Spending & Budget

Spending & Budget

Research

Brian Blase, Doug Badger, Edmund F. Haislmaier, Seth J. Chandler | Jun 28, 2016
The Affordable Care Act (ACA) significantly altered the rules governing health insurance, especially in the individual market. While the law has increased the number of people with health insurance, lower-than-expected enrollment in the new health insurance exchanges and significant insurer losses have resulted in substantial premium increases and insurer withdrawals from state markets. These negative outcomes cast increasing doubt on the ACA and its long-term sustainability.
Daniel Sutter | Jun 21, 2016
Medicaid was established in 1965 as a joint state and federal program to provide medical insurance to Americans who are poor and have disabilities, and it has grown from 1 percent to 3 percent of GDP. The source of Medicaid’s growth over the past 50 years must inform efforts to reform the program and slow spending. The literature on the political economy of Medicaid provides strong evidence of interest group and political ideological influence, enabled by the open-ended federal match for state spending.
Mark J. Warshawsky | Jun 16, 2016
Thomas Piketty’s Capital in the Twenty-First Century has ignited a debate over inequality that has significantly impacted public perceptions and policy debates in the United States. Piketty uses hundreds of years of income data to make bold predictions about future income inequality and justify aggressive policy reforms—including a global tax on capital—to tackle the issue. But are Piketty’s conclusions and policy prescriptions really grounded in economic theory and solid empirical results? In a new study from the Mercatus Center at George Mason University, economist Mark J. Warshawsky reviews and critiques Piketty’s analysis and proposals. Warshawsky finds several significant flaws in Piketty’s methodology for estimating future inequality and in his suggested reforms to the tax code. Warshawsky’s review also summarizes the criticism of Piketty’s book by other academics and Piketty’s responses to this criticism.
Mark J. Warshawsky | Jun 10, 2016
Concern about income inequality has dramatically shifted public attitudes toward economic and fiscal policy, and the subject of inequality has increasingly dominated the political debate. But the discussion has focused almost exclusively on comparing the earnings of lower- and higher-paid workers, and on promoting redistributive policies aimed at “correcting” this disparity. New research finds, however, that both scholars and politicians have largely overlooked a key contributor to earnings inequality: the role of rapidly increasing healthcare costs.
James C. Capretta | May 24, 2016
The fundamental problem with the nation’s finances—and thus the problem our budgetary procedures should focus on solving—is the runaway expense of entitlement programs, often described as “mandatory spending.” The current budget process does not force policymakers to confront the pressure that these massive programs exert on the federal budget. The process also lacks a ready mechanism for bridging the predictable conflicts that occur between the president and Congress.
Brian Blase, Doug Badger, Edmund F. Haislmaier | Apr 22, 2016
This is the first in a series of papers in which we provide the most comprehensive analysis to date of the impact of the ACA on the individual and small group insurance market in 2014. In this overview, we provide information on how insurers fared in their first year selling QHPs—plans that satisfy all of the ACA’s requirements and are certified to be sold on exchanges—using a data set compiled from medical loss ratio form that insurers are required to file with the Department of Health and Human Services.

