On July 16th the CBO published a report on The Long-Term Budget Outlook and we review the results here. There is also a more detailed Report by the CBO on the same topic.
The first chart is their presentation of the percent of the GDP which will go to care of the aging and excess growth. This chart is purportedly to provide a basis for changing Social Security and Medicare/Medicaid. By 2079 almost 25% of the GDP will flow in this area.
The following chart details one scenario. It is the Extended Baseline Scenario. They state:
"The “extended-baseline scenario” adheres most closely to current law, following CBO’s 10-year baseline budget projections for the next decade and then extending the baseline concept beyond that 10-year window. The scenario’s assumption of current law implies that many policy adjustments that lawmakers have routinely made in the past will not occur."
The second chart is for the second scenario. This is the Alternative Fiscal Scenario. They define it as:
"The “alternative fiscal scenario” represents one interpretation of what it would mean to continue today’s underlying fiscal policy. This scenario deviates from CBO’s baseline even during the next 10 years because it incorporates some policy changes that are widely expected to occur and that policymakers have regularly made in the past. Different analysts might perceive the underlying intention of current policy differently, however, and other interpretations are possible."
The CBO continues to state:
"Long-term budget projections require a stable economic backdrop. For these projections, CBO assumed that even a large increase in federal debt would not affect economic growth or real rates of interest after the first 10 years..."
"Holding down the spiraling levels of debt projected under either scenario could therefore result in significant economic benefits. However, accomplishing that goal would require some combination of substantial revenue increases and substantial spending decreases relative to current law. Those changes would have their own economic and social costs."
" One policy that would prevent the increase in debt would be to raise revenues in line with the projected rise in spending. As evidenced by the estimated fiscal gap, the required increase in revenues under that approach would be large. If the increase occurred through higher marginal tax rates, incentives to work and save would be reduced and economic growth would slow. "
"An alternative policy would be to hold the growth of spending in line with the growth of the economy. That approach would require significant changes in the Medicare and Medicaid programs. Many experts believe that a substantial share of spending on health care contributes little, if anything, to the overall health of the nation, so changes in government policy have the potential to yield large reductions in federal spending without harming health. However, translating that potential into reality would require tough choices. It would ultimately depend on policymakers’ willingness to put ongoing pressure on the health sector to achieve efficiencies in the delivery of health care."
These recommendations are in effect (i) tax more to pay for the costs, and (ii) don't spend the money because the old will die anyway! I suggest that people who reach Medicare age by 2079 should begin worrying now. I also suggest that Congress understand, as we have documented in one of our White Papers, that the typical American will have contributed 65% more to Medicare than they will ever collect! The same and even more applies to Social Security! The issue is Congress spending the money on programs that was targeted for benefits already paid for.
As the columnist Mr. Krugman states in the NY Times:
"...It’s not just that many Americans don’t understand what President Obama is proposing; many people don’t understand the way American health care works right now. They don’t understand, in particular, that getting the government involved in health care wouldn’t be a radical step: the government is already deeply involved, even in private insurance.... And that government involvement is the only reason our system works at all.... The key thing you need to know about health care is that it depends crucially on insurance..."
The problem Mr Krugman seems to not recognize is that in Medicare the Government collects the money and then spends it elsewhere and when it agrees to pay is slow rolls the payments and sets the fees at excessively low rates. Imagine is Mr Krugman were paid say $0.05 per word as a stringer or perhaps $5 per student per lecture as dictated by the Government and then after mountains of paperwork got only 70% of the bills a year later! Perhaps that is a good idea for we could have the Government control the spiralling costs of college as they do Medicare costs. What is good for the goose is good for the gander!
The first chart is their presentation of the percent of the GDP which will go to care of the aging and excess growth. This chart is purportedly to provide a basis for changing Social Security and Medicare/Medicaid. By 2079 almost 25% of the GDP will flow in this area.
The following chart details one scenario. It is the Extended Baseline Scenario. They state:
"The “extended-baseline scenario” adheres most closely to current law, following CBO’s 10-year baseline budget projections for the next decade and then extending the baseline concept beyond that 10-year window. The scenario’s assumption of current law implies that many policy adjustments that lawmakers have routinely made in the past will not occur."
The second chart is for the second scenario. This is the Alternative Fiscal Scenario. They define it as:
"The “alternative fiscal scenario” represents one interpretation of what it would mean to continue today’s underlying fiscal policy. This scenario deviates from CBO’s baseline even during the next 10 years because it incorporates some policy changes that are widely expected to occur and that policymakers have regularly made in the past. Different analysts might perceive the underlying intention of current policy differently, however, and other interpretations are possible."
The CBO continues to state:
"Long-term budget projections require a stable economic backdrop. For these projections, CBO assumed that even a large increase in federal debt would not affect economic growth or real rates of interest after the first 10 years..."
"Holding down the spiraling levels of debt projected under either scenario could therefore result in significant economic benefits. However, accomplishing that goal would require some combination of substantial revenue increases and substantial spending decreases relative to current law. Those changes would have their own economic and social costs."
" One policy that would prevent the increase in debt would be to raise revenues in line with the projected rise in spending. As evidenced by the estimated fiscal gap, the required increase in revenues under that approach would be large. If the increase occurred through higher marginal tax rates, incentives to work and save would be reduced and economic growth would slow. "
"An alternative policy would be to hold the growth of spending in line with the growth of the economy. That approach would require significant changes in the Medicare and Medicaid programs. Many experts believe that a substantial share of spending on health care contributes little, if anything, to the overall health of the nation, so changes in government policy have the potential to yield large reductions in federal spending without harming health. However, translating that potential into reality would require tough choices. It would ultimately depend on policymakers’ willingness to put ongoing pressure on the health sector to achieve efficiencies in the delivery of health care."
These recommendations are in effect (i) tax more to pay for the costs, and (ii) don't spend the money because the old will die anyway! I suggest that people who reach Medicare age by 2079 should begin worrying now. I also suggest that Congress understand, as we have documented in one of our White Papers, that the typical American will have contributed 65% more to Medicare than they will ever collect! The same and even more applies to Social Security! The issue is Congress spending the money on programs that was targeted for benefits already paid for.
As the columnist Mr. Krugman states in the NY Times:
"...It’s not just that many Americans don’t understand what President Obama is proposing; many people don’t understand the way American health care works right now. They don’t understand, in particular, that getting the government involved in health care wouldn’t be a radical step: the government is already deeply involved, even in private insurance.... And that government involvement is the only reason our system works at all.... The key thing you need to know about health care is that it depends crucially on insurance..."
The problem Mr Krugman seems to not recognize is that in Medicare the Government collects the money and then spends it elsewhere and when it agrees to pay is slow rolls the payments and sets the fees at excessively low rates. Imagine is Mr Krugman were paid say $0.05 per word as a stringer or perhaps $5 per student per lecture as dictated by the Government and then after mountains of paperwork got only 70% of the bills a year later! Perhaps that is a good idea for we could have the Government control the spiralling costs of college as they do Medicare costs. What is good for the goose is good for the gander!
Posts
