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View Full Version : Hear No Deficit, See No Deficit, Speak No Deficit



Tommy Duncan
08-18-2004, 11:40 AM
www.fortune.com/fortune/s...-2,00.html (http://www.fortune.com/fortune/subs/article/0,15114,678126-2,00.html)

Hear No Deficit, See No Deficit, Speak No Deficit
Neither party is willing to discuss the wrenching financial choices we must make.

By Peter G. Peterson
Fortune

There is an important question that, if asked of either presidential candidate during the upcoming debates, is guaranteed to elicit an evasive nonanswer. It goes something like this: "All the fiscal experts agree that recent tax cuts and surging pension and health-care spending will trigger wildly unsustainable deficits as the baby boom retires. The deficit explosion, they all say, will occur whether or not your announced program for the next four years is implemented. Do you have any concrete strategy for closing that fiscal gap? If so, would you share it with the American people?"

Neither of our two political parties welcomes such a question, and therein lies a tragedy. Both like to talk volubly about the taxes they will cut and the benefits they will expand—yet this is a future that will never happen. Both dread any discussion of wrenching fiscal adjustment—yet this is the future of higher taxes and pared-back programs that we actually face. All the official reports, from the Congressional Budget Office to the Fed to the IMF, keep returning to the same bottom line: The longer we put off any sacrifice, the harder will be the blow to our nation, our economy, and our lives. In fact, Democratic and Republican leaders are handling the challenge as they might an elephant in the boudoir—by pretending it isn't there and hoping no one dares mention it.

Think I'm being alarmist? With this year's record federal deficit, we are already effectively borrowing to fund all our domestic discretionary programs. By 2020 we will be borrowing to pay for our defense programs as well, since revenues by then will cover only benefit checks and interest on the national debt. For those who want the melancholy figures, the combined cash balance of Social Security and Medicare together moves from a modest annual deficit of $25 billion in 2003 to an unthinkable annual deficit of $783 billion in 2020. According to the trustees of the Social Security and Medicare systems, the present value of the future deficits in the two programs—they are, of course, unfunded deficits—has expanded alarmingly in recent years and now stands at $74 trillion, a staggering number that far exceeds our national net worth ($43 trillion). Technically, in other words, we really are bankrupt.

David Walker, comptroller general of the U.S. General Accounting Office, holds a 15-year congressional appointment and therefore is beholden to no one. His most recent budget projection shows that by 2029, the year the youngest boomer turns age 65, the federal deficit will hit an economy-shattering 14% of GDP. And this nightmare scenario is an "autopilot" projection—that is, it assumes no new programs and no rise in interest rates. "We cannot simply grow our way out of this problem," insists Walker, now a zealous and superbly informed crusader for fiscal sanity.

Both parties have good reason to hide their own complicity in steering us toward this future. In four short years a Republican administration and Congress have taken the ten-year budget outlook from plus $5 trillion to minus $5 trillion, thereby extinguishing the party's already fading reputation for fiscal stewardship. GOP leaders have pushed every deficit button they can reach—lower taxes, higher defense spending, higher benefits (including the new Medicare prescription-drug benefit), and higher discretionary spending (both war-related and not). By voiding the congressional pay-as-you-go rule, they opened the floodgates to both permanent tax cuts and permanent benefit expansions. According to the conservative Cato Institute, they have presided over a "spending explosion."

As for the Democrats, they propose to repeal only part of the Bush tax cuts (the part that goes to "the rich"—good luck!) and spend more than all of those savings on more troops for the military, a giant new health-care program, and more benefits for veterans and colleges and kids. The Democrats have seldom met an entitlement they didn't want to expand. With not a word about controlling the unsustainable costs of the current Medicare program, they mau-maued the Republicans into expanding the Medicare drug-benefit proposal into an unfunded $8 trillion burden on future taxpayers. (That's right, the officially projected liability for just this one new benefit, Medicare Part D, is roughly twice as large as our formal accumulated national debt!) And then their complaint was that the benefit didn't go far enough.

