Tag Archives: deficit reduction

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By Marc Seltzer; originally published on March 29, 2010 at care2.com

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Reform is Bitter Medicine

One aspect of President Obama’s health care reform legislation that has not received enough serious discussion is deficit reduction.  Despite claims that the legislation expands government, the non-partisan Congressional Budget Office (CBO) says that it will reduce the deficit by a significant amount over the next twenty years.

This has not stopped Republicans, such as Lindsey Graham, from announcing a campaign to “repeal and replace” the legislation.  What the Republicans have not said, is whether they would increase the deficit by such repeal, or find a way to match or improve upon the projected $130+ billion dollars in deficit reduction over first ten years and more than a trillion dollars in projected saving by 2030 contained in the Obama plan.  (Atul Gawande in the New Yorker gives some context)

It’s not hard to create popular legislation if it gives benefits that it does not pay for.  Remember that President Bush’s Medicare Prescription Drug benefit was popular, but was also a giveaway, increasing the deficit.  The harder part is to create legislation that lowers the deficit, without losing support among constituents, who like the idea of deficit reduction, but don’t want to see their own benefits taken away.

No matter what happens in November, President Obama would surely veto any attempts to repeal health care reform.  He may be open to improving upon current legislation, but he has promoted the “PayGo” (from pay-as-you-go) rule, which requires that new legislation not raise the deficit.  “PayGo” requires cuts in spending or increases in taxes to offset any new program spending.  “PayGo” led to surpluses in the Clinton presidency, and will again, so long as it is followed.  However, Republicans have no credibility on fiscal discipline.  They may run for office on a repeal platform, but will they propose alternatives to health care reform that cut the deficit?

Remember, repealing the current law would, in itself, raise the deficit, since Obama’s new legislation substantially lowers the deficit.

Republicans’ most appealing political argument, superficially, at least, against Obama’s health care reform, is that it takes money from Medicare.  Republicans claim it will bankrupt Medicare and hurt senior care.  Democrats refute these claims, arguing that the elimination of waste, fraud and abuse and the establishment of an independent panel to review Medicare spending will lower costs without cutting the quality of senior’s care.

An ongoing disagreement over doctor reimbursement rates may be another difficult challenge or an opportunity for creative problem solving, when it resurfaces in coming months or years.

It is no surprise that Republicans have come down on the side of spending more, and reassuring constituents, rather than bold action and fiscal responsibility.  But if Republicans are going to have any relevant part in the health-care debate going forward, they must be willing to offer potentially unpopular proposals that the CBO agrees will cut the deficit.  So far, Republicans have shown no appetite for the politically difficult task of cutting spending, not in Medicare, not in Social Security, and not in Defense.

President Obama has taken criticism for his stimulus spending.  But this was one-time emergency spending to stave off economic crisis, and the benefit of a rebounding economy should include increased tax revenues and a lowering of the deficit over time.  The President has since made it clear that he came to Washington to make the tough decisions, including long-term deficit reduction.  His health care reform triumph follows through on that promise.

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For more on health care reform:  You’ve Got to Hand it To Them:  Obama, Pelosi and Reid.