Writing on how conservatism could get its act together in the New York Times, Ramesh Ponnuru suggested, among other things, that conservatives focus on changing “the existing tax break for health insurance so that people would be able to pocket the savings if they chose cheaper plans.”
Conservative wonks like Ponnuru have long advocated equalizing the tax treatment of health coverage purchased individually and that purchased through an employer, either by repealing the tax break entirely or extending it to the individual market. This is a very good idea. (Eliminating the tax break more than extending it, but that’s a separate issue.) Unfortunately, over at the Washington Examiner, Ponnuru’s fellow conservative Philip Klein does not see it that way. And his objection is, well, weird:
Changing the tax treatment of employer-based health care has long been the cornerstone of market-based reform, because it would give individuals more choices and more incentive to control their medical spending. But with the new health care law in place, changing the tax treatment could simply mean that many more people get dumped into the government-run insurance exchanges, helping accelerate the growth of Obamacare.
You see what Klein did there? Equalizing the tax treatment would significantly lower the incentive for employers to provide health benefits, so fewer would do so. With ObamaCare now in place, that would mean more people going into the exchanges. And Klein assumes any act that grows ObamaCare is ipso facto in tension with the goal of market-based health care reform.
That assumption is very common within the Republican Party and conservative wonk circles. And it makes zero sense.
First off, the definition of a market is any system that allows for the trade of goods and services between buyers and sellers. That’s what ObamaCare’s exchanges do: They provide a framework for individuals to purchase health insurance from providers on an individual basis.
Now, if you click through his links, you’ll find that Klein’s complaint with the exchanges is that they regulate the coverage sold on them. This is equally silly. The government regulates trade in everything from food to cars to cigarettes. Now maybe you think it regulates them too much, but that’s a prudential call. No one suggests we don’t have functioning markets in these goods just because the government stepped in with a few rules — much less that they’ve suffered a “government takeover,” as Klein puts. By that standard, the government already runs the vast majority of the economy and we’ve already descended into socialist dystopia.
In fact, oftentimes regulation actually improves a market’s function. Two of ObamaCare’s key regulations are guaranteed issue and community rating; the first prevents insurance providers from denying people based on pre-existing conditions, and the second bars them from charging certain people exorbitant prices based on their age, gender, etc. Absent those regulations, providers would be able to compete based on who can cherry-pick the least costly customers, rather than competing on what actually matters: who can deliver customers the best value. Markets are social creations, so there’s no objective, self-evident criteria for what constitutes a well-functioning market outside of what we as a society decide. But I hope we can at least all agree that lowering prices for healthy people by rendering sick people entirely uninsurable is not the kind of result we’re looking for from our health care markets.
For what it’s worth, Switzerland also regulates the coverage provided by private insurers, while requiring its citizens to purchase coverage and subsidizing them in doing so — a very similar system to ObamaCare. And if you ask a conservative wonk for an example of a market-based universal health care system they approve of, it generally isn’t long before Switzerland gets mentioned. Read the rest of this entry »
I wouldn’t have expected Marco Rubio, of all people, to dig me out of my personal blogging hiatus. And just in time for the Thanksgiving holidays, too.
Anyway, Rubio’s refusal to give a straight answer on the age of the Earth has been worked over pretty well at this point. But Slate’s Daniel Engber gave things a good shot in the arm yesterday with an instance from 2008, when then-Senator Barack Obama was asked a very similar question and gave a very similar “on the one hand but on the other hand” answer. Several writers have denied there’s an equivalence between the two examples. I don’t think their arguments hold up.
Steven Benen pointed to the wording of the two questions and the settings in which they were asked — a secular magazine interview for Rubio, a religious forum for Obama. I don’t really see how that’s relevant. Both questions were meant to illuminate the same difficulty: “Given how the discoveries of science, concerning the age of the Earth and evolution, run up against some of the premises of fundamentalist and biblically-literalist Christianity, how do you navigate that tension?” Both men functionally gave the same answer, which was, “It’s above my pay grade.”
I’m sure Obama doesn’t actually think the Earth could be a few thousand years old. I bet Rubio doesn’t either. But Obama’s response suggested it would be legitimate for himself or anyone else to let some other belief system trump the scientific consensus in deciding their position on the matter. That’s exactly what Rubio said, too. And that’s exactly what everyone jumped on him for.
