Stop the Posturing and Fix the Problem

I was listening to the radio while driving home Monday evening. One of the news readers teased the opening of the national news segment with breathy excitement announcing a discussion of the “winners and losers” in the recent debt ceiling debate. Unwittingly, this gentlemen – lacking any insight as to what he was reading – encapsulated the very essence of what has transpired over the last several months.

 

This was not an effort to find a solution to a real and growing problem. This was an effort to create talking points for the next election. Big numbers have been tossed around about the magnitude of each sides undertaking but all of the numbers were just smoke and mirrors for one simple reason.

 

None of the plans advanced – not by President Obama (well he never actually advanced any plan, he just criticized others), not by Sen. Reid (even though he finally conceded that tax increases would not be part of a plan), not by Sen. McConnell who just kicked the problem down the road), not by Speaker Boehner (even though he talked tough when forced to by the conservative members of his caucus) and most assuredly not by Rep. Pelosi (who can never really get beyond bumper sticker patois) – actually addressed the problem.

 

Only in Washington can people crow about “reducing the debt by $2.4 Trillion when they in fact put the nation on track to increase the national debt by nearly $10 Trillion.

 

Look, this isn’t rocket science. A welfare state is not sustainable. At a point in time the cost of the myriad of welfare programs exceeds the available resources. Have we reached that point in America? According to an article in Tuesday’s Wall Street Journal, the national debt now equals the Gross Domestic Product (GDP). For those of you forced to endure an education in the Portland public school system, the GDP represents the monetary value of all the finished goods and services produced within a country’s borders in a specific time period. That’s it. Today in America, the federal government, even before the latest $2.3 Trillion increase in the debt ceiling, owes more than it produces.

 

To provide some perspective, let’s look at the ratio of debt to GDP for some other nations:

 

Japan – 225% – the Lost Decades of Japan continue.

 

Greece – 144% – A soft default has already been announced and experts expect a hard default to follow

 

Italy – 118% – Experts expect Italy and Portugal to be the next European nations to fail.

 

In contrast some of the nations where lower ratios represent the growing economic giants of the world.

 

China – 17.5% – because of our failure to address the debt problem, China is likely to become the dominant world economic power.

 

Russia – 9.5% – the heart of the Soviet Union and the hallmark of the failures of socialism now lectures America regarding its slide towards a welfare state.

 

Germany – 78.8% – virtually the whole of European Union now rests on the economy of Germany.

 

All of the big talk about reducing the deficit is just that – “big talk.” Every plan offered back loaded the reductions to a time beyond the current Congress knowing full well that one Congress cannot bind another and the reductions will never occur – just like promised reductions of the past. It is not clear yet what the impact of the debt ceiling deal will have on the 2012 budget but estimates range from $6 Billion to $61 Billion. Maya MacGuineas, president of the nonpartisan Committee for a Responsible Federal Budget described it as “spit in the ocean.”.

 

The fact of the matter is that the country cannot deal with the fiscal crises unless and until it is prepared to deal with the welfare state. Social Security is unsustainable. It is a program that was created based on an actuarial assumption that the average person would not reach the age of eligibility. While minor changes have been made to the age of eligibility, Americans have experienced a dramatic increase in their longevity. Add to that the fact that a succession of presidents and congress spent all of the money in the so-called Social Security Fund.

 

The Medicare system was designed to slow the growth in the cost of treating seniors but adding drug prescriptions and failure to adjust the eligibility age ensured that the program would grow beyond reasonable sustainability.

 

Medicaid, like every other welfare program, has been abused by expansion of eligibility, a refusal by government to police eligibility and a massive influx of illegal aliens. The cost of these programs is not only a massive federal burden but is also driving state governments to edge of bankruptcy.

 

Not even robust economic growth and job creation is sufficient to bring the welfare state back into an affordable condition. It is not sufficient to say, “it’s the economy, stupid.” You must also add, “it’s also the welfare state, stupid.”

 

But, it’s business as usual in Washington. The ink was hardly dry on the debt ceiling plan before Mr. Obama rushed to the microphones to note that this was only the first step and then playing his favorite class warfare card, announced that “we aren’t going to balance the budget on the backs of those who have borne the brunt of this recession.” Mr. Obama may have graduated magnum cum laud from Harvard Law School but he remains studiously ignorant of the realities of economics. You cannot address the problems of America’s welfare state without impacting the recipients of welfare. To do otherwise will simply hasten the looming collapse of America’s economy. Wall Street understands that – in the aftermath of the crowing in Congress about passing a debt ceiling plan, the market’s decline accelerated to its worst day in years.

