Maya MacGuineas: Helping the Budget $150 Billion at a Time
Congress entered 2013 with a great deal on its plate, but it still has some work left to do. Our budget problems are still far from solved and ideally lawmakers would make a comprehensive deficit reduction deal a priority. However, at the very least, they can do no harm.
In today's The Hill, CRFB President Maya MacGuineas writes that one of the greatest accomplishments of the Murray-Ryan deal was being able to fully pay for a reduction in the sequester, with a little extra savings on top. But sequestration was not the only important issue that needed to be resolved in 2014. Congress still has quite a bit of unfinished business to attend to, including the expiration of unemployment benefits, the expiration of the three-month "doc fix" signed at the end of last year, and the expiration of many temporary tax provisions known as "tax extenders."
MacGuineas proposes pay for these three expiring provisions with three separate $150 billion savings packages:
Already, discussions are underway about an extension of unemployment insurance. Given the still weak condition of the economy, it makes sense to extend unemployment benefits and to consider doing a larger package to create jobs and spur the economy. A package could extend and reform unemployment benefits, along with other measures such as infrastructure investments, job training, or targeted tax breaks aimed at promoting job growth or investment.
One option to pay for this, would be to switch to chained CPI—a more accurate way of measuring inflation—and use $150 billion of the non-Social Security portion of the savings to pay for the growth package and some deficit reduction. (The additional savings that would come from the Social Security program should be used to help shore up the program and provide enhancements to low income beneficiaries.) Such a deal would have the multiple benefits of helping the economy, the fiscal situation, and, separately, Social Security.
A second $150 billion package could pay for fixing the impending 25 percent cut in doctors’ payments, or the unsustainable “Sustainable Growth Rate” (SGR). The Congressional health committees have put forward packages which would replace the SGR with a formula that promotes quality over quantity of care and encourages participation in coordinated care models. What they have not done? Proposed how to pay for it.
Congress could pay for these reforms with a $150 billion package of structural health reforms that help slow its cost growth. Such a package could include expanding new forms of cost-controls like bundled payments and readmission penalties; restricting supplemental health plans which lead to the overconsumption of health care; reforming overly-complicated cost-sharing rules; increasing the use of generic drugs; and expanding the means testing of Medicare premiums.
Finally, a third $150 billion package could pay for a one-year extension of the “tax extenders” which expired at the end of 2013, along with a permanent extension of the low-income support from the child tax credit and earned income tax credit scheduled to expire in 2017. One payfor option would be a plan developed by myself, Dan Feenberg and Martin Feldstein of Harvard University, where the amount of tax breaks any one individual can claim are limited to a certain dollar amount, or share of one’s income. It’s not comprehensive tax reform which we need, but it’s a step in the right direction.
At the very least, lawmakers should pay for extensions of expiring provisions with permanent savings that would help our long-term outlook. We will need to do more, but in the meantime, lawmakers can show their commitment to fiscally-responsible budgeting.
Click here to read the full op-ed.
"My Views" are works published by members of the Committee for a Responsible Federal Budget, but they do not necessarily reflect the views of all members of the committee.