This weekend, Mitch McConnell, via an interview with The Wall Street Journal, floated the closest thing so far to a Republican counteroffer in the “fiscal cliff” negotiations. Republicans, McConnell explained, might go for higher revenue in return for entitlement cuts like higher premiums for more affluent Medicare recipients, a stingier cost-of-living adjustment for Social Security, and raising the Medicare retirement age. The problem here isn’t that McConnell’s demands are too big for Obama to accept. It’s that they’re too small.
Let’s go through McConnell’s list. The biggest item, changing the cost-of-living index for Social Security, is already in Obama’s plan. Cutting Medicare for the affluent would save a trivial sum — like $20 billion over a decade, a pure rounding error. I’m sure Obama would be happy to give the Republicans that one. Raising the Medicare retirement age from 65 to 67 is mildly tricky. Many liberals oppose it — ideally, we’d like everybody to be on Medicare. But remember, those 65- and 66-year-olds who won’t be able to get Medicare will either keep getting insurance through their job or through Obamacare. That actually makes the higher retirement age a nice insurance policy against repeal — repealing Obamacare would then leave those 65- and 66-year-olds without any insurance at all. So I think that’s a doable request as well.
But add all this up, and you’ve got around $300 billion in savings over a decade. That’s less than Obama is offering.
So how is this negotiation supposed to work, anyway? If Obama agrees to the GOP’s demands on spending, they will just attack him for offering too little. They’re already attacking him on that basis. If he agreed to McConnell’s demands, they would attack him for making his offer even more stingy. And they’d be right.
The deeper problem here is that the Republican position on Medicare has grown so contorted that it’s impossible to disentangle the spin from the genuine belief. In 2009, Obama decided to reform the health-care system to solve not just lack of access to health care for 30 million people but also skyrocketing cost growth, which is the key driver of future budget deficits. The plan Obama signed incorporated every possible device to ratchet down costs that could be squeezed through Congress. The tax code will stop subsidizing more expensive health plans. The government will stop paying Medicare providers for quantity and start paying them for quality. There will be more research into effective treatments, and mechanisms to start using those, rather than the most expensive treatments.
In response to all this, the Republicans adopted a stance of defending more Medicare spending for everybody (except, of course, the uninsured.) The Paul Ryan budget didn’t actually spend less money on Medicare than Obama’s plan — it just spends it differently, by funneling future beneficiaries into private insurance. Mitt Romney’s plan did all that but also put back in the $700 billion that Obama cut out of Medicare.
The upshot is this. Our long-term deficit problem is mainly due to a combination of rising health-care costs and low tax revenue stemming from the Bush tax cuts. Obama has a plan to deal with both sides of this. You could sensibly argue that his plan doesn’t go far enough — that he needs to raise more revenue and do even more to control health-care costs — but, given political constraints, what he has is pretty aggressive.
Republicans definitely want less revenue than Obama does. On spending, they would clearly like to spend way less than Obama on Medicaid and other subsidies for the poor and people who can’t get health insurance through their employer. But Obama won’t sign any cuts like that. So now we have to figure out if Republicans really want to cut deeply into middle-class social insurance programs like Social Security and Medicare. Was their Medicare Forever message of 2009-2012 just a political feint? Is it what they actually believe? I’m not sure anybody knows.