Category Archives: national debt

Want Something To Be Afraid Of? Here are a few really scary things

Something Afraid Of

Remember the time honored line from childhood, “If you don’t stop crying I’ll give you something to cry about?”  Combine that with the line from the Republicans – We can’t spend any money – Federal Spending is Out of Control—Think of the Children!  Okay, let’s think about the children and what we’re leaving them. That’s scary.

What’s NOT Scary?

First, let’s take on the Republican mantra about spending our grandchildren’s money – it’s hokum, and always has been.  The GOP had, as we remember, no problems conducting the war in Iraq on the national credit card, nor did they have any problems when they put the Medicare Part D into effect without any funding.  Hypocrisy aside,  there are these  inconvenient facts for the GOP:

“Federal outlays over the past three years grew at their slowest pace since 1953-56, when Dwight D. Eisenhower was president. Expenditures as a share of the economy sank last year to 22.8 percent, their lowest level since 2008, according to Congressional Budget Office data. That’s down from 24.1 percent in 2011 and a 64-year high of 25.2 percent in 2009, when Obama pushed through an $831 billion stimulus package.” [BloombergNews]

And then there’s this:

“The deficit probably will fall to $500 billion, or just below 3 percent of GDP, by 2015, as businesses and consumers step up their spending after bringing their own debts down, said Jan Hatzius, chief economist at Goldman Sachs Group Inc. The improving economy will increase tax receipts while lowering government expenditures for benefits including food stamps and unemployment compensation.” [BloombergNews]

So, thus much for the GOP and Faux News talking point, endlessly repeated for effect if not edification.

What IS Scary?

The Infrastructure Nightmare. We are leaving our children and grandchildren one horrific bill for the maintenance and improvement of our national infrastructure.  We keep getting report cards from the ASCE and we keep ignoring them.

“Over two hundred million trips are taken daily across deficient bridges in the nation’s 102 largest metropolitan regions. In total, one in nine of the nation’s bridges are rated as structurally deficient, while the average age of the nation’s 607,380 bridges is currently 42 years. The Federal Highway Administration (FHWA) estimates that to eliminate the nation’s bridge deficient backlog by 2028, we would need to invest $20.5 billion annually, while only $12.8 billion is being spent currently. The challenge for federal, state, and local governments is to increase bridge investments by $8 billion annually to address the identified $76 billion in needs for deficient bridges across the United States.”  [ASCE]

We’re currently spending only a bit more than half of what we need to spend to eliminate the backlog – note that’s not speaking to NEW construction.  Congratulations kids! We’re saving you from the practically non-existent “National Debt” problem – while we are leaving you with the bill for a deteriorating bridge system.  You know, those bridges that are used by commuters, travelers, and truckers…. What could possibly go wrong? Can anyone say I-35 Minneapolis bridge collapse?  Bridges are scary… so are airports:

“Despite the effects of the recent recession, commercial enplanements were about 33 million higher in number in 2011 than in 2000, stretching the system’s ability to meet the needs of the nation’s economy. The Federal Aviation Administration (FAA) estimates that the national cost of airport congestion and delays was almost $22 billion in 2012. If current federal funding levels are maintained, the FAA anticipates that the cost of congestion and delays to the economy will rise from $34 billion in 2020 to $63 billion by 2040.”  [ASCE]

That’s right kids, while we’re saving you from that horrible nasty national debt that is neither horrible, nor nasty, we are leaving you holding the tab for an airline transportation system the cost of which will balloon up to $63 billion, billion with a big B, by 2040.   But, but, but, we’ve saved your “inheritance?” What inheritance? You’ll be spending your tax dollars on things we should have taken care of 25 years earlier.

In case this is giving our children and grandchildren headaches – there’s the problem of real headaches and other medical issues.

The Medical Research Issue.    The Republicans were only too pleased to launch one of their patented panic attacks about the Ebola infections, but that subsided with the election, and we still don’t have a Surgeon General, nor do we have any significant increases in funding for medical research. Remember kids – we’re saving your “inheritance.” Research America tracks funding for medical and pharmaceutical research and reports:

“Federal spending also contributed to the overall increase in the R&D spending reported for FY12, but the apparent increase in this category is misleading. The increase is largely due to changes in the classification of existing spending within the National Science Foundation and the Food and Drug Administration ($315 million at NSF and $152 million at FDA) rather than to an actual increase in dollars.”