Spokespersons for both parties try to excuse this irresponsibility. Some say that these long-run budget forecasts are too "uncertain" to be taken seriously. Nonsense. The aging of America is about as close as social science ever comes to a certainty. Absent a Hollywood catastrophe—a colliding comet or an alien invasion—it will surely happen.

Others say that large budget deficits don't hurt us. But of course they do, by suppressing domestic investment and making us dangerously dependent on a floodtide of foreign borrowing. At 5.4% of GDP, our current-account deficit with other nations now far exceeds our previous borrowing high-water line—3.7% in 1987, the year of the Black Monday stock market crash. During that period the dollar also fell by a third.

Back then we called them our "twin deficits." So, should we still? Thanks to our policy-driven budget deficit (twin No. 1), the U.S. net national savings rate has dipped below 2% of national income for the first time since the early 1930s. This savings vacuum, in turn, sucks in foreign capital through our trade and services deficit (twin No. 2). When foreigners begin to tire of acquiring our dollar assets, the game will come to a sudden and perhaps calamitous end. Hopefully, by acting now on fiscal policy, we can resolve this danger on our own terms and on our own schedule. But to do that means getting our political leaders and the public educated and aroused.

To that end, I have a suggestion. Two years ago Congress and the President established a highly credible, bipartisan national commission on the collapse of the Twin Towers. The 9/11 commission's now released report is waking up the nation to what leaders of both parties have done wrong on national security—and instructing them on how they can do it right. Our political leaders should commit to appointing a similar commission on the twin deficits. Let's learn how we can do fiscal policy right. Only this time around, let's not wait until our budget and the global economy lie in a tangled wreckage. Let's issue the report and wake up the nation before the day of reckoning arrives.

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Peter G. Peterson, Secretary of Commerce during the Nixon administration, is author of Running on Empty: How the Democratic and Republican Parties Are Bankrupting Our Future and What Americans Can Do About It.

Hook Dem
08-18-2004, 11:45 AM
While this is true, most Americans(this includes most in this forum) have spending habits that should prevent them from criticizing the Government. When people get their personal finances straightened out, then they will be in a position to give direction to the Government. Think about it! How many in here have no deficit? Don't do as I do! Do as I say!:wink

Joe Chalupa
08-18-2004, 11:53 AM
When was the current deficit created?

Could it be that it's happened under DUBYA!!!??

Yeeeeeeeaaaaaaaaaaahhhhhhhhhh!!!

MannyIsGod
08-18-2004, 11:57 AM
regardless of who it was created under, at some point some programs will have to be eliminated in order for us to head this off. i'm not holding my breath.

Joe Chalupa
08-18-2004, 12:06 PM
Of course those programs that will be eliminated will be those that most help the lower class.
Cut all the freakin' massive tax breaks that corporations receive while they are reporting huge profits.

Tommy Duncan
08-18-2004, 12:12 PM
You might want to re-read the article, Joe. The unfunded liability (the present value of the projected deficits) for the entitlement programs (Social Security and Medicare) is around $74 Trillion.

If you want a culprit, I would start with the politicians who created those programs and every politician since who has fought mightily to protect the status quo.

Tommy Duncan
08-18-2004, 12:16 PM
If you want to blame Bush for something that is directly responsible for this looming mess, blame him for expanding Medicare to help his electoral prospects.

spurster
08-18-2004, 12:16 PM
It seems that this happened during a GOP president and a GOP congress.

While a lot was out of their control (dot com bust and 9/11), it was compounded by foolish decisions: overgenerous tax cuts, Medicare prescription drug benefits, and Iraq war.

I agree that the Democrats don't want to talk about it and are making all sorts of promises they can't keep. I think the best we can hope for is Kerry as president and a GOP congress.

Tommy Duncan
08-18-2004, 12:23 PM
Medicare and SS were not created during the current administration. The primary cause of this 'problem' is the amount of spending (aka "benefits") required.

This problem has been around for some time. A real reason to be pessimistic about the chances for any real reform is that Republicans are starting to act like Democrats when it comes to entitlements.

