Everyone Tries To Dodge The Tax Man, And It Keeps Getting Easier

Al Capone was busted for tax evasion. Leona Helmsley was, too. But gangsters and entitled millionaires aren’t the only ones who hold something back from the tax man. Each year, Americans of all stripes underpay the IRS by hundreds of billions, aided by the fact that the agency lacks the resources to catch all the cheaters.

Recently, tax dodging has found a new champion: liberal state governments fighting back against the Republicans’ far-reaching tax reforms, which seem to hit a number of blue states particularly hard. New Jersey and California want to reclassify certain state and local taxes as tax-exempt charitable donations, while New York might swap the state’s income tax for a deductible payroll tax, among other ideas under consideration. There’s little doubt about the underlying goal of these potential changes, nicely summarized by Connecticut’s state revenue commissioner when he called his state’s plan a “bit of payback for what I think was the utter disregard of the Congress for the impact of this on states like Connecticut.”

Republicans, for their part, have long blessed other ways of avoiding paying taxes. When Hillary Clinton challenged then-candidate Donald Trump during the first presidential debate for not paying income taxes, he responded: “That makes me smart.” And by cutting funding for audits and enforcement, his party has made it easier for people and companies to fudge their returns.

The bipartisan flirtation with avoiding taxes, through both legal and illegal means, threatens a tax system that is already bringing in historically low levels of revenue and that pays for everything from social security to military preparedness. Three foes in particular are enabling tax dodgers, making their ploys more common and more damaging: reduced support for the IRS, new incentives for people to become cheaters and widening partisan distrust.

Foe No. 1: A weakened IRS

There may be no purer example of D.C. dysfunction than the effort to underfund the IRS. That’s because the IRS isn’t like other agencies; when you cut its funding, you actually lose money.

Every dollar devoted to the IRS budget generates four to five dollars in new revenue, according to statements and congressional testimony from former IRS chief John Koskinen. That’s because a portion of each dollar goes to paying auditors, updating computer tracking systems and otherwise expanding the agency’s ability to collect unreported money from taxpayers.

While this argument may sound self-serving coming from the head of the IRS, recent history seems to confirm Koskinen’s view. IRS funding has been cut substantially in recent years, from over $13 billion in 2010 to roughly $11 billion in 2016.1 And those cuts have set off a chain reaction of underenforcement and undercollection — including a 30 percent cut in “key enforcement occupations,” which has translated into fewer audits.

Specifically, that $2.2 billion funding cut between 2010 and 2016 coincided with an $8.6 billion decline in revenue from audits and investigations.

What’s more, this figure may actually understate the real losses because audits also have spillover effects. After being audited, tax filers tend to change their behavior, increasing compliance to avoid future investigations, according to a study conducted in Denmark. Recent research has also found that when businesses are visited directly by the IRS, other firms who use the same tax preparer also pay slightly more in taxes. With fewer IRS agents taking to the field, these indirect benefits don’t accrue.

Foe No. 2: Small businesses cheat, and tax reform fosters them

Tax evasion isn’t for everyone. Salaried workers who get regular paychecks and a W-2 form have fewer opportunities for it. The IRS simply knows too much about their pay, having gotten regular updates from their employer — not to mention regular payments via withholding.

Instead, the biggest cheaters are the ones for whom it’s easiest. And that tends to be on the business side, with an outsize role for smaller and less bureaucratic outfits — particularly small shops with single owners, self-employed freelance consultants and other independent contractors.

In these businesses (whose owners are generally referred to as “sole proprietors” or “nonfarm proprietors”), the people earning the income are the same ones who decide what information to share with the IRS. There is no third party — an employer or investment manager — to pass those details along in a non-self-interested way. And while the owner-workers are still expected to report every dollar they get from clients, along with a fair accounting of appropriate deductions, that doesn’t always happen.

The effect can be dramatic. The IRS regularly performs a “tax gap” analysis — comparing tax filings against census and other third-party data to estimate underreported and missing income. In 2008-2010, the most recent period for which the IRS has published this analysis, nonfarm proprietors underreported their taxable incomes by an average of 64 percent. And while they accounted for around 15 percent of all individual income tax returns, they were responsible for nearly 30 percent of all underreported dollars.2

The biggest tax evaders are those with the least oversight

Estimated underreported taxable income* by income type, 2008-10

Amount of third-party information Income type Share of tax liabilities misreported
Little or none Farm income 71%
Nonfarm proprietor income 64
Rents and royalties 62
Other income 49
Form 4797 income 42
Some Capital gains 27
Partnership, S-corp, etc. 16
Substantial Taxable Social Security benefits 19
State income tax refunds 13
Dividend income 7
Unemployment compensation 6
Pensions and annuities 4
Interest income 3
Wages, salaries, tips 1

* Net misreported amount divided by the sum of the absolute values of the amounts that should have
been reported.