So, while we’re skimping on funding medical research in this country, we still have mortality rates which differentiate by ethnicity – the average life expectancy of a white male is 76.5 years, a black male 71.8 years, and a Hispanic male 78.7 years.   While the elders march along, on different paths, we could spend a few moments thinking about those infants who are going to be footing our bills.  We have NOT succeeded in bringing down the number of fetal deaths since 2005, and those fetal mortality rates are higher for African American, Native American, and Alaskan Native women than they are for non-Hispanic white women. [CDC]  If the infant makes it into the world there are still problems, for every 1,000 infants born in this country 6 of them will die during their first year of life from a serious birth defect, or being low birth weight, or from being a victim of Sudden Infant Death syndrome, or from the effects of maternal complications of surgery. [CDC]

We do have a Healthy Start program, launched in 2007, to address some of these issues, and then we cut the funding!  So, we still have differentiated life expectancies, a serious problem with fetal mortality among ethnic minorities, a continuing problem with sustaining infants beyond their first year – and we cut the funding – Dear Grandchild, if you are fortunate enough to be alive to read this, please know we love you and hope you don’t mind that we “saved” you from the Nasty National Debt…. You can pay for the research to keep your own children alive, we could have helped but you know how it is.

Oh, and that Ebola thing?  We’d have made more progress on the vaccine but we didn’t want to spend “your inheritance.” [Time] And, the nasal version of the vaccine – that might not happen either because of funding cuts. [Pharma]  Even better – there is a proposal from the Republican to cut funding for the CDC budget – the one that in conjunction with the NIH will be working on drug resistant virus strains.  If the kids want more research on new bacterial and virus related illnesses, they can pay for it themselves?

Gun Violence.  While we were busy protecting your right to bear arms, and we clung to the notion that having a gun in the home will make those little future taxpayers safer.  We did all this while still knowing that a gun in the home makes it 22 times more likely to kill or injure someone (maybe you) in the house than that it will ever be used for self defense.  And, we knew that 60% of all children (0-9) killed  by guns occurred in an apartment or single family dwelling.  We also knew that two-thirds of all school shootings were done with a gun acquired in the home. [Brady]  What did we do about this?

We made it impossible for a gun manufacturer or dealer to be sued for negligence or malfeasance. We refused to enact legislation to require background checks on gun buyers.  We refused to even take an official count of gun deaths and would not allow pediatricians to ask if firearms were in the house.   Because? Maybe you’ll want a gun… if you can still afford one… and you too can be at greater risk for a homicide, suicide, or unintentional shooting. Oh, and by the way, we’re leaving the increasing costs of medical care, emergency room treatment, rehabilitation treatment, lost productivity, and judicial proceedings to you.  Because you’re “free.”

So, if you want some things to truly be afraid of these are just three areas in which we have decided that our children and grandchildren can shoulder the bills because we were too deluded, too ideological, or perhaps too ignorant to do so ourselves.

Comments Off on Want Something To Be Afraid Of? Here are a few really scary things

Filed under Infrastructure, national debt, Politics

Five Quick Reasons the Debt Ceiling Argument is a Farce

Bush Obama Deficit trendsDebt Ceiling fights are truly ridiculous.  Here’s why:

#1. The money has already been spent.  The entire “We Need To Stop Spending” argument isn’t applicable to money already appropriated.  If we want to cut future spending the place to do that is in budget and appropriation bills. Everything else is extraneous.

#2. There are three branches of government.  The President, any President of any party, may only recommend a budget or call for appropriations, and then all the incumbent can do is to pressure the Congress to enact the budget or appropriations.  Arm twisting, log rolling, and other negotiating techniques may be applied, but the final say on all money bills is the province of the House, with the agreement of the Senate.  Thus, the fight about a debt ceiling is essentially a matter of the House arguing that the House should not have appropriated so much funding so the House must (or must not) increase the debt ceiling limit.  If this sounds silly, it’s because it is.

#3.  The failure to increase the debt limit increases the deficit. Telling the world that the U.S. may not pay interest on the Treasury bills it has issued for government operations, then the cost of issuing those securities goes up as investors demand higher yields (read interest rates.)  Higher yields mean more debt service payments, and more debt service payments mean we’re deeper in the hole.  The general rule in life is that when you are in a hole — stop digging.  This rule doesn’t appear to apply to House and Senate Republicans.

#4. The debt ceiling argument is a distraction.  Don’t want to talk about reasonable gun control legislation?  Wave the Debt Flag. Don’t want to talk about comprehensive immigration law reform? Wave the Debt Flag. Don’t want to talk about the reemergence of Wall Street machinations issuing debt instruments the interest on which can be paid off with more debt? Wave the Debt Flag.  Don’t want to talk about infrastructure investment? Wave the Debt Flag. Don’t want to talk about re-authorizing the Violence Against Women Act? Wave the Debt Flag.   Don’t want to talk about enacting the American Jobs Act? Wave the Debt Flag.  It is as if the multi-tasking performed by every other human being on this planet becomes a mystery when a person enters the halls of Congress.  Evidently, the House of Representatives gets mesmerized (with the assistance of a compliant press) by the Debt Flag every time it’s waved.

#5.  The institutions which are crying the loudest for debt management, the investment bankers, may have very personal motives.  Not that profit making is a bad thing — but, they want their cake and the eating of it too.  If they invest in Treasury bills, then they’d like to earn as much interest as possible. If the debt ceiling isn’t raised then interest rates on Treasuries will likely go up –and they’d like that. Who wouldn’t?

1 Comment

Filed under national debt

Leverage?

