Health Reform to Slash Deficit By $1.3 Trillion over 20 Years

Ezra Klein has the details:

According to a Democratic source, CBO has finished its work and will release the official preliminary score later today. But here are the basic numbers: The bill will cost $940 billion over the first 10 years and reduce the deficit by $130 billion during that period. In the second 10 years -- so, 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.

It will be worth digging into these numbers once the full CBO score is released to see, for instance, if it is still the case that roughly half of the the 32 million newly insured Americans under this legislation will be receiving coverage through a government program (Medicaid or CHIP), as well as exactly what aspects of the House legislation have been incorporated into the reconciliation package. But if these numbers are borne out, they would certainly seem to keep Congress on track to sending a final bill to the President's desk this weekend.

The Pivot from Stimulus to Deficit Reduction

Another thing that came out of my day trip to Washington for the West Wing progressive roundtable on the economy was a reconciling of the seemingly dissonant message of extolling the virtues of Keynesian stimulus while at the same time advocating for a new commission to address the deficit. How can deficit spending be bad if it's also good? 

The answer actually is not as complicated as one might imagine. In the short term, says the administration, deficits were necessary. The economy was on the brink, shedding jobs at a rate unseen in decades, and something had to be done. Supply-side economics clearly not the answer, a Keynesian stimulus package that included significant deficit spending was required to reboot the economy. 

Yet looking further down the road, to the medium and long terms, deficits can pose problems. It's worth noting here that a major portion of the medium and long term deficits stem not from Obama administration policies but rather result from the eight years George W. Bush was in office -- unfunded legislative enactments (the 2001 and 2003 tax cuts, Medicare Part D, and the wars in Iraq and Afghanistan) and a plunging economy (that brought with it not only plunging tax revenues but also skyrocketing needs for programs such as unemployment insurance, food stamps and COBRA). Regardless, the theory is this: Once the economy is up and moving at brisker pace, any gains made could be wiped out down the road by the negative effects of large deficits. Deficits, while good and necessary for the economy in the short term, can turn deleterious in the long term.

There is a great extent to which the administration is already addressing these deficits. Wrapping up the wars in Iraq and Afghanistan means ending a massive government expenditure that at present is not being accounted for by dedicated revenue. Beyond that, economic growth brings with it increased tax revenue and decreased need for governmental services. These deficit-reducing mechanisms are aspirational, no doubt, but nevertheless do represent a meaningful was to draw down long term debt problems. 

But these measures are not enough. That's where the deficit commission comes in. The commission is tasked with coming up with answers to the medium and long term deficit problems facing the country. Their conclusions will not effect short term spending, which is still needed to turn the economy around. 

My biggest question -- one in which I was not entirely convinced there is a genuine answer -- is if a bipartisan commission can actually work. Others, including The Christian Science Monitor, are asking the same question. Specifically, what's to say that the Republicans will actually go along with this effort. A bipartisan group of even greater stature than the President's deficit commission came together to propose healthcare reform compromise that looked a whole lot like the eventual Senate legislation. Despite the fact that that group included four former Senate Majority Leaders, including one who ran on the GOP's national ticket on two occasions (Bob Dole) and another who later served as Chief of Staff to Ronald Reagan (Howard Baker), the Senate legislation that looked a great deal like this compromised garnered all of zero GOP votes in the chamber. It could be that the President's imprimatur on the panel will help, as would congressional Republicans' ability to appoint commissioners without whose support the body would be unable to report conclusions (though it is yet unclear if the GOP will go ahead and make appointments). That said, I'm still unconvinced that this commission will succeed where other efforts in other areas have not in the past. 

[UPDATE by Jonathan]: For those interested, here is a blog post on the commission from OMB Chair Peter Orszag.

Alan Simpson Revisited

According to The Wall Street Journal, President Obama will tap former Clinton Chief of Staff Erskine Bowles and former Republican Senator Alan Simpson "as co-chairmen of a bipartisan commission to tackle the mounting federal debt."

With Simpson's name in the in the mix, I thought it worth revisiting another interview I did about five years ago -- specifically the portion of my conversation with Simpson relating to his views on tackling long-term deficits:

Jonathan Singer: Looking at Social Security, the problem with Social Security, if you take the President's number the program's trust fund will be bankrupt in 2040 or so, at which point benefits will be cut by about a quarter. Medicare, on the other hand, the trust fund will run out within about the next decade. Is it time to focus on Medicare and Medicaid rather than Social Security?

Alan Simpson: No. That would be a real grave mistake. You'd better cure the lesser one before you go for the cancer. Go for the one that is lesser, because the figures are huge. Guys your age will be eaten alive in regard to money. So if they can't resolve Social Security, then don't even try to help Medicare if you haven't done anything on Social Security.

