Now if we Could Just Combine Them…

Financially, The United States of America is heading the way of Greece, Britain and France. Rebellion and fiscal implosion are possible (likely?), and a dedicated third party is almost definite, if we don’t balance the budget by 2013. Unfortunately, few Members of Congress are willing to take the political risks necessary to balance the budget at all, never mind by 2013.

Fortunately, at least some Republicans are willing to take a stab at eventual balance of the budget. Rep. Paul Ryan (R-WI) has his Roadmap, but I do not consider it all that serious since it adds debt for over 50 years before balancing the budget. We can’t afford that. What we can perhaps afford is the Ryan-Rivlin proposal which, as Veronique de Rugy shows here, significantly diminishes the cost of health care over the next 40 years and saves hundreds of billions annually while doing so.

Unfortunately, it’s not enough to worry about the long-term debt if we can’t get past the short-term. This is where the decent, though not nearly expansive enough, Spending Reduction Act kicks in. Proposed this week in The Washington Examiner by Senator Jim Demint (R-SC), the House’s Republican Study Committee (RSC) Chairman Jim Jordan (R-OH) and the RSC’s Budget and Spending Taskforce leader Scott Garrett (R-NJ), it aims to cut $2.5 trillion in discretionary spending over the next decade.

However, no plan to balance the budget is complete without looking at national defense and budgetary fraud, and this is where Senator Tom Coburn (R-OK) enters the field of play. First with his various attempts to combat $100 billion in Medicare and Medicaid fraud (see one example from the last Congress here), and secondly with his detailed memorandum last year, Coburn is a one-man wrecking machine in the Senate.

If even half of the potential savings in these efforts are realized, the federal budget would drop by over $200 billion right away. Add in the medium-term and long-term impacts of defense and health reforms and we might actually have a balanced budget before Indiana governor Mitch Daniels hits his second term. (Of course, with Chris Christie as his vice president, maybe it will happen even faster. One can only hope.)

Comparing Bush Spending to Clinton Spending

Yesterday, Jed Lewison of Daily Kos put up a post comparing Clinton’s eight years of spending to Bush’s eight years of spending. The post- which cited the very reputable Tax Policy Center for its budget claims- showed just how badly Bush spent compared to Clinton. According to Lewison, Clinton saved over $100 billion in his final budget, Fiscal Year 2001.

I found the post interesting- not the least because Lewison cited the TPC, a partnership of the Urban Institute and the Brookings Institution- but also because TPC’s (and, thus, Lewison’s) claims are in direct contrast to what the Treasury itself shows in the 2000-2001 Fiscal Year, which is an increase in the federal debt of over $100 billion. I decided to contact Lewison about his claims. Below are the questions I sent, and his responses:

1. According to the Treasury, the debt increased from 9/30/2000 to 9/30/2001. What are the differences between the numbers you used and the numbers from the Treasury?

2. How much of the Bush debt you cited can be attributed to the growth in entitlements started pre-Clinton and pre-Bush years (i.e. not including the Medicare Drug Bill, etc. that added to the debt) and that obviously grew during both presidencies?

Lewison’s response:

1) The increase in total debt is basically an increase in the Social Security Trust Fund (i.e., intragovernmental debt, money that the government owes itself, which accounts for a bit over a third of all debt). I’m not an expert on all the accounting rules, but if you look at the non-intragovernmental debt, it decreased. But how Social Security is accounted for is a separate issue from the overall fiscal well being of the Federal government under Bush and Clinton.

2) Outside of new programs like the Medicare drug plan, the rate of growth in entitlements should be a wash; since they are proscribed by law, both administrations would have experienced growth in them. The underlying demographics would have had to have been huge to explain the difference in overall spending growth rates.

Regarding #1, Clinton almost balanced the annual budget, but never took care of the long-term entitlement issues America was (and still is) expected to face. So while he (and his Republican Congresses) should get credit for almost balancing the budget, they should also get blame for not touching the Third Rail of politics that is Social Security. I think Lewison is mostly right on this one, though I disagree with his last sentence. (Note: the 2000-2001 recession cut into the revenues in FY2001, which Clinton could not have accounted for in his FY2001 budget, since the recession started one month after the start of FY2001.)

