Arnold Kling  

Question for Brad DeLong

PRINT
Preventing Foreclosures... Friday's Rant...

You objected, reasonably, to my attempt to characterize what you might have said about a hypothetical debt-reduction thesis issued by a Republican. Could you state your position on my substantive point, which I will repeat here:


Relative to current law, I am willing to grant that the legislation will reduce the deficit (assuming no glitches, such as failure to project expenses properly or failure to follow through on promised benefit cuts). It does so by cutting future Medicare benefits by X, and then using a little bit less than X to pay for new subsidies. But in order to actually have a budget that does not collapse by 2030, we have to cut future Medicare benefits by much, much, more than X, and not use the cuts to pay for anything else.

Is that point correct? If so, does the argument that this legislation will reduce the deficit strike you as misleading in any way?


Comments and Sharing





COMMENTS (8 to date)
Not-Brad writes:

But in order to actually have a budget that does not collapse by 2030, we have to cut future Medicare benefits by much, much, more than X, and not use the cuts to pay for anything else.

This is correct, but as a practical matter the same logic applies to all tax cuts and spending program increases for the last 50 years. (I understand and acknowledge your previously-expressed point about the moral requirement to keep all Medicare funds within the program.)

However, whatever we do to stop Medicare from growing to 70% of GDP someday, the X we gave up in this health bill will be a rounding error in that program.

The moral bad of taking money out of Medicare is made up for by the moral good of providing health care to the uninsured.

Don writes:

"The moral bad of taking money out of Medicare is made up for by the moral good of providing health care to the uninsured."

The moral good of providing health care to the uninsured already happened before Obamacare, though I understand your effort to rewrite history on its behalf.

Lord writes:

Since much of medicare is funded from general revenue, "taking it from medicare" is a bit misleading. This is a small step, but one that puts in place means to take larger ones in the future.

Arnold Kling writes:

not-Brad,
Your position, that although this bill worsens the fiscal outlook it is for a good cause (if I am paraphrasing correctly), is an honest one.

My position is not so much that Medicare funds should stay in the Medicare program. It is that, given Medicare's dire financial position, allocating future Medicare cuts to a fund a current subsidy is clearly worsening the fiscal outlook.

Yes, every tax cut and spending increase worsens the fiscal outlook. That is my point. This is like every tax cut and spending increase.

My beef is not with you. My beef is with anyone who recycles the talking point that the legislation lowers the deficit without pointing out that it nonetheless worsens the fiscal outlook. It worsens the fiscal outlook because it applies otherwise-inevitable cuts in Medicare benefits to new subsidies.

David C writes:

"It worsens the fiscal outlook because it applies otherwise-inevitable cuts in Medicare benefits to new subsidies."

Don't these new subsidies, then, face otherwise-inevitable cuts themselves? Isn't this simply transferring where some of the cuts have to be made? How is a $1 in cuts not a $1 in cuts? Is it your position that cuts to Medicaid are politically more difficult or less likely than cuts to Medicare? This poll disagrees: http://yglesias.thinkprogress.org/archives/2009/05/everything-is-unpopular.php

In fact, if that poll is any indication, moving money into any program from Medicare improves the fiscal outlook.

mulp writes:

"It does so by cutting future Medicare benefits by X, and then using a little bit less than X to pay for new subsidies."

Factually incorrect.

What is cut is the subsidy paid to insurance companies who sign up Medicare beneficiaries and provide the complete package of Medicare Part A, B, and D and the rather standard private supplemental insurance; the Medicare beneficiaries pay the insurer fees in place of the fees they would pay for their Medicare benefits, and the insurer will be notified of low income and paid that subsidy.

This program is called Medicare Advantage.

On average, the insurer is paid by Medicare 114% of the cost Medicare bears for each beneficiary.

This subsidy was included (increased) in the 2003 Medicare bill that provided the drug benefit because the previous program to move Medicare beneficiaries to private insurance had failed to convert many from Medicare to private insurance.

The earlier program of Medicare paying insurers, called Medicare Plus, was based on the assumption that private insurers would be more innovative than government, and would be especially cost effective for those with chronic conditions. The insurer would roll up all the care into an integrated managed care program, proactively reducing costs of health care (which goes to their profit), and attracting customers by the convenience of the insurer eliminating all the government involvement in their care.

Insurers did not find they could profit by taking over for Medicare. Thus the substantial subsidy to insurers. Which the insurers used to add a few low cost benefits like dental or health club membership, and in some cases they aggressively marketed their plans, with some people complaining they weren't told they would need to switch doctors to get the in-network benefit.

I don't have a problem with integrated care, especially one focused on cost cutting, but I don't think an insurer can deliver. I don't have a problem with Medicare benefit payments to an integrated care provider aka a real HMO, and then paying a higher monthly if required to gain the better care and simplicity of the HMO I once used. But I object to paying an for profit insurer a subsidy large enough to entice them to do what government does for significantly less - where is the innovation?

Wilmot of Rochester writes:

lol @ lowering deficits.


Believe me, the last thing that's going to happen is for there to be a serious fiscal overhaul of the US.

Bloggers like Brad DeLong and Paul Krugman do anything they can to brush off what might happen to the future. So does the Washington establishment.


The moment they actually deal with the collapse of the US financial system is the moment it actually caves in.

Anthony St. John writes:

Wilmot of Rochester you are absolutely correct. Brad DeLong, Paul Krugman and the Washington establishment are proving the conclusion that historians Will and Ariel Durant came to after studying the lessons of history for many decades:

“When a civilization declines, it is through no mystic limitation of a corporate life, but through the failure of its political or intellectual leaders to meet the challenge of change.”

Your observation that intellectuals like DeLong and Krugman along their Washington political counterparts “do anything they can to brush off what might happen to the future” was explained by evolutionary biologist E.O. Wilson who once said that far-off catastrophes, engineered by our own species, are simply out of the range of human capacity for planning and action.

And the root cause of their failures to protect and preserve civilization was documented by Ornstein and Ehrlich who wrote “Although we are evolving, our mental machinery will not change biologically in time to help us solve our problems.”

So Wilmot, you got a Bulls-Eye with your Comment because the fact of life is that the prefrontal cortex of our intellectual and political leaders really hasn’t evolved that far beyond that of chimpanzees.


Comments for this entry have been closed
Return to top