About the only good thing that Bush did with respect to the entitlements is not expand Medicare as much as Kerry and his ilk wanted.

But it's ok, someone will eventually pay the taxes for all this. Perhaps it will be the mythical 'evil rich'...

Joe Chalupa
08-18-2004, 12:25 PM
Well combine the Bush tax cuts and the soaring federal deficits and you go from one method of financing government (which we used to call it a progressive income tax) to another method—consisting of loans from the wealthy—and interest payments to them from everyone else.

And we will be pouring billions more into Iraq while those at home suffer the consequences.

But I'm no economic expert as you can see.

Tommy Duncan
08-18-2004, 12:29 PM
Um no. Why does the federal budget matter when it comes to funding the entitlements to begin with? Think about that for a minute.

Were not the payroll taxes supposed to fund those?

The concept of those programs were flawed to begin with.

Do you think that expanding Medicare was a good idea?

Tommy Duncan
08-18-2004, 12:32 PM
Well combine the Bush tax cuts and the soaring federal deficits and you go from one method of financing government

That's good Joe. That's the federal budget. What about the entitlement programs?


(which we used to call it a progressive income tax)

:lol Um, it still is. Quite heavily so.



to another method—consisting of loans from the wealthy—and interest payments to them from everyone else.

To pay for what? Everything that your ilk thinks the government should provide. Shifting the blame to someone else is absurd.

Joe Chalupa
08-18-2004, 12:37 PM
Do you think that expanding Medicare was a good idea?

Yes, I do.

MannyIsGod
08-18-2004, 12:42 PM
medicare is not worth it. socialized medicine will send us to poverty.

Joe Chalupa
08-18-2004, 01:03 PM
It won't send me to poverty.
I believe our senior citizens are worth it.

Perhaps if our senior citizens were allowed to freely purchase cheaper drugs from Canada it would lighten their burden.

Perhaps when we are older we will see things differently.

Bandit2981
08-18-2004, 01:45 PM
socialized medicine will send us to poverty.
the rest of the free world seems to be doing just fine with it

Tommy Duncan
08-18-2004, 01:50 PM
Addressing the unfunded entitlement program liabilities by increasing them makes little sense. What we are seeing is that some on the left want to shift those programs from being funded by the workers who will themselves one day receive benefits to one being funded by "the rich" through federal income taxes.

And portraying the idea that expanding entitlements falls under the banner of fiscal responsibility is quite disingenious, to say the least.

Tommy Duncan
08-18-2004, 01:52 PM
the rest of the free world seems to be doing just fine with it

Sure, if you feel like waiting a year for heart bypass surgery.

You might want to learn a bit more about the subject.

Aggie Hoopsfan
08-18-2004, 01:52 PM
Part of the problem in all this is the pharmaceutical companies that are extorting insurance companies and the general public with astronomical medicine costs.

They have a captive audience, I'd argue it's really price gouging. Those medicines don't cost what they charge the insurance companies or the general public. I have a friend who's a pharmacist, and she says most medicines are marked up upwards of 1000% over manufacturer's cost.

I know it'll never happen because of the PACs running around Washington protecting the pharmaceutical industy, but I'd like to see the government nip this price gouging in the ass.

Something that costs them $8 to produce shouldn't be costing you, me, or our medical insurer $70 to buy.

Tommy Duncan
08-18-2004, 01:53 PM
It won't send me to poverty.
I believe our senior citizens are worth it.


Well Joe, you know what? You are free to take your money and give it to all of those great senior citizens.

Joe Chalupa
08-18-2004, 01:54 PM
As should you. :p

why all the fancy words. Can you explain it...like I'm a four year old. :lol

Tommy Duncan
08-18-2004, 01:56 PM
AHF, part of that is certainly IP law and part of it is the fact that so many people use health insurance in this country for routine health expenditures. The incentive is not there in a 3rd party payer system to help keep demand in check.

