Ocasio-Cortez Wants Congress to Stop Pretending to Pay for Its Spending

Get used to reading more storylines like this over the next two years: The left hand doesn’t know what the far-left hand is doing.

On Wednesday, incoming House Speaker Nancy Pelosi (D-CA) faced a potential revolt from within her own party. Rep.-elect Alexandria Ocasio-Cortez (D-NY) and several progressive allies threatened to vote against the rules package governing congressional procedures on the first day of the new Congress Thursday, because of proposed changes they believe would threaten their ability to pass single-payer health care.

What’s Going On?

Ocasio-Cortez and her allies object to Pelosi’s attempt to reinstate Pay-as-You-Go (PAYGO) rules for the new 116th Congress. Put simply, those rules would require that any legislation the House considers not increase the deficit over five- and ten-year periods. In short, this policy would mean that any bill proposing new mandatory spending or revenue reductions must pay for those changes via offsetting tax increases and/or spending cuts—hence the name.

Under Republican control, the House had a policy requiring spending increases—but not tax cuts—to be paid for. Pelosi would overturn that policy and apply PAYGO to both the spending and the revenue side of the ledger.

Progressives object to Pelosi’s attempt to constrain government spending, whether in the form of additional fiscal “stimulus” or a single-payer health system.

However, Pelosi’s spokesman countered with a statement indicating that the progressives’ move “is a vote to let Mick Mulvaney make across-the-board cuts.” Mulvaney heads the Office of Management and Budget, which would implement any sequester under statutory PAYGO.

Regardless of what the new House decides regarding its own procedures for considering bills, Pay-as-You-Go remains on the federal statute books. Democrats re-enacted it in 2010, just prior to Obamacare’s passage. If legislation Congress passed  violates those statutory PAYGO requirements (as opposed to any internal House rules), it will trigger mandatory spending reductions via the sequester—the “across-the-board cuts” to which Pelosi’s spokesman referred.

To Pay for Spending—Or Not?

Progressives think reinstituting PAYGO would impose fiscal constraints hindering their ability to pass massive new spending legislation. However, the reality does not match the rhetoric from Ocasio-Cortez and others. Consider, for instance, just some of the ways a Democratic Congress “paid for” the more than $1.8 trillion in new spending on Obamacare:

  • A CLASS Act that even some Democrats called “a Ponzi scheme of the first order, the kind of thing Bernie Madoff would have been proud of,” and which never went into effect because the Obama administration could not implement it in a fiscally sustainable manner;
  • Double counting the Medicare savings in the legislation as “both” improving the solvency of Medicare and paying for the new spending in Obamacare;
  • Payment reductions that the non-partisan Medicare actuary considers extremely unlikely to be sustainable, and which could cause more than half of hospitals and nursing homes to become unprofitable within a generation;
  • Tax increases that Congress has repeatedly delayed, and which could end up never going into effect.

A Bipartisan Spending Addiction

An external observer weighing the Part D and Obamacare examples would find it difficult to determine the less dishonest approach to fiscal policy. It reinforces that America’s representatives have a bipartisan addiction to more government spending, and a virtually complete unwillingness to make tough choices now, instead bequeathing massive (and growing) amounts of debt to the next generation.

In that sense, Ocasio-Cortez and her fellow progressives should feel right at home in the new Congress. Republicans may criticize her for proposing new spending, but the difference between her and most GOP members represents one of degree rather than of kind. Therein lies the problem: In continuing to spend with reckless abandon, Congress is merely debating how quickly to sink our country’s fiscal ship.

This post was originally published at The Federalist.

Mitch McConnell’s Amendment Dilemma

Mitch McConnell has a problem entirely of his own making. The Senate majority leader promised a vote on Obamacare “stability” legislation to Sen. Susan Collins (R-ME). Collins wants a vote on the package as a Senate floor amendment to the omnibus appropriations legislation (that is, if and when congressional leaders emerge from their smoke-filled rooms and actually release an omnibus package for Congress to vote on).

Except that not six weeks ago, McConnell literally let the federal government shut down rather than grant his fellow Kentuckian Sen. Rand Paul a floor vote on his amendment to appropriations legislation.

It’s a fun choice McConnell gets to make—and he’s running out of time to do it.

