Senate Democrats’ Plans and Entitlement Reforms

Ahead of this afternoon’s series of budget votes, it’s worth examining the plans Senate Democrats have put forward to reform America’s unsustainable entitlements.  Recall that Medicare ran a larger deficit than Greece last year, that Medicare is scheduled to run deficits FOREVER, and that the President’s then-Chief of Staff, Bill Daley, said last July that Medicare “will run out of money in five years if we don’t do something.”

Given all that, we’ve prepared the following detailed summary of Democrats’ entitlement and budget reform plans.  You can find them below.

Democrats’ Entitlement Reform Plans

THIS SPACE INTENTIONALLY LEFT BLANK.

 

Comparing Deficits: Medicare and Greece

In case you haven’t been watching the stock ticker closely today, most broader market indicators are down significantly, due once again to events in Europe.  Among these were today’s release of updated economic and fiscal data for members of the European Union released by Eurostat, the EU’s statistics agency.  The new data found that last year, Greece ran a fiscal deficit of €19.6 billion, or about $25.7 billion at current exchange rates.  Compare that to Medicare, which according to the trustees report ran an even greater deficit ($27.7 billion) in 2011.  In 2010, Medicare also incurred a larger fiscal deficit than the Greek government – Greece ran a budget deficit of €23.5 billion ($30.8 billion), whereas Medicare’s deficit was a whopping $32.3 billion.

As the chart below shows, the Medicare Hospital Insurance Trust Fund is scheduled to run deficits throughout the upcoming 10-year period – and every year thereafter.  And under the high-cost scenario (the pink bars in the graph), the Medicare trust fund would run out of cash in 2017, just five short years from now.

Given all this, it’s again worth asking: Where is the Democrat plan to stop all this fiscal bleeding?  Some liberals argue that America is not like Europe, and does not face an impending fiscal calamity.  But if Medicare is running larger deficits than the Greek government, and Senate Democrats refuse even to vote on a fiscal blueprint in the form of a budget, how will America NOT end up like the Greeks – facing an economic collapse brought on by unsustainable burdens of debt?

Jon Stewart Talks about Obamacare’s “Big Dump”

Appearing on The Daily Show last night, Secretary Sebelius answered a series of questions from host Jon Stewart about employers dropping coverage that can best be described as awkward.  In the extended interview posted online, Stewart asked whether or not there would be a “big dump” of employees into Exchanges under the law.  The full exchange occurs beginning at around 3:15 of the second segment; here are the highlights:

STEWART:  “Can they [i.e., employers] dump you into the exchange?”

SEBELIUS:  “Well, at the end of the day, there is no mandate now.  In 2014, if employers don’t cover health insurance, they will pay a penalty, and they’ll pay for every employee who goes into the Exchange.”

STEWART:  “Is the penalty more than the [cost of] insurance?”

SEBELIUS:  [Long pause] “The penalty will help pay for the tax credit that the employee will get in the insurance [sic]….”

STEWART:  “Is there a consequence other than a fine or shame – cause I know the shame thing’s not gonna work.  [Laughter.]”

STEWART:  “Let’s say I’m paying, for a family plan, $1200 a month.  And my employer says, oh, we’ve got these exchanges now, I’m going to dump you into that.  And you’re going to get a tax credit.  Will my tax credit be the equivalent of the money that the employer was paying, or is that now going to come out of [unintelligible]”

SEBELIUS:  “It’s really…it’s hard to tell because employers are all over the board….”

STEWART:  “Do you think ultimately this is, a bunch of people dump to the Exchange, and it becomes sort of, a back door, of government, not a takeover necessarily, but of a government responsibility for the health care, employees, and it decouples it – I’m not saying that’s a bad thing – but decouples it from employment, and people will get it through the government – through tax credits, rather than through their employers – and then suddenly, obviously then, we’re Sweden.  Do you think that’s the case?”

Sebelius claimed that the law is “filling in the gaps in the private market.”  But the reality, as Stewart laid out and other studies have confirmed, is that it’s much cheaper for employers to drop their workers’ health plans and dump them into the Exchanges – costing the federal government trillions of dollars and turning us into Sweden (or Greece).  It also raises an obvious question:  If even liberals like Jon Stewart believe the health law will cause Americans to lose their health plans, who actually believes they will be able to keep their current coverage under Obamacare?

