P.S. Are We Sure that Medicare Spending Is Still Outstripping GDP Growth?
In yesterday’s post, I said that Wall Street was getting nervous about the stalemate over raising the debt ceiling—and the possibility that the U.S. Treasury would run out of the money needed to pay its bills. If the world begins to lose confidence in the full faith and credit of the U.S., it loses confidence in U.S. government debt (i.e. Treasuries)—which means that investors lose confidence in the dollar. Looking for a safe haven, they begin to buy gold. This morning Bloomberg reported that gold futures have risen to a record $1,631.20 an ounce. Meanwhile, the dollar fell to a record low against the Swiss franc. Among paper currencies the Swiss franc is considered a relatively “safe haven.” This afternoon both gold and the dollar appeared to be correcting.
Wall Street abhors uncertainty, and uncertainty is seeping into the market. “Government securities, the traditional area of safety, are now at risk, so that’s why you’re seeing gold grind higher,” Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago, told Bloomberg. “The level of U.S. government borrowing has caused the erosion of the dollar and adds more fuel to the metal’s rally.”
Wall Street’s rating agencies may lower the nation’s credit rating. “I’m pretty certain that the government is going to see a downgrade by at least one agency,” Kathleeen Gaffney, co-manager of the $21 billion Loomis Sayles Bond Fund said yesterday in an interview on Bloomberg Television’s “Street Smart.” She offered some reassurance: “Treasuries will continue to be a large, liquid market whether it’s AAA or AA.” (Gaffney is a seasoned investor. As Bloomberg notes her bond fund returned 14 percent in the past year, beating 98 percent of its competitors.)
What a Downgrade Could Mean For You
Nevertheless, “the longer-term implications are that a downgrade could be bad for our currency and this could raise our borrowing costs,” warned Stephen Walsh, the chief investment officer of Western Asset Management, the Pasadena, California-based fixed-income unit of Legg Mason Inc.
If Treasuries become less appealing to the world’s investors, they will demand a higher rate of return, which means that interest rates will rise. This is what President Obama was referring to Monday night when he cautioned that if politicians cannot break the deadlock on the debt deal, “Interest rates could climb for everyone who borrows money: the homeowner with a mortgage, the student with a college loan, the corner store that wants to expand.” This, in turn, “could cost us jobs,” the president observed.
Vote Delayed Until Thursday
Late Tuesday afternoon the Congressional Budget Office (CBO) told Republican leaders that the savings package proposed by Boehner would cut spending by only $850 billion over the course of a decade—roughly $150 billion less than the $1 trillion increase proposed for the debt ceiling. This sent Boehner’s staff scrambling to revise his plan. The House vote on his proposal has been postponed until Thursday—at the earliest. Meanwhile, the Tea Party nation appears to be turning on Boehner.
Democrats received better news. CBO told them that the package proposed by Senate Majority Leader Harry Reid would produce $2.2 trillion in savings over 10 years—enough to raise the debt ceiling. This assumes that Congress is willing to include savings that will flow from winding down the wars in Iraq and Afghanistan. Republicans balk at that suggestion. The GOP has ridiculed using those presumed savings as a “budget gimmick.” Democrats note that House Republicans used similar assumptions for the wars in the budget they passed earlier this year.
According to the New York Times, Senator Harry Reid of Nevada, the majority leader, is saying that “with modest ‘tweaking’ his proposal could now form the basis of a ‘true compromise. For Reid, the question is whether he can attract the seven Senate Republicans he needs to cut off a threatened filibuster and claim bipartisan backing.
“‘I think we’re going to solve this,’ said Senator Richard J. Durbin of Illinois, the assistant Democratic leader, but he called the latest delay ‘a bitter lesson’. . . What we’re facing here is a Republican caucus that is basically showing its political bravery by giving up Medicare benefits for elderly people, by increasing the cost of student loans for working families, by cutting money for medical research,” Durbin told the Times.
