Thursday, May 16, 2019

Budget Discipline Procrastination Already Has Had Its Consequences

In 1993, when Republican House Budget Committee staffers were searching for options to include in the GOP budget alternative “Cutting Spending First”, we opened a book called “CBO Spending and Revenue Options” to find proposals to reduce the rates of growth in federal spending over the next 5 years.

We found $177 billion in savings from projected baselines in Medicare and Medicaid alone. Over 5 years, not 10 years as is custom today. Those proposals just slowed down the rate of growth in both programs ever so slightly. They were not absolute cuts from the year before in any of the 5 years.

They led to balanced budgets from 1998-2001. That is all we need; a slowdown in growth in federal spending, not absolute cuts.

In Medicaid and Medicare in particular.

If Congress passed every proposal put out by CBO back then, we would be swimming in budget surpluses, not deficits. There were trillions of cumulative savings laid out back when the federal budget was only $1.4 trillion to begin with.

The most recent 2019 edition brings tears to the eyes of anyone who was serious about budget discipline 25 years ago. A cursory reading of the options to hold down the rate of growth in entitlement spending shows that most of the options in 2019 are the same as they were in 1993 simply because so few of them have been passed and implemented.

For example, there was a proposal back then to raise the eligibility age for Medicare from 65 to 67 to match the stairstep increase in retirement age eligibility of Social Security by 2024. We are living far longer than life expectancies were in 1935 when Social Security was passed; shouldn’t the retirement age in Medicare be raised to reflect that basic fact of life especially since Social Security has already done so?

Had it been passed into law 26 years ago, as it should have, we would be saving roughly $40 billion annually today, savings that would continue to compound far into the future.

If we had started the process back then to raise the retirement age to 70 by 2024, the annual savings in Medicare would be in excess of $100 billion today and $150 billion in 2024.

Both are still in the CBO Spending Options book as “options to consider”. Both have laid dormant for an entire generation. No elected Democrat or Republican public official has touched that third rail of American politics with a ten-foot pole.

The price of our collective national political cowardice and procrastination for the past 18 years is $15 trillion of new debt. Had substantive action been taken to reform entitlements back then, we could have seen balanced budgets every year beyond the four balanced budgets we saw from 1998 to 2001.

There is only one way to balance the budget now beyond making major programmatic changes in the major mandatory programs, Medicare, Medicaid and Social Security. To solve our federal budget crisis, we simply have to solve our burgeoning health care cost crisis nationwide. Inflation in federal health programs has averaged 6%+ annual growth for the past decade.

Spending in all federal health programs has to be held under 3% annual growth for us to have any chance of solving our debt crisis. Promising “free health care for all!” as all of the Democrat presidential candidates are proposing is exactly the wrong way to go if we are serious about fiscal responsibility.

Ronald Reagan said: “(T)he trouble with our liberal friends is not that they’re ignorant; it’s that so much they know isn’t so.”

Based on what we have seen when it comes to federal budgeting over the past 18 years now and still counting, apparently this includes our conservative friends as well.


(first published in North State Journal 5/15/19)

Do You Want Better People to Run for Public Office?
Support the Institute for the Public Trust Today

Visit The Institute for the Public Trust to contribute today

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.