Uwe
The current Brit Secretary of State for Industry described your 
Republican austerity addicts as "nutters"
Love the reaction to "rationing" and "killing grannies": that is routine 
business of all health care systems!
With the Norwegian nutter looking so much like your Oklahoma nutter, 
life has some grim aspects to cloud the hilarity induced by your 
comrades on the right and the brinksmanship which may cut all our incomes
Be good!
Alan

Uwe E. Reinhardt wrote:
>
> *Health Affairs Blog has posted a new item, '*_*Assessing The 'Gang Of 
> Six' Deficit Reduction Plan*_ 
> <http://healthaffairs.org/blog/2011/07/22/assessing-the-gang-of-six-deficit-reduction-plan/>*' 
> by Uwe E. Reinhardt
> *
>
> The “Bipartisan Plan to Reduce our Nation’s Deficits” developed by the 
> “Gang of Six (or Seven)”, a group of Senators from both parties, 
> certainly is not something I would brag about before a group of 
> Princeton students who, I routinely tell them, will have to grow up 
> quickly to clean up the mess their parents have made of our country 
> and have proven unable to clean up themselves.
>
> But in a country that, as Robert J. Herbold recently noted in / The 
> Wall Street Journa/l in his “_China vs. America: Which is the 
> Developing Country?_ 
> <http://www.imackgroup.com/mathematics/648580-wall-street-journal-chinas-impressive-5-year-plan/>”, 
> now effectively is left without a functioning national government, it 
> is a feeble hint that governance might yet one day be resuscitated in 
> what we call “our government,” even if not restored to full vigor and 
> health.
>
> Viewed from that perspective, we must rate the achievement of the Gang 
> of 6 to 7 as a significant breakthrough and thank them for their 
> enormous effort at reaching even this tenuous and vague compromise.
>
> The plan is long on hopes and short on specifics. We learn of an 
> immediate “down payment” of a $500 billion deficit reduction in 
> federal spending by capping discretionary spending through 2015, 
> reducing by an expected average of 25 basis-points the inflation 
> update for Social Security by shifting from the current inflation 
> adjustment to _the Chained-CPI_ 
> <http://www.bls.gov/cpi/cpisupqa.htm#Question_1>, repeal of _the CLASS 
> Act_ 
> <http://www.healthaffairs.org/healthpolicybriefs/brief.php?brief_id=46> 
> for long-term care insurance that was included in the Affordable Care 
> Act, freezing Congressional pay and, as in Greece, selling off some 
> unspecified federal properties.
>
> It remains to be seen how easily this wish list can be converted into 
> binding legislation. Repealing the CLASS Act probably will be easiest, 
> because the program it envisages is not yet in place.
>
> The longer-term deficit reduction called for by the Gang of 6 to 7 for 
> the remainder of the decade consists in the main of general 
> instructions, supported by several procedural enforcement mechanisms, 
> to relevant Senate committees somehow to find specified amounts of 
> savings in the federal programs under their jurisdiction.
>
> *Savings From Federal Health Care Programs*
>
> The Finance Committee, for example /“would permanently reform or 
> replace the Medicare Sustainable Growth Rate formula ($298 billion) 
> and fully offset the cost with health savings, but would find an 
> additional $202 billion/$85 billion in health savings, and would 
> maintain the essential health care services that the poor and elderly 
> rely upon.”/
>
> To the typical voter, this instruction may be as clear as mud. As I 
> understand it, it means that Medicare is to pay physicians over the 
> next decade $300 billion more than is currently projected, but carve 
> that sum out of other federal health care programs and, on top of 
> that, find additional savings from these health care programs. The 
> Gang, however, could not reach agreement on how large these additional 
> savings ought to be, so they show two figures — either $202 billion 
> over the next decade or only $85 billion. Why the Gang thought that 
> its phrasing should make this obvious to the media and the public 
> beats me.
>
> In 2010, a provision in the Affordable Care Act that called for a cut 
> of about $500 billion in Medicare spending to finance health-insurance 
> coverage for otherwise uninsured younger Americans swiftly triggered 
> accusations of “rationing” and “killing Granny” from opponents of the 
> ACA It will be fascinating, and vaguely amusing, to observe how the 
> folks who leveled these accusations now defend the much deeper future 
> cuts to federal health spending they now advocate.
>
> Because over the years Congress has taught us that, in Washington, 
> D.C., English words such as “cuts” and “savings” have entirely 
> different meanings than they do in the hinterland, we should expect 
> that these top down instructions will be met by Congress’ legendary 
> budget artistry, especially once the lobbyists for impacted special 
> interest groups plead their clients’ cases and open up their cash 
> kitties.
