The Super Committee Faces the Challenge of Knowing the Unknowable
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So the Super Committee--formally known as the Joint Select Committee on Deficit Reduction-- is up and running on Capitol Hill. It even has its own website. And yet one US Senator, Mike Lee of Utah, told a reporters' breakfast this morning that he is "bleak," "pessimistic," even "bitter," about the prospects for the Super Committee. The fundamental problem, Lee says, is the inability of one Congress to bind a future Congress. To which we can add, the even more fundamental problem is straight out of the Austrian School of Economics--the unknowability of the future, and the folly of trying to know the unknowable.    

The mission of the Super Committee, as everyone knows, is to reduce the future deficit by $1.5 trillion over the next ten years. Although some members of the Super Committee, including Rep. Chris Van Hollen (D-MD), have urged the Super Committee to seek even larger deficit reductions, as much as $4 trillion. Inevitably, deficit reductions of that magnitude will cut into Medicare, Medicaid, and all other federal health and research programs.  

But the question is always, "how?" And then the question is, "really?" Another member of the Super Committee, Sen. Jon Kyl, has already suggested saving money by hiring more auditors. And former House Speaker Newt Gingrich--not associated with the Super Committee, but an influential figure in the healthcare debate--has argued for years that Medicare fraud costs as much as $120 billion a year.

Those targets are worth aggressively pursuing, yet even if we stipulate that we can find plenty of genuine ways to squeeze down federal spending, we are still left with the question, "How do we know what's real? How do we know which cuts will actually materialize?" After all, the future is unpredictable. And yet one thing is relatively predictable: Congress responds to pressure from powerful claimants. A case in point is the Sustainable Growth Rate (SGR) for Medicare, enacted by Congress in 1997, aimed at reducing the growth rate of Medicare reimbursements to doctors. Predictably, doctors don't like this limitation, and while the AMA has never been able to repeal the SGR, the AMA has been able to adjust the SGR in its favor just about every year--the so-called "doc fix." Princeton economist Uwe Reinhardt describes the process as the "annual drama of the 'doc fix,'" and it always ends the same way--doctors get their money.

In other words, the confident predictions about savings from the SGR have turned out not to be true. The future, once again, is unpredictable, and it is also uncontrollable. The Congress that voted for the SGR in 1997 is not the Congress voted to adjust them upward in subsequent years. With apologies to Heraclitus, you can't cross the same budgetary river twice.

So what if the Super Committee votes on big cuts for Medicare in 2011? And what if the Congress as a whole goes along? If history is any guide, the cuts will be shallow to non-existent in the near term, and deeper only in the out years. And yet what happens when those out years become "in years"? Well, the SGR saga helps answer that question.

In other words--how do we say this nicely?--the Super Committee is likely to be a failure at deficit reduction. It is premised on over-confident pseudo-certainty about the future, and about the ability of one Congress to bind a future Congress.

That's the opinion of Sen. Lee, who told a Wednesday breakfast co-hosted by The American Spectator and Americans for Tax Reform that he doesn't see how the Super Committee can succeed. "I am pessimistic about the Super Committee," he said. "I don't think it works all that well to put them in a room, and tell them, 'agree.' "We have been down that road before, he said, recalling innumerable budget negotiations--most recently, the debt-ceiling legislation--in which "A small number of Congressional leaders are holed up and then bring it forward at the last possible moment, saying, 'If you don't pass this, it will be fiscal armageddon.'" Lost in that process, he added, is any sort of deliberation, and prospects for a good policy outcome.

Indeed, Lee added, to the extent that the Super Committee obviates tougher measures--such as immediate spending cuts, and an immediate plan for balancing the budget, as envisioned in the "cut, cap, and balance" legislation he co-authored-- the Super Committee is at best a detour and at worst a delusion. The real answer, he has long argued, is a constitutional amendment requiring a balanced budget.

Of course, some might question whether a balanced budget amendment is much of a better solution. Fraud aside, the basic reason why Medicare, for example, is expensive is because illness is expensive. The Alzheimer's Association, for example, estimates that the annual cost of Alzheimer's Disease is $172 billion a year; and the cumulative cost of Alzheimer's treatment is estimated to total $20 trillion by 2050. By all means, let's find ways to improve Medicare spending and root out fraud. But let's also realize that the real driver of Medicare spending are the illnesses suffered by Medicare beneficiaries.

And that suggests what a real strategy for getting Medicare spending under control would look like.

1 Comment

Perfectly written subject matter, Really enjoyed studying.

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