Network News

X My Profile
View More Activity

Which party is better on the deficit? Maybe the one trying to reduce the deficit.

Megan McArdle has a really good post demonstrating how seriously Democrats took deficit reduction in the health-care bill, only she seems to think it's a post about how they didn't take it all that seriously. It's really odd.

The examples she uses are the 1099 rule, where Democrats infuriated small businesses by trying to collect more from them in taxes, and the Independent Payment Advisory Board, where Democrats infuriated seniors by creating a body able to cut costs and reform procedures in Medicare without congressional approval.

One thing to note here: Neither makes up a big portion of the bill's scored savings. The 1099 rule is good for less than $20 billion over 10 years. IPAB doesn't really kick in until 2018, and so has very little to do with the bill's first 10 years, which is where the main claim of deficit reduction comes in.

Nevertheless, McArdle says that these two proposals "don't really make it seem that deficit reduction is a critical Democratic priority." The 1099 rule proves this because the small-business lobby hated it so much -- and made enough compelling arguments against the amount of paperwork it would require -- that Democrats are now open to reforming it. In fact, they tried to do so the other day, exempting smaller purchases from the rule so that it cut down on paperwork and making up the savings by cutting oil and gas subsidies. That seems like exactly what you'd do if you were both fiscally responsible and willing to revisit issues if constituent groups made strong enough arguments. Republicans filibustered the effort.

As for IPAB, well, that's harder: McArdle says "it's a high-risk strategy." True! And it may not work if cuts in Medicare prove "politically unviable." Also true! But if that's true, then we're pretty much cooked one way or the other, as cost control is impossible. Meanwhile, Republicans have been trying to prove the point, singling the proposal out as a special target in their efforts to undermine the bill. So you've got Democrats including a politically vulnerable idea that wasn't necessary for PayGo reasons simply because they believe it'll cut spending far into the future and you have Republicans trying to specifically repeal that proposal because cutting Medicare spending at any time is unpopular.

Then, of course, there are the major savings in the health-care reform bill: The $500 billion in Medicare cuts that's been a staple of Republican advertising this election. The excise tax on high-value health-care insurance that made the unions throw up. McArdle dismisses these, as she'd prefer to have seen them used to reduce the deficit, rather than to pay for health-care reform while reducing the deficit. But neither policy would have passed as part of a deficit-reduction-only package. And the point of being fiscally responsible isn't that you're never allowed to make progress on priorities that require money. It's that when you do so, you pay for it. In the case of health-care reform, the Democrats did -- and then some.

It's when you don't pay for things that deficit reduction stops looking like a critical priority.

Contrast the Democrats' health-care reform bill with the Medicare Prescription Drug Benefit, which was paid for by the deficit. Or the Bush tax cuts, which were paid for by the deficit. Or "CutGo," in which tax cuts would never have to be paid for.

McArdle has two examples of Democrats not only trying to pay for things, but making unpopular choices to pay for things. Then she's got a bill in which Democrats decided to pay for more than the whole thing, and made a bunch of unpopular decisions to do so -- decisions which Republicans are attacking mercilessly. And this is her evidence for a post which asks the question, "Which Party Is Better on the Deficit?" and finds it impossible to answer.

By Ezra Klein  | November 2, 2010; 4:50 PM ET
Categories:  Budget  
Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati   Google Buzz   Previous: Some questions for the Fed
Next: No reconciliation tonight

Comments

This is most like Wrestling. People want a compelling narrative. It's not about actually reducing the deficit, but who's the best trash-talker.

Just sayin'.

Posted by: Kevin_Willis | November 2, 2010 5:01 PM | Report abuse

"But if that's true, then we're pretty much cooked one way or the other, as cost control is impossible."

This should be rewritten to say the following:

"But if that's true, then we're pretty much cooked one way or the other, as cost control by government fiat is impossible."

The real answer to cost control is more insurance competition by having everyone buy their own insurance rather than get it through their employer and having the individual paying a greater portion of their own medical bills out of pocket and thus having an incentive to shop around for cost effective care.

This approach would require something closer to Wyden-Bennett at a minimum and in an ideal world would treat health insurance the same way we treat auto or homeowner's insurance for those who can afford it. For poor people and the elderly Medicare and Medicaid would still be available to the extent we chose to fund them against competing government priorities.

At the moment, no individual will see the specific benefits of the IPAB board's cost controls, but you can sure bet that anyone who has a potentially viable treatment denied by the IPAB will be well aware of it. This will of course make for great media stories about "rationing" care, etc.

Posted by: jnc4p | November 2, 2010 5:09 PM | Report abuse

Also "where Democrats infuriated small businesses by trying to collect more from them in taxes" should read:

"where Democrats infuriated honest small businesses by trying to make them file more paperwork to collect more taxes from other dishonest independent contractors"

If the Democrats wanted to collect more taxes from small businesses, there are a hell of a lot of easier ways to raise the equivalent revenue. I suspect this slipped into the bill under the guise of catching "tax cheats" without thinking about who was actually going to be stuck with the paperwork.

