Health Care and America’s Budget Outlook
In today’s Washington Post, Robert Samuelson lays out how Washington has added to our skyrocketing debt with its misguided takeover of health care:
When historians recount the momentous events of recent weeks, they will note a curious coincidence. On March 15, Moody’s Investors Service — the bond rating agency — published a paper warning that the exploding U.S. government debt could cause a downgrade of Treasury bonds. Just six days later, the House of Representatives passed President Obama’s health-care legislation costing $900 billion or so over a decade and worsening an already-bleak budget outlook.
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Large deficits and rising debt — the accumulation of past deficits — spook investors, leading to higher interest rates on government loans. The higher rates expand the budget deficit and further unnerve investors. To reverse this calamitous cycle, the government has to cut spending deeply or raise taxes sharply. Lower spending and higher taxes in turn depress the economy and lead to higher unemployment. Not pretty.
One estimate being flaunted by the bill’s proponents predicts the legislation will cut the deficit by $143 billion over the next decade. But this conclusion can only be reached using accounting gimmicks that mirror Wall Street’s behavior leading up to the financial crisis, says Samuelson.
But the CBO estimate is misleading, because it must embody the law’s many unrealistic assumptions and gimmicks. Benefits are phased in “so that the first 10 years of [higher] revenue would be used to pay for only six years of spending” increases, a former CBO director, Douglas Holtz-Eakin, wrote in the New York Times on March 20. Holtz-Eakin also noted the $70 billion of premiums for a new program of long-term care that reduce present deficits but will be paid out in benefits later. Then there’s the “doc fix” — higher Medicare reimbursements under separate legislation that would cost about $200 billion over a decade.
Ten years of taxes to pay for six years of benefits? A sharp rise in the already-bloated deficit? A $528.5 billion slash in Medicare coupled with significant tax increases? Washington must do better. Real health care reform must focus on a genuine reduction in costs so that we can get our budget under control.