Shutdown Showdown

Lest anyone forget what transpired a few short weeks ago, Paul asked for a clean vote on his amendment to budget and spending legislation, to preserve strict spending caps enacted as part of the Budget Control Act. (When it passed in 2011, McConnell said the Budget Control Act spending caps would slow down the “big government freight train”—a freight train that he now apparently wants to put into hyperdrive.)

McConnell and the Senate leadership refused to give Paul an up-or-down vote on his amendment. As Senate Republican Whip John Cornyn (R-TX) put it, “Why reward bad behavior?” Because under Senate rules Paul could speak for an extended period of time, and because Senate leadership did not allow enough time for a full floor debate on the legislation—apparently thinking it appropriate for the Senate to consider and pass in mere hours a 652-page bill allocating trillions of dollars—the federal government briefly shut down.

Susan Collins’ Precious Bailout

Enter Collins, who along with Sen. Lamar Alexander (R-TN) has been pushing for a bailout of Obamacare insurers for months now. Collins claims she has a commitment from McConnell to support an insurer “stability” package. Alexander said he would demand a vote, asking for senators “to be accountable” for their positions on the issue, because he thinks bailing out Obamacare will lower premiums for 2019 (it won’t).

However, as I noted just last week, Collins has moved the goalposts on the bailout package significantly. Whereas she initially requested “only” $5 billion in reinsurance funds, according to her December colloquy with McConnell, the new bill she and Alexander introduced this week contains more than $30 billion in spending on reinsurance—a sixfold increase. Because Collins has demonstrably walked away from her side of whatever bargain McConnell made with her, Senate leadership should have no qualms about doing the same.

Different Treatment?

However, the McConnell office appears inclined to give Collins her way, with multiple reports saying that McConnell was “open” to such an amendment vote to the appropriations bill. Compare that to the reactions Paul received from his colleagues last month, when he wanted an amendment vote to an appropriations bill. Congressmen called it an “utterly pointless” “stunt” that “doesn’t make any d-mn sense.” One unnamed Senate Republican aide called it “the stupidest thing to happen to Congress in three weeks….This is even stupider than the kid who didn’t recognize Justin Timberlake at the Super Bowl.”

Conservatives should watch with intense interest how the Senate floor debate plays out. If McConnell moves heaven and earth to get Collins a vote on her precious bailout, after moving heaven and earth to deny Paul a vote on retaining spending caps that McConnell himself used to support, they should neither quickly forgive, nor easily forget, the double standards created by Senate leadership.

This post was originally published at The Federalist.

The White House’s Plan to Bail Out Obamacare AND Fund Abortion Coverage

The White House released its budget proposal this morning. Apart from the fact that the budget abandons any attempt to get to balance within ten years (or ever), a footnote buried deep in the document hides key proposals: Bailing out Obamacare health insurers to the tune of tens of billions of dollars, and taxpayer funding of abortion coverage.

On page 141, footnote 6 of Table S-6, showing the president’s policy proposals, includes the following admission: “The Budget requests mandatory appropriations for the risk corridors program and for cost-sharing reduction payments.”

There you have it: At least $11.5 billion in corporate welfare payments to insurers for risk corridors, and more for cost-sharing reductions.

About Risk Corridors

While risk corridors have faded in the public debate over the past two years, they remain a potent issue for health insurers. See a full explanation of the issue, but here’s a summary.

To prevent the Obama administration from using funds from elsewhere to subsidize corporate welfare to insurers, Congress enacted restrictions prohibiting the use of taxpayer funds to bail out risk corridors. Under these restrictions, insurers with losses could only receive as much money from the risk corridor program as insurers with gains paid into the program.

In Obamacare’s first few years, most insurers suffered massive losses, so the money coming in to the risk corridor program by no means equaled the requests for funds from the program. As a result, several insurers sued in the Court of Federal Claims, requesting payment from the Judgment Fund of the Treasury for their unpaid risk corridor obligations. Many of those cases remain on appeal.

While both the White House and HHS budgets include few details about this proposal, it appears that they would pre-emptively surrender the pending legal cases by paying insurers more than $11.5 billion in risk corridor obligations that insurers claim they are owed. The budget further proposes making these payments exempt from the budget sequester.

About Cost-Sharing Reductions

The White House’s proposal on CSRs looks downright conservative, however, compared to the budget gimmick being contemplated by Speaker of the House Paul Ryan (R-WI). The White House budget indicates that spending on CSRs would have no deficit effect, because the Gramm-Rudman-Hollings statute requires budgetary agencies to assume full funding of entitlements (including CSR payments) when developing their fiscal baselines.

