Category Archives: entitlement reform

Fix the Debt

Posted on by
Reply

 

Recently I have had several posts about our national debt, for example, “Why the National Debt Is Such a Threat to the U.S.,” showing graphically that our current public debt at 74% of GDP is very high by historical standards and rising rapidly under current fiscal policies.
CaptureYesterday I attended a workshop in Washington D.C. put on by Fix the Debt.  All expenses were paid and, in return, the attendees agree to make at least three presentations to local community groups during the following year.  This means that I will soon be sending out a letter to such groups as Kiwanis and Rotary Clubs around the Omaha area where I live, offering my services as a speaker at one of their meetings.  The purpose is to build more public awareness of the threat of a huge and growing national debt to the long-term welfare of our country. Here is a summary of talking points from the workshop:

  • The deficit for the 2013-2014 fiscal year is almost $500 billion.
  • Under current fiscal policies the debt will increase to 270% of GDP by 2080.
  • Reasons for our debt problem:
  1. An aging population which means expanded Social Security spending
  2. Healthcare costs are growing for both Medicare and Medicaid
  3. Interest costs will grow rapidly as the economy recovers and interest rates rise
  • All bipartisan reform plans call for both spending cuts and revenue increases.
  • The benefits of taking action are:
  1. Increased budget flexibility
  2. Lower exposure to changes in interest rates
  3. Reduced risk of another financial crisis
  • The longer we wait:
  1. The older our population gets
  2. The higher the debt will rise
  3. The less time we have to phase in changes
  4. The slower our economy will grow
  5. The fewer tools we will have to fix it
  • How do we bring debt under control?
  1. Enact policies that grow the economy
  2. Health care cost containment
  3. Spending cuts
  4. Tax reform and tax expenditure cuts

Let me know if you’d like a speaker on this topic at your club!

How to Shrink the Deficit: Control Entitlement Spending by Fixing Obamacare

Posted on by
Reply

 

Our country faces two major fiscal and economic problems:

  • How to boost the economy in order to put more people back to work.
  • How to either increase tax revenue or better control spending in order to shrink the deficit.

My last post, “The Great Wage Slowdown and How to Fix It” makes a specific tax reform proposal to cut tax rates for all by shrinking tax deductions for the wealthy.  This would put tax savings in the hands of millions of wage earners with stagnant incomes, who would likely spend it, thereby boosting the economy.
CaptureAs the above chart clearly shows, there is only one realistic way to shrink the deficit.  We have to do a better job of controlling entitlement spending (Social Security, Medicare and Medicaid.)  As a practical matter, this means we have to cut back the cost of American healthcare in general, both public and private.
The Manhattan Institute’s Avik Roy has come up with an attractive Plan for doing just this, “Transcending Obamacare.” Mr. Roy’s proposal is to:

  • Repeal the individual mandate. Insurers are encouraged to design policies of high quality tailored to individual need. By lowering the cost of insurance for younger and healthier individuals, the Plan will expand coverage without a mandate.
  • Repeal the employer mandate, thereby offering employers a wider range of options for subsidizing employees insurance.
  • Keep the exchanges to provide broad access as well as subsidies for those with low incomes.
  • Migrate the Medicaid population onto the exchanges.
  • Raise the Medicare eligibility age by 4 months per year indefinitely. Over time this will maintain future retirees on exchange-based or employer sponsored health plans.

By gradually moving the Medicaid and Medicare recipients onto the exchanges, both of these very large populations will receive equal quality coverage to everyone else, delivered in a cost effective manner.  Mr. Roy estimates that the Plan will expand coverage by 12 million above Obamacare levels by 2025 and reduce the deficit by $8 trillion over 30 years.
This is the sort of major healthcare reform which we need to get entitlement spending under control!

Which Nebraska Senate Candidate Is Most Serious about the National Debt?

Posted on by
4

 

“The single biggest threat to our national security is our debt”
Admiral Mike Mullen, former Chairman of the Joint Chiefs of Staff

My last blog, “Why the National Debt Is Such a Threat to the U.S.” observes that our debt is very large by historical standards and will just keep getting worse under current policies now in effect.  This has many severe consequences for the well-being of our country.
What do we do about it?  We have to shrink the size of our annual deficits which are continuing to make the debt bigger and bigger.  The deficit for the 2014-2015 budget year just ended is $483 billion which is 2.8% of GDP.  Since our economy has been growing at a rate of only 2.2% for the past five years, this means that the debt is still growing faster than the economy.  We have to do better than this.
CaptureThe above chart from the Congressional Budget Office shows that the main contributors to the deficit, and therefore also the debt, over the next 20 years, will be entitlements (Social Security, Medicare and Medicaid) and interest payments on the debt.  All other programs, i.e. almost all of traditional federal spending, will decrease as a percentage of GDP.
This means that there are just two basic ways to solve our debt problem: trim entitlement spending and/or increase government revenue.  We’ll need to do both.  Furthermore, it is unrealistic to expect middle-income and lower-income people to pay higher taxes when their wages have been stagnant for many years.  New tax revenue will have to come from the wealthy including upper-income wage earners.  The best way to do this is by cutting back on the annual $1.2 trillion in loopholes and deductions built into the tax code.
CaptureOnly one Senate candidate from Nebraska is willing to both trim entitlement spending and raise additional tax revenue: Jim Jenkins, a registered independent from Calloway.  The Democratic candidate, David Domina, will not support any significant reining in of entitlement spending.  The Republican candidate, Ben Sasse, is too beholden to wealthy contributors to be willing to raise their taxes by cutting back on their tax deductions.
We badly need elected representatives in Washington who will make it their top priority to “fix the debt.”  Jim Jenkins is such a person.  I hope you will vote for him!

Straight Talk about the National Debt

Posted on by
Reply

 

The deficit for fiscal year 2014-2015 just ended is “only” $483 billion, about 2.7% of current GDP, and some observers are saying this means that our deficit and debt problems are now under control and we should stop fretting so much about them.
CaptureThere is a nonpartisan outfit in Washington DC, “Fix the Debt,” which focuses on this very problem and they’re saying not so fast.  In their document, “Common Myths about the Debt,” they debunk several false impressions about the national debt:

  • Myth: Deficit levels are falling and therefore debt is no longer a concern.
  • Fact: Over the next decade our debt is on track to grow about $8 trillion (see above chart). Its growth will accelerate after 2018 and will exceed the size of the entire economy by 2035.
  • Myth: Deficit reduction is just code for austerity which will ultimately hurt the economy.
    Fact: A comprehensive and gradual deficit reduction plan can replace austerity with targeted and pro-growth reforms which promote economic recovery and accelerate long-term wage growth.
  • Myth: Deficit reduction will harm low-income and vulnerable populations.
  • Fact: Every recent bipartisan deficit reduction plan has included progressive reforms that ask more from those who can afford it and protect low-income programs.
  • Myth: The debt can be solved with faster economic growth.
  • Fact: Economic growth must be part of the solution, but it can’t solve the debt problem alone. Productivity growth would have to be 50% higher over the next quarter century just to hold debt to its current record-high levels.
  • Myth: Taxing the wealthy more will solve the debt problem.
  • Fact: Our debt problems are too large, and the top 1% too few, to solve the entire problem by raising taxes on the wealthy.

Conclusion: Our debt problem is so large that it can only be solved by stern measures, such as tax reform, including reducing tax breaks, and also spending reform to slow the growth of entitlement programs. Stay tuned for further discussion of this critical problem!