Skip to comments.Controlling the Debt Is Gonna Be Painful: Do Americans REALLY want government to control the debt?
Posted on 10/16/2018 6:56:29 AM PDT by SeekAndFind
Entitlement cuts, tax increases, howling seniors: This is our future, whenever we choose to face it.
The Manhattan Institutes Brian Riedl isnt trying to trigger the libs. His new plan to stabilize the debt doesnt gut welfare, doesnt repeal the New Deal — hell, it doesnt even keep tax increases off the table, which practically makes him a lefty pariah in modern GOP circles.
But its still going to alienate just about every elected official across the political spectrum, because it illustrates what it would actually take to get our mushrooming deficits under control. Were talking weaker Social Security benefits, a total overhaul of Medicare, cuts in Medicaid subsidies to the states, and, yes, tax hikes to boot.
Riedl writes that if we dont enact reforms like these soon, we could face a debt crisis down the line. My bet is that our politicians will take the risk.
Heres a chart showing our debt as a percentage of our gross domestic product, as projected currently and under Riedls plan:
The explosion of debt expected under the status quo? Thats because the Baby Boomers have started to retire and are going to cash in their magical Social Security and Medicare tokens over the next few decades. The blue line? Thats the plan to stabilize the debt at 95 percent of GDP, which means cutting it roughly in half from what it would otherwise be 30 years from now. Even then, we would run a deficit every year, but the debt would grow at the same rate as GDP, maintaining a constant ratio. (Spending is stabilized at 23.3 percent of GDP while taxes are stabilized at 20.1 percent.)
No one knows exactly what happens if we simply maintain the status quo instead, but at some point it will certainly become untenable. As the debt accumulates, our interest payments will become more difficult to manage — theyll eat up 40 percent of all our tax revenues in 2048 — and interest rates themselves may rise. Eventually investors will stop lending us money at rates we can afford, and were looking at a debt crisis.
But eventually is a tricky timeframe for consequences when politicians are involved, and the alternative isnt something any congressman would want to run on. Lets take a quick walk through Riedls sensible and fair series of reforms, which reduce the annual deficit (as distinct from the total debt) by 6 percent of GDP:
Social Security spending falls by 1.2 percent of GDP. The retirement age climbs from 67 to 69, reflecting the fact that lifespans have increased. As for benefits, the bottom 40 percent of income earners are held harmless, as are current retirees — but middle- and higher-earning future retirees lose out. For a couple turning 65 in 2030 with median lifetime earnings, Riedl writes, the plans reforms mean approximately $2,500 less in annual benefits adjusted for inflation; the damage for the top 20 percent is $8,600. Riedl points out that these cuts are relative to the current formulas, in which benefits grow faster than inflation, so most people would still be treated at least as well as todays retirees are. But even with that in mind, the top 20 percent see cuts, and the top 10 percent see a significant drop in inflation-adjusted benefits relative to 2018 levels.
Medicare costs fall by 1.5 percent of GDP. This is the biggest cut in the plan, the most sweeping change to an entitlement program, and the reform with the most uncertain benefits. Traditional Medicare (Parts A and B) is replaced with a premium support system in which seniors are given vouchers with which to buy private plans; this would lead to more choices for seniors, no reduction in benefits, and substantial cost savings both for seniors and the federal government. However, the money each senior receives is tied to the average cost of a plan offered by local insurers — no matter how much healthcare costs rise. This means that if competition doesnt succeed in driving down costs, taxpayers won’t save the expected amount of money. (To be fair, it also means that the reform could save more than anticipated.) Oh, and by the way: Seniors premiums will rise by approximately 4% of aggregate senior income, though, as with the Social Security changes, the bottom 40 percent of seniors by income will be protected.
Critics will say the plan ends Medicare as we know it, and theyll be right. So huge political opposition is a sure thing, even though this is the best chance we have for making the program sustainable.