Ryan, however, finds this legal requirement an inconvenient truth. He wants to direct the budget agencies to raise the spending baseline artificially, so Congress can then “lower” the spending baseline right back to where it is now—and spend the phony “savings” from this gimmick on more corporate welfare to insurers.

Forcing Taxpayers to Fund Abortion Coverage

Another point of note: Passing either one of these proposals would by definition result in taxpayer funding of plans that cover abortion. The administration did not include any language prohibiting the use of CSR or risk corridor funds for plans that cover abortion. Therefore the White House presumably endorses federal taxpayer funding of abortion coverage.

The budget proposal means Trump administration is now actively working to codify not one but two Obamacare bailouts that a Republican Congress denied to the Obama administration—doing liberals’ bidding for them. Moreover, the failure to include any pro-life protections on these bailouts represents at best a massive managerial oversight, and at worst an insult to the pro-life community. For those who thought that last week’s budget deal represented the nadir for conservative principles among this administration, think again.

This post was originally published at The Federalist.

Lowlights of Senate “Budget” Deal

In the budget agreement announced Wednesday between Republican Sen. Mitch McConnell and Democrat Chuck Schumer, McConnell’s negotiating position can be summed up thusly: “Give us the money we want for defense spending, and you can run the rest of the country.”

The result was a spending bonanza, with giveaways to just about every conceivable lobbying group, trade association, and special interest possible. The unseemly spectacle resembles “Oprah’s Favorite Things:” “You get a car! You get a car! You get a car! EVERYONE GETS A CAR!!!”

Even reporters expressed frank astonishment at the bipartisan profligacy. Axios admitted that “there’s a ton of health care money in the Senate budget deal,” while Kaiser Health News noted that the agreement “appear[s] to include just about every other health priority Democrats have been pushing the past several months.”

Of course, McConnell and Schumer want to ram it through Congress and into law by Thursday evening—because we have to pass the bill to find out what’s in it.

Lowlights of the Health Legislation

Repeal of Medicare Spending Restraints: The bill would repeal Obamacare’s Independent Payment Advisory Board (IPAB), a board of unelected bureaucrats empowered to make rulings on Medicare spending. I noted last year that conservatives could support repealing the power given to unelected bureaucrats while keeping the restraints on Medicare spending—restraints which, once repealed, will be difficult to reinstitute.

Congressional leaders did nothing of the sort. Instead the “deal” would repeal the IPAB without a replacement, raising the deficit by $17.5 billion. Moreover, because seniors pay for a portion of Medicare physician payment spending through their Part B premium, repealing this provision without an offset would raise seniors’ out-of-pocket costs. While a Congressional Budget Office (CBO) score of the bill as a whole was not available as of press time Wednesday evening, this provision, on its own, would raise Medicare premiums by billions of dollars.

Big Pharma Giveaway: In a further giveaway to the pharmaceutical industry, the bill would close the Medicare Part D prescription drug “donut hole” a year earlier—that is, beginning in 2019 rather than 2020. Having failed to repeal Obamacare, Republicans apparently want to expand this portion of the law, in the hopes of attracting seniors’ votes in November’s mid-term elections.

Extension of an Unreformed SCHIP Program: The bill would extend for another four years the State Children’s Health Insurance Program—a mandatory spending program that Republicans extended for six years just last month. I previously explained in detail that last month’s reauthorization failed to include at least ten different conservative reforms that Republicans previously supported. By extending the program for another four years, the “deal” would prevent conservatives from enacting any reforms for a decade.

Back in 2015, Republican aides pledged that “Republicans would like to reform and improve this program, and the next opportunity will be in two years when we have a new President.” Not only have Republicans done nothing of the sort, the additional extension will prevent this president—and potentially the next one as well—from reforming the program.

Mandatory Funding for Community Health Centers: The bill provides for $7.8 billion in mandatory spending for community health centers over the next two years, once again extending a mandatory program created by Obamacare.

While many conservatives may support funding for community health centers, they may also support funding them through the discretionary appropriations process, rather than by replenishing a pot of mandatory spending created by Obamacare to subvert the normal spending cycle. The normal appropriations process consists of setting priorities among various programs; this special carve-out for community health centers subverts that process.

Mandatory Opioid Funding: The bill also provides $6 billion in mandatory spending over the next two years to address the opioid crisis. As with the community health center funding, some conservatives may support increasing grants related to the opioid crisis—through the normal spending process.

