September 29, 2010 9:52AM

Bending the Cost Curve: Ryan’s Roadmap Would Succeed Where ObamaCare Fails

From my oped in today’s Investors Business Daily:

Rep. Paul Ryan’s (R‑Wis.) “Roadmap for America’s Future” proposes even tighter limits on Medicare’s growth, leading columnist Bruce Bartlett to opine, “the Medicare actuaries have shown the absurdity of the Ryan plan by denying that Medicare cuts already enacted into law are even worthy of projecting into the future.”


On the contrary, experience and public choice theory suggest that the Ryan plan has a better shot at reducing future Medicare outlays than past efforts, because the Roadmap would change the lobbying game that fuels Medicare’s growth.

For more on Ryan’s Roadmap, click here. For more on Medicare, read David Hyman’s Medicare Meets Mephistopheles. For more on public choice economics, click here.

August 12, 2010 12:45PM

USA Today Abets ObamaCare Supporters’ Misinformation Campaign

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An article in today's The USA Today titled, "With Many Still in Dark, Groups Shed Light on Health Care Law," aims to correct misinformation about ObamaCare.  Ironically, the article is itself a monument to misinformation.

It begins:

True or false: The new health care law will cut Medicare benefits for seniors. It will slash Medicare payments to doctors. It will ration health care.

In three polls conducted last month, large percentages of Americans answered "true" to each statement. All three are false.

In fact, two of the three statements are 100-percent true.

First, ObamaCare will cut payments to the private health insurance companies that provide coverage to the 20 percent of Medicare enrollees who participate in the Medicare Advantage program.  That will eliminate many types of coverage for seniors in Medicare Advantage.  That should be painfully obvious, but if you require confirmation, visit FactCheck.org.  ObamaCare will also ratchet down the price controls that Medicare uses to pay hospitals and many other health care providers.  It should likewise be obvious that that will reduce access to services that are ostensibly "guaranteed" to all enrollees.  But again, if you need confirmation, check in with Medicare's chief actuary, who works for President Obama.  We can debate whether that's good or bad.  What's not up for debate: ObamaCare in fact "will cut Medicare benefits for seniors."

Second, it is also true -- ipso facto -- that ObamaCare "will ration health care."  To ration is to limit consumption.  When ObamaCare reduces coverage for Medicare Advantage enrollees and reduces access to care for all Medicare enrollees, it limits seniors' consumption of medical care.  We can debate whether that's good or bad.  What's not up for debate: that is rationing.

Finally, yes, it is technically false that ObamaCare "will slash Medicare payments to doctors."  But since current law will slash Medicare payments to doctors if Congress does nothing, and since an earlier version of ObamaCare would have eliminated those cuts, but ObamaCare's architects dropped that provision so as to make ObamaCare appear deficit-neutral... well, perhaps the public can be forgiven if it confuses "eliminating a provision that would have prevented cuts in Medicare payments to doctors" with "slashing Medicare payments to doctors."

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July 26, 2010 11:43AM

How Big Were the Bush Tax Cuts?

The debate on extending the Bush tax cuts has begun. Those opposed to extension argue that the cuts would greatly increase the federal deficit.


The first thing to note is that extending all the 2001 and 2003 tax cuts would lose the government about $216 billion a year in 2012 and rising amounts after that (see page 16). By contrast, federal spending in 2011 will be almost $2 trillion higher than in 2001 when the first Bush tax cuts were passed. Thus, in a rough sense, spending increases have had a nine times greater impact on our changed budget situation since 2001 than have tax cuts.


How big were the Bush tax cuts compared to previous tax legislation? One way to compare different tax bills is to look at the initial projections of the effects when they were passed. I assembled the figure below based on official scores of past tax legislation, as reported by the CBO at the time. The revenue effects of each tax bill are measured over the first five years as a share of GDP.


The figure shows that the Bush tax cuts were small compared to the Reagan tax cuts of 1981. The Revenue Act of 1978 was also a big tax cut. Note that the Tax Reform Act of 1986 was scored as being revenue neutral, and thus isn’t shown.


The figure also shows that the combined effect of tax cuts from 1997 forward were not large enough to offset the tax hikes under Reagan and the first Bush between 1982 and 1993.


I have a detailed discussion of federal tax policy between 1994 and 2004, here.