Tommy Duncan
08-18-2004, 01:59 PM
You want it simple? Here it goes: those receiving benefits will demand more and more and those who have to pay those benefits will get screwed. That means payroll tax rates will go up and so workers will be taking home less and less from their paychecks.

Which of course creates ever increasing dependency on those entitlement programs.

Bandit2981
08-18-2004, 02:03 PM
Sure, if you feel like waiting a year for heart bypass surgery.
and where is your proof of this? how long would it take here to get it done? what if you needed the surgery and had no coverage at all?

spurster
08-18-2004, 02:03 PM
I don't think Medicare (minus new drug benefit) and SS can be blamed for the current deficit. Clinton had surpluses.

Regarding far-in-the-future deficits, if they are truly going to be that bad, then Bush's tax cuts are even more foolish, trading lower taxes now for even higher taxes later (when he leaves office).

Aggie Hoopsfan
08-18-2004, 02:20 PM
Clinton wasn't fighting a war on terror, unless you count the fifty cruise missiles he fired off in vain at OBL.

Tommy Duncan
08-18-2004, 02:20 PM
My concern is not the current deficit. It's the one which is specific to Medicare and SS. That dwarfs the projected federal budget deficits.

The way the federal deficit becomes an issue for the entitlements is if it is expected that federal tax revenues are to be used to make up for shortfalls between the benefits and the payroll tax collections.

I think this is a spending issue more than anything else. The way the programs are set up, they are virtually guaranteed to result in high growth rates in spending into the future. Steps to restraining this growth by cutting benefits (could be done in a variety of ways, including increasing the minimum retirement age) may help somewhat but of course would be very politically unpopular.

Spending drives taxation. It's the increases in spending which the Bush administration has pushed through and which an unfortunately compliant GOP congress has allowed which are of the greatest concern. The article provides a good example:


As for the Democrats, they propose to repeal only part of the Bush tax cuts (the part that goes to "the rich"—good luck!) and spend more than all of those savings on more troops for the military, a giant new health-care program, and more benefits for veterans and colleges and kids. The Democrats have seldom met an entitlement they didn't want to expand. With not a word about controlling the unsustainable costs of the current Medicare program, they mau-maued the Republicans into expanding the Medicare drug-benefit proposal into an unfunded $8 trillion burden on future taxpayers. (That's right, the officially projected liability for just this one new benefit, Medicare Part D, is roughly twice as large as our formal accumulated national debt!) And then their complaint was that the benefit didn't go far enough.


Gridlock is probably Kerry's best selling point. But one can certainly envisage a scenario in which a Kerry administration browbeats a GOP congress into passing further increases in entitlements.

The entitlement programs as we know them need to be funamentally changed. I mean, you could take current worker's payroll taxes, put them in savings accounts, and they would be able to beat what they get in SS. I did find Bush's willingness to propose 'privatizing' part of SS refreshing. But I think you would have to basically set up true savings accounts for that (how SS was basically supposed to work originally) instead of the equity markets. If someone loses that $ in the market then they will be back demanding more benefits when they retire.

exstatic
09-09-2004, 12:11 AM
Sure, if you feel like waiting a year for heart bypass surgery.

Beats no coverage at all, the situation for tens of millions here.

Tommy Duncan
09-09-2004, 12:43 AM
Health and Poverty

The Wall Street Journal
August 27, 2004; Page A12

Yesterday's batch of data from the Census Bureau is being handled as usual by our gloomy colleagues in the press: more Americans living below the poverty line, more Americans without health insurance. The same stories have been told year after year for so long that it's a wonder we're all not being evicted from emergency rooms to dine in dumpsters. We deal with the income numbers below, but let's first take up the problem of the health-care "uninsured."

The part of this picture that always seems to be ignored is that there are more Americans with various problems in part because there are more Americans. True, the Census Bureau reported yesterday that, by its methodology (more on that in a moment), there was a record total of 45 million Americans without health insurance for at least part of 2003.

But the total number of people with insurance also rose by one million to 243.3 million. Or to put it yet another way, while there are three million more people uninsured in 2003 than in 1996, the percentage of uninsured Americans was exactly the same at 15.6%. That's lower than it was in 1997 and 1998 and within the same range it's been for the past decade.

