Misplaced budgetary concerns are impeding major legislation that would create and preserve jobs, continue unemployment and health benefits for those who are out of work, and fix Medicare’s flawed payment formula for physicians for several years.
Our nation’s short- and long-term budget issues may look similar, but they are fundamentally different. Current budget deficits are not a problem. In fact, large deficits are needed in a deep economic downturn such as this one. The problem is that our current fiscal path is unsustainable over the longer term.
As Chad Stone and I explained in a paper yesterday, the jobs bill would provide a needed boost to the economy in the near term, but it wouldn’t add significantly to long-term deficits because its provisions are largely temporary. Those provisions — including extending unemployment benefits, subsidized COBRA health insurance, and fiscal assistance to states — are widely recognized as effective ways to boost the economy and create jobs when the economy is operating well below capacity.
Offsetting the cost of these measures by cutting spending or raising taxes at the same time, as some favor, would cancel out the very economic stimulus they are designed to provide. That’s why the recently enacted pay-as-you-go (PAYGO) legislation specifically exempts emergency measures, such as those needed during economic downturns, from the requirement that Congress pay for changes in taxes or entitlements.
Offsets that take effect after the economy is fully back on track would not suffer from the same problem, but Congress should not hesitate to enact beneficial measures to shore up the economy even if it cannot find ways to pay for them.
The upcoming legislation may also provide a multi-year fix for Medicare’s flawed sustainable growth rate (SGR) payment formula for doctors. If not changed, the SGR formula will trigger a massive 21.3 percent reduction in doctor payment rates on June 1. Everyone agrees that would threaten Medicare beneficiaries’ access to physician services.
Although offsetting the cost of the SGR fix through tax increases or spending cuts would be desirable once the economic recovery gains steam, Congress has repeatedly signaled that it is unlikely to do so. The new PAYGO law — in a bow to this political reality — exempts the cost of freezing physician payment rates for five years.
If Congress isn’t going to pay for the SGR fix, it is more sensible — and no more costly — to enact a multi-year solution rather than a series of short-term extensions, which create needless uncertainty for both Medicare beneficiaries and their doctors.