There’s been remarkably little detail out there about the substance of the deficit reduction negotiations, so I thought I’d point you to a piece by Keith Hennessey. Hennessey, who blogs at keithhennessey.com, appears to have some of the specifics.
He doesn’t source it, but I trust his information because Hennessey has contacts all over the place, having served as the National Economic Council Director to George W. Bush and as a senior adviser to Sen. Trent Lott (R-Miss.) when Lott was Senate GOP leader.
First, a note on the state of journalism. Reporters are focusing almost entirely on the politics of the discussions, the outbursts, the struggles – the big football game.
My experience is that people want to know what’s actually going on too. It now apparently takes an economist with no journalism experience that I know of prior to establishing his blog to ferret out the details, while actual reporters provide their expert “analysis,” like a bunch of ESPN talking heads at halftime.
Hennessey REPORTS that the Biden groups has come up with $1.7-$1.8 trillion in spending reductions, including about $200 billion to Medicare and Medicaid and another $220 billion in miscellaneous mandatory program spending.
The widely ridiculed $2 billion in discretionary savings next year would get to about $1 trillion over ten years because it would set the “baseline” lower for spending and then increase by only two thirds of inflation, multiplying the effect.
Of course, future Congresses could always change this. And Hennessey notes that $195 billion of the Medicare and Medicaid cuts “comes from traditional cuts in how much the government pays a doctor, hospital, or other health provider for a given service.”
Wait ’til their lobbyists get ahold of that one. For example, the doctors’ Medicare fee cuts mandated by the 1997 Balanced Budget Agreement never actually occur.
Add on $300 billion in interest savings. We only get to $2 trillion plus – a number bandied about – if you include new taxes.
Obama would do all this as well as cut projected Medicare benefits in ways Hennessey describes, add some more discretionary cuts – I assuming a big chunk from Defense – and tax the “rich.”