ArchimedesSome members of the chatterati may have taken Archimedes a bit too literally: “Give me a place to stand and with a lever I will move the whole world.”  Often too much emphasis is placed on the fulcrum and not quite enough on the part about the ancient mathematician needing a place to stand.  The word of the week sounds like “leverage” in Washington, D.C. Who has it? Who doesn’t? And, so what? The So What part isn’t all that interesting.

Although the pundit class is thoroughly fascinated at the moment with how much leverage the President and the Republicans may each possess after the self inflicted Fiscal Cliff fiasco, most of their comments can be categorized as post game “analysis” of the variety which is more commonly associated with post game “analysis” of a sporting event.  It’s never quite enough to declare one team or another victorious based on the scoreboard numbers — “we” have to “know” why one team won and the other lost.  In reality, we really don’t.

So, in the parlance of political reporters emulating the post game questions of their sports writer colleagues — can the President win the next game? A game of Debt Ceiling already scheduled by the Republicans and given official status by the post game analysts.

It depends on where you stand.

There are two major elements of the federal debt that deserve serious scrutiny.  First, during the Bush Administration’s policy of credit card conservatism we racked up two wars (off the budget and supported by supplemental appropriations), a major addition to the Medicare program (Medicare Part D, also unpaid for) and one major Recession.  All were guaranteed to increase the national debt.  The first two increased spending and the latter cut into the tax base.

Secondly, we do need to reduce the national debt, but how we do it is important.  This is one of those occasions which calls for a scalpel, not a meat axe.

It is also important to stand on firm ground.

A few facts are in order.  The first part of standing on terra firma before attempting to leverage anything is to dismiss some media mythology about trends in the national budget deficits.  The following chart should provide an illustration of the inaccuracy of the Now That A Democrat Is In The White House The Deficit Is Out Of Control Myth:

Bush Obama Deficit trends

The chart illustrates what happens when two wars, one major Medicare addition, and a nasty Recession contribute to national spending. It also shows the effect of Obama Administration policies mentioned earlier, a point at which we should note that the Bush Administration toted up about $5.1 trillion in expenses, while as of last June the Obama Administration’s policies resulted in about $983 billion in spending.

Bush Obama Spending ComparisonIn short, if we are really serious about deficit reduction then we need to eschew the policies that got us into this mess in the first instance, i.e. unnecessary tax cuts, and two very expensive wars.

OK, so if we don’t get involved in more military operations, we resist the myth that tax cuts somehow cause economic growth (which they never have), and we regulate our financial markets more effectively in order to mitigate the excessive enthusiasm of traders who created the last great mess, then where do we cut?

It’s time for another reality check.

Here’s where the money goes:

Budget Categories

Since Social Security is a self-funding program, which as President Reagan famously cautioned in 1984 doesn’t add to the federal deficit (video), we can take that 20% out of the equation right now.  Anyone who is truly serious about the single issue of Social Security solvency should be clamoring to increase the cap on earnings liable to the payroll tax, currently set at a measly $110,000. We also need to remove the mandatory spending from the discussion because what we cut will have to be from discretionary spending.

The FY 2013 budget calls for spending $666.2 billion by the Department of Defense.  Another $80.6 billion is allocated to the Department of Health and Human Services (Medicare, Medicaid), and the Department of Education (Pell Grants, Title I, student loan guarantees, etc.) is scheduled to spend or entail $67.7 billion while the 4th largest chunk of the budget goes to the Veterans Administration which has $60.4 billion in scheduled spending.

In short, we’ve budgeted for $1,510 billion in discretionary spending in FY 2013.  The Department of Defense is on track to receive 44.12% of ALL the discretionary spending in the national budget.   Yet calls to cut military spending brings on the wailing of voices, the gnashing of teeth, and the rending of garments about “making us less safe” in an uncertain world.  In spite of all the wailing, gnashing, and rending — that one single department consumes 44.12% of the entire pot of discretionary spending is something we ought to be discussing.

Medicare is another matter.  IF we are truly serious about deficit reduction then we need to have more than the simplistic discourse already in evidence.  There is a false choice being presented, as though the only options are to privatize the Medicare program (give Granny a coupon and let her go out and find her own insurance) or to create a Single Payer national health care system.  While I wouldn’t be sorry to see a Single Payer system, this is an argument for another day.  The point is that there are options between these two proposals.

The central focus point should be that nothing which doesn’t have a bearing on health care cost containment is going to make much difference in the spending levels.   Privatization doesn’t address the cost containment issue, and a single payer system without cost containment elements is merely a recipe for increased expenses.

Now that the campaign season is over we can dismiss the Republican rhetoric about “Obama cut $716 out of Medicare,” and consign to the dust bin the notion that the Affordable Care Act somehow impinges on Medicare benefitsBusiness Week explains:

From 2010 to 2019, Obamacare trims payments to providers by $196 billion. They agreed to take a cut because they will get so many new patients, thanks to the individual mandate. Another $210 billion will be generated by raising Medicare taxes on the wealthy (that’s households earning more than $250,000). Another $145 billion comes from phasing out overpayments to Medicare Advantage. About 25 percent of seniors use the program—in which private plans compete for Medicare dollars—instead of traditional fee-for-service Medicare. Under Obamacare, the government has to keep Medicare Advantage costs in line with those of traditional Medicare. More savings come from streamlining administrative costs.

