Real Fiscal Responsibility
And we are underway: Henry Aaron, Nancy Altman, Kenneth Apfel, James Blum, J. Bradford DeLong, Peter Diamond, Robert Greenstein, James Horney, Richard Kogan, Jack Lew, Marilyn Moon, Van Doorn Ooms, Uwe Reinhardt, Charles Schultze, Robert Solow, and Paul Van de Water:
- agree that the nation faces large persistent budget deficits that ultimately risk significant damage to the economy,
- concur that policymakers should begin now to make the tough choices needed to avert such deficits,
- But the methods set forth in the Brookings/Heritage
/Concord"Taking Back Our Fiscal Future" proposal strike us as misguided.
Specifically:
- TBOFF subjects Social Security, Medicare, and Medicaid to the threat of automatic cuts while giving a free pass to regressive open-ended tax-loophole and tax-break entitlements.
- TBOFF thus departs from the "shared sacrifice" approach that characterized the only successful budget deficit reduction efforts--those of 1990 and 1993.
- TBOFF does not focus adequate attention on the main driver of the forthcoming budget crisis: rising health care costs everywhere, not just in the public programs.
- Thus TBOFF's attempts to restrain public health care spending growth without taking measures to alter the dynamics of the private health care markets are misguided.
- Thus TBOFF places a large share of the burden of adjustment on the poorer members of American society: it hits the weak claimants, rather than those who have weak claims on federal spending and on tax expenditures.
- Moreover, TBOFF's strategy relies on automatic cuts--and congress has never in the past been willing to actually let the automatic cuts written into law take effect.
We believe that rather than spending time trying to design complicated budget procedures of dubious merit and effectiveness, we should focus on concrete legislative steps: policies that raise more revenue, increase economic growth, slow the rate of health care spending systemwide and nationwide, reform Medicare, and bring Social Security expenditures into balance with Social Security resources. Specifically:
- Slash farm supports.
- Slash tax loopholes and tax expenditures.
- Halt Medicare Advantage overpayments to private insurance companies.
- Adopt the other recommendations of the Medicare Payment Advisory Commission.
- Increase Medicare premiums for the well-off.
- Institute vigorous research programs to determine the comparative cost-effectiveness of different treatments and procedures.
- Institute vigorous research programs to determine the causes of the extraordinary nationwide variation in health-care spending.
- Use the results of research to devise policies to restrain health care cost growth without seriously compromising quality.
- Index entitlement benefits by a proper cost-of-living rather than a consumer price index.
- Index tax brackets by a proper cost-of-living rather than a consumer price index.
- Adhere to the time-tested and effective pay-as-you-go rules.
And I, at least, also say:
- Include mandatory private accounts in Social Security as an add-on, not a carve out.
- Uncap FICA.
- As the price of oil declines from its current peak, tax back 2/3 of the decline--and spend half the tax revenues in an across-the-board equal-dollar reduction in FICA, and half the tax revenues on infrastructure and climate-relevant research and development.
Great company to be in.
- Press Release: http://www.cbpp.org/7-9-08bud-pr.pdf
- Executive Summary: http://www.cbpp.org/7-9-08bud-summ.pdf
- Henry Aaron, Nancy Altman, Kenneth Apfel, James Blum, J. Bradford DeLong, Peter Diamond, Robert Greenstein, James Horney, Richard Kogan, Jack Lew, Marilyn Moon, Van Doorn Ooms, Uwe Reinhardt, Charles Schultze, Robert Solow, and Paul Van de Water (2008), "A Balanced Approach to Restoring Fiscal Responsibility" (Washington: CBPP) http://www.cbpp.org/7-9-08bud.pdf
