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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A good start that will be unpopular with the 47% and will affect our
imaginary unemployment percentage is. We can't afford our own
government anymore. It's time for drastic cuts. As one gentleman
said, as much as 50%. We can start with laying off the 143,000
new federal employees hired since Obama took office. It's time
to wake up. We as taxpayers can't do it anymore.
The hard choices are..
.less government perks for our 'hard' working politicians..
.no pac contributions for them..
.fix redistricting scams...
.less retirement and medical contributions...
.cut the military budget by 1/5th..reduce foreign military assistance...time they spent more of their money on their defense...
.review ALL SS, disability and medicare recipient cases..
.revamp the US tax code...if people need to have the EZ form done for them its too hard...
.cut $$$ from foreign aid...
.don't pay to rebuild residences, condos, apts, in recurring flood zones...
......this may not add up to much but it would sure satisfy and benefit the us who pay the bills...
Social Security is a giganatic entitlement program.
I am getting ready to retire in the next 5-6 years. If I live to be 90 years old like a lot of people do these days I will draw 400% of the money that I paid into social security over the years.
Young people on the other hand face a prospect of their SS taxes doubleing (or worse) to pay my check and chances are they will never get back the amount of money they are going to have to pay in to the system.
Watched an interesting show the other night with the former congressman from Minnesota on. In 1976 when he
was elected to congress they made 49,500 per year and worked 48 out of 52 weeks in the year. Now congressman
make 194,500 per year and last year worked............103 days, thats it. Its time we organize and march on Washington
and demand the removal of these lazy idiots. I talked to a retired policeman last week in the store and he said he
hates to say it, but he believes we are going to see another civil war in our country...I believe that. You can only
push people so far. All these people who want to collect welfare instead of work. Go apply for a job and you will
have to take a drug test. Apply for welfare, and even though they wanted to be able to test for drugs for welfare
receipients, that was ruled unconstitutional.................no wonder our country is going down fast. WE took God
out of our schools and our pledge of alligence, now we are reaping what we are sowing.
Trade trade trade trade, should be the new source of income, " I GOT WHAT U NEED, WHAT U WANT, IF I DON'T, THEN I AM GOIN TO GET IT, IF I STILL DON'T HAVE IT THEY DON'T MAKE IT like I said before every country has something somebody needs, why not trade, ill give u 4 tons of rice for 2 or 4 tons of beans (dry) just an example of what I mean, there counties with no military or small one, we have the world's best military ever made and I don't think that's going to ever change, but we can offer protection and skills for goods, even though we are protection for the world anyway, there are boarders
Something has to be done eventually, we all know the SS/Medicare receipts have gone into the general fund and have been spent. Water over the dam. I feel SS/Medicare should be looked at as POVERTY INSURANCE. If between your wealth, 401K, IRA or pension plan you have X amount of funds your SS/Medicare should be reduced/eliminated until such time as other funds become lower. Again look at it as insurance for the working individual who wasn't able to save. With such a system the amount of SS/Medicare tax perhaps even could be reduced. Just a thought, I am interest in others opinions.
I want to rule the world!
All problems solved!
See how easy that was?
Social Security is still self supporting and should not be included in the budget, as it was never intended to be in the first place, untill they dumped the excess in the general fund and started partying with it.
The same with gas taxes, those taxes were supposed to be to keep up the infastruture, not dumped into the general fund for Congressmen to party with.
. . SECRET BUGETS . . . SECRET
YOU CAN NOT FIX WHAT YOU DO NOT ADMIT EXISTS. . . .
SECRET DEALS >> SECRET WARS
> > WASHINGTON SPYS >> PRYS >> LIES ...........THEIR BIGGEST FEAR IS THAT THE PEOPLE WILL UN-DO THE SECRECY ACT AND FIND OUT THE TRUTH.......
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