Indeed, the arguments Phil Plait, Alex Knapp, and others made for why Rubio’s statement was objectionable were all of the same “pull one thread and the whole fabric falls apart” variety. If Rubio thinks science was wrong (or possibly wrong) when it determined the Earth is 4.54 billion years old, what does he make of radiometric dating? Or our reliance on the speed of light as a constant? As Plait asked, what does he make of the science that lead to “cell phones, computers, cars, machinery, medicine, the Internet, manufacturing, communication, agriculture, transportation, on and on.” The ideas and evidence and observations and theories that made all these advances possible intellectually interlock. The whole process of science over time is the attempt to get them to interlock better. By implicitly, if not explicitly, questioning the science behind the age of the Earth, Rubio creates unavoidable intellectual ripple effects that call into question more or less all of the modern technological world.
Anyway, that’s the argument. And it makes perfect sense on the abstract and intuitive level. But if you actually think about the nature of faith for a moment, or just the practical realities of human behavior, it’s clearly balderdash. Read the rest of this entry »
Reihan Salam dubs Ryan’s budget the “put up or shut up” budget, in that it forces confrontations with the unspoken unpleasantries that would accompany either the Democrats preferred spending or the Republicans preferred cuts:
[A] March 2012 report from the Tax Policy Center by Eric Toder, Jim Nunns, and Joseph Rosenberg examines the top marginal tax rates we’d need to bring debt to sustainable levels without significantly altering the federal government’s spending trajectory and they are strikingly high. This is part of why a number of neoliberals, including Matt Yglesias and Josh Barro, have argued that we need significant tax increases on middle-income households: the spending cuts we’d otherwise need to achieve fiscal balance are in their view unacceptable…
Democrats declare Ryan’s proposed spending cuts unacceptable without acknowledging that broad-based tax increases are the most realistic way of avoiding them. Republicans, meanwhile, have not generally thought through the impact of (in particular) the Medicaid cuts envisioned in the Ryan budget.
The math of this is correct. I’m firmly in the Yglesias camp on this. You can’t make the kind of government I’d prefer fiscally sustainable without hiking taxes on the middle class.
However, you also can’t talk about this stuff without acknowledging the unique political environment of an economic depression. Americans are freaked out by the deficit in the abstract. But they don’t want their taxes hiked — reasonable, given that we’re in a depression — and they don’t want their government support cut — also reasonable, given that we’re in a depression. Politically, this should lead everyone to a pretty straightforward policy response: Don’t cut the deficit!
Happily, that response is fully consistent with Keynesianism and textbook macroeconomics. You don’t reduce deficits during economic depressions, through sending cuts or tax increases, because this sucks demand out of an already struggling economy. In fact, in the short run, you increase deficits through new spending to help drive the economy back to its prior level of output. Once the economy is back on its feet, then you reduce the deficit.
With robust economic growth, the tax hikes or spending cuts needed to reduce the deficit become much less politically fraught. People tend to feel more secure in their circumstances, which makes them more tolerant of higher tax rates or lessened government support. I think this point is woefully under-appreciated. Depressions don’t just make deficits harder to close on a policy level, they make them harder to close on a sociological level as well. Conversely, getting back to robust growth lessens the hurdles on both fronts.
This should reemphasize what a godawful tragedy not getting a sufficiently large fiscal stimulus actually was. (Or sufficiently large monetary stimulus, for that matter.) We pumped enough demand into the economy to prevent a full-scale meltdown, but not enough to boost us back out. That left us limping along in a prolonged period of high unemployment, thus low revenue, thus expanded deficits. It also left us limping along through a prolonged period in which most Americans are already on the ropes, and thus vociferously opposed to any of the steps necessary to close the deficit. So both good politics and good policy converge on just not cutting the deficit right now.
Unfortunately, the Republican Party has made such an agreement all but impossible. While no politician ever suffered at the polls for increasing the deficit, fears of runaway deficits operate as a stalking horse in the public’s mind for a bad economy. So in a depression, demagoguing the deficit becomes a very effective short-term political tactic. And now that the Republicans have demagogued the deficit, they can’t very well turn around and agree to a policy program that blows it up over the short term, and they’ve mad it much harder for the Democrats to do so as well.