Ready for some more surprising news? The actual number of uninsured may be a third less than the Census figures claim, while another third of the uninsured appear to be wealthy enough to afford coverage.

How do we figure? Let's start with the fact that the Census Bureau counts as uninsured individuals who are eligible for Medicaid and the State Children's Health Insurance Program (or S-CHIP), but are not enrolled. This way of counting doesn't make much sense, since these individuals can enroll and have their expenses covered if and when they require health care.

In fact, John Kerry's health proposals single out this group for special attention, with his campaign literature noting that "Today, there are millions of uninsured children who are eligible for health care coverage under Medicaid or SCHIP but are not enrolled." But the hard truth is that making special efforts to enroll these people, as Mr. Kerry proposes, would make no actual difference in the number of people with access to health care.

And how many of such "eligibles" are there, both children and adult? Based on a review of the literature, Devon Herrick of the National Center for Policy Analysis estimates as many as 14 million. That figure seems quite possible, given that the Census Bureau finds more than 15 million "uninsured" individuals in households with less than $25,000 in income, in which many would be eligible for assistance.

And what about the "wealthy" uninsured? The Census data for 2003 show almost 15 million uninsured people in households with incomes above $50,000 (7.6 million of them in households over $75,000). That's hardly rich, but it's enough to afford coverage in most states if individuals treat health care with the priority it deserves.

Finally, another 18.8 million of the uninsured are between the ages of 18 and 34, and many of them voluntarily (if unwisely) forgo coverage. Their gamble is actually encouraged by "guaranteed issue" laws in many states that reassure the irresponsible that they can avoid buying insurance until they get sick. This defeats the whole point of insurance, which is to pay into a pool when you're healthy so you can be covered when you do get sick. A young person who thinks he'll live forever is especially inclined to spend his marginal income on something other than health insurance if he knows he can buy it when he really needs it.

We don't point all this out by way of denying that there are some people with genuine difficulties obtaining health insurance. But there are a lot fewer than 45 million of them. The Congressional Budget Office estimated earlier this year that the number of those actually uninsured for the entire year is between 21.1 and 31.1 million. Perhaps the best proxy for who's really in need are the 14.8 million uninsured who the Census lists in households between $25,000 and $49,000 in annual income.

States like New York could do a lot for this group merely by getting rid of the state insurance regulations that make a basic policy roughly 10 times more expensive than it is in neighboring Connecticut. Better still, Congress could save poor New Yorkers from the tyranny of Albany by putting an end to our Balkanized and anachronistic 50-state insurance market and simply decreeing that there shall be nationwide commerce in health insurance. They could then buy policies issued in saner states or over the Internet. Equalizing the tax treatment for employer-purchased and individually purchased health care, as President Bush proposes to do, is another good step.

Election-year opportunism aside, the Census numbers are actually better news than advertised. An honest review of the numbers shows no crisis of uninsurance in America, and certainly no need to dump more health-care costs and services onto businesses and taxpayers.

Brodels
09-09-2004, 03:10 PM
and where is your proof of this? how long would it take here to get it done? what if you needed the surgery and had no coverage at all?

Well, I'll tell you this: I worked at a hospital about ten miles from New Brunswick, Canada, and we had a lot of customers coming over and paying full cost because they couldn't get the necessary procedures done in a timely manner in Canada.

The Canadian system is poor enough that those who can easily come over to the U.S. and pay the bill do so.

If you need surgery and have none at all, you walk into a hospital and get the procedure done. You'll have an enormous bill that you can't pay, and then you'll be written off by the hospital as charity care. If you can show financial need and are lucky, you may even get your costs waived. If you need a procedure done that immediately threatens your life, you can't be turned away.

The U.S. system isn't perfect. In fact, there are big problems. But a Canadian-style socialized medicine system ensures that the quality of your healthcare will decrease. Socialized medicine isn't the answer to addressing the problem of uninsured citizens.