Thursday, March 14, 2013

Why President Obama wants a grand bargain

This chart from the Center for Budget Policies and Priorities explains the situation.

 photo longtermdebt_zps1772aef8.jpg

The chart represents the national debt (not deficit) as a percentage of GDP. The dark blue line is where we were headed prior to the debt ceiling deal in the summer of 2011. The light blue line is the projection after that deal. The yellow line shows the long-term picture after the so-called "fiscal cliff" deal and the red line is where we'd be heading with an additional $1.5 trillion in savings over the next 10 years.

A couple of weeks ago at his press conference, President Obama called the sequester cuts that just went into effect - providing an additional $1.2 trillion in savings - "dumb." The reason he said that is because they don't tackle the one thing that is driving those upward care costs. Here's how Kevin Drum explained it.
In other words, we don't have a discretionary spending problem. We don't have an interest expense problem. Once we withdraw from Afghanistan we don't have a big defense spending problem. And Social Security, at worst, is a very small and very manageable problem.

Our only serious problem is Medicare, thanks to an aging population and rising health care costs. That's it. End of story. If you actually care about federal spending, that's the only thing you should be focused on.
We all know that Rep. Ryan's budget does nothing to address this problem other than transfer those increased costs on to seniors. Here's what President Obama is proposing:
While the Affordable Care Act was an historic step toward getting health care costs under control, there is still more that we can do to realize efficiencies, cut waste, and improve Federal health care programs. Most importantly, we can make modest adjustments to strengthen Medicare and Medicaid in a way that does not undermine the fundamental compact they represent to our nation’s seniors, children, people with disabilities, and low-income families. For this reason, the President's Plan for Economic Growth and Deficit Reduction included proposals to save approximately $320 billion in federal health spending over the next decade. As these reforms save money, they also will strengthen these vital programs so that they are robust and healthy to serve Americans for years to come... 
More specifically, the President’s proposals:
  • Create payment incentives for skilled nursing facilities to improve their care to prevent avoidable hospital readmissions. 
  • Include incentives for people with Medicare to choose high-value health services. 
  • Reform Medicare payments to better align with patient care costs. Accelerate the availability of lower-cost generic drugs. 
  • Take steps to make Medicaid more efficient, accountable, and flexible.
Yesterday President Obama conceded that if Republicans aren't willing to make this kind of deal, the opportunity to tackle these issues will have been missed.  He's basically echoing the same thing he said in response to Rep. Ryan's release of his last budget back in 2011.
They want to give people like me a $200,000 tax cut that’s paid for by asking 33 seniors each to pay $6,000 more in health costs. That’s not right. And it’s not going to happen as long as I’m President.
So Ryan's plan is once again DOA. If any Republicans are really interested in a deal - there's one on the table. If not...we move on.


  1. This is a great piece, above all because the more that people discuss our fiscal picture in terms of a single problem, that of health care costs, rather than a general crisis or, worse, of numerous crises all but one of which are fictional, the better off we are.

    One of the things I think a lot on the left of center miss with the President's proposals is that I don't recall an instance where he sought to reduce tangible benefits to actual people as a means to cut costs. He always proposes improvements to efficiency. He loves incentivizing things, and while personally--I have many flaws as a person, but lacking a strong work ethic isn't one of them--such proposals chafe my aesthetic, I know that incentives, well-structured, can both produce better results than directives, without producing push-back.

    I took one college class, a history class, in which the professor, a flawed liberal, but a liberal to be sure, gave one lecture about debt. The historical topic was the rivalry between Britain and France, and he chalked up British geopolitical superiority to the creation and solidity of the British national debt. Hardly an original idea but a good one. The point he made is that modern states float debt. National debt is NORMAL in the modern world. It is not the same as personal debt.

    I say this, because in all my education, which would be considered a fairly good one, I got, as a non-econ major, only one sober discussion of the meaning of national debt in a single history class, and that a general survey. I could easily have, hung over to hell, missed that lecture and spent the rest of my days in ignorance.

    We very simply, in this country, do not understand the fiscal underpinnings of how any modern state operates and must operate. So, when people, gunning to dismantle social programs and so buttress the oligarchy, cry "debt!" people in general make the connection to the debt they know: their own. The connection, however, is false. Personal debt and national debt, in terms of how they function and what they mean, are at best distant cousins rather than fraternal twins.

  2. "One of the things I think a lot on the left of center miss with the President's proposals is that I don't recall an instance where he sought to reduce tangible benefits to actual people as a means to cut costs."

    Yet we still have those 'progressives' screeching as if PBO is gonna cut a 'grand bargain' that does the very thing he has never advocated, with some flat out lying about his stances.


    1. If we're going to advocate for social programs and pay for them with tax dollars, we need at the same time to make sure that we are not wasting those dollars. Wasted money is money taken from someone who could use it, or very possibly from another, worthwhile program. We have to press for administrative efficiency while at the same time opposing a reduction of actual benefits.

    2. Truth, liberals should be able to walk and chew gum at the same time. PBO campaigned on getting our financial house in order as I recall. We just can't sell these prog. to taxpayers because it gives us warm fuzzies