Hasn't gotten any better since 2003 ....
http://reason.com/archives/2003/12/29/ride-the-death-spiral
"Ride the Death Spiral
Vicious cycles in entitlement spending
Julian Sanchez | December 29, 2003
The Long-Term Budget Outlook, released last week merely puts the Congressional Budget Office's imprimatur on what taxpayers under the age of 40 have known for years: We're fucked.
The CBO's projections indicate that our current spending policies will become unsustainable over the next half century. We face a choice between unprecedented rates of taxation, steep (and politically unpalatable) cuts in government benefits, or simply racking up debt until we've crippled the economy while nevertheless requiring some combination of tax hikes and benefit cuts. The last, most insane option is also the most politically probable.
The source of the problem has been long familiar to policy wonks. The American population is aging (and longer lived), while technological developments drive up health costs even as they extend our lives. The pending mass retirement of the Baby Boom generation threatens to make entitlement spending explode like Tetsuo turning into the amoeba-monster.
As CBO Director Douglas Holtz-Eakin told the audience at a New America Foundation event [Real], that means that public policy "auto-pilot is not an option". But there are obstacles to grabbing the throttle.
One is that there are plenty of interest groups eager to peddle the comforting message that nothing is wrong to a populace squeamish about tough choices. The AARP's John Gist is representative of attempts to persuade us that there's no need to fear those beloved entitlement programs. Gist soothingly coos: "Entitlements overall have grown at virtually the same rate (2.6% per year) as inflation-adjusted GDP (2.57%) since 1975, and only two-thirds as fast as income tax revenues (3.84%)." Strictly speaking, this is true, but it's nevertheless grossly misleading.
In 1967, the first year for which the CBO lists numbers for each program, Medicare, Medicaid, and Social Security together accounted for just under half of all federal entitlement spending, which stood at 6.3 percent of GDP. In 1975, the baseline year chosen by the Gist, total entitlement spending had jumped to 10.9 percent of GDP, but the proportions were about the same. The three programs accounted for a quarter of federal outlays. The same three programs are now up to 71.5 percent of federal entitlement spending, and about 42 percent of total spending. Gist's claim is true because he lumps in those burgeoning programs with other entitlements, such as farm price supports, whose slice of the total economic pie has shrunk. Even leaving that aside, Gist relies on ham handed extrapolations of the sort that prove if you haven't died over the past 25 years, you're immortal.
A 1997 poll conducted by The Washington Post, Harvard University, and the Kaiser Family Foundation found that, by large margins, citizens oppose cutting entitlements to balance the budget. As the Post put it, "more than three-quarters of Americans believe the federal budget can be balanced without touching Social Security and Medicare benefits-despite claims to the contrary by congressional budget experts." The experts are right in this case, of course, but economists lack both the AARP's lobbying heft and the public's seemingly unshakable popular faith in fiscal miracles.
At a November Democratic primary debate in Iowa, John Kerry, backed by Dick Gephardt, developed a full-sentence stutter, asking rival Howard Dean over and over again whether he would dare to "slow the rate of growth of Medicare." Dean hedged a bit, then replied: "We will not cut Medicare in order to balance the budget." This leaves the governor a bit of fudge space, depending on whether one counts a decrease in a program's growth rate as a "cut" (reform opponents typically do), but the need to leave that fudge space suggests that reports of the death of the "third rail" in American politics have been exaggerated.
A recent ABC News poll showed mixed reactions to the new Medicare prescription drug benefits, with 32 percent supporting the reform and 38 percent opposed. You might think that's because, as Reason's Jacob Sullum has persuasively argued, the new bill is massively, irresponsibly costly.
