April 25, 2014

"Insufficient Political Will"

Ezra Klein has a good post today discussing the problem with the costs of health care reform and how to pay for them. His point is that the structure of the bills being discussed so far lead them to not do enough to control long-term costs, and that efforts to scale them back further either achieve a lower price by delaying implementation--which just allows cost to dramatically diverge from the "pay-fors" outside the budget window--or they simply leave the currently unaffordable system relatively intact.  As David Brooks seconds in the New York Times, the effort to make reform politically palatable--in that it didn't try to dramatically change how most Americans get their health care--instead left us with proposals that are not very popular, but also don't provide the change needed to begin to fix our health care cost problems.

In some sense this is because the problems with our health care system are so dramatic, that the broader in scope the reform, the greater the chance that reform has to actually cut costs. But it is also because members of Congress have a hard time doing the right thing from a policy standpoint, have a hard time honestly paying for that policy, and then taking those decisions to their constituents and honestly talk about them. Instead, members like to stick to arbitrary and artificial dollar figures, or draw lines in the sand based on ideological buzzwords, or get into scoring arguments with CBO.  

However, as Ezra says, "The problem is not insufficient money, or the relative growth in costs, or the savings. The problem is insufficient political will."

This is why watching the wrangling over CBO scoring or whether the bill will wind up costing $1 trillion or $800 billion over 10 years is so frustrating, (as if there is some policy rational that dictates a hard, round number). This also tends to happen whenever discussions about PAYGO come up.

Furthermore, playing these short-term optic games seems to be a case of members trying to win a battle, where the end result is that they lose the war.

The stimulus debate from earlier this year is a good example. In order to make themselves look fiscally responsible, some members cut $50 billion of stimulus money prior to passage. However, the money that was cut was aid to the states. The problem is that most economists agree that aid to the states is one of the more effective forms of stimulus. So, instead of cutting some provisions that are of dubious economic benefits (like cash-for-clunkers (see here and here), or the homebuyer tax credit (see here and here), they cut helpful ones in the name of fiscal responsibility. Ultimately, the absence of the additional state aid almost certainly led to the firing of workers and increased unemployment--leading to less tax revenue and the need for higher spending for unemployment benefits. 

For health care, there might be the same problem. Congress could decide to spend less than the initial expectations for a 10-year health care bill for the sake of political expediency, but to do so, cuts back on subsidies designed to help middle class families afford health insurance. And then they might also limit some of the long-term inflation taming ideas that can be distorted by political opponents (like comparative effectiveness research, altering the health insurance tax exclusion, or a "Super MedPAC"). Then, you might have a situation where middle class Americans are forced to buy health insurance, yet that insurance quickly becomes unaffordable because costs don't decline enough. This would become a major controversy and could have quite negative political ramifications for those in office. Then, a decision about what to do would have to be made under the gun of an unhappy public.

In those circumstances it is quite likely that the easiest thing to do would be to increase the subsidies, yet because the political environment will be so threatening, the chances of the extra subsidies being paid for by increased taxes are quite unlikely, as are the chances that Congress would suddenly be willing to take the steps necessary for cost-control. However, even if Congress was to then be willing to take the steps needed for cost-control, those changes tend to take a lot of time to bear fruit and the country would be forced to simply going further into debt to pay for the subsidy increase.

A better solution? Do it right the first time. All it takes is sufficient political will.