The Schumer-McConnell “deal” would bust through the Budget Control Act spending caps, increasing the amount of funds available for the normal appropriations bills. (Most of this spending increase would not be paid for.) Additional mandatory health care spending on top of the increase in discretionary funding represents a spendthrift Congress attempting to have its cake and eat it too, while sticking future generations with the bill in the form of more debt and deficits.

But Wait—There’s More!

Surprisingly, the bill does not include an Obamacare “stabilization” (i.e., bailout) package. But other reports on Wednesday suggest that will arrive in short order too. One report noted that Democrats want to increase Obamacare premium subsidies. They not only want to restore unconstitutional payments that President Trump cancelled last fall, “but to expand it—and to bolster the separate subsidy that helps people pay their premiums.”

Republican leaders want to pass a massive Obamacare bailout in the next appropriations measure, an omnibus spending bill likely to come to the House and Senate floors before the Easter break. In a sign of Republicans’ desperation to pass a bailout, Wednesday’s report quoted a Democratic aide as saying that corporate welfare to insurers in the form of a reinsurance package “has become so popular among Republicans that Democrats don’t feel like they have to push very hard.”

There are two ways to solve the problem of rising premiums in Obamacare. One way would fix the underlying problems, by repealing regulations that have led to skyrocketing premiums. The other would merely throw money at the problem by giving more corporate welfare to insurers, providing a short-term “fix” at taxpayers’ ultimate cost. Naturally, most Republicans wish to choose the latter course.

Moreover, in bailing out Obamacare, Republicans will be forced to provide additional taxpayer funding of abortion coverage. There is no way—zero—that Democrats will provide any votes for a bill that provides meaningful pro-life protections for the Obamacare exchanges. Republicans’ desperation to bail out Obamacare will compel them to abandon any pretense of pro-life funding as well.

Most Expensive Parade Ever?

Press reports this week highlighted Pentagon plans to, at President Trump’s request, put on a military spectacle in the form of a massive parade. Trump tweeted his support for the Schumer-McConnell deal on Wednesday, calling it “so important for our great Military.”

It’s an ironic statement, on several levels. First, the hundreds of billions in new deficit spending coming from the military buildup included in the agreement would make the parade the most expensive ever, by far. Second, Michael Mullen, the former chairman of the Joint Chiefs of Staff, called our rising debt levels our biggest national security threat, because it makes us dependent on other countries to buy our bonds. Given that statement, one can credibly argue that this deficit-driven spending binge will harm our national security much more than the defense funds will help it.

Time will tell whether or not the legislation passes. But if it does, at some point future generations will look back and wonder why the self-proclaimed “king of debt” imposed a financial burden on them that they will not be able to bear easily—if at all.

This post was originally published at The Federalist.

Congress Needs to Eat Its Spinach

The tax bill’s effective repeal of Obamacare’s individual mandate briefly reprised the “broccoli mandate”—whether, as Justice Antonin Scalia asked during Supreme Court oral arguments on Obamacare in March 2012, the federal government could compel individuals to purchase certain foods.

But instead of broccoli, spinach might serve as a more apt analogy, for the way the tax bill came to repeal the mandate demonstrates the ways Congress refuses to eat its policy spinach, following the path of least resistance in making easy choices rather than tough ones.

Avoiding Tough Choices on Taxes

Cotton said the “looks of hesitance and outright terror on the faces of my colleagues” convinced him that Republicans had to repeal the mandate as part of the tax package. Translation: Republicans thought it easier to obtain revenue from repealing the mandate than to weed out the tax code of popular tax breaks—the point of tax reform, which Republicans initially sold as a way to simplify the Internal Revenue Code.

Remember how Speaker of the House Paul Ryan (R-WI) sold tax reform as a way to allow Americans to complete their taxes on a postcard? That type of reform didn’t happen, because enacting that reform would have involved eliminating many more popular deductions than the final tax bill ended.

Revenue Neutrality and Spending

Another key point in the tax debate surrounded the issue of revenue neutrality. The “Better Way” platform released by House Republicans last year not only “envision[ed] tax reform that is revenue neutral,” it included a very clear standard for that metric: “House Republicans measure revenue neutrality by reference to a ‘current policy baseline’—i.e., achieving a level of federal revenues that is approximately $400 billion less over the ten-year [budgetary] window than the current law baseline.”

