Sunday, February 27, 2011

What Can the US Learn from Other Countries' Health Care Systems?

Even after the Patient Protection and Affordable Care Act (PPACA) of 2010, and in part, because of it, health care remains a major issue of public policy in the United States. It is central to ideologically charged discussions of fairness, the role of government, and even the budget, since the cost of health care is the single largest driver of the federal deficit. In confronting this complex and sensitive issue, it seems only reasonable that we ask what we can learn from the experience of other countries. As the first in an occasional series, this post will look at broad international comparisons of health care systems. Subsequent posts will examine what can be learned from individual countries.

Friday, February 18, 2011

How Chronic Budget Optimism Helped Dig The Hole We Are In

The budget for fiscal year 2012, just published by the White House, presents an optimistic prognosis for US fiscal health. Like all budgets, it looks ahead not just one, but several years. The budget deficit, expected to be 10.9 percent of GDP in 2011, is projected to fall to 7 percent in FY 2012 itself (October 2011 through September 2012), then to 4.6 percent in 2013 and 3.6 percent in 2014. By 2018, the budget is supposed to show a small primary surplus (surplus before interest expense), something essential if the debt-to-GDP ratio is to be stabilized.

Some of the deficit decrease is to come from spending cuts and measures to enhance revenues, but most of it comes from assumed improvements in the economy. Real GDP growth, which is expected to be 2.6 percent this year, is assumed to rise to 3.6 in FY2012, and then to 4.4, and 4.3 percent in the next two. At the same time, according to assumptions, the unemployment rate is supposed to fall steadily from 9.6 percent in 2011, to 8.6, 7.5, and 6.6 percent for 2012 through 2014. The numbers are not brilliant, but compared to the recent past, they don't look bad.

However, if the assumed improvements in the economy don't materialize, neither will the deficit reductions. Overly optimistic assumptions for future years may bring short-term political gains at the moment the budget message is delivered, but they spell long-term trouble. They give Congress an excuse for tax cuts and spending increases the country can't really afford, and they give the White House an excuse for signing off on them. Unfortunately, the experience of the recent past suggests that the Office of Management and Budget (OMB) has had a tendency to look at the world through rose-colored glasses.

Sunday, February 13, 2011

A Policy Dilemma: Budget Deficit vs. Infrastructure Deficit

As the federal budget season moves into full swing, infrastructure is not only on the table, but in the center of the table. The Obama administration budget, which would cut some areas of spending and freeze others, calls for more infrastructure spending, including high-speed rail, wireless Internet, and modernization of the electric grid. Across the aisle, House Republican leaders, vowing to "leave no stone unturned and allowing no agency or program to be held sacred," envision infrastructure cuts, including Amtrak, EPA grants for municipal clean water, and other programs. Some Republicans want to outdo the leadership and cap federal spending at 20 percent of GDP, something that would require even more drastic infrastructure cuts.

Who is right? Is infrastructure spending an essential investment in our future or a morass of waste and boondoggles? Where can we safely prune the infrastructure budget, and where can we not?

Sunday, February 6, 2011

The Case Against the Mortgage Interest Deduction

As the US economy struggles to recover from recession and cope with a budget crisis, all past policies must be put on the table for review and revision. Even the sacred cows. Even the mortgage interest deduction.

A new report from the OECD, which deserves more attention than it has been getting, explains the role badly-designed housing policies played in triggering the recent economic crisis. As the report shows, housing policy varies greatly among developed economies. There are some areas where the United States scores well. For example, it has a relatively liberal regime of building and land use permits. As a result, the supply of housing responds more to rising prices than in other OECD countries. Also, with the exception of some urban areas like New York and San Francisco, the US rental housing market has a healthier balance between the rights of landlords and tenants. However, in the area of tax treatment of owner-occupied housing, the United States comes off poorly.