conservatives are the ones who always pushing for catastrophic health insurance alone- ignoring the fact that much of health care costs would fall under these programs). Also, a large percentage of medical costs go to end-of-life-care or treatment for people (often in Medicaid) with multiple physical and mental impairments- which is why their medical decisions are handled by other people or the medical system-at-large. The system, and family members, is based on humanity’s sense of morality and ethics that you have to help these people- that it’s not right for you to decide to not pay for these people’s treatment because you don’t want to pay the cost. Look at our debates over Terri Schiavo and others- people who actually arguably brain-dead. People had problems with family members trying to end their care, imagine how people would react if people tried to deny people care because they were almost guaranteed to die… in a few weeks, or gave people less care because of their disabilities. That won’t happen, which is why costs for these types of people wouldn’t be significantly impacted by increased cost-sharing that Ryan proposes for them, and if it did have an impact it would be because other people over their cost concerns were limiting patients’ access to care. Is that an outcome Ryan is hoping for? Cost-sensitivity is also flawed because it ignores how humans’ well-established problems with making rational time preferences would make them particularly inadequately able to make the trade-offs between preventative care and more costly long-term treatments, besides the fact that even health experts dispute whether preventative care is cost effective! Republicans also ignore how there are and always will be huge informational asymmetries in the doctor-patient relationship that inevitably lead to supply-driven demand which instantly breaks down the economic theory they are trying to apply.
Besides theoretical problems, the Ryan proposal flies in the face of facts and evidence. For instance, we already have higher cost-sharing than other countries. Republicans ignore the evidence that consumers in American largely have no control over their medical decisions, even with far higher cost-sharing levels and presumed sensitivity to cost. They ignore the entire field of health economics since the ground-breaking work of Kenneth Arrow that practically started the whole discipline. They ignore the fact that increased cost-sharing has been shown to lead to worse outcomes for the particular populations Republicans are solely interested and able to apply it to- the elderly, disabled, very sick, and low-income Americans dependent on Medicare and Medicaid. All the conservative shills have been able to do is say over and over again is “increased consumer choice, competition, cost sharing” will have an impact. They ignore the actual facts that we already have higher levels than other countries (that somehow do 50% or more better than us on controlling costs while getting the same outcomes), that there are huge theoretical problems with applying those concepts to a) medical care, and b) the disadvantaged populations in government programs, and that the empirical literature is screaming huge big red flags that this won’t work but it will have substantial unintended consequences. Do these facts mean anything to anyone? Lastly, Holtz-Eakin ignores that health-status variation in premium support is in an incredibly complicated, incomplete, and impossible procedure to do adequately- you will always significantly fail many people at adequately varying supports for their health status. At the same time, Holtz-Eakin ignores that while there is variation in premium support payments based on income, the overall system of payments is determined by a formula completely unrelated to rising costs in the health care system which means everyone will see dramatically increasing cost-sharing, and that because low-income seniors have so much less disposable income that they will actually be hit harder by this system.
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