Posted by: jnc4p | November 2, 2010 5:14 PM | Report abuse

Good thing you're defending Democrats for trying to balance the budget during a huge economic crisis. Wouldn't want to offend the memory of Herbert Hoover. FDR? Keynes? Never heard of them.

Posted by: stonedone | November 2, 2010 5:32 PM | Report abuse

I don't even know why this is a point of debate. Reagan exploded the deficit. George H.W. Bush tried to reduce it, and received almost no Republican votes for his efforts. Clinton balanced the budget, and in fact created a surplus. George W Bush not only lost the surplus, but then exploded the deficit with repeatedly unfunded policies, to say nothing of their view on unfunded tax cuts. Basically, there is no evidence whatsoever that Republicans are either interested, or capable of, reducing the deficit.

Posted by: workmonkey | November 2, 2010 5:39 PM | Report abuse

Bob McDonnell's (VA Gov.) recent comments regarding federalism are probably correct: the volume of anti-Pelosi support shown today has meaningful effect until 2021 and such meaningful effect includes a re-evaluation of federalism, the overall role of the federal government, and, therefore, the size of the federal budget and deficit.

The election of Governors and Attorneys General in a Census Year (that is, the election of officials involved in Congressional redistricting) can lock-in incumbent seats: typically, Democrats try harder in such years and gain the ability to gerrymander districts. Not so this year... and that means a decade of House control lost. Moreover, the Govs and AGs can file litigation -- litigation regarding every aspect of the PPACA, immigration, offshore drilling, etc., etc. -- to help bring the wheels of the social-progressive movement to halt. Statehouses can join the bandwagon if necessary, passing Amendments as necessary to help the federal regime learn its proper place.

The net effect is that the federal budget and federal deficit will be reduced. The President, Congress (under any party's control), and Washington thought-tankers may be largely irrelevant for a while. And that's a good thing.

Posted by: rmgregory | November 2, 2010 5:39 PM | Report abuse

stonedone - the ideas of deficit reduction and Keynesian fiscal stimulus are not inherently incompatible, and specifically, the are not incompatible in this instance. Democrats passed ARRA, which gives a [not] large [enough] bump in *short term* debt. However, they're working hard to offset that, and other deficit spending in the *long term* through cost-saving measures like IPAB. This is all very sound, counter-cyclical economics. Republicans love railing against the short term spending, but offer no viable, alternative solutions in the short term or the long run.

Posted by: tcjutras | November 2, 2010 5:46 PM | Report abuse

"Which party is better on the deficit? Maybe the one trying to reduce the deficit."

Perhaps. Certainly Republicans don't have a whole lot of credibility here.

But let's assume that the CBO numbers are correct and the deficit is actually reduced $140 billion over 10 years. That's what, 1%-2% of the projected deficits?

Another interpretation is that the Dems took over a trillion worth of potential savings, and spent ~85% of them on a new entitlement.

In a sense, it is as if a person making $100,000 a year and spending $150,000 a year decided not to take a $25,000 vacation but then bought a $35,000 car after picking up a weekend bartending job that brought in $12,000 more, and was patting himself on the back for reducing his personal deficit by $2,000.

The truth is neither party is great on the deficit, one just is running to the cliff faster than the other.

Posted by: justin84 | November 2, 2010 5:47 PM | Report abuse

@justin84

Where do you see 1 trillion dollars in savings? Health care expenses were entitlements that were going to happen with or without reform - if anything, reform is projected to reduce costs in the next decade. There weren't 1 trillion dollars in "potential" savings unless you meant the eradication of Medicare.

Regardless, even if 1 trillion dollars were up for savings, it still doesn't match the cost of the Bush Tax Cuts - so i'd say the cliff is being approached much faster by Republicans.

Posted by: workmonkey | November 2, 2010 5:53 PM | Report abuse

how about this narrative.

THEY BOTH SUCK. We couldn't get $13 trillion in the hole and counting without both their helps.

Dems lie about the deficit (as examples see the ponzi scheme known as the CLASS act as the latest example) and Republicans don't care about counting.

Do we have a third choice??

Posted by: visionbrkr | November 2, 2010 6:06 PM | Report abuse

Just file this one under "Megan McArdle is Always Wrong." I have no idea why she gets so much coverage from the liberal press other than she provides easily demolished straw men at convenient intervals. Newsflash!

Conservatives aren't listening to your rebuttal anyway. As the saying goes, "It is difficult to get a man to understand something, when his salary depends upon his not understanding it!" If conservative pundits couldn't forward obviously fallacious arguments they would be out of a job.