 

Mr. President, stop the rhetorical flourishes and lead. If you will not or cannot, get the hell out of the way.

 

 

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Posted by at 05:00 | Posted in 2012 Election, Economy, Federal Budget, President Obama | 21 Comments |Email This Post Email This Post |Print This Post Print This Post
  • Jess

    I agree that we are on an unsustainable path, but we started out our lost decade due to starting the starve-the-beast process, but not following the Bush tax cuts with corresponding cuts. That’s not responsible by any measure. Those people in power at the time (Boehner, Frist, McConnell, Pelosi & Reid) & the key players in the financial markets all are to blame alongside President Bush for what we are dealing with today. We also need to accept that our Country & our countrymen need to have a sustainable safety net. I don’t think anyone but the liberal Dem’s are talking seriously about expanding the Welfare State; most people will acknowledge that we need to means test a good amount of it, if not all. One useful thing Republicans can argue for is a 20 to 30 year sunset provision in all future regulations & revising future benefits for people of a certain age. That would be a good accompaniment to the Democrats’ Pay-Go proposals.

  • Bob Clark

    This own congress will be tested later this year when medicare payments are supposed to be cut per this deficit reduction legislation.  So far, the track record on this account isn’t good at all.  Every year this past decade I think congress has intended to freeze or reduce medicare payments (to doctors and hospitals) only to reverse course in December just before the start of the intended cuts, and boosted the payments.  So, we shall see once more this December.

    I still think we can do things to bolster our outcome.  Europe’s central bank needs to print money instead of raising interest rates as it has this past year.  The U.S needs to ease regulation, approve drilling in ANWR and building of resource projects like Keystone Pipeline.  Drop tax rates on corporations bringing back untaxed dollars they have stowed overseas inexchange for private domestic investment.  Move the economy to the frontburner and move abstract things like climate change to the backburner.  Maybe put a tax on gold transactions while maintaining very easy money policy.

    • 3H

      Careful Bob – advocating a new tax is going to get you pilloried.  

  • Jess saying he’s right

    Metastasize:Spread of cells from the original site of the (governmentium) cancer to other parts of the body where secondary tumors are formed.One underutilized therapy:  Sunset laser application.

    Oregonian Letters (Aug 2)
    Columnist Paul Krugman would do well to go back to the Constitution.
    He asks, “After all, how can American democracy work if whichever party
    is most prepared to be ruthless, to threaten the nation’s economic
    security, gets to dictate policy?”

    Is he ignoring that we are a republic with representation under the
    rule of law? Those are my “representatives” there in Congress. I’m proud
    at 74 to associate with the basic ideals of the Tea Party in a time
    when the “unorganized” are organizing again.

    We’ve been quietly running our businesses, paying our taxes and
    living our lives without the government dole. Now we are standing up and
    speaking out. Get used to it.

    KAY L. BRIDGES
    Southwest Portland

  • the real valley person

    The welfare state is not sustainable? The two main pillars of the welfare state are Social Security and Medicare, which are basically paybacks for compulsory old age insurance. Its basically money we pay to ourselves so we are not destitute and without health care when we are old. If we can’t afford this then we can’t afford to be a modern, industrialized nation, and should give up our claim as the leader of the free world, because going back to a pre welfare state condition would be an 8 decade step backwards in time. Not a step forwards.

  • 3H

    I’m curious.. how did we provide Social Security, Medicare and Medicaid during the Clinton years and run a budget surplus?  Evidently it is not as impossible as Mr. Huss would have us believe. 

    I’m also curious – if we get rid of Social Security, Medicare, Medicaid, WIC, etc…   How do we help those people?  Or is it a “too bad, sucks to be you” State? 
     
     

    • the real valley person

      What we can’t sustain is a welfare state, forever wars in the middle east, a  military budget larger than every other nation combined, the Bush tax cuts, and countless tax breaks all at the same time on Eisenhower era tax collections.

      We also can’t sustain the “tea party” much longer, since they appear determined to blow up the entire economy just to make a point. 

      • Rupert in Springfield

        When the Tea Party starts racking up the bills you guys have I’ll be worried.

        When you convince people we can tax our way to prosperity I’ll be amazed.

        • 3H

          Don’t you think that says it all: “You guys”. Not us.  It’s a nation as a whole Rupert, not just one segment of it. 

          No one is talking about taxing to prosperity.  That is a sleight of hand you are pulling.  A diversion.  We are talking about taxing to pay for services.   However, since you mentioned it, how was it that this country was prosperous even when tax rates were higher?  Since the refrain seems to be: Lower taxes = prosperity; higher taxes = economic downturn, can you explain to me, and show me, when this has ever been historically true? 

