Commentaries

from Rolfe Winkler:

A healthcare failure could save Obama

The rising costs of Medicare and Medicaid threaten to destroy the nation's fiscal future, but President Obama is pushing for healthcare reform that would increase costs. Instead, he should refocus his presidency on paying down debt.

America's obligations over the next 75 years now surpass $62 trillion, up 8 percent since last year. And a new report released today by the Peterson Foundation suggests that total will go even higher if the House's health care legislation is passed.

(Click table to enlarge in new window)

With today's pliant bond market, it's easy to pretend we can have things that can't be paid for. But that's the kind of attitude that led California into the fiscal abyss. We have to get serious about bringing our expenses in line with our income. Now.

Unfortunately Republicans and Democrats alike are more concerned with winning elections than passing good public policy. Republicans told us "deficits don't matter," signed a prescription drug benefit for Medicare that created a bigger fiscal hole than Social Security, waged two very expensive wars financed with debt, and borrowed to bail out banks.

For their part, Democrats complain about the deficit they "inherited," then proceed to expand the bailouts, pass hundreds of billions worth of "stimulus," and try to increase our health care liabilities over and above already unsustainable levels.

Partisan economists on both sides provide intellectual cover for this foolishness, but most Americans know better. They know our spending is unsustainable. They see what's happened to California and know intuitively that government can't deliver services it can't pay for. Not forever.

Debt on autopilot

At first glance this week’s budget projections paint President Obama as a spendthrift. The White House itself offered a grim glimpse of a future in which U.S. debt more than doubles to $17.5 trillion in a decade — an increase of nearly $10 trillion.

Merely servicing the U.S. debt will cost more than America currently spends on either defense or social security.

But the yawning deficit can’t be blamed on Obama — or for that matter, on Bush or on the financial crisis. Instead the government’s finances are locked on autopilot, with entitlement programs driving the country towards a fiscal crisis.

Spending on three giant programs — Social Security, Medicare and Medicaid — will account for three quarters of the extra borrowing over the coming decade. By 2019, it will more than double to $2.5 trillion — more than the U.S. government expects in total tax revenues for next year.

Washington needs to address the deficit soon. To avoid pointless political wrangling, it is first important to make clear what is not causing the fiscal meltdown — including the economic stimulus.

Even if you add in interest payments from the $789 billion recovery bill, the stimulus accounts for only a tenth of the rise in debt up to 2019, according to calculations by Chris Edwards at the Cato Institute.

Three years of weak tax receipts, courtesy of the recession, will cost the country about $1.3 trillion if interest costs are included. This represents just 15 percent of the borrowing binge.

Deficit hypocrisy

There’s something scary about big numbers. It’s one reason we in the media often like to put the biggest number we can find into a headline.

So it was no surprise that most media outlets went gaga over the Obama administration’s projection that the nation’s debt will grow by $9 trillion over the next decade. And sure enough, critics of the administration’s efforts to reform healthcare were quick to seize on that scary number as another reason to advocate doing nothing.

But without wading into the muck of the current debate over healthcare reform, it’s worth taking stock of just how much hypocrisy there is when it comes to the subject of government spending and those big bad deficits.

Let’s start with the Republicans. They talk a good game about reining in federal spending, but they bear as much responsibility as the Democrats for the nation’s $11 trillion in total debt.

It’s sometimes hard to remember that when President Clinton left office in January 2001, the federal budget actually was in surplus. Yet by the time President Bush left town, the federal government was running a nearly a $1 trillion deficit thanks to spending on the wars on Iraq and Afghanistan, the bank bailout and increased spending on prescription drug coverage for Medicare beneficiaries.

But the Republican deficit hawks didn’t really start squawking about government spending until President Obama took office and proposed a $700 billion stimulus package for the ailing economy.

In reality, no political party can claim title to being prudent fiscal managers. All that talk about reducing the deficit often is just a wedge issue that gets used by politicians — both Republican and Democratic — to score points and torpedo legislative proposals they oppose.

from Rolfe Winkler:

Latest Biden gaffe illuminates spending absurdity

Personally, I like Joe Biden's verbal gaffes.  They tend to throw public policy problems into stark relief.  Today, he's reported to have uttered the following at an AARP town hall meeting on health care spending:

“Well, people when I say that look at me and say, ‘What are you talking about? You’re telling me we have to go spend money to keep from going bankrupt?’” Biden said. “The answer is yes, I’m telling you.”

Contrast with the testimony of Congressional Budget Office Director Douglas Elmendorf in front of the Senate Budget Committee today:

“In the [health care] legislation that has been reported, we do not see the sort of fundamental changes that would be necessary to reduce the trajectory of federal health spending by a significant amount....on the contrary, the legislation significantly expands the federal responsibility for health care costs."

I understand the desire to achieve universal health care, especially when it comes to basic coverage.  Surely better preventive care and administrative efficiencies can achieve cost savings.  But, as Elmendorf argues, what's being proposed won't reduce costs.

In the meantime, this week total public debt outstanding increased $65 billion to $11.58 trillion.