Congressional budget still part of “same family”

By Suzia van Swol-University of New Mexico, Talk Radio News Service
Office of Management and Budget (OMB) Director Peter Orszag said today that the budget proposals under consideration in the House and Senate Budget Committees "are from the same family as the President’s budget." "The resolutions may not be identical twins to what the President submitted, but they are certainly brothers that look an awful lot alike,” said Orszag, speaking to reporters on a conference call.

In response to Republican criticism of the proposal, Orszag responded that it is “easy to lob criticisms, but part of governing, or part of the policy process, needs to involve putting forward alternatives.” He said that he hasn’t seen an alternative budget proposal on the Senate side and his understanding is that there won’t be one. “It seems off to be criticizing, without putting forward an alternative,” stated Orszag.

The tax gap in the budget proposal amounts to a figure around 300 billion a year, and Orszag says that there are some proposals in the budget to start to reduce this number. However, Orszag stated that “there is widespread concern, frankly, that perhaps even the 300 billion dollar estimate is too low because of the complexity of some of the transactions that are involved.”

Orszag said that he takes issue with the objecture that there is “spiraling debt.” He stated that “we are inheriting a budget situation that is a mess and that we are working our way out of, and under both budget resolutions, the deficit is reduced in reduced in half—by more than half—by 2013.”

Orszag went on to explain that the only constraints on the task force are that there can be no tax increases during 2009 or 2010 and that the proposal should not raise taxes on American families making less than $250,000.

Orszag said that in regards to the committee using reconciliation this year,“reconciliation is not where we would like to start but we are not willing to take it off the table. There clearly are some differences between the Senate and the House on this topic and that will be worked out, assuming that both resolutions are adopted by the respective bodies; that would be something that would be worked out in conference.”

Obama's Budget creeps towards the Senate

By Michael Ruhl, University of New Mexico – Talk Radio News Service

Office of Management and Budget Director Peter Orszag testified before the Senate Committee on the Budget concerning President Obama’s FY2010 Budget. Committee Chairman Kent Conrad (D-N.D.) praised the transparency and initiatives set forward in the budget, which included healthcare reform, a revamping of education, and a shift away from dependence on foreign oil.

Ranking Member Judd Gregg (R-N.H.) criticized the costs associated with the budget. Gregg pointed out that the debt to GDP ratio in 2013 will be 67% and questioned how sustainable such a costly plan could be. He said that it would double the publicly held national debt in 5 years.

Orszag stated that this budget accounts for $2.7 trillion in costs not accounted for in previous budgets, and although it would see some increases in mandatory spending, but this is partially due to baseline changes in this spending. He continued that healthcare reform would help, because one of the problems with entitlement spending is that a disproportionate amount of it is in Medicare and Medicaid.

It's Expensive, Yes, But What is the Cost of Doing Nothing?

Coffee Brown, University of New Mexico, Talk Radio News Service

Dr. Peter Orszag, previously the Director of the Congressional Budget Office, currently the Director of the President's Office of Management and Budget, told the Senate Committee on Finance that the cost of doing nothing about healthcare reform would be fiscal crisis, decreased take-home pay, 46 million uninsured Americans, and an increasing burden on state governments which is already cutting into other services, such as increased tuition costs for college.
"Do you know of anyone in either party who wants to do nothing?" Sen. Chuck Grassley (R-Iowa) asked.
Orszag replied, "No, Sir. That's why I am confident that we can get healthcare reform passed this year."
Grassley said there was not yet any conflict between Republicans and Democrats about healthcare reform, but that that was partly because the president's budget, while "bold", was "not very detailed."

Still, $634 Billion is a lot of money.

Sen. Max Baucus (D - Mont.) said, "Would healthcare reform now lead to substantial savings?"
"Yes," answered Orzack.
"Should we accept short term deficit spending to achieve that?" asked Baucus.
Orzack replied, "The president's budget for healthcare reform is designed to be deficit neutral for the first 5-10 years, then we should begin to see savings. If we could cut one percent per year from medical cost growth, we could realize savings of 20 percent of GDP in 50 years. For forty years, medical costs have risen 2 to 2.5 percent faster than inflation."

The hearing, at which Orszag was the sole witness, turned from general costs to specific strategies.

Baucus asked, "Can we incentivize consumers to be more cost effective?"
"25 percent of beneficiaries use 85 percent of the cost. That's the group to target," Orszag replied.
"Would costs come down if everyone were covered? And how could we do that?" Baucus asked.
According to Orszag, we need to reduce consumer costs, reduce complexity, and encourage enrollment. We can encourage enrollment by subsidies, mandates, and automatic enrollment with an opt-out choice. Social norms need to change, so that people would be as shocked if you had no health insurance, as they now are if you don't buckle your seatbelt. the key to that is massive public awareness campaigns, he finished.

Grassley said he was concerned that Medicare Advantage might be cut too sharply under the new budget. Physicians might opt out of Medicare if reimbursement is too low.
Orszag said that Medicare Advantage was targeted because it paid substantially more than basic Medicare.

Expansion of the public sector would place new pressures on the private sector.

"Would a public plan undermine Obama's promise that people who prefer to can stay with their current plan? Would Obama support a plan that would 'crowd' 18 million people off private plans onto public?" Grassley wondered.

Sen. Maria Cantwell (D - Wash.) was also concerned about proposed cuts: "We've found medical homes, home care, and Medicare Advantage to be cost effective, but they face cuts under the new budget."
"Evidence strongly favors integrated care...Long term health care is in the budget...Competitive bidding should reflect local costs," Orszag replied.
He pointed out later, however, that the budget office had found that home care typically had much higher profit margins than other sectors of healthcare, and had been targeted for that reason.

Public funding means public accountability.

Orrin Hatch (R - Utah) said, "A Federal Reserve-style medical board would be a disaster, leave standards of care to the specialty boards. Keep these decisions in the private sector. We should not be be setting prices."
"Those problems are common to all the models. Both public and private systems must change," Orszag said.

Sen. Baucus closed the meeting by pointing out that time is of the essence, and the Senate must move quickly.
"We have our sleeves rolled up; we're ready to go," said Orszag.

Retirement plans don't work

Rep. George Miller (D-Calif.) said that the current "go-go, wild west style approach to governing" is severely affecting citizens' retirement security.

In a hearing held by the House Education and Labor Committee, Miller said, "63 percent of Americans are worried that they will not have enough savings for retirement." He continued, "one in five middle-aged workers stopped giving funds to their retirement plans in the last year." In addition, he said $500 billion has been lost from current 401(k) plans in the last year.

Director of the Congressional Budget Office Dr. Peter Orszag said that the current economic crisis is affecting state and local pensions as well. He said $300 billion were lost from those pension between the second quarter of 2007 and the second quarter of 2008. He said workers are taking "unnecessary risk" in that 90 percent have 401(k) plans in their own company's stock. He said workers need to be given "a strategy of diversification."

Research Director of the Employee Benefit Research Institute Jack VanDerhei said there are "fundamental flaws" in our current retirement plans. He said that the last few weeks have proven that even large companies can go bankrupt and retirement plans are always at risk. He added that he hopes workers don't "overreact" to the economic downturn and continue to contribute money to their retirement plan.

Rep. Yvette Clark (D-N.Y.) said that the public is "in a state of shock." "We're in the midst of a reorganization of the financial system," said Clarke in reaction to the failing economic system.