April 18, 2014

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Thursday, July 14, 2011 - 10:57 AM

The partisan vortex in Washington is now so strong that it threatens to swallow all rational thought.

As the nation rushes closer to default, politicians are rushing to their respective partisan corners. At times they truly seem more interested in blaming each other for causing a crisis than they are with preventing a crisis from happening. It is little wonder that credit ratings agencies such as Moody’s and Standard & Poor’s have repeatedly questioned whether U.S. Treasury bonds can maintain their AAA status.  The scenario they fear, which becomes more likely by the day, is not so much that the U.S. can’t pay its bills but that it will refuse to do so.

For a brief time last week, President Obama and House Speaker John Boehner appeared ready to challenge their respective political bases. Hopes were raised for a “big deal” that would include essential compromises on popular entitlement programs and tax breaks to reduce the deficit by roughly $4 trillion over 10 years. It was a good idea, but it didn’t last long.

Instead of looking at what the nation might gain in fiscal sustainability, politicians on both sides looked with horror at what they might lose in terms of partisan finger-pointing. A big deal would mean that Republicans could no longer accuse Democrats of trying to kill the economy with...

Monday, July 11, 2011 - 10:39 AM

The biggest sticking point in the debt-limit talks has been the disagreement over tax policy. President Obama has been encouraged by his fiscal commission to insist that higher revenues be part of any major deficit-reduction deal -- and to recommend that much of the revenue increase should come from broadening the tax base by reducing "tax expenditures." Although Republicans are coming around to the idea that tax expenditures are just subsidies run through the tax code, many of their leaders stand firm on the position that revenues as a share of the economy not rise from current policy.

While President Obama and other Democrats want revenue increases, they don’t want any changes that would raise taxes on middle class or lower-income households, arguing that such taxes would be overly burdensome and would harm the economic recovery. Meanwhile, Republicans only want reduced tax expenditures to pay for cuts in marginal tax rates, asserting that they would be the path to stronger economic growth and in turn higher revenues.

So both sides are reluctant to change their tax-cutting ways, and they continue to have their own great expectations for tax cuts. But tax cuts don’t always live up to such expectations,...

Thursday, July 7, 2011 - 12:00 AM

 

This originally appeared on The American Square at http://theamericansquare.org/profiles/blogs/go-long

President Obama says he wants to jettison the short-term focus that has guided recent budget negotiations in favor of a more comprehensive fiscal sustainability plan. This initiative could be the beginning of a major new phase in negotiations between the administration and congressional leaders. On the other hand, it could prove to be just another false start, designed for “positioning” rather than results. It will take more than one or two meetings to know the difference.
 
In any event, we seem to have come full cycle. This is where negotiations should have started several months ago when the President presented his original budget. But even if precious time has been wasted, the right goal is finally in view.
 
Our fiscal challenges demand an ambitious approach. Ratings agencies Moody’s, Standard and Poor’s, and Fitch have all warned the United States that its coveted Aaa credit rating will be reevaluated if swift and comprehensive action is not taken to get its fiscal house in order. Political gridlock featured prominently...
Monday, June 13, 2011 - 10:33 AM

A shorter version of this column is featured on CNNMoney.com.

It is often said that the most expensive piece of medical equipment is the doctor’s pen. Unfortunately, after more than two years of intense debate about health care costs in Washington, politicians still seem stuck debating who should pay for the pen instead of focusing on how to make the pen less expensive.

Republicans want private insurers to make health care payments along with substantially higher cost-sharing by individuals. Democrats and the President want retirees to continue in a system where the government is the predominant payer.

However, in either vision of the world, the primary decisions driving the costs of medical care will be made based on what the doctor says to a patient in an office visit or laying on a hospital bed. This is destined to be the case for as long as doctors train and build up extraordinary expertise. 

This is why the Independent Payment Advisory Board (IPAB), created by the 2010 Affordable Care Act (ACA), is so important in the effort to control costs. The IPAB will be made up of 15 experts, some suggested by congressional leaders and all confirmed by the Senate, appointed to represent the major...

Friday, June 3, 2011 - 9:33 AM

The punch line of an old joke aptly describes the status of budget negotiations in Washington: you can’t get there from here. It’s not the “there” that is the problem; it’s the “here.”

Broad bipartisan consensus exists on two points. The first is that the debt limit must soon be raised to avoid a default in one form or another. The second is that current fiscal policy cannot be sustained. Missing from the equation is any solid evidence that political leaders are prepared to do what is necessary to solve either problem.

Republicans have chained themselves to a rigid negotiating position, insisting that there can be no tax increase regardless of the need or on whom the burden would fall. They argue that even a deficit reduction plan heavily tilted toward spending cuts, such as the framework recommended by the President’s bipartisan fiscal commission (Bowles-Simpson), must be rejected outright.

