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The National Deficit and the Debt? Why is Social Security Part of the Debate?

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CBO Outlines Health Benefit Cuts Worth Hundreds of Billions - The Hill's Healthwatch

By Julian Pecquet

The nonpartisan Congressional Budget Office released a list of deficit-cutting options Thursday that includes hundreds of billions in cuts to Medicare and Medicaid.

The two programs account for 38 percent of mandatory spending — more than Social Security — and face a visit to the chopping block as Americans across the political spectrum clamor for the government to keep its spending under control.

In its report, CBO says giving states a block grant (indexed to annual increases in the employment cost index) to cover long-term care services in Medicaid — something conservative state leaders have been clamoring for — would shave $287.4 billion off the deficit over 10 years. The next biggest saver, increasing the basic Medicare premium for doctor's visits to 35 percent, would save $241.2 billion.

Other options include: More

Press Releases | News from EPI: CBO Budget Report Shows Little Change to Social Security Outlook

By EPI economist Monique Morrissey

Yesterday’s Congressional Budget Office budget report showed that the weak economy continues to be a drag on Social Security’s short-term finances as payroll tax receipts lag pre-recession projections. Outlays are also higher than anticipated before the downturn, as Social Security has helped cushion the blow for older workers who have lost their jobs. This will have little impact on Social Security’s long-term finances, however, in part because workers who take early retirement receive reduced benefits.

Social Security is still projected to run an $868 billion surplus over the next decade, building up a trust fund sufficient to last through the peak baby boomer retirement years.

Nevertheless, gloomy news reports—in particular an Associated Press story by Stephen Ohlemacher—show that when it comes to Social Security, no news is bad news. The AP story claims that “Social Security will run at a deficit this year and keep on running in the red until its trust funds are drained by about 2037.” The story misrepresents the trust fund’s solvency by excluding interest earnings, a major source of revenue for Social Security. The article also fails to mention that even if nothing is done to shore up the system’s finances, current tax receipts will be sufficient to cover most benefits in 2037, which will still be higher in inflation-adjusted terms than benefits are today. Social Security is not in crisis.

A paper released yesterday by EPI looks at Social Security’s long-term finances, concluding that the biggest cause of Social Security’s projected long-term shortfall is not rising life expectancy or the baby boomer retirement, but rather stagnant wages and growing inequality.

TIME GOES BY | The State of the Union, Jobs and Social Security

by Ronni Bennett

President Barack Obama covered a lot of territory in his State of the Union address to Congress on Tuesday (transcript here). What was conspicuously missing, however, is the number one concern of the majority of Americans – jobs. The only reference he made - that the government would continue to fund infrastructure repair projects - contained no specifics.

Robert Reich, the former secretary of labor under President Clinton, had the most cogent response I read to this gaping hole in the speech:

”[T]he President’s failure to address the decoupling of American corporate profits from American jobs, and explain specifically what he’ll do to get jobs back...risks making his grand plans for reviving the nation’s 'competitiveness' seem somewhat beside the point...

“What the President should have done is talk frankly about the central structural flaw in the U.S. economy – the dwindling share of its gains going to the vast middle class, and the almost unprecedented concentration of income and wealth at top – in sharp contrast to the Eisenhower and Kennedy years.

“Importantly, it would give him a convincing counter-narrative to the Republican anti-government one. Government exists to protect and advance the interests of average working families. Without it, Americans have to rely mainly on big and increasingly global corporations, whose only interest is making money wherever it can be made.”

A large part of that "making money wherever" is making money from money instead of goods and services - Wall Street stock and bond fees, dividends, interest, etc. Taxes are much lower on those transactions than on income and there is no FICA tax on corporate revenue. Which brings me to this:

On the morning after the speech, the non-partisan Congressional Budget Office announced that without legislative changes, Social Security will post a $45 billion shortfall for fiscal year 2011, meaning it will pay out that much more than it takes in. Shortfalls, said the CBO, are expected to continue until 2021.

Oh, my. Would that two percent payroll tax holiday enacted by Congress with the extension of the Bush tax cuts for the wealthy have anything to do with this shortfall? After all, it does amount to 15 percent of Social Security revenue - money that is lost forever.