Lewison is a bit more inaccurate in his second point. The rate of entitlements can’t be a wash, as they continue to annually increase as a percentage of the national budget. This in no way excuses Bush and the Republicans for their spending spree(s), nor the Democrats who were in charge for two fiscal years during the Bush presidency, but it does clarify things a bit, I think.

Lewison’s post does point out that a Democratic president spent much better than a Republican president, and rightly so. He did, however, miss that that Bush was opposed by most Republicans on TARP (which Democrats mostly supported, as well as much of the Republican leadership), and while he acknowledged the drop in revenues from the recession at one point in the post, he neglected to do the final math. Using Lewison’s numbers:

• The FY2009 deficit was $1.4 trillion;

• the stimulus accounted for $200 billion of that deficit;

• and the recession accounted for $400 billion losses in revenue for FY2009.

So, while the deficit was an atrocious $800 billion, what Bush was directly responsible for in FY2009 deficit was not nearly as bad as Lewison would like to think. It certainly was not as bad as the FY2010 or proposed FY2011 budgets under President Obama (who, admittedly, has to deal with a terrible recession and seven decades of entitlements and many years of war he is not responsible for).

Overall, as I have been saying for some time, both parties need to grow up. The Debt-Paying Generation is here, as a previous post pointed out, and unless we get a batch of politicians willing to reform how much we spend on Medicare, Medicaid, Social Security and defense, the situation is only going to get worse. (And no, the new health care law won’t help prevent that financial worsening.)

Full disclosure: I informed Lewison I would likely be using his comments in a post. I am not pulling a bait-and-switch by asking him for his thoughts without disclosing I would use them.

The Debt-Paying Generation Has Arrived

In the near future, The Heritage Foundation’s Bill Beach and I will officially introduce the soon-to-be-important term “The Debt-Paying Generation,” (DPG) a term that all Americans should become familiar with. It is the financial future of America, and not a pretty one at that.

What is the DPG? It is those Americans who are presently between 5 and 30, and will be hardest hit from childhood through death by the debt irresponsibility in Washington. According to calculations broken down from Census Bureau data, the DPG is approximately 35% of the total American population, and currently stands at 108,670,000. Given expected life spans- nearly 80 years old on average, and having increased an average of three years since 1990- it is not impossible to believe that the DPG will be the longest-lived generation in American history.

Why is this age group being named the “Debt-Paying Generation?” Well, primarily because this generation will almost certainly have to pay down most of our national debt through higher taxes, which almost certainly will relegate them to the status of being  the first generation of Americans to live a worse life than its immediate predecessors. Additionally, to rub salt in the wound, the big three entitlement programs—Social Security, Medicare, and Medicaid—will have to be cut and, thus, will pay less to the Debt Paying Generation than the Boomers.

In short, to summarize an upcoming Heritage Foundation paper on the subject, a huge population of Americans will be financially burdened, and their quality of lives diminished, because of errors and dereliction of duty by Members of Congress and presidents in both parties. (Full disclosure: I worked for two months at Heritage on said paper.)

When I interviewed Rep. Michele Bachmann (R-MN) for this site, I asked her about the DPG. She expounded upon how much debt is being added by the Democrats, and how it is demoralizing to young people. According to Bachmann,

I will tell you, anywhere I go to speak, I ask that question. “Do you believe you live better than your parents?” Almost everyone in the audience puts their hand up. I ask them, “do you think your children will live better than you financially?” Virtually no one puts their hands up. I doubt in the last 234 years, if you ask that question of any generation, that they would think that their children would not be better off than they are; I just don’t think that you would have gotten that response. That’s really what is frightening today, because we’ve always been a country that’s been about forward- looking people, and growth. And this is one of the first times when Americans look into the future, and they see diminished way of life, and they see decline.

It is not only Democrats, of course, who are at fault. Republicans voted in unpaid-for Medicare legislation; tax cuts that added to the debt, according to the Congressional Budget Office; and launched a War on Terror that, according to the Congressional Research Service, had cost over $900 billion as of September 2009. Additionally, few Republicans are willing to address our overall defense spending, which increased between 2001 and 2008 by over 90%, not including inflation. However, the real problem is the unwillingness of both parties to address our growing entitlements which, according to the International Monetary Fund (IMF), need to be cut by 12% of GDP by 2015 in order to keep the debt manageable. (This equals just over $400 billion in annual cuts at the federal level, in 2012 dollars.) In absence of this courage, of course, tax hikes (or “revenues,” in the election-year language of Democrats) will be necessary, and the level of taxation will just devastate the DPG.