Source: IRS

Looking ahead, there’s reason to fear that the new tax bill will only make the situation worse. Among its key provisions is a sizable tax break for these sole proprietorships and other so-called “pass-through” businesses (non-corporate businesses whose profits are distributed among owners and recorded as a form of personal income).

This tax advantage functions as a kind of incentive, encouraging more people to file as sole proprietors in order to claim the new deduction. That in of itself is entirely legal, and in some cases could spur entrepreneurship as people jump at the lower-cost chance to start their own small businesses. But it would also mean more people moving from the well-regulated world of paystubs to the tax-evasion-rich world of self-reporting, providing easier paths to tax cheating for more people. Some workers could even use creative accounting to pretend that they are independent contractors in order to take advantage of such opportunities.

Foe No. 3: Partisanship

Norms matter, too, when it comes to tax evasion. Comparative studies of different tax systems have found that people are more likely to pay when they have faith in their government — and the overall fairness of its tax system.

This is a two-part problem for the United States. First, residents don’t have much faith in the U.S. government: Polls show that levels of trust hover around 20 percent, close to historic lows. Second, rising partisanship makes this trust problem harder to solve, because it means that whoever takes office will face opposition from a stalwart and sizable population of distrusting voters loyal to the other party.

The U.S. tax system hangs in the balance. A recent working paper from a team of university and government economists found that tax evasion is indeed wired — like a light switch — to the partisan outcome of presidential elections. The results suggest that when George W. Bush claimed the presidency in 2000, people in heavily Republican counties became more tax-compliant and suddenly started revealing more of their income to the IRS; ditto for heavily Democratic counties after Barack Obama’s election.3

And what was the source of this extra income, hidden from view until a friendly president assumed the Oval Office? Using proprietary data from the IRS, the researchers were able to show that more income was suddenly reported from those same under-inspected sources, including sole proprietors and other pass-through businesses.

Also, while you might expect these swings between Democratic and Republican tax evasion to balance out over time, that’s not guaranteed. If polarization continues to increase, it could be that each election produces a new level of evasion as ever more people on each side look to hide income from presidents they distrust.

One crucial piece of information is still missing in all this: How much are people currently concealing, year in and year out? The IRS makes that calculation as part of its “tax gap” reports, but that means that the most recent data, from 2008-2010, reflects a time when funding cuts were only beginning and the new Republican tax bill was barely a glimmer in the eye of current House Speaker Paul Ryan.

Even in 2008-2010, the share of taxable income being secreted from view was at its highest level since the mid-1980s, at 18.3 percent, although the IRS attributes part of this increase to technical changes in how it creates its estimates. Only the IRS knows for sure whether people have continued to hide more money from tax collectors since then, but apart from a few preliminary calls from legislators for extra funding to help the IRS oversee the latest tax reform package, there has been no effort to stop it. Quite the contrary, the foes of tax compliance have only gathered strength.

Posted in 未分類 |

Trump’s Tariffs Could Actually Work — If He Has A Plan

Republicans are in revolt. Economists on the left and right are deeply skeptical. President Trump’s top economic adviser resigned rather than be party to it. The culprit: tariffs, and specifically the president’s decision to slap duties on imported steel (25 percent) and aluminum (10 percent).

Though they are widely vilified, tariffs actually can work, providing protection for a few vulnerable companies, safeguarding entire industries, maybe even encouraging a wholesale reassessment of what counts as fair trade. Tariffs also come with considerable costs and risks, however, and making the gambit work requires a well-defined goal and a winning strategy. And it’s not clear that Trump has the detailed plan needed to make this gamble pay off.

One early estimate of Trump’s plans, for example, uses a variant of a well-respected model to project that the tariffs would eliminate five jobs for every one they save, because the help they offer steel producers is more than offset by the elevated prices that users of manufactured steel, like car manufacturers, wind up having to pay. This is often a risk with tariffs: By raising the price of imported goods, tariffs strain the budgets of companies — and consumers — who buy those goods. In addition, tariffs can provoke an escalating trade war in which foreign countries who resent the new border tax fight back by implementing protectionist measures of their own.

