Is Big Government Making a Comeback?

Plus, employers reach a health care turning point 

Is Big Government Making a Comeback?

Reflecting a growing hostility toward major social welfare programs, President Bill Clinton famously announced back in 1996 that “the era of big government is over.” Twenty years later, Democratic presidential nominee Hillary Clinton pushed back against calls from within her own party for new social programs such as Medicare for All or free college tuition, saying the president can’t just “wave a magic wand” to finance new spending, however necessary or desirable.

But the Clintonian sense of fiscal restraint, which had long been shared by vast portions of the American political establishment in both parties, is in retreat, says Bloomberg’s Sahil Kapur. Despite rising debt and near trillion-dollar deficits, this year’s crop of Democratic presidential candidates is proposing a wide range of new social programs to tackle serious problems like health care, student debt and the high cost of child care.

Big government, it seems, is “back with a vengeance,” Kapur writes. And Democrats are open to different ways to pay for it, including issuing more debt.

‘Plenty of Money’

Joe Biden, who served in an Obama administration that, like the Clinton administration before it, made substantial efforts to rein in spending and reduce the deficit, has lately shown a renewed interest in the creation of new federal programs. “The fact of the matter is there is plenty, plenty of money to go around,” the former vice president told the Poor People’s Campaign earlier this week. Biden said he would seek to roll back President Trump’s tax cuts and close loopholes to help pay for goals like free community college.

Other candidates, including Sen. Kamala Harris, have also said they want to repeal the Trump tax cuts to pay for new spending. Sen. Elizabeth Warren has put forth a plan for a universal wealth tax she says would pay for an ambitious agenda that includes universal child care and canceling student debt, though critics say the money raised by her tax plan would likely fall short of covering all the costs of her programs. At the other end of the spectrum, Sen. Bernie Sanders has generally avoided talking about how he would finance his single-payer Medicare for All proposal, which would raise federal spending by trillions of dollars.

What Changed?

Two trends have influenced Democrats’ change in perspective on government spending, Kapur says. First, Democrats have watched Republicans preach fiscal restraint and then proceed to run up huge deficits with tax cuts and increased military spending. “Democrats are seeing themselves as Charlie Brown to Lucy and the football. At least some of them are waking up to the fact that they have been played,” said Stephanie Kelton, an economist advising the Sanders campaign who has sharply criticized the conventional understanding of how government debt works.

Second, persistent deficits and the big increase in debt over the last decade haven’t produced the negative effects that fiscal hawks have long warned about. Interest rates have dropped rather than risen, with the 10-year Treasury note yield falling below 2% on Thursday. And investors are snapping up all the U.S. Treasuries they can get, despite a volume of debt sales that has more than doubled since 2017. “None of the bad things that were supposed to happen, according to the warnings from the ‘very serious economists’ — crowding out effects, inflation, slower growth — have happened,” Kelton said.

As a result, Democrats have once again started proposing large-scale spending programs to address major social issues such as rising inequality and national health care. And how to pay for those programs seems to have become a less important issue, Kapur says, as the leading presidential candidates propose competing visions of big government in the 21st century.

Employers Are Ready to Step Up Their Fight Against Rising Health Care Costs: Report

Americans’ frustration with rising health care costs has always extended to companies as well — and those businesses may now be ready to assert themselves more forcefully to try to get results, according to a new report from the PwC Health Research Institute (HRI).

Employers face a faster rise in costs: The report projects that employer health costs will rise 6% next year, slightly faster than over the past two years, despite businesses’ continued efforts to control costs by passing them on to workers and shifting to high-deductible health care plans that have left employees unhappy. (HRI found that at least a third of individuals and families with an employer-provided high-deductible plan said they don’t have enough money saved to pay their deductible.)

Factoring in increased employee cost sharing and health plan changes, employers still face a 5% increase in costs, the report says — and businesses feel they can’t ask their employees to bear much more at this point.

It’s the prices, stupid: The report also notes that higher health care spending continues to be driven by rising prices more than increased use, with a separate HRI study published earlier this year finding that use of medical services by individuals with employer-based insurance decreased by 0.2% from 2013 to 2017 — while prices rose 17% over that time.

So we may have reached a breaking point of sorts: “More employers are taking matters into their own hands, becoming what HRI terms ‘employer activists.’ These new employer activists are taking bold new steps in their efforts to contain costs. They are negotiating contract prices, setting up their own provider networks and, in some cases, building parallel health systems to take care of their own employees at more manageable costs,” the report says.

It adds that “2020 likely will be, in some ways, a turning point in the long arc of employer-sponsored insurance, a year in which more employers fight back using new tools and strategies to control the ever-growing costs to their own organizations, their employees and their families. Dissatisfaction with the system is widespread among all stakeholders, and there is a sense among employers that it is time to think creatively and broadly about changing the system.”

And employers could use their power to really shake things up: In an interview with HRI, Michael Thompson, president and CEO of the National Alliance of Healthcare Purchaser Coalitions, said that, “If market-based solutions don’t work, employers may push for healthcare to be regulated like a public utility.” Warnings like that are bound to get the attention of just about every player in the health care industry.

Number of the Day: 18% of ER Visits End with Surprise Bills

For people in large employer health plans, nearly one in five emergency room visits in 2017 was followed by a “surprise” medical bill, according to a study released Thursday by Kaiser Family Foundation researchers. Similarly, 16% of in-network hospital stays had at least one out-of-network charge. The chances of getting hit with an unexpected charge varied widely by state, with patients in Texas, New York, Florida, New Jersey and Kansas more likely to face surprise bills. Patients in Minnesota, South Dakota, Nebraska, Maine and Mississippi had the lowest rates of out-of-network charges.

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Why Congress’ Budget Talks Have Stalled

Congressional leaders and top Trump administration officials failed to make progress on Wednesday toward a budget agreement to prevent another partial government shutdown later this year and avoid steep automatic budget cuts from kicking in for fiscal 2020.

“Both parties in Congress agree that avoiding cuts of $55 billion to domestic spending and $71 billion to defense spending is imperative,” Politico reports. “But there is sharp disagreement over how to do that, with the administration seeking to keep spending from rising any further given the yawning annual budget deficit.”

Where things stand: The Trump administration wants a one-year deal to extend current funding levels, stave off those steep automatic budget cuts and avoid a debt-ceiling crisis. Democrats prefer a two-year deal that would increase non-defense spending as well as military spending — and allow Congress to adjust funding for next year as it sees fit rather than keep levels as they were set for 2019. They see a one-year deal as a last-ditch fallback. Many Republican lawmakers also prefer a two-year deal in order to raise defense spending — but they’ve balked at Democrats’ non-defense spending proposal and they don’t want to get undercut by President Trump at the eleventh hour.

The key quotes:

  • “Their level of non-defense discretionary spending was $639 billion, that was their proposal. Today their opening bid was $647 [billion],” said Acting White House Chief of Staff Mick Mulvaney, according to Politico. “The last time I checked, that’s not how you compromise.”
  • "If the House and Senate could work their will without interference from the president, we could come to a good agreement much more quickly,” House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer said in a joint statement after the meeting.

A note of optimism: “Still,” The Wall Street Journal’s Kristina Peterson and Andrew Duehren note, “it isn’t unusual for Republicans and Democrats to be nowhere close to an agreement months before the government runs out of money, since politically-difficult compromises typically grow increasingly acceptable as the deadline approaches.”

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