Unfortunately, I do not see the political will in Congress necessary to make the changes the IMF recommended. From the Beach/Siggins essay:

The IMF recommendations would consist of Congress eliminating, in 2012 dollars:

• 57% of defense; or, if Congress keeps the full defense budget,
• Over twice the interest payments for next year; or, for a third option,
• Over 30% more than the president’s entire proposed Medicaid budget.

Each of these would have to happen every year until 2015. Of course, Congress could simply eliminate the entire discretionary budget; all of Social Security; and two-thirds of the interest payments for FY 2011  (well, except that not paying the debt’s interest would be to default on the debt itself) to reach the same total cuts this year, and leave the budget in other years untouched.

Medicare and Medicaid are necessarily the biggest concern of budget hawks, especially those who look decades into America’s financial future. Not far behind, however is Social Security. I recently conducted an interview with James Agresti, the founder of Just Facts, a New Jersey-based think tank, about Social Security and its impact on the National Debt. James- who regularly updates the burden of the national debt on Americans on his website- informed me that the Social Security Administration (SSA) may be misrepresenting the solvency of Social Security. According to James,

[I]n 2001, the Social Security Administration projected the trust fund balance would reach $2.54 trillion by the end of 2007. It actually reached $2.24 trillion- 13 percent lower than projected. Yet, if you compare the projections from the 2001 report and the 2008 report, they’re more optimistic in the 2008 report than in the 2001 report. So the financial condition of the Social Security program is worse than they projected…but yet they are saying it’s going to be better in the future. So in 2001 they were saying, [with] expected annual deficit in 2075, we’d have to increase Social Security taxes by about 49 percent to cover that deficit. In 2008, they said we’ll only have to increase taxes by 32 percent.

On April 15, The Center for American Progress noted that in President Obama’s proposed Fiscal Year 2011 budget, Social Security, Medicare and Medicaid add up to 41.5% of the federal budget. That is expected to grow astronomically over the next 70 years, under current budget proposals and with Congress’ current intestinal fortitude. Unfortunately, it won’t be these politicians who suffer- it will be their kids and grandchildren. To paraphrase a columnist from the Center for American Progress in The Washington Post some weeks ago, we need a generation of politicians who don’t care about being re-elected, and will thus make the tough choices. Hopefully, the American people vote in such politicians this fall, and in 2012, to prevent America from having its own Greek Tragedy, riots and all.

An Indication of Seriousness, or More D.C. Manipulation?

H/T to Hot Air for linking to the deficit reduction plan by Republicans on the House Budget Committee. The plan would, according to Republican estimates, cut $1.3 trillion over ten years.

This is nowhere close to enough to even be a solid dent in the national debt (it averages out to $130 billion in annual savings- which is less than 1/10 of the deficit for this year alone), but at least it’s a start. The plan also, as Ed Morrissey pointed out, takes care of some of the major issues with Freddie Mac and Fannie Mae, which are sucking tens of billions of dollars annually from the American taxpayer, and continue to be damaging to the economy and the possibility of an economic recovery.

Of course, Social Security, Medicare, defense cuts, Medicaid and subsidies to private companies (outside of TARP and the stimulus) are not addressed. This is disappointing, and may show a lack of reform seriousness on the part of Republicans. However, this plan is a start. Considering that House Democrats can’t even pass a budget, this is a great public relations step for Republicans, and a small bit of hope for those of us who want to see a functioning America 10 years.

The Republican press release can be seen here, and the specific cuts are outlined below, as posted by Morrissey:

