No new promises, please

The bill’s architects have cleverly gamed the rules to minimally satisfy the requirements of getting the referee to say the new promise is funded, while creating real long-term fiscal risk. There is an obvious parallel to the financial engineers who worked with credit rating agencies to tweak new risky credit derivatives until they barely qualified for a AAA rating. The financial engineers did not eliminate real risk, they instead solved for the rating agency’s scoring model. They then sold these products to clients as safe investments, with a wink. The authors of the pending health care bills have done the same with the CBO scorekeepers. You are the potential client being asked to buy this product. The proponents assure you that the scorekeeper says it’s OK. Then they wink.

Like many clients who did not understand the derivatives they were buying, you may not be an expert in the arcane world of CBO scoring. Or you may believe the bill will be implemented exactly as written, that there will be no future expansions or spending increases, and that future elected officials will resist all of the above pressures. If so, you still must wrestle with the unsustainable fiscal path with which we began. The deficit reduction credited to this bill by the referee and claimed by the bills’ proponents sounds large, but compared to our long-term fiscal problems it is trivially small. The President argued that health reform is entitlement reform, and that slowing the growth of health spending would address our long-term fiscal problem.

Instead, at best this bill makes our long-term fiscal problem no worse, while using up options to solve it. The pending legislation takes all of the easiest hard choices and uses them to offset the new promise. This leaves even harder and more painful policy choices when policymakers choose or are forced to address the long-term fiscal problem…

Make us no new promises, please, until you have funded the old ones.