The Dirty Four Letter Word That's Killing Us

It's a dirty four letter word. M-A-T-H. On a federal level, it's killing us.

Did you know that social security is running at a deficit this year, for the first time in a quarter century? According to Senate Majority Leader Harry Reid, that wasn't supposed to happen for another fifty years. Oh well. That's what 2.7 million new claims and a deepening recession will do. Instead of borrowing from social security, as we've been doing for years, we will now have to use general revenues just to keep it afloat.

That's a problem, but it pales in comparison to Medicare, where the deficit is a whopping $36.3 trillion, give or take a trillion.

When pols speak about our national debt, they conveniently ignore the cost of Medicare and social security, resulting in a an artificially low figure of somewhere around $13.5 trillion, although Obama's latest budget will add between $8.5 and $9.7 trillion to even that figure over the next ten years. When you add everything together, the real national debt, right now, is close to a $56.4 trillion sinkhole.

David Walker, who served as Comptroller General and headed the nonpartisan GAO under both Presidents Clinton and Bush, has a sobering assessment, along with some suggestions. Here are some excerpts from one of his recent speeches.

First and foremost, our nation's financial condition is worse than advertised and it's deteriorating with each passing day. We face a $60 plus trillion dollar financial sinkhole that is growing rapidly.
From a cultural perspective, it's pretty clear that beginning within the past 2-3 decades, America and many Americans became addicted to current consumption and debt. In addition, many public officials have come to accept deficits as a normal and acceptable thing. Fortunately, Americans are waking up and changing their ways but Washington hasn't seen the light yet.

[U]nlike at the end of World War II when we financed our own national debt, America's mortgage is increasingly being held by foreign lenders. This dangerous dependency is not in our longer-term economic, foreign policy, national security or domestic tranquility interests.

To put our nation of a more prudent and sustainable path, we must take a number of policy related actions. For example, we need to re-impose tough statutory budget controls, tougher than the ones that existed from 1990-2002. These budget controls should take effect after we turn the corner on the economy and make progress on unemployment. We should also seek to stabilize the amount of the nation's debt as a percentage of the economy.

We need to take steps to make Social Security more solvent, sustainable, secure and more savings oriented. This includes taking such steps as strengthening the benefit levels for the near poor, making the benefit structure more progressive (e.g., progressive wage indexing), encouraging people to work longer, raising the taxable wage base cap, and implementing a supplemental, automatic and payroll deduction based savings account.

With regard to Medicare, we need to separate the issue of eligibility for participation from the amount of taxpayer subsidies one might be eligible for under Medicare’s voluntary programs (i.e., Parts B and D). The truth is, the federal government has over promised in many areas, including Medicare.

For example, individuals making well into six figure annual incomes should not receive taxpayer subsidies for their decision to voluntarily enrolls in Medicare's Part B (i.e., physician and outpatient) and D (i.e., prescription drugs) programs. They do under current law.

From a broader perspective, we must take steps to achieve real and comprehensive health care reform in installments and over time. These health care reform efforts should focus on four key dimensions: cost, coverage, quality, and personal responsibility. While, in my view, we need to achieve some level of universal coverage, that level of coverage must be appropriate, affordable and sustainable. However, in my view, we should focus on reducing and controlling costs first and foremost. After all, if there is one thing that could bankrupt America, it's out of control health care costs.

To do so, we must, among other things, pursue setting a budget for federal health care costs, move away from fee-for-service payment systems, and better target health care tax preferences for employer paid health care and taxpayer subsidies applicable Medicare's voluntary programs.

With regard to the current health care reform effort, in order for any health care reform legislation to be considered fiscally responsible, it should meet four key tests based on reasonable and realistic assumptions. First, it should pay for itself over 10 years. Second, it should not add to deficits beyond 10 years. Third, it should result in a significant reduction in the tens of trillions of unfunded health care promises that we already have. Finally, it should result in total health care costs as a percentage of the economy that are lower than the status quo.

The current health reform bills in the Congress do not meet all four of these tests. In fact, the ones that it does meet are based on questionable assumptions and the CBO has noted a number of related concerns and qualifications in connection with its cost estimates that the proponents of reform conveniently fail to note. Furthermore, some of the proposed Medicare revenues and cost reductions will be used to fund additional health care coverage rather than to enhance the government’s capacity to deliver on the Medicare promises that it has already made.

One thing is for sure, taxes are going up over time on a lot more people than those who make $250,000 or more. Why? Because of a very simple and yet increasingly troubling four letter word in Washington. And that word is - MATH!

Update: Within minutes of posting this entry, one of my astute readers gave me a -1 for plagiarizing from Terri Gross' Fresh Air. Yesterday's broadcast is, in fact, the inspiration for this thread. Although I spent most of the night independedntly researching and writing this blog, I should have noted that source. In fact, the link to that broadcast is much more detailed than this thread, and includes an excerpt of Walker's most recent book.