While Reid’s plan leaves entitlement programs untouched, Boehner would make deep cuts to Medicare. As the Congressional Budget Office explains, “Boehner’s plan [also] would eliminate the subsidized loan program for graduate students.” Today, borrowers are not required to pay interest on their loans while they are still in graduate school, but “beginning July 1, 2012, the bill would eliminate the interest subsidy on subsidized student loans for almost all graduate students while a borrower is in school, in the post-school grace period, and during any authorized deferment period”. . . . Because borrowers would be responsible for the interest accrued on those loans while in school, CBO estimates that “this provision would reduce direct spending by $8.2 billion over the 2012-2016 period and $18.1 billion over the 2012-2021 period.” (The current annual and cumulative loan limits for unsubsidized loans would be adjusted to permit students to borrow additional funds in the unsubsidized loan program, but they would be required to pay interest while still in school.)
Despite talk of finding a compromise between Boehner’s and Reid’s plans, I doubt that the financial markets will accept Boehner’s two-step proposal, which requires that Congress go through another debt-ceiling debate next year. Investors want closure on this issue. If they don’t get it, I am afraid that we will pay the price, not only on Wall Street, but on Main Street. Late this afternoon, both the S&P 500 and Treasuries were sliding, while interest rates were rising.
Has Medicare Already Broken the Inflation Curve?
Much of the debt debate has pivoted on one question: do we really need to cut Medicare and Medicaid? After all, the Affordable Care Act is designed to rein in health care inflation. And in fact, this may already be happening on the ground.
A few days ago, Standard & Poor’s reported that over the past year, Medicare spending has slowed considerably. In the twelve months ending May 2011, Medicare claim costs rose at an annual rate of just 2.64%, as measured by the S&P Healthcare Economic Medicare Index. I wrote about this in May when I reported that, according to S&P, as of April 1, Medicare spending was climbing at an annual rate of only 2.78%—the lowest rate posted for the Medicare Index in its six-year history. As of May, reimbursements had slowed further.
Today, I talked to David Blitzer, the chairman of Standard & Poor’s Index Committee, who said “I’m hesitant to say that this is a clear long-term trend. But I think it’s more than a blip on the screen.” He noted that we tend to get data from the Centers for Medicare and Medicare about 1 to 1 1/2 years after the fact; this is why there is a widespread perception that Medicare spending is still rising 2% faster than GDP. S&P is trying to giving us more current numbers, and while the S&P index is “is not perfect,” Blitzer says, “it’s good.”
Tomorrow I’ll write more about our conversation, and other signs that Medicare inflation may not be the problem that conservatives claim.
Certainly, there is waste in the Medicare system. But as I have explained, the ACA will squeeze some of that waste out of the system by reducing overpayments to Advantage insurers, refusing to pay for some preventable errors, trimming annual increases in reimbursements to hospitals, nursing homes and other institutional providers, and changing the way we pay for care—rewarding providers for better outcomes, rather than for “doing more.” If Medicare’s reimbursements are now increasing by just 2.64 percent a year it will not be difficult to rein in Medicare’s outlays so that they are growing no faster than GDP.
The epic credit bust is being ‘treated’ with more credit to pay interest, at least. No matter what they do, we are headed for a currency crisis. The dollar remains on a sell signal and if it breaks the all-time low of about 71, look out below.
If you back the military conflicts out of GDP, it is likely negative, so it is hard to determine whether Medicare is truly decelerating vs ‘normalized’ GDP, imho.
Don’t forget, we are spending 1.5 trillion over collections and 1 trillion more than under the last president, yet, if we cut 1 dollar of spending, we are throwing granny off the cliff, the children will starve and we will all die of dirty food, air, and water.
Where are the democrats with brains or the republicans with brains who will save us.
If the budget STAYS THE SAME FOR THE NEXT 10 YEARS, the CBO scores this as a 9 trillion CUT. Give me a break.