But that seems unlikely, as indicated by the higher opposition to the reform among seniors who, unless seized by a sudden pang of guilt for the hole into which they're tossing their grandchildren, have the most reason to favor more "generous" benefits. It seems, that is, that people oppose the bill because it's not irresponsible enough. That squares with a Harris Poll conducted before the passage of Medicare reform this summer, in which 21 percent of respondents favored passing "current proposals even if the benefits will still leave many seniors with big out-of-pocket costs," while 52 percent wanted legislators to "oppose this bill and fight for a more generous benefit, even if it is unlikely to pass any time soon"
What about the tax end, then? The CBO's "rosier" scenarios assume that the current Alternative Minimum Tax remains unchanged. The AMT, which now accounts for only 2 percent of individual income tax liability, would acount for 20 percent by 2050. During the same period, because the tax isn't inflation indexed, it would begin creeping down the income brackets: Whereas some 2 percent of U.S. households are currently subject to the AMT, it would affect 70 percent by 2050, yielding a de facto tax hike. Federal tax receipts eventually rise to almost 25 percent of GDP under this scenario.
Economist John Maynard Keynes once quipped, in response to critiques of the long-term effects of his policies, that "in the long run we are all dead." In the context of entitlement programs for the elderly, that puts a particularly sinister spin on the phenomenon Milton Friedman called " the tyranny of the status quo." New benefits may be debated when first introduced, but for both psychological and political reasons, become near impossible to eliminate once in place. But the same is true, to a lesser extent, when taxes are at issue. The prospect of a 9 percentage point rise in federal tax reciepts is also unlikely to be popular. But thanks to the corporate fictions we call "countries," politicians can dodge the bullet-for a while-via rising debt. Of course, this only makes matters worse. As the CBO report observed, "The longer that lawmakers delay acting to counter an unsustainable budgetary situation, the larger the spending cuts or tax increases will eventually have to be."
And there's the rub. The more dire the long term problem grows, the greater the cost, and the political resistance, of doing something to fix it now. So, for instance, debate over private account reforms for Social Security stalls on the size of "transition costs," which are much less than the cost of not reforming, but must be borne in the present. The question now is whether we've passed the point of no return: Whether the near-term pain required to fix things will continue to multiply with the long-term cost of inaction at a rate that keeps us locked on course. Perhaps, sometime soon, citizens will be struck with the spirit of civic and intergenerational responsibility, bite the bullet and clean up the mess their predecessors made. Or perhaps, if we're lucky, the scam will last long enough for us to pass the bill on to our kids."
Friday, April 16, 2010
Thursday, April 15, 2010
Choosing, Owing and Liberty
"She Chose http://www.cafehayek.com/
Posted: 06 Feb 2010 10:58 AM PST
Thanks to Andrew Garland for this link <http://justoneminute.typepad.com/main/2010/02/eulogy-to-the-unknown-campaign-volunteer.htmlhttp://justoneminute.typepad.com/main/2010/02/eulogy-to-the-unknown-campaign-volunteer.html> , which provides details about Melanie Shouse, the St. Louis woman who once worked for the Obama campaign and who died last week of breast cancer.
Contrary to the implication that I drew in my previous post <http://cafehayek.com/2010/02/perhaps-he-gave-her-a-free-t-shirt.html> , Mr. Obama did not know Ms. Shouse, so I was off-base to suggest that perhaps he should have personally paid for her medical care. Ms. Shouse should have paid for it.
All the available evidence suggests that she could have afforded to do so. First, - and contrary to what Mr. Obama said - Ms. Shouse did have health-insurance. It was a catastrophic-coverage policy. That is, annually her insurance paid nothing until her medical expenses hit $5,000. So the most that she could have been out of pocket each year is $5,000. That's not a small sum of money, but nor is it a sum out of reach for most Americans. Second, Ms. Shouse and her boyfriend, for 12 years, owned their own small business. I have no idea how profitable it was, or is, but because they'd been in business for 12 years I infer that it did not leave them anywhere close to destitution.
Ms. Shouse also found time to volunteer to work for Mr. Obama's presidential campaign. This is time that she could have instead spent working at a job that paid her extra income. But, as reported, she chose to contribute, free of charge, some of her time to a political campaign. It's quite possible that the value of the hours that Ms. Shouse contributed to Mr. Obama's campaign exceeded the cost she would have incurred had she gone to the MD when she discovered a lump in her breast.
Third, Ms. Shouse knew that she had a lump in her breast and she knew that such a thing put her life in severe jeopardy. Yet she chose not to spend up to a maximum of $5,000 annually (and likely less) to check this malady out with a physician. Yes, she excused her failure to see a physician because, allegedly, she couldn't afford it - that is, allegedly she couldn't afford to pay up to $5,000 annually to save her life!