And it's going to be a pitched battle with the Republicans later this year not to extend the payroll holiday when it expires because it is the first successful inroad made against the program since it was created in 1935.

I think we can take a bit of credit, along with many progressives throughout the land, thanks to our letters to the White House and petitions, that the president did not continue the attack on Social Security Tuesday by endorsing deeper cuts suggested by the cat food commission and other Republicans.

Here is what he did say, buried in a section about the deficit:

“To put us on solid ground, we should also find a bipartisan solution to strengthen Social Security for future generations. We must do it without putting at risk current retirees, the most vulnerable, or people with disabilities; without slashing benefits for future generations; and without subjecting Americans’ guaranteed retirement income to the whims of the stock market.

“And if we truly care about our deficit, we simply can’t afford a permanent extension of the tax cuts for the wealthiest two percent of Americans. Before we take money away from our schools or scholarships away from our students, we should ask millionaires to give up their tax break. It’s not a matter of punishing their success. It’s about promoting America’s success.”

Notably missing is a reference to not raising the age at which people are eligible for full Social Security benefits. I'm a little concerned, too, with that adjective, “slashing,” in the first paragraph which could imply cutting at a rate that is not viewed as extreme.

And, there was no mention of the cost-of-living (COLA) formula which some Republicans want to change that would result in smaller increases for current and future Social Security beneficiaries.

It is probably a poor idea to parse as minutely as this what the president said about Social Security (or anything else). Life moves on, politicians renege on promises every day and most people are already forgetting the SOTU now, three days later.

What is so disappointing about the president ignoring the subject of jobs on Tuesday is that full employment increases all taxes reducing or eliminating the need to cut funding for schools, fire, police and other public services, and keeping Social Security strong.

The two biggest moves that will revive the middle class and get our nation back on a sound economic footing are jobs and a tax structure in which the wealthy pay as big a share of their income as everyone else. For Social Security, removing the salary cap is a start.

Our fight to preserve and strengthen Social Security is not done just because the president sounded support in one speech. He already signed legislation that cut Social Security revenue by 15 percent.

TIME GOES BY | The State of the Union, Jobs and Social Security

CBO: GOP Repeal of Health Reform Will Add $230 Billion to Deficit, Eliminate Coverage for 32 Million, and Americans Will Pay More for Less | The Gavel

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by Karina

The nonpartisan Congressional Budget Office (CBO) just released an estimate of the Republican bill to repeal the Affordable Care Act and finds the GOP plan explodes the deficit and will have a devastating impact on the health of millions of Americans.

According to CBO, here’s what the GOP repeal bill means for Americans:

Adds $230 billion to the deficit over the first ten years and more than $1.2 trillion in the second decade (around one-half percent of GDP)

32 million Americans will lose health coverage

Americans will get fewer health benefits for their money

Americans purchasing health insurance on their own will see their costs rise

Health care premiums for Americans getting coverage through large employers will go up

CBO: GOP Repeal of Health Reform Will Add $230 Billion to Deficit, Eliminate Coverage for 32 Million, and Americans Will Pay More for Less | The Gavel

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• Repealing health-care reform would cost hundreds of billions of dollars -- and Eric Cantor knows it (voices.washingtonpost.com)
• Republicans Ignore That Health Care Repeal Would Cost $143 Billion Over Ten Years (alan.com)
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With Multi-Billion "CutGo" Loophole, House GOP Admits Its Health Reform Repeal Explodes Deficit | OurFuture.org

By Bill Scher

Instead of the House Republicans breaking their own proposed "CutGo" rule to offset the cost of all spending increases, they have chosen to carve a multi-billion dollar loophole, specifically exempting the $143 billion 10-year cost of repealing health care reform.

By brazenly doing so, House Republican leaders are tacitly admitting that 1) health care reform is deficit reduction, and 2) their claims of fiscal responsibility are completely empty.

Not only is health care reform the equivalent of deficit reduction, health care reform is the only serious path to deficit reduction. The CBO estimates the savings of the Affordable Care Act to be $1 trillion over the next two decades, and many health care experts believe that's a conservative estimate because the cost-control provisions are inherently experimental.