Thus, if we trim payments to providers, phase out over-payments for profitable private health care policies, and put some reins on administrative costs we’ll find about $716 billion in savings for the Medicare program.  Other cost savings may also be the result of more efficient record keeping, especially in the pharmaceutical segment.  Anyone who’s dealt with the medical issues of an elderly parent knows of multiple prescriptions written from several physicians who may or may not consult with one another.  The result can be as minimal as two (or three) prescriptions for the same medication at different dosages; or, as detrimental as two prescription medications which should not be taken together.

However, the bottom line is still the bottom line — unless and until we are ready to discuss health care cost containment we’ll be immersed in the rhetoric of low bludgeon and high dudgeon without much result.

When we discuss funding for the Department of Education it’s important to note that the FY 2013 discretionary requests yield an official number, $69.8 billion — if we include Pell Grants.  Pell Grants constitute about $22.8 billion of the total, a decrease from $23.8 billion in the FY 2011 budget.  Without the Pell Grants the total discretionary spending in the FY 2013 budget is $47 billion.   There are two constituencies with major stakes in arguing about these funds.

Parents.  Unless one is amenable to the elitist argument that kids should have access to only the level of education their parents can afford (which makes social mobility a moot point) parents are going to need assistance paying for their children’s education.  Whether we like it or no, education is a labor intensive business.  We can trim educational spending by continuing what the Obama Administration has started — saving approximately $61 billion by cutting the banks out of their role as middlemen in the student loan program [NYT]– but it really doesn’t do to cut efforts to educate our young people.  It also doesn’t make economic sense since a college degree is worth money in the marketplace.

Educations Pays Local school districts.  Cash strapped and semi-starved local school districts rely on funds for Special Education programs, Title I services, School Lunch programs, to make up budget shortfalls.  While the level of federal involvement at the local level isn’t all that much it does cover expenses local districts would be hard pressed to meet were the monies cut.

Hostage Taking

How we fund, or de-fund, these major activities depends on who is being held hostage and by whom.   Did the President allow the Republicans to gain “leverage” by taking the tax rates off the table in the next Congressionally manufactured debt ceiling debacle. Or, are we going to change hostages?

Will the Republican stance be that all other programs must be cut in order to spare the 44.12% consumed by the Department of Defense?

Will the GOP position be that Medicare must be privatized in order to practice “sound fiscal responsibility?”

Will the GOP position be that Social Security must be “reformed” (read cut) in the interest of “fiscal accountability and deficit reduction” even though it adds not a nickel to the federal debt?

Will the Administration simply say — You manufactured this debt ceiling “crisis” live with it?  Remembering that if the national credit rating is downgraded this will likely mean that the cost of borrowing (yields paid to those who invest in Treasuries) will go up, exacerbating the problem rather than addressing it.

Will the point be made to the American people that while the credit card analogy is handy, the United States of America doesn’t have creditors it has investors.  Our federal government accesses funds by issuing bonds.   And WE own most of those bonds.

Here’s the little chart again:

Who owns US debt

42.2% of the money “borrowed” by the U.S. government is an asset for U.S. individuals and financial institutions.   Today’s yield curve doesn’t indicate a government which is having to pay all that much to get people and institutions to invest in it:

Daily Yield CurveEven 30 year bonds are paying only 3.0% interest.

The amount of leverage always depends on where one stands and places the fulcrum.

Comments Off on Leverage?

Filed under Congress, Economy, education, Federal budget, Health Care, Medicaid, Medicare, national debt, Obama, privatization, recession

Things that could get me to toss confetti in 2013

ConfettiThere are things that could get me to toss confetti for 2013.   Not many, mind you, which would justify the consequent vacuuming, but a goodly handful.

#1. The Senate of the United States of America does something constructive with the FILIBUSTER rule.   The original rule was intended to prevent the willful trampling of minority points of view, but the abuse of the rule is now part of the clichéd “Washington Gridlock.”  There is a delicate balance between Majority Rule and Minority Rights, but Obstruction for its own sake is not a laudable occupation.

#2. The Republicans in the House of Representatives eschew the  Hastert Rule , under which a majority of the majority party caucus must agree to the passage of a bill before a vote can be taken on the House floor.  This might have been a lovely idea if the current majority party caucus weren’t the replication of that other cliché– a wheelbarrow load of frogs.  Governance requires compromise, and compromise demands the admission that we don’t always get everything we want.  Ideological posturing is not a substitute for principled discourse.

