Saturday, October 24, 2009


The Politics Don't Add Up
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....

...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.

"There's been discussion of taking behavioral economics into account when assessing health care reform," says Marc Goldwein, policy director of the Committee for a Responsible Federal Budget. "We also have to take into account behavioral politics. Political history teaches us that it's unlikely that there will be nominal cuts."

If Congress faces pressure from voters or from powerful lobbies like doctors, it could buckle and pass legislation that gets around the law (as it has repeatedly in saving doctors from cuts in payments). It's not so far-fetched: It's happening right now with Social Security. Cost of living increases are meant to help seniors maintain purchasing power, not increase it. Deflation and other factors actually mean that seniors should get a negative COLA, but law prohibits the COLA from being less than zero. ...