To exempt heath care reform from a deficit reduction rule is to not have a deficit reduction rule.
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Ezra Klein - 30 options for reforming Social Security -- and how much they'll save

Image via Wikipediaby Ezra Klein in the Washington Post

As I've said, my preference is to make Social Security more, rather than less, generous. There are a lot of areas in which the federal government should be spending a lot less -- but I don't think Social Security is one of them. Still, Social Security reform is likely to be a big issue in the fall, and so it's worth getting a sense of the wide range of potential changes available. This chart comes from the Congressional Budget Office's report on 'Policy Options in Social Security,' and it shows both what people think they are, and how much they'll save
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No Bailout Needed for Social Security

from Off the Charts Blog - Center on Budget and Policy Priorities

To correct some recent stories suggesting that Social Security faces deep and immediate financial problems, a new report from our colleague Kathy Ruffing outlines the program’s outlook over the short and long term. Here’s the summary:

In recent months, a few commentators have sounded an alarm about the recession’s impact on Social Security’s near-term prospects, which may lead some people to think that the program faces financial problems in the next several years. Fortunately, that is not the case. Social Security continues to run annual surpluses and remains capable of paying scheduled benefits in full for nearly three decades.

The deep recession has indisputably affected the Social Security system’s finances, as is visible in the latest projections by the Social Security trustees and by the independent Congressional Budget Office. But both organizations estimate that, under current trends, the program can continue to pay full benefits from the trust funds until 2037. Thus, Social Security faces no immediate threat.

Nevertheless, Congress and the Administration should act sooner rather than later to restore Social Security’s long-run solvency. Prompt action would allow changes to be phased in gradually and afford people ample time to adjust their financial plans.

Report Shows Health Reform Will Reduce Health Care Spending by Nearly $600 Billion While Improving Access to Care for 32 Million Uninsured

The Center for American Progress and The Commonwealth Fund released a report that details the effects of the health reform law passed in March.

The report, "The Impact of Health Reform on Health System Spending," concludes that the Patient Protection and Affordable Care Act of 2010's significant payment and system reform provisions will begin to realign health care system incentives and reduce cost growth far in excess of that predicted by the Congressional Budget Office and the Office of the Actuary within the Centers for Medicare and Medicaid Services.

The report projects the new law's effects on total national health expenditures and the insurance premiums families are likely to pay. Most assessments of the law have focused only on how it will affect the federal budget. The new report by CAP Senior Fellow and Harvard economist David Cutler, Commonwealth Fund President Karen Davis, and Senior Research Associate Kristof Stremikis takes into account implications of important research not reflected in previous analyses and estimates that the health reform law will result in:

• Total reductions in health care spending of $590 billion from 2010 to 2019

• Reduction in the annual growth rate in national health expenditures from 6.3 percent to 5.7 percent from 2010 to 2019

• Savings of nearly $2,000 on annual health care premiums for the typical family by 2019

• Deficit reduction of up to $400 billion over 10 years

• Medicare savings of $524 billion

The authors find that establishing new insurance market rules, health insurance exchanges, and innovative provider payment and delivery system reforms will result in substantial health system modernization and improved access to care for millions of previously uninsured and underinsured Americans.

"The Patient Protection and Affordable Care Act is the most significant piece of health care cost-reducing legislation ever passed in the United States," said David Cutler, CAP Senior Fellow and Harvard economist. "It gives us the tools to improve the quality and lower the cost of medical care. Now we need to use those tools to make reform work."

"With passage of the Affordable Care Act we have entered a new era in American health care—one in which all Americans will be able to get the care they need, and in which families will be protected from high health carecosts," said Commonwealth Fund President Karen Davis. "By changing the way we pay for and deliver care to reward high performance, we will begin to bend the health care cost curve, and all Americans will see real economic benefits."

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Off the Charts Blog | Q & A with Paul Van de Water on How the Health Reform Law Reduces the Deficit

Paul, the Congressional Budget Office says that health reform will reduce the deficit by $143 billion dollars over the next ten years. That’s a lot of money. What are some ways that the federal government will save money?

There are four major sources of savings. First, reducing overpayments to Medicare Advantage plans. Second, lowering some Medicare payment rates. Third, cutting Medicaid prescription drug costs, and, fourth, reducing payments to hospitals for treating uninsured patients.

Let’s start with Medicare Advantage.

