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ObamaCare vs. the Fiscal Responsibility Commission

Today I think health care reform legislation has about a two in three chance of being enacted into law. The legislative dynamic is volatile and my estimate changes at least daily.

For this post let’s assume for a moment that the President is successful, and that he soon signs two health care reform bills into law.

The President has created a Fiscal Responsibility Commission by Executive Order. That Commission is supposed to report its recommendations by December 1, 2010.

Part of that Commission’s Presidential mandate is:

[T]he Commission shall propose recommendations that meaningfully improve the long-run fiscal outlook, including changes to address the growth of entitlement spending and the gap between the projected revenues and expenditures of the Federal Government.

The President is pushing for enactment of a large new health entitlement. In addition, the pending legislation would slow the growth of Medicare and, to a lesser extent, Medicaid spending. It would also raise taxes.

CBO says the new health entitlement would be more than offset by a combination of the “reductions” in Medicare and Medicaid spending and the proposed tax increases. I think CBO is wrong in their long run estimate, but will set that aside for this discussion.

Problem: Those “reductions” in Medicare and Medicaid spending are from an unsustainable trend, what budgeteers call an unsustainable baseline. The growth of Medicare and Medicaid spending are, along with Social Security spending growth, the main drivers of our long-run fiscal problem.

If the pending health bills are enacted, I anticipate their repeal will be topic A for the Fiscal Responsibility Commission. It’s an obvious starting point for the new Commission.

Actually, a better long-term fiscal policy solution would be to leave the “offsets” in place and just repeal the new spending promises. Pocket the enacted Medicare and Medicaid savings for deficit reduction (some would include the tax increases as well) as an initial down payment on our long-run fiscal problem, and just repeal the deficit-increasing portions of the new laws.

This is a different view from that of some Congressional Republicans who have argued that the Medicare savings in the proposed legislation are too harsh. I’d save even more money if I could (albeit in a different way), I just wouldn’t spend the savings on a new entitlement program.

Of course if you were to repeal the new health insurance subsidies, then the individual mandate becomes unaffordable for millions of individuals and families in the rough middle of the income distribution. If the subsidies were gone, Congress would be unwilling and unable to sustain the mandate. You’d have to repeal that.

And without the mandate, guaranteed issue and community rating wouldn’t work. (Some would argue that the mandate is so weak that they won’t work even with the proposed mandate.)

Repealing one trillion dollars of new federal commitments over the next decade, and even more beyond that, would be a great first step for a Fiscal Responsibility Commission. And since those promises aren’t scheduled to be delivered for at least four more years, you wouldn’t be taking something away from people who are already receiving the benefits. This would make repeal a smidge easier politically.

I hope that the pending health legislation is not enacted into law. If it is, fiscally responsible legislators, including those on the new Fiscal Responsibility Commission, should include in their formal recommendations repeal of all the deficit-increasing provisions of these new laws.

A similar argument could be made for the Medicare drug benefit, or for almost any previously-enacted entitlement expansion. I think there is a practical political and legislative difference between a benefit that has been enacted and promised but is not yet being delivered, and one which is already delivering benefits. It’s easier to “cancel” a new health insurance entitlement scheduled to begin 4-5 years from now, than to “repeal” or dial back a Social Security or Medicare benefit being received today by millions. (For the record, I’m quite open to all of the above.)


The President boxes himself in

Six of the 18 members of the Fiscal Responsibility Commission are current Republican members of Congress: House Members Dave Camp, Jeb Hensarling, and Paul Ryan, and Senators Tom Coburn, Mike Crapo, and Judd Gregg.

If these health bills are enacted, I expect all Congressional Republicans will vote no on final passage, including the six listed above.

I assume those six Members of the Commission will push for something like what I describe above. My proposal should not surprise anyone who gives it a moment’s thought. It’s the obvious first step.

The President and his team have admirably maintained complete flexibility on what the Commission should consider. All options are on the table, they say, and it’s not our job to take options off the table. Kudos to the Administration for doing this, especially when they will have AARP & Friends pushing them to rule out changes to major entitlement programs.

But how does the Administration answer the following questions:

The Administration has said that all policy options are on the table for the Fiscal Reform Commission. Would that include repeal of all or part of a new health care reform law or laws?

Is repeal of the proposed trillion dollars of new entitlement commitments over the next ten years, and even more beyond that, an option that the President’s Fiscal Reform Commission should consider?

Wouldn’t repeal of the new entitlement, while leaving the deficit-reducing elements of those bills in place, be a significant first step toward closing our long-term fiscal gap?

I expect Administration spokespeople would try to duck these question by saying the legislation as a whole reduces the deficit in the short-run and the long-run. If given, such an answer would be nonresponsive, because the question is instead whether the President is willing to consider recommendations to repeal only those parts of (hypothetical) new laws that would increase the deficit.

I can easily imagine the Commission breaking down over this question even before it gets off the ground. The President and Congressional Democrats would not want to give up their hard-won victory (if they achieve one) so quickly, and Republicans would insist on it as part of any long-term deal.

If I’m right, then one side effect of enacting the pending health care reform legislation would be to reduce the probability of a successful Fiscal Responsibility Commission.

(photo credit: Official White House photo by Craig Kennedy)

By | 2017-05-23T19:06:27+00:00 Monday, 15 March 2010|

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