Posted on 11/18/2010 10:07:31 AM PST by SeekAndFind
President Obama’s deficit commission continues to surprise. On paper, it appears to be failing—it looks increasingly likely that no proposal or idea will get enough members behind it to become an actual official recommendation of the commission. But the members’ efforts to avoid simply admitting defeat have produced some pretty interesting and valuable results. Last week, the co-chairmen released a serious (if of course far from perfect) proposal for deficit and debt reduction. Earlier this week, Illinois Rep. Jan Schakowsky (a Democrat, and one of the commission’s more liberal members) released her own plan, which mostly revealed a profound lack of seriousness among some liberal Democrats about deficit reduction.
Now, today, Rep. Paul Ryan (Republican of Wisconsin and soon to be chairman of the House Budget Committee) and Alice Rivlin (a Democrat, and former director of the Office of Management and Budget under Bill Clinton) released an excellent and very ambitious bipartisan plan for Medicare and Medicaid reform. The plan would not touch the Medicare benefits of people who are 55 and older today, but for anyone younger than that, the existing structure of Medicare would be transformed into a defined contribution program which, rather than directly paying for services in an open-ended way, would give each senior money toward the purchase of private health insurance. Meanwhile, the federal share of Medicaid would be transformed into a block grant to the states, which would grow only in line with the Medicaid population and with growth in GDP per capita plus one percent—rather than in the open-ended way in which such funding grows today.
Rep. Ryan asked the CBO to score the idea and—as you might imagine given a request from a soon-to-be chairman of the Budget Committee—they did so in record time. Here is their assessment of the plan. It would make a major dent in the deficit, and help control the growth of health-care spending, which is the essence of our health-care dilemma and which Obamacare would thoroughly fail to do.
That Paul Ryan would propose such a good idea is hardly surprising. That he could get even a little support from the Democratic side of the commission is surely surprising, and a good sign.
Call me crazy, but there were many parts of the Deficit Panel’s plan that I liked. I was pleasantly surprised that two dolts like Simpson and Bowles were able to come up with something like that.
I would love to see the stupid mortgage income deduction scrapped in favor of lower rates across the board. That particular deduction encourages home ownership by people who can’t afford homes. And it perpetuates the “housing-based” economic model that we have in the U.S.
Lower rates across the board in exchange for all of the complicated deductions is the way to go.
I am with you on the mortgage deduction and on being surprised by the commission.
I sure hope Ryan or somebody else smart like that runs in 2012. The frontrunners as they are defined don’t enthuse me all that much.
There are lots of things people will find not to like about Ryan’s plan, including me. But in terms of something that actually addresses the problem, and has at least a plausible chance at enactment, I really haven’t seen anything better. The complete rolling back of the whole entitlement concept isn’t going to happen overnight, so we ought to take incremental rollbacks whenever we can.
Wow, I didn’t know that Paul Ryan had enough seniority to be first in line for the House Budget Committee.
I hope the establishment GOP doesn’t throw him under the bus and go back to business as usual.
My biggest fear with the Republicans back in control is that they will sell out, reform nothing and pretend that the US is not in a fiscal nightmare.
It is not good enough just to thwart Barack Obama at every turn.
We have to get the budget back in black as soon as humanly possible.
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The problem with scrapping the mortgage deduction is that it would effectively increase the cost by a substantial amount for each homeowner. A change in rates would not lower payments without a refi.
It would also tank the housing market, because there is no reason to expect rates to drop commensurately.
If it is to be phased out, the better options are to drop the second home, and possibly to cap the amount to a lower level (not that I support this).
If a substantial change is made, it could be phased in to reduce pain. At least over 5 years, maybe 10 or more. Possibly grandfather existing mortgages taken out under the deductible. (Which admittedly would cause people to retain houses they didn’t need, and not move, and hurt the construction industry).
I’d probably drop the second home deduction now, and limit the percentage of interest by an increasing amount over several years (at least 10), which would affect everyone gradually, instead of every family (and market segment) having a jarring effect. Maybe leave the second homes alone if they’re being phased out too.
