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Obama's Agenda And The Deficit

Charles Krauthammer argues that President Obama has permanently altered U.S. fiscal policy:

Obama's most far-reaching accomplishment is his structural alteration of the U.S. budget. The stimulus, the vast expansion of domestic spending, the creation of ruinous deficits as far as the eye can see are not easily reversed.
These are not mere temporary countercyclical measures. They are structural deficits because, as everyone from Obama on down admits, the real money is in entitlements, most specifically Medicare and Medicaid. But Obamacare freezes these out as a source of debt reduction. Obamacare's $500 billion in Medicare cuts and $600 billion in tax increases are siphoned away for a new entitlement -- and no longer available for deficit reduction.

First of all, the stimulus is temporary. And the spending surge is scheduled to largely recede:

I realize that conservatives believe that the stimulus will "really" be a permanent addition to the spending baseline. I have yet to see this explanation account for the mechanics of how Congress will add the stimulus to the regular budget, especially with the constraints of pay-as-you-go financing. It's simply a variant of free-floating quasi-paranoid anti-government animus.

Second, Krauthammer utterly omits the huge ramp up in defense spending that began under the previous administration. He proceeds to denounce Obama's hidden plot to create a tax increase to pay for his domestic spending, but of course defense spending needs to be paid for with taxes, too. (And Bush never matched his defense increases with tax hikes or spending cuts elsewhere.) There's no real way to square this disconnect except as a function of the fact that he favors high defense spending and wants to paint Obama as radical.

Third, it's highly unrealistic to presume that the cost savings used to finance the Affordable Care Act would be sitting on the table if Obama hadn't scooped them up to cover the uninsured. Those savings were bargained for in exchange for covering the uninsured. Medical providers well be getting some thirty million new subsidized customers, so they're willing to make concessions elsewhere in exchange. Some of the cuts are literally not possible without covering the uninsured -- one of the largest cuts comes from reducing reimbursements to hospitals who treat the indigent, because there will now be fewer indigent patients.

In any case, there was no plausible path to extracting hundreds of billions of dollars in cuts from providers without offering an increase in coverage for the uninsured. If you want to cut Medicare, the most realistic option has always been means-testing. The Affordable Care Act has done nothing to foreclose this option.