#3.  Someone in a position to do something about it finally figures out that arguments over raising the debt ceiling are academic at best and consummately silly at worst — rather like announcing that because I overspent my budget for this holiday season I’m going to chop up my credit cards and not pay the bills.  Aside from being the most fiscally irresponsible action imaginable, it’s also a manifestation of the idea that the full faith and credit of the United States is some kind of bargaining chip in ideological squabbling.

#4. The National Rifle Association (aka No Rational Argument) stops pretending to care about the right of our citizens to keep and bear arms, and honestly announces that its ultimate intention is to promote the sale of as many firearms as its manufacturing donors can create.  After that, it should be far easier to discuss comprehensive background checks, closing the gun show loophole, and banning military style assault weapons.

#5. More people, perhaps even more people in the national media, stop referring to “The” government and start calling it what it is — OUR government.   “The” government calls to mind the institution which cracks down on Moonshiners, or enforces school integration, or ignores calls to make Jefferson Davis’s birthday a national holiday.  “The” government didn’t decide to integrate public schools — “our” government did. “The” government didn’t decide to enact regulations to prevent air and water pollution — “our” government did.  And, “The” government didn’t create the Food Stamp (SNAP) program — “our” government did that.  And so it goes.  Continual references to “The” government is an unfortunate holdover from the Reaganesque caricature of government designed to promote the financial health of the economic elite by appealing to the discontent with those laws “our” government enacted to promote OUR general welfare.

#6. Our representatives on Capitol Hill learn to say “____ isn’t the end of the world as we know it.”  I could do with a great deal less hysterical hyperbole.  “This is the Largest Tax Increase In The History of the Universe!”  Probably not.  “This is the worst violation of human rights ever!” Probably not that either.  “This will create the worst calamity known to man.” Probably not.  “This will destroy our ____.”  Again, probably not.  Excuse me while I chuckle at the pomposity of this meaningless prognostication.

#7.  Journalists who seek to inform me via the television set prove to be (1) knowledgeable about the subject under discussion, and (2) include fact checking as part of the “context” of which they speak so often.  If a statement made by a politician is factually inaccurate, they will tell me; and I hope they’ll be able to offer a correction.  I really don’t care if they are correcting the record in the wake of Left Wing Larry or Right Wing Richard’s pontification.  The object of the exercise should be to impart accurate information so far as it can be known — I can get my “entertainment” elsewhere.  Bluntly, the “he said, she said, and then he said” reactions from professional chatterati or elected representatives is less entertaining than a good professional wrestling match, which at least has the grace to admit it’s a scripted farce.

#8. Somebody finally declares the Culture Wars over and done with.  Our contemporary version appears to incorporate a toxic dose of good old fashioned misogyny.  Women make up about 51% of our population and telling them they cannot have an abortion (even in the cases of an ectopic pregnancy or as the result of a rape) is paternalistic to the core.  Worse still would be telling them that their employer can decide if their health insurance plan covers contraceptive medication.

#9.  On a related note, it really doesn’t do to blame God for everything.  I’d cheer the week that some blowhards weren’t showcased in the media for pronouncing God’s Wrath for … whatever.  Hurricane Katrina — God’s wrath for a Gay Pride gathering? Really?  God’s wrath because we don’t pray hard enough?  That certainly doesn’t explain the attack on congregants in the Knoxville Unitarian church.  God’s Wrath because we don’t have organized  prayer in schools? Huh?  No one at Columbine High School, Platte County High School, Northern Illinois University, Virginia Tech University, or Sandy Hook Elementary knew how to pray and practiced it regularly? Spare me the Westboro Wannabes who “know” the mind of God better than a six year old child.

#10.  The confetti will fly when we begin to have a serious discussion about global climate change without having to incorporate the phony “science” offered up by the fossil fuel industry.  No, there isn’t a “controversy” here. And, no reputable science deflects our responsibility as human beings for the contamination of which we are clearly capable.

Speaking of the Almighty, there’s an old story about the man caught in a flood which seems appropriate at the moment.  “Why, he cried out to God, am a trapped in these flood waters?”  The Almighty, sorely tired of listening to the wailing, said, “I sent you warnings.” “When?”  “When?” responded the Deity. “When indeed.” “I sent you warnings on the radio. You ignored me. I sent you warnings in television broadcasts, and you ignored me. I even sent a deputy sheriff to personally advise you to evacuate. And, you ignored him too.”  ….

We’ve been visited with major named storms, watched ice caps diminish, seen glaciers disappear… and all together too many people are ignoring the warnings.

Comments Off on Things that could get me to toss confetti in 2013

Filed under abortion, conservatism, ecology, energy policy, family issues, Federal budget, filibuster, Filibusters, Global warming, Gun Issues, Health Care, national debt, pollution, public health, racism, religion, VA Tech, Women's Issues, Womens' Rights

Yes, We Could Be Having A Serious Deficit Reduction Discussion?

Tea Party FlagAt some point in the ongoing discussion about federal debts and budget deficits everyone needs to get serious.  Serious, that is, about doing that which will reduce our federal deficit spending.  Really serious, not as in “let’s wave a Debt Crisis Flag every three months to advance an agenda including the privatization of Social Security and the voucherization of the Medicare program.”

