Monthly Archives: March 2012

Wednesday afternoon, the House began consideration of the fiscal year 2013 budget resolution (the basic congressional budget plan, which sets the limit for appropriations).  Late in the evening, the House defeated a proposed amendment that would have implemented a substantial deficit-reduction plan, modeled after the report of the President’s Commission for Fiscal Responsibility and Reform, commonly called the Bowles-Simpson Commission (after its co-chairs, Erskine Bowles and former Senator Alan Simpson).  The language of the amendment mirrored the Bowles-Simpson report fairly closely (a budget resolution is rather sketchy on details), with the major departure being to allow the continuation of a capital gains tax preference, which Bowles-Simpson would have repealed.

The vote was 38 in favor, 382 against the amendment.  Democrats voted against the amendment 22-159; Republicans voted 16-226.  So it was a bipartisan amendment, even in defeat.

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Many view the 2010 health-reform law’s requirement to purchase insurance (or pay a penalty) as the central element in the current Supreme Court case.  After considering this “mandate” itself yesterday, the Court today will debate “severability:”  If the mandate itself is unconstitutional, could the rest of the law stand in its absence?  Or as a Washington Post headline put it today, “Could the health-care law work without the individual mandate?

Public-opinion polls seem to indicate that many people dislike the Affordable Care Act (ACA) as a whole, but like virtually all of its parts – except the mandate.  People do not want to be forced to buy something they do not want or need.  And because many people believe that they are immortal and will be forever young, one thing they do not want to buy is health insurance, which they will never need – or at least will not need until some year in the distant future, which they will know in advance and with certainty.

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I am not an attorney, and I don’t even play one on TV, so I do not want to venture onto the likely outcome of the Supreme Court challenge against the Patient Protection and Affordable Care Act (aka PPACA, or ACA, or Obamacare).  If pressed, I would note that those who argue that the Court has for many decades not been kind to legal challenges based on the commerce clause of the Constitution seem persuasive.  But that may be yet another rule that always is true, until it is not.

Click the image above to view our 2007 policy statement. In this report, CED recommends the creation of independent regional exchanges that allow individuals to choose among competing health plans.

However, also on the table is the legislative repeal of the ACA – either in whole (“repeal and replace”) or in part (as in House Budget Committee Chairman Paul Ryan’s recently proposed budget resolution for fiscal year 2013).  Neither of these approaches is going anywhere in 2012, with the Senate and the White House controlled by Democrats.  However, both options could be live next year, depending on the outcome of the November elections.

CED recommended a “no” vote on the ACA when it came to the end of the process, because we believed that it did too little to contain health costs.  However, it is worth noting briefly that the partial repeal of the ACA in the House budget resolution (it apparently would eliminate all of the provisions that spend money, but retain all of the law’s budgetary offsets) would scrap the law’s saving grace, which we highlighted throughout.

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Ever since the late 1970s, some Washington hands and a few economists have argued that cutting tax rates would increase federal tax revenues – and that “dynamic scoring” would prove it.  The argument is that lower tax rates would increase work, saving and investment, and that as a result the economy would grow faster, yielding more revenue, not less.

This refrain has echoed for years, running through all of the tax changes since 1981, and recurring in the years between.  And we hear it again today:  Proposed tax cuts will reduce, rather than increase, the deficit – if only we take account of the effects on economic growth.

However, the conventional tool of budget analysis – so-called “static scoring,” – assumes that the economy remains unchanged.  To the faithful, that sells tax cuts short.  Assuming that the economy doesn’t change at all must be inferior to taking changes into account, right?  So why, other than politics, would any bozo not use dynamic scoring?

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The good news is that we still have time to deal with the deficit problem, but the longer we put it off, the bigger it will become.  This problem is not one that can be solved either simply or quickly.  It is too large to solve solely with economic growth, or only with tax increases or spending cuts alone.  It will take some of all three.  Anyone who says with a straight face that we are going to deal with our deficit in a serious way without touching revenue, defense spending, Medicaid and Medicare and addressing the solvency of Social Security is not telling you the truth.

All of us have to make some sacrifices today so that our nation can remain strong in the future. As my friend and partner Al Simpson says, we all have to be prepared to give up something we like to protect the country we love.

That is the approach we took in the Fiscal Commission. Our plan asked for sacrifice from all but the most vulnerable in society.  We subjected all parts of the budget to scrutiny and cut wasteful and low-priority spending wherever we could find it.  Liberal and conservative Commission members were willing to accept tough choices in areas important to them as long as they saw everyone else willing to do the same with their priorities.  Everyone had to swallow hard and nearly choked on one item or another. None of us thought our plan was perfect. But perfection was not the goal. Getting an agreement on a plan big enough to be equal to the challenge was the goal.  In the end we were able to get a bipartisan supermajority of the Commission on a plan with $4 trillion in deficit reduction, three quarters from spending cuts and one quarter from increased revenue, which would stabilize our debt and put it on a downward path as a percentage of GDP.

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The late North Carolina Senator Jesse Helms once told a story of a defense planner in the early years of World War II, who was tasked by his colleagues to figure out how the United States could supply England.  He thought for a while, and then proposed that we should drain the Atlantic Ocean and drive the provisions over by truck.  When his colleagues protested that this plan was hopelessly unrealistic, the planner responded, “I’m the big picture guy.  Implementation is your problem.”

There is some measure of this problem in just about every budget-deficit-reduction plan.  The budget is big and complex.  Many claims of budget savings are very hard to verify.  Yet if the individual pieces do not pan out, the much bigger whole will break apart.

House Budget Committee Chairman Paul Ryan’s new draft budget resolution raises such concerns.  Some of its major budget savings may prove unrealistic, in terms of their subsidiary consequences or whether they can be implemented at all.  Or, on the other hand, they may be implemented and provide the answer to our prayers.  The answer at this point is a judgment call or a forecast on the part of budget analysts, not a certainty.

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Earlier today, the House Budget Committee released its 2013 budget plan titled “The Path to Prosperity: A Blueprint for American Renewal.” Click here to view the full report.

Following the release, House Budget Committee Chairman Paul Ryan delivered remarks at the American Enterprise Institute. Watch the event here:

Some key elements of the GOP’s 2013 budget plan:

Click here to read Back in the Black’s evaluation of the budget resolution.