I hope none of you believe this
I share at least some of your optimism regarding the long term outlook for Medicare cost growth. That said, according to the most recent Monthly Budget Review from the Congressional Budget Office (CBO), adjusted Medicare spending net of offsetting receipts is up 4.3% from the prior year so far this fiscal year (thru May) vs. the 2.78% increase you cited for the trailing twelve months. Private insurers are also experiencing lower medical cost growth than they expected. Nobody has a very good explanation for what’s going on. I’m reminded of the first two lines of a song by the late 1960’s rock group, Buffalo Springfield, which goes:
There’s something happening here
What it is ain’t exactly clear
A recent article in the Wall Street journal that focused on the 9.7 million people who are eligible for both Medicare and Medicaid (dual-eligibles) noted that this relatively small population accounts for $300 billion of annual spending for healthcare and nursing home care. This is roughly one-third of the combined cost of both programs and 39% of Medicaid costs. I think there is a lot that can be done to better manage this population. Primary care doctors could be paid enough to monitor nursing home patients and to eliminate care that drives revenue for the home but doesn’t benefit the patient. Hospital discharge planning has plenty of room for improvement as well. Also, we could try harder to get each person to execute a living will or advance directive and store the information on a registry so their end of life preferences are both known and accessible to doctors and hospitals when needed.
Since the govt. is broke and future entitlements are unfunded, one macro trend worth watching is less spending and more savings by individuals. 70% of GDP is consumption. This is now declining. Part of this equation, imo, is less consumption of health services. This saves on deductibles, share of cost and so on. If true, there will be adverse consequences such as non-attendance to necessary medical care such as screening colonoscopies, mammograms, prescription compliance, etc.
Barry & Sidney
Barry- I looked at the CBO monthly review and I have a call in to the person who does their numbers. (Update, I talked to somene; they get the numbers from Treasury. These Treasury numbers also show Medicare spending slowing. They don’t know why.) .
S&P uses as much hard data as it can get , and has a pretty good track record of predicting what CMS will tell us 1 to 1 1/2 years later.
This isn’t to say it’s a perfect forecast, by any means, but it is as Blitzer said “pretty good.”
He is, as you may well know, a very smart guy, has been around for years, and when he says this is not a blip, I believe him.
Also, I don’t see how S&P would have any vested interest in projecting lower Medicare spending.
In Washington, you never know. There are those who have a stake in claiming that Medicare spending is still rising by 6% to 8% a year– and will always rise by that amount. (John Goodman made that argument on the Health Affairs blog in May.)
You’re right that private insurers outlays also have been slowing , but not nearly as much.
We know why they’re slowing: the recession. People are putting off or just not doing elective surgery. Physicians have told me that traffic is even down in ERs. See Naomi’s post on this today.
Many unemployed people are not taking their prescriptions– they can’t afford them. (And with true unemployment– including discouraged workers adn those working part-time who need full-time jobs– in the high teens, we’re talking about a great many people.
By the way, when I looked at CBO’s monthly report I was startled to see govt spending on unemployment benefits Down 22.9% over the past 12 months. We know that the number of unemployed has not fallen significantly, so I take this as a measure of how many long-term unemployed are no longer eligible for benefits . . .
I suspect that, going foward, private insurers’ outlays will begin to fall as they try to “manage care”. But right now, according to S&P, their spending is still increasing at an unstainable rate . . .
Monday (or maybe this week-end) I’ll be running charts showing the difference between private insurance outlays and
Medicare outlays.
The fact that private insurers’ outlays also are declining sugggests that hospitals are Not cost-shifting to make up for lower reimbursements from Medicare– at least not to the degree many people assume.
Finally, yes the cost of nursing home care, & home health care accounts for a huge chunk of CMS outlays.
And as I’ve written recently, for-profit nursing homes have been reporting high double-digit profit margins on Medicare pattients. Meanwhile home health agencies have been reporting 18% profit margins.
