The Right Opinion

Denial

By John C. Goodman · Feb. 10, 2013

There was a time, not long ago, when both Republicans and Democrats agreed that something had to be done about entitlement spending – especially spending on the elderly. But no longer.

Although he promised in his first run for the presidency to reform Social Security, Medicare and Medicaid, Barack Obama seems increasingly unwilling to do any of that now.

• The leftwing of the Democratic Party seems increasingly shrill in its insistence that there is no need for any fundamental reform of entitlement spending.

• Even in the left-of-center think tanks and on the liberal blogs, one finds increasing denial that any fundamental change is needed.

This last development is especially disappointing. Tyler Cowen writes:

I see the current American Left as rapidly losing what it once knew about the need for entitlement reform. This is a shame, it does not augur well for our fiscal future, and it remains an under-reported story. I see it happening right under my nose, day by day, article by article, blog post by blog post.

Our budget problem should not be a mystery. Basically, spending on government entitlement programs has been growing at almost twice the rate of growth of our national income for the past 40 years. Health care entitlements have been growing more than twice that fast. Entitlement spending is already more than half of the federal budget and soon it will be more than half of all government spending – including state and local governments.

You don't need to be an economist or a mathematician to know that if the cost of something you are buying is growing at twice the rate of growth of your income, you are going to be facing deficits that will get larger and larger through time.

When he was head of the Congressional Budget Office, one-time Obama adviser Peter Orszag estimated what tax revenues would be needed to stay on the spending course we are on. The projection: By mid-century, the average family will have to fork over two-thirds of its income to the federal government and upper-income families will have to surrender more than 90 percent!

And that was before the passage of Obama Care, which creates a new, massive entitlement for people under 65 years of age. Right now, the real cost of Obama Care is not showing up in official projections because of two budget gimmicks. The law assumes that Obama Care entitlements will be paid for by (1) slowing the rate of growth of Medicare to the growth of the economy as a whole and (2) slowing the growth of federal subsidies for the insurance everyone will be required to buy to the growth of the economy as a whole, even though health care costs will be growing at twice that rate.

The first assumption will crumble as soon as seniors discover doctors won't see them and hospitals won't admit them and they decide to march on Washington as a result. (See the Medicare Actuaries report.) The second assumption will crumble as soon as everyone else discovers they have been hoodwinked and joins the seniors in their public outrage.

The problem of entitlement spending deficits, by the way, is not something in the distant future. Don't be misled by “trust funds” that are holding nothing more than IOUs that the government has written to itself. All our entitlement programs are run on a pay-as-you-go basis. Every dollar of payroll tax revenue is spent the very minute, the very second, the very day it comes in the door. And here is the bottom line: we are spending more than we are taking in right now. That is, we are experiencing a cash flow deficit that is growing larger and larger through time.

On the present course, we will need one out of every four general revenue dollars at the federal level to cover the cash flow deficits in Social Security and Medicare by 2020. We will need one in every two by 2030. To balance the budget without raising taxes, the government will need to stop doing about one in four other things it is currently doing in seven years. It will have to stop doing one of every two things it is currently doing in 17 years.

Nate Silver summarizes the state we are in this way:

We may have gone from conceiving of government as an entity that builds roads, dams and airports, provides shared services like schooling, policing and national parks, and wages wars, into the world's largest insurance broker.

Most of us don't much care for our insurance broker.

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7 Comments

Adrien Nash in Crescent City said:

Fundamental transformation is coming for sure, but it won't be in the form that socialists like Obama had hoped for. There won't be a federal civilian police force that Obama can order around like Hitler's Brown Shirts, instead there will likely be a greatly reduced military force since there won't be enough dollars to fund the vast sprawl of American bases across the country and around the world. American forces still stationed in Japan, Germany, and Korea? That is only justified by the fear that they might someday be needed, while it will become inescapably clear the a very real and pressing danger is the one at home due to spending that can't be sustained and debts that can't be paid. Something will have to give, and no doubt the money funnel toward the hypothetical military threat will finally be the expense seen as sacrificeable, while entitlement spending will be seen as sacrosanct, -though perhaps not at its current wasteful and corrupt levels..

Sunday, February 10, 2013 at 12:33 AM

Tod the tool guy in brooklyn ny said:

The evil spider web of SOCIALISM, is being spun around the NATIONS, by deception, pagan false prophets, and Fred Engels supporters! Lafcadio Hearn was a true prophet, who predicted what is Koming, back in 1904! What wisdom! What vision!

Sunday, February 10, 2013 at 6:46 AM

Wayne in Hinesville, GA said:

I hope the sequeatration takes place even though it will hit me personnaly. Just maybe when the checks don't show up those seniors who supported AARP's campaign for Obama care will finally realize what a Communist POS he is. When the active duty military, military retirees, VA compensation recepients don't get paid I hope that all hell breaks loose and just maybe it might open the eyes of some of the idiots in all three areas who voted for Odumbo. Something has to occur to convince the average American that we are going down the wrong road. I don't count welfare queens, blacks on the Demoratic plantation, a large number of Hispanics, or illegal aliens among the average American's.

Sunday, February 10, 2013 at 8:57 AM

G Dub45 in Lee's Summit, MO said:

I grow ever tired of hearing that Social Security is still lumped in with Entitlement Programs.
Sorry Charlie, ever since I was a lad a portion of my wages, salaries and commissions have been extracted by the Federal Government to be held for me in the Social Security Fund. That is, until the second great usurper, Lyndon Johnson, stole those funds and gave me a Federal Government IOU ( read as a worthless piece of non-paper paper ).
Now the 3rd Usurper, the Grand Trickster - Soreto - is trying to convince everyone that that never happened.
The way I see it, Soreto has committed upwards of 15,000 Impeachable acts. When will someone in the House grow a pair of balls or ovaries and file Articles of Impeachment on him, Holder and Soreto's entire cabal?
HE NEEDS TO BE REMOVED.

Sunday, February 10, 2013 at 9:53 AM

richard ryan in Lamar,Missouri replied:

I`m with you G Dub. It pisses me off when someone refers to SS as a government entitlement. I and my employer paid for my SS over a 46 year span, and it was taken pretty much at the point of a gun. If that money had been prudently invested at even a three percent return, I would be drawing something over $3,600.00 a month instead of $1,200.00 per month and there would be enough to do so until the age of about 97. The hardworking American has been subject to grand theft on a grand scale by his own government.

Monday, February 11, 2013 at 12:25 AM

Wayne in Hinesville, GA replied:

The first rip-off occured when FDR borrowed 2 million from the Trust Fund in 1937 just two years after it was started. It's been going on ever since.

Monday, February 11, 2013 at 1:42 AM

veritaseequitas in Fightertown, USA said:

"Although he promised in his first run for the presidency to reform Social Security, Medicare and Medicaid, Barack Obama seems increasingly unwilling to do any of that now."

King Craptastic never intended to reform any of the social programs. His aim has always been to grow government, to tax, tax, tax, whoever he needs to in order to keep the socialist dream going, and cut military spending for the rest of it.
Let us not forget that the con man who sits in the Oval Office thinks America is too big for her britches and he believes it is his mandate to bring her to her knees.
He is doing the bidding of his current masters, and paying tribute to his America hating fathers - Barack Obama, Sr., and Frank Marshall Davis.

Sunday, February 10, 2013 at 10:13 AM