It may well be that objections to the Obamacare replacement bills partly reflected just such budgetary sensitivities. To be sure, the Freedom Caucus fought Republican leadership and President Trump on social as well as economic issues. It nonetheless also showed sensitivity to the legislation’s lack of economic viability. The proposal, for instance, might have used tax credits to individuals in place of Obamacare’s more direct subsidies to health insurers, but the net effect would still have burdened the budget. Objections to community ratings also showed recognition of actuarial reality. The replacement legislation did loosen Obamacare’s insistence that premiums for all, regardless of age and health, must remain largely equal. But it failed to loosen them enough to offer the system sustainability. It would seem, then, that any future efforts to replace Obamacare will receive a warmer welcome if they consider broader budgetary ramifications, and would receive still more support if they aimed to deal with the more general entitlements problem.
Nor would reformers lack for proposals. On the contrary, there is much on offer to move this critical process forward. This is hardly the place to itemize, much less assess the many schemes that would control the growth of entitlements spending, but a sketch might indicate how many options exist. Social Security’s trustees have placed their own on the system’s website. Among them is the suggestion to raise the age for full retirement benefits. A shift from today’s limit of sixty-seven years old to seventy would do much to make Social Security actuarially sound, and hence lift its burden on the rest of the budget. It would also reflect a national demographic reality in which people live longer than in the past, and remain vital until older ages. Other reforms advocated by the trustees and others would, for instance, change how the system calculates cost of living adjustments or, alternatively, how it determines the benefits paid to high-income beneficiaries.
With healthcare, whether Medicare, Medicaid or, for the time being, Obamacare, matters are less clear cut. Nonetheless, here, too, prospective reformers would have much material with which to work. Allowing insurers to sell across state lines, for instance, would introduce new levels of competition that should hold down premiums. Of course, such a move would force Washington from its clear preference to care more for the bottom lines of insurers than for those paying premiums, but the option exists. Reforming the way in which the Federal Drug Administration tests new drugs offers a way to reduce prescription costs. Block grants to states for Medicaid could unleash a raft of cost-saving schemes that would slow spending with no loss of services. Already, state efforts have yielded more effective ways to deliver health services (the use of clinics, for instance, instead of emergency-room calls, has not only cut immediate costs but, by improving prevention, has held down costs over time). Similarly, if employers simply offered employees block payments for premiums, they would introduce further competition into insurance markets, impose spending disciplines and hold down premiums accordingly.
Legislation might make progress if Congress would change the terms of debate. For a long time, a tedious moralistic posturing has interfered with rational discussion. A more technical approach would allow representatives and senators much more room to compromise. So-called budget hawks could then seek expense relief for the public at large without having to fend off accusations of heartlessness. Those who worry from the other side about the quality of life among those less capable could embrace the virtue of putting support systems on a more secure and durable footing. Though a portion of the moralizing, and the animosity it fosters, would inevitably remain, any movement to minimize it would relieve bad feelings in Washington and among the public generally. At the same time, a turn to honesty by representatives and senators about matters of budget viability, something the public already sees quite clearly, might well defuse the ever-growing distrust of Washington. Difficult as the initial effort at such reform no doubt will be, it is essential, and promises to pay considerable dividends.
ON THE final part of this program—regulatory relief—the White House has reasonably claimed that many of the regulations in place in this country interfere needlessly with business and daily life, slowing the pace of economic growth and unreasonably infringing on private decisions. To the extent that the administration proceeds judiciously, it can not only improve the country’s economic prospects but also remove some major irritants among large groups in society.
The White House has made a start. When, right after his inauguration, Trump issued Executive Order 13771, requiring agencies to eliminate two regulations for each new rule they make, all in Washington and beyond expressed skepticism. But it seems to have had an effect, as has White House insistence that all agencies abide strictly by established procedures and allow time for public comment. Neomi Rao, head of the White House Office of Information and Regulatory Affairs, has noted that through the end of September 2017, the efforts resulted in sixty-seven deregulatory actions (ninety at an annual rate) and only three new regulatory actions. It has also resulted in the withdrawal or delay of 1,500 planned new rules. The Federal Register over this time added 45,678 pages of new rules and changes. That would come to some sixty-one thousand a year, but is still minimally invasive compared to the 95,894 pages added in 2016.
No doubt these measures have contributed to businesses’ increased interest in expansion, as shown in their spending surge on new equipment and technology. But this White House could do more by altering the culture of U.S. regulatory bodies, or at least beginning to do so. Aside from an aggressive agenda under the last president, much of the economic harm done by regulators in this country stems from their legalistic and adversarial approach. These, if they serve public interests at all, do so inefficiently and in ways that create considerable animosity toward government—as well as distrust.
The country’s present regulatory approach should, of course, hardly come as a surprise. Washington is, after all, the land of lawyers. Regulators have grown up in the law’s adversarial culture. They can hardly think in other ways. In their scheme, regulators write reams of rules that aim at the impossible job of covering every eventuality. They then approach those they regulate with the presumption that they are evading those rules. The regulated naturally become wary of their would-be prosecutors, stick strictly to the letter of the law and withhold as much information as they can, worried that the regulators will somehow use it against them. Meanwhile, those who would uncover wrongdoing are loath to expose their objectives, lest the regulated use that knowledge to conceal their evasions. This hide-and-seek approach creates considerable and unnecessary expense. It can cause regulators, eager to punish wrongdoing, to lose sight of the original purpose of their oversight, and can sometimes lead them to destroy or downsize industries—needlessly throwing people out of work—even though management might willingly have cooperated with cost-effective means to accommodate public interests.
Because few firms and people seek to break laws, the way is open for a more cooperative approach. Canada and Australia might serve as a model. There, regulators see themselves less as the adversaries of those they regulate and more as partners who consider the needs of stakeholders otherwise neglected by markets and common practice. The matter of pollution might serve as an illustration: since the market charges the polluter nothing, the public interest in clean air and water would seem to demand a government presence. Firms have long since reconciled themselves to this need. Understandably, they would prefer to comply at the lowest possible cost. But they have little means to work with regulators on such solutions. Instead, they face reams of explicit rules that seldom consider cost and anyway cannot take every possible situation into account. A more cooperative interaction could do both. Similarly, those who would protect minority rights, such as the LGBT community, might do better at lower cost and with less animosity if they worked with schools, parks and the like to protect the safety and dignity of that community, while also considering the needs and dignity of others. Such efforts multiplied across business and daily life would save money and ease tension.
Glimmers of such desired arrangements have appeared. The Consumer Financial Protection Bureau (CFPB), for one, has come to recognize that rules have stifled desirable technological innovation in the financial industry. Firms simply will not take the risk of spending millions on systems and practices that the CFPB or some other regulator will not only summarily disallow, but also penalize them for even trying to implement. In an uncharacteristically cooperative move, CFPB regulators have promised to issue what they call a “no-action letter” that will allow firms to experiment with new practices without the risk of regulatory retaliation. It does not save managers from the gamble of squandering resources on business models that fail in the marketplace. That is a risk that a business takes with any new approach. Nor does a no-action letter offer a guarantee of regulatory approval. It does, however, save firms from incurring penalties just for making the effort. It is a small step—but it shows a willingness to set aside the adversarial culture, albeit in a very narrow way.