One other point: Your average European country not only has a broader, more regressive tax system than American — it also has a much more generous and expansive social safety net as well. I take that as evidence of an implicit deal required to satisfy your average populace of western voters. Low and middle income voters only tolerate significant tax burdens if those burdens are in equilibrium with generous government support programs. The kind of tax system American conservatives prefer has to be balanced against the kind of social safety net American liberals prefer, for political sustainability as well as fiscal sustainability. Right now America has neither.
You could argue that this is good reason to reduce both the tax burden and the size of government concurrently. But I think it’s pretty clear that the free market, absent significant government intervention, creates circumstances and distributions most Americans find utterly unacceptable. And we’re already pushing that boundary of the voters’ tolerance on that front.
William Galston is worried that if they go overboard in criticizing Paul Ryan, Obama and the Democrats may hamstring their own ability to sell future reforms to the American public.
In 2008, John McCain wanted to treat employer-provided health insurance as taxable income, a policy that many economists in both parties favor as helping to slow the pell-mell increase in health care costs. The Obama campaign went on the attack, to great effect. But in the process, they made it impossible to include any robust version of that policy in the architecture of the Affordable Care Act. […]
A number of Democrats once believed—and some still do—that a well-crafted version of premium support is part of a balanced and sustainable long-term fix for Medicare. If the effect of the Ryan choice is to take not only the Ryan budget’s version of premium support off the table, but also the kinds of approaches that Alice Rivlin and Ron Wyden have proposed, then we’ll be left with far less appealing options for stabilizing Medicare… If Obama wins the election by playing on the fear of change, which is very real, then the election will settle nothing, and our already dysfunctional political system will be mired in gridlock indefinitely.
This isn’t a crazy concern. I’m one of those Democrats who thinks premium support might (might!) be a necessary part of Medicare’s future, and the employer-provided insurance kerfuluffle was, in terms of policy substance, one of Obama’s lowest points. The Affordable Care Act may still be able to unwind the employer-provided market, but the process will take far longer and be much messier than if we had just gone at the tax treatment question directly.
So I get the worry that by taking advantage of immediate political expediency, Obama could kill needed policy down the line. But it doesn’t really concern me in this instance, for several reasons.
One, political expediency can flip pretty quickly. Just take Obama’s one-eighty on the individual mandate. In fact, I’d argue the ACA’s failure to go after employer-provided coverage had a lot more to do with the GOP’s lock-step opposition than with Obama’s previous promises. If the Democratic leadership thought equalizing tax treatment could peel off enough Republican Senators to afford losing a few Democratic ones, I think they would’ve done it. They were certainly happy to compromise on a raft of other points.
More fundamentally, Obama’s promises will only bind the Democrats for another four years — assuming he wins in November – and moving Medicare to premium support just isn’t going to become a terribly pressing concern in that window. I realize this goes completely against centrist conventional wisdom, much less conservative conventional wisdom, but it’s true. The key thing to remember is that Medicare is not becoming more expensive because there’s anything particularly wrong with Medicare. It’s becoming more expensive because it happens to buy health care, and health care is becoming more expensive. And the primary engine driving that rise in costs is far and away the private markets.
The growth rate in Medicare has been well below that of the private markets, and it only covers 16 percent of Americans versus around 65 percent covered by private ensurers. Medicare rides the costs of health care, and is able to bargain them down somewhat below trend. But it isn’t driving them. You cannot treat these things as conceptually separate — if you want to fix Medicare, you need to fix everything outside of Medicare. (And Medicaid.)
This is precisely what the Affordable Care Act does. It uses Medicare’s bargaining position to inject a whole raft of delivery reforms into the market that will hopefully be taken up by private insurers. There’s evidence this is already having an effect. It also created a mechanism for forming multi-state compacts out of the exchanges, which could break down the state-by-state fracturing of the health coverage market. And it set up long-term forces that could unwind the employer-based system over time. As I said earlier, if Republicans were willing to play ball, and accept the ACA as the framework for health care reform going forward, they could probably improve the law in ways that would greatly speed up these processes.
