Tax Refunds, Health Spending and the Debt Limit

Special Guests: Diane Lim

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During the latest “Economist Mom” segment on Facing the Future, Diane Lim, a principal at the District Economics Group, said that the statutory debt limit has become a problem because it is used as a political weapon instead of a tool for fiscal discipline.

“It really does jeopardize the functioning of the government and the government’s responsibilities,” she said. “It doesn’t really impose the discipline that one would hope, and it instead encourages the political partisan antics that prevent us from making progress on anything.”

She also said the debt limit figure is arbitrary.

The debt limit, which had been suspended a little more than a year ago, is returning this week although the Treasury can avoid a federal default for several months through what it calls “extraordinary measures.”

Concord Coalition Executive Director Robert L. Bixby joined the segment and said: “I look at it as a trigger that can’t be pulled because — unlike a government shutdown, which is bad enough and should not happen — if they go to the debt limit and don’t raise it, or play games with it, then you’re putting the nation’s creditworthiness at risk.”

“Once you are at the debt limit, you have already incurred the obligation, it’s just a question of whether or not you will pay it,” Bixby said. “I’d be in favor of some sort of targeted debt-to-GDP ratio, or something like that, that has a more economically meaningful target.”

He and Lim also discussed taxes, including the disappointment expressed by many taxpayers concerning 2018 tax refunds.

“This is the first tax filing season that people have been filing their tax returns under the new tax law,” Lim said. “The IRS has to try to figure out how this is going to affect different types of taxpayers and adjust those withholding tables that employees fill out . . . It’s difficult.”

“Having a change in refunds, for better or worse compared to prior years, is not surprising,” she said. “Once you get through one year . . . as a taxpayer, you’ll be more prepared . . . to adjust your withholdings in anticipation of what your ultimate tax bill will be.”

Bixby said, “It’s an entirely human reaction if you see a slight increase in your paycheck, you don’t really question it . . . but then it comes around to the end of the year . . . and you get a much lower check for a refund.”

He said many people are “just reacting to the fact that they’re getting a lower refund, but they might have in effect already gotten that refund in advance.”

Concord’s Policy Director Joshua Gordon also joined the program to discuss trends in national health care costs in light of new government projections on health care.

“Health care cost growth is the most important factor leading to long-term federal budget unsustainability,” he said. “The big picture is that . . . over the long-term, health care will be growing faster than the economy.”

“This is ultimately a problem because, if we continued on these trends, you would go from one-sixth of the economy devoted to health care to about one-fifth in a decade, and it just keeps growing and growing in the future,” Gordon said. “And we can’t really have an economy that is so heavily weighted toward one sector.”

He added: “As the population ages, more and more people are shifting where they get their health care. . .and that shift drives federal budget issues and is also driving this change in where we spend our health care dollars. As people get older, they spend more on health care . . . and the aging of the population is really a permanent shift, it isn’t a bubble.”


Hear more on “Facing the Future.” I host the program each week on WKXL, (N.H.), and it is also available via podcast. Join me and my guests as we discuss issues relating to national fiscal policy with budget experts, industry leaders, elected officials and candidates for public office. Past broadcasts are available here. You can now subscribe to the podcast on iTunes, Google Play or through RSS.

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