By Steven Pearlstein
Wednesday, May 20, 2009
In the political menagerie that is Washington, there exists a species known as the budget scold -- analysts, advocates, editorial writers and politicians who possess a fierce determination to bring the federal budget into better balance.
Budget scolds have a wonkish demeanor and a skeptical outlook. They possess an undue fascination with rules and processes, and speak in the arcane language of baselines, sunsets and pay-fors. There have been times when the budget scolds have saved the country from short-sightedness and pulled us back from the fiscal brink. There have been other times -- and this is one of them -- when their well-intentioned hand-wringing borders on the politically naive and threatens to derail much-needed reforms.
Let us begin with the budget scolds' recent indictment of President Obama for his alleged scheme to turn the United States into a third-rate economic power by racking up more than $10 trillion in additional government debt. The evidence for this supposed fiscal treason is the 10-year budget projection that was included in his spending proposal for the next fiscal year.
Do you think, maybe, we could cut the guy a little slack? After all, he's been in the job all of four months. He inherited two wars and the worst economic crisis in 75 years. And he came to office after an eight-year orgy of tax cutting and spending.
There's also every indication that Obama takes his fiscal responsibilities seriously. Against the best advice of many Washington insiders, he's also decided to move ahead with the one initiative -- health-care reform -- that is the single most important thing he could do to lower long-term deficits. And while he has acknowledged that the tax increases and spending cuts that he included in the budget are just a first step on the long, uphill road to fiscal rectitude, even those ideas have received the "dead on arrival" treatment. Would anything have been accomplished at this point by proposing more?
Indeed, these 10-year budgets have become useless exercises in false precision and political nonsense. In reality, the president and Congress do their budgeting on an annual basis, with each year offering a fresh opportunity to revisit tax and spending decisions. The longer-range projections are certainly useful for our general understanding of where things are headed -- and there's no doubt that they are now headed in a bad direction. But to treat what Obama submitted as a definitive fiscal blueprint for his two terms in office -- plus the first two years of his successor -- is politically and economically absurd.
The biggest threat from this budgetary obsession is likely to come up in the debate over health-care reform. Under pressure from budget scolds, Congress and the administration have agreed that any plan to extend health care to 47 million uninsured Americans and reform a $2.6 trillion industry will be "budget neutral" within the first five years after enactment.
There is, for example, general agreement that it will cost $100 billion to $150 billion a year to provide the subsidies necessary to allow all Americans to afford a basic health plan. But the Congressional Budget Office, the official scorekeeper on these matters, has been reluctant to certify the major cost savings that might come from various proposals to restructure the health delivery system, or reform the health insurance market to make it more competitive, or change the way doctors and hospitals are compensated so they have the incentive to use only the most cost-effective treatments.
It is, of course, the CBO's job to be skeptical, particularly after a number of past experiments in this area have yielded disappointing results. But it is also true that because nothing of this scale and complexity has been tried before, projecting the fiscal impact is next to impossible. This budgetary standoff will leave Congress with no choice but to try to finance its health-reform efforts by raising taxes or limiting payments to doctors and hospitals, possibly jeopardizing the entire project.
We can certainly applaud policymakers for their reluctance to enact another expensive and popular entitlement program without finding the money to pay for it. But it is folly for them to put themselves in a political and procedural straitjacket. In all of history, no revolution was ever made by budget analysts. Health reform requires leaders with the foresight and confidence to take a leap into the unknown.