August 2, 2015

The (Tab)ulation

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Monday, July 27, 2015 - 11:44 AM

The message from the Social Security and Medicare trustees last week could not have been more blunt: the two programs’ long-term costs “are not sustainable with currently scheduled financing and will require legislative action to avoid disruptive consequences for beneficiaries and taxpayers.”

This conclusion should take no one by surprise. The pressures on both programs from population aging and rising health care costs have been warned about many times by many nonpartisan sources.

What is surprising is that so few lawmakers seem to take these warnings seriously.

After all, Social Security and Medicare are not insignificant programs. In 2014, 59 million Americans received Social Security benefits, and Medicare covered 54 million. At a cost of nearly $1.5 trillion, the two programs alone accounted for 42 percent of federal program spending last year.

Given their size and importance for so many American families, the fact that Social Security and Medicare are on an unsustainable track should place them high on the legislative agenda for both...

Tuesday, July 14, 2015 - 10:58 AM

Last week the Department of Health and Human Services (HHS) proposed a new method of paying for health care services, using its authority under the Affordable Care Act (ACA) to scale up payment reforms that have been shown to save money while maintaining the quality of care.

In 75 metropolitan areas, Medicare will use “bundled payments” for hip and knee replacements  -- meaning that every aspect of an intervention, from the surgeon’s work to the artificial joint to post-surgery rehab, will be covered in a single payment. Ultimately, providers will both share in any cost savings or risk penalties if there are cost overruns or quality falls short.

For the first time these payment changes will be mandatory. This is an important step in furthering the Obama administration’s goal to make most Medicare payments through alternative models (not fee-for-service) by 2018.

Starting with hips and knees for such mandatory changes makes sense because there is a wide cost variation for these procedures, but no evidence linking cost to quality. Furthemore, this...

Monday, July 13, 2015 - 8:17 AM

In a good example of history repeating itself, Congress for the second year in a row is going down to the wire on a mid-summer deadline to replenish the Highway Trust Fund before it runs out of money.

If lawmakers can’t find a solution by July 31, states will not receive promised funding from the federal government to help pay for transportation projects, bringing many such projects around the country to an abrupt halt.

Proposals released last week rely on a flawed plan to temporarily replenish the trust fund. One of those proposals, however, does identify an alternative way to fund transportation spending that could be a long-term solution.

Lawmakers also have to reauthorize highway and transit programs after passing a two-month extension of them in late May. The short-term patch ensured that state governments could continue to be reimbursed for infrastructure projects during peak construction season, but lawmakers delayed action on needed reforms to transportation financing.

And make no mistake, the trust...

Monday, June 29, 2015 - 12:54 PM

Federal officials could take some lessons from the success that many state leaders have had in putting together responsible budgets, according to former elected officials and others at a recent  panel discussion in Washington.

“There is something about being a governor that seems to force hard choices that don’t always happen in Congress,”  said Robert L. Bixby, executive director of The Concord Coalition. Concord presented the panel discussion Thursday in connection with giving its 2015 Economic Patriot Award to former Indiana governors Mitch Daniels and Evan Bayh III.

In addition to the award winners, other panel members were Michael Castle, a former Delaware governor; Tim Penny, a former Minnesota congressman with experience...

Tuesday, May 19, 2015 - 10:52 AM

At a forum last week on Capitol Hill hosted by The Concord Coalition and the Bipartisan Policy Center (BPC), experts from across the political spectrum shared their thoughts about retirement security in America. While several different policy proposals were discussed, one area of broad consensus was that Social Security is a critical component of retirement security -- and that lawmakers must act to strengthen the program.

Sen. Kent Conrad, who co-chairs the BPC’s Commission on Retirement Security and Personal Savings, kicked off the event by pointing out that "ultimately, almost all of us will rely on Social Security for the base of our retirement income needs."

"Social Security has serious financing problems," Conrad also said. "We've not really grappled with these issues, and the longer we wait, the more draconian the solutions will have to be."

However, he suggested an even broader reform agenda: “While fixing Social Security will involve tough decisions on revenues and benefits, we shouldn't just be looking at this through the lens of making the program solvent. Social Security, many of us believe, also needs to be modernized...

Thursday, March 12, 2015 - 1:15 PM

In less than three months, the highway bill enacted last July will expire and the program’s trust fund will face imminent depletion. At that point, Congressional failure to act would cause tens of thousands of infrastructure projects to be put on hold and would jeopardize construction jobs across the country.

