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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There are an amazing amount of people who get rehab treatment. They should put a limit on how many times
a person can get public fundig for this also. Give them 3 chances to work a recovery. After that if they want
rehab treatment, then they have to get it on their own. This would cut costs on Welfare and Medicaid and
Drug and Alcohol programs.
Sorry, forgot to add, stop all foreign aid. Countries where we have established military facilities, those countries will now pay the U.S. to have the facilities and military personnel stationed there (I.E. Germany, England, Iceland, Japan, South Korea, etc and especially CALIFORNIA). Otherwise, we close up shop and leave. It happened in the Philippines and it wrecked their economy for more than 20 years. Also, the GSA should check out some of the outrageous spending, like $58 for a gallon of aviation gas sold to the military. Cute trick. Congress should use their authority, not brow beaten by the senate and executive branch. If congress feels a program in place is not effective or contrary to budget necessities, then waive the magic wand and announce "We will stop funding of this program". Then move on. Congress controls the purse strings, not the senate or executive branch. Put forth your budget proposal, if the senate fails to bring it to the floor (as harry reid has failed to do on the 16 budget bills sent to him), then start pulling the funding for specific programs. harry reid needs to play ball and Congress is holding the bat. Use it.
Anthony Mirhaydari doesn't know what he is talking about. I am going to put a lnk that appeared on "you tube" and it wll explain why the "budge" can never be balanced. So all the geniuses that appear on all the news show don't know what they are talking about.
Here's the link:
I suggest everyone to watch this and you will see why the budget can't be balance not matter what the President says or what the republicians say. Everyone you are going to be in for a real education.
Do you know why the Senate rushed a gun bill today.
They are not serious about the deal, but need to give the american opposition to government spending a detraction while passing legislation to spend and tax.
I am 77 years old and still working. I collect social security which is not entitlement. I also pay $120.00 a month
for social security. I pay 104.00 a month for Medicare. I have a supplement health care premium at $50.00 a month.
My husband passed away at 65 years old. He never got a dime from Social Security. We both worked all our
lives and paid into social security. And the government calls this an entitlement. Bull Chit
heres what is hidden with the government debt.
two much money setting on a table for stupid spenders to have access to.
If we are out of money because of social programs, then where did we get money to bail out banks and auto makers and fanny mac and the list goes on and on.
Would I want to see a bank fail, no, but that is what should have happened because of business decisions. Do I want to see auto manufactures' fail, no, but that was there decisions to do so. I believe you guys are forgetting that a bail out is not what needs to happen. What needs to happen is a spending freeze on the governments part, period. Keep the defense of our country and cities in tact and allow the rest to do without for a while including government payroll.
A person went to doctor and wanted to know how to lose weight. The doctor advised to eat all fatty items to the heart content. The person was surprised and asked the doctor to explain how it was going to make him thin. The doctor replied that if he goes on that kind of binge eating he will start gaining weight very rapidly and in no time he won’t be able to even walk. Eventually he will not be able to work and will lose the job. Afterwards he will start starving as he won’t have any money, and in no time he will become thin.
I think that is the treatment we need here now.
The simple reason is that our government does not want to stop the deficit and loves to spend money. This is the only country on earth where it is running deficit, and loves to borrow to spend, and on top of that loves to donate money to the countries who will love to kill us. There are only few countries in the world from where we have not taken loan.
All lawmakers get fat salaries and perks (even through retirement) and they keep on increasing their benefits. Their healthcare and pension are not tied to the Obama care and social security therefore they do not care how the masses suffer. They know how the vote bank works and exploit people for their own vested interests.
We have become like ostrich which puts its head in sand during the storm. Our leaders explain us that only way to get rid of deficit is to borrow more and spend even more. What a concept! And surprising many of us even believe it also!
Our national deficit till 1980 was less than 1 trillion dollars, which jumped to over 2.1 trillion by 1988, jumped further to 6 trillion by 2000 racing further jumped to 11 plus trillion by 2008, and increased speed to 16.3 trillion in just 4 years.
I suggest the country raises the ceiling by 100 trillion and our interest alone payment may be around 5 trillion per year at that time. The rate we are accumulating deficit we will cross 100 trillion within 30 years, and at that time the country will declare bankruptcy. As soon as we will file bankruptcy, all other countries will have no choice but to file bankruptcy. Thus a new beginning will start cleaning all debt for the entire world. See such an easy solution for a problem that we are losing our sleep!
one word would fix everything 'ACCOUNTABILITY' - of the president (stop the vacations and get to work on reaching out and compromise!); of congress (stop bickering already and make all of your decisions applicable to yourselves as well as the rest of us!); of the American people (you voted for them, now take your medicine and SHUT THE F*** UP and ride this out - All Things Must Pass).
US Population 315,212,095
Tax payers 112,916,749
look at the debtclock in real time
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