Debt Digest | Stabilizing the Debt, Health Care Reform, and Defense Spending
Links & Fiscal Facts
Here are this week’s reading links and fiscal facts:
Congress should adopt a credible fiscal stabilization plan. Under the latest Congressional Budget Office (CBO) projections, debt is expected to reach 118 percent of GDP by 2033. The Committee for a Responsible Federal Budget (CRFB) argues that “policymakers should seek a fiscal goal to prevent debt from growing indefinitely, causing harm to the budget and the economy.” Stabilizing debt at its current level – 98 percent of GDP – requires $8.1 trillion in savings over 10 years. Read Boccia’s recommendations for how to cut spending immediately, reduce future spending growth, and reform entitlement programs here.
Adopt market-based health reforms to reduce spending and improve quality care. The American Enterprise Institute’s James Capretta argues “market reforms [in health care] hold more potential than stricter regulations to deliver sustainable savings because they rely on voluntary cost cutting by those who are in the best position to re-engineer the care process to be more efficient without harming quality.” Cato’s Michael Cannon suggests that Congress should expand the usage of flexible, tax-exempt health savings accounts (HSA) to replace the tax exclusion for employer‐sponsored health insurance. “Expanding HSAs in the right way could completely eliminate the tax code’s distortions of how consumers pay for medical care and reduce the overall level of distortion that the exclusion introduces into the economy.”
Americans are unwilling to pay for federal paid leave. Senators Brian Schatz (D-HI) and Don Beyer (D-VA) have introduced legislation to provide paid family and medical leave for federal employees. As a prior 2018 Cato poll shows, nearly three quarters of Americans support a federal government program to provide 12 weeks of paid leave, but support slips after costs are considered. “Americans aren’t willing to cut spending, increase the deficit, have fewer employer‐provided benefits, or reduce the number of female managers for federal paid leave.” As Cato’s Michael Tanner argues, increased deficit spending, lower pay, higher unemployment, and fewer leadership positions for women overall are just a few of the unintended consequences for mandating parental leave.
Curb wasteful defense spending. Nick Licata argues in the Daily KOS that Republicans and Democrats treat the military budget as sacrosanct. Congress should use its power of the purse and engage in robust oversight to promote efficient spending and reduce rent seeking. To guide military spending reductions, Cato’s Eric Gomez recommends Congress and the President adopt a grand strategy of restraint. Rather than pursuing global military dominance against all potential threats, the U.S. would “emphasize preventing other great powers from achieving dominance over Europe and Asia.”
Entitlements are the root cause of spending growth. Cato’s Chris Edwards writes “the main drivers of rising deficits and debt are Social Security and Medicare, as shown in the chart with CBO data.” To reduce economically damaging debt growth and prevent trust fund exhaustion, “policymakers in both parties should be studying the programs and offering constructive solutions.” Read Boccia’s latest article on using bipartisan commissions to reform Social Security and Medicare here.