Congress may have valid justifications for reducing revenues, such as to increase economic growth, or to shrink the size of government. But the fact remains that, when faced with enacting a supposed “parade of horribles” to achieve a revenue-neutral tax bill, Congress chose to change the nature of the bill rather than to make the tough choices needed to achieve its original benchmark.

Likewise on spending reductions arising from the tax bill. Because the tax measure increased the federal deficit, the Statutory Pay-as-You-Go (PAYGO) act would normally require commensurate spending cuts offsetting the revenue loss. However, rather than allow these reductions to go into effect—or replacing the proverbial hatchet of automatic cuts with more targeted spending reductions—both Republicans and Democrats voted to exempt the tax bill from the PAYGO law, ducking another difficult choice.

Repeal Only Unpopular Parts of Obamacare

Repealing only Obamacare’s individual mandate—one of the most loathed parts of the 2010 health care law—echoes a problem Republicans faced during the “repeal-and-replace” debate last year: Many want to retain popular elements of the law, while repealing its unpopular features. Witness Republicans’ statements of support for keeping the status quo on pre-existing condition exclusions.

By repealing the unpopular parts of Obamacare but retaining the popular parts, Congress may have created an incoherent, and potentially unstable, policy that results in premium increases, infusions of taxpayer cash to “stabilize” markets, or both. Senate Republican leaders have already proposed the latter, precisely because they fear the political effects if the former occur.

Therein lies the problem with the congressional strategy: Avoiding tough choices generally only postpones them for a time—not forever. If insurers decide to leave markets after the mandate’s repeal takes effect in 2019, Congress will have to fix a problem it helped create. Likewise attempts by today’s Congress to reduce taxes, and not reduce spending, in shifting the blame to future generations.

At some point those bills will come due, so Congress might want to consider actually making some tough choices now, rather than creating even tougher choices in years to come.

This post was originally published at The Federalist.

What’s Wrong with Republicans on Medicare

To demonstrate that most Republicans have no desire to reduce federal spending, one need look no further than a Politico story last Thursday. The article recounted how the pending tax bill could trigger automatic reductions in mandatory spending, including to Medicare, under the pay-as-you-go law. When presented with that scenario, Rep. Phil Roe (R-TN) responded thusly:

Medicare is underfunded as it is. If we have to change the PAYGO [pay-as-you-go] rules [that trigger the spending reductions], we’ll just change ‘em. At the end of the day, we—Republicans and Democrats—have to go home and face our constituents. I wouldn’t want to go home and face my constituents if I’d cut Medicare.

Over and above the obvious fact that Roe expressed less-than-zero interest in actually reducing federal spending, he also showed some tortured and erroneous logic in arriving at his position.

To put Medicare’s spending in another context: According to International Monetary Fund statistics, in 2016, the program spent more than the total economic output of all but 20 nations. That same list demonstrates that Medicare spent more than the entire economic output of New Zealand, Greece, and Portugal combined. Yet Roe considers the program “under-funded.”

But Medicare Is Going Insolvent, and Fast

As I noted last year, the Medicare trustees report issued in 2009, the year before Obamacare’s enactment, predicted the program’s Part A (Hospital Insurance) Trust Fund would become insolvent in 2017—this year. The following year, after Obamacare became law, the trustees postponed the insolvency date from this year to 2029.

But, as the Congressional Budget Office noted, Obamacare did not “enhance the ability of the government to pay for future Medicare benefits.” Put simply, because Obamacare’s re-directed Medicare savings to pay for new entitlements, the provisions improved Medicare’s solvency only on paper. Then-Health and Human Services secretary Kathleen Sebelius admitted as much when, asked in congressional testimony whether the Medicare provisions were being used “to save Medicare or…to fund [Obamacare],” she answered, “Both.”

Substantively, Obamacare’s fiscal schemes did not help Medicare’s solvency one whit. The program was scheduled to become functionally insolvent this year, and because Congress has enacted few meaningful reforms to the program in the time since, can be considered as such. However, because they improved the program’s solvency on paper, Obamacare’s budgetary gimmicks have allowed people like Roe to deny the problem exists, which will only worsen the scale of fiscal adjustment needed when Medicare finally faces its fiscal reckoning.