Senate Democrats Defend Benefits for Billionaires

Amidst the ongoing discussion about the need to reform entitlements, this morning’s New York Times article on the payroll tax conference included these two interesting paragraphs:

The largest sticking point may be Medicare.  The House-passed yearlong extension would increase premiums for high-income beneficiaries and increase the number of people who would have to pay extra.  About 5 percent of beneficiaries now pay higher premiums based on income.  The proportion would eventually rise to 25 percent under the House bill and under a separate deficit-reduction plan proposed in September by Mr. Obama.

Senate Democrats want no part of that.  They say the White House proposal came as part of a broad deficit-reduction plan that included tax increases on the wealthy.  If Republicans will not make concessions on revenues, the Democrats are not going to give Republican Congressional leaders what they want most: a concession on entitlements to defang Democratic charges in the coming campaign that the Republican Party plans to dismantle the health care program for the elderly.

In other words:

  1. Senate Democrats will NOT reduce subsidized health benefits for billionaires like Warren Buffett and Bill Gates unless Republicans agree to a massive tax increase – at a time when long-term unemployment remains at record highs.
  2. Democrats do not want to deviate from prime electoral strategy – a “Mediscare” campaign designed to distract from the fact that their policies have failed to create the jobs that were promisedeven when it comes to reducing entitlement payments to billionaires.

Medicare faces a significant – and imminent – financial crisis.  The program is now running bigger deficits than Greece, and the President’s own Chief of Staff admitted that the program “will run out of money in five years if we don’t do something.”   This morning’s New York Times article only re-emphasizes a key difference between the parties: Democrats itching for a massive tax increase are unwilling to raise Medicare premiums on millionaires and billionaires to help improve Medicare’s solvency – because they would rather gain politically than fix the problem.

Medicare’s Fiscal Hole STILL Larger than Greek Deficit

The Wall Street Journal reported this morning on the status of Greek debt restructuring, which was complicated by yesterday’s announcement that the Greek government ran a budget deficit of € 21.6 billion, or about $27.4 billion at current exchange rates.

However, these Greek budget deficits – which have created a fiscal crisis in Europe, and the threat of financial contagion spreading to the American banking system – are dwarfed by the ongoing deficits facing the Medicare program.  The Congressional Budget Office projected that Medicare Part A spent nearly $40 billion more than it takes last year, and run a further deficit of nearly $30 billion this year.  The only thing keeping the Medicare program afloat currently are the paper IOUs in the Medicare trust fund, and the Congressional Budget Office projects that even those will be exhausted within the decade.

The fiscal turmoil in Greece and throughout Europe provides the prime example of why our entitlements like Medicare should be fixed NOW; after all, the President’s own chief of staff admitted that the program “will run out of money in five years if we don’t do something.”  But what has the President proposed to solve these looming problems?  A deficit plan that would actually INCREASE Medicare spending, unless the President finds another $300 billion to pay for a long-term physician payment “doc fix” that the White House magically assumes would be offset.

The fact that Medicare’s fiscal shortfalls exceed that of the troubled Greek economy and government provide further indication why “We Can’t Wait” until after the President’s re-election campaign to reform our unsustainable entitlements.

House Democrats’ Absurd Double Standards on Benefits for Billionaires

On Friday evening, Democrats on the House Energy and Commerce Committee sent out an analysis of the health provisions of the House Republican payroll tax proposal.  Of particular note is the following sentence: “Increases and other changes made to the premium structure of Medicare raise fundamental and difficult issues for the program and certainly should never be considered in the context of addressing short term issues.”  This sentence obliquely refers to the proposals for additional means-testing included in the House Republican payroll tax bill – which come directly from the deficit reduction proposal the President submitted to the Joint Committee earlier this fall.
There’s a good reason why House Democrats might want to be circumspect about criticizing the means-testing proposal – because their position results in what can most charitably be described as feats of tautological jujitsu:
  • Congress SHOULD raise taxes on “the rich” to pay for a short-term payroll tax extension – but SHOULD NOT take away taxpayer subsidies for wealthy Medicare beneficiaries to pay for a short-term “doc fix” extension;
  • Congress SHOULD pass the tax increases the President proposed in his September submission to the Joint Committee right away – but SHOULD “CERTAINLY” NOT pass proposals to reduce wealthy beneficiaries’ Medicare subsidies included by the President in the same September proposal without months or years more study;
  • Choosing not to subsidize the health benefits of billionaires like George Soros is a “difficult” decision, but raising taxes by trillions of dollars is easy; and
  • Taking away wealthy Medicare beneficiaries’ subsidies “raise[s] fundamental…issues for the program,” but raising taxes on job creators in the middle of a sluggish economy raises no concerns, fundamental or otherwise, about the impact on stubbornly high unemployment.
It’s clear that Medicare is in the midst of a fiscal crisis – the program is projected to suffer a record deficit of nearly $40 billion this fiscal year, a greater deficit than that faced by Greece.  Even President Obama has admitted that “if you look at the numbers, then Medicare in particular will run out of money and we will not be able to sustain that program no matter how much taxes go up. I mean, it’s not an option for us to just sit by and do nothing.”  Yet House Democrats have articulated a philosophical position on which they are apparently willing to fight:  The holy right of people like Warren Buffett and Bill Gates to have their health benefits subsidized by federal taxpayers. 
So much for fighting for the middle class…

