March 28, 2017

The (Tab)ulation

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Tuesday, December 20, 2016 - 10:33 AM

Republican efforts to repeal Obamacare while imposing a delay on replacement plans could prove to be fiscally problematic.

From strictly a budgetary perspective, the “repeal and replace” plan being floated by Republicans can be viewed as simply an immediate $680 billion tax cut bill combined with an uncertain promise to achieve savings down the road.

Furthermore, those savings can only come from reducing the number of people with insurance or dramatically lowering the generosity of that insurance -- both politically unpopular options -- because you can’t keep just the good parts of Obamacare (for instance the ban on exclusion for pre-existing conditions) without the “bad” parts (subsidies for insurance and some type of mandate to keep healthy people in the insurance market).

This combination -- the immediate easy choice of a tax cut and the vague promise to make harder choices in the future -- is the definition of avoiding hard choices. Making it even more toxic is that the delay period itself might unravel the individual insurance market, making any replacement scheme even more costly or unworkable.

There are clearly ways to make Obamacare work better and there are ways to make it align with a more...

Monday, December 19, 2016 - 1:07 PM

In selecting Rep. Mick Mulvaney (R-S.C.) as his budget director, President-elect Donald Trump has chosen a strong advocate of balanced budgets accomplished through deep spending cuts. It will be Mulvaney’s difficult task to craft a budget that adheres to this goal while accommodating Trump’s many campaign promises to increase spending and cut taxes.  

As a co-founder and leader of the House Freedom Caucus Mulvaney has advocated deeper spending cuts than House Republican leaders have agreed to, even if that meant shutting down the government. In his quest to reduce spending he has not spared the Pentagon budget from scrutiny, particularly the gimmick of using the Overseas Contingencies Operations fund (OCO) to avoid spending caps.

He has also opposed raising the nation’s statutory debt limit without spending cuts and has downplayed the likelihood of a government default.

Some of these hard-line positions might prove difficult to maintain as budget director where his job will require negotiations with his former colleagues in Congress to push through the administration’s fiscal agenda. This will include decisions on Fiscal Year 2018 spending caps, replacement costs of repealing the Affordable Care Act, and an inevitable need to raise the statutory debt limit.

Mulvaney may also find...

Friday, December 16, 2016 - 4:50 PM

Senate Majority Leader Mitch McConnell (R-Ky.) made headlines this week when he suggested that the GOP must pay for its campaign promises, stating his preference for “deficit-neutral” tax cuts and offsets for new spending.

“I think this level of national debt is dangerous and unacceptable,” McConnell told the press at a recent briefing. His comments come at an important time.

As a candidate, Donald Trump frequently made mention of the size of the debt, but some of his more popular proposals threaten to grow it even larger. Analyses of Trump’s proposed tax cuts put the cost between $3 trillion and $6 trillion. Incoming White House Senior Advisor Steve Bannon says he is “pushing a trillion dollar infrastructure plan” and many observers are waiting to see the size of Trump’s actual proposal.

The size of possible proposals is leading many Republicans, including McConnell and even the incoming White House chief of staff, Reince Priebus, to call for offsets. On “The Hugh Hewitt Show” on Wednesday,...

Tuesday, December 13, 2016 - 12:41 PM

Once again, federal lawmakers have turned to a familiar tactic to keep the government operating and delay significant decisions to a later date: the Continuing Resolution (CR), a stopgap measure that generally extends federal funding at current levels.

The House and Senate left town last week after passing a CR to keep the government operating through next April, when the new fiscal year will be more than half finished. Many experts warn that CRs are irresponsible, short-sighted measures that merely punt serious fiscal decisions to a later date.

CRs continue current funding levels regardless of priorities and create uncertainty about the rest of the fiscal year, which makes planning more difficult for federal agencies. CRs also occupy ample amounts of time on the legislative calendar that would be better spent addressing the long-term fiscal challenges facing the nation: rising health care costs, an aging population and an inefficient tax code.

A CR only delays the day of fiscal reckoning, which is perhaps why they’ve been so popular over the years; Congress hasn’t been able to operate the federal government without some form of a CR since 1996.

Lawmakers in both parties should avoid this form of budgeting-by-crisis and develop a more sensible...

Tuesday, December 13, 2016 - 11:31 AM

Three former congressmen and a retired U.S. ambassador warned of the difficult fiscal policy challenges facing the incoming Trump administration and congressional leaders at a forum last week in Concord, N.H.

The bipartisan panel discussed issues such as the growing debt and deficit, tax reform, affordable health care, Social Security and infrastructure investment. It was hosted by The Concord Coalition and the Warren B. Rudman Center at the University of New Hampshire School of Law.
 
Panel members were retired ambassador George Bruno and former congressmen Charles Bass, Paul Hodes and William H. Zeliff. Bruno and Hodes are Democrats; Bass and Zeliff are Republicans. Robert L. Bixby, Concord’s executive director, moderated the conversation. A video is available here.
 
