[Congressional Record (Bound Edition), Volume 156 (2010), Part 15] [House] [Pages 22239-22240] [From the U.S. Government Publishing Office, www.gpo.gov]DEFICIT REDUCTION The SPEAKER pro tempore. Under a previous order of the House, the gentleman from Massachusetts (Mr. Frank) is recognized for 5 minutes. Mr. FRANK of Massachusetts. Mr. Speaker, I have been troubled by what seems to me a mistaken focus in the debate about reducing the deficit. I do agree that it is important to reduce the deficit. Indeed, Mr. Speaker, I now believe that I am more focused on reducing the deficit than many of my colleagues, including on the other side of the aisle, who have with great alacrity put deficit reduction aside in favor of a fairly indiscriminate degree of tax reductions. A couple of weeks ago, we were told that reducing the deficit was the number one priority, but reducing the taxes, particularly on the wealthiest in America, rapidly overtook deficit reduction. I hope we will get back to it. What troubles me is the extent to which people, mainly on the Republican side, but elsewhere as well, have said that what we need to do most to get the deficit down, as we should, is to reduce entitlements. That's a polite way of saying they want to cut Social Security and Medicare and Medicaid, even though Medicaid is not an entitlement. But those are the things that are on the agenda. In fact, that is neither socially or economically the sensible way to begin with the short-term--near-term deficit reduction we need. We shouldn't say short-term. We do, I believe, need some stimulus. I'm glad we are extending unemployment compensation. I wish we were doing more to help cities and States keep people on the payroll. The private sector has added jobs in these past few months. Job growth has been held down because the public sector has been forced at the State and local level to fire people. But this focus on Medicare and Social Security is mistaken economically and politically. Mr. Speaker, let me calculate; about 45 years ago, I took an economics course in graduate school from a young assistant professor named Henry Aaron. I was impressed with him then, and I've been impressed with him since. In the New York Times recently he had an article in the op ed page headlined: ``All or Nothing Equals Nothing,'' in which he argued that the focus on reducing the deficit by 2020, which is the time we've set ourselves, which is very important, is an issue that should not encompass a focus on Social Security and Medicare. He is not saying ignore Social Security and Medicare, only that a rational way to go after the deficit in the near term wouldn't focus on them. And Social Security, as he points out, Social Security is not going to be contributing to the deficit at that point. Indeed, Social Security at this point is in such good economic shape that people have decided Social Security should be a contributor to economic stimulus because we are reducing the revenue that comes into Social Security for 2 years by reducing the payroll tax. Now I think that's a useful stimulus, but I regret the fact that it was not accompanied by a binding piece of legislation that will return that money from elsewhere in the general fund so that we don't put Social Security further in the hole. But as Henry Aaron points out, yes, we should begin to look at Social Security and the problems of 30 years from now. My own view is that you do that mostly by increasing the level of income on which the tax is levied, but there is no need to begin doing that right away. I should have said this earlier, Mr. Speaker. Two of the greatest accomplishments of America in the 20th century, Social Security and Medicare, accomplished an important goal. They made it the case that poverty was no longer going to be the rule for many older people. Prior to Social Security and then Medicare, poverty was too often the reward for living long enough if you weren't rich. We have brought older people on the whole--not entirely--out of poverty. There are still enough low-income older people that I greatly regretted the fact that this House and the Senate, which are apparently ready to give multimillionaires tax breaks, couldn't support $250 per person for Social Security recipients, some of whom were wealthy but many of whom are quite poor. And I have people saying, Well, you don't want to give Warren Buffett $250. Mr. Buffett, to his credit, has objected to a $250,000 grant that he is being offered--more than that--in the tax reduction that is [[Page 22240]] being offered--tax reduction from what current law would be. But Henry Aaron makes the point that focusing on Social Security is taking up a very controversial issue way prematurely. And as for Medicare, here is what he said, which is of great social and economic importance: ``To slash Medicare and Medicaid spending before reforms to the health care system bear fruit would mean reneging on the Nation's commitment to provide standard health care for the elderly, the disabled, and the poor. The only realistic way to realize big savings in the two programs is to reform the entire health care payment and delivery system in a way that will slow the growth of all health spending.'' I am asking, Mr. Speaker, that Members read this. Henry Aaron is a great economist. He has studied Social Security as well as anybody. He has studied Medicare. He makes the point that focusing almost exclusively on those--or primarily on those--as a way to end the deficit is bad social, economic, and political policy. Let me say at this point, Mr. Speaker, speaking for myself, not for Aaron, there are things we can do in the near term. If we hadn't gone into Iraq, that terribly mistaken war in which so many brave Americans suffered, we would have a trillion dollars more than we have today. We are grossly overextended in having military presence all over the world where it is needed and where it isn't. We continue to spend tens and tens of billions of dollars a year protecting Western Europe when they're not in danger and can protect themselves. So let's focus on reducing military spending, let's rationalize agriculture spending, let's put some restraints elsewhere. But as Henry Aaron correctly points out in this article, let's not make the mistake of focusing on Social Security and Medicare, prematurely in the case of Social Security, and in a socially destructive way with regard to Medicare and Medicaid. All or Nothing = Nothing (By Henry J. Aaron) Washington.