• Reflex: November 17, 2011

    Bowles and Simpson tell students slim chance for a deal, writes Jim Morrill. The chairs of the President’s deficit reduction commission took questions from UNC-Charlotte students on Wednesday about the work of the Super Committee. Don’s comment: I think President Obama made a mistake in not embracing the recommendations of this commission, and not including them in his budget.Particularly on taxes, even though the deal put forth by the commission was seen as too conservative (too many benefit cuts to tax increases) by many progressives last winter, all of the plans discussed in actual negotiations since have had fewer tax increases, and more cuts. Taxes received as a percent of GDP will have to rise substantially over current levels to ever have a sustainable budget.

    Rising health insurance premiums in the news. On one hand, Igor Volsky cites a Modern Healthcare piece that reports a slower rise in employee health benefits: “[T]his year’s increase is lower than 2010′s and will continue to slow in 2012, according to survey results from Mercer.” On the other hand, a new Jenny Gold reports on a Commonwealth Fund study that illustrates ballooning employee health care costs over a longer period. “[A]nnual cost to employees increased by 63 percent [from 2003-2010], as businesses required workers to pick up a greater share of health insurance costs.  Per-person deductibles increased an average of 98 percent.” Austin’s comment: Though we know the general factors that influence health care costs and premiums, the specific reasons why one year’s increase is above or below another varies and is often unknowable by researchers who lack full commercial market data to study such things in depth. 

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    • I have a question for Don (and a follow-up). He accurately states that taxes as a percentage of GDP must go up if we want to have a sustainable budget. But Don also suggests that Obama should have embrashed the Bowles-Simpson recommendations. My question is the following–is Don aware that Bowles-Simpson recommended imposing a permanent cap on federal taxes at 18% of GDP? My obvious follow-up question is how does Don reconcile his two points, i.e., how can one embrace Bowles-Simpson when it implicitly includes embracing the 18% cap on taxes as a percentage of GDP (which ultimately makes responsbile budgeting impossible)?

    • @zzz
      I should have said more clearly that it is my personal belief it was an error not to embrace Bowles-Simpson. That said, I don’t understand that Bowles-Simpson would cap federal spending at 18% of GDP; I understand the balance goal to be 21% of GDP ~2035 for spending and taxes. See figure 4, p. 17 of the report

    • @Don Taylor–

      I appreciate the correction–I remembered incorrectly and I see that you are correct that the ultimate intended cap of Bowles-Simpson is 21% and not 18%. My basic question remains. As you point out, average expenditures from 1970-2009 were about 21% of GDP. The government is heavily involved in health care spending, and the PPACA makes this involvement heavier. Health care spending inevitably will become a larger percentage of GDP over time than it has been historically. How can the government avoid spending (and thus taxing) an increased percentage of GDP (i.e., higher than 21%) over time given the disproportionately rising costs of the area in which government is so heavily involved? Perhaps it was an error politically not to embrace Bowles-Simpson, but on the substance, it was not a mistake. The 21% cap is unworkable. Bowles-Simpson is overly conservative in virtually all of its priorities, and the fact that the bidding has gotten even worse ever since is irrelevant in my view because none of those proposals are likely to become law either. And embracing Bowles-Simpson would not have made it more likely to become law nor would it have avoided the future bidding getting worse. Bowles-Simpson would have died even if Obama gave it the biggest bear hug he could have mustered. The Republicans would have seen to that.

      • @zzz
        I follow your narrative of Obama supporting something being its kiss of death and it makes sense (and there is lots of evidence; I am not saying they would have passed plan if he supported it). In my book I talk a good bit about the politics of the deficit and how I think progressives should address the issue (with a grand plan included!). It is linked on the main page sidebar if you want to check it out. thx