Obama to Boehner: “John, I’m Getting Tired of Hearing You Say That”

This was President Obama’s reply, during fiscal cliff negotiations, when House Speaker John Boehner declared, for the umpteenth time, that “ The U.S. has a spending problem.” 

I can understand the president’s irritation. How could anyone believe that we have a “spending problem?’

Look around. Consider the state of our bridges, our roads and our crumbling inner city public schools. Are we spending too much on the nation’s infrastructure?

Next, think about unemployment. During this recovery we have lost 750,000 public sector jobs.  Republicans are intent on “starving the beast” (of government) and as a result Washington has not given states the financial support they need continue delivering public services. Across the nation, public school teachers have been laid off in droves, while class sizes increase at unprecedented rates.  Does this sound like government spending run amuck?

One in five American children now lives in poverty. Seventeen million children find themselves in homes where they can’t be sure of getting enough to eat.  (a.k.a. “food-insecure households.”)  At the end of the month, many kids go to bed hungry because the government Food Stamps program (now known as Supplemental Nutrition Assistance Program, or SNAP)  gives families less than $1.50 per person per meal. Are we being overly generous?

During the past two wars, we sent millions of American men and women to Iraq and Afghanistan –many went back for repeated tours. In some cases, their bodies were not  broken–but their minds were.  Now 1.3 million Vets seeking mental health services are told they must wait of 50 days before getting treatment.   A recent government report suggests that 22 Vets die by suicide every day – about 20 percent of all Americans who kill themselves. Are we spending too much on healthcare for Veterans?

Let me suggest that we don’t have a spending problem. We have a revenue problem. Current federal revenue levels are at their lowest levels since the 1950s. 

                      How Anti-Tax Pledges Have Weakened the Nation

In a recent post, Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities, nailed it: “The tax system doesn’t raise enough revenue.  And that’s not just the recession; it’s also tax policy and anti-tax pledges  . . . The system has become less progressive, with the largest declines in effective tax rates at the top of the income scale.

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Join the debate on “Reining in Medicare Costs without Hurting Seniors”

The January 26 post below (“How to Rein in Medicare costs without Hurting Seniors“) has drawn some 43 comments (including mine, as I responded to readers). I thought of turning a couple of my replies into posts, but then decided it might be more interesting for you to read them in the context of what other readers said.

I would love to see more readers participate in this thread. Comments are still open.

It’s a lively thread that takes on a number of third-rail issues: Does Medicare spend too much on pricey cancer drugs, end-of-life care and brand name hospitals?

 Should we try to spend less on end-of life care? Many say “Yes,” but Zeke Emanuel (a medical ethicist and oncologist who was part of the Obama team during the president’s first term), says “No.” I link to a column where he notes that “It is conventional wisdom that end-of-life care is an increasingly huge proportion of health care spending. . . Wrong. Here are the real numbers: end-of-life care (not just for the elderly, but for all Americans) accounts for just 10% to 12% of  total health care spending. This figure has not changed significantly in decades.”

He goes on to suggest that while we probably can’t make end-of-life “cheaper,” we can make it “better . . .  Here are four things the health care system should do to try to improve care for the dying, even if they won’t save money.”

A number of readers comment on what is driving Medicare spending. Is it “patient expectations,”  “doctors’ fear of litigation,”  “regulations that dictate nurse-staffing ratios,” “practice patterns that doctors learned long ago,” or is the biggest problem “promotional efforts by manufacturers?”

Other questions come up: Does anyone really have any idea how much Medicare will cost in 2022?  By then will Medicare have begun negotiating with drug-makers and device-makers for discounts on drugs (the way the VA does now, saving 40%)?  How far will Medicare go in using medical evidence to decide what to cover?

One doctor/reader points out that in his field Medicare has begun to refuse to pay for procedures when research shows that they are not effective. He and another reader agree that in this way Medicare can provide “political cover” for private sector insurers who will follow Medicare’s lead.

We also discuss the deficit, and whether we should be trying to address the deficit now — or wait until the recession ends and unemployment falls. Also, is the deficit already dissolving as CAP suggests? 

And is the deficit our biggest problem? On this question, you will find links to Paul Krugman, Peter Orszag (who analyzes the slow-down in health care spending over the past three years as a “structural change, not just the result of the recession) and Ezra Klein,

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U.S. Media Loves “Fiscal Cliff” Metaphor; The Economist Recognizes that It’s An Imaginary Line in the Sand

In the U.S., pundits cannot resist the fiscal cliff metaphor: it’s colorful, punchy and easy to understand. It’s just two words long. What’s not to like?

It’s not true.

The metaphor assumes that if Republicans and Democrats fail to reach an agreement on the budget by the end of the year, the U.S. economy falls over a cliff,  crashes, and burns.  The “cliff “metaphor complements the equally imaginative “iceberg metaphor” that some fear-mongers use to portray the deficit. (Think Titanic) 

It’s all a bit more complicated than the metaphors suggest.

What few conservatives mention is that the deficit has already begun to dissolve:  since 2009 the deficit has fallen from 10% of GDP to 7% in the fiscal year that ended on September 30th.  By historic standards this is still enormous, and must be addressed. But  the numbers demonstrate that, over time, we can reduce the deficit without renting the nation’s safety nets.

As for the cliff, there is no precipice—just an imaginary line, drawn in the sand, as Republicans and Democrats play “chicken.”

The Economist understands all of this. The lead story in the most recent issue focuses on the “cliff” and points out that “worries” about what will happen if we go over that precipice are “understandable”  but “overblown.” The “risk of economic catastrophe is minimal.” Any damage would be short-term. 

I don’t always agree with the Economist: the UK publication has its own sometimes eccentric slant on things. But on the whole, it is a thoughtful publication—well-researched and fact-checked.  Moreover, in this case, distance may give the Economist a perspective on the problem that some in the U.S. lack.

                                   Exaggerating the Threat to the Middle-Class      

Yesterday’s New York Times suggests that if we cross that line in the sand, an already beleaguered the middle-class will suffer great hardship, and this “Complicates Democrats’ Stance in Talks.” 

The analysis suggests that Democrats don’t dare just stand back and let Bush’s tax cuts expire– as they will if party leaders don’t reach a settlement by year-end: “Only a small handful of policy voices on the left are making the case for the tax cuts to fully expire. In part, that is because the economy is still growing slowly, and tax increases have the potential to weaken it.” But it is also because “If the two parties fail to come to a deal by Jan. 1, taxes on the average middle-income family would rise about $2,000 over the next year. That would follow a 12-year period in which median inflation-adjusted income dropped 8.9 percent, from $54,932 in 1999 to $50,054 in 2011.”

This assumes that once we miss the January 1 deadline, tax hikes for the middle-class would become permanent—which, of course, is not true. Talk about how much more a family would pay over the course of 2013 falls somewhere between hyperbole and hysteria, ignoring what everyone knows:

If the Bush tax cuts expire, Democrats will presumably simply propose to restore them in January for those [families] earning less than $250,000,” the Economist observes, “daring Republicans to block them.” 
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