Paying Tomorrow for Hamburgers Today

COMMENTARY Budget and Spending

Paying Tomorrow for Hamburgers Today

Dec 11, 2013 1 min read

Executive Director, Economic Research Center

Rea served as the Director off the Center for Data Analysis and was a Lazof Family Fellow.
The new budget deal is disappointing to conservatives and believers in a limited government that manages its finances. Earlier during the negotiations, my colleagues and I at the Heritage Foundation warned that sacrificing short-term budget constraint for savings that would occur in the long-term future is a dubious proposition.

Budget historians know that previous agreements of more spending today and budget cuts tomorrow have resulted in more spending today and more spending tomorrow as well. Blowing through the sequester caps today doesn’t make us confident that future Congresses will abide by these caps in the next decade.

While the agreement does take some positive steps — having federal workers fund more of their own retirement plans instead of relying on taxpayer funding — the deal will put additional pressure on Medicare providers. To finance Obamacare, President Obama took hundreds of billions from Medicare providers and Medicare Advantage plans, and the sequester also reduced payment to Medicare providers. Policymakers go to future Medicare spending, because they know CBO will score these as big savings on paper, no questions asked.

There are better ways to reduce Medicare’s burden on the government and most of these provider cuts are simply price controls. The results are budget agreements that result in billions of paper savings, but much higher deficits in reality as politicians blow through these caps when Medicare doctors, hospitals, and, of course, beneficiaries are threatened. We believe that there can be a good trade using the sequester for entitlement reform, but this deal is not it.

Finally, conservatives should favor user fees in place of broader tax increases because fees are more closely tied to the government service delivered and thus more efficient and fair than income taxes. However, the higher fees in this case are simply a placeholder for tax increases since the fees are used as cover for higher spending. This defeats the purpose of fees, which should not serve as a vehicle for higher government spending.

- Rea S. Hederman is the director of the Center for Data Analysis at the Heritage Foundation.

Originally appeared in National Review Online.