"Fixing the Debt: Reforming the Tax Code and Federal Health Spending" Recap

Yesterday, the Fix the Debt Campaign had a event with two roundtables bringing together many health policy and tax experts from across the political spectrum to discuss two of the central issues involved in the current budget negotiations.

The first panel on health care spending began with opening remarks from Sen. Rob Portman (R-OH), who urged the need for both tax reform and entitlement reform, and Director of the National Economic Council Gene Sperling, who gave some insight into the current fiscal negotiation from the White House perspective. Former CBO Director Alice Rivlin emphasized the importance of reducing the cost of health care, which she called the key to fixing the debt (and longer-term economic growth).

There was a broad feeling among the panelists that health care reform needed to begin getting better value for its costs, shifting away from a fee-for-service model to a fee-for-outcomes model. There was some disagreement on how to achieve this: competitive bidding, premium support, and block granting Medicaid with agreed outcomes were all proposed as ideas. One area of concern from some of the panelists like Neera Tanden of the Center of American Progress is that health reforms should first focus on inefficiencies and avoid shifting costs to employers and the states, as that will create another problem that will need to be solved.

The second panel featured a range of tax policy experts on how to reform the tax code and make it more efficient. The roundtable opened with remarks from Sen. Max Baucus (D-MT), Chairman of the Senate Finance Committee. He commented that the fiscal cliff, while a potential disaster for the economy if not dealt with, was also a great opportunity.

Most of the panelists agreed that more revenue from the income tax might be necessary in a deficit reduction tax. Many panelist liked the approach of Simpson-Bowles and similar plans that broadened the base and lowered rates while raising more revenue and being distributionally more progressive than the current code. Tax Policy Center director Donald Marron pointed out that it will require politicians to make the tough choices--once we start taking tax expenditures off the table, the math gets much more difficult.

While ideally we could make decisions about each tax expenditure individually, a more politically feasible option would be broader caps on deductions in a medium-term deal. There was also talk about new taxes: Bill Gale of Tax Policy Center suggested that a value-added tax and a carbon tax, although politically they are controversial. Tax policy is a complicated subject, but its clear that lawmakers have a lot of ideas to work with.

Former Senate Finance Committee chairman Bob Packwood (R-OR) also made great comments about the 1986 compromise and how the plan was able to come together. Hopefully efforts toward compromise to advert the fiscal cliff will see the same kind of leadership.

Both panels are worth watching to get a sense of the overall budget debate in two of its key areas -- tax and health spending policy. Policymakers should take up some of these ideas, as well as those from the vast number of plans out there in their effort to avoid the fiscal cliff. As can be seen from our comparison chart posted yesterday, both sides are beginning to put proposals on the table, but we still have a ways to go to reach a final deal.