Government Bytes


Don't Be Fooled By Obama's New Debt Deal

by Brandon Greife / /

Who knew “The Who” would be such prescient political philosophers? As the media swoons over Obama’s offer to cut Medicare spending and reign in the cost of Social Security (he’s soooo bipartisan!), I can’t help but be reminded of The Who’s “Won’t Get Fooled Again.”

“Change it had to come

We knew it all along

We were liberated from the fall, that’s all

But the world looks just the same

And history ain’t changed

‘Cause the banners, they all flown in the last war

…We don’t get fooled again!”

You’ll have to pardon their syntax, I think rock legends are allowed a little leeway when it comes to grammar, but those lyrics pretty much sum up exactly how I’m feeling about Obama’s newfound willingness to address entitlements: I won't get fooled again!

According to the Washington Post,

“Obama plans to argue that a rare consensus has emerged about the size and scope of the nation’s budget problems and that policymakers should seize the moment to take dramatic action.

As part of his pitch, Obama is proposing significant reductions in Medicare spending and for the first time is offering to tackle the rising cost of Social Security. The move marks a major shift for the White House and could present a direct challenge to Democratic lawmakers who have vowed to protect health and retirement benefits from the assault on government spending.”

First, let’s understand this “dramatic action” is probably more accurately described as “teensy weensy action.” According to the Washington Post story, the White House is now “seeking a plan that would slash more than $4 trillion in annual budget deficits over the next decade.” That sounds big, but not compared to the $46 trillion the Congressional Budget Office expects the federal government to spend over the next ten years.

Second, when it comes to Washington, never take the future for granted. As Senator DeMint told the Washington Times, “We agree we need immediate spending cuts, caps and entitlement reform, but that’s exactly what Washington did in the 90s when we were $5 trillion in debt. Now Gramm-Rudman is ignored, the entitlement reforms never materialized, and debt has exploded to over $14 trillion. Americans won’t be fooled again; they know none of these grand promises will ever happen unless we force Washington to do it with a balanced-budget amendment.”

In fact, recent history is littered with the carcasses of failed budget deals, in which spending reductions, and even entitlement reforms, are offered up in return for higher taxes. Inevitably, the result has been the same – the spending cuts never materialize, Congress loses its stomach for politically difficult reform, and the taxes stay the same.

Given that it is apparently big news that Obama has shown a willingness to cut Medicare, let’s take a glance back into history to search for parallels. Fortunately, it is not very difficult. Nearly every budget deal for the last 30 years has involved some tweaks to Medicare and Medicaid as a way to score big, but illusory, savings. 

One of the most (in)famous was a 1990s deal between President Bill Clinton and Republican Congress called the Balanced Budget Act. Part of the compromise is the now infamous “doc fix” - an attempt to control the growth in Medicare spending. Except it never materialized. The law tied physician pay to increases in the economy, but since health care spending grew twice as fast as gross domestic product, the provision meant doctors faced huge pay cuts. This led to an annual ritual of complaining by the American Medical Association, Congress voiding the mandated cuts, and enormous growth in the size of the annual “doc fix” that must be dealt with.

The Obama cuts will be no different. He’s reportedly considering further reduction in payments to providers, cuts to support physician-training programs, and changes to Medicare’s prescription drug benefit. But when the politics become tough and when the lobbyists get cranking you can bet Washington will fold like a cheap suit.

The fact is, none of his proposed reforms can be guaranteed to take place beyond 2012 because there is no way to bind future Congresses; unless that is we pass a balanced budget amendment.

Until I see that, I, Like The Who, won’t be fooled again.