Let’s start with the obviousSocial Security doesn’t add a dime to the national debt.  If the words of a progressive blogger won’t suffice, how about listening to former President Ronald Reagan?  (video here)  So, discussing “reforms” to the self funded Social Security program as a means to reduce the national debt is extraneous to any serious deficit reduction discussion.

One way to approach the privatization of Social Security is to change the frame of reference, such as altering the connotation of “entitlement” from some earned benefit to which we are entitled because we paid for it, to one which has a tinge of “welfare” about it.  Social Security is not a welfare program — it is an earned benefit.  People who have paid into it all their working lives have every right to expect to be getting something back.  Social Security is not a retirement program.  It is a program which seeks to prevent abject poverty for elders.   Nothing in the Social Security program prevents anyone from maintaining a self-contributory retirement account of any shape or form.   Indeed, the benefits from Social Security are low enough that retirement to the Gated Golf Paradise Of Your Choice can only happen if you have a self-contributory retirement savings program. Anyone suggesting that “entitlements” such as Social Security “have to be reformed” to ease the burden on the federal debt (1) doesn’t have a clue what they are talking about, and (2) is regurgitating anti-safety net talking points from radicals who want to privatize all retirement income programs to the benefit of Wall Street investment firms.

Medicare does have some issues.  The first, and most readily apparent, is that the Medicare Part D (prescription drug) segment is, and always has been, underfunded.  However, the really big monster under the Medicare bed is the increasing cost of health care in America.  When private health care corporations started buying up religious organization/private, state, and locally supported hospitals the profit motive surged in the sector.  Health care must now generate a profit.  Savings, which were once achieved for the purpose of reducing costs for local tax payers or donors to religiously based institutions, now accrue to the corporate bottom line — not to taxpayers, donors, or patients.

The second factor is technology.  We do have the best medical treatment providers in the world.  However, best often translates into “most expensive.” We have all manner of devices and gadgets and equipment and gear to save or sustain lives.  Our hospitals take it as their mission to save or sustain life, which is all well and good until the emotional meets the economical.  There are “death panels” in this country, but they aren’t governmental — they are familial, with families making ‘end of life’ decisions which horrifically in some instances are based on what the family can afford.   Frankly speaking, we don’t do a very good job of educating our citizens about advance directives.  Some conservatives set up a howl when they noticed the Affordable Care Act provided for paying physicians or other medical professionals who provided ‘end of life’ counseling for their patients — however, a little counseling might go a long way toward reducing the anxiety of hospital personnel and the trepidations of family members.  It could also provide some savings in the long run.

Returning to the Big Problem — the Medicare Part D component; we knew in 2003 that the Part D segment would  cost approximately $534 billion.  [Foster pdf] Simply put, “the drug benefit had no dedicated financing, no offsets and no revenue-raisers; 100% of the cost simply added to the federal budget deficit,..” [Forbes]  The part about “dedicated financing” is important.  While the Social Security trust funds have dedicated financing (payroll taxes) there were no provisions to increase the revenues available to finance the Part D enhancement.   There is something unappealingly ironic about the current GOP insistence on “entitlement reform” because “Medicare is broken,” when it was the GOP majority in 2003 that Broke the Program.

Ways to ‘reform’ the Medicare program have been suggested which do not require “voucherizing” the entire thing and sending seniors back to pounding pavement in order to find affordable health insurance plans.  We could consider means testing for the prescription drug benefit.  We might take under advisement lifting the earnings cap for payroll taxes from the current $110,000 level and dedicating a portion of the revenues toward the Part D program.  We could allow the Department of Health and Human Services to negotiate for prescription drug prices the way the Veterans Administration bargains for prescription drugs for VA hospitals and clinics.

If we are REALLY REALLY SERIOUS about ‘reforming’ Medicare then it would be helpful to get past the silly voucherization proposals, referred to as “structural reform” in Speaker Boehner’s response to the President, [Boehner pdf]  and get to the core of what makes health care expensive — we could talk about health care cost containment, dedicated financing for Medicare, and lifting the earnings cap.   We might also want to take a deep breath and see if the Affordable Care Act’s provisions, such as eliminating tax payer subsidies for profitable private Medicare Advantage insurance policies, could achieve some savings over the next decade.

However, it’s getting relatively obvious that the Republicans aren’t terribly serious about deficit (debt) reduction when their offers are strictly ideological (privatize and voucherize) and the proposals don’t address the monster of their own creation — the lack of financing for Medicare Part D.

Buzz Words and Generalities.   Speaker Boehner is offering (pdf) “pro-growth tax reform that closes loopholes and deductions while lowering rates.”   This phrasing is coming perilously close to the older verbiage: Waste, Fraud, and Abuse.  As if we could make up any gaps in program funding by simply cutting out the WFA.  Most anti-tax advocates cite the WFA as some massive potential figure which if reduced could cure all our fiscal woes.  When pressed to provide total figures associated with the largely mythical WFA these advocates provide outlier examples of welfare fraud, some particularly egregious Pentagon payments to contractors, and perhaps a bit of information from Internet e-mail chain letters.  The WFA numbers have yet to yield up the level of financing needed to close budget gaps in the Pentagon or any other government activity.

