Category Archives: Congressional Budget Office

If US is Serious About Debt, There’s a Single-Payer Solution

St. Louis Post-Dispatch Editorial

August 14th, 2011

If America truly is serious about dealing with its deficit problems, there’s a fairly simple solution. But you’re probably not going to like it: Enact a single-payer health care plan.

See, we told you weren’t going to like it.

But the fact is that everyone who has studied the deficit problem has agreed that it’s actually a health care problem — more specifically, the cost of providing Medicare benefits to an aging and longer-living population. The bipartisan National Commission on Fiscal Responsibility and Reform reported last December: “The Congressional Budget Office (CBO) projects if we continue on our current course, deficits will remain high throughout the rest of this decade and beyond, and debt will spiral ever higher, reaching 90 percent of GDP in 2020.

“Over the long run, as the baby boomers retire and health care costs continue to grow, the situation will become far worse. By 2025 revenue will be able to finance only interest payments, Medicare, Medicaid, and Social Security. Every other federal government activity — from national defense and homeland security to transportation and energy — will have to be paid for with borrowed money.”

That being the case — and nobody argues that it isn’t — there are two broad ways for the government to address its spiraling health care costs. One, shift more of those costs to recipients, by trimming benefits and/or extending eligibility ages and indexing eligibility to personal income. This is politically unpalatable, particularly to most Democrats, President Barack Obama being a conspicuous exception.

The second way for government to address its health costs is not to shift them, but to reduce them. This is what a single-payer health care system would do, largely by taking the for-profit players (insurance companies for the most part) out of the loop.

The advocacy group Physicians for a National Health Program estimates that “private insurance bureaucracy and paperwork consume one-third (31 percent) of every health care dollar. Streamlining payment through a single nonprofit payer would save more than $400 billion per year, enough to provide comprehensive, high-quality coverage for all Americans.”

Once everyone is covered, the government would have the clout to bring discipline into the wild west of health care spending. It could insist that providers be paid for quality of service, not quantity. Health facilities and equipment could be managed by regional boards. Medical services could be “bundled” — rather than paying hospitals and doctors and laboratories separately, there would be fixed prices for treatments. And so on.

The Patient Protection and Affordable Care Act passed in 2009 contains many pilot programs designed to test cost-reduction strategies. Most of them won’t kick in for another six to eight years, by which time health care costs will be approaching 20 percent of U.S. gross domestic product. The combined state and federal share of that will be 49 percent, up from 45 percent today.

Indeed, a study published this month in the journal Health Affairs estimates that while the Affordable Care Act will pay for itself by 2020, it won’t actually “bend the cost curve,” as the Obama administration had hoped. But the study, done by the Actuary Centers for Medicare and Medicaid Services, says the ACA will significantly slow the rise of health care costs to state and local governments.

But consider those two findings: In effect, they say that if reducing overall health care costs is the goal, then the ACA didn’t go far enough. Thirty million more people will be insured and government costs will grow more slowly. But overall health care costs will continue to explode.

Sooner or later, a nation serious about controlling spending must take broad control of the health care system.

It surely won’t be sooner. Compared to the political fight that would erupt over a single-payer plan, the congressional battle over the Affordable Care Act would seem as tame as resolution praising mom, the flag and apple pie.

The ACA was a compromise. Mr. Obama brought everyone to the table — doctors, insurance companies, drug companies, hospitals — and came away with a “best we can get” kind of bill. Many of those at the table turned around and lobbied against it or sought special favors once the bill came before Congress.

It passed by narrow margins, and Congress is decidedly more conservative now. Indeed, the new House majority has voted to repeal the ACA and challenges to its constitutionality continue to work their way toward the Supreme Court.

But now, like a baby discovering its toes, Congress has discovered the deficit. And the plain fact is that unless you want to commit political suicide and cut Medicare to the bone — as Rep. Paul Ryan’s, R-Wis., budget plan would do — the best way to seriously address long-term deficits is to get control of health care costs through a single-payer plan.

In 2008, when health care costs amounted to “only” 16 percent of U.S. gross domestic product, Great Britain was spending 8.7 percent of its GDP on health care, and Canada was spending 10.4 percent. Both nations have single-payer plans. Quality of care scores in both nations are at least comparable, and in most cases, better.