There’s a huge amount of fraud in both areas– as well as fraud among for-profit hospices.
CMS is stepping up fraud investigation in these areas, and under the Affordable Care Act it plans to slice annual “updates” (essentially inflation increases ) to nursing homes, home health agencies and hospices as well as hospitals by 1% a year for 10 years. Compounded, that will represent huge savings.
Meanwhile, more and more seniors are receiving palliative care in hospitals and hospice care at home– a far less expensive (and painful) way of dying than in an ICU. And this trend will only continue.
MedPAC recommended no update for home health agencies this year, and I think CMS followed MedPAC’s advice. My guess is that we will see more of this going forward.
This helps explain why Medicare inflation is slowing. Under the Obama administratoin, Medicare has been following more of MedPAC’s recommendations– not paying for preventable readmissions, etc.
Under the Bush administration, CMS director McClellan wanted to use MedPAC’s recommendations, but the Bush wouldn’t let him. (McClellan has talked openly about his frustration and is now quite clearly on the side of the reformers.)
I actually think that we could do more than “break the curve” of Medicare inflation. It is possible that, over time, we could reduce Medicare spending as a percent of GDP by a point or two. This assumes that GDP grows by 2% to 3% a year . . .
Of course, over time we will have more seniors, but that will happen very gradually–the boomers will age, as they were born, over decades. And upper-middle class and upper-class boomers are much healthier than their parents were–as are some middle-class boomers who quit smoking when they were young, eat less meat, exercise more, etc.
The problem will come in 20 years or more, when we discover that those healthier boomers are living longer, and more and more of them are developing Alzheimer’s or some other form of senile dementia.
At about age 75, the incidence of Alzheimer’s begins to rise very sharply. People really should be careful about what they wish for . . .
Sidney–
The big spending increases are in interest on debt–up 17.8% a month. See http://www.cbo.gov/ftpdocs/121xx/doc12165/2011_06_MBR.pdf
That debt was accumulated during the Bush administration, thanks to the wars in the Middle East, tax cuts for those earning more than $200,000, etc. As you may recall, at the end of the Clinton administration we had a surplus.
As for entitlement programs, we have more poor children in the U.S. (as a percent of the population under 18) than any other developed country in the world.
Every night, a huge percentage of U.S. children go to bed hungry. (See recent news reports.)
Public schools in some areas have cut or eliminated their school lunch and breakfast programs for low-income children.
Meanwhile, median income for people 65 and over is $20,000. This means half of all seniors are living on less than $20,000– often much less. “Income” includes social security, dividends, pay from full-time or part-time work– every penny that comes into the house.
Many of these seniors have high co-pays for prescriptions as well as deductibles and co-pays for hospitalization, etc.
Many do not own their own homes.They are paying rent (or still paying a mortgage) plus utilities, and food (both energy prices and food prices have been soaring recently) transportion (gas prices are, of course, up). Inflation is very hard on people living on a fixed income, and Social Security’s cost of living adjustments have been slim to non-existent.
Perhaps you are proud to live in a country where the very rich enjoy tax cuts while childhood poverty climbs.
I am not.
Ruth–
First, the government is not broke and entitlements are not unfunded.
The government is not broke– we have been raising the debt ceiling, regularly, for some time. This time, the Tea Party conservatives and some Republicans decided to turn a regular event into High Drama.
As Former fed chairman Paul Volcker said in a Bloomberg interview today, “none of this was necessary.” He has seen the debt ceiling raised many, many times. Jim
Grant, one of the smarter people on Wall Street told Bloomberg that this is
debt-ceiling crisis is “contrived” — it’s a political event, not an economic event.
On the entitlement programs: Social Security is in very good shape. With very slight fixes, Social Security will be fine for many years to come.
Don’t let the fear-mongers scare you.
Medicare does need reform — basically we need to bring Medicare spending growth down to roughly 2% a year, so that it parallels GDP growth.