The arithmetic from “loopholes and deductions” doesn’t add up either.  The same sort of fantastical thinking is required to equate the WFA savings and the L&D revenues.  These mythological creatures are based on the same gossamer upon which anti-tax advocates conjure up the notion that an inordinate amount of the U.S. budget is allocated to foreign aid.  The average American has come to believe that foreign aid takes up 10% of the federal budget, when if fact it consumes only 1%. [NYM]

The Republicans also appear to be consuming their own rhetoric on savings associated with reductions in federal employee compensation.

“Cutting pensions and benefits for government workers is popular, but once again most Americans overestimate how much that costs the government. On average, Americans think the federal government spent 10 percent of its 2010 budget on pensions and retiree benefits; the OMB figures indicate the real number is about 3.5 percent.” [CNN]

The moral of this story is that if the amounts of spending on pensions and benefits, or the amounts that can be retrieved by closing loopholes and eliminating deductions, are grossly inflated, then the resulting policy and budget decisions will be widely off the mark.

Unfortunately, the same type of ideologically based proposals which are the core of Speaker Boehner’s “structural reforms” i.e. voucherization and privatization of Medicare appear to inform his suggestions about federal employee compensation, and another favorite GOP target, SNAP (food stamps.)

The program is already under assault from all sides, considering the appropriations being entertained in the agriculture bill.

The Senate’s version of the farm bill would reduce overall funding by $23 billion, with a reduction in food stamps of $4.5 billion over five years. The House Agriculture Committee is proposing to cut funding by $35 billion — with nearly half the overall cut coming from reductions in food stamps by $16 billion over five years. [Atlantic]

But there’s a problem here.  Food stamps have a beneficial effect on the national economy.

“Those who believe in cutting SNAP funding as a cost-saving measure should know that food stamps boost the economy — not put a strain on it. Supporters of federal food benefits programs including President George W. Bush understood this, and proved the economic value of SNAP by sanctioning a USDA study that found that $1 in SNAP benefits generates $1.84 in gross domestic product (GDP). Mark Zandi, of Moody’s Economy.com, confirmed the economic boost in an independent study that found that every SNAP dollar spent generates $1.73 in real GDP increase. “Expanding food stamps,” the study read, “is the most effective way to prime the economy’s pump.” [Atlantic]

If the object of the game is to increase federal revenues by generating a higher GDP along the formula proposing that a growing economy produces jobs, and more jobs yield more taxable income, and more taxable income means more revenue — then the GOP has the SNAP portion of the argument exactly backwards.  They are proposing to cut a program which actually generates more economic growth.   If one seriously believes that economic growth means more revenue and hence less indebtedness, then one can’t seriously advocate cutting programs which elevate levels of economic growth.

All Pain and No Gain.  The two sides don’t seem to be speaking to the same fiscal slope, cliff, gully, whatever.  From the Republican perspective the damage to the economy might be done by The Specter of Rising Taxes.  Those legendary Job Creators — who are now seeing record corporate profits while wages continue to stagnate — might not invest, and hence there will be no economic growth.  This is fundamental Supply Side Hoax thinking.  That it has been, and still is, a hoax is demonstrated neatly by this graph from the Federal Reserve Bank of St. Louis:

Corporate Profits Low Wages

The blue line represents wages, the red line corporate profits.  If corporate well being were the driver of overall economic growth and  well being then why has the blue line been trending downward since 1970?  The answer is simplicity itself: Supply Side Economics is a Hoax of the First Water.

A deficit reduction plan predicated on ideology, urban legends, misunderstandings, and economic illiteracy isn’t SERIOUS.   That conclusion further advances the argument that the Republicans aren’t really serious about debt or deficit reduction, but merely see the issue as a flag to be waved in the van of their attack on the social safety net, a banner of privatization signaling their allegiance to Tea Party politics.

Comments Off on Yes, We Could Be Having A Serious Deficit Reduction Discussion?

Filed under Economy, Health Care, health insurance, income tax, Medicaid, Medicare, national debt, Social Security

Six Talking Points about Fiscal Cliffs and Austerity Bombs

Senate Majority Leader Harry Reid (D-NV) has a message for the middle class this morning:

“Nevadans and Americans across the country agree that we can strengthen the middle class by adopting a balanced fiscal policy that requires millionaires and billionaires to pay a little more. In July, the Senate passed a bill to cut taxes for the 98% of Americans and 97% of small businesses making less than $250,000. House Republicans should stop trying to protect the wealthiest Americans from contributing their fair share and pass this bill immediately. Middle class Americans will have more opportunities to succeed when we level the playing field and make tax policy fairer.”  Senator Harry Reid (D-NV) 11/19/12″  (emphasis added)

In order to effectively expound on this message it is necessary to plant oneself firmly in the Reality Based World, and to dismiss some common misconceptions being promoted by the plutocrats and their GOP allies.

