December 22, 2014

The (Tab)ulation

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Tuesday, January 14, 2014 - 10:14 AM

A new report by the Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS) found that health care spending over the past four years grew at the slowest rate recorded in more than half a century. The spending grew by 3.7 percent in 2012; since 2009 the annual rate has been between 3.6 percent and 3.8 percent.

That's down from the 5.5 percent average increase over the past decade, and well below the average annual increase of 11 percent observed in the 1980s and 13.1 percent average annual increase observed in the 1970s.

The recent slower growth contributed to the first reduction in health care costs as a share of the economy in 15 years, down to 17.2 percent of GDP in 2012 from 17.3 percent in 2011.  

It is good news that we are bucking the historical trend on health care cost growth. But the causes for this are not completely understood and thus we have uncertainty as to the sustainability of the trend.

Several factors are at work, including: the last recession and subsequent slow recovery, programs and policies initiated by Obamacare, structural changes in the health care...

Monday, January 13, 2014 - 4:02 PM

The national taxpayer advocate, who serves as ombudswoman for the Internal Revenue Service (IRS), released her annual report last week, saying budget reductions have “significantly hampered” the agency’s ability to provide top-quality service. While additional funding would undoubtedly help, an even better way to help taxpayers and collect revenue more effectively would be for Congress to eliminate many tax expenditures. 

Nina Olson’s report notes that IRS funding has decreased by nearly $1 billion, or 8 percent of its budget, since Fiscal Year 2010.

Her report says that shrinking budgets for the agency mean “fewer dollars available to fund all federal programs.” Restoring the lost funding, she said, would lead to more effective revenue collection and could help reduce the budget deficit.

The annual report came after a very tough year for the agency. The IRS became embroiled in controversy when it was revealed that it had applied extra scrutiny to some political advocacy groups that had applied for tax-exempt status. Olson’s office issued a special...

Friday, December 13, 2013 - 3:43 PM

Unlike the past few years, the recent budget agreement has smoothed the way for Congress to recess for its winter break well before Christmas. That has left some traditional end-of-year legislation out in the cold.

That is bad news for the unemployed, as emergency unemployment benefits are scheduled to expire. Yet there is also hopeful news for those who wish to bring some sanity to the tax code because the oft-extended package of miscellaneous tax breaks, collectively called the “tax extenders,” is also scheduled to expire.

The tax extenders are temporary provisions. Like other tax expenditures, they are disguised federal subsidies that encourage certain behaviors. Every year Congress has extended them for at least another year, allowing certain individuals and businesses to lower their tax bills. Extenders represent the ad hoc approach that has made the tax code a complex, inefficient mess of tax expenditures.

Senate Finance Committee Chair Max Baucus (D-Mont.) and House Ways and Means Committee Chair Dave Camp (R-Mich.) came out last week against approving the extenders for another year. Instead, they want a comprehensive overhaul of the tax code that would eliminate wasteful subsidies.

Denying a vote on the...

Thursday, December 12, 2013 - 9:12 AM

President Obama hailed the two-year budget deal reached by House Budget Committee Chair Paul Ryan (R-Wis.) and Senate Budget Committee Chair Patty Murray (D-Wash.) as a “good first step.”

If he meant a good first step toward broader reforms needed to put the nation’s finances on sounder footing for the long-term, let’s hope he is right.

It is not clear, however, that Capitol Hill leaders, or the President for that matter, have any plans to follow up this very modest achievement with anything more.

Under the terms of the agreement, spending caps for appropriations would be adjusted upward for 2014 and 2015, resulting in an outlay increase of $62 billion over 10 years, according to the Congressional Budget Office (CBO)

That increase, however, is calculated from the “sequestration” level that neither party ever intended to go into effect. The new caps would still be lower than the original caps put in place by the Budget Control Act of 2011 and lower than the levels under the Simpson-Bowles plan or the original Ryan budget.

The spending increase would be more than offset by an array of future cuts in mandatory (non-appropriations) spending and higher user fees together totaling $78...

Friday, December 6, 2013 - 2:19 PM

Extending emergency unemployment compensation for another year would add 200,000 jobs but carries a price tag of $25 billion, according to an analysis released recently by the Congressional Budget Office (CBO). Such an extension now appears to be a central focus of negotiators trying to reach a budget deal before Congress adjourns for the year.

Emergency unemployment compensation (EUC) provides more “bang for the buck” than many other policies aimed at improving the economy. It provides an immediate surge in economic activity due to recipients quickly spending their benefits on consumer goods and services, which boosts aggregate demand and induces businesses to increase production and hire more workers.

CBO noted that part of this positive effect is offset as some workers reduce the intensity of their job searches in response to the extension of benefits.

