The levees around the U.S. Treasury have been breached. Fiscal policy is now at sea. Swimming in red ink, policymakers are flailing about, spending unaccounted billions on misdirected hurricane relief, bridges to nowhere and foreign wars, while getting set to slash entitlement programs and assist the wealthy with yet more tax breaks.
Amid the swirling confusion, it's no surprise that providers and the public aren't more alarmed.
Hurricane Katrina was supposed to be the wake-up call for our government, not just because of the failure to plan for and respond to a storm of this magnitude but also the revelation of the deleterious effects of persistent poverty. Despite President Bush's assurance in his televised speech from Jackson Square that he had absorbed the message of New Orleans, everything that has and hasn't been done since has belied that contention. Instead, the catastrophe is being used as cover for carrying out an agenda of cutting the social safety net and aiding the advantaged.
It takes a lot for Chuck Grassley, the Senate Finance Committee chairman who has carried the administration's water on tax cuts for years, to publicly attack Bush. But the senator exploded when it became clear his plan to come to the aid of Katrina victims through a short-term federalization and expansion of Medicaid coverage for evacuees was being sabotaged behind the scenes by the administration, which believes that victims can simply find whatever Medicaid coverage is available wherever they made landfall.
Grassley is being counted on to find some $35 billion in entitlement program savings to help pay for Katrina and keep the deficit in check. Others in the Senate insist that the figure should be $50 billion. In the House, talk is tougher. If you go on the scary Web site of the Republican Study Committee, which has more than 100 House members, you will find proposals to cut Medicaid and Medicare by $485 billion over 10 years. Contrast that with Katrina relief, which would cost no more than $150 billion.
There are also some more mainstream cost-cutting proposals, such as holding off on the drug benefit for seniors, eliminating incentives for insurers to offer Medicare managed care, freezing payments for home health providers and giving doctors a much smaller increase under Part B. Sen. Ron Wyden (D-Ore.) claims to have the votes to allow the CMS to competitively bid for drugs under Part D, but it's unlikely it would get to a floor vote.
The deficit for fiscal 2006 is projected to be about $314 billion. That does not include Katrina-related spending. Toss in two more tax cuts set to take effect in January, the almost certain extension of the 2001 and 2003 tax cuts, and we are looking at a tab of close to $2 trillion over the next five years, much of which has not been counted in future deficit assumptions and all of which will explode the national debt, which already has grown by $1.2 trillion in just five years under Bush to $7.95 trillion.
Amid all of this, the president's tax reform advisory commission is considering recommendations that tax incentives for employer-paid health insurance be reduced to pay for a worthy plan to end the alternative minimum tax. The plan calls for capping the exemption for employer-provided health insurance premiums and forcing employees to pay taxes on the value of insurance above $11,000.
Nobody knows how this will turn out. With Congress and Bush sinking in the polls, it may be that not enough of them will have the stomach to carry out the worst of the cuts. In the meantime, those concerned about Medicare, Medicaid and health coverage might want to pay closer attention. The waters are getting deeper.