#1.  When the GOP says “your taxes will be raised” they are not talking to 98% of the American public who earn less than $250,000 in adjusted gross income annually.  The Obama Administration’s proposal is to allow the Bush Tax cuts to expire on earnings above $250,000; and to KEEP the Bush era tax rates in place for those individuals earning less than $250,000 in adjusted gross income annually.

#2. When the GOP says taxes will increase on small businesses, they are including those 3% of “small businesses” which are lobby shops, major law firms, large hedge funds, etc.  They are NOT speaking of the 97% of American small businesses which are small partnerships, single proprietorships, or small corporations which constitute the backbone of the American economy.

#3. Social Security and Medicare are called “entitlements” because they are earned benefits, which individuals have paid for and therefore are entitlements. These programs are not the problem, they are simply the target of choice from the Republican leadership which wants to cut Social Security and privatize Medicare.   These programs have NO place in budget negotiations concerning the reduction of the federal debt.

#4.  The legislation to which Senator Reid refers is S. 3412.  The terms of which can be generally summarized as:

“The Senate bill (S. 3412), passed on July 25, 2012, would extend current tax rates for lower- and middle-income persons, would increase tax rates on higher-income persons, would extend for one year (through 2013) certain tax provisions that expire at the end of 2012, and would patch the alternative minimum tax for one year only (2012).” [source]

#5.  “Harry and Louise” style ads from the Edison Electrical Institute (DefendTheDividend) notwithstanding,  S. 3412 and the Obama Administration proposals are  NOT an attack on retirement savings.  Remember the threshold levels:  “Individuals with incomes above these threshold levels, would have some of their itemized deductions and personal exemptions limited by phase-outs, would have a 20% rate on dividends and long-term gains, and would face tax rates of 33%, 36% and 39.6%”  [source]  The current rate for investors is 15%.

Who would  be affected by the Obama Administration’s tax proposals on capital gains?  Information from the Tax Policy Center is helpful.

Things to note — there are NO changes for those individuals in the bottom four income quintiles.  Only those individuals who are in the TOP income brackets (the top quintile, especially those in the top 1% or the top 0.1%) would be affected by the proposed changes in tax treatment of dividends.

#6.  There is NO correlation between low tax rates and economic growth. The non-partisan Congressional Research Service came to this conclusion after studying data from the last 65 years.

“The results of the analysis suggest that changes over the past 65 years in the top marginal tax rate and the top capital gains tax rate do not appear correlated with economic growth. The reduction in the top tax rates appears to be uncorrelated with saving, investment, and productivity growth. The top tax rates appear to have little or no relation to the size of the economic pie.

However, the top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution. As measured by IRS data, the share of income accruing to the top 0.1% of U.S. families increased from 4.2% in 1945 to 12.3% by 2007 before falling to 9.2% due to the 2007-2009 recession. At the same time, the average tax rate paid by the top 0.1% fell from over 50% in 1945 to about 25% in 2009. Tax policy could have a relation to how the economic pie is sliced—lower top tax rates may be associated with greater income disparities.”  [CRS pdf]

In short, the only economic feature impacted by a reduction in tax rates is income inequality.   Nothing says “Support The Plutocrats and Financialists” better than saying we can’t raise taxes on the top 2% without cutting earned benefit programs like Social Security and Medicare.

Comments Off on Six Talking Points about Fiscal Cliffs and Austerity Bombs

Filed under Economy, income tax, national debt, Politics, Reid, tax revenue, Taxation

The Campaign for the Middle Class Isn’t Over

The candidates are no longer running ads, the campaigns have been shut down, BUT the campaign for the American Middle Class continues.  The next phase comes as the Congress debates how to reduce the national debt — brought to us by two wars fought “off the books,” ill considered tax rate reductions, and a nasty recession.  If the American Middle Class is to avoid the detonation of the Austerity Bomb (aka the Fiscal Cliff) then we need to:

(1) Let our Senators and Representatives know that without an increase in the tax rates for millionaires and billionaires the ARITHMETIC necessary to reduce the national debt doesn’t add up.

(2) Remind our Senators and Representatives that federal discretionary spending has already been cut by $840 billion to $916 billion over the next ten years [QS] in the Budget Control Act of 2011.

(3) Let our Senators and Representatives know that we understand merely closing a few loopholes in the tax code isn’t nearly enough to make a serious dent in the national debt.  If they are serious about debt reduction then “increasing revenues” can’t be a code phrase for “tinkering with deductions and loopholes.”

If millionaires and billionaires don’t want a national debt passed along to their children and grandchildren — it just might behoove them to help pay off some of it.

 

 

Comments Off on The Campaign for the Middle Class Isn’t Over

Filed under Congress, Federal budget, income tax, national debt, Politics, Senate