>
> The Senate Finance Committee is to reform our tax system by broadening 
> the base but lowering tax rates, with 29 percent, rather the current 
> 35 percent or originally proposed 39.5 percent for the highest income 
> groups. As part of the broadening of the tax base, the Committee is to 
> “reform, but not eliminate,” current tax expenditures (tax 
> deductibility) for health care, charitable giving, homeownership and 
> retirement, whatever that may mean specifically. Here, too, lobbyists 
> for the affected groups – e.g., real estate developers, health 
> insurers, employers of many stripes, unions and non-profit groups — 
> undoubtedly will seek to help write the specific provisions.
>
> *Raising And Lowering Revenue At The Same Time*
>
> As I read the talking-point memo issued by the Gang, it appears that 
> the tax reform is to achieve two goals at once. First, it must be 
> estimated to yield $1 trillion in additional tax revenue over the 
> decade. Second, it should be done so that the Congressional Budget 
> Office (CBO) will score the tax reform as a net tax relief of 
> approximately $1.5 trillion.
>
> Folks from the hinterland may view these desiderata mutually 
> inconsistent. They are not in Washington, D.C. budget speak. It is 
> eminently possible to estimate that a given tax reform will both 
> increase and decrease tax revenues, if different baseline revenue 
> projections are assumed to which the new tax projections are compared.
>
> It so happens that the tax-revenue projection under the tax reform 
> envisioned by the Gang lies above the baseline projection (without the 
> reform) assumed by the Gang, but it lies below the baseline projection 
> the CBO is, by statute, compelled to use. For its baseline, the CBO 
> must assume that the Bush tax cuts will expire by 2013 for all income 
> classes. The Gang’s baseline, on the other hand, assumes that the Bush 
> tax cut would expire only for high-income groups, that is, people with 
> incomes above $250,000, as was assumed by the Bowles-Simpson 
> Commission. (I thank Paul N. Van de Water of the Center for Budget and 
> Policy Priorities for explaining this detail to me.)
>
> The beauty of these differential baselines lies in the fact that they 
> allow members of Congress to explain to constituents who favor tax 
> increases that the program does just that, while others can tell their 
> constituents who may favor tax cuts that the program does just that. 
> In fact, the same member of Congress could tell both stories, each 
> with a straight face, to different constituents. In my Princeton 
> classes, we call it “siffing,” that is, *_s_*tructuring 
> *_i_*nformation *_f_*elicitously.
>
> The budget plan also provides that if future Congresses find that the 
> dynamic effects of tax reform result in additional revenue – the 
> comforting theory that cuts in tax rates will raise total tax revenues 
> – then that revenue must go either to further tax-rate reductions or 
> deficit reductions. Fortunately, one can always find distinguished 
> economists who will certify that such dynamic effects did, indeed, 
> occur, whatever the truth may be. There will, of course, be other 
> distinguished economists who will deny it. Econometrics is just that 
> flexible in empirical application.
>
> In any event, the proposed tax reform is based on the hypothesis that 
> reductions in income tax rates will spur economic growth, although as 
> a micro economist one would like to see explained more fully how 
> exactly lower tax rates will translate themselves into added economic 
> growth in an era of sluggish demand and of widespread excess capacity. 
> I, for one, believe that the effect of changes in tax rates on 
> economic growth is likely to depend where in the business cycle they 
> occur (and ditto for changes in government spending).
>
> *An Attempt At A Cease Fire In A Decades-Long War*
>
> In the sweep of things, one can understand the Gang’s effort as a 
> fragile cease fire in a long ideological war fought over the 
> distribution of economic privilege in this country, a war that has 
> been raging unabated for over three decades now.
>
> One side in this war believes that the current distribution of income 
> and wealth in this country is fair, as it rewards generously those who 
> contribute commensurately to the economy and properly gives short 
> shrift for those who do not – e.g., unskilled workers. The only 
> complaint of that faction is that the distribution of income and 
> wealth in this country would be even fairer and more efficient if the 
> tax system did not take away so much income from the richly deserving. 
> That faction does not appear to believe that health care, education 
> and legal care, so to speak, need to be distributed among the 
> citizenry on a roughly egalitarian basis, and believes that federal 
> efforts to achieve such a distribution through taxes and transfers 
> will doom the economy.
>
> The opposing faction believes that the current distribution of income 
> and wealth no longer is the product of a genuine meritocracy, and even 
> if it were, that health care, education and legal care are so-called 
> social goods to which rich and poor should have access on roughly 
> equal terms, regardless of their own ability to pay for these 
> increasingly expensive services. That faction would be willing to 
> trade off some economic growth for the sake of this egalitarian goal.
>
> Economists can at best project the economic footprints these distinct 
> visions would be likely to beget over time, if implemented. As 
> economists, they are not licensed to judge their merit on ethical 
> grounds.
>
> It remains to be seen whether the cease fire worked out by the Gang of 
> 6 to 7 will take hold, and how long it will last. The larger war of 
> which it is but a small part is far from over.
>
>
>
> You may view the latest post at_
> __http://healthaffairs.org/blog/2011/07/22/assessing-the-gang-of-six-deficit-reduction-plan/_
>
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