Senate Majority Leader Harry Reid today revealed his own budget proposal, which would hand Obama the full $2.4 trillion borrowing authority he has requested—enough to last through the 2012 election—tied to $2.7 trillion in spending cuts that would leave Medicare, Medicaid and Social Security untouched. The plan does not attempt to raise new revenues: conservatives have been adamant that they will not vote for any proposal that raises taxes.
Reid announced his plan this afternoon, pointing out that his package meets Republicans’ two major demands: it does not raise taxes and the spending cuts are designed to meet or exceed the amount of the debt-limit increase.
“I spent all week-end trying to work something out with the Republicans,” Reid said. “We are spending $700 billion dollars this year on the military, more than all of the other countries put together. You would think the Pentagon could chip in some bucks. Gates thinks they can,” he added, referring to former Defense Secretary Robert Gates. “But this week-end, lo and behold, Republicans wanted to raise money for the Pentagon.”
Meanwhile House Speaker John A. Boehner has proposed a two-step plan to cut spending by nearly $3 trillion, laying out the details to his Republican colleagues this afternoon in a closed-door meeting in the Capitol. Boehner’s plan includes an immediate increase in the debt ceiling of up to $1 trillion that is paired with $1.2 trillion in cuts to discretionary spending over the next decade. A new, joint House-Senate committee of 12 lawmakers would then be mandated to come up with another $1.8 trillion in deficit savings over 10 years by Christmas.
“What they are trying to do is to force us to have the same debate on the exact same subject, two months from now,” said Reid. “A short-term agreement risks many of the same dire consequences that would be triggered by the default itself.” If Congress adopts a short-term approach, Wall Street might still lower the nation’s credit rating.
Christian Cooper, head of U.S. dollar derivatives trading in New York at Jefferies & Co., told Bloomberg that markets view Boehner’s two-stage plan as a “non-starter because we now know it is amateur hour on Capitol Hill and we don’t want to be painted in this corner again.”
Earlier today, Treasury bonds fell after Mohamed A. El-Erian, whose Pacific Investment Management Co. runs the world’s biggest bond fund, said the U.S. may lose its AAA debt rating even if lawmakers reach a plan to avoid a default.
While Reid’s plan takes Medicare and Medicaid off the table, Huffington Post’s Sam Stein reports that as for cuts to Medicaid or Medicare suppliers—namely hospitals and pharmaceutical companies—that remains less clear.”
According to Stein, Reid’s budget “leans heavily on cuts to discretionary spending. The package will also reportedly include roughly $1 trillion in savings that will come from the drawdown of the wars in Iraq and Afghanistan (which the Congressional Budget Office does score).” He explains, “if entitlement programs remain more or less untouched in the plan, there would be few other areas from which to draw ten-year savings.” Later this afternoon, Reid's office confirmed that $1 trillion will indeed come from the drawdown of troops.
Reid's proposal would also establish a congressional committee comprised of 12 House and Senate members to consider additional options for debt reduction. The committee's proposals would be guaranteed a Senate vote with no amendments by the end of the year.
Republican reactions to Reid’s plan were frosty, but reportedly, many of the cuts are ones that Republican leaders have agreed to in past discussion.
Reid’s proposal meets Republican’s major demand: no new taxes. At the same time, liberals will be enormously relieved that the package protects Medicare and Medicaid. From a reasonable man’s point of view this would seem like a win-win solution. Now we will find out how many reasonable men there are in Washington.
I think it’s more accurate to say that it leaves Medicare and Medicaid unscathed “for now.” That commission is a dangerous thing to include.
Once again liberals want to kick the can down the road for political benefit when the Republicans are making the tough calls at their political expense.That’s called leadership…much the same when Reagan told Volker to raise interest rates to crush inflation…which has kept inflation low for more than 30 years. Unfortunately spending to liberals is like crack to an addict. The electorate sent a very loud message to Congress in 2010 and the newly elected reps are honoring their contract with America, unlike this Prez who has produced no jobs and bankrupted the country.
Robert Reich said that the real crisis is caused by inflation in the cost of health care and that without dealing with that issue, this crisis cannot be solved without great pain! Now that brings the entire subject back into the real focus of this blog. We cannot have a secure life in this country for most if we do not control the runaway health care cost we are now seeing!
If solvency is the goal, Medicare and Medicaid need to be “scathed” to at least some degree.
Right you are Brian.
