Tuesday, January 18, 2011

Why Doc Fix (and the rest of the CBO fight) Matters

The fight over the budget effects of ACA (or, hypothetically, ACA repeal) went a bit higher profile yesterday with a fine Paul Krugman column defending the CBO estimates and calling the GOP position a "War on Logic." Conservative push-back from Yuval Levin here; Jonathan Cohn is reprising some of the arguments, and CBPP weighs in on "false claims" from Republicans.

On the merits, as regular readers will know, I find the CBPP arguments far stronger than the conservative case. Levin's piece is about the best I've seen. He doesn't rely on the phony "doc fix" argument or the entirely fictional "10/6" claim. But it's still a weak argument. Levin links to CBO documents, but they don't really support his claims. For example, it's correct, as Levin says, that CBO thinks it's possible that savings will not materialize -- but CBO is careful to say that there is uncertainty in both directions. Moreover, while Levin is right that ACA involves new spending and new taxes, he's wrong to say that there are no savings involved; in fact, the CBO document he cites says that "Under the legislation, CBO expects that Medicare spending would increase significantly more slowly during the next two decades than it has increased during the past two decades." The main reason that might not happen is if Congress changes the law; but surely it's an odd argument to make that we must repeal the law because if we listen to the people who want to leave it intact then it will be costly when it's changed.

What interests me, however, is a different argument from Austin Frakt that this entire dispute about CBO scoring "misses the most important message conveyed by CBO estimates." That is:
Here’s the state of the debate over these CBO health-reform estimates: which is right, the baseline scenario or the alternative fiscal scenario? It’s the wrong question! It doesn’t matter which scenario you think is right. Likely neither is when examined in any detail, and both are horrible in broad sweep. Choose your poison: massive taxation or massive debt.

Actually, though, there’s a third option: recognition of the underlying problem and dealing with it.

The problem is health care costs. They’ll cause budgetary distress with or without health reform. The CBO’s estimates, both of them, show it clearly. Health care costs have been the source of budgetary woes for decades, and there’s no end in sight under any realistic scoring of any serious health reform proposal.

I understand Frakt's point, but I think he's wrong. Yes, it's quite true that reformed health care is still producing enormous projected future budget deficits. Indeed, that's just the most obvious problem; it's an even bigger deal that health care costs threaten to swamp the rest of the economy, which can't possibly be a good thing.

I guess the question to ask is whether the problem with health care and future budgets is a policy question or a political question. If it's a policy question, one in which the real unknown is whether anyone can figure out a way to control costs, then Frakt is correct. If, however, it's a political question, one in which the real unknown is whether the political system can develop and implement the rational solutions that are available, then the CBO fight matters.

That's because it's impossible to have a sensible debate about these issues if one side is going to play with its own set of numbers, instead of accepting neutral accounting. It's because reaching sensible compromises -- and remember, policy is not (necessarily) a zero-sum game -- is impossible if one side has convinced itself that, as Krugman says, the laws of logic do not hold.

What strikes me is that while CBPP calls Republican CBO-bashing "unprecedented," I don't think that's correct at all. It reminds me more than anything of the Bush-era tax cuts, accompanied by GOP dogma about how those cuts wouldn't actually cause budget problems because the experts were all wrong about the effects of those cuts. Of course, the consequence was large deficits for the last decade.

What's more, I'm sure that rank-and-file Republican activists believe what their leaders in Washington are saying, and I think there's every possibility that GOP Members of Congress believe it themselves. That's the danger of a closed information loop, and it makes compromise impossible even if the interests represented by both sides would benefit from cutting a deal. If Republicans really believe that cutting taxes will reduce the deficit, then there's no way they're going to reach a budget deal with Democrats that involves spending cuts and tax increases. If they really believe that climate change is a plot by a few crazed, self-interested climate scientists that's been discredited by leaked memos and a few snowstorms, then there's no way they're going to cut a deal on climate/energy. And if they really believe that CBO's numbers on ACA are somehow "cooked" and phony, it makes it a whole lot harder to reach a deal on health care, and therefore on the long-term budget. That's what's at stake in the CBO fight, and at least in my view that makes it somewhat important.

(Update: link fixed, and while I'm at it see Frakt's excellent response).


  1. Thank you. An excellent corrective for the critique I just left on your prior post.

    I do think your distinction between policy and politics is rather arbitrary -- it seems to reflect a static analysis, whereas there's a whole lot of dynamic interplay as the years go by between the two.

    We don't have the policy answers today to how we'll eventually bring health care costs under control -- or how we would respond to an economy structured on lines that are pretty much unimaginable today. (What in the world would an economy look like where more than half of it was devoted to health care?) But ACA is a package of policies that will start us down a road where the cost control problem is likely to be less overwhelming than if we do nothing, and therefore far more susceptible to future management through (messy but reasonably effective) policy incrementalism.

    So from that standpoint, you're right, what we have is a severe political problem, where one side's maximalist position simply rejects the possibility of policy, which in turn makes anything other than zero-sum politics virtually impossible. So "policy vs politics" is a distinction that works rather well rhetorically.

  2. Austin Frakt is being way too cute. So neither side can answer how they're going to control costs in the long run. Not so fast.

    The Democrats have had lots of ideas that would likely make a big difference. But they're not politically possible because of the opposition from all the folks who have interests to protect, from the insurance co's to the doctors and hospitals to big Pharma.

    But the status quo is broken. So since we can't replace the current system, the first step is to rationalize it, working with the existing elements. That has necessitated buying off the vested interests in a manner that will at least bring the US up to the standards of the rest of the developed world in terms of basic health coverage of its population. While slowing the growth rate a bit and not breaking the federal budget in the process. Not too shabby for what is designed to be a first step.

    We don't know yet how the various bits of the system are going to respond. For example, what's going to happen with employer-provided insurance. Will it go the way of other benefits like defined benefit pensions, or will the reforms make it somewhat easier for business to provide health benefits. So "what to do next" is going to depend in part on what needs to be done.

    And if ongoing incremental adjustments to the system turn out to be inadequate and a wholesale revision is required that takes a pound of flesh from not just the insurance industry but health care providers, at least we'll tackle a major reform from a much better starting point in terms of defining the minimum level of basic services.

    And what does Frakt think we ought to do instead? Throw up our hands and do nothing because the political system can't solve the whole problem now? Does he think the political system is going to be able to solve the problem any better if we repeal ACA? That Republicans will finally come up with "what do we do now" or that Dems, having had their enormous effort dismantled, come up with another set of bright ideas that will work better than ACA and that are politically feasible? Seriously.

  3. There is absolutely zero logical basis for including CLASS Act revenues in the CBO score for PPACA. There's no way to defend it, which is why you don't see anyone do it. Even in that CBPP piece you linked to, Paul Van De Water doesn't actually address the issue of counting the CLASS Act revenues as "savings", he just says that even without them the bill still scores as deficit reducing. His "Fact" is a complete non-sequitur when it comes to challenging the supposedly "false claim".

    Yet despite all of this, people still trot out that $143B number, when it is so obviously dishonest. That itself is just as harmful to our entire CBO scoring process as any of these dishonest attacks from Republicans. By including things in the score that they know for a fact do not represent real savings to the federal budget they're making a mockery of the entire process. How can we have an independent and unbiased scorekeeper if we allow one party to completely game the scoring process?


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