Serious Proposals to Reduce Debt
5:01 PM, Nov 15, 2010 • By JEFFREY H. ANDERSON
The recently released draft proposal from the federal debt commission offers some useful ideas for reducing runaway federal spending on health care. Even a committee comprising two-thirds Democrats is suggesting tort reform to curb wasteful malpractice lawsuits (Obamacare would do nothing about these), which the CBO says would save $64 billion in federal spending by the end of 2020 – in addition to what it would save Americans as a whole in lowered health costs, as doctors wouldn't feel so compelled to practice wasteful defensive medicine. And the committee's suggestion to increase nominal Medicaid co-pays would save an estimated $15 billion – and probably more so, as beneficiaries would then have at least some additional skin in the game.
But the commission has missed, or perhaps willingly overlooked, a couple of far more inviting targets: $747 billion, currently slated for exchange subsidies, that would be saved by repealing Obamacare; and $540 billion, currently slated for a drastic expansion of Medicaid and CHIP, that likewise would be saved by repealing Obamacare. That would provide savings of a cool $1.287 trillion through 2020 alone (according to CBO projections), which would come with a bonus prize of increased liberty.
On the whole, the debt commission states that its draft recommendations would bring "spending down to 22% and eventually 21% of GDP." But that's still high by historical standards. A far better approach would be to limit the annual increase in government spending to 2 percentage points above inflation (except in times of declared war, or if a super-majority of states grant an exception requested by a super-majority of Congress). Over time, such an approach would profoundly reduce government spending as a percentage of GDP, and would thereby ensure a limited government. Moreover, government spending shouldn't be tied directly to GDP (and certainly not to an unduly high percentage of it), as we shouldn't be promising a given percentage of our economy to the government.