But these risks don’t mean tariffs are doomed to fail; they just require a long-term goal that justifies the short-term cost in jobs and dollars — and a way to reach it.

This kind of targeted tariff helped save Harley Davidson, for example. In the early 1980s, the company was losing market share to smaller, more affordable imports from Japan. Bankruptcy seemed a real possibility until President Ronald Reagan agreed to introduce a severe protective tariff.

Deliberately designed to be fast-acting and short-lived, the tariff started at a steep 49.4 percent before gradually falling back to the normal 4.4 percent rate over the course five years. In the end, it didn’t take that long for Harley Davidson to reorganize its operations, fix manufacturing problems and return to profitability. By year four, they felt secure enough that they actually asked for the tariffs to be lifted early (presumably because the tax had already fallen dramatically and because a show of strength was good PR).

To some observers, that turnaround might still count as a failure because the company recovered not on its own but with the help of regulations that, by their very nature, interfere with the free market, limiting consumer choices and putting upward pressure on prices.1 But clearly the tariffs accomplished their basic goal, blunting competition from Japan in order to give an iconic U.S. company breathing room to catch up.

Now consider a broader example of tariffs in action, namely the heavily protectionist world of European agriculture. The EU operates under an integrated set of policies designed to ensure a decent standard of living for Europe’s farmers while also guaranteeing a reliable supply of food for European citizens. Among those policies are direct payments to farmers, funding for rural development — and also tariffs, including some tariffs that bite deeply into the pockets of U.S. farmers. When sending goods to Europe, American farmers face an average tariff of 13.7 percent, or nearly three times what E.U. farmers face when exporting their products to the U.S.

All this special treatment for native agriculture comes at a serious cost, of course: Over a third of the E.U. budget goes to support the roughly 5 percent of citizens involved in farming, which is money that can’t be used for other urban or industrial priorities. But what really matters is whether Europeans think these costs are outweighed by the benefits that come with tariffs and other agricultural supports. And in a recent Eurobarometer poll, 52 percent of respondents said they “totally agree” or “tend to agree” that the EU should have trade barriers for agricultural products, compared to 34 percent who disagreed.

Which brings us back to Trump’s decision to impose a 25 percent tariff on steel imports from outside North America and a 10 percent levy on aluminum. Here, too, the defining question shouldn’t be, “What will it cost?” but rather, “What’s the underlying goal, and can it be achieved at a reasonable cost?”

The chosen goal might be quite narrow, along the lines Trump himself outlined when he signed the tariff proclamations last Thursday: “A strong steel and aluminum industry are vital to our national security.” Ensuring that the U.S. can produce enough steel to keep building planes and ships in the event of a military emergency seems like a tailored and well-defined objective, not unlike the aim of the tightly targeted Harley Davidson tariff.

But narrow efforts aren’t always the most successful. The last time the U.S. imposed steel tariffs in an attempt to bolster the industry, under President George W. Bush, the real-world effects proved rather meager. Imports did decline, but seven U.S. steel companies still went bankrupt and the number of workers in the industry seems to have dropped. Partly, this may be because the tariffs didn’t last long enough to allow for the kind of restructuring that U.S. steel mills really needed; they were lifted within two years, after the World Trade Organization ruled them illegal. But it’s also possible the industry needed more help than tariffs alone could provide as a result of high pension costs and a history of inadequate investment.

With the virtue of hindsight, it seems like the time was ripe during Bush’s presidency to pursue a bigger goal: not just helping America’s struggling steel industry but helping many U.S. industries fight off the full force of what’s sometimes called the “China shock” — the sudden rise in Chinese imports of all kinds after the country joined the WTO and gained broader access to U.S. markets. Between 2000 and 2007, America lost about a million manufacturing jobs, affecting industries well beyond steel. A more ambitious plan — one that included steel tariffs alongside other protections and supports — might have helped defend U.S. industries across the board.

Trump may indeed have something bolder in mind, in which case steel and aluminum tariffs may merely be the opening move. At times, he seems ready to embrace a widening trade war, saying that if Europe retaliates against the steel imports, the U.S. could impose a new tax on EU cars. And during his campaign, he floated the far more disruptive possibility of a 45 percent tariff on Chinese imports.

But if the goal is indeed grander — a realignment in global trade that opens space for more U.S. exports and U.S. manufacturing jobs — then tariffs alone probably won’t suffice. Remember that to build a unified agricultural support system, the EU created a complex package of tariffs, subsidies, regulations and rural development aid that all operate in concert.

