If you read anything policy-related this weekend, make sure it's Peter Orszag's testimony to the Senate Budget Committee. He gives a fair reading of the factors producing the explosion in health care costs.

Though I'd like it to have gone deeper, in terms of the explanation, and maybe a little bolder in terms of the solutions, there's no doubt that this testimony is a tremendous step forward in the debate over the long-term budget imbalance (or should I say, the health care crisis). Kudos, Mr. Orszag! Hopefully, this line of analysis, focusing on the inefficiencies in the health care market, will get enough traction to center the debate moving forward- with no more talk of cutting Medicare, Medicaid and Social Security!

Praise be budget nutcase David Walker. His Word is holy, and those who speak it become holy, i.e. writers for the Washington Post.

Today's epistle expresses almost zero skepticism about any of Walker's claims about the "entitlement" crisis. It is not for the Washington Post to question the Word, though the author gets a little credit for including a paragraph with a quote from a heretic.

In all seriousness, the problem is simple: Walker, et al, lay claim to the Truth about The Budget. They are Sensible and Reasonable people who want the Best for America. It would be absurd- no, defamatory!- to accuse them of exaggeration, or having ideological blinders, or just plain being wrong. They want America to know the Truth.

There's no point in having an inclusive discussion with different perspectives. Everyone on the fiscal wake-up tour agrees with each other- and they are the High Priests of Budget Truth.

Then again, it should be easy for the High Priests to expose the budget heretics and their wicked ways. Why not bring them on the tour- what are the High Priests so afraid of?

A good article in the New York Times today, on the disconnect between price and quality of health care services:

Stark evidence that high medical payments do not necessarily buy high-quality patient care is presented in a hospital study set for release today.

In a Pennsylvania government survey of the state's 60 hospitals that perform heart bypass surgery, the best-paid hospital received nearly $100,000, on average, for the operation while the least-paid got less than $20,000. At both, patients had comparable lengths of stay and death rates.

And among the 20 hospitals serving metropolitan Philadelphia, two of the highest paid actually had higher-than-expected death rates, the survey found.

The Hamilton Project's new paper on tax reform is a mixed bag. The section on the tax gap is pretty good, and it makes some interesting points about how unpaid taxes seem to make the tax code more regressive. But the section on deficits- which leads the paper, reflecting the Hamiltonian philosophy of fiscal responsibility uber alles- is a disappointment.

The paper's authors just don't want to understand what's driving up health care costs. Instead, they sound the familiar refrain about cutting benefits:

To put this in perspective, achieving long-run fiscal balance would require an immediate and permanent 34 percent cut in all government spending, including Social Security, Medicare, and defense. Delaying these changes, or exempting some areas of government spending from cuts, would mean substantially larger reductions later to restore fiscal balance.

A massive reduction in services is not necessary to control health care costs. The government could make an effort root out the rampant inefficiencies that are the primary cause of rising costs. Really, it's that simple. This isn't rocket science.

So why they won't examine the issue? Since they've never explained, I'm left to speculate. I think the problem here is ideology.

The market-worshiping ideologues of the Hamilton Project won't seriously engage the question of how to solve the health care crisis because it requires doubting their most cherished assumptions. They believe that markets, and only markets, have the capacity to efficiently distribute goods and services. But the one thing that the health care crisis proves is that markets are extraordinarily bad at providing quality health care at efficient prices.

It is no longer clear why it is worth reading the Hamilton Project's output on deficits and the long-term fiscal issues, unless you already agree with them. Theirs is a closed system, impervious to reality, as they worship an illusion of their own conjuring.

UPDATE: Here's a paragraph from the paper that just about captures the Hamiltonian ideology:

First, progressive taxation is often more economically efficient than other solutions, because it leaves most economic decisions to participants in a competitive marketplace. Industrial policies and direct market interventions can try to change the before-tax distribution of income. But ultimately such policies harm the economy—for example, excessively high living-wage laws can result in large job losses for low-skilled workers. Progressive taxation first lets the competitive market economy maximize the total pie, and then uses instruments such as the EITC and the top marginal tax rate, in combination with a variety of other social policies, to help spread the gains thereby generated more widely (Bordoff forthcoming).

The Government Accountability Office (GAO) has released the latest version of their "The Nation's Long-Term Fiscal Outlook" report today. As with previous reports, GAO finds little change in the long-term outlook and warns that current fiscal policies are unsustainable (duh!).

Despite re-stating the important fact that current policies are unsustainable, the report also helps to distinguish what is driving long-term imbalances. Instead of lumping Social Security and Medicare together and labeling the problem as an "entitlement" one, the GAO report highlights health care costs generally as the major obstacle. The relevant paragraph from the report states:

Although Social Security is a major part of the fiscal challenge, it is far from our biggest challenge. Spending on the major federal health programs (i.e., Medicare and Medicaid) represents a much larger and faster growing problem. In fact, the federal government's obligations for Medicare Part D alone exceed the unfunded obligations for Social Security. Over the past several decades, health care spending on average has grown much faster than the economy, absorbing increasing shares of the Nation's resources, and this rapid growth is projected to continue. For this reason and others, rising health care costs pose a fiscal challenge not just to the federal budget but to American business and our society as a whole.

Under the leadership of Comptroller General David Walker, the GAO continues to bring an important and under appreciated voice to long-term fiscal policy debates. The short report is worth a read:

GAO: The Nation's Long-Term Fiscal Outlook

About a year ago, we reported on the administration's opposition to continued funding of the Survey of Income and Program Participation, or "SIPP." SIPP, you may recall is an ongoing program that ""collect[s] source and amount of income, labor force information, program participation and eligibility data, and general demographic characteristics to measure the effectiveness of existing federal, state, and local programs." It is an indispensable source of data for researchers and policy makers that allows them to asses the effectiveness of government assistance programs.

Yesterday, the administration flip-flopped reversed its stance of the program, and dropped its opposition. There's one tiny catch - Bush has not revised his 2008 budget to include funding for the program, and OMB Director Rob Portman has stated that he would advise the president to veto spending bills that exceed the president's request. The absence of a line item in the president's budget for SIPP could cause its demise.

From a statement by Heather Boushey, Senior Economist, Center for Economic and Policy Research:

The Census Bureau has recently indicated that, without additional funding, it will start a new SIPP panel with only half of the standard number of respondents. This is unacceptable. Interviewing only half as many people would severely limit researchers' ability to examine particular government programs, sub-populations and state-level data. Many government programs, such as Temporary Assistance for Needy Families or child care subsidies, affect only small shares of the U.S. population, so a smaller sample would not provide enough data to properly assess these programs. It would also make it difficult, if not impossible, to assess demographic trends at the state level (such as wealth, childcare usage, etc.), even for larger states like North Carolina or Washington.