Eventually, the United States will have a single-payer plan. But we’ll waste a lot of money and time getting there.

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Filed under America’s Affordable Health Choices Act, baby boomers, Congressional Budget Office, GDP, health care reform, Medicaid, Medicare, single-payer system, Social Security, St. Louis Post-Dispatch

Cut And Grow Fail: CBO Schools Tea Party Freshman In Basic Economics

This little ditty was posted Friday on Talking Points Memo. It should be a wake-up call to all those TEA partiers and other right-wingers out there that think that all will be fine in the world if we only cut spending and do nothing to increase revenue.

Unfortunately though, regardless of economic schooling provided by the CBO, there will those that continue to burry their heads in the sand and refuse to believe anything a socialist government agency has to say:

Rep. Tim Huelskamp (R-KS), a Tea Party-backed freshman who voted against the final debt limit bill, recently asked to hear from the Congressional Budget Office about the impact of government spending on economic growth. It’s an article of faith on the right that vastly shrinking government will unleash the forces of private enterprise, and faced with CBO’s opposing view, Huelskamp wanted to know the answer to two questions:

1). What current federal departments, agencies, programs, or portions thereof do not contribute to economic growth?

2). In the programs that CBO believes do contribute to economic growth, what level of spending cuts would amount to a level you believe would be significant enough to “probably slow the economic recovery”?

But if the newly elected member of the Budget Committee was hoping the non-partisan CBO would buy into his premise, he’ll be sorely disappointed.

In a response letter Thursday, CBO-chief Doug Elmendorf gives Huelskamp a layman’s lesson in Keynesian economics: Under current economic circumstances, new federal spending would help economic growth, and current and future cuts could stymie it, particularly if they hit key government investment.

“When demand for goods and services falls short of the economy’s ability to produce them, as is the case currently, increasing government spending can increase aggregate demand and thereby narrow the gap between the economy’s actual and potential levels of output,” Elmendorf writes.

The precise details matter. The more robust the economy, the lower the impact. But, according to Elmendorf, “when the Federal Reserve’s ability to lower short-run interest rates is constrained because those rates are already near zero, as they are currently, the short-run effects of changes in government spending on output tend to be larger than usual.”

To illustrate the point, Elmendorf notes that deficit reduction measures that cut spending by $100 billion next fiscal year, and hundreds of billions more over the coming decade “would decrease real (inflation-adjusted) gross national product (GNP) in 2012, 2013, and 2014 by amounts ranging from roughly 0.1 percent to 0.6 percent depending on the year and the assumptions used.” In other words, the GOP’s current governing theory is damaging the economy and, by implication, costing jobs. And for those Republicans who want to cut more, ” a reduction in primary deficits that followed the same gradual time path but was twice as large would produce macroeconomic effects that were roughly twice as large.”

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There are important growth-related reasons to reduce deficits if and when the economy improves — it reduces the extent to which government spending “crowds out” private investment, by undertaking functions the private sector can do more efficiently. But we’re not there yet and, according to CBO, won’t be until the end of the decade. Spending cuts like the ones describe above, “[a]t the turn of the decade, from 2019 through 2021…would increase [GNP] by roughly 0.5 percent to 1.4 percent.”

But again the specifics matter, and if the GOP wants to slash across the board, they’ll do damage anyhow.

“Some types of spending, such as funding for improvements to roads and highways, may add to the economy’s potential output in much the same way that private capital investment does,” Elmendorf writes. “Other policies, such as funding for grants to increase access to college education may raise long-term productivity by enhancing people’s skills. The positive longer-term impact of deficit reduction on GNP would be smaller if the policies that reduced deficits included cuts in productive government investments.”

Huelskamp’s original letter is here. Read Elmendorf’s response here.

The letters stem from the below exchange between Huelskamp and Elmendorf at a recent Budget committee hearing. Elmendorf and Huelskamp are arguing two different points. Huelskamp would like to see big cuts to federal safety net programs and other spending. Elmendorf argues that while the macroeconomic consequences of slashing some of those programs might be minimal in the long run, the near-term impact would be significant, given the current downturn.

