Deficit Gambit, Medicare Bankruptcy, Social Security Crisis, Elderly Sacrifices, Taxes On The Middle Class
Thursday, Friday May 14,15, 2009
Today’s Zinger:
Procrastination May Provide Flexibility, But Determination Creates Results
Morning Briefing:
Many Americans have become numb to the Congressional spending and budget deficits (trillions of dollars), yet as the administration rolls out cost reduction programs we’re expected to be excited about the savings (millions and billions). Consider this, in addition to the new spending; Medicare is bankrupt in eight (8) years and Social Security begins deficit spending in seven (7) years with more money going out than coming in. These programs consume the vast majority of government spending. These problems must be addressed and more deficit spending is not the answer. A fundamental realignment of spending must take place and the savings programs offered up by the administration must be substantive and verifiable.
The elderly will pay through reduced benefits and taxes. The young and middle class will pay through higher taxes and we will all pay through the anxiety and turmoil that will begin within the next few years as we must finally deal with this problem.
The Facts:
The Discussion:
It seems that each day brings a new budget and deficit announcement. In the first six weeks of the Obama administration, Congress authorized the greatest deficits in the history of the country. As a matter of fact, Congress authorized deficits greater than the all deficits in the cumulative history of the country. The deficits represent spending over the next three years. The purpose of the deficit spending is to meet current government obligations, increase economic activity to address the recession and reposition the economy and our country for a new future in energy, infrastructure, education, health care, jobs, business and government involvement.
For those that think President Obama inherited this problem, I will remind you that the $780 billion in TARP funding (estimated to actually cost $360 billion by the CBO), is not spending, but is a loan to these companies. Many of these companies are aggressively trying to repay the funds to the government. Secondly, it was President-Elect Obama that personally appealed to President Bush to authorize a second stimulus bill. President-elect Obama did not want to wait the six weeks until he entered office to get the money into the economy. Bush agreed to the request. President-Elect Obama then asked President Bush for additional spending, but President Bush said no that we should wait and see the effects of the current stimulus.
In hindsight, it seems as if there was a deliberate attempt to push as much spending under Bush so the new administration could say they inherited this or they could say they reduced the prior administrations deficits. And for good reason. During the first six weeks of the administration, Congress was consumed by quickly approving massive additional spending on top of that approved by President Bush. Most people recognize that the level of spending that has been committed will have dire consequences unless there is a dramatic change in spending or if the economy does not come roaring back. Most realize that the economy is not going to roar back. In an effort to balance the conversation away from deficits, the administration has tried to switch gears and focus on budget reductions and savings.
With the help of the new government efficiency Czar and greater attention to spending by the Cabinet, the President has brought to the American people several initiatives that will reduce government spending $30 billion over the next 10 years. (This represents .0027 or approximately 1/4 of one percent of the deficit that is being created in that same period of time). This is achieved through consolidated buying and eliminating a few projects that no longer are achieving their objectives.
President Obama also announced a verbal agreement with certain health care providers that will hold or reduce cost increases by $2 trillion over the next 10 years. There are no specifics on who, when or where these reductions will take place. This is great theater but lacks any substance or accountability on the part of the health care providers or the President.
President Obama can spend the next four years rooting around the government wasteland, but he will not find anything close to the money needed to offset the massive spending that has been authorized. The only way to offset the cost of transforming the role of government and our economy is to undertake massive changes in Medicare, Medicaid, Social Security, defense spending and welfare.
A Democratic Congress must face their constituents and radically reduce their Social Security and Medicare benefits. The implications are enormous. The government will have to tell the elderly that they cost too much. Tough decisions on end of life medical care or Social Security benefits will dominate the news. Prior attempts at dealing with this problem were stalled in Congress. Time is running out. Tough choices will have to be made.
A Democratic Congress will not do it. They will not be able to go to the American people and force this level of change. So what will they do? We will hear more long-term savings programs (even greater than 10 years). We will hear about offsetting anticipated decreases (smoke and mirrors) and we will hear about sacrifices that we must all make. We will hear about large anticipated reductions in military spending through ending the wars or changing the scope and focus of the military. Outrage by Congress will be tempered with eloquent speeches that will be hollow statements designed to create the drama of politics in hopes that each member of Congress will be able to preserve his or her job.
