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Friday, April 06, 2007
Krugman on PAYGO, Sorta
Paul Krugman's column today highlights what seems to me an unintended but good consequence of the PAYGO world: rooting out corporate welfare.
The column (available here for non-subscribers) is about a proposal to offset an expansion of SCHIP, a health insurance program for kids, by eliminating the Medicare Advantage progam, which by Krugman's account is a wasteful subsidy for private health insurers. Though Krugman does not mention it, PAYGO was probably the inspiration to link this program expansion with a program elimination, as the package is more or less deficit-neutral and therefore not subject to a PAYGO point of order.
Program A is the proposal by Senator Hillary Clinton and Representative John Dingell to cover all children by expanding the highly successful State Children's Health Insurance Program. To pay for that expansion, Democrats are talking about ... shutting down Program B, the huge subsidy to private insurance plans ... so-called Medicare Advantage plans — created by the 2003 Medicare Modernization Act. The numbers for that trade-off add up, with a little room to spare. ...
Similar things are happening with attempts to close the "tax gap," or the difference between the amount of taxes owed and actually paid. Proposals are being floated to increase tax information reporting on stock sales, and shut down offshore tax havens. This legislation could gain momentum by becoming PAYGO offsets.
Taking on wealthy people and powerful industries is never easy. But PAYGO makes doing so much more likely. In a PAYGO world, good things like more health care for kids have to be paid for with more revenues or program cuts. Eliminating wasteful spending on corporations and the wealthy, or catching wealthy tax dodgers, are easier way to pays for these programs than raising taxes.
If PAYGO isn't around, legislators would have less incentive to root out waste - and more opportunity to increase the deficit, which can cause problems for programs down the road.
In a paid-for package, the public also sees why these corporate subsidies are truly damaging- they're a fiscal trade-off where money is taken away from public programs that benefit us all and given to industries that don't need it. Eliminating waste isn't just "soaking the rich;" it's about providing for the common good.
Posted by Matt Lewis
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