        • the real valley person

          The Tea Party just racked up God knows how much in business put on hold while they threatened the entire economy, and loss of jobs resulting from their nonsense.

          When you can convince people we can budget cut our way to prosperity, I’ll be amazed. 

    • Rupert in Springfield

      >I’m curious.. how did we provide Social Security, Medicare and Medicaid during the Clinton years and run a budget surplus?

      Im curious, when liberals try and be clever with quips like this, do they ever realize it makes them simply look uninformed?

      Clinton had two things going for him – One, the draw down from the cold war. Two, Clinton’s term was before the massive wave of baby boomers retiring.

      What you have done here is made a classic error in the attempt to be clever. When talking about something being sustainable or not, showing that something was sustained in this period or that does not prove it is possible to do so in perpetuity.

      • 3H

        but the idea that it’s impossible?  No, it’s not.  There are ways to do it.  The idea that somehow we have to scrap the safety net, as Huss implies, is simply ridiculous. 

        We can’t tax our way to prosperity (which only you seem to believe Liberals are saying), but prosperity seems to have little to do with taxation.  Yes, at some level, it could be harmful.  But then, no one is talking about those levels, are they?

    • Phoenixbird

      We never had a surplus. Using accounting that would get most firms in hot water with the IRS, Clinton literally raided Soc. Security to pay down public debt. In other words, his administration robbed Peter in order to screw Paul. 

  • BiteItLibs

    Time to let people know the dole will not be a lifetime gravy train for the lazy or criminal. And cuts for all Federal programs – including maybe eliminating the Depts. of Energy and Education. Noone but the employees and the people that get payments from those agencies would miss them…

  • Rupert in Springfield

    This is really a simple problem to solve. You have two choices:

    Social Security was conceived as a tax scam. At inception, its purpose was to wring money out of the public, not provide benefits. FDR sold the country on a retirement benefit most would not live to collect by setting the retirement age beyond life expectancy. People were duped and they fell for it. What went wrong was when this program was changed from tax scam to a retirement program. We could go back to this original idea of SS as a simple rip off and set the retirement age at 80 or so. Is it politically possible? Not on your life.

    Means testing. The elderly make up the richest demographic by age of any group. By means testing both SS and Medicare you are soaking the rich by definition. Is this politically possible? It should be. The left loves soaking the rich, so they should have no objection. The right loves reigning in government, and limiting the constituency for SS and Medicare would certainly do that.

    The situation is simple – roughly 40% of the federal budget is based on the notion that if you reach a certain age, you win a prize called SS and Medicare. Everybody working pays for your prize. You get to play golf and drive the RV, the kid working at McDonald’s gets to pay for it.

    That’s insanity. There is no logical basis for 40% government to be a sweepstakes operation with prizes rewarded based on age. Means test these programs.

    • the real valley person

      “This is really a simple problem to solve. You have two choices:”

      So your first of only 2 possible choices you can imagine is to raise the retirement age to 80, which you then state is not a choice at all because it isn’t politically possible.

      Leaving your second and only remaining choice as an undefined means testing, which if you did the math on this would discover (I mean actual math, not Rupert world math)  would save very little since about 98% of those on the geezer dole are basically middle class or poor. And since they all vote, you lose on political possibility here as well.

      Not that it ever matters, but here is some data for you (2008) to put in your ignore data so I can spew BS closet.

      1) The median income for those over 65 in the US is $18,000 a year.
      2) 25% have incomes under $11K a year
      3) Only 25% have incomes over $33K a year
      4) Only 89% of households over 65 even get SSI
      5) SSI is the single largest source of income for those over 65. Read that again before you propose cuts.
      6) 41% of SSI recipients get 90% of their income from SSI.

      Basically most geezers just get by, and as they age they get poorer because their savings or investments are exhausted or cashed in by the time they pass 80.

      The “prize” of SSI and Medicare comes with aching joints, poor eyesight, increasing illness or risk thereof, living in the fog of new technologies, Gunsmoke reruns and a gradual shunting aside of whatever you once were and had accomplished. Quite some prize.

      • 3H

        Rupert.. you might want to not confuse life expectancy with life span at various ages.  Given that they started making payments almost immediately from inception, your statement is just silly.

      • Zanzara

        Yeah, “geezer dole” — they who were sucked dry by SS, Medicare, income, property, and sales taxes, and what ever they had accumulated for themselves to retire on got eaten up by the stock and money market fraudsters and swindlers and hind end buddies in Congress who get off scott free.   

    • Ardbeg

      Ok, now your just being dumb.  If you reach a certain age you get a ‘prize’? Really?

  • Feelgood

    We are the next Greece without the culture.

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