Tuesday, January 18, 2011

Why Doc Fix (and the rest of the CBO fight) Matters


The fight over the budget effects of ACA (or, hypothetically, ACA repeal) went a bit higher profile yesterday with a fine Paul Krugman column defending the CBO estimates and calling the GOP position a "War on Logic." Conservative push-back from Yuval Levin here; Jonathan Cohn is reprising some of the arguments, and CBPP weighs in on "false claims" from Republicans.

On the merits, as regular readers will know, I find the CBPP arguments far stronger than the conservative case. Levin's piece is about the best I've seen. He doesn't rely on the phony "doc fix" argument or the entirely fictional "10/6" claim. But it's still a weak argument. Levin links to CBO documents, but they don't really support his claims. For example, it's correct, as Levin says, that CBO thinks it's possible that savings will not materialize -- but CBO is careful to say that there is uncertainty in both directions. Moreover, while Levin is right that ACA involves new spending and new taxes, he's wrong to say that there are no savings involved; in fact, the CBO document he cites says that "Under the legislation, CBO expects that Medicare spending would increase significantly more slowly during the next two decades than it has increased during the past two decades." The main reason that might not happen is if Congress changes the law; but surely it's an odd argument to make that we must repeal the law because if we listen to the people who want to leave it intact then it will be costly when it's changed.

What interests me, however, is a different argument from Austin Frakt that his entire dispute about CBO scoring "misses the most important message conveyed by CBO estimates." That is:
Here’s the state of the debate over these CBO health-reform estimates: which is right, the baseline scenario or the alternative fiscal scenario? It’s the wrong question! It doesn’t matter which scenario you think is right. Likely neither is when examined in any detail, and both are horrible in broad sweep. Choose your poison: massive taxation or massive debt.

Actually, though, there’s a third option: recognition of the underlying problem and dealing with it.

The problem is health care costs. They’ll cause budgetary distress with or without health reform. The CBO’s estimates, both of them, show it clearly. Health care costs have been the source of budgetary woes for decades, and there’s no end in sight under any realistic scoring of any serious health reform proposal.

I understand Frakt's point, but I think he's wrong. Yes, it's quite true that reformed health care is still producing enormous projected future budget deficits. Indeed, that's just the most obvious problem; it's an even bigger deal that health care costs threaten to swamp the rest of the economy, which can't possibly be a good thing.

I guess the question to ask is whether the problem with health care and future budgets is a policy question or a political question. If it's a policy question, one in which the real unknown is whether anyone can figure out a way to control costs, then Frakt is correct. If, however, it's a political question, one in which the real unknown is whether the political system can develop and implement the rational solutions that are available, then the CBO fight matters. 

That's because it's impossible to have a sensible debate about these issues if one side is going to play with its own set of numbers, instead of accepting neutral accounting. It's because reaching sensible compromises -- and remember, policy is not (necessarily) a zero-sum game -- is impossible if one side has convinced itself that, as Krugman says, the laws of logic do not hold.

What strikes me is that while CBPP calls Republican CBO-bashing "unprecedented," I don't think that's correct at all. It reminds me more than anything of the Bush-era tax cuts, accompanied by GOP dogma about how those cuts wouldn't actually cause budget problems because the experts were all wrong about the effects of those cuts. Of course, the consequence was large deficits for the last decade.

What's more, I'm sure that rank-and-file Republican activists believe what their leaders in Washington are saying, and I think there's every possibility that GOP Members of Congress believe it themselves. That's the danger of a closed information loop, and it makes compromise impossible even if the interests represented by both sides would benefit from cutting a deal. If Republicans really believe that cutting taxes will reduce the deficit, then there's no way they're going to reach a budget deal with Democrats that involves spending cuts and tax increases. If they really believe that climate change is a plot by a few crazed, self-interested climate scientists that's been discredited by leaked memos and a few snowstorms, then there's no way they're going to cut a deal on climate/energy. And if they really believe that CBO's numbers on ACA are somehow "cooked" and phony, it makes it a whole lot harder to reach a deal on health care, and therefore on the long-term budget. That's what's at stake in the CBO fight, and at least in my view that makes it somewhat important.

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