Democrats say they are more reasonable because they believe that everything -- spending cuts and tax increases -- should be “on the table.” However, they have unanimously rejected four budget plans in the Senate, including the President’s official budget, without proposing anything of their own. They are clearly content to let the House Republican budget twist slowly in the wind while maintaining the safety of silence...

Monday, May 2, 2011 - 4:52 PM

Elected officials in both parties have made what I call “magical, mystery tax pledges” that are at odds with bipartisan approaches to serious deficit reduction:

  • Republicans: Don’t raise revenue above the 40-year historical average of around 18-19 percent of GDP.
  • Democrats, including President Obama: Don’t raise tax burdens on households making under $250,000 a year.

Some Republicans may not realize how their promise works against not only bipartisan compromise but against their own policy goals. As explained in a recent opinion piece I wrote for Bloomberg Government (subscription-only access here):

“To those on the right holding fast to an 18-19 percent of gross domestic product revenue ceiling, here’s the paradox: Raising more revenue by broadening and leveling the tax base is actually consistent with ‘supply-side’ economic goals. Raising revenue by reducing at least some of the $1 trillion a year in tax breaks and shelters — also known as tax expenditures — and adding on new, broadly defined tax bases would increase, not decrease, the supply of productive resources in our economy…”

Reducing tax expenditures would actually reduce the government’s role in the economy, a central goal...

Tuesday, April 12, 2011 - 11:57 AM

Here is a trivia question: Under which scenario would Social Security, Medicare and Medicaid make up the larger share of non-interest (i.e. “primary”) federal government spending?

A. President Obama’s budget

B. Rep. Paul Ryan’s budget (House Budget Committee)

The answer is B.

Under Ryan’s budget, these programs would grow from 46 percent of primary spending in 2011 to 62 percent in 2021. This compares with an increase to 56 percent under the President’s budget.

The divergence becomes even more pronounced after that. By 2040, Social Security, Medicare and Medicaid account for 74 percent of non-interest spending under Ryan’s budget compared to 62 percent under the President’s budget.

At first, this result may come as a surprise because it is clear that Ryan’s budget would do far more than the President’s budget to curtail the growth of federal health care spending. At...

Thursday, March 31, 2011 - 1:30 PM

Moe, Larry and Curly are fighting in the back seat of the car. No one is in the driver’s seat. As the boys settle down, Curly looks up and says, “Hey, don’t look now but we’re about to be killed.”

Leave it to The Three Stooges to provide the perfect metaphor for what passes as a budget debate in Washington these days.

It appears that we’re headed for a government shutdown in April and a possible default in May all because politicians can’t stop squabbling over a few billion dollars from a small slice of the budget while our overall fiscal policy is headed for a cliff.

The long-awaited “adult conversation” has not yet begun.

Very few dispute the fact that we’re on an unsustainable fiscal path. Yet too few seem willing to take the mountain of official and unofficial warnings seriously enough to do anything about them.

Indeed, they seem eager to engage in a reckless game of fiscal chicken, virtually daring the other side to do something responsible. We are left with a fierce debate over non-security appropriations that account for only 12 percent of the budget.

That is why even tentative sprouts of reason are worth nurturing. For...

Thursday, December 16, 2010 - 4:55 PM

The legal term severable normally gets little notice outside the world of constitutional law -- yet now it has become a big buzzword amongst health care analysts and federal budget wonks. The reason has to do with the numerous legal challenges to the Accountable Care Act's individual mandate to purchase health insurance. 

A U.S. District Court Judge in the Eastern District of Virginia recently declared the mandate unconstitutional. He also declared it severable from the rest of the health care reform legislation. This means that even though he found that one provision is unconstitutional, he held that the rest of the legislative package is constitutional and can continue on its path to full implementation. If the courts ultimately agree with this judge's interpretation, the budgetary results could become disastrous without congressional action.

While we have discussed the primacy of the individual mandate in making health care reform work (here and here,) it makes sense to revisit the issue of...

Monday, December 6, 2010 - 11:54 AM

By now we've seen a number of proposals for fiscal sustainability from groups with very different perspectives. Some of the harshest critics of the bipartisan deficit-reduction panels are liberal-leaning groups that argue that the recommendations of the President's commission, as well as those of the Bipartisan Policy Center and the MacGuineas-Galston plan, leaned too heavily toward the conservative side and proposed packages that were too heavy on spending cuts and too insistent on keeping taxes (too) low. (I may agree that I would have preferred more revenue increases in the overall mix than the President's commission proposed, but I don't think that should lead me to declare the overall proposal "dead on arrival" or to reject the the individual policies contained within it.)

I've looked at two...