But as the Medicare Trustees report — Affordable Care Act has made it much less likely that Medicare will become “insolvent” at some point down the road. And even then, “insolvent” does not mean that Medicare is broke: it would mean that Medicare wouldn’t have enough money in the hospital trust fund to pay all of its hospital bills (as I recall, it woudl be able to spend 89% of hospital bills, which means we probably would have to raise Medicare taxes to cover the gap, and the most recent Medicare Trustee’s report is farily hopeful that this won’t happen. We have quite a few years for the reforms in the Affordable Care Act to kick in– enough breathing room that we should be able to avoid a problem.
The fear-mongers want to say that Medicare is going broke because they would like to privatize it–giving seniors a voucher, sending them into the prpivate insurance market, and wishing them “good luck.”
This means many seniors just wouldn’t get the care they need.
Instead, we need to reform Medicare, cut the waste, and make sure that seniors are receiving needed care–and that we’re not overpaying for it.
It appears that Medicare spending already is slowing. And under the reform bill it will certainly slow further.
(See CBO analysis of the reform bill.)
And see my response to Barry.
That said, the size of our debt is NOT GOOD. Our problem is that we have built up a huge amount of debt– so much that the interest on that debt is growing by 18% a year.
We accumulated much debt during the Bush administration, thanks to the wars in the Middle East, and fat tax cuts for the very rich.
Those tax cuts will expire Dec. 31. It’s not likely that conservatives will have the votes to prevent them from expiring. (The majority of voters are against tax cuts for people earning over $200,000 a year.) Democrats won’t have to do anything– just stand there, and wait for them to expire. It happens automatically unless Republicans are able to overturn the law that calls for expiration.
And at last we are winding down the wars in the Middle East. . .
The other big problem in this economy is that we are consuming more than we produce.
It is hard to increase production because the cost of living in this country makes products that are manufactured here very expensive– too expensive for consumers in Asia, and even for many consumers in Europe.
Meanwhile, consumption at home is slowing because real unemployment (including discouraged workers no longer looking for work and those working part-time jobs because they cannot find a full-time job) hovers around 17%.
If you don’t have a job, you can’t consume as much.,
But rarely than reducing unnecessary consumption (the stuff that fills our closets, medical overtreatment, etc.) high unemployment means that children are not getting enough to eat, famlies are losing theirr homes, and poverty is climbing.
Yes, we need to cut back on overtreatment– unnecessary tests and treatments. But we don’t want the poor to cut back on necessary care. In the end, we all would pay.
Ultimately, the government will have to put people back to work by creating jobs. There are plenty of things that need to be done: we need more public school teachers (and smaller classes), more nurse practitioners, more people cleaning up our parks, more people working on finding alternative sources of energy, more people to staff non-profit hospices, nursing homes and community homes for those who need long-term care; more people repairing our bridges, roads and schools, more people building parks and playgrounds where all of us can exercise safely.
These are govt jobs– and they are not “make-work.” These are things that need to be done. To pay workers to do these things, we may need to raise taxes. Taxes rates for wealthier Americans are at historic lows.
Letting the Bush tax cuts expire will be a beginning.
If we solve the unemployement problem, the economy will begin to turn around. People who have jobs pay taxes, and contribute to govt revenues. They contribute to Medicare and SS through payroll taxes. And, if they have jobs with decent pay, they will be able to send their children to college. That’s how you grow the wealth of the nation–by investing in human beings.
Maggie:
You’ve said many times that Social Security is not broke and needs minor tweaks to fix it.
Would you mind posting a link to someplace that explains this more fully?
Panacea:
Bruce Webb is probably the most knowledgeable person I know on Social Security. You can read the complete SS story here:
http://bruceweb.blogspot.com/2008/08/angry-bear-social-security-series.html
All of the reports are there from 1941 to 2010.
