Hard Working Traditional Values With A Dash of Fun

Hard Working Traditional Values With A Dash of Fun

Monday, September 30, 2013

The Deficit is $200 Trillion, Not $16 Trillion

The American public is very wary that Obamacare will be a good thing. Most people are largely ignorant of the details of Obamacare, but they have a gut feeling that things will not turn out well.

There is a good reason for this queasy feeling and it´s nothing that can be solved by a shot of Pepto Bismal. (You may feel you need a shot of something much stronger,)

Those of us who have studied the failures of government to do an adequate job of serving the general public are quick to point out the already established government health care program, Medicare, is train wreck ready to happen and, unfortunately, we are all on the train.

How bad is it?

What are your favorite synonyms for bad?

Abhorrent, appalling, atrocious, awful, dire, disastrous, dreadful, frightful, ghastly, horrendous, shocking, monstrous, petrifying, unnerving.

All of these describe the problem and here is why:

  • When Medicare was set up in the 1960s, the number of years people lived past age 65 was much less. That is a good thing if you are over age 65, but this increased longevity was not factored into the cost of Medicare. In fact for the past 40 years, the cost of Medicare has grown at twice the rate of the economy.
  • The pending retirement of the large baby boom generation (78 million) is only going to make this imbalance worse.
  • With smaller families there are fewer people contributing to Medicare withholding and more people taking money out.
  • Adding to costs, we have the popular prescription drug benefit called Medicare Part D (a George W. Bush program) that provides the elderly an average of $1,500 per year in drug subsidies.  How was this paid for? It wasn´t funded by any new taxes. This has created a $16 trillion unfunded liability.  In other words, this ¨most fiscally irresponsible piece of legislation since the 1960s¨ (in the words of David Walker, former comptroller general of the GAO) is equal in size to the official federal debt that has us Tea Party types pulling our hair out. Due to squirrelly government accounting, this is kept off the books. So should our debt actually be $32 trillion? No, it´s actually much worse.
  • Boston University economist Laurence J. Kotlikoff calculates that the actual deficit number we have to worry about is over $200 trillion, and most of this is due to the underfunding of Medicare vs. projected costs. How does this number get so unfathomably huge? Proper accounting methods require that we project the cost of not paying for things that have been promised, that is how we end up with a $200 trillion deficit.
We can make this $200 trillion go down but it will mean either taxing people more to pay for Medicare or cutting back on Medicare benefits, neither option is likely to get you elected to Federal office, hence nothing ever gets done.

What is the solution? You can give up on the Democrats. They have proven time and time again that they can´t cut government spending and there are not enough rich people to fund all the taxes they would like to raise. You can also give up on most Republicans.  This is because too many of them are also okay with more government spending without funding it with new taxes (Medicare Part D mentioned above and wars in Iraq and Afghanistan). Our best bet is with the Tea Party Republicans who are okay with cutting back on government spending. Unfortunately, this is not popular with most voters who are only looking after themselves and don´t care if our fiscal irresponsibility ruins the future for our children and grandchildren.

Your thoughts?

1 comment:

  1. Agreed! It is becoming increasingly obvious that the two main parties are causing so many of the problems. The rise of the tea party Republicans is giving me hope.