California's fiscal disaster was brought on by the state lawmakers' unwillingness to spend less for fear of denying constituents services, and taxpayer's unwillingness to pay more for fear of paying more. Hassett calls this an impasse (I would call it politics), and in Washington, this kind of thing happens all the time. Ronald Reagan thought that if Americans paid lower taxes, the government would raise more money. George Bush thought Reagan was right, so he lowered taxes even more. And Barack Obama's health care and climate change bills both operate under the principle that we can create savings opportunities in the future if we spend money on new programs today.
But here's Hassett on why this time is different:
If Obama's health-care plan passes, then we may well end up paying for it with federal slips of paper worth less than California's. Obama has bet everything on passing health care this year. The publicity surrounding the California debt fiasco almost assures his resounding defeat.Is that true? Could publicity over California's deficit problem really translate into falling support for health care? The most recent study I could find on this, a Gallup poll from late June, finds that Democrats still value health care reform, even over deficit reduction. It's Republicans who seem to be drawing the line between state government budget problems and an increase in the federal budget deficit.
Ultimately, Hassett falls into the same trap as his Bloomberg buddy Amity Shlaes -- he derides Obama's deficits without providing any sort of alternative to our long-term fiscal crisis. Spending cuts? Nope. A tax increase? Don't make me laugh. Instead, Hassett is hopeful that we'll get "some [health care] bill that has health in the title but costs almost nothing
and does even less." In the short term, that idea will absolutely 100 percent keep deficits lower than Obama's plan. In the long term, however, it does nothing to solve this:
Or this:
Or Obama and Congress could focus on health care reform. Health care reform does not equal health care expansion. You can reform health care by focusing on the Dartmouth study and Atul Gawande's article and figuring out why some areas pay more for health care than others, despite no measurable difference in outcome. I believe this all revolves around the incentives inherent in physician pay per procedure, and think the Mayo clinic et al. model of salaried physicians required to meet in peer councils on patients at least weekly shows the most hope for reform. Also, there is no reason for the continued attachment of health care to employment. This connection at the very least dampens the free market that is supposed to be regulating the industry, because people are not allowed to switch health care, it is already determined by their employer.
Either way, I cannot understand why no one questions the fact that health care reform and expansion are the same thing. If we reform health care, and it becomes more affordable, wouldn't that allow more people to become insured without costing the government anything, as well as reduce Medicaid/care payments? Then, if necessary, we can consider expanding Medicare/aid, or even consider a universal health care plan. But throwing more money and people into an already broken system while vaguely hoping electronic records and preventative medicine will fix the cost issue reeks of a giant ponzi scheme.
Nola Dawg,
I think I agree with you. The concern that a lot of people have -- and I think rightly so -- is that reforming health care, while necessary in the long term, is going to be insanely expensive in the short term. Practically, we can debate that fiscal impact, and whether it will lead to inflation or a real debt crisis, but politically you have to admit that whatever number is on the deficit in 2010 is going to be bandied about in campaigns across the country. The health care reform process does give fiscal hawks a great chance to flex their fiscal hawkishness, but in my mind, it's coming at the expense of any real ideas for fixing our long term budget crisis, which will require raising taxes or instituting serious reforms.
Derek,
I don't know how expensive reforming health care has to be, and that's my point. Loosing analysts and statisticians to study different Medicare/aid expenditures and outcomes in the areas with higher and lower expenses would not be free, obviously, but it wouldn't be all that expensive to study it. Based on the results of these studies and statistics, the government can begin regionally "reforming" how they pay for health care in Medicare/aid. If it works, and for whatever reason private insurers don't follow the model that reduces costs for the government programs (although this is hard for me to believe), then they could consider either legislation to encourage or force the lower paying model or universal health coverage.
This quote from Atul Gawande in an interview he did with Ezra Klein on his Washington Post Blog really drove that point home for me:
"I order more than $50,000 worth of health care in a day. Would a public or private option change that?
People say that the most expensive piece of medical equipment is the doctor's pen. It's not that we make all the money. It's that we order all the money. We're hoping that Medicare versus Aetna will be more effective at making me do my operations differently? I don't get that. Neither one has been very effective thus far."
http://voices.washingtonpost.com/ezra-klein/2009/06/an_interview_with_atul_gawande.html#more
I have no doubt they will pay off the debt with "federal slips of paper worth less than California's." The name of this slip of paper is the US Dollar, freshly printed.