Government In Wonderland Part II: We Have A Plan. It's Called Medicare

One area where the Democrats have their head in the sand is Medicare. From the Daily Kos:

House Minority Leader Nancy Pelosi has the talking points every single Democrat should be using when talking about the Republican budget and protecting America's senior and disabled citizens: "We have a plan. It's called Medicare."

When will Medicare start to have more bills than it can pay? From the L.A. Times:

Highlighting the financial peril confronting Medicare, the federal government predicted Friday that the program's largest trust fund would run out of money in 2024, five years earlier than projected last year.

I have read various estimates of how much will have to be cut at that time. The general figure is about a 10% cut.

I blame Bush for a lot of the Medicare problem. Bush added a prescription drug component to Medicare without any taxes to pay for it.  It was estimated at the time that he added 7.5 to 12 trillion dollars to Medicare's unfunded liabilities.

While projecting out medical expenses for 50 years is an exercise in futility, the unfunded liabilities of Medicare are 74 trillion, give or take a few trillion.

These obligations will not be met because they cannot be met. It is really that simple. Because of interest received now on the Medicare surplus, a small cut now will prevent a bigger cut later. (Yes I know the surplus in mostly myth as it consists on non-negotiable IOUs.)

 Charles Smith at Of Two Minds:

The numbers are something like this: the average Medicare recipient pays in $10,000 and extracts $250,000 in benefits. This kind of system is only sustainable if there are 25 workers for every retiree. Right now, there are roughly 2.5 workers for every retiree in the U.S., and if you consider only private-sector workers, it's more like 2 to 1.

Just as most Republicans have their heads in the sand with regard to military spending, so most Democrats have their heads in the sand with regard to Medicare. But there is a proposal to save $600 billion for the next ten years and cut $10 trillion from Medicare's unfunded liabilities. The Lieberman/Coburn proposal is summarized by a Heritage blog this way:

* Create a catastrophic Medicare benefit and simplify Medicare cost-sharing.        

* Increase Part B premiums from 25 to 35 percent.        

* Expand income-related cost sharing and phase out Part B and D subsidies for the very wealthy.

* Raise Medicare’s age of eligibility to 67.        

* Make physician payment and other program changes.

Click on the Heritage link if you want more details. Click here for a critique of the plan.

Any plan is going to have bad consequences. The whole point is that a cut is a cut. Oddly enough, this critique favors decreasing the eligibility age to 55??? The Lieberman/Coburn proposal is in fact too mild, and it does nothing more than kick the can down the road. It is better than nothing. And something needs to be done quickly.

Nancy Pelosi’s response to Lieberman/Coburn?

Any changes to Medicare must strengthen the Medicare system and improve the health of our seniors.

It is unfair to ask seniors to get less in benefits and wait longer to get onto Medicare – all while Republicans back tax breaks for Big Oil and corporations that ship American jobs overseas.

Just like the Republican plan to end Medicare, this proposal is unacceptable, especially for struggling middle-class Americans. 

I will leave it to each of us to insert an appropriate expletive here.

Government in Wonderland, Part I

I think that eventually we will need a portion of the deficit reduction to come from increased taxes, hopefully as part of tax reform and a flat(ter) tax structure. But the chart above explains the Republicans’ reluctance to raise taxes. We have a spending problem more than a taxing problem. Note that these figures are in steady 2010 dollars. (The dollar is anything but steady—what I am trying to say is that the chart takes into account inflation.) 

Let me begin by criticizing Republicans.  I certainly want to be bipartisan! Returning our defense expenditures to 2001 levels, adjusting for inflation, would still leave us by far with the largest military in the world. It would be more than sufficient to defend us. We need to bring at least a portion of our troops home. Unless we want to keep 50,000 soldiers in Afghanistan permanently, we need to, as Nancy Reagan might put it, just say no.  I thought that was what Obama promised us. 

I was told that if I voted for McCain we would be stuck in Iraq and Afghanistan. Well, I held my nose and I voted for McCain. We are still stuck in these wars, so I guess they were right. (This is an update of the old Johnson/Goldwater joke about Vietnam.) 

But even the supposed (I use supposed because no one really knows who is proposing what) Obama proposal is $1 trillion reduction in proposed expenditures over 10 years. If you want each portion of the budget to receive proportionate cuts in order to balance the budget, the correct figure is double that. If you want to return to 2001 levels, then you need to almost triple this proposed cut. (All these numbers that I am using are over ten years.)  If we exempt any portion of the budget from cuts, then other areas have to be cut more. The needed Medicare and Social Security cuts are unpalatable enough without forcing them to be larger. 

Here is what the Reason article from which I took the chart concluded about many Republicans:

At the same time, GOP types need to face the fact that we can't keep spending $700 billion or more on defense while keeping Medicare going full steam ahead and never touching Social Security, which represents a sacred bond by which relatively wealthy old people fleece relatively poor young people. Something has got to give, because we're out of money.

I have to agree. These Republicans are the proverbial ostrich burying its head in the sand. Next time I will talk about their Democratic brother ostriches. 

The $1 Bank Robber

This is a most unusual bank robber:

That is how Verone said he came to the decision to rob the RBC bank on New Hope Road on Thursday, June 9.

He didn’t have a gun and he handed the teller a rather unusual note.

"The note said ‘This is a bank robbery. Please only give me one dollar,’" Verone said.

Then he did the strangest thing of all.

"I started to walk away from the teller, then I went back and said, 'I'll be sitting right over there in the chair waiting for the police," Verone said.

        ...

Verone said he doesn’t have medical insurance. He has a growth of some sort on his chest, two ruptured disks and a problem with his left foot. He is 59-years-old and with no job and a depleted bank account, he thought jail was the best place he could go for medical care and a roof over his head.

A sign of the times.

Energy Independence

Charles Hugh Smith at Two Minds had a guest blogger yesterday:

The Bush Administration may have made a strategic error when it chose a primarily military response to 9/11. We’ve spent a couple trillion dollars in the decade since with precious little to show for the expense and effort. Would a national effort to develop renewable energy have had a greater impact? Probably not at the time—the slow pace of technological progress could not have competed with the primal thrill of military conquest.

But the tangible benefits of a renewable energy thrust would certainly be evident by now. Lower dependence on foreign oil imports, the rise of new technologies, the creation of new businesses and new jobs and a sense of a hope for a better future might be apparent today had the leadership of the time embraced the long view. And it could have been accomplished for a fraction of what we’ve paid to date for the wars in Iraq and Afghanistan.

The link I posted on Saturday got a lot of discussion on Facebook. One point was that there was an advantage to energy independence and that the Chevy Volt helps in this. I think that energy independence should be a national goal. This will require tariffs, which is not mentioned in the article at Two Minds. A good read anyway. 

Ben Bernanke's Spiritual Ancestor

This is something on the light side of things for a lazy Sunday morning. 

This "economist" from the 30's actually makes more sense than our current crop of "economists."