It's not clear whether Simpson's views today are similar to what they were in 2005 when we spoke -- that is, whether he believes it makes more sense to tackle smaller bore problems before addressing the more difficult issues -- but it might be worth it for the White House press corps to ask the question. Presumably Simpson does still agree with with his earlier sentiments on appointing a Commission to take on challenges Congress has been unable to successfully tackle. Here's Simpson on a Social Security Commission:

Alan Simpson: I said [to the House Financial Services Committee], "gentlemen and ladies, you'll never get that done on this end. You'd better appoint a commission and take the heat off yourselves, because you're never going to make it yourselves."

Again, it's not clear that Simpson believes today exactly what he believed five years ago -- but it's nevertheless interesting to get a sense of the perspective with which he approaches his role as co-chairman of President Obama's deficit commission.

Alan Simpson Revisited

According to The Wall Street Journal, President Obama will tap former Clinton Chief of Staff Erskine Bowles and former Republican Senator Alan Simpson "as co-chairmen of a bipartisan commission to tackle the mounting federal debt."

With Simpson's name in the in the mix, I thought it worth revisiting another interview I did about five years ago -- specifically the portion of my conversation with Simpson relating to his views on tackling long-term deficits:

Jonathan Singer: Looking at Social Security, the problem with Social Security, if you take the President's number the program's trust fund will be bankrupt in 2040 or so, at which point benefits will be cut by about a quarter. Medicare, on the other hand, the trust fund will run out within about the next decade. Is it time to focus on Medicare and Medicaid rather than Social Security?

Alan Simpson: No. That would be a real grave mistake. You'd better cure the lesser one before you go for the cancer. Go for the one that is lesser, because the figures are huge. Guys your age will be eaten alive in regard to money. So if they can't resolve Social Security, then don't even try to help Medicare if you haven't done anything on Social Security.

It's not clear whether Simpson's views today are similar to what they were in 2005 when we spoke -- that is, whether he believes it makes more sense to tackle smaller bore problems before addressing the more difficult issues -- but it might be worth it for the White House press corps to ask the question. Presumably Simpson does still agree with with his earlier sentiments on appointing a Commission to take on challenges Congress has been unable to successfully tackle. Here's Simpson on a Social Security Commission:

Alan Simpson: I said [to the House Financial Services Committee], "gentlemen and ladies, you'll never get that done on this end. You'd better appoint a commission and take the heat off yourselves, because you're never going to make it yourselves."

Again, it's not clear that Simpson believes today exactly what he believed five years ago -- but it's nevertheless interesting to get a sense of the perspective with which he approaches his role as co-chairman of President Obama's deficit commission.

Alan Simpson Revisited

According to The Wall Street Journal, President Obama will tap former Clinton Chief of Staff Erskine Bowles and former Republican Senator Alan Simpson "as co-chairmen of a bipartisan commission to tackle the mounting federal debt."

With Simpson's name in the in the mix, I thought it worth revisiting another interview I did about five years ago -- specifically the portion of my conversation with Simpson relating to his views on tackling long-term deficits:

Jonathan Singer: Looking at Social Security, the problem with Social Security, if you take the President's number the program's trust fund will be bankrupt in 2040 or so, at which point benefits will be cut by about a quarter. Medicare, on the other hand, the trust fund will run out within about the next decade. Is it time to focus on Medicare and Medicaid rather than Social Security?

Alan Simpson: No. That would be a real grave mistake. You'd better cure the lesser one before you go for the cancer. Go for the one that is lesser, because the figures are huge. Guys your age will be eaten alive in regard to money. So if they can't resolve Social Security, then don't even try to help Medicare if you haven't done anything on Social Security.

It's not clear whether Simpson's views today are similar to what they were in 2005 when we spoke -- that is, whether he believes it makes more sense to tackle smaller bore problems before addressing the more difficult issues -- but it might be worth it for the White House press corps to ask the question. Presumably Simpson does still agree with with his earlier sentiments on appointing a Commission to take on challenges Congress has been unable to successfully tackle. Here's Simpson on a Social Security Commission:

Alan Simpson: I said [to the House Financial Services Committee], "gentlemen and ladies, you'll never get that done on this end. You'd better appoint a commission and take the heat off yourselves, because you're never going to make it yourselves."

Again, it's not clear that Simpson believes today exactly what he believed five years ago -- but it's nevertheless interesting to get a sense of the perspective with which he approaches his role as co-chairman of President Obama's deficit commission.

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