To ignite a renaissance of U.S. manufacturing, a lot of other things would have to change: The dollar would probably need to fall further, which would help spur exports; countries like China and Germany would have to start saving less and spending more, thus creating more demand for foreign goods, including those made in America; and the U.S. would likely have to pare back its own appetite for imports, including getting Americans to save more money.

Whatever the objective, it needs to be paired with the appropriate tactics. For some goals, tariffs make sense, even if they do come with costs. Ultimately, the only way to assess Trump’s tariff plans is not with a ledger comparing the boon for steel producers against the cost for steel users, but by identifying the broader goal — and seeing whether it gets met.

Posted in 未分類 |

The Economy Is Soaring, And Now So Is The Deficit. That’s A Bad Combination.

Between costly tax cuts and last week’s hefty spending bill, Congress is generating deficits that aren’t just large, they’re also unprecedented and potentially ominous. And even with some optimistic assumptions, President Trump’s latest budget proposal wouldn’t eliminate these deficits — in fact, the president is still angling to add a potentially costly infrastructure plan on top of current spending. But when the economy is this strong, deficits are usually small and shrinking, not ballooning back toward $1 trillion.

We are following a path that the country hasn’t traveled since World War II, with green economic pastures alongside rivers of red deficit ink. And that combination carries unique risks — not because the numbers are especially large (during the early years of the Obama administration, the deficit regularly exceeded $1 trillion) but because these deficits provide unneeded stimulus, which can overheat an economy already operating near full capacity. And in the process, they drain away funding that might be better reserved for fighting off the next recession.

Congress’s don’t-tax-but-spend approach is a root cause of the sizable deficit. Less than two months after Republicans passed a tax plan expected to cost the Treasury roughly $1.5 trillion, members of both parties agreed to raise spending by as much as $300 billion over two years, not including the new infrastructure and other spending increases in Trump’s budget proposal. Resistance to these moves has been inconsistent, with just two members of the entire Republican caucus voting against both the tax cuts and the spending bill despite the fact that deficit reduction has been a GOP rallying cry for decades. Even famously deficit-averse House Speaker Paul Ryan signed on.

But in plum times, deficits this big carry real risks. To start with, financing these deficits will require the government to borrow more money via the bond market. And to attract enough investors, they may have to pay higher interest rates, in the form of higher bond yields. But that only makes the budget situation even worse, forcing the government to pay back its debt at higher rates.

Private businesses would feel the squeeze, too. If the government starts paying higher interest on its bonds, companies will have to do the same for corporate bonds. That’ll make it costlier for them to raise money, reducing investment and even dampening overall productivity.

This was less of a problem during the Great Recession and its aftermath because bond yields were held down by the Federal Reserve. Among other things, the Fed engaged in a massive bond-purchasing enterprise called quantitative easing, which created a kind of backstop to ensure that the government could find buyers without having to raise payouts.

But the situation has now reversed. The Fed is raising interest rates, selling off bonds and generally trying to restrain an economy that’s growing at a pace the regulatory body fears may be unsustainable. And that means there is no backstop, just an environment where deficits could make it much more expensive for both government and private companies to borrow money.

And this is just one potential issue. Perhaps the greater risk of rising deficits is that they make it harder for the U.S. to fight off the next recession, whenever it comes. Combating a recession generally requires a twofold approach: Rapid interest-rate cuts at the Federal Reserve to encourage borrowing and stimulus spending from Congress, both of which inject cash into the economy. But the Fed is in a weak position now. It can’t cut rates by 4 or 5 percentage points, as it has in recent recessions, because interest rates aren’t that far above zero right now — and the Fed’s own projections suggest they won’t get much higher, even over the long run.

Congressional action is thus especially important, but here’s where deficits get in the way. When Congress passed stimulative tax cuts during the recession of 2001 and boosted direct spending with the American Recovery and Reinvestment Act in 2009, they were starting from a position of relative comfort, as pre-recession budget deficits were either small or nonexistent. This time around, the U.S. is liable to enter its next recession with a substantial deficit, inflaming concerns that even necessary stimulus would be just too dangerous.

To appreciate just how unusual today’s deficits are, consider that the last time the job market was comparably robust was in the mid-2000s, and at that time the deficit declined from 3.4 percent of the GDP in 2004 to 1.1 percent in 2007. One cycle earlier, when the unemployment rate hit a 30-year low in 2000, the U.S. actually ran a budget surplus.