Baker and Weisbrot here: http://www.press.uchicago.edu/Misc/Chicago/035468.html
If you read Economists View or Angry Bear you will find many positive views on SS. I argue for it also.
Maggie –
I, along with numerous others, think there is more to the slowdown in healthcare utilization than just the recession. Insurers didn’t start to see it until the latter half of 2010 while the worst of the financial meltdown and its economic consequences happened in 2008 and 2009. Moreover, the utilization decline spanned all market segments including Medicare and Medicaid. In its most recent quarter, HCA pointed to fewer surgeries among Medicare patients as one of the more significant causes of its earnings shortfall.
While the economy is certainly a factor, I think there are numerous other drivers at work as well. These include, more people with high deductible insurance plans, the increasing traction gained by limited network and tiered network insurance products, more people choosing hospice and / or palliative care at the end of life and more efforts to improve patient safety in hospitals. One doctor on another blog commented that he sees patient safety gaining traction among hospital administrators as a key priority to focus on. Maybe no one of these things, other than the economy, is enough to move the needle on healthcare utilization, but the cumulative effect may be starting to make a positive difference. Of course, none of us can prove it but I’ve always said that there are lots of silver pebbles that can contribute to lower healthcare costs. The proof of the pudding will come from what happens to utilization after the economy recovers.
Barry–
You write: “In its most recent quarter, HCA pointed to fewer surgeries among Medicare patients as one of the more significant causes of its earnings shortfall.”
This is significant.
You also point out that “While the economy is certainly a factor, I think there are numerous other drivers at work as well.”
I agree.
The recession is the most obvious factor, but as you say, there are so many factors that affect healthcare spending.
You write “there are lots of silver pebbles that can contribute to lower healthcare costs.”
Absolutely. That is what I like about the Afforable Care Act (ACA) so many silver pebbles, even if some of them are small.
This is why so few people understand what the ACA is likely to do. It is such a very long document- literally hundreds of provisions that affect Medicare.
Understandably, 99% of all people don’t have the time to read all of this or take it in, unless it is their job (as it is my job.)
But the benefits of the ACA are in the details.
Over the next 2 1/2 years, as health reform rolls out, people will begin to really see the benefits.
Over the next 10 years, as all of the reform provisions are implemented, everyone should see the benifits.
Perhaps we will screw up
implementation. Perhaps people will play the system and undermine the reforms.
We can’t know. But it seems to me that all that we can do is make a good-faith effort to follow through on what the Medicare Payment Advisory Commission has been recommending for years- recommendations that form the backbone of the Affordable Care ACt.
Also, over the next 13 years, I am sure that we will revise–and, I hope, improve the Affordable Care Act.
Reform is a work in progress.
Anyone who says that this cannot happen is morbidly cynical.
(I’m cynical, but not morbidly.)
Panacea–
The Century Foundation has done a great deal of work on SS and I know the people who have done that work. That is why I speak with such confidence about Social Security.
But in fact, it is not my area of expertise.
This is why you should look at “run75441″‘s comment, just above yours and read the links he recommends.
I also know him (via e-mail) and his writings.
He, too, is very intelligent and truthful.
Run 75441 wrote:
Bruce Webb is probably the most knowledgeable person I know on Social Security.
I have seen Bruce’s name mentioned many times, mostly in a very positive light.
My experiences with him and his colleagues on Angry Bear has been negative from the get-go.
I would try to be objective, posting reputable government links, and Bruce would either ignore the links, or say they were outdated, or biased, etc.
These were links from the CBO, GAO, Treasury, and even the Social Secururty Administration itself.
Bruce and his friends started attacking my character and intelligence, which indicates to me, they were unable to dialogue in a civilized fashion.
I repeatedly told Bruce that it was not my opinion against his but his opinion against that of the government agencies I cited.
I was kicked off the blog, without being notified.
While my posts were showing up, I was the only one seeing them.
I was wondering why no one was responding to my comments, for about a week.
