Judd Gregg: The way ahead on tax, debt and healthcare

The conventional wisdom among pundits and in the subterranean pathways of the Capitol building is that the new administration and Congress cannot do tax reform, repeal and replace ObamaCare, and keep the debt down.

The naysayers are wrong. This is a “have your cake and eat it too” moment.

The goals are attainable.

{mosads}In healthcare, the goal is to repeal and replace the Affordable Care Act (ACA) with a system that delivers better quality healthcare at a lower cost. This is certainly doable.

In tax reform, the goal is to reduce the corporate and individual tax rates, while on the individual side retaining essentially the same progressivity — in other words, the top 20 percent of income-earners would continue to pay approximately 85 percent of the income tax. Again, this is doable.

As for the debt, the goal is to stabilize its growth so it does not exceed 70 percent of GDP. If you do the two things previously mentioned right, you get this result as a bonus.

Here is how to accomplish all this.

In healthcare, ObamaCare a.k.a. the ACA had a variety of cost offsets. These should be built upon, not repealed.

For example, the Medicare reforms in ObamaCare would generate approximately $750 billion in savings if retained, according to the Committee for a Responsible Budget.

In addition, if the deductibility of health insurance was limited to the average cost of a health policy rather then being allowed to go as high as $27,000 — as is the case under the ACA — this would generate approximately $1.3 trillion. This concept was proposed under the George W. Bush administration.

The only reason this has not been accomplished is the opposition of Big Labor, which wants to protect its contracts with large employers. It truly makes no sense to allow this sort of deductibility. It generates massive and wasteful over-utilization of the healthcare system, and encourages costly and inefficient practices.

If these two actions are combined, it would allow for two positive events.

First, it would generate the funds for a truly robust effort to replace ObamaCare with something that is good and works.

It could, for example, pay for a national plan that covered catastrophic health events as well as subsidies for the daily healthcare needs of low and moderate income people. This should be coupled with major malpractice tort reform, which also would generate considerable savings.

Interestingly and importantly, this approach would leave approximately $500 billion available for debt reduction.

In the area of tax reform, there are so many good options, it is difficult to know where to start.

But the goal of getting rates down while maintaining progressivity can be met.

One of the key issues would be how to deal with the desire of the Congressional leadership to move to full expensing by corporations. If this is coupled with dramatically limiting other deductions and exemptions, and is phased in, it could be accomplished in an essentially revenue-neutral manner on a static-scoring basis.

In order to keep changes to individual taxation revenue-neutral, all that needs to be done is a trade-off. There should be a balance between how low the rates should go and how high the limits on deductibility should go on big items such as mortgage interest and charitable giving.

A significant reductions in tax rates would generate such powerful growth as to lead to an explosion in revenues. These revenues could, in due course, also be put toward debt reduction.

Healthcare delivery gets better and more affordable. Tax rates drop and the tax laws become simpler and more growth-oriented. The debt stabilizes or goes down.

Some might call this wishful musing. It is not. It is practical, conservative governing.

Judd Gregg (R) is a former governor and three-term senator from New Hampshire who served as chairman and ranking member of the Senate Budget Committee, and as ranking member of the Senate Appropriations Foreign Operations subcommittee.