1/24/2013 12:30 AM ET|
Why Washington can't fix the budget
Americans want low taxes and government largesse, and are ready to punish anyone who says that's not possible. Is it any wonder politicians are afraid of hard choices?
Now that the inaugural balls are over and the speeches and celebrations are finished, Washington returns to the task it's been struggling with for years amid partisan rancor and brinkmanship: how to solve the budget mess.
Our leaders have had little success in addressing the problem, so the debt load is now larger than the economy's annual output, at roughly $52,000 for every man, woman, and child in America.
There's a reason that the problem seems never-ending. And President BarackObama touched on it in his inauguration speech when he said that he rejected "the belief that America must choose between caring for the generation that built this country and investing in the generation that will build its future."
The problem is, we can't do both. Not so long as we hitch the government's finances -- via Obamacare, Medicare and Medicaid -- to a bloated and inefficient health care system. Not while making needed investments in education and infrastructure, and providing for the national defense. And it can't be done while keeping taxes reasonable.
Thus, the bickering. The deficit commission. The congressional deficit committee. The fiscal cliff. The debt ceiling. The fact that the government hasn't operated under an actual budget since 2009. The recent flirtation with the "trillion dollar coin" idea. There is a real and growing threat that our fiscal procrastination will damage an already fragile economic recovery via a government shutdown, a debt default or a credit-rating downgrade.
So now, with the economy faltering again, continental Europe and Japan in new recessions and the United Kingdom slipping into one, too, we have politicians focused not on making hard choices to solve the problem but on finding ways to pin the blame on the other side. And it's going to get worse before it gets better.
A tough nut to crack
The political reality is that no one wants to be the bearer of bad news. No one wants to spell out the cuts that are needed. Part of the reason the Republicans lost the presidential race was because of their plan for Medicare vouchers and deep spending cuts. Even though the GOP approach would have taken a decade to balance the budget, even this fiscal tonic was too harsh for the electorate. Voters instead preferred Obama and his call that the rich "pay their fair share."
Americans want to believe that the days of ample spending, low taxes and easy credit can continue -- and they will punish anyone who tells them otherwise.
While Obama talked in his inauguration of making the "hard choices to reduce the cost of health care and the size of our deficit" -- which has been $1 trillion or larger for the past four years and likely will be for at least two more years -- no one wants to put pen to paper to outline the reforms that are needed.
Obama's 2013 budget proposal, the only working budget document we have from the Democrats, did nothing to address the long-term debt, as the chart below, lifted from that proposal, shows. That's because it doesn't propose the structural reforms that are needed to control costs associated with the aging of baby boomers.
In 2011, the three major entitlement programs -- Medicare, Medicaid and Social Security -- accounted for 44% of non-interest government spending, up from 30% in 1980. According to Credit Suisse estimates, the way things are going, by 2025, spending on these programs, plus interest on the debt, will take up 100% of tax revenues.
Mostly, it's health care. Over the past two decades, annual health care cost inflation has been running at 150% of the underlying inflation rate. Asa result, despite mediocre scores on measures of the quality of care (such as infant mortality), we pay far more per capita than anyother developed country.
What's really scary is that the chart above assumes the economy will grow at a 3.7% average annual pace through 2018 (which is doubtful), interest rates will remain near zero and that the cost-control efforts in the Obamacare legislation -- such as the tax on low-deductible health care plans and the Medicare payment advisory board that opponents have dubbed "death panels" -- will actually work as planned.
If any of these assumptions is incorrect, the long-term outlook will be even worse.
What will it take?
To really wrap your head around the scale of the problem, I recommend trying the Committee for a Responsible Federal Budget's budget simulator tool, which allows you to pick and choose ways to close the deficit and stabilize the country's debt load by 2021.
The tool was designed before the fiscal cliff deal -- which the Congressional Budget Office says will increase the deficit by $4.6 trillion over the next 10 years -- was done. So be sure to factor that in.
It also doesn't account for the impact on growth of things like tax hikes (negative) or short-term stimulus (positive). Indeed, Merrill Lynch believes the various tax hikes associated with the fiscal cliff deal will reduce disposable income by 2.1% this quarter and will drag down first-quarter growth of gross domestic product. Consumers are already expressing displeasure, with the Consumer Sentiment Index recently falling from a post-recession high all the way down to levels not seen since late 2011.
