The Politics Don’t Add Up

ogenic posted by Ogenec
(editors note: Coming Soon from 44-D’s Ogenec: “Health Care: A Diatribe in Three Acts– Act TWO”)

Why health care reform will cost more than Congress and Obama say it will.
By John Dickerson–

President Obama has said he will not sign a health care reform bill unless it’s paid for. If it doesn’t lower costs, he will suggest spending cuts to make sure the deficit doesn’t grow. That’s a promise he says he will keep. But what about future presidents and members of Congress?

The question is not exactly a hypothetical: Today’s rush to send money to seniors gives us a pretty good idea of the answer. For the first time since 1975, the Social Security Administration has announced, seniors will not receive an annual cost-of-living adjustment in their Social Security benefits. The move makes good policy sense—the formula used by the SSA shows the cost of living has not increased in the past year. But it’s also politically unpopular. That’s why members of Congress and the president are trying to give seniors more money.

When the Congressional Budget Office determined that the Senate finance committee’s health care legislation would not add to the deficit, reform supporters heralded the news. Further, said the CBO, the bill would meet another important Obama priority: It would start to chip away at long-term health care costs. Budget watchdogs were skeptical, though.

Former CBO director Douglas Holtz-Eakin was even more so. “What they’re saying is: ‘Your fantasies add up. I could say to CBO: ‘Hi, I’d like to make 5 million a year and live in a 125-room mansion. Does it work?’ And CBO says ‘yes,’ but that isn’t going to happen.”

The former policy director for the McCain campaign, now with the Manhattan Institute, wasn’t quibbling with the CBO’s math. He just didn’t think future politicians would keep the promises the bill was holding them to. According to one proposal, for example, if health care savings don’t materialize in the coming years, automatic cuts in health care funding will kick in. Holtz-Eakin, not unreasonably, sees this as unlikely. Budget experts also worry that Congress will not reduce payments to providers as scheduled or follow through with planned Medicare cuts.

Read the full story@:

Former CBO director Douglas Holtz-Eakin appeared today on MSNBC discussing these issues:

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Coming Soon from 44-D’s Ogenec: “Health Care: A Diatribe in Three Acts– Act TWO”
Read Act One Here: Health Care: A Diatribe in Three Acts– Act One

Related Story: Growing Approval Of Health Plan – CBS News Video


Filed under Banking, Capitalism, Democrats, Economics, Economy, Money, Uncategorized

3 responses to “The Politics Don’t Add Up

  1. seems to me you can never take politics completely out of the equation but you also can’t substitute politics for common sense.
    They need to act as if the worst case scenario budget wise is actually the most likely and structure the legislation to account for shortfalls etc.

    • ogenec

      Agreed GeoT. The parallels between this and the COLA adjustment are striking. Once the benefits kick in, it’s a one-way ratchet: upwards. That’s the political reality. Which explains why, in a year of negative price inflation, Obama and Congress are tripping over themselves to add a COLA adjustment.

      Mind you, I’m not saying that’s a bad thing. In these perilous times, it’s only humane to give Social Security recipients the additional $250. The only point is that we should be very wary of projections that assume cuts in benefits if the assumed savings don’t materialize. No politician will make that hard choice if and when push comes to shove.

      More to come. 🙂

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