The charts below plot both annual deficits and what’s called the “output gap,” a measure of how close the U.S. economy is to its full potential. And the story comes together in the bottom panel, where the march of dots leading up and to the right shows that from 1950 until very recently, the U.S. has stuck close to the same general pattern: When the economy approached — or sometimes exceeded — its growth potential, deficits tended to be small, or even to flip into surpluses. But when the economy weakened, as in the early Obama years, budget shortfalls widened, sometimes dramatically.

What really stands out are the current projections, which show the U.S. walking into a deficit no-man’s-land, an otherwise empty area where growth is above expectations and yet deficits remain large. Although, in the years since 1950, we’ve had periods where the economy was stronger than today’s, and others where deficits were larger, we’ve never in that time seen a deficit this large in an economy this strong.

But the current deficits aren’t going to vanish; they’re expected to grow. Recent estimates from the Treasury Department show deficits increasing from $750 billion this year to just over $1 trillion by 2020. And while that does include the impact of tax cuts, a separate estimate from the bipartisan, pro-debt-reform Committee for a Responsible Federal Budget — which also accounts for last week’s expensive budget agreement — puts the likely 2020 gap at $1.24 trillion.

The good news is that fixing the deficit problem is relatively straightforward, a matter of finding the right balance of spending cuts and tax increases. And now would seem a propitious time for either approach approach, given that the economy doesn’t need any stimulus.

But deficit hawks seem to have become an endangered species in Washington, apparently outnumbered by the deficit shruggers, who’ve grown inured to the prophecies of impending budget doom. Democrats warned of deficits during the tax cut debate, and some Republicans found their anti-deficit voices last week in a failed effort to block the spending bill — but these critiques seemed mostly opportunistic, a handy weapon for attacking your opponents’ priorities that’s quickly sheathed when pursuing your own.

For now, neither party seems willing to make deficit reduction a top priority, which worsens the odds of finding a solution — and lets the risk accumulate along with the debt.

Posted in 未分類 |

To Cut The Debt, The GOP Should Focus On Health Care Costs

Energized by the successful passage of tax cuts, some Republicans are eying a new target: entitlement programs like Social Security and Medicare. House Speaker Paul Ryan is leading the charge, arguing that the only way to break the cycle of rising deficits and surging debt is to reduce entitlement spending.

Political resistance is likely to be fierce, not only because these programs are massively popular, but also because President Trump opposed any such cuts during his campaign. Even if the political hurdles can be cleared, though, the bigger problem is that this push for entitlement reform attacks the wrong target.

There is no wide-reaching entitlement funding crisis, no deep-rooted connection between runaway debts and the broad suite of pension and social welfare programs that usually get called entitlements. The problem is linked to entitlements, but it’s much narrower: If the U.S. budget collapses after hemorrhaging too much red ink, the main culprit will be rising health care costs.

Aside from health care, entitlement spending actually looks relatively manageable. Social Security will get a little more expensive over the next 30 years; welfare and anti-poverty programs will get a little cheaper. But costs for programs like Medicare and Medicaid are expected to climb from the merely unaffordable to truly catastrophic.

Part of that has to do with our aging population, but age isn’t the biggest issue. In a hypothetical world where the population of seniors citizens didn’t increase, entitlement-related health spending would still soar to unprecedented heights — thanks to the relentlessly accelerating cost of medical treatments for people of all ages.1

What’s needed, then, is something far more focused than entitlement reform: an aggressive effort to slow the growth of per-person health care costs. Or — if that’s not possible — some way to ensure that the economy grows at least as fast as the cost of health care does.

Diagnosing the debt: It’s not about demographics

America’s long-term budget problem is very real. Already, the federal government has a pile of publicly held debts amounting to around $15 trillion, or about 75 percent of the country’s entire gross domestic product. That’s the highest level since the 1940s, yet the debt burden is expected to double by 2047 and reach 150 percent of the GDP, according to the Congressional Budget Office.2

It makes sense to list entitlement spending among the culprits for the growing national debt, given that these programs have grown from costing less than 10 percent of the GDP in 2000 to a projected 18 percent in 2047. Part of this is simple demographics: As America ages, more of us become eligible for Social Security and Medicare, thus driving up expenses.3

But there’s a crack in this demographic explanation: It only makes sense for the next 10 to 15 years. That’s the period of rapid transition when graying baby boomers will boost the population of seniors from around 50 million to more than 70 million. A change like that should indeed produce a surge in entitlement spending as those millions submit their enrollment forms.

