A Liberal Economist Shoots Down the GOP’s Fiscal Chicken Hawks
Republicans want a tax cut, but they don’t want to fully pay for it and may be willing to increase the deficit by $1.5 trillion over 10 years. This would continue a troubling cycle, economist Jared Bernstein writes, in which supposed fiscal conservatives “use the deficit argument to block spending, promote fiscal austerity, and small government, conveniently tossing deficit concerns aside when it comes to tax cuts.”
You’ll hear arguments about how increased economic growth will make up for the budgetary effects of the tax cuts, but don’t believe them. “Our fiscal history on this point is clear: Cutting taxes loses revenues, which, unless offset by higher taxes elsewhere or spending cuts, increases the budget deficit, which in turn raises the debt.” When this happens again, and the promised growth effects don’t materialize, the tax cutters will go back to pushing for spending cuts.
The country faces a number of serious challenges, including an aging population that by itself will require increased government spending, and we need a tax policy that does more than drive up the deficit. “The problem with structural deficits — ones that go up even in good times — is that they reveal that we’re unwilling to raise the necessary revenues to support the government we want and need. This enables those who whose goal is to shrink government to point to deficits and debt as their proof that we can’t afford it, whatever ‘it’ is, except when ‘it’ is tax cuts.” (New York Times)
Chart of the Day: High Deductible Blues
The higher the deductible in your health insurance plan, the less happy you probably are with it. That’s according to a new report on employer-sponsored health insurance from the Kaiser Family Foundation and the Los Angeles Times.
Chart of the Day: Tax Cuts and the Missing Capex Boom
Despite the Republican tax overhaul, businesses aren’t significantly increasing their capital expenditures. “The federal government will have to borrow an added $1 trillion through 2027 to pay for the corporate tax breaks,” says Bloomberg’s Mark Whitehouse. “So far, it’s hard to see what the country is getting in return.”
Chart of the Day: 2019’s Lobbying Leaders
Roll Call reports that trade, infrastructure and health care issues including prescription drug prices “dominated the lobbying agendas of some of the biggest spenders on K Street early this year.” Here’s Roll Call’s look at the top lobbying spenders so far this year:
Can You Fix Social Security? A New Tool Lets You Try
The Congressional Budget Office released an interactive tool Wednesday that shows how some widely discussed policy changes would affect the long-run financial health of the Social Security system.
“This interactive tool allows the user to explore seven policy options that could be used to improve the Social Security program’s finances and delay the trust funds’ exhaustion,” CBO said. “Four options would reduce benefits, and three options would increase payroll taxes. The tool allows for any combination of those options. It also lets the user change implementation dates and choose whether to show scheduled or payable benefits. … The tool also shows the impact of the options on different groups of people.”
Click here to view the interactive tool on the CBO website.
Why Prescription Drug Prices Keep Rising – and 3 Ways to Bring Them Down
Prescription drug prices have been rising at a blistering rate over the last few decades. Between 1980 and 2016, overall spending on prescription drugs rose from about $12 billion to roughly $330 billion, while its share of total health care spending doubled, from 5% to 10%.
Although lawmakers have shown renewed interest in addressing the problem, with pharmaceutical CEOs testifying before the Senate Finance Committee in February and pharmacy benefit managers (PBMS) scheduled to do so this week, no comprehensive plan to halt the relentless increase in prices has been proposed, let alone agreed upon.
Robin Feldman, a professor at the University of California Hastings College of Law, takes a look at the drug pricing system in a new book, “Drugs, Money and Secret Handshakes: The Unstoppable Growth of Prescription Drug Prices.” In a recent conversation with Bloomberg’s Joe Nocera, Feldman said that one of the key drivers of rising prices is the ongoing effort of pharmaceutical companies to maintain control of the market.
Fearing competition from lower-cost generics, drugmakers began over the last 10 or 15 years to focus on innovations “outside of the lab,” Feldman said. These innovations include paying PBMs to reduce competition from generics; creating complex systems of rebates to PBMs, hospitals and doctors to maintain high prices; and gaming the patent system to extend monopoly pricing power.
Feldman’s research on the dynamics of the drug market led her to formulate three general solutions for the problem of ever-rising prices:
1) Transparency: The current system thrives on secret deals between drug companies and middlemen. Transparency “lets competitors figure out how to compete and it lets regulators see where the bad behaviors occur,” Feldman says.
2) Patent limitations: Drugmakers have become experts at extending patents on existing drugs, often by making minor modifications in formulation, dosage or delivery. Feldman says that 78% of drugs getting new patents are actually old drugs gaining another round of protection, and thus another round of production and pricing exclusivity. A “one-and-done” patent system would eliminate this increasingly common strategy.
3) Simplification: Feldman says that “complexity breeds opportunity,” and warns that the U.S. “drug price system is so complex that the gaming opportunities are endless.” While “ruthless simplification” of regulatory rules and approval systems could help eliminate some of those opportunities, Feldman says that the U.S. doesn’t seem to be moving in this direction.
Read the full interview at Bloomberg News.