After saying they did not know what was the problem, they fially adnitted I was kicked off the blog.
Why not be civilzed, and just tell me, straightforwardly.
Don Levit
Maggie wrote:
Entitlements are not unfunded. Social Security is in very good shape.
That is partially true about the funding.
Current FICA taxes do pay current beneficiaries.
Unfortunately, since last year, interest was needed to help pay the benefits.
Since the interest to the trust fund was credited with debt, it could be redeemed only by general revenues – like any other government expense.
The trust fund principal (excess FICA taxes)has been loaned out to the Treasury to pay for other government expenses, so the entire trust fund is unfunded.
To tap trust fund principal and interest, the same process is used for any other expenses – with or without a trust fund.
I can provide government excerpts and links for those who are interested.
The disagreement about whether the trust fund is funded is represented in several papers, actually, as the Trust Fund Perspective versus the Government-wide Budget Perspective.
The Trust Fund Perspective adherents believe the Trust fund is funded with gold ingots, even though the numbers simply represent the amount that can be withdrawn from the Treasury (like any other pay-as-you-go expense) without an official appropriation.
The Government-wide Perspective discounts any numbers in the trust fund as being a store of wealth.
The biggest discrepancy between the 2 perspective can be seen in part D of Medicare.
Here, we have 75% of the premiums paid bty the government’s general revenues, with an immediate budget impact, like any other expense, whether in a trust fund or not.
The other 25% comes from the beneficiaries.
The Trust Fund Perspective says Part D is fully funded, while the Government-wide Budget Perspective says Part D is underfunded by trillions of dollars!
The Govvernment-wide Perspective is seen as more objective and transparent than the Trust Fund Perspective, for the former deals with actual dollar impacts on the budget, while the latter does not.
I can provide government links and excerpts to support all these statements.
Don Levit
Thank you Don, I was wondering how that worked.
Don:
I am one of those contributors to Angry Bear and I post articles there on numerous topics. I am not often agreed with either. I often times do not respond to trolls.
SS is not bankrupct and the discussion pivots around paying back the special Treasury Bills purchased with the surplus revenues and the interest on Bills held.
Many who have benefited from the loans from the TF do not wish to pay it back. If such were to happen, SS would be in dire trouble. As suggested by Coberly and suported by Bruce a simple solution would be to raise the Withholding tax 1 tenth of 1% for a period of 10 years for both employee and employer. This would be more than adequate to cover the shortfall in 2037 of ~1.92%.
– A superior solution would be to concentrate on employment, creating jobs more meaningful than the Texas miracle of low wage and uninsured healthcare (Texas is #1 in this bracket) hamburger flippers. Participation Rate for the Non-Institutional Civilian Population as a part of the Civilian Labor Force has not been this low since 1983(?). This is a huge cost on the economic infrastructure which every politician and teabaggers choose to ignore. Revenue wuld increase and our problems would be far smaller.
– Change the paradigm from profits on Wall Street gained from investments in non-Labor intensive gambling to profits gained from investing in Labor Intensive industries. Tax CDS, naked CDS, tranched CDO, and false Moody ratings insuring safety of the investments. More transparency is neeed here as Brooksley Born and Senator Dorgan proposed. Reverse Brennan’s Marquette National Bank versus First of Omaha Service which removed state usury, directly allowed 30% interest rates to become vogue, and led to two states to become super states for banking. None of this aids manufacturing and does little for labor intensive industry. Brennan never intended this.
– Repeal the 2001/2003 tax breaks for those making >$500,000 annually as this group benefited the most from these tax breaks with average annual increases of ~$20,000 in income for the making between $500M and $1MM. Do the same for those making >$1MM who saw an increase in income annually exceeding $100,000. What Hoover would not do, George Bush did for the high income brackets of this nation or ~1 million taxpayers by incresing their income during a recession while the median household income decreased.
– End the wars in Iraq and Afghanistan as both tax unfunded wars contribute greatly to the deficit and budget shortages.