Emergency unemployment compensation was approved in 2008 as the unemployment rate was rapidly rising due to the recession. It provides at least 14 additional weeks of benefits to individuals who have exhausted...

Wednesday, December 4, 2013 - 7:28 AM

If the recent past is any indication of how elected officials will deal with the country’s short- and long-term fiscal challenges, Americans – and especially younger ones – are in trouble.

Washington will have to step up its game.  And ordinary Americans can help by encouraging their elected representatives to forgo political  theatrics in favor of timely budgets and more responsible policies.

That was the consensus of budget experts as well as former lawmakers who spoke at a conference Tuesday on Capitol Hill. The conference was organized by the University of New Hampshire’s Warren B. Rudman Center for Justice, Leadership and Public Policy in cooperation with The Concord Coalition and several other organizations.

With congressional negotiations on an overdue budget for Fiscal 2014 still sputtering, speakers at Tuesday’s conference considered what it would take to avoid a federal debt crisis.

They generally agreed that lawmakers in both parties as well as the President should put a greater focus on developing realistic solutions and exercising bipartisan cooperation.

“We have got to get our colleagues to lift themselves out of this political quagmire -- and forget, just for...

Tuesday, November 26, 2013 - 9:57 AM

A recent report by the President’s Council of Economic Advisors (CEA) reviewing the recent slowdown in health care costs examined its potential causes, its sustainability and the economic impact going forward.

While the report is intended to put the administration's efforts on health care reform in the best light, that shouldn’t diminish the importance of the slowdown and the lessons we can learn from it. When looking at future fiscal policy decisions, some crucial takeaways are:

  • Changes in government policy can, at the very least, contribute to lowering health care cost growth.
  • Unlike five or six years ago, health care experts are now fairly confident they have identified some strategies to build upon and there is an emerging political consensus for encouraging their implementation.
  • The slowdown presents a unique opportunity to expand reform efforts, and is not a moment for complacency or resting on laurels.

The CEA report highlights the cost slowdown by examining how per-capita spending from 2010 to 2012 saw the lowest growth rate for a three-year...

Saturday, November 23, 2013 - 8:36 AM

Sen. Angus King (I-Maine), a member of the budget conference committee, on Tuesday released a proposal that replaces roughly half of the sequestration scheduled through 2021 with savings from mandatory spending and revenue from ending corporate tax expenditures.

The plan calls for $455 billion in mandated cuts to be replaced by $200 billion in revenue from closing corporate tax loopholes, and $255 billion in savings from entitlement reforms. The plan also calls for smoothing out the sequester cuts, slowing their growth in earlier years and increasing them in later years to achieve the same amount of deficit reduction.

King, who named his proposal the “Grande” plan after Starbuck’s middle-sized cup, represents the “middle-of-the-road” approach to fiscal policy that has been sorely lacking in Washington over the last few years.

To attract support from both parties, King also calls for lower corporate tax rates and increased infrastructure spending. These would be paid for by $325 billion in revenue from ending certain corporate tax expenditures, which are subsidies built into the tax code....

Monday, November 18, 2013 - 12:16 PM

In recent interviews and speeches, Defense Secretary Chuck Hagel says the military is “challenging every past assumption, every past formula” for allocating budget resources as he tries to reorganize the military for 21st century challenges in the face of a rapidly tightening budget.

Hagel appears to be on the right path in encouraging top Pentagon officials to take a fresh look at everything in setting defense priorities. But uncertainties about sequestration and the Fiscal 2014 budget in general are complicating that work.

In January a new round of sequester cuts is scheduled to reduce the military’s budget cap by $21 billion. The Pentagon faces nearly $1 trillion in overall spending cuts over the next decade due to the budget caps and sequestration put in place by the Budget Control Act. In FY 2012, the defense budget was $670 billion.

Pentagon Comptroller Robert Hale says he implemented $37 billion in cuts required by the sequester earlier this year in part by delaying sending army units...

Monday, October 28, 2013 - 8:38 AM

Who says that Democrats and Republicans can't reach a grand bargain?

Harry Reid and Paul Ryan seem to have it figured out. If Democrats and Republicans don’t demand compromises from each other, everyone can get along. It’s the perfect political grand bargain: Do nothing.

Unfortunately, that could easily become a self-fulfilling prophecy.

The prospects for a real grand bargain – one that actually makes some headway on solving our fiscal imbalance – are not looking good right now. It is particularly disappointing, however, that already two key members of Congress are simply accepting the gridlocked status quo rather using their leading positions to figure out a better result.

In an interview with the Associated Press (AP), Ryan summed up his view this way: “If we focus on some big, grand bargain then we’re going to focus on our differences and both sides are going to require that the other side compromises some core principle and then we’ll get nothing done.”

That’s a bit like saying elected officials can’t do a grand bargain because it would require a grand...