The highway trust fund has historically operated on a “user pays” principle, where motor vehicle and fuel taxes paid by those who directly benefit from roads fund programs to maintain and improve the system. However, when Congress last raised the federal gas tax in 1993, lawmakers chose not to index it to inflation. As a result, the gap between revenue and expenditures has grown as the real value of the tax has declined.

As the chart above shows, there would be no shortfall in the highway trust fund today had its dedicated revenue source been allowed to grow with inflation. But instead of rectifying this problem or finding an alternative source of dedicated revenue, Congress has largely relied on fiscally irresponsible patches funded by...

Thursday, March 5, 2015 - 1:25 PM

The New Democrat Coalition, a group of 46 House members who describe themselves as the "pro-growth, fiscally responsible wing of the Democratic Party," have announced a new platform designed to strengthen the role of moderates in Congress.

Among the many items on their “American Prosperity Agenda,” the New Dems pledge to "pursue a long-term, pro-growth fiscal reform that prioritizes investments in our future." If the New Dems really want to make good on this plank of their platform, here are five things they can do in this Congress.

1. Propose a Responsible Sequester Replacement

Lower discretionary spending caps will go back into effect on Oct. 1, enforced by an across-the-board sequester. But these lower caps were never supposed to actually take effect: they were designed to be so irrational that lawmakers would be induced to agree on a so-called "grand bargain" that addressed the real long-term drivers of our debt.

Because Congress could not agree to curb entitlement spending or raise more revenue, the discretionary budget -- the part of the budget that funds the "investments in our future" supported by...

Tuesday, March 3, 2015 - 10:58 AM

A hearing by the House Ways and Means Social Security subcommittee last week drew attention to the impending insolvency of the Disability Insurance (DI) trust fund in 2016. While there were some disagreements, there was also a clear bipartisan consensus that something must be done to shore up the finances of Social Security.

The hearing featured testimony from Charles Blahous, a public trustee for Social Security, Ed Lorenzen of the Committee for a Responsible Federal Budget, and Webster Phillips from the National Committee to Preserve Social Security and Medicare.

All three agreed that, given the limited time between now and the exhaustion of the DI trust fund, it would be impossible to avoid a draconian cut in disability benefits without reallocating some of the payroll tax from OASI (the retirement program) to DI. Congress last reallocated the payroll tax in 1994.

However, both Blahous and Lorenzen strongly advocated that...

Monday, January 12, 2015 - 10:27 PM

A looming crisis is facing Social Security’s Disability Insurance (DI) program: Unless Congress takes action, the DI trust fund will run out next year and beneficiaries will suffer an across-the-board cut of 19 percent.

Some advocates suggest that a “simple fix” would be for Congress to shore up the DI trust fund by reallocating a portion of Social Security’s payroll tax revenue from the Old Age and Survivors Insurance program (OASI). But this approach would ignore the fact that OASI has growing problems of its own. 

Last week, as part of a rules package marking the start of a new Congress, House Republicans included a rule that would prohibit reallocating payroll taxes from OASI to DI unless steps are also taken to strengthen both funds.

While House rules are easily waived, this one points policymakers in the right direction. Social Security as a whole is on an unsustainable course, with its larger piece, OASI, running a cash deficit that is projected to grow larger and larger as the population ages and workforce growth slows. 

Disability Insurance is depended on, primarily by workers over age 50 because they are more vulnerable to medical conditions that impede work. This demographic continues to grow with the aging of the baby boomers and now consists of almost three in four DI...

Tuesday, December 2, 2014 - 11:23 AM

Lawmakers are now focusing on extending a series of tax provisions mainly benefiting businesses for one year after a much larger deal that would have added hundreds of billions of dollars to the deficit collapsed last week.

Initially, lawmakers were considering making a few temporary provisions permanent while extending most other provisions through 2015 -- without offsetting a single dollar of lost revenue. If Congress were to pass legislation resembling that deal, it would have added roughly $530 billion to the deficit over 10 years.

These provisions -- collectively known as “tax extenders” -- are temporary measures that, like other tax expenditures, essentially subsidize certain special interests or activities. Making them permanent, or even just extending them again without offsetting the lost revenue, would be fiscally irresponsible. Any tax provision that decreases revenue should be offset by eliminating other provisions in the tax code or cutting spending. Unfortunately, neither the House nor the Senate seem to be concerned with finding offsets, even though offsets are required under pay-as-you-go (PAYGO)...