There are numerous solutions to the issues we face today which do not involve balancing the budget and the defict shortfalls on the backs of the poor, the children, and the elderly of this nation.
Don:
My previous post does not imply you are a troll.
Don, did you ever expect not to pay the SS TF back? and did you ever expect not to make a return on an investment? The special Treasury Bills for SS, the same as the Treasury Bills sold to China do incur interest. (I dare say placing those funds on Wall Street would have have been catastrophic the same as what had happened with most 401k.) These bills in spite of today’s spectre of default next week are still the safest investment in the world (for now). To repay those Treasury Bills, you can regen more Treasury Bills or raise taxes. My preference would be to repeal much of the 2001/2003/2006 tax breaks for those making > %500,000 in income; put much of the inheritance tax back in place; tax CDS and other WS gambling devices; end both wars; etc. In the end we would have more revenue without slowing the economy.
As to funding for Treasury Bill in the SS TF, are the Treasury Bills no funded which are sold to China? They are backed by the full faith and credit of the US Government. Try not paying back a TB to China and see what happens globally. The same would apply for SS TB. That we are drawing on the TF interest to make SS payments is more a function of people working and contributing to tax revenue. A perspective could be made in that we have reversed the productivity of this nation by allowing the percentage of people in the Noninstitutional Popuplation making up the Civilian Labor Force to decrease without equivalent increases in Labor Efficiency.
Or as I mentioned earlier, we could easily place an emphasis on Labor and employment which the Fed appears to have abandon in favor of Wall Street. More people working creates more tax revenues. If you believe more of the NonInstitution Civilian Population will be idle and we will never return to 66.6% of that population being in the Civilian Labor Force, than a cut in SS, Medicare, or Medicaid and SCHP would not be sound as these are the programs which would be most needed for them if we did believe 2% (difference we need to return to what was expperinced in Participation Rate after the 2001 recession) of the Noninstitution population plus the U3 numbers will never work again.
So we have a true dilemma, cut programs for those who mostly need them and balance the budget and the deficit on their backs (even George Bush promised not to do this in 1999) while we have a decreasing Participation Rate of the population in the Labor Force which means even more decreased tax revenues. In which case, we will need to keep doing it as labor generated tax revenues decrease. Or you can take a different approach and truly fund labor intensive industry as the expense of Wall Street gimicks which are not Labor Intensive. The key is to get people back to work.
run75441:
Bruce Webb made a statement on Angry Bear which I still remember.
He believes Treasury Bills are worth more than cash, because Treasuries earn interest.
That included the Treasuries in the SS trust fund, which as you acknowledge, are not funded, but only promised to be paid back.
This is versus cash or an investment which can be liquidated to cash, without any new revenues being raised or adding to our debt.
Once he came to that conclusion, there was no way to dialogue with him.
An unfunded Treasury is worth more than a funded investment?
Bruce apparently sides with the trust fund perspective: Part D of Medicare is fully funded, because it is backed 25% by citizens and 75% by the full faith and credit of the U.S. Government. And, this faith and credit is as good as money in the bank.
He seems to be very comfortable with those who espouse Modern Monetary Theory, in which the federal government can create money out of thin air.
And, I thought only God could create something out of nothing.
How foolish!
Don Levit
Run 75441, Don, Everyone
Everyone Don & Run 75441– Please see run75441’s comment — July 31, 2011 at 10:54 AM
These are all excellent ideas.
Don, Run, Everyone–
Let me add that I agree with Don that Medicare Part D is underfunded.
We must negotiate with drug companies for discounts on drugs, and set up a formulary of drugs that Medicare will cover, excluding over-priced drugs that provide little or no benefit to the patient. (If a few patients would benefit, Medicare would cover the drug for them, just as Kaiser and the Mayo Clinic (that also have formularies do). But Medicare shoudl not cover these low-benfefit drugs for all patients.