Hearing of the House Budget Committee - Congressional Budget Office's Long-Term Budget Outlook
Interview
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REP. ROBERT C. "BOBBY" SCOTT (D-VA): Thank you, Mr. Chairman.
Dr. Orszag, we're trying to deal with this AMT problem, and it seems to me that a lot of the AMT problem was predictable because we passed the tax cuts knowing that there'd be an AMT problem, and that was part of the scheme. You pass a trillion-dollar tax cut and you phase it in, phase it out, don't pay for the AMT, figuring that when the time comes we'll fill in the gaps. We put in a down payment of about ($)300 billion on the tax cut, and now we're kind of filling in the gaps, AMT being one.
If the tax cuts were to expire, how much of an AMT problem would we have?
MR. ORSZAG: The AMT problem is significantly less extreme in the absence of the 2001 and 2003 tax legislation. And the reason again is that people wind up on the AMT when their AMT liability's higher than their regular income tax liability. So as you reduce regular income tax rates, more people are shifted onto the alternative minimum tax.
REP. SCOTT: So we could equalize it when we get there and make sure that if we have a tax cut, it's paid for without the AMT.
I notice that your analysis didn't include interest on the national debt. That is one of the fastest growing parts of the federal budget; it's already, what, a couple hundred billion dollars. And according to the chart in your testimony, Page 5, by 2030 it goes from 1.7 to 4.8 percent under the alternative -- Page 5 -- under the alternative fiscal scenarios; 2007 is 1.7; 2030 is 4.8 percent. It almost -- it triples. The interest on the national debt, which would put it in the 700, 800 percent range -- how do you do a budget that -- shouldn't you, in your charts on Page 3, shouldn't interest on the national debt be a part of that chart?
MR. ORSZAG: You know, you could always add interest spending on top of so-called primary spending, that is non-interest spending. The reason that analysts sometimes, or often, examine primary spending is that is what drives the debt dynamic. So if non-interest spending exceeds revenue, you wind up with rising debt and vice-versa, and the debt dynamics just follow. You can present the figures in terms of overall government spending, and as you note on Table 1.2, that's what we do.
REP. SCOTT: Well, and on Table 2 you also show that the kind of so-called primary -- we actually have a surplus if we didn't have interest on the national debt. But since you've run up interest on the national debt, we have actually a deficit, so we're adding to the debt.
MR. ORSZAG: Correct.
REP. SCOTT: So, I mean, it's nothing you can ignore. As a matter of fact, it's the first thing you've got to pay.
You just finished answering a health care question where if we fix Medicare and Medicaid, others will follow. I have a question of kind of who's following who. The health care problem is not a Medicare and Medicaid problem, it's a general problem. Everybody's health care, everybody, the private sector is going. And is there any credible way to fix Medicare and Medicaid growth curve without doing something about health care generally?
MR. ORSZAG: Again, only to the extent that the changes you make to Medicare and Medicaid spill over and also help to constrain growth in the rest of the health sector will those changes in Medicare and Medicaid ultimately be sustainable, because if not, you'll create huge access problems.
REP. SCOTT: Who's driving what? I mean, it seems to me the private sector health care drives the cost of Medicare and Medicaid, and as you suggested, if it gets too far out of whack people just won't take Medicare and Medicaid, and you've had that scenario plenty of times.
MR. ORSZAG: One of the complexities in health policy is these complicated interactions between the public and private parts of the system, so it goes in both directions.
REP. SCOTT: Okay, well is there any -- what's the experience in cost control in Medicaid and Medicare? Is it better or worse than the private sector?
MR. ORSZAG: Over long periods of time over the past three to four decades, excess cost growth, which is the best way of measuring these things, in Medicare and Medicaid have closely tracked cost growth in the rest of the health system. So on average, they've been growing at about the same rate.
REP. SCOTT: Is there any way to get hold of it without going to a single payer plan?
MR. ORSZAG: Any way to get hold of what?
REP. SCOTT: The growth in health care costs?
MR. ORSZAG: Again, I think the answer to that is yes. There are different models. The fundamental problem that we face is that we lack adequate information on what works and what doesn't, and we have financial incentives to provide more care, both for providers and consumers, rather than better care.
And that combination of a lack of knowledge and then financial incentives just for more care rather than more efficient care or better care leads to rapid growth in spending and also to spending levels that are higher than they need to be to deliver health quality of whatever level.
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