October 24, 2014

Washington Budget Report: Oct. 2, 2012

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Reforms in Health Care, Entitlements Seen as Crucial

Four prominent experts agreed Monday that two complex and interrelated tasks are essential to the nation’s future prosperity: curbing the growth in health care costs and reforming federal entitlement programs.

The speakers were William Frist, a doctor and former U.S. Senate majority leader (R-Tenn.); Donna Shalala,  former U.S. secretary of health and human services; John B. Taylor, former U.S. under secretary of the Treasury for international affairs, and Alice Rivlin, former director of the White House Office of Management and Budget.
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They spoke at the fourth public forum presented by Strengthening of America – Our Children’s Future, a bipartisan initiative by former members of Congress and a number of organizations concerned about the federal debt and related issues.

In the first panel discussion Monday, Shalala and Frist agreed that substantial changes were needed in the delivery of health care not only to save money but to improve the quality of care.  Both, however, said caution was in order.

“More than anything, I do believe the health care system needs to be reformed,” Shalala said. But she noted that many Americans remain skeptical of reform proposals discussed in Washington. She also warned against “front-loaded, excessively large, poorly designed” proposals that could hurt the economy as well as patients.

Frist said Washington policymakers often lacked understanding of key health care issues, and added that reform efforts should rely heavily on health care professionals rather than federal bureaucracy. He said incentives in the health care system should be better aligned with results, and he stressed the need to encourage research and innovation.

In the second part of the program Monday, Taylor focused on federal spending trends and emphasized the damage that he believes high federal debt is already inflicting on the American economy. He said various fiscal reform plans, including his own, called only for “a very gradual decline” in federal spending as a percentage of GDP. There is general agreement, he said, on the need to contain health care spending so that it does not grow much faster than the overall economy. The disagreements, he added, were simply over how to do that.

Rivlin said many economists agree on a number of points about the federal budget, including the key roles that an aging population and health care costs play in driving future spending. She said simply cutting back on the size of government enough to accommodate the country’s huge demographic shift, however, would “risk reducing the investments in education and science and infrastructure that we need for growth.” She called for the country to act soon to put Social Security on a “firm foundation” and suggested giving people a choice on Medicare between the current system and another option such as the “premium support” model.

The program Monday was convened by former Senators Pete Domenici (R-N.M.) and Sam Nunn (D-Ga.), a co-chairman of The Concord Coalition. Former Rep. Bill Frenzel (R-Minn.) and former senators Evan Bayh (D-Ind.), Bill Brock (R-Tenn.) and Byron Dorgan (D-N.D.) questioned and responded to the panelists.  

Seeking a Better Tax Code -- and a Better Economy

At a forum last week in New York, business executives and former federal officials offered their views on how best to reform the tax code in ways that could promote economic growth as well as put the federal budget on a more sustainable path.

The forum was part of the Strengthening of America -- Our Children's Future initiative. The first part of the program featured Martin Feldstein, former chairman of the Council of Economic Advisers and a Romney adviser, and Lawrence Summers, former Treasury secretary and an Obama adviser.

Diane Lim Rogers, chief economist for The Concord Coalition, said Feldstein and Summers made it clear that in thinking about pro-growth tax reform, “there is a lot of common ground between Republican economists and Democratic economists.” This included, for example, support for broadening the tax base and eliminating tax expenditures that are considered inefficient or unfair.

But Rogers writes that she also heard “some remaining sources of disagreement between Feldstein and Summers, which are probably indicative of where ‘stumbling blocks’ to bipartisan tax reform remain.” For example, she says Feldstein “seems to favor continued low or even lower effective tax rates on capital income” while Summers “seems to favor reducing or eliminating the current preferential rates on capital gains and dividends.”

The second panel at the forum Thursday featured David Cote, chairman and CEO of Honeywell; Alfred West, CEO of SEI and chair of the American Business Conference, and Navin Thukkaram, COO of Qwiki, Inc.

Cote, who served as a member of the Simpson-Bowles fiscal commission, stressed the need for a credible and bipartisan plan to address the debt problem. This, he said, would reduce uncertainty in the business community, making businesses more willing to hire workers and expand production.

West said any program to reduce the debt must start with economic growth, and suggested that nothing would have a more positive effect on growth than embracing a debt reduction plan and sticking to it.

Thukkaram said Americans have been good at creating fiscally sustainable enterprises but that the government has fallen short. He urged policymakers to take a number of specific steps that would make the tax code more predictable and conducive to encouraging investment in small businesses.

Thousands Try the Federal Budget Challenge

The latest version of The Concord Coalition’s “Federal Budget Challenge” has been online for only two weeks, yet the game has been played by more than 5,000 people from almost half of the states in the nation. Players examine over 50 different policy choices and their budgetary impacts over 10 years, and decide whether and how to reduce budget deficits.

The new version of the game, built in partnership with the California-based non-profit Next 10, is now touch-screen playable and has built-in integration with Twitter and Facebook. Like the previous version, as well as the group exercises on which it is based -- “Principles and Priorities” and “Debt Busters” -- the Federal Budget Challenge offers the opportunity to learn about many of the public policy options being debated in Washington, along with arguments for and against each of them.

The least popular choices among game players involve some of the thorniest issues threatening to push the nation over the looming “fiscal cliff.” The least popular option so far involves increasing discretionary spending, and the next least popular choice is to extend all of the 2001 and 2003 tax cuts.