Does this make any sense? No, but there is likely to be a lot more of this in our immediate future.
Republicans are dug in very hard against raising taxes. I testified before the Joint Economic Committee of Congress last week, and the discourse was much more cordial and constructive than it had been in recent years. Still, I doubt the House Republicans will budge in their opposition to raising revenue.
Meanwhile, in December, the Obama administration decided not to press its main advantage, which was the expiration of the Bush tax cuts. The drama over the so-called fiscal cliff at the end of last year was the right moment to put additional revenue on the table; this happened, but only to a small and insufficient degree.
At the hearing, Sen. Amy Klobuchar, D-Minn., vice chairman of the committee, said Medicare should be able to negotiate the price of prescription medicine, which could save hundreds of billions of dollars over 10 years. This idea will soon be gaining traction. How could any reasonable person keep this off the current budget table (unless they work for Big Pharma)?
More broadly, we need to confront and limit healthcare costs (not just Medicare and Medicaid). Cutting government support for healthcare and shifting the burden onto families will have one clear and unavoidable impact: less care and less good care for poor people and their children.
The United States needs a strong defense. And that includes helping a generation out of poverty, up the education ladder and into the middle class.
We must look at how the world is changing and recognize threats, including those from North Korea, Iran and terrorism (including the cyber kind). We need the government to help organize and pay for our protection, and that includes our data networks.
But we must also address the poverty all around us. Income inequality has increased over the past three decades. Many families thought they were making sensible decisions for the future, only to see their jobs move overseas and their human capital lose value. The housing boom-bust and recent recession have exacerbated these problems. The social-insurance system is already stretched very thin.
Shifting healthcare costs from the government to the private sector doesn’t help anyone. I agree with the Congressional Budget Office that doing so would probably increase overall healthcare costs (as a percentage of gross domestic product and as a percentage of your total income). The effect of raising the Medicare eligibility age to 66 or 67, from 65, would be similar — creating a new group of people, ages 65 or 66, who can get insurance only at a high price.
Americans need to have a more honest and open conversation about what we want to achieve as a nation and how to use our government’s fiscal policy, in a responsible manner, to reach these goals.
Congress should end the sequestration and replace it with a more-sensible process of determining how big the federal government should be (in terms of spending as a percentage of GDP) and how to pay for that.
Simon Johnson, a professor at the MIT Sloan School of Management, as well as a senior fellow at the Peterson Institute for International Economics, is co-author of “White House Burning: The Founding Fathers, Our National Debt and Why It Matters to You.”