Democrats Defend (Medicare) Benefits for Billionaires

The latest version of Democrats’ payroll tax proposal includes two provisions designed to reduce federal welfare subsidies paid to millionaires and billionaires from the unemployment insurance and food stamp programs.  But it’s worth emphasizing that the new bill does NOT impose additional means-testing on Medicare (or Social Security, for that matter).

If ever there was a program in desperate need of reform NOW, it’s Medicare:

  • The Congressional Budget Office projects that Medicare Part A will spend nearly $40 billion more than it takes in this fiscal year, and run a further deficit of nearly $30 billion next year.
  • At a time when Europe faces major sovereign debt woes, Medicare is now running a bigger fiscal deficit than Greece.
  • The President’s Chief of Staff, Bill Daley, said in July that the program “will run out of money in five years if we don’t do something.”
  • And the President himself acknowledged that “if you look at the numbers, then Medicare in particular will run out of money and we will not be able to sustain that program no matter how much taxes go up.  I mean, it’s not an option for us to just sit by and do nothing.”

The President’s most recent deficit submission proposed additional means-testing for wealthy beneficiaries.  One would think that a party breathlessly waiting to raise taxes on “the 1%” would be chomping at the bit to take Medicare subsidies away from people like Bill Gates and Warren Buffett.  Yet what have Democrats done on this Medicare reform?  Nothing.  And why do they want to do nothing?  In a word, politics:

  • One House Member objected to any agreement between the President and Republicans on fundamental entitlement reform, because reforming entitlements now would “cancel out any bludgeoning that Democrats might give the Republicans over Medicare and Medicaid.”
  • The Washington Post’s liberal Plum Line reported in July that Senate Democrats don’t want to pass Medicare reform because it would be “giving away the biggest [political] advantage” Democrats have had “in some time.”
  • In a story last week, Rep. Steve Israel, Chair of the Democratic Congressional Campaign Committee, “declined to say whether a [deficit] agreement to cut entitlements might have hindered his political strategy.”  In other words, Democrats WANTED the supercommittee to fail – so that they could resume their “Mediscare” political attack ads against Republicans.

The latest payroll tax proposal only re-emphasizes one key difference between the parties: Democrats itching for a massive tax increase are unwilling to raise Medicare premiums on millionaires and billionaires to help improve Medicare’s solvency – because they would rather gain politically than fix the problem.

Democrats’ Hypocrisy on Cutting Medicare Benefits

The Hill reports this afternoon that several dozen Democrats sent a letter asking the supercommittee “to allow Medicare to negotiate prices for prescription drugs.”  The article goes on to cite a report from House Democrats claiming that “price negotiations could save the government $156 billion over 10 years.”  However, the Congressional Budget Office has previously – and repeatedly – indicated that the only way to achieve savings through drug “negotiation” is by restricting access to therapies for seniors.

For instance, in January 2007 CBO said that “without the authority to establish a formulary, we believe that the Secretary would…lack the leverage to obtain significant discounts in [her] negotiations with drug manufacturers.”  And in April 2007 CBO similarly concluded that drug “negotiation is likely to be effective only if it is accompanied by some source of pressure on drug manufacturers to secure price concessions.  The authority to establish a formulary, set prices administratively, or take other regulatory actions against firms failing to offer price reductions could give the Secretary the ability to obtain significant discounts in negotiations with drug manufacturers.”  In other words, the only way to achieve the $156 billion in savings Democrats claim would come from “negotiation” would be to impose harsh restrictions on seniors’ ability to access prescription drug therapies.