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Filed under Congressional Budget Office, debt deal, economy, government spending, job growth, Talking Points Memo, tax cuts, tax revenues, Tea Party

>Republican Plan To End Medicare And "Privatize" Health Care For American Seniors Is Not A Solution

>By Congressman Steve Rothman(D-NJ9)

We must not end Medicare: Too many American seniors would suffer or die prematurely if we did.

WHAT WOULD you say to someone who told you that in order to save something, you’d have to kill it?

On April 15, the Republican-controlled U.S. House of Representatives voted, 235-193, to end Medicare for Americans who are currently under the age of 55. No Democrat voted in favor of the plan.

For those tens of millions affected, and for all future generations, the Republican plan ends Medicare and “privatizes” health care for American seniors. According to the non-partisan Congressional Budget Office, the plan, if acted upon, would create a voucher system in place of Medicare. The U.S. government would assign approximately $8,000 to purchase private health insurance for each senior once he or she turned 67 years of age. If they were ill or older, the voucher amount would be slightly higher. But under the Republican plan, the average senior would see their out-of-pocket health care costs double to $12,150 per year, $6,400 more than today — not including co-pays.

Under the Republican plan, there would be no more government lifetime coverage, as we currently have it under Medicare. If you could not afford a private health care premium because you had a preexisting condition (for example, high blood pressure, diabetes, breast cancer, asthma, lupus, heart condition, hip, back or knee surgery) you’d have to find the money to pay whatever premium the private marketplace would charge. The government, under the Republican plan, would not even limit the amount the private market could charge. And so, if you could not afford to purchase a private health insurance plan at the age of 67 or older, for any reason, you’d be uninsured. An American senior citizen, without any health insurance.

Imagine the suffering, pain and terror for those tens of millions of seniors under those circumstances. Where would they turn? Charity? Family members? Early death? And why?

Yes, the United States has a $1.4 trillion annual deficit and a $14 trillion national debt. But what are the best and fairest ways to deal with those extremely serious problems? Should we rely on shared sacrifice in the American tradition, or put the burden disproportionately on the backs of seniors and the middle class?

To me, the Republican plan is at best a misguided approach to solving our nation’s common problems. At worst, the Republican plan reflects their undiminished zeal to “shrink” government by eliminating programs most Americans rely on, including Medicare. As a result, however, this would hurt the middle class and most Americans, leaving only the rich and super-rich to be assured of a good education for their children and affordable health care for them and their children, when they retire.

Remember that the median income for seniors in America in 2009 was $19,167; with most seniors having at least one chronic condition and many having multiple chronic conditions. Can you imagine the premiums they’d have to pay to get health insurance at age 67 and older?

Medicare was created in 1965 precisely because the private market failed to provide seniors with affordable and quality health care. Before Medicare, nearly half of American seniors had no health insurance, and nearly 35 percent lived in poverty. Thus, for me, leaving U.S. seniors again at the mercy of private health insurance companies is an absolute non-starter. We must not end Medicare. Too many American seniors would suffer or die prematurely if we did.

As for our extremely important deficit and debt problems, I believe that all options should be on the table, with sacrifices shared by all, according to assets owned and annual income. That means that the following items must be considered: making additional cuts in spending, including defense; reducing income and capital gains tax deductions for earnings over $350,000 per year; reforming our tax code to prevent individuals and companies from avoiding all tax liabilities; partially, and in some cases completely, eliminating subsidies to America’s richest families; reducing or eliminating subsidies to agribusiness, big oil and gas; ending or proportionately scaling back the Bush tax cuts for the wealthiest Americans; and, additional cost control measures to the health care reform law, including a public option.

House Republicans argue that it is necessary to end Medicare in order to balance the federal budget, albeit with continued tax breaks for individuals and companies making millions and billions of dollars in income per year. Forcing seniors and the middle class to bear a disproportionate burden in solving our nation’s fiscal crisis is, in my opinion, unfair and unnecessary. The better, more typically American way to address our common problems is with shared sacrifice and fairness.

