The US Budget Watch Blog

Yesterday the CBO delivered a cost estimate for instituting permanent Medicare physician payment updates by repealing the sustainable growth rate (SGR) formula. The CBO estimates that repealing SGR, as S. 1776 calls for, would increase spending by $247 over the next ten years.

Since 2003 Congress has been overriding scheduled payment cuts on an ad-hoc basis. Without action next year there will be a 21 percent reduction in physician payments.

Yesterday, Council of Economic Advisers Chair Christina Romer spoke at the Center for American Progress on Health Care Reform and the Budget Deficit.

Romer aimed to make the case the health reform was the key to deficit reduction, explaining:

We need to look forward and begin to put the nation on a more sustainable long-run fiscal path. Given the central role of rising health care expenditures, any solution to our long-run budget problem will simply have to include slowing the growth rate of health care costs… Some have argued that it is irresponsible to reform our health care system at a time when the budget deficit is so large and our long-run fiscal problems are so severe. I firmly believe the opposite.

The health care reform bill recently passed by the Senate Finance Committee relies on a $200 billion health insurance tax to help fund the costs of expanding health insurance coverage. Although there are some exceptions, the policy generally imposes a 40% excise tax on each dollar of health insurance premium beyond $8,000 for an individual or $21,000 for a family.

Although this tax is far from perfect (limiting the employer sponsored insurance tax exclusion directly would probably be better), it has at least two major advantages in the context of health reform: it grows faster than new health care costs and it helps to slow health care cost growth.

A Growing Revenue Sources

Here are the highlights from this weekend’s editorials on fiscal and budget policy:

On Friday evening, the FDIC reported that it has taken over an additional seven banks (First DuPage Bank, Riverview Community Bank, Bank of Elmwood,  Flagship National Bank, Hillcrest Bank Florida, American United Bank, Partners Bank) for a cost to the FDIC of around $360 million.

Today, the Congressional Quarterly reported that Congress is considering a bill (H.R. 3548) to extend unemployment benefits to help states deal with rising unemployment, but amendments to increase and extend the first-time home-buyer tax credit and net operating loss carry-back would probably also be added. Harry Reid has given assurances to Senator Isakson (R-GA) that the Senate will consider extending the home-buyer tax credit when it considers the unemployment benefits bill. Including provisions to extend the tax credit and carry-back period have been seen as ways to receive Republican support for extending unemployment benefits.

As it currently stands, CBO estimated that the unemployment bill would give states an additional $2.4 billion and would decrease the ten-year deficit by $200 million.

The Administration has just announced a new small business lending initiative under the Treasury’s TARP. According to a White House release, the new initiative will offer lower-cost capital to small banks and community development financial institutions (CDFI) that support small business lending.

The Administration also intends to further support small businesses by seeking legislation to increase the maximum loan sizes of several Small Business Administration (SBA) loans. In addition to these proposals, the 2009 stimulus act has paid out over $115 million of the more than $335 million in available funding to SBA.

Yesterday, President Obama signed the Agriculture Appropriations bill into law. The $121 billion measure includes $58 billion for food stamps -- a 7% increase from last year (or roughly a 19% increase, when funding from the ARRA are included). The bill also increase Aid to school and child care nutrition programs by 13% to $17 billion, and $350 million in emergency aid to milk farmers.

Absent from the bill is most of the cuts proposed in the President's budget.

This is the second appropriations bill signed by President Obama so far this year.

The Medicare physician payment bill (S 1776) sponsored by Senator Stabenow was defeated yesterday by a Senate vote of 47-53, as twelve Democrats along with Independent Joe Lieberman voted along with Republicans in favor of failing to invoke cloture on the bill. The bill would have spent $247 billion to patch ten years of cuts to physician payment rates, which have been patched annually since 2003.

Today, the Fed released its latest Beige Book, with each Fed bank reporting on current economic conditions within its district. Reports from Fed district banks showed stabilization or small improvement in many sectors of the economy since the last report came out in September.

Of the various economic sectors, residential real estate continued on a path of improvement, while reports on consumer spending and nonfinancial services were mixed. Although conditions in the housing market were reported to have slightly improved, the commercial real estate market continued to be reported as one of the weakest sectors. Manufacturing has also improved slightly since the last report.

In the banking sector, loan demand has continued to be weak, with credit quality continuing to be a problem. In labor markets, hiring has remained limited or stagnant along with wages and prices.