Conclusion:
In 2004 President Bush tried to enact Social Security reform. The Democrats in Congress claimed that there was no crisis and there was no need to push new legislation. No action was taken. This sounds a lot like 2005 when President Bush tried to push for reform of Fannie Mae and Freddie Mac only to be met by the likes of Barney Frank declaring there was no crisis at Fannie and Freddie. We have all learned that was not the case and has ended up as the worst financial meltdown in history, all because Congress did not act.
The deficit spending in the last six months has drained our coffers and significantly diminished our ability for future borrowing. With the looming crisis in Social Security and Medicare, our government will be left with few alternatives but to reduce benefits and raise taxes. The elderly will bear the brunt of Congress’ long procrastination in dealing with these problems. The younger worker will be impacted by higher taxes.
The timing of these benefit reductions and tax increases will be critical. If they do them too soon, the 2010 and 2012 elections will come into play and Congress and the President will fear a voter revolt. If they try to wait until 2013, the system will be bankrupt in just a few years meaning that there will be no way out and another meltdown may be in our future.
We can be assured that the teleprompters are getting warmed up and the spin will be dizzying. We are about to experience a Jimmy Carter moment where the President and Congress both employ empathy and concern but then ask for lots of sacrifice from the citizens. I am sure that there will be the "blame it on Bush" mantra shouted from the Congressional rafters to deflect blame, when in fact it was Congress that allowed this situation to develop. We need a Congress with the determination to get things done.
Today’s Zinger:
Procrastination May Provide Flexibility, But Determination Creates Results
Morning Briefing:
Many Americans have become numb to the Congressional spending and budget deficits (trillions of dollars), yet as the administration rolls out cost reduction programs we’re expected to be excited about the savings (millions and billions). Consider this, in addition to the new spending; Medicare is bankrupt in eight (8) years and Social Security begins deficit spending in seven (7) years with more money going out than coming in. These programs consume the vast majority of government spending. These problems must be addressed and more deficit spending is not the answer. A fundamental realignment of spending must take place and the savings programs offered up by the administration must be substantive and verifiable.
The elderly will pay through reduced benefits and taxes. The young and middle class will pay through higher taxes and we will all pay through the anxiety and turmoil that will begin within the next few years as we must finally deal with this problem.
The Facts:
- President Obama, with his new government improvement Czar, announced $21 billion in anticipated savings over 10 years through elimination of government programs that are no longer effective.
- On Monday, President Obama announced a verbal agreement, or understanding, with members of the health care providers, to reduce costs (or reduce anticipated cost increases) $2 trillion over the next 10 years.
- Congress has increased the budget deficit $89 billion for the current year resulting in a $1.85 trillion deficit for the current year alone.
- Medicare is bankrupt in 2016. Social Security begins paying out more than they collect in 2017. According to the Congressional Budget Office and the Social Security Trust, The time to failure has been shortened by one and two years respectively, since the last estimate in 2008. For perspective, just six years ago, the Federal government estimate was that Medicare was solvent through 2030. In just six years, the estimate shrank 14 years.
The Discussion:
It seems that each day brings a new budget and deficit announcement. In the first six weeks of the Obama administration, Congress authorized the greatest deficits in the history of the country. As a matter of fact, Congress authorized deficits greater than the all deficits in the cumulative history of the country. The deficits represent spending over the next three years. The purpose of the deficit spending is to meet current government obligations, increase economic activity to address the recession and reposition the economy and our country for a new future in energy, infrastructure, education, health care, jobs, business and government involvement.
For those that think President Obama inherited this problem, I will remind you that the $780 billion in TARP funding (estimated to actually cost $360 billion by the CBO), is not spending, but is a loan to these companies. Many of these companies are aggressively trying to repay the funds to the government. Secondly, it was President-Elect Obama that personally appealed to President Bush to authorize a second stimulus bill. President-elect Obama did not want to wait the six weeks until he entered office to get the money into the economy. Bush agreed to the request. President-Elect Obama then asked President Bush for additional spending, but President Bush said no that we should wait and see the effects of the current stimulus.