The other problem with tackling this issue is that despite the mainstream bias towards deficits as an evil, the correct economic policy is to run deficits. So one-upping the Republicans on deficit reduction isn't really a win.

Posted by: awcarr | November 2, 2010 6:07 PM | Report abuse

Megan McArdle (like many of the conservatives posting here) has a problem: she knows how to argue from evidence to conclusions and she knows the conclusions they want to argue towards, but these things don't match. So what to do? Megan just sort of muddles through, putting in a little evidence and a little argument then tacking on the desired conclusion. If your intellectual dishonesty at this point still makes you queasy you can ameliorate it a bit by weakening your conclusion from "Democrats suck" to "both parties suck". This is still a good rhetorical tactic when Republicans are demonstrably the ones sucking. By making a pox-on-both-their-houses argument you neutralize a Democratic strength, so it's all good.

Posted by: dfhoughton | November 2, 2010 6:19 PM | Report abuse

Ezra, you missed the point and not because you are stupid either! The Medicare savings were included in the evaluation of the bill for the first ten years.

This was so cynical that the 21% mandated SGR reduction was waived almost immediately AFTER the passage of the bill that included the savings in it!!!

So when Medicare payments are INCREASED as doctors demand to keep treating patients instead of decreasing as the bill projects, you will simply act as if it was going to happen all along and nobody believed the numbers anyway.

How bad is that?

Posted by: 54465446 | November 2, 2010 6:44 PM | Report abuse

I've asked before and I'll keep asking: Just what does McA have to do before "reasonable" people stop linking to her?

Seriously, I want an answer.

Posted by: AZProgressive | November 2, 2010 6:46 PM | Report abuse

tcjutras wrote:

"the ideas of deficit reduction and Keynesian fiscal stimulus are not inherently incompatible, and specifically, the are not incompatible in this instance. Democrats passed ARRA, which gives a [not] large [enough] bump in *short term* debt. However, they're working hard to offset that, and other deficit spending in the *long term* through cost-saving measures like IPAB. This is all very sound, counter-cyclical economics."

Actually, it's not economics at all, just wishful thinking. Where do you think the stimulus money comes from? It increases the debt obviously, and even EK in his column last week expressed his disappointment that GDP growth was minimal. The rpojected cost savings from health care are fictional.

Want proof? The medicare provider savings that were included in that estimate were ALREADY waived off by Congress, shortly after passing the legislation that counted them.

No, there are litte or no savings in the health care legislation, but please do your own research.

Posted by: 54465446 | November 2, 2010 6:55 PM | Report abuse

Ezra,
Very few people take McMegan seriously anymore because while she occassionally makes a serious, thoughtful and well-reasoned argument, she more often starts to make one, realizes the evidence actually shows the opposite of her preferred outcome, and then revises and muddles here original argument to not show anything substantive at all.

Posted by: ctown_woody | November 2, 2010 7:43 PM | Report abuse

"Where do you see 1 trillion dollars in savings? Health care expenses were entitlements that were going to happen with or without reform - if anything, reform is projected to reduce costs in the next decade. There weren't 1 trillion dollars in "potential" savings unless you meant the eradication of Medicare."

PPACA was projected by the CBO to increase spending by just under $1 trillion, right?

And PPACA reduces the deficit by ~$140 billion.

So the bill could have reduced the deficit by over $1 trillion had the spending provisions not been included.

If the Dems were serious about cutting the deficit, they'd cut the deficit by a good margin. If they were serious about spending more on health care but wanted to look good politically, they'd implement a spending program while raising just enough extra revenue to say they cut the deficit (though whether the expected savings materialize is another question entirely).

"Regardless, even if 1 trillion dollars were up for savings, it still doesn't match the cost of the Bush Tax Cuts - so i'd say the cliff is being approached much faster by Republicans."

I wouldn't disagree.

Posted by: justin84 | November 2, 2010 8:13 PM | Report abuse

By 2017 debt service will equal the defense budget. Coming up with a huge new redistribution/entitlement scheme is not helping the deficit, it means we're going to have to raise taxes even higher to cut the deficit. The Democrats certainly seem hell bent on increasing the size of the federal budget. The Republicans just seem hell bent on getting back into power.

There were Democrats in favor of sensible health reform- eliminating the tax free status of employer provided benefits, HSAs, high deductible care, and other things that would put consumer market pressure on prices. Sadly, we ended up with the poison pill plan that gets more people on a ship designed to sink (buy good insurance after you get sick!), with the real ugly (progressive?) end goal being creating the conditions where the market simply can't function at all, forcing the government takeover they really wanted, where you can't pay more money to get a better doctor.

Posted by: staticvars | November 3, 2010 12:13 AM | Report abuse

Brilliant evisceration of McArdle, Ezra!