--Two plans for reducing the federal deficit are now on the table. One of them, proposed by the chairmen of President Obama's debt-reduction commission, Erskine Bowles and Alan Simpson, was endorsed on Friday by 11 of the 18 panel members. The other comes from the nonprofit Bipartisan Policy Center. The two plans differ in important ways, but both put everything on the table, including not only things like tax rates and defense spending but also Social Security, Medicare and Medicaid. This approach is mistaken, and it's at the heart of why both plans are unlikely to succeed, Deficit reduction should stop debt from growing faster than gross domestic product-- and do so within the next decade. But closing the projected long-term gap between Social Security spending and revenues and materially slowing the growth in Medicare and Medicaid spending will take much longer. The Bipartisan Policy Center's proposal illustrates this temporal mismatch. It aims to prevent government debt--now equal to roughly 60 percent of gross national product from growing faster than income does. After some additional increase during the current economic slowdown, this plan would return the ratio of debt to income to below 60 percent by 2020. To that end, it would lower government spending and raise taxes by $5 trillion over that period. Its menu is replete with controversial items--including cuts in defense spending, a national value-added tax and myriad cuts in domestic spending. The most highly charged suggestions, however, are its proposed changes in Medicare, Medicaid and Social Security. The plan would convert Medicare into a voucher system under which the elderly and disabled would receive money to buy health insurance. The value of this voucher would increase more slowly than health care costs have grown for the the past half century. The proposal would also raise by two- to five-fold the states' share of part of Medicaid costs. The Bipartisan Policy Center's plan would also reduce the share of earnings that Social Security would replace for future retirees. This ``replacement rate'' is already set to decline under current law, but the plan would cut it further, by as much as 22.5 percent. The proposed changes in Social Security, Medicare and Medicaid (whose acceptance by Congress is not assured, to say the least) account for only 5 percent of the deficit reduction that the overall plan would achieve by 2020. To be sure, they promise to do considerably more in later years. But they are largely extraneous to the immediate goal of deficit reduction and debt stabilization by 2020. The president's debt-reduction commission advances even larger changes to Social Security--cuts of up to 41.5 percent--a longer list of near-term changes to Medicare and a blanket cap on the longer-term growth of overall health care spending. But approach is similar to that of the Bipartisan Policy Center's in that it relies primarily on cuts in other government spending and on tax increases to reduce the deficit. Stabilizing the debt must begin as soon as economic recovery is well established and must be accomplished over the next decade in order to prevent the ratio of debt to G.D.P. from becoming excessive. Timely deficit reduction is therefore urgent. Asking Congress simultaneously to reform three of the most important and complicated government programs only jeopardizes the solution of the more immediate problem. The Social Security challenge plays out over the next quarter-century. Early legislation to close the gap between revenues and spending is desirable, because changes will be less onerous if they are phased in. If President Obama believes that a commission could help to restore balance in Social Security, he should appoint one now, but its work could not do much quickly to help reduce the deficit. The fiscal challenge posed by Medicare and Medicaid is vastly larger and infinitely more difficult to meet than that posed by Social Security. Some modest savings in Medicare are manageable, along the lines suggested by both commissions, including increased premiums for upper-income beneficiaries and modest increases in Medicare deductibles. As for Medicaid, its benefits are already stringently limited in some states. In others, payments to providers are so low that doctors shun the program and hospitals suffer losses. To reduce Medicaid benefits now, just as the Affordable Care Act will be adding roughly 16 million new beneficiaries, would risk chaos. To slash Medicare and Medicaid spending before reforms to the health care system bear fruit would mean reneging on the nation's commitment to provide standard health care for the elderly, the disabled and the poor. The only realistic way to realize big savings in the two programs is to reform the entire health care payment and delivery system in a way that will slow the growth of all health spending, The Affordable Care Act is intended to initiate such systemic reforms. The best way to rein in growth of spending on Medicare and Medicaid is to put the provisions of that law into action, but this will take many years. The job that should not be delayed, to stop excessive growth in the federal deficit, is challenging but doable: curb tax expenditures (including tax deductions, credits, exclusions and exemptions); end at least some of the tax cuts that were enacted under President George W. Bush; enact many of the cuts in defense spending advocated by both budget commissions; limit, but not eviscerate, other discretionary spending; and gradually increase Medicare premiums for upper- income beneficiaries. Congress and President Obama should adopt a three-stage program: start deficit reduction as soon as recovery is securely under way, reform Social Security soon and resolutely carry out the Affordable Care Act so that the growth of Medicare and Medicaid can be slowed, Trying to do everything at once only makes it difficult to do anything at all. ____________________