In hindsight, it seems as if there was a deliberate attempt to push as much spending under Bush so the new administration could say they inherited this or they could say they reduced the prior administrations deficits. And for good reason. During the first six weeks of the administration, Congress was consumed by quickly approving massive additional spending on top of that approved by President Bush. Most people recognize that the level of spending that has been committed will have dire consequences unless there is a dramatic change in spending or if the economy does not come roaring back. Most realize that the economy is not going to roar back. In an effort to balance the conversation away from deficits, the administration has tried to switch gears and focus on budget reductions and savings.
With the help of the new government efficiency Czar and greater attention to spending by the Cabinet, the President has brought to the American people several initiatives that will reduce government spending $30 billion over the next 10 years. (This represents .0027 or approximately 1/4 of one percent of the deficit that is being created in that same period of time). This is achieved through consolidated buying and eliminating a few projects that no longer are achieving their objectives.
President Obama also announced a verbal agreement with certain health care providers that will hold or reduce cost increases by $2 trillion over the next 10 years. There are no specifics on who, when or where these reductions will take place. This is great theater but lacks any substance or accountability on the part of the health care providers or the President.
President Obama can spend the next four years rooting around the government wasteland, but he will not find anything close to the money needed to offset the massive spending that has been authorized. The only way to offset the cost of transforming the role of government and our economy is to undertake massive changes in Medicare, Medicaid, Social Security, defense spending and welfare.
A Democratic Congress must face their constituents and radically reduce their Social Security and Medicare benefits. The implications are enormous. The government will have to tell the elderly that they cost too much. Tough decisions on end of life medical care or Social Security benefits will dominate the news. Prior attempts at dealing with this problem were stalled in Congress. Time is running out. Tough choices will have to be made.
A Democratic Congress will not do it. They will not be able to go to the American people and force this level of change. So what will they do? We will hear more long-term savings programs (even greater than 10 years). We will hear about offsetting anticipated decreases (smoke and mirrors) and we will hear about sacrifices that we must all make. We will hear about large anticipated reductions in military spending through ending the wars or changing the scope and focus of the military. Outrage by Congress will be tempered with eloquent speeches that will be hollow statements designed to create the drama of politics in hopes that each member of Congress will be able to preserve his or her job.
Conclusion:
In 2004 President Bush tried to enact Social Security reform. The Democrats in Congress claimed that there was no crisis and there was no need to push new legislation. No action was taken. This sounds a lot like 2005 when President Bush tried to push for reform of Fannie Mae and Freddie Mac only to be met by the likes of Barney Frank declaring there was no crisis at Fannie and Freddie. We have all learned that was not the case and has ended up as the worst financial meltdown in history, all because Congress did not act.
The deficit spending in the last six months has drained our coffers and significantly diminished our ability for future borrowing. With the looming crisis in Social Security and Medicare, our government will be left with few alternatives but to reduce benefits and raise taxes. The elderly will bear the brunt of Congress’ long procrastination in dealing with these problems. The younger worker will be impacted by higher taxes.
The timing of these benefit reductions and tax increases will be critical. If they do them too soon, the 2010 and 2012 elections will come into play and Congress and the President will fear a voter revolt. If they try to wait until 2013, the system will be bankrupt in just a few years meaning that there will be no way out and another meltdown may be in our future.
We can be assured that the teleprompters are getting warmed up and the spin will be dizzying. We are about to experience a Jimmy Carter moment where the President and Congress both employ empathy and concern but then ask for lots of sacrifice from the citizens. I am sure that there will be the "blame it on Bush" mantra shouted from the Congressional rafters to deflect blame, when in fact it was Congress that allowed this situation to develop. We need a Congress with the determination to get things done.
Posted by ZK at 5/13/2009 7:54 AM 
Categories: Federal Budget, Taxes, Politics, Social Issues, Congress
Categories: Federal Budget, Taxes, Politics, Social Issues, Congress
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6/5/2009 7:41 AM
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6/12/2009 9:31 AM
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