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July 15, 2010 8:52AM

GOP Spending Cap

Republicans on the Senate Appropriations Committee have announced support for caps on the discretionary spending portion of the federal budget. According to press reports, discretionary spending under the cap for fiscal year 2011 would be approximately $20 billion less than what the president has proposed.


Appropriators — often referred to as the “third party” in Washington — exist to do one thing: spend other people’s money. Getting appropriators to agree to place any sort of limit themselves is a plus.


However, it’s hard to get excited about spending $20 billion less than the president. As the following chart shows, discretionary outlays have soared in the past decade:

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With three months still to go in the current budget year, the federal deficit has already hit the trillion dollar mark. By year’s end the government will have borrowed about $1.4 trillion. It’s like the entire discretionary budget — defense and hundreds of other activities — are all financed by borrowing from the next generation.


Republicans apparently want agitated voters to see this gesture as evidence that the party is serious about out‐​of‐​control spending and deficits. But capping spending at the already exorbitant levels that Republicans helped reach isn’t exactly a big reform. Instead, Republicans need to propose the elimination of entire agencies and major programs for them to be taken seriously as a party willing to confront the nation’s looming financial crisis.

May 18, 2010 1:39PM

Fed Ed on the Move

There’s a lot to learn about what’s going on in federal education policy today, and none of it is good.


First, Steven Brill offers a revealing look at the Race to the Top evaluation process in a piece that can be added to the ever‐​growing pile of evidence that Race to the Top isn’t even close to the objective — or, I’d add, powerful — catalyst for meaningful reform that the Obama administration insists it is.


Second, it appears that congressional Democrats are preparing to pass a Harkin‐​proposed, Obama‐​endorsed, $23 billion bailout for teachers by attaching it to an “emergency” appropriation for the war in Afghanistan. (Passing major — and highly suspect – education legislation by attaching it to something totally unrelated? Sound familiar?) And what’s the nice thing about “emergency” legislation? No need to worry that the outlay would add to our already insane federal deficit; that can’t be allowed to interfere with saving the world (or public schooling lard).


Finally, looming on the horizon is the release of final standards from the Common Core State Standards Initiative. The Obama administration is trying to coerce all states to adopt the standards by linking adoption to Race‐​to‐​the‐​Top competitiveness and, potentially, Elementary and Secondary Education Act funding.


The good news is that on June 2 — potentially the very day the standards will be released — you can catch what has sadly been a rarity so far in the push for national standards: a real debate about whether national standards will actually improve educational outcomes. My answer is that there is no meaningful evidence that national standards drive superior results, but joining me to debate that right here at Cato will be the Heritage Foundation’s Lindsey Burke, Sandra Boyd of Achieve, Inc., and the Fordham Foundation’s Michael Petrilli. It will be a debate that must be replicated across the country before we make any further move to adopt one standard for every public school in America. You can register here to see our debate live, or catch it online at Cato​.org.


The feds are on the move in education, and the more we learn about their plans, the more obvious it is that they must be stopped.

April 8, 2010 12:44PM

By Pulling His Punches, Bernanke Shatters ObamaCare’s Credibility

Federal Reserve Chairman Ben Bernanke gave a speech in Dallas yesterday where he inadvertently discredited claims that ObamaCare would reduce health care costs and the federal deficit.  According to The Washington Post:

Federal Reserve Chairman Ben S. Bernanke warned Wednesday that Americans may have to accept higher taxes or changes in cherished entitlements such as Medicare and Social Security if the nation is to avoid staggering budget deficits that threaten to choke off economic growth...

While the immediate audience for the speech was the Dallas Regional Chamber, his message was intended for Congress and the Obama administration...

Bernanke has urged Congress to address long-term fiscal imbalances in congressional testimony before, but usually only when he is asked about them by lawmakers. His speech Wednesday aimed to reach a broader audience, steering away from technical economic speak and using plain, sometimes wry, language -- a rare thing for a Fed chairman.

The non-partisan Congressional Budget Office projects the annual federal deficit will be at least $700 billion in each of the next 10 years.  Deficit spending is a form of taxation without representation, because it increases the tax burden of generations who cannot yet vote (often because they are as yet unborn).  Bernanke wants us to end deficit spending.  Kudos to him.

But consider the timing of his speech.  Why wait until April 7, 2010, to deliver that message directly to the public?  Why not give that speech in January? Or February? Or any time before March 21?

The reason is obvious: Bernanke held back to appease his political masters.

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