But keep in mind, we’re really talking about a tax increase here.
step it down from the curr
The simple solution to retiree benefits like SS and Medicare is to maintain annual break-even solvency by floating the retirement age as needed each year.
Something to keep in mind about having a "grandfather" provision for existing mortgages is that this single measure could be a big help in solving the mortgage crisis. A mortgage on a home that is in foreclosure is worthless to the bank unless they can sell the home to someone who can either continue paying the mortgage or pay cash for the home and cover the entire outstanding balance. But a mortgage that is covered by this kind of grandfather provision and has a hefty tax break attached to it could become a very valuable asset. Basically, the tax break on that mortgage becomes an attractive perk to anyone looking to buy the foreclosed home.
I think the deduction has contributed to the inflated demand for housing. There are literally some people who buy a home for the deduction.
I think lower across the board rates would offset the increase, and greatly simplify the tax code.
I’m not for doing it all at once. A phase out is appropriate, and grandfathering in properties makes sense as well.
How bout we trade Amnesty (subject to verifiably closed borders) in exchange for a Constitutional Amendment eliminating the income tax and replacing with a Nat Sales Tax?
There’s no reason to be considering S.S./Medicare reforms, while the Gov’t owns trillions of dollars worth of land and other property. Selling/leasing part of it would go a long ways towards handling the ‘’debt crisis’’. Especially considering that our neweast aircraft will be primarly be used to do flybys at airshows.
Sorry but anything that grows faster than GDP is a disaster waiting to happen. While 1% seems like a small amount, if GDP were to grow at 4% a year for 28 year and the block grants grow at 5% a year, the GDP would triple but the block grants would quadruple!
The block grants should grow only at the rate of GDP and if GDP contracts, so should the block grants.
“Meanwhile, the federal share of Medicaid would be transformed into a block grant to the states, which would grow only in line with the Medicaid population and with growth in GDP per capita plus one percent—rather than in the open-ended way in which such funding grows today.”
I have what I think is an easier formula for paying the Federal portion of Medicaid and for trying to get the total coming down.
Block grants, based on NATIONAL statistics for the “Medicaid population” and “growth in GDP” will do nothing to induce the states to work to get health care costs in their state moving lower. They’ll just, politically, seek to keep getting the block grant formula tweaked.
Right now, the main Medicaid formula provides for the biggest part of the Federal portion given to the states for Medicaid to be 50% of the Medicaid benefits paid in the state. It amounts to a Federal reward for states that by their own actions have helped health care costs - and this Medicaid costs - become more expensive on a per-capita (per Medicaid recipient) basis.
High spending states will always have an inflated affect on the national figures, and you can be sure that those national figures - skewed higher by the high spending states - will be the primary data source for the initial block grants.
We need an incentive for the states to work to lower their state’s health care costs built into the Federal portion from the start.
We could lower total Medicaid costs now, and produce an incentive for the states to get their in-state costs under control, and this formula would reflect, to some degree, Medicaid population changes and GDP growth.
Change the Federal portion of Medicaid to the states to an amount that is the lessor of (a) 50% of the state’s Medicaid charges or (b) 50% of the national median for Medicaid charges for all the states in the prior year - the “median” I am referring to is on a per-capita basis.
States that keep their health care costs down, and thus the Medicaid costs as well, would not get “extra” Federal money for being below the median, but states that do not keep their health care costs down would have to cover their own excesses above the median. Places like New York would no longer get their health care excesses subsidized by everyone else in the country.
It would help push the states to lower health care costs in their state and it would lower Federal medicaid costs at the same time; and it we keep the pressure in place for that to continue.
Paul Ryan and Alice Rivlin, names to remember. They have done their homework, and are getting about the hard work of governing.
Medicaid should be on the chopping block, even moreso than Medicare.
These days? Mortgage rates have been so low for so long, that I really doubt it. I have student loans that were 1/3 the amount of my mortgage that make a MUCH bigger impact on my taxes.
Selling government land is one of the commission’s proposals, as I understand it.
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