The Krugman Conundrum

Townhall.com ^ | October 4, 2014 | Eric Peters

[Kaslin]

The Congressional Budget Office recently released an update to their 2014-2024 budget projections, sending the Washington Budget wonks into a frenzy. With deficits projected to reach heights not seen since World War Two, the spin doctors have been out in full force trying to turn around recent report. One such man is New York Times columnist Paul Krugman. Armed with a Nobel Prize in New Trade Theory, Mr. Krugman’s opinion column carries extraordinary weight in intellectual circles however his latest on Medicare doesn’t pass the smell test upon closer examination.

Krugman recently wrote of the “Medicare Miracle” about how the growth of Medicare spending had slowed compared to earlier projections. This slowdown he argued shows that entitlement spending and America’s long term fiscal outlook is not as bleak as previously anticipated. The problem with Krugman’s analysis is that it’s incredibly narrow in focus and fails to account for healthcare and mandatory spending as a whole. His rationale took a further hit when CBO announced that tax receipts would be $2 trillion less than expected by 2023 and the Medicare savings he championed just a week ago would be erased five times over.

According to the CBO, spending on major health care programs “will jump by 67 billion (or about 9 percent) in 2014”, this spending is primarily due to costly expansion of Medicaid as well as costly subsidies to for individuals who signed up for Obamacare. Contrary to the opinion of Mr. Krugman, this trend of increased healthcare spending is unlikely to decline anytime in the near future. Overall Health Care Spending is projected to increase from $935 billion in 2014 to $1.7 trillion in 2024. Medicaid spending increased by 15 percent while spending on Obamacare subsidies increased from $1 billion to $17 billion from 2013. While the rate of growth for one program may have slowed, Medicaid and Obamacare spending has certainly picked up the slack at total healthcare spending will increase from 4.9 percent of GDP to 5.9 percent of GDP by 2024. By telling only one third of the overall spending on health care one could be forgiven thinking that Mr. Krugman is simply peddling talking points for ideological reasons.

More worrisome than simply healthcare spending however, is the amount that mandatory spending will eat up in the coming decade. Mandatory spending from the major health care programs and social security and interest paid on Americas debt will consume over 85 percent of the total budget over the next decade. This leaves a paltry 15 percent for all the other essential functions of government that many Americans rely upon. Furthermore this increase in mandatory spending will drive America even further into debt. By the end of the CBO projection window government debt held by the public will eclipse $20 trillion and account for nearly 77 percent of America’s GDP. This is a shocking increase as recently as 2007 debt held by the public was only 35%.

While Mr. Krugman and his fellow tax and spend progressives would have you believe things are looking up for America’s fiscal health, the truth is far less rosy. Instead of laying out the facts of the full report, Krugman instead opted for a convenient op-ed headline to please his devoted readership, no doubt. Perhaps next time Mr. Krugman will read the entire CBO report instead of cherry picking the facts to help his case.

[oh8eleven]

the growth of Medicare spending had slowed compared to earlier projections.
Well, that may be because the projections are just wrong, or because the majority of the WWII generation has passed, while the baby boomers are just starting to use Medicare.

[txrefugee]

We all knew that Obama raided the Medicare for seniors to the tune of $800 billion to keep the cost of ObamaCare below a trillion dollars when the CBO was scoring the bill. It has the added bonus of getting rid of the elderly, the most expensive cohort in medical spending. Krugman must think that seniors don’t remember how those “savings” in Medicare came about....but we haven’t and will do our best to vote every Democrat senator out of office.

[Soul of the South]

All of this involves future projections of spending, none of it is real. Remember Obama and the Democrats took money out of future Medicare spending and reallocated it to Obamacare in order to make the Obamacare numbers work. This accounting trick doesn’t mean the spending won’t occur, it just means it isn’t built into the projections.

What the author doesn’t say is Krugman, Obama, and the progressive intellectuals don’t believe these projections because the projections don’t model their real plan. Within five years their plan is for all US healthcare to be on the British and Canadian single payer model. Once the government is completely in contral of the health care system they believe they can control costs by limiting services to selected groups (elderly for example), steering research dollars, reducing compensation for physicians, and closing unnecessary facilities. From a revenue perspective they’ll be able to fund the system through premiums. If there isn’t enough money, they’ll just raise premiums on affluent individuals. The HHS bureaucrats will be able to do this without a vote of Congress.

If the Republicans win both houses of Congress in 2014, even if they try to accomplish something (doubtful with Boehner and McConnell as leaders), the Democrats and the press will spend the next two years blaming the Republican Congress for every ill in the country. Obama will certainly use his veto to obstruct anything that might restrict him. In 2016, the Republicans will be on the defensive in the election because they’ll have a record of doing nothing. Also, the construct of the Senate races in 2016 mean the GOP will have more vulnerable Senate seats in play than the Dems. If the Republicans run Jeb Bush, Mitt Romney, or Chris Christie for President in 2016, with the same weak campaign strategy they’ve employed in 2008, 2012, and 2014, we will have a President Clinton or Warren elected with Democrat majorities in both houses of Congress. Under that scenario, a single payer system will be passed and signed into law to “fix” the healthcare system. Krugman fully understands this is the plan.

[D Rider]

Krugman may be the most consistenly wrong person in American history. He is at least a top contender. This is probably due to the fact that his being wrong in his chosen field does not result in his death. It was a good life choice that he did not become a machine operator.

[oh8eleven]

Remember Obama and the Democrats took money out of future Medicare spending and reallocated it to Obamacare in order to make the Obamacare numbers work.
Believe me, I know. I've been on a Medicare Advantage plan for two years and just received notice of another premium increase (for 2015) plus incredible increases for co-pays, out-of-pocket maximum, ER coverage, in-hospital stays, etc.
Another year or two and the Advantage programs will be on par with the Medicare Supplemental plans.

[oh8eleven]

This is probably due to the fact that his being wrong in his chosen field does not result in his death.
He's the kind of guy who would never get injured/killed in combat, but would cause someone else's demise.

[ripley]

“...do our best to vote every Democrat senator out of office...”

...and Progressives will do everything in their power to prevent that, with voter fraud at the tip of the spear.

IMHO

[D Rider]

He's the kind of guy who would never get injured/killed in combat, but would cause someone else's demise.

True, but he is also the kind of guy that would misinterpret the meaning of the minefield signs and walk right out into it. Again, he made a good life choice by not becoming a soldier.

[Tallguy]

I would describe Paul Krugman as an “intellectual fraud”. Professor Irwin Corey, only he isn’t funny.

[D Rider]

I believe he commits intellectual fraud on himself, as he comfortably insulates himself in his ivory tower. Think about the choices he really has to make. He can take the stairs or take the elevator to get to his office, he can write his next article on a notepad and give it to his secretary to type, or he can type it himself into his computer. Nothing he does has any direct impact on his own life or those directly around him. Now imagine a person like that, so detached from reality, operating heavy equipment. (Bad visual) Like many in the ivory tower, he lives a life of no consequences. (Take note: the organic chemistry labs are more than halfway across campus. That's the place where mistakes go boom.)