Reducing Spending Increases Is Not a ‘Cut’

As the New York Times has noted, Republicans argued vociferously—and correctly—earlier this year that slowing the growth of Medicaid spending in their “repeal-and-replace” bills did not represent a “cut” in that program. Yet Roe quickly resurrected the familiar (and incorrect) talking point about budget “cuts” when discussing Medicare.

Over the years, Republicans have spent far too much time demagoguing Obamacare for “cutting” Medicare. (As noted above, the problem with the law wasn’t that it reduced Medicare spending, it’s that it spent those Medicare savings to fund Obamacare, rather than shore up Medicare’s finances.) They now face many of the same opportunistic attacks from the Left regarding the entitlement reform proposals included in the “repeal-and-replace” bills. So why is Roe retreating into that same mindset that a decrease in a spending increase represents a “cut?”

Roe may not want to go back home and explain to his constituents why he reduced Medicare spending. But sooner or later, he and his fellow members of Congress will have to do just that. And the more he and his colleagues continue their pattern of obfuscation and denial through these kinds of ill-informed comments, the worse those spending reductions will end up being.

This post was originally published at The Federalist.

Memo to Congress: It’s the Spending, Stupid!

As Republicans in Congress continue work on tax legislation, reconciling differences between the House and Senate bills, debate continues over the legislation’s fiscal impact. Will an enacted bill end up increasing the deficit—and if so, by how much?

Most experts agree that providing tax relief will increase economic growth, and that growth will deliver additional revenue to the U.S. Treasury. But whether that revenue fully offsets the approximately $1.5 trillion cost of the legislation should miss the point—if Republicans had any sense of fiscal discipline about them.

Unfortunately, at present our country lacks a party that actually wants to reduce government spending. One party wants to spend more, and the other party wants to tax less. Neither party wants to reduce spending—a bad sign for future generations, who will pay the price for current leaders’ profligate ways.

Spending Promises, Then and Now

Back in 2010, upon the expiration of the Bush tax relief, Republican leaders repeated the same mantra: “We don’t have a revenue problem. We have a spending problem,” claimed Sen. Mitch McConnell (R-KY), current House Speaker Paul Ryan (R-WI), and others.

Fast-forward seven years, when Republicans control the elected branches of government, and how are they working to solve that spending problem? Ryan and McConnell issued a joint statement Friday claiming that automatic spending reductions triggered by the tax law “will not happen,” and that “we will work to ensure these spending reductions are prevented.”

So much for Washington “having a spending problem.” Their comments attempted to assuage Republicans like Maine Sen. Susan Collins, who said publicly she “would not even be considering voting for this [tax] bill” if she knew it would result in spending reductions.

To be sure, the spending reductions in question—an automatic fiscal sequester imposed by the statutory pay-as-you-go law—are blunt and arbitrary. Congress would have good reason to replace a meat-cleaver version of these spending reductions with a more surgical approach. But that’s not Republicans’ plan: “Within the GOP, leaders are confident that once the tax bill is passed, they can strike a quick deal to waive the federally mandated cuts.”

Holiday Spending Binge Ahead

But Republicans don’t just want to back off on imposing spending cuts—they affirmatively want to increase spending. On Saturday, Republican leaders released a two-week continuing resolution that would fund the government through December 22—just long enough for them to strike a budget-busting deal to increase spending caps.

Rightly fearing the government giveaways that always happen in a mad rush before Christmas, fiscal conservatives want to extend the continuing resolution into the New Year, preventing a rushed end-of-year process that would increase the urge for a spending binge. But Republican leaders have rejected that approach: They want to increase spending NOW—just in time to give the next generation more debt as a Christmas “present.”

The president’s budget this year notes that, prior to the effects of any policy proposals in that budget, the federal government is on track to spend approximately $53.4 trillion over the coming decade. Reducing spending by $1.5 trillion over a decade (the cost of the tax bill before taking into account economic growth) would therefore require reducing federal spending by approximately 2.81 percent—a level of discipline apparently beyond the comprehension of most congressional Republicans.

If Washington had a spending problem in fall 2010—when McConnell, Ryan, et al. made their comments, and the federal debt was “only” $13.7 trillion—it sure has a spending problem now, with the debt up to $20.6 trillion, up more than 50 percent from when the Republican leaders first spoke. Perhaps Republicans could start acting like it, and stop trying to find ways to circumvent budget caps. When you’re in a hole, stop digging.

Better yet, Republicans could actually embrace a fiscally conservative approach and take affirmative steps to solve the “spending problem” they complained about in 2010, rather than using Republican control of Congress to exacerbate it.