Medicaid, the health-care program for the low-income, is chopped by 0.6 percent of GDP. This program is a ripe target because its utterly dysfunctional — for one thing, it reimburses states a set percentage of whatever amount of money they choose to spend (anywhere from 50 to 76 percent), providing an obvious incentive for states to spend more. Riedls plan addresses this problem through a per capita cap on payments to states. It also kills the special higher rate, currently 94 percent, that applies to Obamacares Medicaid expansion. (As Riedl notes, no rational explanation exists for subsidizing the expansion population — nondisabled, working-age adults — at a higher rate than the traditional Medicaid population, which includes children, the elderly, and the disabled.) These types of changes are obviously anathema to state governments, even if theyre entirely defensible as policy.
Assorted other programs have their growth rates limited, saving another 1.2 percent of GDP. This is a hefty share of the total savings — the same as the Social Security reform — but its hard to say exactly what opposition would arise and whether Congress would really stick to it if enacted.
That still doesnt eliminate the need to raise taxes. So far we have Social Security cuts, a total revamping of Medicare, and Medicaid reforms that will hammer state budgets. But even all that wont let members of Congress keep their pledges not to hike taxes. The payroll taxes for Social Security and Medicare increase by one percentage point each, with a surcharge covering folks who earn above the threshold where the Social Security tax currently maxes out; the tax exclusion for employer-provided health care is also trimmed back. These and some smaller tweaks raise the final 1.5 percent of GDP.
I hope Im wrong, but I dont think these are the kinds of changes politicians will make to stave off a crisis that will arrive at some indeterminate date in the future. And while you can of course change the mix of tax hikes, spending cuts, and cost-saving reforms, it would be hard to decrease the total amount of pain.
The situation will have to become far more dire to force action. And by that point, the required changes will be even more excruciating.
DOA. Any politician who cuts peoples benefits/raises their taxes is going to be looking for another line of work.
This will all happen when pigs can fly.
Once a country heads towards insolvency, war almost becomes inevitable. It’s where America is headed at the moment, if nothing changes.
Does it say anything about cutting payments to people who aren’t citizens? Why do anchor babies get welfare? Why does your auntie from India get Social Security?
Yes, they call it the third-rail for a reason.
We’ll pay for this with printing press Monopoly money.
The rest of the world will go along. They really have no
choice. The alternative is unthinkable.
Does it say anything about cutting payments to people who arent citizens?
We need to stop giving SS checks to people who never paid a dime into the system.
Want to control medica l costs? Get rid of the profit motive and the leeches that feed off of it.
Big medicine rapes us all with a license to steal.
We have given our politicians blank checks and credit cards so they spent them to the limit. They make secret deals to pay off sexual harassment payoffs at our expense. They steal our social security trust fund to the tune of $Trillions. Secret agencies sell drugs to fund covert operations then make corrupt individuals rich.
Lock them up
The answer to that depends on how much socialism they’re willing to give up.
This story is always treated, and will be treated by the political class, as one of those phony “the sky is falling” tales, and most don’t listen to it and many don’t want to listen to it. But it is no fairy tale. We are headed down the road to Venezuela style insolvency and everyone wants to treat our current national finances like a party they refuse to leave, because as long as the party keeps going they feel great.
Our great grandchildren will curse us.
After looking at LBJ’s “accomplishments” I can see which party has caused a lot of our problems:
With these acts President Johnson and Congress wrote a record of hope and opportunity for America.