Testimony & Comments

Maurice P. McTigue | Apr 12, 2016
Today I will comment on “wasteful and duplicative spending,” and discuss how better, more transparent budget processes are the first step, but not the solution, to controlling such spending. I would like to make three main points. First, changing the focus to the desired outcomes in the budget process is essential to controlling duplicative spending. Second, comparing the results of all activities that impact the same outcome is critical in allocating resources to the most effective activities and maximizing outcome achievement. And third, budget procedures matter when it comes to controlling spending, based on evidence from state governments and overseas.
Jason J. Fichtner | Mar 22, 2016
My testimony focuses on two key issues. First, I will explain how the current-law Windfall Elimination Provision (WEP) is overly complex and unfair. Second, I will discuss how reforming the Social Security benefit formula would improve the simplicity and fairness of the WEP, while still maintaining the original public policy purpose. Additionally, though most of my testimony focuses on the WEP, a related provision, the Government Pension Offset (GPO), has similar complexity and fairness problems that should be addressed.
Jason J. Fichtner, Adam Michel | Mar 22, 2016
The OECD hopes that the new reporting standards will provide tax administrators with useful information to more effectively direct auditors while making it easier to identify artificial profit shifting to tax-advantaged environments. This public comment will argue that the accounting costs of country-by-country reporting will be larger than the Department of the Treasury’s revenue gains and that there will be even higher unanticipated costs from inadvertent disclosures of sensitive information. Because the costs of information centralization will be greater than the benefits, we recommend that the IRS should not implement the proposed regulation on country-by-country reporting. This recommendation is informed by a recent paper from the Mercatus Center at George Mason University that explains key features of the international corporate tax system, the changes the OECD wants to make, and the potentially far-reaching consequences of those changes. The study also provides recommendations to improve corporate taxation without compromising state sovereignty or taxpayer rights.
Veronique de Rugy | Feb 02, 2016
The heated rhetoric coming in March 2017 about whether Congress should raise the debt ceiling will obscure the federal government’s real problem: an unprecedented increase in government spending and the future explosion of entitlement spending has created a fiscal imbalance today and for the years to come. No matter what Congress decides to do about the debt ceiling, the United States must implement institutional reforms that constrain government spending and return the country to a sustainable fiscal position.
Jason J. Fichtner | Sep 30, 2015
Academic research and some anecdotal evidence suggests that the current budget rule of use it or lose it is not optimal and may be encouraging wasteful spending of taxpayer dollars. The question remains: If such spending is indeed wasteful, what can be done to reduce it?
David M. Primo | Jul 28, 2015
My three-part message today is this. First, Congress should treat the budget process as a means, not an end, and enact reforms accordingly. Second, given the fiscal challenges facing the country, now is not the time for minor tweaking. Instead, now is the time to think big and craft a process that drives legislators to produce credible and sustainable fiscal policy by constraining federal spending both today and tomorrow. Third, any reform should include effective enforcement mechanisms, preferably constitutional in nature, to prevent the new process from suffering the same fate as the current one.

Research Summaries & Toolkits

Jason J. Fichtner, Veronique de Rugy, Matthew Mitchell, Angela Kuck, Adam Michel | May 25, 2016
The nation’s persistently sluggish economic growth and dire long-term fiscal outlook have increased the urgency of the need to reform the federal revenue system. But what does successful, sustainable tax reform look like? What are its key elements? And what would it achieve?
J. W. Verret, Marc Joffe | Apr 28, 2016
J. W. Verret and Marc Joffe debate whether Puerto Rico should be allowed to restructure its debt. After 10 years of recession and poor fiscal management, Puerto Rico is facing a major fiscal crisis. With $72 billion in debt (the equivalent of the commonwealth’s entire economy), deeply distressed pensions, high unemployment, and outmigration, Puerto Rico is insolvent. Congress is deliberating on legislation to provide a framework for Puerto Rico to restructure its finances under the guidance of a federal control board. The most contested point in the current proposal is whether to allow the board broad authority to restructure debt.
Veronique de Rugy, Jason J. Fichtner | Oct 10, 2013
As federal government borrowing is set to exceed yet another debt limit, most are quick to recall—and wish to avoid a repeat of—the 2011 debt-limit showdown. If current rhetoric is any indication, it appears many of the last debate’s lessons have been forgotten. Regrettably, it seems many of the debate’s facts have been forgotten as well.
| Sep 24, 2013
The Mercatus State Policy Guide is intended to summarize and condense the best research available on the most relevant topics. It’s a starting point for discussion, not a comprehensive overview of economic policy. Each statement is supported by academic research, with links provided in the endnotes. Mercatus scholars are available to further explain the results of their studies. We hope the guide will prove to be a valuable tool in your economic policy research.
| Jul 23, 2013
The Mercatus Policy Guide is intended to summarize and condense the best research available on the most pressing topics. It serves as a starting point for discussion, not a comprehensive overview of economic policy. Anyone who wants to go deeper into these studies should consult the references listed at the back. Mercatus scholars are available to further explain the results of their studies. We hope the guide will prove to be a valuable tool in your evaluation of economic policy.
Veronique de Rugy, Jason J. Fichtner, Charles Blahous, Matthew Mitchell | Mar 15, 2013
Despite years without a federal budget, trillion-dollar deficits, and ad hoc, crisis-driven fiscal and economic policies that failed to deal with the looming entitlement crisis, leaders on both sides in Washington are now touting seemingly miraculous progress toward a “fix” to our budgetary woes.