Medicare is an essential and successful American program that has worked extremely well for the past 46 years. It makes possible a longer and healthier life for millions of our seniors. It is, also, often the difference between life and death. We must not end Medicare.

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Filed under Congressional Budget Office, Congressional Republicans, Democrats, Health Care, Medicare, Seniors, US Congressman Steve Rothman

>The White House White Board: CEA Chair Austan Goolsbee Explains the Tax Cut Fight

>From the White House Blog

Today Team Obama is trying something new, they are rolling out the – White House White Board,in which one of the key players on the White House team will cut through the political back-and-forth you hear every day and break down an issue affecting American families into simple, understandable terms. Today, Austan Goolsbee, the new Chair of the Council of Economic Advisers at the White House, tackles the tax cut fight and what it means that Congressional Republicans are “holding middle class tax cuts hostage” as the President has said:

http://www.whitehouse.gov/sites/all/modules/swftools/shared/flash_media_player/player5x2.swf

Key points and links:

Under President Obama’s plan, all Americans would receive a tax cut on the first $250,000 of their income. Every middle class family would receive the immediate certainty and comfort of knowing their tax cuts were permanently extended. Every American making more than $250,000 per year they would receive a tax cut on the first $250,000 of their income.

Instead of working to give middle class families this immediate certainty and comfort, Congressional Republicans are continuing to hold that relief hostage in order to have our nation borrow $700 billion that we can’t afford to provide an average tax cut of $100,000 to millionaires and billionaires.

We simply can’t afford to give the wealthiest Americans these big tax cuts that would add to our deficit and, according to the non-partisan Congressional Budget Office, be just about the least effective way to grow our economy and help create jobs.

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Filed under Austan Goolsbee, Congressional Budget Office, Conservative Republicans, middle-class tax cuts, President Obama, The White House White Board, White House Blog

>NJPP Monday Minute 8/23/10: Extending Bush Tax Cuts for Top 2% Shortchanges the Economy

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When Democrats in New Jersey raised the top rate on the state income tax last year, it was billed as a one-year, temporary increase on millionaires. When it expired this year, Democrats voted to renew the increase for another year. Republicans, emboldened by Gov. Christie’s veto threat, said “no.” They reasoned that Democrats purposefully wrote the expiration into the legislation, and so it should be allowed to expire.

In Washington, D.C., the partisans argue opposite sides of the “expiration” debate.

Republicans a decade ago enacted what came to be known as the Bush tax cuts, the signature domestic policy legislation of the Bush Administration. That legislation enacted tax cuts with an expiration date at the end of this year. Republicans want to renew the legislation. Democrats in Congress (echoing Republicans in New Jersey) argue the bill was written with an expiration date, and so it should be allowed to expire.

If it feels a little like a funhouse mirror, well, there’s a reason.

None of the partisan back-and-forth is about good fiscal policy or philosophical differences. It’s entirely about gaining political advantage.

But it should be pretty clear by now tax cuts haven’t spurred the nation’s economy. In fact, the worst economic collapse since the Great Depression happened on the heels of deep federal tax cuts. It makes almost no sense, from a policy perspective, to continue such cuts.

A study earlier this year by the non-partisan Congressional Budget Office of 11 options for stimulating economic growth placed tax cuts dead last in effectiveness. Top among the options for creating jobs and jump-starting the economy: job-creation tax credits; extended unemployment benefits and funds to help states balance their budgets with fewer cuts in services.

A proposal by President Obama would allow the tax cuts to expire for the highest-income taxpayers while temporarily extending the cuts for the other 98 percent. Effectively, the plan would restore taxes on households with incomes of $250,000 or more to the same levels as ten years ago, except for tax cuts enacted as part of the American Recovery and Reinvestment Act.

This chart from the Center on Budget and Policy Priorities uses the CBO analysis to break down the cuts by income category:

The CBO study found that allowing the tax cuts to expire for those earning $250,000 a year or more – the wealthiest 2% of all taxpayers – would provide $40 billion in public funds over the next two years to invest in economic programs to boost the economy. Extending the cuts for the high-income earner would likely spur after-tax investments that would increase the GDP by about $10 billion, the CBO said. By comparison, the Center on Budget points out using the economic multipliers in the CBO analysis, investing $20 billion into state fiscal relief and $20 billion in job-creation tax credits would generate about $32 billion in GDP. That’s a tripling of the effect of extending the tax cuts.

