Thursday, July 8, 2010

Someone Talking Sense on the Budget, I'm Sure He'll Be Ignored

Great opening on this post (the original closes with the statement), "the worst federal budget policy is the one we're now following."

It's worth a read and so is the full article, the main take away is that we should institute automatic stabilizers and budget balancing measures tied to the unemployment rate and worry about long term structural deficits and not stimulus spending.

For the questions raised at the end, I have an answer to the need to fund a war even with these stabilizers are in place. Wars should be funded solely through spending cuts or tax increases to force Congress and the President to seriously question whether or not we need to be in it. For the few truly serious wars we can't avoid, this restriction should be relaxed if we use the draft. Politicians should face very, very tough choices when initiating a conflict, I think a choice between paying for it and a draft are sufficiently unpleasent to insure proper discipline. War should be an unpleasant necessity, not a desirable policy, and we've been experiencing the unpleasant consequences of what happens when it isn't unpleasant enough for politicians the last few years.

Back on topic, I think the concerns mentioned about the policy of using the unemployment rate to enforce discipline are answerable and the policy is a good one, that logically should be able to attract bipartisan support given the beliefs and priorities expressed by each party. Given their actual expressed preferences instead, I am certain this won't be seriously mentioned by anyone, and if it is brought up the inconsiderate rogue mentioning it will enjoy a moment of true bipartisanship in being shouted down.


  1. The problem being that one congress can't control another, so a law that requires a balanced budget whenever the unemployment rate is below 6% wouldn't be enforceable. It would be nice if congress would pretend it were a law, though.

  2. Doug,

    True enough. I guess I have something more like PAYGO in mind. It of course hasn't been binding in practice but it sure does seem to have been effective in getting Congress to focus on short term bean counting rather than long term policy. I'd like to see a rule enacted that would put the opposite frame on the debate, even if not binding in practice.

  3. I guess this is a good idea. The structure of the law helps our lawmakers understand the difference between short-term debt and long-term debt, maybe? Do we think they are that smart?
    I don't see how the US can do anything about the budget without fixing medical cost inflation, though. I'm very pro death panel. People have the right to evidence-based medical care. The rest they can pay for themselves. The health care bill was such a failure.
    I am very worried about the propensity of the government to want to try to cut public health care benefits and to leave people of private insurance. This stifles innovation as we move towards more genetic based medicine. In the near future, we will test people for diseases and manage those risk factors. Private insurance that tries to drop high risk individuals and doesn't invest in prevention can't do this type of medicine. There are several other problems, but inflation will be terrible and the system is still unworkable without a complete and immediate revamping.

  4. SirW,

    I agree with you that health care costs are the major budget problem and wish people would focus more clearly on that.

    I'm quite a bit less sour than you on the actual health care bill. I agree it could have been much better but I've come to believe the central problem is that we don't have universal coverage and the bill moves us much closer to that. The reason I think that is the main problem is structural.

    To borrow some loosely game theory sounding phrases, every actor currently has a dominant strategy with health care costs of trying to push those costs onto another actor in the system. In the few areas where a system has emerged where this cost shifting is difficult we get relatively good performance. But this describes few sectors of our health care system, mostly the VA. Health reform means a lot more insurers will be stuck with the patients they have rather than being able to pass them to someone else.

    Admittedly, I think more could have been done now but I think the ground has been set for cost control (or repeal, but I'm an optimist) to be the central focus of the next wave of reform. Since coverage is no longer the central issue and no one can hope to make anyone else pay they'll have to start making the tough choices about whether we want a Dutch style system, or a Canadian style (to choose two representative systems, others differ mostly in the details).

  5. The health care bill is a pretty good bill for most of the country. Most people hardly see the doctor but a few times in their life, until they are old. Universal coverage will solve a lot of problems and makes more reform possible, so I'm very glad it happened. Getting control of the special interests, like the insurance companies, and getting them to not drop people will be hard. So I will hold my breath there. The inflation problem is in Medicare and no one wants to touch it with a 20 foot pole. I am mostly concerned about politicians cutting benefits in sneaky stupid ways like raising the age and cutting payments to doctors, rather than instituting evidence based medicine (No more double lung transplants for 85 year olds!-I not just being cheap, I saw an old woman die a horrible, horrible death after a doctor convinced her it was a good idea to do this-she rejected the transplant and her chest turned into a giant open wound). Simply cutting out these types of unnecessary procedures would make the program sustainable and would improve the quality of death (we don't like to talk about, but its important, right?) people have in this country. The "death panel" claims really made me angry. The Tea Party should all be mandated to care for dying people at the hospital for 6 months as punishment for such idiocy.