What you have demonstrated is the fundamental limitation of an ideologue with partisan taint like McArdle: even if she's capable of thinking clearly, she can't do so if thinking runs contrary to her partisan bias and/or her ideology.

Posted by: fredbrack | November 3, 2010 2:02 AM | Report abuse

Leave it to a liberal Pundit to make the argument that a bill that increases government spending but puts newer and better taxes that hurt small business is a way to reduce the deficit. Sorry Mr. Klein, but Aqua Buddha and others like him won last night because the American people don't want TAX and SPEND. Creating new taxes or finding ways to take more taxes from the people to cover new expenses is not a way to reduce the deficit. If my family needs to save money to reduce debt and move from the red to the black, we cut spending. At the same time if we do get a raise we don't use that new money to spend more.

Posted by: daveo2324 | November 3, 2010 8:52 AM | Report abuse

If the US really wishes to cut the deficit, it should end the $3 billion dollars every year that is paid to Israel in aid. This is apart from extra billions of dollars in arms and the latest hi-tech weaponry supplied to Israel, which helps to maintain Israel's illegal occupation of the West Bank and blockade of Gaza, and stirs up the situation of constant warfare with surrounding Arab states, which all feeds so much anger and thus more terrorism against the West. It is time that the US looked to its own interests, and stopped helping fuelling the conflict in the Middle East (and God help us if Israel bombed Iran's nuclear facilities)!
You can bet your bottom dollar that Israeli PM Netanyahu will use the Republican gains to continue its territorial expansion and settlement building, with the expectation that the US will continue its lavish funding. Now is the time to say "No" to Israel, end all the billions of cash, and end all the vetoes of UN resolutions that feed Israel's impunity. The end result of this will actually be more beneficial to a proper negotiated peace with justice, bring Israel to its senses, and lead to greater economic benefit to all parties in the conflict, less spending on arms, and more on global peace.This would lead to less being spent (over £ 1 trillion) by the US on wars, and a huge reduction in its deficit!

Posted by: abehayeem | November 3, 2010 12:26 PM | Report abuse

If the US really wishes to cut the deficit, it should end the $3 billion dollars every year that is paid to Israel in aid. This is apart from extra billions of dollars in arms and the latest hi-tech weaponry supplied to Israel, which helps to maintain Israel's illegal occupation of the West Bank and blockade of Gaza, and stirs up the situation of constant warfare with surrounding Arab states, which all feeds so much anger and thus more terrorism against the West. It is time that the US looked to its own interests, and stopped helping fuelling the conflict in the Middle East (and God help us if Israel bombed Iran's nuclear facilities)!
You can bet your bottom dollar that Israeli PM Netanyahu will use the Republican gains to continue its territorial expansion and settlement building, with the expectation that the US will continue its lavish funding. Now is the time to say "No" to Israel, end all the billions of cash, and end all the vetoes of UN resolutions that feed Israel's impunity. The end result of this will actually be more beneficial to a proper negotiated peace with justice, bring Israel to its senses, and lead to greater economic benefit to all parties in the conflict, less spending on arms, and more on global peace.This would lead to less being spent (over £ 1 trillion) by the US on wars, and a huge reduction in its deficit!

Posted by: abehayeem | November 3, 2010 12:28 PM | Report abuse

Maybe government of the people, by the people and for the people is impossible. Maybe "the people" are too easily led down the garden path by demagogues.

I remember an incident from US History class, way back when... at the dawn of our country, a woman on the street asked one of the Founding Fathers (Franklin or Jefferson?), upon emerging from Independence Hall, "What kind of government have you given us?... and received the answer: "You have a Republic, if you can keep it".

I still hope we can keep it.

Posted by: Iconoblaster | November 3, 2010 1:13 PM | Report abuse

Mr.Wangpeng(ROC):
美联储出台新一轮的量化宽松政策,保持中央利率%0至0.25不变,6000亿美元资金救援计划到明年底.同时,鉴于目前的经济走势与市场流动性需提振,进一步加大固定资产投入可扩大生产降低失业率,减少赤字,所以固定资产投入提高到%4.5,同时左右浮动即在现有的基点上再上调%1.5.

Posted by: happywwwppp | November 4, 2010 12:15 AM | Report abuse

Post a Comment

We encourage users to analyze, comment on and even challenge washingtonpost.com's articles, blogs, reviews and multimedia features.

User reviews and comments that include profanity or personal attacks or other inappropriate comments or material will be removed from the site. Additionally, entries that are unsigned or contain "signatures" by someone other than the actual author will be removed. Finally, we will take steps to block users who violate any of our posting standards, terms of use or privacy policies or any other policies governing this site. Please review the full rules governing commentaries and discussions.




characters remaining

 
 
RSS Feed
Subscribe to The Post

© 2010 The Washington Post Company