Expert Commentary

Jun 28, 2016

Without significant revision to the ACA that makes insurance more attractive to younger and healthier people and that significantly reduces the incentive for people to wait until they are sick to purchase coverage, the individual market looks increasingly likely to morph into a highly subsidized high risk pool.
Jun 23, 2016

Sensible Medicaid reform must accomplish two aims: reduce the unsustainable trajectory of federal and state Medicaid spending, and produce better outcomes for people most in need of public assistance. The House task force proposal would take steps to accomplish both aims. While much more work needs to be done, this is generally a good start.
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Jun 23, 2016

The BPC retirement security commission proposals reflect a roughly 50/50 compromise between left and right as to how to shore up the finances of Social Security. All program participants would benefit from the stabilization of program finances, with the largest gains accruing to low-wage workers.
Jun 22, 2016

The Social Security annual report, released today, shows that while the projected insolvency date for the combined Old Age, Survivor, and Disability Insurance (OASDI) trust funds remains unchanged at 2034, another year has been lost to inaction.
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Jun 10, 2016

Both economic theory and empirical findings indicate a trade-off between earnings and benefits: if benefits become more expensive, earnings growth will suffer. Indeed, the fact that average employer costs for family health coverage exploded from around $4,200 in 1999 to nearly $11,800 in 2013 gives a reasonable explanation for why earnings have stagnated in recent years.
Jun 08, 2016

The large premium increases indicate that the ACA is not working. People enrolling in ACA plans have much higher average medical claims than was expected. The reason: young and healthy people are generally refusing to purchase ACA plans. In fact, enrollment in the ACA exchanges is less than half of what was projected when the law passed in 2010.

Charts

According to the federal government’s latest estimates, government programs for fiscal year 2015 paid out $137 billion “improperly”—meaning that these payments violated guidelines or rules in some way. Fraud is not the only reason, as the federal government reports. Rather, an improper payment can also result from simple clerical error or failure to confirm that a recipient was eligible to receive the amount of money that was disbursed. Whether due to fraud, the complexity of program rules, or bureaucracy, $137 billion is a significant amount of taxpayer funds. Federal spending has grown too massive for the government to provide adequate oversight.

Experts

Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University and a nationally syndicated columnist. Her primary research interests include the U.S. economy, the federal budget, homeland security, taxation, tax competition, and financial privacy. Her popular weekly charts, published by the Mercatus Center, address economic issues ranging from lessons on creating sustainable economic growth to the implications of government tax and fiscal policies. She has testified numerous times in front of Congress on the effects of fiscal stimulus, debt and deficits, and regulation on the economy.
Charles Blahous is the director of the Spending and Budget Initiative, a senior research fellow at the Mercatus Center at George Mason University and has served as a public trustee for Social Security and Medicare. He specializes in domestic economic policy and retirement security (with an emphasis on Social Security), as well as federal fiscal policy, entitlements, demographic change, and health-care reform.
Brian Blase is a Senior Research Fellow with the Spending and Budget Initiative at the Mercatus Center at George Mason University.
Antony Davies is associate professor of economics at Duquesne University, Mercatus Affiliated Senior Scholar, and Strata Research Fellow. Davies has authored over 150 op-eds for, among others, the Wall Street Journal, Los Angeles Times, Washington Post, Forbes, Investors Business Daily, and New York Daily News.
Jason J. Fichtner is a senior research fellow at the Mercatus Center at George Mason University. His research focuses on Social Security, federal tax policy, federal budget policy, retirement security, and policy proposals to increase saving and investment.

Podcasts

Veronique de Rugy | May 25, 2016
Veronique de Rugy talks about the government’s attempted, but ineffectual, fix for VA hospitals.

Recent Events

Join Mercatus senior health care scholar Brian Blase, senior regulatory fellow Patrick McLaughlin, & senior budget reform fellow, Jason J. Fichtner, for a Capitol Hill Campus that will showcase Mercatus resources & explore how congressional staff can more effectively use our research.

Books

Jason J. Fichtner, Jason S. Seligman | Mar 2016
This book was published by The McCrery-Pomeroy SSDI Solutions Initiative, and includes a chapter by Mercatus scholars Jason Fichtner and Jason Seligman.

Media Clippings

Jason J. Fichtner | Jul 28, 2014
This excerpt originally appeared in The Daily Caller.
Jason J. Fichtner | Jul 24, 2014
This excerpt originally appeared in FOX Business.
Jason J. Fichtner | Jul 17, 2014
This excerpt originally appeared in FOX Business.
Charles Blahous | Jun 04, 2014
This excerpt originally appeared in CQ and also appeared Roll Call.
Veronique de Rugy | May 20, 2014
This excerpt originally appeared in Wall Street Journal.
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