Strategic Communications and Marketing News Bureau

Will the congressional ‘super-committee” agree to spending cuts by its deadline?

Richard L. Kaplan, a law professor and expert on taxation and retirement issues, talks with News Bureau Business and Law reporter Phil Ciciora about some of the proposals being floated by Democrats and Republicans as a pre-condition to raising the federal debt ceiling.

How different is this debt-ceiling vote from ones in the past?

Congress has always played politics with the debt ceiling, so this is nothing new. When President Obama was a senator he did it, too. So, for the most part, this is par for the course.

What is different this time around is the resolve of the Republicans – particularly, those Republicans who identify with the tea party. They will not countenance any tax changes that increase net revenues. Some Republicans have said they’re willing to close loopholes but only if those changes are fully offset with other tax breaks. Well, that’s a pretty standard approach to tax reform, but it doesn’t do very much for deficit reduction.

In exchange for increasing the debt ceiling, what kind of deal are the two sides trying to engineer?

There are several key proposals being batted around – ones that ought to be considered on their own merits.

Three major proposals are broadening the tax base, getting rid of certain tax loopholes, and increasing the age of eligibility for Medicare. There’s nothing new about the proposals – in fact, the first two were integral components of the Tax Reform Act of 1986.

Raising the eligibility age for Medicare was proposed in 1997 to coordinate with the increase in Social Security’s full retirement age from age 65 to age 67. The current proposal is to do the same thing with Medicare. It makes a certain amount of sense to coordinate the two programs. But there’s also an offsetting consideration in that people have the ability to take Social Security with reduced benefits at age 62, but they cannot generally enroll in Medicare before age 65. So until they reach that age, they may have no health insurance.

That’s still the case until 2014, when there will be state-insurance exchanges that will enable anyone – whether they’re employed, retired, old, young, have a pre-existing condition – to purchase health insurance from an insurance clearinghouse. However, we don’t know very much about these exchanges other than they were authorized by last year’s health care reform act.

How does the current proposal for Medicare compare with the plan put forward by Rep. Paul Ryan, R-Wis.?

The current proposal is relatively modest compared to Ryan’s plan, which is a complete re-think in terms of going to a premium support system. This is tweaking just one parameter – increasing the age you can sign up for Medicare from age 65 to age 67.

As with health care reform generally, the current proposal is not a silver bullet. You’re just shifting costs out of Medicare and onto the individuals who must buy policies on their own. But if your exclusive focus is the federal government’s deficit, then this is a net gain.

 

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