Friday, April 15, 2011

Deficit attention disorder

Over on AlterNet, Joshua Holland calls out President Obama for giving a deficit speech that was long on "flowery talk" and short on substance:
The reality is that while our private profit-driven health-care system is unsustainably expensive, the U.S. spends less on the public sector than almost every other developed country. We're running large deficits because we're maintaining costly military operations in several countries and the federal government collected less tax revenue in 2010 than in any year since 1961.

Progressives will no doubt celebrate Obama's deft dissection of the GOP's budget gimmicks and his full-throated defense of the welfare state. But it was ultimately some thin political gruel with unemployment remaining at 9 percent and the foreclosure crisis continuing unabated. When Obama's on, as he was today, it's easy to forget that our biggest national debate is little more than a distraction from the real issues plaguing our economy.
The big question on my mind is, how much, in the end, will Obama going to cave in to the extreme budget agenda of House Budget Committee Chair Paul Ryan. Dean Baker explains exactly how bad Ryan's budget proposal is. It will "leave the vast majority of future retirees without decent health care by ending Medicare as we know it. According to the Congressional Budget Office (CBO) analysis, most middle-income retirees would have to pay almost half of their income to purchase a Medicare equivalent insurance package by 2030." Baker also notes that:
he ostensible rationale for this attack is the country's huge budget deficit. This is garbage. As all the pundits know, the country has a huge deficit today because the Wall Street boys drove the economy off a cliff. If the government deficit were not propping up the economy, we would be looking at 11 or 12 percent unemployment, rather than 8.9 percent. Spending creates jobs, and at this point, it is not coming from the private sector, so the government must fill the hole.

Over the longer term, the projections of huge deficits are driven by the projected explosion in health care costs. President Obama's health care reform took steps toward constraining these costs, although probably not enough. Remarkably, Ryan's plan abandons these cost control measures, virtually guaranteeing that quality health care becomes unaffordable for all but a small elite.
Finally, former Labor Secretary Robert Reich points out how expanding Medicare could actually lower both health care costs and the federal deficit:
For starters, allow anyone at any age to join Medicare. Medicare’s administrative costs are in the range of 3 percent. That’s well below the 5 to 10 percent costs borne by large companies that self-insure. It’s even further below the administrative costs of companies in the small-group market (amounting to 25 to 27 percent of premiums). And it’s way, way lower than the administrative costs of individual insurance (40 percent). It’s even far below the 11 percent costs of private plans under Medicare Advantage, the current private-insurance option under Medicare.

In addition, allow Medicare – and its poor cousin Medicaid – to use their huge bargaining leverage to negotiate lower rates with hospitals, doctors, and pharmaceutical companies. This would help move health care from a fee-for-the-most-costly-service system into one designed to get the highest-quality outcomes most cheaply.

Estimates of how much would be saved by extending Medicare to cover the entire population range from $58 billion to $400 billion a year. More Americans would get quality health care, and the long-term budget crisis would be sharply reduced.

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