Sure. One quarter of Medicare beneficiaries get their health coverage through private insurance companies in a program called Medicare Advantage. Medicare pays those private insurance companies about 13 percent more per beneficiary than it would spend on the same beneficiary in traditional Medicare. The health reform law scales back these overpayments.

You mentioned reducing some Medicare payment rates in your second point. Which rates would be cut and why?

Each year, Medicare increases the amount that it pays hospitals, nursing facilities, and other providers to account for inflation and other factors that increase the cost of providing care. But, Medicare doesn’t consistently factor in productivity improvements that actually reduce providers’ costs. The health reform law scales back annual payment increases to account for increased productivity.

Your third point was Medicaid prescription drug costs. How does the health reform law reduce them?

To participate in Medicaid, drug companies must pay rebates to the federal and state governments for drugs that are prescribed to beneficiaries. The health reform law will increase these rebates. This will save money by ensuring that Medicaid programs don’t pay more than private purchasers for the same drugs.

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CBO Gives Democrats Good News On Health Reform – Health Affairs Blog

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by Chris Fleming

Breaking news this morning provides some cheer for Democrats on health reform. The Congressional Budget Office reportedly will release this afternoon a preliminary analysis of the Senate-passed health reform bill as modified by a separate “reconciliation” measure, and the numbers look favorable for Democrats.

According to reports, CBO estimates that the combined package will cost $940 billion over the first 10 years and reduce the deficit by $130 billion during that period. In the second 10 years, 2020 to 2029, it will reduce the deficit by $1.2 trillion. The legislation will cover 32 million Americans, or 95 percent of the legal population.

“To put this in context, that’s more deficit reduction than either the House or Senate bill, and more coverage than the Senate bill,” Ezra Klein writes over at the Washington Post. The CBO has determined that the bill would reduce the annual growth in Medicare spending by 1.4 percent annually, and extend Medicare’s solvency by at least nine years, Politico reports, citing House Democratic aides.
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The Ryan Budget's Radical Priorities — Center on Budget and Policy Priorities

By Paul N. Van de Water

The Roadmap for America’s Future, which Rep. Paul Ryan (R-WI) — the ranking Republican on the House Budget Committee — released in late January, calls for radical policy changes that would result in a massive transfer of resources from the broad majority of Americans to the nation’s wealthiest individuals.

The Roadmap would give the most affluent households a new round of very large, costly tax cuts by reducing income tax rates on high-income households; eliminating income taxes on capital gains, dividends, and interest; and abolishing the corporate income tax, the estate tax, and the alternative minimum tax. At the same time, the Ryan plan would raise taxes for most middle-income families, privatize a substantial portion of Social Security, eliminate the tax exclusion for employer-sponsored health insurance, end traditional Medicare and most of Medicaid, and terminate the Children’s Health Insurance Program. The plan would replace these health programs with a system of vouchers whose value would erode over time and thus would purchase health insurance that would cover fewer health care services as the years went by.

The tax cuts for those at the very top would be of historic proportions. A new analysis by the Urban Institute-Brookings Institution Tax Policy Center (TPC) finds:
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Media Briefing: The Ryan Budget’s Radical Priorities — Center on Budget and Policy Priorities

Robert Greenstein:

Good afternoon everyone. In late January, Congressman Paul Ryan, the ranking Republican on the House Budget Committee, issued a sweeping proposal known as the “Roadmap For America’s Future” that would overhaul both the tax code and the nation’s biggest social programs. And it has been touted as one that restores fiscal responsibility. Today we’re releasing a major analysis of The Roadmap. This analysis is based on work by the Congressional Budget Office, an extensive new analysis of the Ryan plan’s tax provisions by the Urban Institute Brookings Tax Policy Center, and analyses of the social security provisions of an earlier version of the plan, by the Social Security Actuary. The Center’s team that conducted the analysis was led by Paul Van de Water and Jim Horney, both former Senior CBO officials who are now here at the Center on Budget and are among the city’s leading policy experts.


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Reform Would Increase Healthcare Spending, But Millions More Would Have Insurance, Says RAND

by Janice Simmons, for HealthLeaders Media

In just over a week, congressional leaders will meet on Feb. 25 with President Obama in a televised healthcare reform summit

As a way of anticipating questions about the two reform bills passed last year by the House and the Senate, RAND researchers have been examining the impact of the bills, with a focus on access, quality, and cost.

