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Opinion

Opinion

Health spending plan is irresponsible

April 3, 2010

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The Obama administration has sobering news about the federal government’s propensity to spend more than it collects in tax receipts (http://www.whitehouse.gov). During 2010, the administration projects spending of $3.7 trillion, tax receipts of $2.2 trillion, and a whopping $1.5 trillion deficit.

With a population of 309 million, projected federal government spending amounts to more than $12,000 for every man, woman and child in America. The projected deficit amounts to more than $5,000 per person. Put differently, the federal government is spending $1.72 for every $1 that it takes in. Is such fiscal irresponsibility the solution to our economic problems?

When the state of Kansas wants to increase expenditures, it has to cut spending on other programs or raise taxes. The federal government can increase spending by raising taxes, borrowing or printing new money. Raising taxes is the least popular option. Voters and special interests like government spending and Congress always postpones having taxpayers pick up the tab until after the next election.

In the short run, an increase in government debt can have little effect on interest rates and seem like a painless way to fund the deficit. That’s what’s happening now. The sharp recession and financial collapse have depressed private borrowing so interest rates have remained low. That happy situation is about to end, however. The recent explosion in federal debt is nearing a “tipping point” where bond buyers demand sharply higher interest rates. Given the unprecedented size of the federal deficit, and the corresponding explosion in national debt, it’s hard to project just how high interest rates are headed. Without sharply lower deficits, however, it’s easy to see how double-digit interest rates of 10 percent or more are in the offing.

Simply printing money sounds like an especially attractive way of funding new government spending except that it inevitably leads to inflation. If the amount of money grows faster than the rate of growth in the goods and services available for consumption, higher prices are inevitable. Again, the sharp recession and financial collapse have depressed consumer and business demand, so inflation has remained low, so far. As the economy begins to recover, however, private-sector demand will pick up and so will inflation.

At best, borrowing to pay for federal spending, or simply printing new money, are shell games. At worst, they are a fraud on the taxpayer. They represent hidden increases in future taxes that have not been agreed to by taxpayers. Politicians like hidden taxes; the federal budget typically runs a deficit. A small surplus was only achieved in two of the last 50 years, in 1999 and 2000. Hats off to the Clinton administration for fiscal responsibility!

Exploding deficits are new phenomena. The “conservative” Bush administration can be blamed for getting the process started; the Obama administration must take responsibility for outspending even the Bush administration. Shame on both Republicans and Democrats.

Raising taxes on the “rich” is a popular idea for reducing the deficit but there aren’t that many “rich” taxpayers. In 2010, income tax receipts of $951 billion are projected for all individual taxpayers; you could double everyone’s personal income taxes and still have a huge federal deficit. Cutting spending is the surest way of reducing the deficit, but that's unpopular with spend-and-elect politicians. You would only dent the current deficit if you eliminated the Departments of Energy ($28.3 billion), Education ($49.7 billion), Transportation ($77.6 billion), Interior ($12 billion), Labor ($14 billion), HUD ($41.6 billion), Agriculture ($23.9 billion), and Commerce ($8.9 billion). Simply reducing the size of traditional government programs will not close the deficit.

The really big numbers in terms of federal spending are in Social Security ($715 billion), Medicare ($451 billion), and Medicaid ($275 billion). Such spending is exploding because eligibility has been greatly expanded over time, medical costs are rising, and aging baby boomers are beginning to tap the system. Spending has far outstripped taxpayer willingness to pay for these health-care “entitlements.”

It is neither liberal nor conservative to advocate new health-care entitlement spending under the current budget situation; it is irresponsible. Current obligations must be funded before new ones are incurred. You and I cannot get away with spending $1.72 for every dollar of income, neither can the federal government. “You can fool some of the people all of the time, and all of the people some of the time. But you cannot fool all of the people all of the time.”

— Mark Hirschey is the Anderson W. Chandler Professor of Business at Kansas University.

Comments

mr_right_wing 4 years ago

I have THE answer! This will fit in perfectly with the Obama administrations philosophy of caring for us all. A new "fat tax"! It will help offset the cost of Obama care and motivate folks to get in shape. For each pound you are over your 'ideal weight you have to pay an annual tax of $5. 5 lbs overweight? An annual tax of $25. We could cap this off with a tax on the 'obese' being $500, and on the 'morbidly obese' $1,000. This tax would include children as well, since fat children often grow up to be fat adults. Now for those who have some kind of health condition, they'd be exempted by an official Obama care doctor. Pregnant women and all Washington insiders would be exempt as well (of course!!) Being "underweight" doesn't get you any 'tax credit' though... With all the fat people I see each and every day, through this tax alone Obama care could be completely funded! The government will make you get insurance or pay, logically the next step would be the government will make you lose weight or pay. Makes sense to me.

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camper 4 years ago

I agree with the editorial up until the end part. Health care reform is irresponsible? I believe the opposite. The rising costs of medine and the increasing number uninsured is putting tremendous stress on Medicare/Medicaid. If something is not done to reverse this trend, the defecit will continue to grow.

