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Super Committee Sets Sights on Social Security, Medicare and Medicaid

The Super Committee held its first public hearing today, the subject of which was the “History and Drivers of Our Nation’s Debt and Its Threats.” The responses of the Super Committee’s members to the testimony of Congressional Budget Office (CBO) Director Douglas Elmendorf showed bipartisan consensus in favor of cutting Social Security, Medicare and Medicaid; little discussion of defense spending; and Republican denials that immediate spending cuts are bad for the economy.

After the hearing ended, I stuck around to interview Super Committee members with my flip cam. I managed to get a hold of Portman before he left.

He was very reserved in his comments, but his remarks make clear they are considering Social Security cuts. When I reminded him that Social Security does not contribute to the debt, he cited the irrelevant fact that the Social Security ran a cash deficit this year. (Counting interest on its bonds it had a $69.3 billion annual surplus in 2011, and an accumulated surplus of $2.7 trillion.)

Below is the transcript of our exchange.

Daniel Marans: Excuse me Senator Portman, you didn’t discuss so much today the changes you want to see made to Social Security. I felt like the health care programs got more attention (Portman nods) and I was wondering what changes you might like to see and how you think that program might be dealt with?

Sen. Rob Portman (R-OH): We’ll see. I think there was discussion about it, and certainly the CBO tables made the point that the fastest growth is in the health care programs and Social Security. There was the projection shown that it would be a growing part of our budget over the next ten years—

DM: What about the fact that Social Security doesn’t have borrowing power, and so it doesn’t contribute—it is paid for, and it doesn’t contribute to the deficit? How do you think that could affect the way that—

RP: (Shrugs) We’ll see, we’ll see. It is running a cash deficit this year, so there is some concern about it.

Here were some key elements of the hearing:

  • CBO testimony conflates Social Security with Medicare, Medicaid and the other health care programs; Becerra corrects it. If I had a nickel for every time I heard the phrase “Social Security and the major health care programs” during the course of the hearing, I would be a rich man. CBO Director Elmendorf dwelled on the cost trend-line of Social Security combined with the health care programs—Medicare, Medicaid, CHIP, the ACA exchanges and subsidies—in the next decade, in order to say that “entitlements” were the leading causes of the debt. It is a very misleading trend-line, because Social Security’s relationship to the debt and budget is completely different from that of the health care programs. Social Security cannot contribute to the deficit, since it is a pay-as-you-go system. And as Rep. Xavier Becerra (D, CA-31), ranking member of the Social Security Subcommittee, pointed out, Social Security spending as a share of GDP is projected to stabilize at 6 percent—just a one-point increase from its current level—whereas the health care programs are projected to grow to more than 17 percent of GDP in the coming decades. So as not to throw the health care programs under the bus, Becerra also noted that Medicare and Medicaid are not in trouble due to growth in the programs themselves, but because of the rapidly increasing costs of the private health care services they reimburse.

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    Source: Congressional Budget Office, The Long-Term Budget Outlook, June 2010 (Revised August 2010)

  • Democrats party like it’s 2001…sort of. Democratic committee members all successfully underscored the extent to which deficits were the result of the Bush tax cuts. And they did it by repeatedly bringing the conversation back to the surpluses we had in 2001, right before the tax breaks happened. Rep. Van Hollen (D, MD-8) pointed out that if all the Bush tax cuts were allowed to expire, and tax rates were brought back to the Clinton-era levels, when we created 20 million jobs, we would reduce the deficit by more than $4 trillion. Unfortunately, Van Hollen stopped short of endorsing full repeal of the Bush tax cuts. Instead, he suggested the Super Committee strive to emulate the Rivlin-Domenici and Bowles-Simpson plans with a “balanced” proposal that includes cuts and revenue increases.
  • Republicans refuse to believe cuts will stall economic recovery. To his credit, Elmendorf repeatedly warned that tax increases and spending cuts that occur while the economy is still recovering would seriously impede the economic recovery. But Super Committee Republicans pretty much repeated their growth-through-austerity argument across the board. Sen. Rob Portman (R-OH) suggested that we are already losing jobs because of the “uncertain investment environment” created by the deficit, so immediate deficit reduction is needed to stem job losses. This is creative, because it allows conservatives to say that no matter how badly employment fares under their austerity policies, without austerity it would always be worse, because of the “uncertain investment environment.”
  • Kyl surprises with proposals that could gain bipartisan support. Sen. Jon Kyl (R-AZ), who recently said new defense cuts would be an immediate deal breaker, struck a more conciliatory tone.
    • Cutting Medicare waste. Kyl focused his remarks on finding ways to cut waste, fraud and abuse from Medicare. “We can save money on Medicare without cutting benefits,” Kyl said. Kyl cited a CATO study estimating that Medicare makes $100 billion in improper payments annually, and asked Elmendorf whether allocating additional funds to enforcement would save money in the long-run. Elmendorf was less optimistic about the prospect, suggesting that many “improper payments” refer to administrative errors in the forms for payments that would still be going out if those errors were corrected. Elmendorf also said he knew of no evidence that significant deficit reduction just by reducing waste, fraud and abuse. Still, Baucus and Upton chimed in to voice strong support for finding ways to cut fraud.
    • Selling government land. When Kyl asked about selling unused government land to generate revenue, Elmendorf was similarly dismissive of the idea, claiming most of it was worthless, uninhabitable desert property. When the land is valuable, Elmendorf warned, communities become very defensive of it, and have staged effective resistance to its sale in the past.
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Daniel Marans

Daniel Marans