Now, maybe you think this is all bullshit. Maybe you think the ACA is the worst thing ever, and should be repealed wholesale, and then we should nuke the employer-based system, give everyone health savings accounts, and turn the health insurance regulatory environment into a nationwide wild west. But even if this approach did work, it would bring down health care costs across the board. That would go most of the way towards fixing Medicare right there — whether you fiddle with the program itself is gravy.
This gets us to the real perversity of Paul Ryan’s position. He’s out there proposing that we torpedo the biggest overhaul to the health care market we’ve passed in decades, and instead wants to upend Medicare’s structure in ways that don’t meaningfully change its spending course from Obama’s proposal. Of course, he’d like to kill the employer-based system, do HSAs, and do cross-state competition too. But that stuff isn’t in his budgets, for the very simple reason they’d be an even more politically difficult and poisonous lift than the ACA itself was.
We barely got the ACA through thanks to a highly unusual political moment. It’s a profoundly valuable foothold. The idea that we could kill it, and then impose an even more disruptive reform on the private markets — minus all that making-sure-poor-and-sick-people-can-get-coverage hippy nonsense, of course — is just insane. But that’s just what Ryan and his cohorts are proposing.
UPDATE: Sen. Ron Wyden of Oregon is more positive on premium support for Medicare than I am. But Paul Ryan and Mitt Romney’s attempts to use the Ryan-Wyden plan as bipartisan cover are extremely disingenuous, and this interview Wyden gave to Ezra Klein sums up my own frustrations with the Medicare debate we’re having:
In the broader conversation over Medicare, the reforms in the Affordable Care Act and premium support are seen as sharply divergent paths. The ACA relies on delivery-system reform and the IPAB, while premium support relies on vouchers and competition. But you’re saying they’re not opposed at all. In fact, they’re best done together.
I’ll make a substantive point and then a political point. I feel strongly that to tee premium support up for a decade from now — which is what the white paper called for — you need the kind of delivery system reforms envisioned in the Affordable Care Act to accelerate the trend toward more coordinated care and paying for quality and bundled payments. If you don’t accept those, and Gov. Romney says just rip the Affordable Care Act up and go to our form of coupon care, you’ll never had have any of these reforms.
Number two, I’ve found that more and more Americans are coming around to this head-scratching exercise where they ask, shouldn’t we do the same things for people over 65 that we’re doing for people under 65? Can’t we start the march to an integrated system?
One frustration for me in this debate has been that Republicans have essentially lifted the insurance market structure from the Affordable Care Act, which they say will save no money, and moved it to Medicare, where they say it will save tons of money. But it’s the same idea! The Affordable Care Act’s exchanges use an almost identical competitive-bidding process to the Medicare exchanges in Ryan’s budget. I don’t see how you can say one will save money but the other won’t.
People have described it almost as ideological bedlam. You have Republicans saying that what they’re so strongly opposed to in the Affordable Care Act is exactly what they’d like to see done in Medicare. And then if you give traditional Medicare, which I think has to keep its purchasing power and we have some ideas for that, but if it did that, it would end up essentially being the public option that Democrats have been for.
I generally like Sarah Posner’s work, but her piece yesterday — assessing the debate over whether Paul Ryan’s latest budget for the House GOP can claim the Catholic tradition of subsidiary — goes off the rails:
These disputes — particularly for a religion reporter like me — are the stuff of fascinating and illuminating stories on religious history, theology and political gamesmanship. In a pluralistic democracy, though, they have no place in determining the federal budget.
No one’s religious view is entitled to preference when Congress is crafting the federal budget. To be sure, given the attention paid to the plight of the poor by the most prevalent religions in the United States, there are many politicians, and many citizens, whose faith would inform how they evaluate the priorities — or lack thereof — in the Ryan budget. At the same time, secular humanists, atheists, and other varieties of the non-religious also have a set of values on income and wealth inequality.
Progressives and conservatives should duke it out — but without invoking religion. The budget should be based on shared concepts of fairness and justice, not whether Jesus or God or Allah (oh, never mind, the Republicans would never go for that!) approves.
This passage is just strange to me. The unspoken assumption here seems to be that the mere presence of religious values in the public discourse forces non-religious people to adhere to those values. From there, Posner proceeds to the spoken conclusion that everyone should just keep religion out of the public discourse. Which is both logically silly and utterly antithetical to the values of a liberal democracy based on individual rights, free speech, and so forth.