This post was originally published at The Federalist.

Are Cost-Sharing Reductions Subject to the Sequester?

Sen. Susan Collins (R-ME) thinks she has a deal with Senate Majority Leader Mitch McConnell (R-KY) to attach two provisions to a short-term spending bill later this month: The Alexander-Murray legislation to appropriate funds for cost-sharing reduction (CSR) payments to insurers, and a separate bill she and Sen. Bill Nelson (D-FL) have developed regarding reinsurance proposals.

Collins also thinks these two provisions will have a “net downward effect on premiums,” even after repealing Obamacare’s individual mandate as part of the tax bill the Senate is currently considering. However, it appears that Alexander-Murray and Collins-Nelson’s net effect on premiums could end up being a nice round number: Zero.

Cost-Sharing Reductions and the Sequester

The statute that created the budget sequester applies a list of programs and accounts not subject to sequestration spending reductions. For instance, the law exempts refundable tax credits, like those provided to low-income individuals who buy coverage on Obamacare’s exchanges, from sequestration reductions.

However, neither cost-sharing reduction payments nor reinsurance would qualify as refundable tax credits. They are paid directly to insurers, not individuals, and are not part of the Internal Revenue Code. Also, neither cost-sharing reductions nor reinsurance are on a list of other accounts and programs exempted from the sequester.

The Obama administration previously admitted that cost-sharing reduction payments were subject to the sequester, in a sequestration report to Congress in April 2013, and in testimony before the House Energy and Commerce Committee in August of that year. In a separate 2014 report, the Obama administration also admitted that Obamacare’s transitional reinsurance program (which expired in 2016, and which senators Collins and Nelson effectively want to re-create) was subject to the sequester.

However, last year Judge Rosemary Collyer ruled these actions unconstitutional, because the treasury lacks a valid appropriation to pay out CSR funds. The Trump administration last month stopped the CSR payments to insurers, citing the lack of an appropriation. While the Alexander-Murray bill would appropriate funds for the CSR payments, it would do so through the Centers for Medicare and Medicaid Services, not the treasury—meaning that the sequester would apply.

Statutory PAYGO and the Sequester

Earlier this month, the Congressional Budget Office (CBO) released a letter to Rep. Steny Hoyer (D-MD) indicating that legislation increasing the budget deficit (on a static basis, i.e., not accounting for economic growth) by $1.5 trillion would result in a sequester order of approximately $136 billion for 2018. The existing statutory formula would deliver a 4 percent, or approximately $25 billion, reduction in Medicare spending, followed by about $111 billion in reductions elsewhere.

However, because the sequestration statute exempts many major spending programs like Social Security and Medicaid, CBO believes that only about $85-90 billion in existing federal resources would be subject to the sequester. This means an additional $20-25 billion in mandatory spending, if appropriated, would immediately get sequestered to make up the difference.

On the one hand, conservatives who oppose paying CSRs to insurers may support an outcome where insurers do not actually receive these payments. On the other hand, however, some may view this outcome as the worst of all possible worlds: Having surrendered the principle that the federal government must prop up insurers—and Obamacare—without receiving any actual premium reductions, because the payments to insurers never get made.

This scenario, when coupled with repeal of the individual mandate, could result in a legislative outcome that raises premiums next year—a contradiction of the promises Republicans made to voters.

This post was originally published at The Federalist.

A Conservative’s (Sort of) Defense of IPAB

The House of Representatives will vote Thursday on whether to eliminate Obamacare’s Independent Payment Advisory Board (IPAB). I come not to praise IPAB, but not to bury it, either—at least, not yet.

Yes, Obamacare empowers this federal board to make binding recommendations to Congress about enforcing per capita spending caps within Medicare. Yes, that board undermines congressional sovereignty by empowering unelected bureaucrats, in what its own advocates transparently described as an attempt to minimize democracy. And yes, federal bureaucrats have no business interfering still further with physicians’ practice of medicine. But for multiple reasons, Congress should not repeal IPAB without first enacting a suitable replacement.

We Can’t Afford Medicare As It Is

The Medicare Trust Fund suffered $132.2 billion in deficits during the Great Recession, and faces insolvency in just more than a decade. Medicare needs fundamental reform now, but repealing IPAB without simultaneously enacting other reforms will only encourage partisan attacks when Congress finally must act. Witness the liberal ads throwing granny over a cliff in response to congressional Medicare reform proposals that would save both seniors and taxpayers billions of dollars annually.