• Cancel Unused TARP Funds. Prohibit the Treasury Secretary from entering into new commitments under the Troubled Asset Relief Program [TARP]. Ending TARP would prevent up to $396 billion in additional disbursements; CBO estimates savings of $16 billion. H.R. 3140 introduced by Rep. Tom Price of Georgia.
• Cancel Unspent ‘Stimulus’ Funds. Rescind all unobligated budget authority authorized under the “stimulus” bill and dedicate to deficit reduction. Saves up to $266 billion. H.R. 3140 introduced by Rep. Tom Price of Georgia.
• Cut and Cap Discretionary Spending. Return non-defense discretionary spending to pre-Obama (fiscal year 2008) baseline levels. Saves up to $925 billion. Legislation introduced by Reps. Ryan and Hensarling (H.R. 3964) and Rep. Jim Jordan of Ohio (H.R 3298) include caps on discretionary spending.
• Reduce Government Employment. Hire one person for every two who leaves civilian government service until the workforce is reduced to pre-Obama levels (exempting the Departments of Defense, Homeland Security, and Veterans Affairs). Saves an estimated $35 billion. H.R. 5348 introduced by Rep. Cynthia Lummis of Wyoming.
• Freeze Government Pay. Freeze Federal civilian pay for 1 year. Saves an estimated $30 billion.
• Adopt the Legislative Line-Item Veto. Enact a constitutional line-item veto law. The President’s FY 2011 budget included terminations, reductions, and savings that would achieve $23 billion in one year. While Congress may not accept all these savings, the Line Item Veto can help reduce spending. H.R. 1294 introduced by Rep. Paul Ryan of Wisconsin.
• Reform and Bring Transparency to Fannie Mae and Freddie Mac. Reform these companies by ending conservatorship, shrinking their portfolios, establishing minimum capital standards, reducing conforming loan limits, and bringing transparency to taxpayer exposure. According to CBO, the cost to taxpayers of putting government in control of Fannie and Freddie is $373 billion through 2020. Saves an estimated $30 billion. H.R. 4889 introduced by Rep. Jeb Hensarling of Texas. H.R. 4653 introduced by Rep. Scott Garrett of New Jersey.
• Create a Sunset Commission. Establish a commission to conduct systematic reviews of Federal programs and agencies, and make recommendations for those that should be terminated; and provide for automatic sunset of programs unless expressly reauthorized by the Congress. H.R. 393 introduced by Rep. Kevin Brady of Texas.

Republicans Are Focused On The Wrong Target

President Obama’s budget is massive, full of debt and, according to USA TODAY, “…did not propose any major savings in Medicare, Medicaid and Social Security, the three entitlement programs that consume nearly 40% of federal spending. By 2020, they’ll eat up 46%.” However, Republicans should not concentrate their fire on the president. Congress holds the purse strings to the federal government, and while Obama is an easy target for both Members of Congress and activist groups to go after, it is Congress that will decide what gets spent, and how it gets spent. Going after the president certainly feels good…but it won’t do the job of holding down federal spending. Only going after Congress will do that.

Taking $1 From Every American

Last evening thelobbyist’s founder Nick Brown gave me the quote of the day: “So what you’re telling me is they took a dollar from every American to pay off [Senator Mary] Landrieu (D-LA) to vote for health care reform?”

In short, Senator Landrieu demanded $300 million for her vote to start debate on the Senate’s health care bill. Initially worth $100 million, her critical vote for Democrats is increasing in price. The Senate is trying to hide its bribery by claiming the money is for any qualifying ?state,” saying, among other things, that it would be states that ?during the preceding 7 fiscal years? have been declared a ?major disaster area.?” In other words, for Hurricane Katrina and Louisiana.

Can we please call our senators and kill this bill? Then, next year, let’s vote the bums out. Please. In both parties. Starting fresh is a great way to go. Or, we could always rebel. Put a government in place that represents the people, institute constitutional term limits, have transparency with every political donor required to be listed on political websites and in every office, eliminate business subsidies, eliminate bailouts and cut the waste in defense, education, Medicare and Medicaid. Oh, and put in a flat tax or, even better, the Fair Tax that Mice Huckabee has made almost famous.

An Actual Solution To Health Care Reform

As a third year medical student keeping a close eye on the progress of the health care reform proposals moving through the Democrat-controlled Congress,? thoughtful analysis leads to one conclusion ? a government takeover of the health care system is not the solution to the catastrophic problems we face.

I am concerned by the justification given by Democrat leaders and liberal newspaper editorial boards for supporting the ?public option.?? The Miami Herald recently opined ?private insurers don’t make a profit by insuring people likely to need coverage? ? which could be distilled to ?sick people cost more.?? The significance here is that insurance companies then charge them more making coverage increasingly unaffordable.? To complete the argument, the ?public option? would solve this problem.? The CBO says otherwise.? The non-partisan referee of this domestic policy heavyweight bout says the public plan would be more costly than the average private plan because it would ?engage in less management of utilization by its enrollees and attract a less healthy pool of enrollees?. In other words, sick people are more expensive independent of who is paying the bill.

