Column: The budgetary fix we're in
WASHINGTON — The capital’s dysfunction has its unfortunate exceptions. Gridlock yields to interests powerful enough to trump habits of obstruction. The result is compromise of a peculiarly distasteful variety — bipartisanship in the form of can-kicking, budgetary obfuscation and unaffordable generosity to those with the best-connected lobbyists.
One such example was on display last week as lawmakers neared agreement on the so-called “doc fix,” the perennial problem created by an overambitious Clinton-era attempt to rein in Medicare spending.
A second is looming in the form of another perennial debate on “tax extenders,” the near-automatic process by which hundreds of billions of dollars in tax breaks, some of them supposedly temporary, are renewed at the behest of the businesses who rely on them.
The Medicare issue stems from the move in 1997 to adopt a “sustainable growth rate” for Medicare reimbursements to physicians. The notion was to save money — or at least, to slow down the system’s exploding costs — by decreeing that total spending could not exceed specified amounts.
You can guess what happened next. When the cuts triggered by the sustainable growth rate turned out to be unsustainable, Congress responded by averting them. Lawmakers understand: There is no voter so furious as one whose Medicare, or her Medicare-accepting doctor, is about to be messed with.
Beginning in 2003, the “doc fix” became a ritual as predictable as the cherry blossoms. Indeed, with the underlying formula unchanged, the magnitude of threatened cuts has become larger, and more unimaginable (24 percent in 2014), with each passing year.
This year could have been different. Medicare costs have dramatically slowed, significantly reducing the price — more important in Washington, the officially scored price — of a permanent fix. The Congressional Budget Office estimated in February that the cost would be $115 billion over 10 years, nearly a third of the estimate just two years earlier.
So the responsible approach, instead of applying a 17th Band-Aid to a broken system, would have been to ditch the sustainable growth rate, replace it with something more realistic, and pay for the difference with smaller-scale tweaks.
Lawmakers flirted with such a long-term fix but doubled down on irresponsibility. They not only applied a one-year patch, they used budgetary prestidigitation to make some of the cost disappear, by crediting themselves now with savings a decade away. Money saved — in theory — more than 10 years down the road gets used to pay for real costs today. Voila! Problem solved.
Next up, tax extenders, the grab bag of corporate tax breaks too popular to repeal but too costly to build into the permanent cost of the tax code. This is spending by another name, and a lot of it: $47 billion for a one-year extension, according to the Joint Committee on Taxation, $693 billion for the entire decade.
Extenders are the perfect obscure corner for bipartisan consensus: so mind-numbing that no regular voter will take notice, so important that legions of lobbyists, and cascades of campaign checks, are deployed on behalf of the various provisions.
The correct way to handle extenders is to decide which ones are worth keeping and make them permanent, which is what House Ways and Means Committee Chairman Dave Camp commendably did in his ignored-on-arrival tax reform plan.
But with tax reform shelved at least until after the election — and isn’t there always one around the corner? — the imperative arises to deal with the expiring tax provisions on their own. And with it, the twin temptations now facing Camp and his new Senate Finance Committee counterpart Ron Wyden of Oregon: Option one, extend, but just tack the cost onto the deficit tab. Option two, same, but make the extension permanent.
The second approach is expensive but appealing, because it would make it easier for lawmakers to achieve the elusive nirvana of revenue-neutral tax reform. If extenders are built into the baseline — that is, you start by assuming tax revenue will be that much less — it’s easier to figure out how to make rates lower and still bring in enough money not to add to the deficit.
Think about it like starting a diet by setting the scale to read 10 pounds lighter. It’s a lot easier, but you still end up 10 pounds too fat — or in this case, hundreds of billions more in debt.
They say the scale doesn’t lie. Washington budgets do.
Ruth Marcus’ email address is email@example.com.