Serious Dialogue On The Big Issue

If we’re ever going to take real steps towards reducing the debt, we are going to have to make cuts in sacred cows. And we’re going to have to take steps that raise real revenue in a way that doesn’t weigh down economic growth.

So despite the fact that it comes in the form of an obnoxiously long set of overly-complex and unbeautiful Powerpoint slides, I have to welcome the arrival of the President’s Fiscal Commission report on reducing government expenditures. Because it’s all well and good to talk about reducing the deficit, and ultimately the debt, but it’s something else entirely to get down into nuts and bolts and wield a merciless scissors on the government. Because if Paul Krugman is horrified by it, there’s pretty good odds that it’s worth a second look.  Let me offer my own take on the high points of the idea, perhaps in a more understandable format than the one presented by the commission itself.

Proposal Projected Impact TL’s thoughts
Revenue cap at 21% of GDP. No direct impact This number seems arbitrary to me. While I hope we wouldn’t, if we should need more revenue, we should be able to get it.
Reduce overall discretionary spending in FY 2012 to FY 2012 levels Unspecified There was too much discretionary spending in FY 2010. Roll it back to FY 2008.
Sequester discretionary spending above caps Controls spending creep Putting spending cuts on autopilot doesn’t work, because it’s too easy for Congress to override.
Apply overhead savings Secretary Gates has promised to deficit reduction $28 B Yes yes yes! All spending cuts must apply to deficit reduction. There are no “savings” or “dividends” to spend on pretty things elsewhere.
Freeze federal salaries, bonuses, and other compensation (including noncombat military personnel pay) for 3 years $14.5 B Well, that’s painful, alright. No one wants to tell the soldiers “no raises,” and civilian workers no less.
Reduce military procurement by 15 percent $20 B Less equipment, etc.; painful indeed. If we don’t feel the pain, we aren’t tightening the belts.
Modernize Tricare, Defense health $6 B Looks suspiciously like “eliminate waste, fraud, and graft.”
Reduce spending on base maintenance and facilities maintenance $3.4 B My experiences out at Edwards AFB over the past several months reveal it to be not beautiful nor particularly modern-looking, but serviceable and well-maintained. If Edwards is a good exemplar, then chances are that yes, this is a place where we can probably afford to make some cuts for now — but we can’t defer maintenance forever.
Integrate children of military personnel into local schools in the United States $1.1 B This is a buck-pass, not a spending cut; education costs not paid by the Feds would have to be paid by the various states. Nor does it address children of soldiers stationed overseas, for whom there is no state structure to pass the buck to.
Reduce Congressional & White House budgets by 15% $.8 B This is more illustrative than meaningful; Congressional offices are generally pretty cramped and only a few staffers make real money anyway. But it’s important to do for symbolic purposes.
Cut the federal workforce by 10% (2-for-3 replacement rate) $13.2 B Do more with less? If the private sector can do it, so can the government. I like that the plan is to do it through attrition rather than layoffs.
Freeze federal salaries, bonuses, and other compensation at non-Defense agencies for three years $15.1 B Same as with the military personnel; these are generally hard-working people with talent and skills in their fields. It sucks for them to have to do without raises but again, we have to think differently and more frugally about our government.
Eliminate 250,000 non-defense service and staff augmented contractors $18.4 B Again, this is probably going to suck in practice but is probably necessary if we’re going to be serious about this job.
Create a Cut-and-Invest Committee charged with trimming waste and targeting investment $11 B Now, this is eliminating waste, fraud, and graft. Some other committee will come up with another eleven billion dollars in cuts these guys couldn’t?
Eliminate all earmarks $16 B Hardly a new idea but one that Congress can’t seem to steel itself to do.
Sell excess federal property $1 B I’m skeptical of government asset sales; it’s a one-time fundraiser and if it’s an asset worth having in the first place, the government will have to lease it back.
Reformed, simplified tax structure (one tier for corporate taxes, three tiers for personal income taxes) and substantially reduce deductions $1,100 B Reducing deductions is, effectively, a tax hike. The three-tiered progressive tax structure would be similar to the six-tiered structure in place now, so this isn’t fundamental reform. As I’ve noted before, deductions today count more than marginal rates.
Raise gas tax gradually by 15¢ beginning in 2013 Not stated I can think of no more inflationary tax than the gas tax, unless we were to institute a VAT. Initially, I disapprove.
Pay doctors and other providers less, improve efficiency, and reward quality by speeding up payment reforms and increasing drug rebates Unspecified I hate seeing doctors take pay cuts; plenty of docs out there aren’t making mid- to high-six figure salaries and they have huge educational loans and overhead to deal with. Still, everyone takes a hit here. The “improve efficiency” is still something like the magic of reducing fraud and waste, but it’s hard to argue that there isn’t inefficiency in large medical facilities. That doesn’t mean that people are idle there; it means that no one can figure out how to run things any more efficiently than they are. So at least some of this may be an illusion.
Pay lawyers less and reduce the cost of defensive medicine by adopting comprehensive tort reform $ 4 B in 2013, increasing thereafter I guess this will be news to the Commission: there are already caps on malpractice verdicts in most states. Turns out they don’t have any effect on malpractice insurance rates and have done nothing to stop escalating health care costs, almost as if malpractice lawsuits have no substantial effect on healthcare costs. So this $4 billion in savings is also magic.
Expand successful cost containment demonstrations Unspecified Once again, it’s the magic of cutting waste and fraud.
Require Drug Rebate Payments for name-brand drugs on Medicare Part D $5 B in 2013, increasing thereafter How about abolishing Medicare Part D altogether? The market will price out the drugs just fine, thank you very much, President Bush.
Identify an additional $200 billion savings in federal health spending $200 B As best I can figure, this is cuts in payments to hospitals and other non-doctor providers
Strengthen the Independent Payment Advisory Board (IPAB) Unless I miss my guess, this is the entity that looks at claims from doctors, hospitals, etc., and adjusts them downward. This may well be redundant with the other medicare cuts. I am pleased that they’re looking at medicare and medicaid spending cuts seriously at all.
Reduce farm subsidies by $3 billion per year $ 3 B A good idea anyway.
Ask federal workers to contribute ½ the cost (not 1/14th) of pension and retirement Private employers are doing this and the government needs to follow suit.
End payments to states and tribes for abandoned mines. We’re doing what now?
Require Tennessee Valley Authority to impose transmission surcharge on electricity sales. They’re not doing this now? Southern California Edison does here. I’ve no complaints about my electric bill; TVA ratepayers can do this too.
Index all fixed-dollar user fees to inflation. Well, duh.
Review, annually, whether the budget is on a sustainable path. You would have thought that there would have been powerful political incentives to do this anyway, but no, that turns out not to be true. So I guess the government has to require itself to look in to this more than sporadically.
Allow Congress and the President to waive the requirements during years with low economic growth, unanticipated military conflict, or major disaster. I’d be okay with that if it requires a super-majority in Congress to do.
Gradually move to a more progressive benefit formula by creating a new bendpointat the 50thpercentile and reducing upper replacement factors slowly over time, phased in by 2050 That sounds right — if you have substantial income other than Social Security, you shouldn’t get Social Security.
Increase retirement age by one month every two years after it reaches 67 under current law, meaning the normal retirement age would reach 68 in about 2050 and 69 in about 2075. We might even go a little bit faster than that, especially later in the track.
Gradually increase the taxable maximum to capture 90 percent of wages by 2050 I’ve never understood why SSI taxes cap out at $106,000. If the basic idea behind progressive taxation is rich people pay more, why are we capping payments at all?