For taxpayers in New Jersey, Obama’s proposal would mean an average federal tax cut of $2,245 in 2011 taxes over what would have been owed in 2001. For 80% of New Jersey taxpayers, that’s actually more than the Republican proposal for extending the tax cuts, according to a state-by-state analysis by Citizens for Tax Justice. Higher income households would still reap substantial savings: at least $10,000 for those with incomes of $350,000 or more.

It seems clear that given the anemic effect tax cuts have in stimulating the economy and the immediate impact of channeling those savings back into the economy, the Obama proposal is the middle ground that will provide revenue for improving the economy at the same time it provides relief for the greatest number of taxpayers who have been hardest hit by the economy.

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Filed under Bush Tax Cuts, Congressional Budget Office, economy, Gov. Chris Christie, Middle Class, Monday Minute, New Jersey Policy Perspective

HOLT TOUTS IMMEDIATE HEALTH INSURANCE REFORM BENEFITS FOR NJ

FOR IMMEDIATE RELEASE
March 25, 2010

(Washington, D.C.) – U.S. Rep. Rush Holt (NJ-12) today highlighted benefits of health insurance reform that would go into effect within the year. Holt attended President Obama’s bill signing on Tuesday.

“Health care reform has been a long time coming – almost 100 years in the making. Yet, the benefits will be felt immediately, giving families and small businesses control over their health care,” Holt said. “Small businesses will soon receive tax credits, patients will no longer lose coverage when they get sick, and seniors will have help paying for prescription drugs and have access to free preventive care. And as it turns out, lawyers combing the legislation have failed to find any death panels.”

The following reforms would go into effect within the year:

• Providing tax credits for small business owners who help pay health insurance for employees

• Providing $250 payments to help seniors who find themselves in the prescription drug donut hole (and eventually the donut hole will be eliminated)

• Banning insurance companies from dropping coverage when someone gets sick

• Preventing Insurance companies from denying coverage to children with preexisting conditions

• Prohibiting insurance companies from setting lifetime limits or restrictive annual caps on benefits

• Extending free preventive care in all new private plans

• Establishing a new independent appeals process for those who feel they have unfairly been denied an insurance claim

According to the non-partisan Congressional Budget Office (CBO), health insurance reform legislation would cut the deficit by $143 billion in the first ten years and by $1.2 trillion in the second decade. CBO determined that the bill would extend Medicare’s solvency by at least 9 years and expand health coverage to 32 million Americans, guaranteeing coverage for 95 percent of Americans.

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Filed under Congressional Budget Office, Congressman Rush Holt, health care reform, Health Insurance Reform, press release

CBO Scores Confirm Deficit Neutrality of Health Insurance Reform Bill

Late Friday the Congressional Budget Office issued estimates that states for the first time that “H.R. 3200, America’s Affordable Health Choices Act, is deficit neutral over the 10-year budget window – and even produces a $6 billion surplus.”

The estimates also cover important reinvestments in Medicare and Medicaid, including phasing in the closing of the “donut” hole in the Medicare drug benefit.

The estimates issued by the CBO are good news for President Obama and the Democrats in congress because they show that indeed, health insurance reform can be deficit neutral and pay for itself.

Here is what House Speaker Nancy Pelosi had to say on her blog:

“The CBO report confirms that The America’s Affordable Health Choices Act delivers on a critical promise President Obama and the House have made to the American people: health insurance reform legislation will be paid for.

After an historic day yesterday when two out of three committees in the House passed the legislation, Congress has made major progress on health insurance reform that will put patients and doctors back in charge, ensure quality, affordable, and accessible health care for America’s middle class and control the spiraling costs of health care through innovative reforms.

As the legislative process moves forward, we will continue to look for ways to squeeze more savings out of the system.”



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Filed under America’s Affordable Health Choices Act, Congressional Budget Office, deficit neutral, Medicaid, Medicare, Nancy Pelosi