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New Senate Health Bill: Exacerbating Federal Fiscal Insanity

Posted By John Ligon On December 11, 2009 @ 11:27 am In Obamacare,Ongoing Priorities | Comments Disabled

Senator Reid seems comfortable with clandestine negotiations in order to ensure passage of any type of health reform. This course, aside from being politically dubious and whimsical, is fiscally reckless, and with its passage, will continue to add to the debt that will straddle future generations with a significant amount of fiscal stress.

As with the previous health reform bills, the assumptions and parameters the Congressional Budget Office must use will likely score this new bill as deficit neutral. Yet, the price tag for the overall bill will not changed, and will include massive expansions of Medicare and Medicaid making the long-term fiscal outlook in the US dismal at best.

Now, Congress wants to also raise the debt limit to finance more spending—including any type of health reform. Existing healthcare entitlement spending is already on an unsustainable course, however, and the intergenerational fiscal imbalance will only worsen, where future generations will face substantially higher net lifetime tax rates, permanently lower federal government purchases and transfers, or some combination of the two policy changes [1].

Ever-rising fiscal imbalance means that future generations will continue to face higher net total payments to the government than current generations. This translates to higher life time tax rates for future generations—estimated in 1999 to be at 71.1 percent [1]. This also means that future generations will pay a disproportionately high level of net total payments to the government. In other words, a newborn in future generations will have to pay permanently higher net total payments (significantly exceeding 100 percent) than a current newborn to restore fiscal balance. Since the debt levels in 2009 are the highest in history—significantly higher than in 1999—and there are no proposed adjustments over the short-run there will be far higher permanent lifetime net tax rates faced by future generations.

In sum, this legislation only pushes restoring fiscal sanity into the future. As the burden of this fiscal strain is continually delayed, though, this permanent strain will be borne by future generations. This is in addition, of course, to the fact that expanding fiscally draining government programs that are in dire need of reform will never be the right solution. [2]


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2009/12/11/new-senate-health-bill-exacerbating-federal-fiscal-insanity/

URLs in this post:

[1] some combination of the two policy changes: http://people.bu.edu/kotlikoff/New%20Kotlikoff%20Web%20Page/Generational%20Accounting%20A%20Meaningful%20Way%20to%20Assess%20Generational%20Policy%201994.pdf

[2] expanding fiscally draining government programs that are in dire need of reform will never be the right solution. : http://www.foundry.org/2009/11/26/the-senate-health-bill-not-the-lesser-of-evils/

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