House Democrats Choose Dishonesty
I’m not a fan of the House Democrats’ proposed takeover of the health care sector. (If there’s one thing that legislation is not, it’s “reform.”) But at least House Democrats were honest enough to include the cost of the $245 billion bump in Medicare physician payments in their legislation, unlike some committee chairmen I could mention.
Unfortunately, House Democrats have since decided that dishonesty is the better strategy. They, like Senate Democrats, now plan to strip that additional Medicare spending out of health “reform” and enact it separately. (Democrats are already trying to exempt that spending from pay-as-you-go rules, making it easier for them to expand our record federal deficits.) Why enact it separately? Because excising that spending from the “reform” legislation reduces the cost of health “reform”!
But why stop there? Heck, enact all the new spending separately, and the cost of “reform” would plummet! Enact the new Medicaid spending separately, and the cost of “reform” would fall by $438 billion! Do it with the subsidies to private health insurance companies, and the cost of “reform” would plunge by $773 billion! All that would be left of “reform” would be tax increases and Medicare payment cuts. Health “reform” would dramatically reduce federal deficits! Huzzah!
Except it wouldn’t, because at the end of the day Congress would be spending the same amount of money.
The only good news may be this. If this dishonest budget gimmick succeeds, then Congress will have “fixed” Medicare’s physician payments. Absent that “must pass” legislation, the Democrats health care takeover would lose momentum, and would have to stand on its own merit. That would be good for the Republic, though not for the legislation.
(Cross-posted at Politico’s Health Care Arena.)
Filed under: Cato Publications; Health, Welfare & Entitlements
So Much for the Obama Administration’s Fiscal Free Lunch
So far the Obama administration has been enjoying the ultimate fiscal free lunch. Massive borrowing, massive spending, lower taxes, and low interest rates.
Alas, all good things must come to an end.
The nation’s debt clock is ticking faster than ever — and Wall Street is getting worried.
As the Obama administration racks up an unprecedented spending bill for bank bailouts, Detroit rescues, health care overhauls and stimulus plans, the bond market is starting to push up the cost of trillions of dollars in borrowing for the government.
Last week, the yield on 10-year Treasury notes rose to its highest level since November, briefly touching 3.17 percent, a sign that investors are demanding larger returns on the masses of United States debt being issued to finance an economic recovery.
While that is still low by historical standards — it averaged about 5.7 percent in the late 1990s, as deficits turned to surpluses under President Bill Clinton — investors are starting to wonder whether the United States is headed for a new era of rising market interest rates as the government borrows, borrows and borrows some more.
Already, in the first six months of this fiscal year, the federal deficit is running at $956.8 billion, or nearly one seventh of gross domestic product — levels not seen since World War II, according to Wrightson ICAP, a research firm.
Debt held by the public is projected by the Congressional Budget Office to rise from 41 percent of gross domestic product in 2008 to 51 percent in 2009 and to a peak of around 54 percent in 2011 before declining again in the following years. For all of 2009, the administration probably needs to borrow about $2 trillion.
The rising tab has prompted warnings from the Treasury that the Congressionally mandated debt ceiling of $12.1 trillion will most likely be breached in the second half of this year.
Last week, the Treasury Borrowing Advisory Committee, a group of industry officials that advises the Treasury on its financing needs, warned about the consequences of higher deficits at a time when tax revenues were “collapsing” by 14 percent in the first half of the fiscal year.
“Given the outlook for the economy, the cost of restoring a smoothly functioning financial system and the pending entitlement obligations to retiring baby boomers,” a report from the committee said, “the fiscal outlook is one of rapidly increasing debt in the years ahead.”
While the real long-term interest rate will not rise immediately, the committee concluded, “such a fiscal path could force real rates notably higher at some point in the future.”
Alas, this is just the beginning. Three quarters of the spending in the misnamed stimulus bill (it would more accurately be called the “Pork and Social Spending We’ve Been Waiting Years to Foist on the Unsuspecting Public Bill”) occurs next year and beyond, when most economists expect the economy to be growing again. Moreover, much of the so-called stimulus outlays do nothing to actually stimulate the economy, being used for income transfers and the usual social programs.
However, we will be paying for these outlays for years. Even as, the Congressional Budget Office warns, the GDP ultimately shrinks as federal expenditures and borrowing “crowd out” private investment. Indeed, the CBO figures that incomes will suffer a permanent decline–even as taxes are climbing dramatically to pay off all of the debt accumulated by Uncle Sam.
And you don’t want to think about the total bill as Washington bails out (almost $13 trillion worth so far) everyone within reach, “stimulates” (the bill passed earlier this year ran $787 billion) everything within reach, and spends money (Congress approved a budget of $3.5 trillion for next year) within reach. Indeed, according to CBO, the president’s budget envisions increasing the additional collective federal deficit between 2010 and 2019 from $4.4 trillion to $9.3 trillion.) Then there will be more federal spending for wastral government entities, such as the Federal Housing Administration; failing banks, which are being closed at a record rate by the FDIC; pension pay-offs for bankrupt companies, administered by the Pension Benefit Guaranty Corporation; and covering the big tab being up run up by Social Security and Medicare, which currently sport unfunded liabilities of around $100 trillion.
Oh, to be an American taxpayer — and especially a young American taxpayer — who will be paying Uncle Sam’s endless bills for the rest of his or her life!
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