I'm seeing a lot of worry that if Republicans take Congress, it will be bad for the deficit, because they're not serious about deficit reduction. I agree that they aren't serious--but this has less bite than it might, because I've seen little evidence that the Democrats are serious. An enormous amount of the "Democrats are serious" credibility is borrowed from the Clinton years. Even crediting Clinton with 100% of that, and the Republican Congress with none--an interpretation I think rather far-fetched--that was over a decade ago. What have they done for us lately?
Don't get me wrong, I think that Republicans are deeply, terrifyingly unserious about raising taxes and cutting spending. But I think that Democrats are also deeply, terribly unserious about doing those things. I think that Republicans are worse on the tax side, but I think Democrats are worse on the spending side, and it's far from clear to me that on balance, the Democratic position leads to net deficit reduction over the Republican alternative.
Democrats do a lot of talking about the deficit. But how serious is it? Take the health care bill. This got a deficit-reducing score from the CBO, which is good. (Certainly, it could have been worse). But it did so in a number of ways that don't really make it seem that deficit reduction is a critical Democratic priority.
For starters, take the 1099 reporting requirement. This was, almost everyone agrees, a terrible idea--an enormous administrative burden on small businesses and the IRS for a relatively trivial revenue gain. I suspect that the bill's sponsors knew it was a terrible idea. The way it was explained to me by a longtime Congressional reporter of my acquaintance is that at any given time, a bunch of revenue raising proposals are floating around the Senate--and a bunch of them are turkeys, dropped from other bills because upon careful consideration, they turned out to have all sorts of unwanted side effects. Unfortunately, during health care, they needed every revenue measure they could get their hands on, so things like this got jammed in--and passed, because of course no one had actually read the whole thing.
This will have to be undone. It's quite likely that other, less obviously flawed provisions will also fail--not because mean Republicans vote them down, but because they will simply cause too many problems in practice. That same reporter--who supported the reform overall--thinks that the Medicare cuts to hospitals and some other providers have basically been pushed to the edge of what's feasible, and perhaps beyond it. If they have gone too far, they will have to be reversed, because the alternative is declining quality of care, or seniors being turned away from providers who can't afford to take on too many money-losing clients.
Is it fiscally responsible to pass a bill that requires cuts that will quite possibly be unsustainable--again, not because Republicans are irresponsible, but because there is no political will for cutting services to seniors? I'd argue not. I understand that you can argue that the bill was desirable for other reasons, but it doesn't add to credibility on the deficit for me.
Nor am I convinced by the arguments about IPAB, the Medicare advisory committee that is supposed to "bend the cost curve" by recommending cuts. It may bend the cost curve, if the cuts are politically sustainable. But it's a high-risk strategy: there's some chance of cost-curve bending, and also some chance that the cost-cutting is politically unviable, while the spending is locked in. Progressives and I obviously disagree about the relative risks, here, but please note that the CBO does not weigh those relative risks; it is required to assume that IPAB and the Medicare cuts are implemented as written. Even relatively small discount for political risk might have radically altered whether the bill reduced the deficit. To be clear, I do not think the CBO should perform such weighting--but pundits and politicians should. And a number of officials, including the head of the Center for Medicaid and Medicaid Services, and the head of the CBO, expressed concern that the cost-reducing measures might not be feasible.
But even if the cuts go through, unless IPAB manages an unexpectedly heroic reduction in health care spending, I still think the bill was fiscally irresponsible. Again, maybe it was morally or economically necessary--we will leave those arguments aside, because for the nonce, the question is whether I trust Democrats on the budget. The problem is that even if all the Medicare cuts work, we're still left with a really big deficit problem--and we have already "spent" the arsenal of revenue enhancers and spending cuts that would otherwise have been our first line of defense against fiscal disaster.
Imagine that you are a household with some real problem--a lot of kids in a small house, say. Imagine, too, that your expenses are larger than your annual income--say, outflow exceeds inflow by 5% a year, or $2,500 for the average household. The credit card bills are mounting up, and you are starting to worry about bankruptcy.
Now imagine that your spouse comes to you and says he has a fix for the space problem--you can trade down one of the cars to a beater to get chunk of cash, take out a home equity loan for the rest, and build an addition. The cost of servicing that debt will add $1,000 a year to the budget, but don't worry--he's figured out that if you take lunches, deliver pizzas once a week, and cancel cable, you can just about make that extra payment. Indeed, you'll actually be able to put another $7 a month towards those credit cards!
Would a "fiscally responsible" household do that? To me, that's obviously not fiscally responsible, $7 a month notwithstanding. The family has taken the most obvious cuts to their budget and used them to fund new spending, rather than close their budget gap. They still have $2500 a year to go, and now it will be harder, and more painful, to find ways to make ends meet. Moreover, if anything in the plan goes wrong--say, the pizza place closes, or the beater breaks down and needs to be replaced--you've actually added hundreds of dollars to the household's already looming financial problems.
So while I worry about Republicans passing irresponsible tax cuts, I worry equally about Democrats passing irresponsible spending programs that pay lip-service to the notion of deficit reduction, while in fact making it more likely that America will end up in a crisis. You can argue that American really needed health care reform, but the Republicans would say the same about tax cuts. At that point, you're obviously not that interested in the deficit; you're simply saying that the stuff my side wants to do is worth risking the country's financial future, while the stuff the other side wants to do isn't. Okay, maybe, but that isn't going to make the resulting deficit any less . . . um . . . deficit-like.
So I worry that if Republicans get in, we'll end up with a huge budget problem. And I also worry that if Democrats retain control, we'll end up with a huge budget problem. I see no evidence at this point that I should worry more about one than the other. We have a huge deficit problem. And I'm pretty sure that whatever batch of politicians we elect next Tuesday is going to make it worse, rather than better.
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is a columnist at Bloomberg View
and a former senior editor at The Atlantic.
Her new book is The Up Side of Down