A recent CNN poll found that 57 percent of Americans blame the current economic woes on former President George W. Bush and the Republicans, compared to 29 percent on President Obama and the Democrats. The electorate sent a message to Congress in 2010, they wanted a divided government, but they didn’t want a dysfunctional one like the Tea Party bangers are giving them. I wish the bangers would ease up on the cool-aid!
Brian, ng
I’m curious: how would you cut Medicaid?
Should we continue to exclude impoverished adults who don’t have children? I don’t really see how we could cut reimbursements to providers . . .
ng– Yes, we need to rein in healtlh care inflation.
As I’ve explained at length, the Affordable Care Act does just that by changing how we pay for care, (paying for quality not quantity), cutting annual “updates” in payments to hospitals, nursing homes, etc by 1% a year (putting them under some financial pressure to motivate them to be more efficient), and using various financial carrots and sticks — paying more for better outcomes, not paying for preventable readmissions, preventable errors, etc. I also expect that Medicare is going to begin negotiating for lower prices on drugs, and eventually, lower prices on devices and durable medical equipment as well.
Finally, as I explained in an earlier post, in the 12 months ending in April,
Medicare spending grew no faster than GDP. Things have already begun to change on the ground.
Gregory–
Polls also show that when it comes to the deficit debate, the public supports the president.
And I agree, people are very frustrated with the gridlock in Washington.
Hoyt–
Today, Bloomberg News pointed out that
“Republican House Speaker Boehner, , House Majority Leader Eric Cantor, House Budget Chairman Paul Ryan and Senate Minority Leader Mitch McConnell all voted for major drivers of the nation’s debt during the past decade: Wars in Afghanistan and Iraq, the 2001 and 2003 Bush tax cuts and Medicare prescription drug benefits. They also voted for the Troubled Asset Relief Program, or TARP, that rescued financial institutions and the auto industry.
“Together, a Bloomberg News analysis shows, these initiatives added $3.4 trillion to the nation’s accumulated debt and to its current annual budget deficit of $1.5 trillion. ”
Why is Medicaid covering adults with children? Shouldn’t it be just children?
Peter, Mike M
Peter if the parents die because they don’t have accesss to healthcare, the children would become orphans.
(Btw– contrary to the conventional wisdom, emergency rooms do not have to treat poor people unless they are unconscious or incapable of walking. As long as they are ambulatory the ER can turn them away if they don’t have insurance or cash.
So if you are very poor and don’t have Medicaid, you may not get care. In Money-Driven Medicine I write about a man who had been badly beaten– his jaw was fractured. Two ERs turned him away before the third one treated him.
. Medicaid is health insurance for the poor. Originally, it was supposed to be for all poor people but many (about half) of all states decided not to cover adults unless they had children. This meant that homosexuals suffering from AIDS could not get care unless friends could raise the money to pay for their medication and hospital bills. Sometimes they couldn’t. Back in the 1980s, my husband and I knew people who were in that situation and died.
(SCHIP is the program that provides health insurance for children only.)
Mike M.– I, too, was somewhat concerned about the commission. But note that under Reid’s plan, he has already put together savings equal to what is needed to lift the debt ceiling so that we don’t default on our debt.
Any cuts that the commission suggests would be extra.
Then, the Senate would have to approve the cuts the Comission recommended. (As far as I can tell, the House wouldn’t have a vote.)
I cannot imagine the Senate endorsing serious cuts to Medicare or Medicaid benefits or reimbursements if it wasn’t absolutely necessary to avoid default, and under Reid’s plan, it wouldn’t be necessary.
The AARP and most seniors would be against cutting Medicare–or lifting the eligiblity age to 67. (As I explained in an earlier post, that saves no money, but just shifts the burden, so that everyone’s insurance goes up.) As for
Medicaid, it’s hard to imagine the Senate slashing health care benefits for the poor while keep the Bush tax cuts for the very rich. . .
Under Boehner’s plan, on the other hand, I believe that the Commission’s cuts would be needed to complete the second step of the process.
They should pass the Reid plan. No body wants to go through all of this bickering 6-8 months down the road.
I think they definitely need to pass this otherwise we are really just asking for it. Beckershospitalreview.com has been posting a lot of great articles recently about the affects this proposal would have on medicare/medicaid.
Valerie–
I totaly agree.
Congress has other things to talk about- namely,
unemployment and the economy.
This partisan bickering is
distracting legislators from the real problems.
Valerie–
I totaly agree.
Congress has other things to talk about- namely,
unemployment and the economy.
This partisan bickering is
distracting legislators from the real problems.
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