By 2030, however, this wave will start to ebb, leaving the elderly share of the population at a roughly stable 20 to 21 percent all the way through 2060, based on the size of the population following the boomers and slower-moving forces like lengthening lifespans.

But think what this should mean for entitlement spending. As the population of seniors levels out in those later years, costs should naturally stabilize — at least, if demographics were really the driving factor.

This is exactly what you see for Social Security. The CBO expects total Social Security spending to leap up over the next decade but then settle at just over 6 percent of the GDP, at which point it will cease to be a major contributor to rising entitlement spending or growing debts. Social Security is thus a minor player in our long-term budget drama; if you cut the program to the bone, shrinking future payouts so that they won’t add a penny to the deficit, the federal debt would still reach 111 percent of the GDP in 2047.4

Likewise, cuts to welfare and poverty-related entitlements like food stamps and unemployment insurance are unlikely to improve the debt forecast. In fact, spending on these entitlements has been dropping since the high-need years around the Great Recession and is expected to shrink further in the decades ahead — partly because payouts aren’t adjusted to keep up with economic growth, and partly because the birth rate has been falling and several programs are geared to families with children.5

But the scale of the problem is totally different when you turn to health care. Spending on entitlement-related health programs — including Medicare, Medicaid and subsidies required by the Affordable Care Act — will never shrink or stabilize, according to projections. The CBO predicts these costs will grow over 65 percent between now and 2047 — and then go right on growing after that, heedless of the fact that the percentage of the population that’s over 65 should no longer be increasing.

Why is health care eating the budget? Per-person costs

Demographics aren’t responsible for the projected explosion in health care costs. More important than the growing number of elderly Americans is the growing cost per patient — the rising expense of treating each individual

The CBO found that the lion’s share — 60 percent — of the projected increase in health spending comes from costs that would continue to increase even if our population weren’t getting older.

The reasons for this are many, including the rising cost of prescription drugs and the fact that hospital mergers have reduced competition. But since 2000, per capita health costs in the U.S. have, on average, grown faster than the GDP. And while these costs rose more slowly after the Great Recession and the implementation of the Affordable Care Act, analysis from the Centers for Medicare and Medicaid Services suggests this slower growth rate won’t last.

Which is bad news for these programs, because if the problem were demographic, it’d be easier to solve. By mixing the kind of program cuts Republicans generally support with targeted tax increases favored by some Democrats, you could meet the short-term challenge posed by retiring baby boomers and raise enough money to cover the larger — but stabilizing — population of eligible seniors. But with ever-rising costs, there is no stable future to prepare for. To keep these programs funded, you’d need a wholly different approach — indeed a whole new perspective on mounting federal debt and the role of entitlements.

The future is a race between rising health care costs and economic growth, a race that the economy is losing. Each time health costs outpace the GDP, it creates what the CBO calls “excess cost growth,” which feeds the federal debt. If the government could close this gap, the long-term budget outlook would be a lot rosier.

There are two ways to solve this issue: Either contain health care costs — say through price regulation or more competitive markets — or boost economic growth enough to pay for this expensive health care. Success on either front would make health care spending look more manageable over future decades and lighten the debt load.

Entitlement reform needs health care reform to work

Few of the proposals that commonly fall under the heading of entitlement reform target the health care cost problem, which limits their ability to reduce the long-term debt.

Even when they do address health care, often the result is to shift — rather than solve — the problem. Say lawmakers decide to dramatically cut Medicare. That would indeed ease the government’s debt problem. But the underlying dynamic — the race between health costs and the GDP — wouldn’t really change. Seniors would still need health care, and per-person costs would likely still grow (maybe even faster, since Medicare is a relatively efficient program).

On top of all this, there’s also a deep-seated political barrier: It’s no good if one party picks its favored solution only to watch the other party dismantle it when they next take over. You need political consensus to make changes stick, and America is notably short on consensus right now.

In the end, though, it won’t do to just throw up our hands. Absent some workable solution, spending on health care will sink the federal budget, generating levels of debt that would hold back the economy and potentially spark a global crisis of confidence in the United States’ ability to borrow.

If Republicans are serious about addressing this challenge and reducing America’s debt, they need to find an approach to entitlement reform that can both reduce out-of-control health costs and also survive under Democratic governance.

Posted in 未分類 |