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Serious Proposals to Reduce Debt

5:01 PM, Nov 15, 2010 • By JEFFREY H. ANDERSON
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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.

Serious Proposals to Reduce Debt

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.

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