There is also a practical problem with saying “the budget should be based on shared concepts of fairness and justice.” Few frameworks of value for determining what constitutes “fairness and justice” are more widely shared than religion. Now, not all Americans share that framework of value. But then not all Americans share the same framework when it comes to, say, whether free market capitalism does a good job dishing out just deserts in correspondence with merit.
It comes down to what Posner means by “shared.” If she means shared by every single American, there is no conception of fairness or justice that would meet that requirement. If there was one, we wouldn’t have political division, party disputes, or arguments over the morality of the budget in the first place. By contrast, if Posner means “shared by a broad enough chunk of the American population to be useful,” then religion certainly qualifies. Elevating an argument because it has a “religious imprimatur” is no different than elevating it because it was made by FDR, Ronald Reagan, Ayn Rand, Marx, Lenin, the Founding Fathers or Alec Baldwin. Voters have all sorts of criss-crossing signals for what they consider authoritative voices and sources of legitimation.
There are lots of people in America who are Catholic, and even more who respect Catholic theology, and subsidiary helps crystalize our notions about government’s moral obligations towards the least fortunate, its effectiveness, and its proper role. Even from a pure numbers standpoint, this makes a debate over whether subsidiary supports or condemns Paul Ryan’s budget a very useful and germane one to have. There will be moments of tribal silliness and stupidity — like trying to tar Ryan with his admiration of Ayn Rand, not because her moral views were monstrous but just because she happened to be an atheist. But American political debates are always shot through with tribal silliness and stupidity along all sorts of vectors.
Plenty of Americans aren’t Catholic, plenty aren’t religious, and plenty don’t know and/or don’t care about subsidiary. They are all free to ignore this particular debate and base their support or condemnation of Ryan’s budget on whatever frameworks and conceptions of value they see fit. One side or the other will accumulate an ad hoc coalition of different-but-overlapping frameworks, and thus put together a voting majority sufficient to drive a policy decision. That’s the way it’s supposed to work in a democracy.
One of the key assumptions in the Congressional Budget Office’s model — upon which it based its conclusion that the Affordable Care Act will reduce the deficit — is that the depletion of Medicare’s trust fund will be ignored and Congress will simply continue spending to maintain Medicare’s benefits. One of the key assumptions in Charles Blahous’ new study — which says the CBO flubbed it and the ACA will actually worsen the deficit — is that this depletion will most certainly not be ignored. From a follow up defense Blahous wrote of his study, which I think best encapsulates his logic on this point:
The historical evidence is overwhelming that Congressional behavior is heavily influenced by Social Security and Medicare solvency determinations. Specifically, Congress is much less likely to enact cost-containment measures in either program when projected insolvency is more distant.
Supporters of the ACA have elsewhere made clear that they agree the ACA will extend the Medicare Trust Fund’s solvency, protect its spending authority, lessen the risk of near-term benefit reductions, and mitigate the urgency of further Medicare reforms. Examples include David Cutler’s public policy memo, various Administration announcements, and Congressional Dear Colleagues.
These and countless other statements contradict the theory—on which the scorekeeping convention depends—that the extension of Medicare solvency is a budgetary non-event that leaves Congress just as likely to enact the same amount of further Medicare cost constraints as before the ACA was passed.
What this doesn’t answer is the question of why this is so. Does Blahous really think voters, and thus Congress, are concerned with the trust fund qua the trust fund? Of course they aren’t — neither the vast majority of voters nor legislators are policy wonks. What concerns them is whether Medicare’s benefits will keep coming as they always have. Voters and politicians are concerned with the insolvency of the trust fund only to the extent they think it will stop Medicare from buying retirees’ health care. “Trust fund solvency” is a stalking horse for “continuation of benefits.”
CBO assumes that when the chips are down, Congress will break the link between the trust fund and Medicare benefits. It will let the trust fund die, and continue funding Medicare out of general revenue. This shift would occur sometime in the next decade or two. And yes, I’m sure as news reports came filtering out that Medicare’s trust fund was going insolvent, there would be a bit of panic. But as soon as voters realized their Medicare benefits were still coming, the issue’s political potency would utterly vanish. To claim otherwise is to claim American politics values an abstraction (the solvency of the trust funds) over a concrete reality (whether Medicare benefits keep coming). Does anyone doubt me on this point?