I would also say that fighting two wars is much more the problem. Atleast with health care (and other public projects) you get something tangible in return. Fighting in two useless conflicts is just throwing money down the toilet.

And even a bigger problem is the deterioration of the US mfg base. Unless this gets fixed, we are going to run out of schemes to make money. Home financing and hedge funding ran out of gas, so we'll have to wait for the next loophole to create the next financing boom, which of course will probably create another crisis. In the end, America needs to start building things once again. We are becoming a lazy service sector economy. Vulnerable to financial crisis.

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independant1 4 years ago

We cuss the lawmakers. But I notice we’re always perfectly willing to share in any of the sums of money that they might distribute. (Will Rogers)

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just_another_bozo_on_this_bus 4 years ago

Hirschey is clearly not serious about decreasing the deficit when he doesn't even mention cuts to the approximately $1 trillion in annual "defense" spending.

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Liberty_One 4 years ago

Whether you like these programs or not they will eventually be voted down by reality when we run out of money. I'd like to avoid that situation if at all possible.

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jaywalker 4 years ago

Have no fear. The President has instituted a "spending freeze". 'Course, it's not to take effect 'til 2018, long after he's out of office, so.......

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Richard Heckler 4 years ago

If the citizens would support ending the war and spending that money on USA citizens this country would be in great shape.

Yes just think about spending that war money on new industry and educating americans. Both are good investments that produce other investments that produce new wealth for others.

BTW health care is a thriving and growing industry.

Medical insurance on the other hand is a leech on society and reduces our expendable cash substantially. How you say?

Thursday, June 25, 2009

Health insurers have forced consumers to pay billions of dollars in medical bills that the insurers themselves should have paid, according to a report released yesterday by the staff of the Senate Commerce Committee.

Insurers make paperwork confusing because "they realize that people will just simply give up and not pursue it" if they think they have been shortchanged, Potter said.

More on this story: http://www.washingtonpost.com/wp-dyn/content/article/2009/06/24/AR2009062401636.html ===================================================================

If you’ve been watching the Senate Finance Committee’s markup sessions, maybe you’ve noticed a woman sitting behind Committee Chairman Max Baucus. Her name is Liz Fowler.

Fowler used to work for WellPoint, the largest health insurer in the country. She was its vice president of public policy. Baucus’ office failed to mention this in the press release announcing her appointment as senior counsel in February 2008, even though it went on at length about her expertise in “health care policy.”

Now she’s working for the very committee with the most power to give her old company and the entire industry exactly what they want – higher profits – and no competition from alternative non-profit coverage that could lower costs and premiums.

A veteran of the revolving door, Fowler had a previous stint working for Senator Baucus – before her time at WellPoint. But wait, there’s more. The person who was Baucus top health advisor before he brought back Liz Fowler? Her name is Michelle Easton. And why did she leave the staff of the committee? To go to work – surprise – at a firm representing the same company for which Liz Fowler worked – WellPoint. As a lobbyist.

You can’t tell the players without a scorecard in the old Washington shell game. Lobbyist out, lobbyist in. It’s why they always win. They’ve been plowing this ground for years, but with the broad legislative agenda of the Obama White House – health care, energy, financial reform, the Employee Free Choice Act and more – the soil has never been so fertile.

The health care industry alone has six lobbyists for every member of Congress and more than 500 of them are former Congressional staff members, according to the Public Accountability Initiative’s LittleSis database.

more juicy details http://www.pbs.org/moyers/journal/blog/2009/10/bill_moyers_michael_winship_in.html#more

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Richard Heckler 4 years ago

There are far greater problems. Believe it!

  1. The muliti trillion war for oil control that is devastating the economy

  2. The Bush/Cheney irresponsible financial disaster that put 11 million people out of work.

  3. 11 million people out of work needs new industry to re-establish that lost wealth of spending

  4. The special interest financing of our elections screws americans out of work and supports economies abroad = trillions is lost dollars to the USA economy

  5. Think about it. In the past 30 years the repub party has been in involved two major home loan scandals that effectively took the USA economy down the tubes. One is too damn many but twice represents repub economic policy. Wreckanomics is a failed economic policy. In fact wreckanomics is beginning to smell like well planned crimes.

The republican party have become masters at putting millions upon millions upon millions of people out of work. AND stealing taxpayers retirement plans along the way.

What Repubs do with a remarkable degree of consistency is wreck the economy,initiate huge movements of shipping jobs abroad aka the Reagan-Bush Global Economy and try to wreck social security and medicare.

Is there a definite pattern? Absolutely!

  1. The Reagan/ Bush Home Loan Scandal http://rationalrevolution0.tripod.com/war/bush_family_and_the_s.htm

  2. The Bush/Cheney Home Loan Scandal http://www.dollarsandsense.org/archives/2009/0709macewan.html

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