Bass said that both Republicans and Democrats are to blame for the nation’s debt and deficit issues, and that both parties must shoulder the responsibility of reform.
 
He called upon Congress -- which has struggled to complete appropriations legislation in recent years -- to consider systemic reforms that could...
Monday, December 12, 2016 - 12:07 PM

Many politicians, including the president-elect, have focused their efforts to improve the federal government’s finances on the elimination of waste, fraud and abuse. While such reforms would be woefully insufficient to address the nation’s broader fiscal challenges, a 2015 report uncovered last week suggests there remains ample opportunity to save money in the Department of Defense. 

The 2015 report, which was produced by a task force of corporate executives and consultants known as the Defense Advisory Board, identified reforms to the Pentagon’s bureaucracy that could have saved $125 billion over five years. Had the report’s recommendations been implemented, the board claims savings could have been achieved without laying off any federal employees or compromising military capability. In fact, the report recommended reallocating these funds to improve military capabilities through additional troop training and hardware purchases. 

Defense officials,...

Tuesday, December 6, 2016 - 10:54 AM

No sooner had Steven Mnuchin confirmed that he was the President-elect’s pick for Treasury secretary than he raised eyebrows in both parties by saying that the new administration’s tax plan would not give an overall tax cut to high-income households.

“Any reductions we have in upper-income taxes will be offset by less deductions so that there will be no absolute tax cut for the upper class,” Mnuchin said. He also said the new administration’s tax plan would provide “the most significant middle-income tax cut since Reagan.”

These comments seemed to contradict the tax reform section of the Trump campaign website, which said taxes would be reduced “across-the-board.” Mnuchin’s statement, in a CNBC interview last week, is also at odds with the work of independent analysts who say the Trump campaign’s plan would deliver substantial tax cuts to high-income taxpayers.

Mnuchin’s comments raised...
Tuesday, December 6, 2016 - 10:20 AM

How the incoming Trump administration handles health care policy is perhaps the most consequential question hanging over the nation’s budgetary outlook.

That’s why policy analysts are scrambling to read the tea leaves on health care amid conflicting signals. Republicans seem to have one foot on the gas pedal and one foot on the brakes.

For example, recent developments have led to intense speculation on whether the new administration will rapidly work to reform Medicare. On the campaign trail, candidate Trump was adamant that he would not touch the program other than by cutting waste, fraud and abuse. However, his selection of a strong Medicare reform advocate, House Budget Committee Chairman Tom Price (R-Ga.), to become secretary of Health and Human Services raises the prospect that something more might be contemplated.

House Speaker Paul Ryan, another strong advocate of Medicare reform, has indicated that he is still planning to push the issue soon, even as senior Senate Republicans have voiced caution. 

So it is understandable if some confusion has arisen as to the direction and pace of Medicare reform.

But the tension between speed and deliberation is best exemplified by the congressional Republicans’ developing strategy for delivering on their campaign promise to “repeal and...

Tuesday, December 6, 2016 - 10:17 AM

Budget experts urged the incoming Trump administration and congressional leaders to address the country’s long-term fiscal challenges at two events in Washington last week. 

The first event, hosted by the Bipartisan Policy Center (BPC), featured the authors of a new report titled Fixing Fiscal Myopia. The report presents five chapters, each by a different budget expert, covering topics such as the framing of long-term budget projections, other countries’ experiences with long-term budgeting, and goals for reforming the budget process.

“Given the documented long-term fiscal challenges facing the country, budgeting with our heads in the sand is no longer a viable strategy,” writes Bill Hoagland of BPC and Phil Joyce of the University of Maryland in the report’s final chapter. “If the budget process is to focus more effectively on the long term, a fiscal goal should be agreed to by the president and Congress.”

The second event, hosted by the Committee for a Responsible Federal Budget, centered around the publication of a memo to President-elect Trump about the fiscal challenges he will...

Monday, December 5, 2016 - 2:44 PM

National health expenditures grew by 5.8 percent in 2015, pushing health care spending to 17.8 percent of the economy, up from 17.4 percent in 2014. This marks the second year in a row spending has grown more quickly than the economy, following a stable period from 2009 to 2013. 

The numbers come from a new report by actuaries at the Centers for Medicare and Medicaid Services (CMS). Increased spending had been widely expected, given expanded insurance coverage through the Affordable Care Act (ACA). The insured population rose from 86 percent of the country in 2013 to 90.9 percent in 2015. 

The actuaries said that in addition to spending on the newly insured, faster growth was driven by increased use and intensity of health care services and rapidly increasing spending on prescription drugs -- which grew by 9 percent after even more dramatic growth of 12.4 percent in 2014.

Slow growth in Medicare spending stands out as a bright spot in the report. While overall Medicare spending grew by 4.5 percent, on a per-enrollee basis spending only grew by 1.7 percent because the number of beneficiaries increased by 1.5 million. 

Even with moderate cost growth, more clearly needs to be done to slow health...