This leads to a profound irony in Blahous’ dismissal of CBO’s model. One of conservatives’ biggest critiques of the ACA is that Congress lacks the fiscal discipline to maintain some of the spending and tax changes the law calls for. They cite such things as the Sustainable Growth Rate, which passed in 1997 and was supposed to cut Medicare payment rates, but which Congress has postponed every year afterward. Fair enough. But the fiscal discipline required to honor current law, and slash Medicare benefits in conjunction with the depletion of the trust fund, would dwarf the discipline required to adhere to the ACA or the SGR. Which is precisely why CBO assumes Congress will display no such discipline, and just keep spending to maintain Medicare.
This is important, because it helps illuminate what may be Blahous’ key logical error — and the error of the rest of the ACA critics crying “double counting.” Here’s Blahous explaining double counting in the appendix of his study:
[I]magine a law that cuts Medicare HI payments by $1 while also spending $1 on a new health program. The $1 Medicare HI spending cut extends the solvency of the Medicare HI Trust Fund, thereby allowing Medicare HI to spend an additional $1 at a later date. The $1 of near-term Medicare savings thus results in an additional $1 of later Medicare spending. Thus, if the law also spends $1 on a new health program, then altogether the law would permit $2 in total new spending while enacting only $1 in savings. On the whole, such a law would increase spending and worsen federal deficits. The case is similar with the ACA.
This misses one absolutely critical detail: CBO assumes up front that all Medicare spending will be honored, so that additional $1 of later Medicare spending is already built into its model. It’s already accounted for that $1 of promised future spending with commensurately higher future deficits. So that $1 is already in the baseline against which CBO measured the effects of health care reform. When the ACA finds $1 of additional savings and enacts $1 of additional spending, those latter two dollars balance each other out. $1 of new savings, $1 of new spending, $1 of future spending, and $1 of future deficits. “Double counting” or no, the CBO’s math adds up. Throw in the other bits of new revenue the ACA pulls in, and you have a net reduction in the government’s deficits.
One last way to look at it: Consider the government’s finances before the ACA passed. The Medicare trust fund is predicted to go insolvent in the next decade, and the CBO’s unified budget model is predicting large future deficits and debt. Now imagine that to shore up Medicare, the government decides to pass a hike in the payroll tax. What happens?
First, the solvency of the trust fund is extended, because new bonds are issued. But this is also new revenue, so it also improves the budget outlook under the CBO’s model. No one, I think, will protest this logic, nor claim there is anything untoward going on here. But it is effectively “double counting” as Blahous and the ACA’s critics have defined it. Conversely, the same thing happens if you cut Medicare’s benefits rather than hiking the payroll tax. It makes the bonds already in the trust fund go further, which extends its solvency. At the same time, you’ve reduced the government’s overall level of spending, so its deficits shrink.
In point of fact, this second scenario is precisely what the ACA did. It cut Medicare’s payment rates, which improved both the trust fund’s solvency and the budget outlook. From there, the ACA instituted new spending to help people buy insurance on the exchanges. This had no effect on the trust fund as it wasn’t under the aegis of Medicare, but it did worsen the budget outlook again. Finally, the ACA found new revenue outside of Medicare — the excise tax, new fees, new penalties, etc. — which once again improved the budget outlook.
So, the first step improved both the trust fund’s solvency and shrunk the deficit. The second step expanded the deficit again, but didn’t effect the trust fund. The third step also didn’t effect the fund, but did shrink the deficit again. Add up the net effect of these three steps — first cuts, then spending, then revenue — and the CBO’s unified budget outlook shows a slightly smaller deficit in the first decade, and a much smaller deficit in the second decade, than we had before health care reform was enacted.
As Paul N. Van de Water points out at the Center on Budget and Policy Priorities, these kinds of Medicare savings have been enacted several times in the past, were “double counted” each time — including by Republicans — and no one ever batted an eye. The only difference this time around is that the savings happen to reside in the same package of legislation as a new entitlement conservatives happen to loath. The conceptual complexities of the trust fund gave them an opening to play silly games with accounting logic, and man did they all leap at the opportunity.