Their analysis was done using "micro simulation" methods, which provide a "way of quantifying how well a policy option will achieve its goal," said Elizabeth McGlynn, associate director of RAND Health and co-leader of the RAND Compare initiative. These methods are similar to the methods "used by the Congressional Budget Office to provide Congress with estimates of the effects of proposed legislation on federal spending."
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How Much Will Medicare Spending Rise in the Coming Decade? - Health Blog - WSJ

By James A. White

The CBO budget report released today says the growth in Medicare and Medicaid spending during the next decade “will be somewhat slower than the average rate seen over the past 10 years.”

Sounds too good to be true — and it almost certainly is. As is standard operating procedure for the CBO, its cost estimates build in savings that are planned under current law. In the case of Medicare, CBO’s calculation of a slowdown in Medicare growth includes a substantial 21% cut in payments to doctors now slated to go into effect in March.

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Does the Congressional Budget Office Underestimate Savings from Reform? A Review of the Historical Record - The Commonwealth Fund

When the Congressional Budget Office (CBO) "scores" legislation, or assesses the likely cost impact, it requires substantial evidence that a cost-saving initiative has historically achieved savings. The agency has difficulty addressing the impact of multiple changes made simultaneously without historical precedent where there is an interaction effect among proposed changes. This study examines CBO scoring of major reform legislation enacted during each of the past three decades, including the prospective payment system for hospitals in the 1980s, the Balanced Budget Act of the 1990s, and the Medicare Modernization Act of 2003. In contrasting actual spending with predicted spending, CBO, in all three cases, substantially underestimated savings from these reform measures.

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CBO issues correction: Health bill nixes deficit less than thought - The Hill's Blog Briefing Room

The Congressional Budget Office (CBO) corrected its estimate of the Senate health bill's costs on Sunday, saying it would reduce deficits slightly less than they'd predicted.

In a letter to Senate Majority Leader Harry Reid (D-Nev.), CBO Director Douglas Elmendorf said that the nonpartisan budget office had overestimated the extent to which the legislation's new Independent Payment Advisory Board would bring down the deficit.

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Reid can’t afford any defections on health - TheHill.com

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By Jeffrey Young

A number of centrist Democrats in the Senate are turning what normally is a simple procedural vote into a cliffhanger.

Majority Leader Harry Reid (D-Nev.) wants the healthcare debate to formally begin this week, before the chamber recesses for the Thanksgiving break. But the absence of both a final bill and a cost estimate from the Congressional Budget Office (CBO) has made some centrists anxious about offering their support for an otherwise routine test vote that typically unites a majority party.
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Medical Malpractice Liability Cost - Health Blog - WSJ

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By Jacob Goldstein

As we’ve noted before, it’s tough to know just how much medical malpractice contributes to health-care spending. Not only do you have direct costs like malpractice premiums, you also have the harder-to-quantify indirect costs of defensive medicine, like extra tests doctors order out of fear of lawsuits.

But its the job of the number crunchers at CBO to put a number on that sort of thing, and they’ve just come out with their latest figures on the subject. Specifically, they estimated what would happen if there were a national cap on punitive and noneconomic damages as well as other new rules that could limit doctors’ liability exposure.

They found that such changes would lower the nation’s total health bill by about 0.5%, or $11 billion a year at current spending levels. That includes 0.2% in savings from lower direct spending on malpractice, and 0.3% in savings from “slightly less utilization” of health care as a result of less defensive medicine.
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Washington Update: Pelosi, Labor and the Public Option - Health Blog - WSJ

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By Jacob Goldstein

Now that you’ve had a chance to read every page of yesterday’s CBO estimates of the Senate Finance bill, here’s a roundup of what’s happening in the Washington health-care debate. Today’s familiar theme: The public option.
. . . .
Meanwhile, back in the House, Speaker Nancy Pelosi says she’ll send three versions of a health-care bill to the CBO for analysis. One, supported by many liberal Dems, will have a public option with payment rates set 5% higher than Medicare, the Washington Post says. The two others, supported by some moderate Dems who say Medicare plus 5% isn’t enough, would have the new-government backed plan negotiate rates with providers.
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