1. College Facilities
2. Clean Air
3. Vocational Education
4. Indian Vocational Training
5. Manpower Training
1. Inter-American Development Bank
2. Kennedy Cultural Center
3. Tax Reduction
4. Farm Program
5. Pesticide Controls
6. International Development Association
7. Civil Rights Act of 1964
8. Water Resources Research
9. War on Poverty
10. Criminal Justice
12. Food Stamps
13. Housing Act
14. Wilderness Areas
15. Nurse Training
16. Library Services
3. Elementary and Secondary Education
4. Higher Education
5. Bilingual Education
6. Department of Housing and Urban Development
7. Housing Act
8. Voting Rights
9. Immigration Reform Law
10. Older Americans
11. Heart, Cancer, Stroke Program
12. Law Enforcement Assistance
13. Drug Controls
14. Mental Health Facilities
15. Health Professions
16. Medical Libraries
17. Vocational Rehabilitation
18. Anti-Poverty Program
19. Arts and Humanities Foundation
20. Aid to Appalachia
21. Highway Beauty
22. Clean Air
23. Water Pollution Control
24. High Speed Transit
25. Manpower Training
26. Child Health
27. Community Health Services
28. Water Resources Council
29. Water Desalting
30. Juvenile Delinquency Control
31. Arms Control
32. Affirmative Action
1. Child Nutrition
2. Department of Transportation
3. Truth in Packaging
4. Model Cities
5. Rent Supplements
6. Teachers Corps
7. Asian Development Bank
8. Clean Rivers
9. Food for Freedom
10. Child Safety
11. Narcotics Rehabilitation
12. Traffic Safety
13. Highway Safety
14. Mine Safety
15. International Education
16. Bail Reform
17. Auto Safety
18. Tire Safety
19. New GI Bill
20. Minimum Wage Increase
21. Urban Mass Transit
22. Civil Procedure Reform
23. Fish-Wildlife Preservation
24. Water for Peace
25. Anti-Inflation Program
26. Scientific Knowledge Exchange
27. Protection for Savings
28. Freedom of Information
29. Hirshhorn Museum
1. Education Professions
2. Education Act
3. Air Pollution Control
4. Partnership for Health
5. Social Security Increases
6. Age Discrimination
7. Wholesome Meat
8. Flammable Fabrics
9. Urban Research
10. Public Broadcasting
11. Outer Space Treaty
12. Modern D.C. Government
13. Federal Judicial Center
14. Deaf-Blind Center
15. College Work Study
16. Summer Youth Programs
17. Food Stamps
18. Urban Fellowships
19. Safety at Sea Treaty
20. Narcotics Treaty
22. Product Safety Commission
23. Inter-American Bank
1. Fair Housing
2. Indian Bill of Rights
3. Safe Streets
4. Wholesome Poultry
5. Commodity Exchange Rules
6. School Breakfasts
8. Aircraft Noise Abatement
9. New Narcotics Bureau
10. Gas Pipeline Safety
11. Fire Safety
12. Sea Grant Colleges
13. Tax Surcharge
14. Housing Act
15. International Monetary Reform
16. Fair Federal Juries
17. Juvenile Delinquency Prevention
18. Guaranteed Student Loans
19. Health Manpower
20. Gun Controls
21. Aid-to-Handicapped Children
22. Heart, Cancer and Stroke Programs
23. Hazardous Radiation Protection
24. Scenic Rivers
25. Scenic Trails
26. National Water Commission
27. Vocational Education
28. Dangerous Drug Control
29. Military Justice Code
30. Tax Surcharge
The only difference between organized crime and D.C. is one is illegal and has no military and the other ...well
Giving money and power to government is like giving whiskey and car keys to teenage boys.
-P. J. O’Rourke
While were at it, lets take the profit out of big agriculture too. Everyone needs to eat. And transportation. Everyone has to get around in the modern world. And communications. No profit for Apple and Microsoft. Heck, lets nationalize everything.
Wait, are you sure youre posting to the right website?
That and it seems like most pols have a relative that’s getting major subsidies
McCaskill’s hubby, gov contracts(Cheney’s Haliburton), Feistein’s hubby
The pols probably suck a couple trillion a year out of the tax payer’s pocket by them and their relatives getting rich.
All the huge money donations from all kinds of large corporations creates inflation for us through the cost of food, drugs, services & goods.
It’s like a hidden tax. Between that and regulations, it’s probably 10%.
When Trump runs for office in two years we’ll ask him to deal with the deficit, he’ll promise to work on it - and soon the problem will be solved.
That’s the advantage of choosing a man of action over a man of cheap words.
It’s human nature. We defer the pain of right decisions until we are right up against the wall of death.
I guess you are too young to know that until about 1974 and Nixon most medicine was not for profit. Things worked just fine, we were healthy and well cared for and it did not cost one-fifth to 1/4of the economy to do it. Doctors still had more money than most of us so their fortunes and mcmansions would be safe.
You must be in medicine. If one would avoid a conflict of interest one should not have one.
I was born in 1957. Doctors made plenty of profit. If healthcare is a right then somebody is obligated to provide it. Also food, housing, and sex.
The welfare debt must be cut. If you dont work you dont eat...at least with tax payers money. All this talk about everyone having rights without being
willing to provide for yourself is not right.
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