• Why “cuts” are bad and “manufactured deadlines” are good

    A couple of sentences in Ezra Klein’s Wonkbook hit me in stride today. I’ve been thinking that entitlement “cuts” are bad, but not in the way you probably think I mean. Second, I’m beginning to see some value in “manufactured deadlines,” as aggravating as the political histrionics are. From Wonkbook:

    In the long-run, we should cut spending in entitlement programs as well as discretionary programs, and raise significant revenues and modernize the tax code by flattening the base and closing loopholes.

    These two priorities don’t conflict. In fact, they support each other. Faster growth now will mean smaller deficits later. And politically, more stimulus now would have helped Democrats agree to more deficit reduction later. But our political system isn’t very good at both/and. It’s more suited to either/or. And so Republicans fought stimulus now and couldn’t agree to the revenues necessary for significant deficit reduction later. So we got neither. We’re pulling support out from under a teetering economy now and we’re punting the hard decisions on the deficit to yet another committee, and yet another manufactured deadline. (Emphasis mine.)

    There’s nothing here I don’t agree with. So in what sense do I mean entitlement “cuts” are bad? I mean the word “cuts” is bad, or too coarse, rather. Cutting is easy, not politically (or not typically so), but technically. Just whack the budget. Pay hospitals less. Reduce subsidies. Drop benefits. Easy. Done.

    But wrong. Entitlement programs exist for reasons. Putting aside the political or cynical ones, they also serve, or aim to serve, actual human needs. Simply “cutting” them risks great harm, not just to political careers and provider incomes, but to people. Quick, cut your food budget for your child. Will you drop the milk or the ice cream? The eggs or the candy? This should be an easy one. But to Congress it is typically not.

    That’s why health care providers should get behind a sensible and sustainable reform of our our system of health care provision and how we pay for it. If they don’t, they risk more meat ax-like cuts by Congress or their designated bodies. If hospitals and physicians don’t like those cuts — and they don’t — the answer can’t forever be merely to oppose them. Math doesn’t lie and the mathematics of our debt tells us it must, in time, come down. That means reductions to health care spending, which is the long-term driver of our debt. So, reform is inevitable. It can either be by crude cuts or by some more sensible means.

    That brings me to “manufactured deadlines.” In general, I hate them because they’re technically illogical. Why should we make a deal with ourselves to do something NOW or else we’ll shoot ourselves in the foot? Actually, this is a recognized strategy in self-control from behavioral economics: pre-commitment to a worse, future evil in order to increase incentives for completion of a current, difficult task.

    What’s more difficult than reforming the health system to reduce spending and increase quality and access? If you think it isn’t among the hardest domestic challenges you haven’t been paying attention. As I wrote yesterday, one benefit of a deadline, even a manufactured one, is to align policymakers across the political spectrum. In the presence of a greater evil (explosive debt! credit rating downgrade! default!) Congress might just agree to health system reforms they couldn’t otherwise. The manufactured deadline serves a useful role in imposing discipline on a body that otherwise seems unable to do anything.

    But, if that unruly, dysfunctional body is just agreeing to cuts by hatchet, maybe the manufactured deadline, as useful a device as it may be, is not worth the price.

    LATER: By the way, that price, so far, is $1.7B in increased interest on issued debt.

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