A Repub­li­can Septem­ber to re­mem­ber

Mon­u­men­tal fi­nan­cial de­ci­sions will test the party’s com­pe­tence

The Washington Times Weekly - - Commentary - By Peter Morici

Repub­li­cans in Congress face a daunt­ing Septem­ber — tough choices on health care, over­all spend­ing and the debt ceil­ing will re­veal once and for all their fit­ness to gov­ern. By the end of the month, health in­sur­ers must file pre­mi­ums for 2018 and in­di­cate in which coun­ties they will of­fer poli­cies on govern­ment ex­changes. The Trump ad­min­is­tra­tion must pro­vide firm in­di­ca­tion about whether it will con­tinue so-called cost-shar­ing re­duc­tion pay­ments to lower pre­mi­ums and co­pays for fam­i­lies with in­comes between 100 and 250 per­cent of the poverty line.

Those crit­i­cal el­e­ments of the Af­ford­able Care Act were struck down in fed­eral court, but the Obama ad­min­is­tra­tion and now the Trump ad­min­is­tra­tion have con­tin­ued pay­ing pend­ing an ap­peal. Con­ser­va­tive Repub­li­can mem­bers could block those in court if broader is­sues re­gard­ing the ACA are not soon re­solved — namely, if a re­place­ment for Oba­macare does not win ap­proval by both the House and Se­nate.

Even with those sub­si­dies firmly con­tin­ued, most coun­ties will have two or fewer in­sur­ers of­fer­ing poli­cies and pre­mi­ums on most in­di­vid­ual poli­cies will in­crease by dou­ble dig­its for 2018.

Sim­ply, Oba­macare has not de­liv­ered on prom­ises to con­trol costs by boost­ing com­pe­ti­tion among in­sur­ers, hos­pi­tals and other ser­vice providers, or by ef­fec­tively reg­u­lat­ing prices through fed­eral pro­grams like Med­i­caid and Medi­care.

Repub­li­cans can’t make mean­ing­ful progress to­ward re­plac­ing or re­pair­ing Oba­macare with­out im­ple­ment­ing price con­trols that bite or at least deny Med­i­caid to able-bod­ied adults who refuse to work.

Con­ser­va­tive Repub­li­cans are in de­nial about the for­mer and mod­er­ates like Sens. Shelley Capito, Lisa Murkowski, Su­san Collins and Rob Port­man demon­strated this sum­mer they can and will block any Repub­li­can re­form pack­age that de­nies free health care to prime work­ing-age men who pre­fer to spend their days play­ing com­puter games and watch­ing ESPN.

Ger­many and Hol­land have manda­tory pri­vate in­surance pro­grams sim­i­lar to Oba­macare but also rec­og­nize the mo­nop­oly power of drug and med­i­cal de­vice man­u­fac­tur­ers, hos­pi­tals and other health care busi­nesses in lo­cal mar­kets. Their gov­ern­ments rig­or­ously reg­u­late prices on the ba­sis of the real value drugs and ser­vices de­liver, and spend about 12 per­cent of gross do­mes­tic prod­uct (GDP) on health care. The United States spends half again more.

No amount of in­ter­state com­pe­ti­tion or tort re­forms ad­vo­cated by con­ser­va­tive Repub­li­cans ab­sent gen­uine price reg­u­la­tions will get the United States into the same time zone on health care costs as those com­peti­tors and oth­ers like Ja­pan. And higher costs for em­ployee ben­e­fits — whether paid di­rectly through pre­mi­ums or in­di­rectly through taxes — are as much a com­pet­i­tive mill­stone around the neck of Amer­i­can cor­po­ra­tions and small busi­nesses as our bur­den­some cor­po­rate and per­sonal tax codes.

This un­will­ing­ness to curb en­ti­tle­ments and forthrightly ad­dress mo­nop­oly pric­ing de­fine why con­gres­sional Repub­li­cans are un­fit to gov­ern, and it all comes to­gether with Septem­ber de­ci­sions about the 2018 fis­cal year bud­get.

Wash­ing­ton must in­vest more in in­fra­struc­ture and de­fense — in par­tic­u­lar the Navy — but it can fi­nance nei­ther with higher taxes or more bor­row­ing. It must carve out what is needed from ex­ist­ing pro­grams — namely en­ti­tle­ments. Specif­i­cally, high cor­po­rate and per­sonal taxes on small busi­ness are driv­ing in­vest­ment off­shore, and large fed­eral deficits re­quire the U.S. govern­ment to bor­row from for­eign in­vestors.

Although U.S. pri­vate cit­i­zens save, they don’t save enough to fi­nance both pri­vate in­vest­ments in new homes and busi­nesses and fed­eral deficits. Con­se­quently, the net for­eign in­debt­ed­ness of the United States has reached about 45 per­cent of GDP and is on track to ex­ceed lev­els that trig­gered fi­nan­cial crises or wrench­ing aus­ter­ity for gov­ern­ments in other ad­vanced, in­dus­tri­al­ized coun­tries.

En­ti­tle­ments and in­ter­est pay­ments now con­sume more than 60 per­cent of the fed­eral bud­get, and ac­cord­ing to the Con­gres­sional Bud­get Of­fice, those will con­sume all fed­eral tax rev­enue by 2027.

By the end of the month, Congress must pass both spend­ing leg­is­la­tion and raise the debt ceil­ing or the fed­eral govern­ment will not be able to pay all its bills in Oc­to­ber. De­ci­sions sur­round­ing those will de­fine whether Repub­li­cans are will­ing to curb en­ti­tle­ments to fi­nance needed spend­ing on in­fra­struc­ture and de­fense or sim­ply run the govern­ment into bank­ruptcy over the next decade.

A Repub­li­can Party that won power on big prom­ises to re­peal Oba­macare and cut taxes can no longer kick the can down the prover­bial road with­out tak­ing the na­tion’s fi­nances over a real cliff.

Although U.S. pri­vate cit­i­zens save, they don’t save enough to fi­nance both pri­vate in­vest­ments in new homes and busi­nesses and fed­eral deficits.

Peter Morici is an econ­o­mist and busi­ness pro­fes­sor at the Uni­ver­sity of Mary­land, and a na­tional colum­nist.


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