Maya MacGuineas: Missed Opportunity to Use Health Care, Tax Policies to Stop Debt Growth
Maya MacGuineas is president of the nonpartisan Committee for a Responsible Federal Budget and head of the Campaign to Fix the Debt. She recently wrote an op-ed for The Hill. It is reposted here.
Headlines were made recently when the gross national debt topped $20 trillion for the first time. You would think this ominous milestone might give lawmakers some pause about our unsustainable fiscal course.
Sadly, the reaction has been quite the opposite.
Not long afterward, Republican senators tentatively agreed to a budget deal that would allow up to $1.5 trillion in tax cuts — all put on the national tab.
Earlier this month, Sen. Bernie Sanders (I-Vt.), with strong Democratic support, rolled out a single-payer health care plan similar to one he proposed while running for president that could add trillions more to the debt.
And just before that, President Trump and Democratic leaders openly discussed a deal to eliminate the debt ceiling outright, taking away one of the only backstops to uncontrolled federal borrowing.
With both parties trotting out proposals that could explode the debt and crying foul only when it politically suits their cause, it appears that we are headed on a course that will make this bleak fiscal situation even worse.
The national debt is expected to grow by $11 trillion over the next decade and reach the all-time record as a share of the economy within 20 years. That’s just under current law. If lawmakers add trillions more to the debt with policies that are not paid for, then the unsustainable fiscal trajectory we’re on will only accelerate.
Tax cuts appear to be the most imminent threat to the bottom line at the moment.
The U.S. is long due for fundamental tax reform that enhances growth, fairness, simplicity and global competitiveness. Sensible reforms that do not add to the debt can give a sustained boost to the economy.
However, unpaid-for tax cuts can have the opposite effect, suppressing economic growth, increasing the debt and slowing the growth of wages over the long run.
The nonpartisan Joint Committee on Taxation found that tax reform that raises revenue actually provides the best long-term bang for the buck.
Smart tax cuts do grow the economy, but not by nearly enough to pay for themselves.
The sooner we can put that myth to bed, the faster we can rouse support for a comprehensive solution that doesn’t grow the debt and actually does grow the economy.
There is no free lunch in tax reform, or health care for that matter.
Sanders recently updated his “Medicare for all” legislation to move the country to a single-payer health system. We estimated last year that a similar proposal he put out during his presidential campaign would have a net cost of about $14 trillion over 10 years, even after introducing a host of new taxes.
Just like the tax code, health care is ripe for reform, which, done right, can go a long way toward getting our fiscal house in order. Growing health-care costs will be one of the biggest drivers of the long-term debt. A key focus of reform must be to bend the cost growth curve downward.
Emphasizing quality and enhancing the efficiency of how care is delivered can improve outcomes and reduce costs.
With trillion-dollar proposals coming out of each political party, the last backstop for fiscal sanity might just be with the debt ceiling.
To be sure, no one should play politics with the debt ceiling or use the risk of default as a bargaining chip. Defaulting on our debt obligations would lead to economic catastrophe.
However, disposing of the debt ceiling entirely is not the answer either, given that it is the only real check on the rising debt that threatens the stability of the economy if left unaddressed. Under the right circumstances and with the right reforms, the debt ceiling can be a powerful tool for fiscal responsibility.
Many past debt-ceiling increases have been coupled with policies that reduce our long-term deficits, and there are plenty of ways the debt ceiling can be improved so it keeps the debt in check while not threatening economic disaster.
A good start would be to tie the debt limit more directly to tax and spending policies.
Currently, the need to address the debt ceiling comes well after Congress has already spent the money. Instead of racking up expenses on the nation’s credit card and then debating on whether to pay the bill when it comes due, lawmakers should increase the debt limit alongside budget-busting legislation that adds to the debt. Perhaps tying the two acts together will make lawmakers think twice about worsening our fiscal situation.
We should consider waiving the debt ceiling if the debt hits certain targets, like declining as a share of the economy. A “break the glass” escape mechanism could be used by the president to avoid default if Congress can’t agree to lift the debt ceiling.
The debt is already at a post-World War II-era high and rising unsustainably. Getting rid of the last debt control mechanism we have won’t right this course, only political leadership and smart policy choices will.
"My Views" are works published by members or staff of the Committee for a Responsible Federal Budget, but they do not necessarily reflect the views of all members of the Committee.