There’s a lot of stuff in here that I think is either too ill-defined or abstract to be counted on as deficit reduction and savings I don’t believe will be real even if the policies are implemented. But there has clearly been a resolve to make painful choices for the sake of reaching sustainability, balanced against a need to not shock the system too badly or starve little old ladies along the way.

What I’m calling it is a good-faith and serious response to the Paul Ryan proposal, and a useful next step in the process of actually cutting spending instead of just kind of being mad about the debt.

Burt Likko

Pseudonymous Portlander. Homebrewer. Atheist. Recovering litigator. Recovering Republican. Recovering Catholic. Recovering divorcé. Recovering Former Editor-in-Chief of Ordinary Times. House Likko's Words: Scite Verum. Colite Iusticia. Vivere Con Gaudium.

One Comment

  1. Thanks for doing the work required to write this post, which is very thoughtful and helpful for those of us trying to wrap our minds around these recommendations.The only area where I can speak with any authority is in health care. As a primary care physician, I can say with confidence that cutting payments to primary care providers is a false economy. Most of us do fine financially, but there is constant pressure on the bottom line. If cuts are to be made, it would be much more prudent and effective to look at procedure-heavy specialties.That being said, there is HUGE inefficiency in health care. There are multiple steps that would need to be taken to address this problem, and I am loath to take up too much of your comment space to share my opinion. However, as someone who provides patient care at one of the premier teaching institutions in the country, I can aver that the problem starts in residency, and the solutions will need to be targeted there, as well.

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