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Obama is right - the current deficit is unsustainable
http://www.bloomberg.com/apps/news?pid=20601087&sid=abXWfVxx_e8w&refer=home
Obama is right that the current debt load is unsustainable - so why is he proposing a $2 trillion deficit which will stay in the trillions for as long as one can project?
How will he pay for it? Even getting rid of the Bush tax cuts will only produce a few hundred billion a year, which isn't nearly enough. They project much lower medical costs because they assume they are going to figure out a way to cut costs and make things more efficient. I guess no one has tried that before.
The only way to really cut costs is to ration health care, especially health care in the last year of life, which I've seen estimated as 30% of health-care expenses. That will be a tough choice but I don't see what other choice Obama has.
You cannot propose massive spending without either creating crushing debt that the markets will simply not allow, pushing interest rates much higher and really slowing growth and hurting the economy. You cannot increase the debt-to-GDP ratio without limit.
We found the limit on personal and corporate debt this year. We pushed the limits until the system crashed. And now the government wants to do the same thing. They are planning to see where the limits on government debt-to-GDP will be. Unless cooler heads prevail, this is not going to be pretty. Somewhere in the middle of the next decade we will hit the wall, and it will make the current crisis pale in comparison.
The only way to solve the problem is to grow GDP more rapidly than debt, and for that to happen you have to have policies that are shaped for the growth of the economy or massive savings by consumers. And right now we have neither. Cap and trade is hugely anti-growth. So are higher corporate tax rates that will be created by closing loopholes for income earned outside the US. Much better would be to lower the overall corporate level to a competitive world rate and then require the offshore income to be taxed.
Obama is right that the current situation is unsustainable. Let's hope he will do more than just talk and show some budget restraint.
Obama is right that the current debt load is unsustainable - so why is he proposing a $2 trillion deficit which will stay in the trillions for as long as one can project?
How will he pay for it? Even getting rid of the Bush tax cuts will only produce a few hundred billion a year, which isn't nearly enough. They project much lower medical costs because they assume they are going to figure out a way to cut costs and make things more efficient. I guess no one has tried that before.
The only way to really cut costs is to ration health care, especially health care in the last year of life, which I've seen estimated as 30% of health-care expenses. That will be a tough choice but I don't see what other choice Obama has.
You cannot propose massive spending without either creating crushing debt that the markets will simply not allow, pushing interest rates much higher and really slowing growth and hurting the economy. You cannot increase the debt-to-GDP ratio without limit.
We found the limit on personal and corporate debt this year. We pushed the limits until the system crashed. And now the government wants to do the same thing. They are planning to see where the limits on government debt-to-GDP will be. Unless cooler heads prevail, this is not going to be pretty. Somewhere in the middle of the next decade we will hit the wall, and it will make the current crisis pale in comparison.
The only way to solve the problem is to grow GDP more rapidly than debt, and for that to happen you have to have policies that are shaped for the growth of the economy or massive savings by consumers. And right now we have neither. Cap and trade is hugely anti-growth. So are higher corporate tax rates that will be created by closing loopholes for income earned outside the US. Much better would be to lower the overall corporate level to a competitive world rate and then require the offshore income to be taxed.
Obama is right that the current situation is unsustainable. Let's hope he will do more than just talk and show some budget restraint.
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He already did. He saved $17 billion out of several trillion by shifting money around.
May 16, 2009 10:52 AM | Reply | Permalink
Assuming 30 percent is accurate, how much of this expense is paid by the government?
Instead of tackling thorny ethical issues first, why not start with defense?
May 16, 2009 5:20 PM | Reply | Permalink
How much of the 30% is paid by the government - well if the government starts down the path of nationalizing healthcare then it will be paying for a lot of this expense.
As a % of GDP, our defense budget has hovered around 5% for the last 30 or so years. So I'm not too fussed with the need to cut defense. Healthcare spending is growing much more significantly than defense spending.
May 16, 2009 5:46 PM | Reply | Permalink
I believe 50% has been published. Whether paid by Medicare or not isn't quite relevant here, but Medicare generally applies to those over 65 whether they have extra coverage or self-pay for luxuries as well.
I agree that "defense" is huge.
May 16, 2009 5:55 PM | Reply | Permalink
"why is he proposing a $2 trillion deficit which will stay in the trillions for as long as one can project?"
My understanding is that it is supposed to come down to around $500B in a few years. What data are you looking at?
The current deficit is largely necessary as a one-time response to the problems accumulated over the prior 8 years.
Cutting health care waste is a legit avenue of exploration. Defining "waste" could be useful. If you redefine waste to include a large portion of "end of life spending" then you have a legit point but you are subject to a number of legit attacks, too.
"The only way to solve the problem is to grow GDP more rapidly than debt"
Not necessarily, and you need to be clear about private vs. public debt.
Cap/trade is designed to promote growth in non-carbon energy production. Of course it is anti-growth for carbon...
Closing tax loopholes does not reduce GDP.
May 16, 2009 6:03 PM | Reply | Permalink
I will continue my policy of not bothering to respond to your points.
May 16, 2009 6:13 PM | Reply | Permalink
It's your life. I'm not your conservator nor your mortal keeper. Silence is an option. My comments usually stand on their own.
May 17, 2009 4:30 AM | Reply | Permalink
I do not try to debate points with people who just tell me that I am ignorant. It's not very open-minded
May 17, 2009 8:33 AM | Reply | Permalink
You're right that it is not very open-minded of you. But it's your life, again.
I'm willing to go further than you are, I will debate or discuss the evidence and theories etc. relevant to a topical (or even meta-topical) point even with the ignorant at least to some extent. Sometimes I'm ignorant, too.
I do draw the line somewhere and I very seldom if ever just tell people they are ignorant, so I guess either you're the rare exception (but you haven't evidenced what you allege of me) or you're not talking about me or my styles here while pretending to say something relevant.
It's an open forum. Other people might read my comments even if the OP poster doesn't respond.
May 17, 2009 12:48 PM | Reply | Permalink
I hope they do. Just don't expect to get comments from me. Have fun calling other people ignorant and illogical
May 17, 2009 12:57 PM | Reply | Permalink
"Just don't expect to get comments from me."
I had thought that was settled long ago, but here you are commenting on my comments, so there's yet hope!
"Have fun calling other people ignorant and illogical"
I probably won't.
May 17, 2009 1:26 PM | Reply | Permalink
You probably won't have fun or you won't call them ignorant?
I am not commenting on your comments - that would be responding to the points on closing tax loopholes, etc, which I will not do because it is a waste of my breath.
May 17, 2009 1:53 PM | Reply | Permalink
How does it matter?
No reason to comment on a comment which nails a point.
May 17, 2009 10:30 PM | Reply | Permalink
Have a nice life.
May 18, 2009 6:07 AM | Reply | Permalink