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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The way our civil war is continuing to grow, this country will never survive. I am not talking the north and south, I am talking Republicans and Democrats. The only way this will stop is to get read of the parties, that way we can all vote as Americans and not with a party that is ran allot like a communist party. Flat Tax (for all)= 10% Fed, 5% State, make SS and Medicare optional, your choice. Just some out loud thinking.
This article is about balancing the budget, but some might not see the bigger point. America needs jobs for people to go and work at. You want to correct a big part of the budget problem then give a lot of people who want to work a job.
I heard some posters in here who say cut the budget for welfare more to the point TANF and food stamps, well where do these people go work then? If you cut defense then people in that industry will let workers go, so more welfare people, where do these go get another job? This budget problem isn't a easy one to fix for sure, but I think we might want to consider other problems that affect our budget too. All I'm saying is this is no easy fix for these problems with the budget.
they need to fix themselves first!!!! then maybe they could fix the economy . show the people they care take the first cut themselves!!!!!! maybe then we will develope some respect for them again.
until then work for new reps in both chambers.
Doesn't surprise me one bit, what government has been able to take care of all of it's people? No matter who gets in office, whether it's here in the US or anywhere else, have they been able to eliminate poverty? Sickness? Injustice? Crime? No. That's why it says in the Bible in the book of Jeremiah 10:23 "I well know, O Jehovah, that to earthling man his way does not belong. It does not belong to man who is walking even to direct his step."
So, if mankind can't direct his own steps, what makes us think he can direct one step? Only God's Kingdom that we pray for, will cure the ills of mankind.
To start out with Obama admin NEVER had a budget to follow because of Harry Reid & the senate!
2nd We need to tell congress that if they do not pass a budget in a month, they forfiet their pay until they do, not this crap about it going into an escrow account.
3rd They need to cut spending. How about 5% from every Federal agency, They can tighten their belts like the rest of the country
Cut military spending, tax the rich. It's not rocket science -it's arithmetic.
I know quite a few people with the majority of their parents assetts, as their parents are in homes at the governments expense.Medicare,medicade cannot absorb end of life situations the cost is just too high and never was aloted for in what we pay in.Nobody including myself wants to give away assets to cover medical expenses but it is what should have to happen.
One of the main reasons our health care is so much more expensive is that we pay 100 times as much for the VERY SAME DRUGS as other countries. New drugs that are developed in the US by US companies are sold here for $100/ pill and those same companies will sell them in Africa for $1 / pill.
We pay for the development and we pay ridiculous prices with the drug companies getting rich. If we passed a law that said a company could not sell products for less to other countries than they do to US citizens I am sure it would go up everywhere else but it would be cheaper here. They do the same thing with a lot of other products like university textbooks. I have had graduate students here from countries like India or Pakistan that get book lists in advance and have their parents buy the books there for $17 that I paid $150 for.
Another major problem is that in the past more specialized equipment was centrally located. When I was a child only orthepedic doctors had xray equipment. Now every doc in a box has one and most have CT machines and such. It may be convenient not to have to travel to get a scan but it is not cost effetive. The the offices get them because they want your money, not to send you somewhre else to get it done (and pay someone else).
If you ever look at what Blue Cross actually pays you will see that many doctors who do not really specialize probably do not make as much as your plumber does.
This will be one of my goals this week. To wright a letter to my Senator.Then i'm going to email this to there office. Maybe ever month I will pick a supject.
America spends more than a trillion dollars on programs to help our own unemployed and disadvantaged. So why are we importing millions of immigrants to compete for jobs and resources with them?
Congress should help the unemployed and disadvantaged Americans get decent-paying work, not import millions of new workers to take entry-level jobs. The U.S. Commission on Immigration Reform, chaired by civil rights activist Barbara Jordan, called for cutting annual legal immigration in half. This would still be double the historical average, and allow for plenty of reasonable immigration. The primary reason for the cutting immigration that the commission cited was that every time immigration levels have been high -- and they are higher in the past decade than every -- wages fell and poverty rose. With so many millions of unemployed Americans and the nation in such a dire fiscal crises, the commission's findings are even more important now than ever.
As Congress considers many "immigration reform" proposals, keep in mind that the reforms we need are those that result in more job openings, less poverty, and lower spending.
My name here
Another thing that would help on the medicare side,a couple(with assets) should not be allowed to give them away until their death.Those assets should be available to cover any health care problems that medicare shouldn't cover.
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