Given all this, some may find it a bit rich that Democrats are also criticizing those who discuss “cutting Medicare benefits” – because that’s exactly what their proposal for $156 billion in “savings” from drug “negotiation” would do.  As has been previously reported in this space, Medicare faces MAJOR structural problems – its budget deficit is larger than Greece’s, and the President’s own chief of staff admitted that the program “will run out of money in five years if we don’t do something.”  Solving these entitlement problems requires a real commitment to solutions, not the false promise that the program’s problems can be painlessly waved away through political sloganeering.

The Bigger Fiscal Problem: Greece or Medicare?

In case you hadn’t been glued to CNBC today, the stock market took another tumble, with both the Dow Jones Industrial Average and S&P 500 index closing at their lowest levels in more than a year.  One of the reasons for the sell-off came early in the day, when Greece announced it would not meet its deficit targets for the current fiscal year.  Greece is now projected to run a budget deficit of €18.69, or about $25 billion, this year, and a further deficit of €14.65 billion, or just under $20 billion.

Unfortunately, the Greek budget deficits – which have created a fiscal crisis in Europe, and the threat of financial contagion spreading to the American banking system – are dwarfed by the ongoing deficits facing the Medicare program.  The Congressional Budget Office projects that Medicare Part A will spend nearly $40 billion more than it takes in this fiscal year, and run a further deficit of nearly $30 billion next year.  The only thing keeping the Medicare program afloat currently are the paper IOUs in the Medicare trust fund, and the Congressional Budget Office projects that even those will be exhausted within the decade.

The fiscal turmoil in Greece and throughout Europe provides the prime example of why our entitlements like Medicare should be fixed NOW; after all, the President’s own chief of staff admitted that the program “will run out of money in five years if we don’t do something.”  But what has the President proposed to solve these looming problems?  A deficit plan that would actually INCREASE Medicare spending, unless the President finds another $300 billion to pay for a long-term physician payment “doc fix” that the White House magically assumes would be offset.

In other words, if you liked today’s stock market rout, just wait until global financial markets stop focusing on Greek and European debt and start scrutinizing America’s (in)ability to fund its own unsustainable entitlement programs.  Then the consequences of the President’s failure to lead on fiscal policy will come into full view.

Obama Leading from Behind on Entitlement Reform

Both the Wall Street Journal and the Washington Post report this morning that the White House will significantly scale back the entitlement portion of the deficit reduction platform the Administration plans to offer next week – for largely political reasons.  From the Journal article:

President Barack Obama’s new deficit-reduction proposal will leave out changes to Social Security, and may exclude any increase in the Medicare eligibility age, people familiar with the discussions said Wednesday….

Changing the inflation formula so Social Security benefits grow more slowly and raising the Medicare eligibility age were ideas Mr. Obama had been willing to accept this summer….[However,] Democrats, who believe it is strategically unwise to put forward a compromise position at the outset, have urged that Mr. Obama not include them in the new deficit plan he is set to unveil Monday….

The Social Security and Medicare provisions that Mr. Obama was willing to agree to with Mr. Boehner drew criticism from members of Mr. Obama’s own party, who oppose the policies.  White House officials worry that including them in his plan now could overshadow the president’s focus on jobs.  Democrats also fear he will be forced to concede even more in later negotiations.

They argue that by proposing controversial changes to entitlement programs, Mr. Obama could undercut Democratic arguments against the GOP on these points in 2012.

Both the Journal and the Post pieces cite Administration sources as repeating the old saw that Social Security is not running deficits.  However, this claim has already been thoroughly debunked by the non-partisan factcheck.org.  The fact is both Social Security and Medicare are running cash-flow deficits – the only thing allowing full benefits to be paid out are the paper IOUs in the respective government trust funds, and when the government cashes in those IOUs, that adds to the deficitMedicare alone is projected to run a deficit of more than $39 billion this year – and will NEVER achieve balance, running deficits as far as the eye can see.  (By point of comparison, Greece ran a budget deficit of only about $35 billion in its most recent fiscal year.)

President Obama was dragged into a debate on entitlements this spring, after Republicans put forward a comprehensive reform platform.  The Administration’s only “substantive” contribution to that debate thus far has been a press release that was publicly derided by the head of the Congressional Budget Office as not being detailed enough to receive serious consideration.  Now the President is backing off a bold approach to tackling the entitlements driving our debt, because members of his own party are more interested in scoring political points and winning re-election than solving America’s fiscal crisis.

The question now is this:  Why is the President asking for “No games, no politics” on his “jobs bill,” when that’s EXACTLY what he’s doing on entitlement reform?  And do Democrats think America’s fiscal crisis should wait for another 14 months so they can win re-election?