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because they are a bunch of self-centered arrogant ****s period................ that includes
The problem is healthcare, nutritionists and scientists believe that our food intake should be 93% vegetables and the average American intake is 10%. We are free as Americans to become as fat as we want. It should be like car insurance !!!! Would you insure a car running on 10% octane instead of the recommended 89%?
They should all resign. The Fed with free money for the banks will fix it all with bankruptcy for the USA.
Sorry, but while your article mentions a few good points (such as both sides are too busy blaming the other instead of fixing the problem), you lost all credibility as soon as you said "In 2011, the three major entitlement programs -- Medicare, Medicaid and Social Security -- accounted for 44% of non-interest government spending"
Social Security is, by law, NOT part of the deficit, NOT part of Government spending. That is OUR MONEY that the Gov puts into a savings account for us, is supposed to collect interest, and gets paid BACK to us (originally, it was actually "bread winner" insurance- if anything happened to the husband of a family, most families would lose their only source of income as a result. This was an insurance policy so that, should that occur, the family would not become State-dependant).
Learn some basics before you speak.
I would think that people have noticed that many of the government officals threaten SS when money issues come up in congress, so why is SS and payments to those who collect SS so vulnerable? Personally i beleive its because the moneysits in a type of limbo that the government can dip into when ever they want to,and distributing what ever is left over as they see fit. I think what the government should do to lessen the so called vulnrabllity of SS would be that the payments made by those of us every pay check would be to put that persons money into a simple IRA or bonds, how hard would it be to track using the same method the government uses to tax us?
I will list a few of the problems: 1. When The news media and some slick politicians were able to coin the word entitlements that contained both insurance plans and welfare. Mix them together and you must defend them all or condemn them all. Clearly the answer was along the lines Romney proposed. Social Security and Medicare should be saved by making them sound. Most of the answer lies in raising the age more inline with the rise in longevity and pushing it out 10 years so that people could plan. Medicaid should be cut and block granted to the states.
2. The nations infrastructure should be rebuilt with no restrictions on the wages other than supply and demand. Lowest bid price that meets the standards required for quality by honest inspectors.
For a lean-left news organization, this is a refreashingly good article. Our republican House has been getting a lot of negative press for pushing real spending cuts, including the real problem, Entitlement reform. It seems that the Senate and the President also need to quit misleading us and start working with the House to restructure Entitlements and cut spending.
If we paid our bills like Washington pays their bills--We would all be in jail. Social Security is not an entitlement. Money was pulled from Social Security to pay for some of the "Obamacare " infrastructures and then passed onto to us as a poor me attitude that is going on today. PUT THE MONEY BACK!! Cap the healthcare and insurance cost. (Gasoline prices were capped in the 70's and are probably some still in effect today to stop the huge price increases. So I know that this can be done.)
I also see now our roads and bridges are in need of repairs. I remember a "gas tax" that was placed on to a gallon of gas by the Federal and States to make these repairs. With the billions of gallons of gas being pumped daily, why are these projects becoming an issue again? Interesting!
One of the major roots of health care costs are the costs of medical insurance for both the patient and the provider.
Many of the patients we see in the Emergency Room threaten to sue if their needs, however stupid, are not met. Low back pain? I want a full MRI and CAT scan (to the tune of several thousand dollars which you and I pay for). Never mind that I'm overweight and totally out of shape and refuse to do anything about it. But, the physicians will do it to avoid the possibility of a suit.
There is a fair solution to the issue. ALL medical suits (and any non-criminal suit) go to arbitration with the party starting the arbitration bearing the initial costs. No lawyers involved, the arbitrator handles the entire matter.
No one's rights are infringed, but specious lawsuits will disappear and costs to the medical industry should drop dramatically. Those reduced costs should result in lower costs to the patients and providers.
I'm 72 and would be more receptive of tough decisions if there were a level playing field and the above "special" groups had to suffer with the rest of us. Perhaps then some real solutions would evolve to solve our budget disaster.
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