Second, repealing IPAB would also undermine the case for reforming Medicaid. Liberals’ hue-and-cry over proposals to reform Medicaid earlier this year demonstrated an opportunistic hypocrisy, as the same groups that attacked Republican efforts to impose per capita caps on Medicaid supported per capita spending caps on Medicare when created by a Democratic president. Conservative support for IPAB repeal would reinforce this ideological incoherence, demonstrating Republicans as favoring per capita caps in Medicaid, but not Medicare, and weakening the case for reforms to either entitlement.

Third, opportunities to control spending do not come often, or easily, which should make conservatives inherently reluctant to repeal any of them. In 1985, Congress enacted the Gramm-Rudman-Hollings Deficit Reduction Act, designed to force lawmakers to live within statutory spending targets. But Congress weakened Gramm-Rudman’s statutory fiscal discipline within five years, and abandoned it altogether by 2002. It took the debt limit fight of 2011 to restore fiscal discipline through the Budget Control Act’s sequestration caps—conservatives’ major policy victory of the Obama era, and one that congressional spendthrifts have consistently worked to undermine since.

It’s Clumsy, But Better than Nothing

As someone who has criticized Obamacare’s overly regulatory structure since its enactment seven years ago, I recognize—and entirely agree with—objections to the way IPAB undermines congressional authority, and intrudes still further into the practice of medicine. But conservatives would do well to avoid conflating IPAB’s highly flawed means with its entirely proper ends.

The board imposes real caps on Medicare spending, however clumsy, and like the budget sequester mechanism represents a genuine, albeit flawed, attempt to reduce federal spending. That’s why the Congressional Budget Office estimates the board’s repeal would increase Medicare spending, and thus the budget deficit, by $17.5 billion over the coming decade and more after that.

Most health-care interest groups want an outright IPAB repeal immediately, which is one major reason the House will vote on its repeal this week. But conservatives should not take that bait, and should instead work to replace IPAB with constructive reforms that modernize Medicare and make the program more fiscally sustainable for future generations.

As the old saying goes, “Be careful what you wish for—you just might get it.” Conservatives may not wish to see spending rise on an already unsustainable entitlement. But if they follow the efforts of K Street lobbyists and repeal IPAB without an effective substitute, that’s exactly what they would end up getting.

This post was originally published at The Federalist.

Another Spending Standoff Between the White House and Congress?

As spring turns to summer, the House and Senate will work on the 12 annual appropriations bills that fund the federal government. The backdrop to this work? The president who signed the Budget Control Act into law four years ago wants to exceed the spending levels the legislation prescribed.

In a recent blog post, Office of Management and Budget Director Shaun Donovan made clear that the administration opposes the spending levels. Mr. Donovan wrote that “sequestration was never intended to take effect: rather, it was supposed to threaten such drastic cuts to both defense and non-defense funding that policymakers would be motivated to come to the table and reduce the deficit through smart, balanced reforms.” However, because the congressional “supercommittee” formed in 2011 did not reach agreement on entitlement and/or tax changes to reduce the deficit, automatic reductions were triggered on discretionary spending, with separate caps on defense and non-defense appropriations.

But in separate letters regarding the House’s first two spending bills, Mr. Donovan wrote that “the President has been clear that he is not willing to lock in sequestration going forward, nor will he accept fixes to defense without also fixing non-defense.” Largely because of these broad disagreements over spending levels, the administration issued veto threats on the first two appropriations measures.

Ironically, President Barack Obama now opposes a policy outcome—the “sequester” spending levels—that he introduced: Multiple fact checkers have confirmed that it was administration officials who proposed the sequester mechanism during debt-ceiling negotiations in the summer of 2011. These histories directly contradict the president’s statement in an October 2012 debate with Mitt Romney that “the sequester is not something that I’ve proposed. It is something that Congress has proposed.”

The administration can say that it did not propose the sequester mechanism. It can also say—with more accuracy—that sequestration was an action-forcing mechanism that was never intended to take effect. But neither argument changes the fact that the Budget Control Act remains the law of the land. The specter of Mr. Obama vetoing spending bills—potentially setting up another government shutdown this fall—because they fail to nullify an act that he signed into law could present an optics problem for his administration.

This post was originally published at the Wall Street Journal Think Tank blog.