To some, the answer to this problem is ?guaranteed issue? ? colloquially known as making it illegal to discriminate against those with pre-existing conditions.? This is known to drive up insurance premiums, in one study by 227%, making coverage for the young and healthy cost-prohibitive.? These are the coveted participants referred to obliquely above that allow the spread of social risk.? In the House bill, the penalty associated with foregoing insurance is 2.5% of adjusted gross income.? For a young person making $40,000, this amounts to $1000 ? small fare if purchasing insurance will cost between $6000 and $8000 ? especially if you don?t think you are going to get sick.? What to do now? As is the case with many government interventions into the private sector, we quickly become mired in how to fix the fixes.

The solution is much less complicated.? What Speaker Pelosi failed to do Friday in 1,990 pages of definitions, distinctions, and dictums, I will do in 418 words.

First, go after Medicare and Medicaid fraud.? A CBS 60 minutes investigation estimated the cost of that enterprise to the taxpayers at $60 billion a year.? A GAO study showed that in 2007, $32.7 billion of Medicaid payments were improper – this cost the state of NY alone over $5 billion. How can we justify expanding the role of government in health care before fixing the current iteration?

Second, sever the union of employers and insurance by taxing employer health plans as income and returning it to employees in the form of a tax credit to purchase insurance.? This would empower patients to choose plans that meet their needs while simultaneously making their plan of choice completely portable.

Third, allow the purchase of insurance across state lines to create a robust market of choices with coverage mandates to be decided by a panel of physicians ? not bureaucrats.? This will facilitate creation of plans for the young and healthy based mostly on routine checkups and catastrophic protection alongside ones for the chronically ill centered on meeting evidence-based guidelines to monitor their conditions.? This prescription gives insurance companies something they want in exchange for something we need.

Fourth, institute meaningful tort reform.? The Pacific Research Institute estimates we spend $200 billion annually on defensive medicine.? Compensating those who are truly harmed and punishing the neglectful does not require trial lawyers.? Physicians traditionally spend 4 years in undergraduate school, 4 years in medical school, and between 3-7 years in residency with a fellowship to follow should they decide to further specialize.? Loss of a license equals loss of a career and loss of 10+ years of one?s life spent intensely training.?? In this medical student?s opinion, there exists no harsher punishment.

Finally, reform the Medicare physician payment formula.? The SGR is an archaic method to determine reimbursement that underpays doctors and forces them to take on less Medicare patients and more of the privately insured in order to cover costs.? The current legislation under consideration in both houses of Congress imposes a 25% across-the-board pay cut to Medicare?s physicians ? Svengali accounting at best and because it will never happen, also blatantly dishonest.? 13 Democrats joined all 40 Republicans voting down the ?doctor fix? bill in the Senate two weeks ago largely because it was seen an attempt to hide the true cost of health care reform.? The adjustment will cost $250 billion over a decade but is a necessary addition to comprehensive legislation to ensure that our senior citizens continue receiving high-quality care.

This five-point plan at Ms. Pelosi?s price of $2.2 million per word only costs only $1 billion.? Please make the check payable to Nicholas Rohrhoff.

From hearing the gentleman repairing my family’s refrigerator the summer before medical school mention how many more he has to repair in order to afford his coronary bypass surgery to sitting in a classroom of 150 extraordinary colleagues called to serve their fellow citizens in the noblest of professions;? From seeing my father?s corporate job disappear in the financial meltdown along with my family?s insurance policy to having a colleague at the University of Florida ask me if we, as future physicians, are going to need second careers in order to secure our financial futures ? I?ve drawn an undeniable conclusion: people are policy.

Health care reform is the domestic issue that will define my generation.? How we decide to take care of each other will be our legacy. ?Unleashing the remarkable ability of the American patient as consumer to bring down costs and increase quality (with appropriate consumer protections and subsidies for those in need) and incentivizing physicians to provide high-quality care and push the envelope of medical innovation is the answer.? As Candidate Obama said, ?We are the ones we?ve been waiting for.?? We are the real public option.

-nicholas rohrhoff is a third year medical student at the University of Miami?s Miller School of Medicine