Deficit reduction – good luck with that

Some politicians, pundits and advocacy groups are hailing the deficit reduction in the Inflation Reduction Act. Let’s hope they are right, but given government’s track record and the twenty-year time frame, pardon me if I have my doubts.

Estimating spending and savings over twenty years is a bit tricky shall we say, more so given there will be ten new congresses over that period.

Note that the bulk of the savings is assumed to be from “negotiated” prescription drugs for Medicare. How much of those savings will be shifted to the private sector?

I also think it’s safe to assume the enhanced ACA subsidies will not go away in three years so the realistic reduction in the deficit over twenty years is $1.1 trillion or the equivalent of $55 billion per year, roughly a 4% annual reduction.

While deficit reduction, including tax hikes as a tool is in play, there are members of Congress and many others who want student loan forgiveness which at this point would entirely wipe out any deficit reduction in the IRA.

2 comments

  1. With respect to Medicare Rx “savings”, all of those costs will be shifted to employer-sponsored plans. Today, hospitals charge private payouts about 250% of the Medicare allowable amount. Why will Rx be different? (Hint: It won’t, and it will be worse than 250%!)

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  2. With a projected 87,000 new hires coming to the IRS, and all of their benefit packages, I don’t see how this is going to reduce anything but cost more in the long term.
    Also, there is not going to be deflation when it comes to drug pricing either.

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