Her allegation is not believable. Again, there's no evidence that she was destitute. She was wealthy enough to donate that most valuable of commodities - time - to a political campaign. And her total, out-of-pocket annual expenses had she chosen to visit a physician when she discovered the lump in her breast would likely have been far lower than $5,000 <http://cafehayek.com/2009/07/health-care-lies.html> .
Fourth, she chose to buy a catastrophic-coverage policy, probably because the higher costs of policies with lower deductibles were not worthwhile for her to pay. Given her choice, surely she and her boyfriend knew - or ought to have known - that each year there is a good chance that one or the other or both of them will require routine (that is, non-catastrophic) medical care. Could they not have saved a small sum of money each year to cover this obvious likelihood?
Here's the bottom line: Ms. Shouse chose not to pay for medical attention when such attention might well have saved her life. If she was unwilling to pay no more than $5,000 annually to save her own life, why should the rest of us be forced to pay for what she, obviously, judged not to be a worthwhile expense for her herself to incur?"
Posted: 06 Feb 2010 10:58 AM PST
Thanks to Andrew Garland for this link <http://justoneminute.typepad.com/main/2010/02/eulogy-to-the-unknown-campaign-volunteer.htmlhttp://justoneminute.typepad.com/main/2010/02/eulogy-to-the-unknown-campaign-volunteer.html> , which provides details about Melanie Shouse, the St. Louis woman who once worked for the Obama campaign and who died last week of breast cancer.
Contrary to the implication that I drew in my previous post <http://cafehayek.com/2010/02/perhaps-he-gave-her-a-free-t-shirt.html> , Mr. Obama did not know Ms. Shouse, so I was off-base to suggest that perhaps he should have personally paid for her medical care. Ms. Shouse should have paid for it.
All the available evidence suggests that she could have afforded to do so. First, - and contrary to what Mr. Obama said - Ms. Shouse did have health-insurance. It was a catastrophic-coverage policy. That is, annually her insurance paid nothing until her medical expenses hit $5,000. So the most that she could have been out of pocket each year is $5,000. That's not a small sum of money, but nor is it a sum out of reach for most Americans. Second, Ms. Shouse and her boyfriend, for 12 years, owned their own small business. I have no idea how profitable it was, or is, but because they'd been in business for 12 years I infer that it did not leave them anywhere close to destitution.
Ms. Shouse also found time to volunteer to work for Mr. Obama's presidential campaign. This is time that she could have instead spent working at a job that paid her extra income. But, as reported, she chose to contribute, free of charge, some of her time to a political campaign. It's quite possible that the value of the hours that Ms. Shouse contributed to Mr. Obama's campaign exceeded the cost she would have incurred had she gone to the MD when she discovered a lump in her breast.
Third, Ms. Shouse knew that she had a lump in her breast and she knew that such a thing put her life in severe jeopardy. Yet she chose not to spend up to a maximum of $5,000 annually (and likely less) to check this malady out with a physician. Yes, she excused her failure to see a physician because, allegedly, she couldn't afford it - that is, allegedly she couldn't afford to pay up to $5,000 annually to save her life!
Her allegation is not believable. Again, there's no evidence that she was destitute. She was wealthy enough to donate that most valuable of commodities - time - to a political campaign. And her total, out-of-pocket annual expenses had she chosen to visit a physician when she discovered the lump in her breast would likely have been far lower than $5,000 <http://cafehayek.com/2009/07/health-care-lies.html> .
Fourth, she chose to buy a catastrophic-coverage policy, probably because the higher costs of policies with lower deductibles were not worthwhile for her to pay. Given her choice, surely she and her boyfriend knew - or ought to have known - that each year there is a good chance that one or the other or both of them will require routine (that is, non-catastrophic) medical care. Could they not have saved a small sum of money each year to cover this obvious likelihood?
Here's the bottom line: Ms. Shouse chose not to pay for medical attention when such attention might well have saved her life. If she was unwilling to pay no more than $5,000 annually to save her own life, why should the rest of us be forced to pay for what she, obviously, judged not to be a worthwhile expense for her herself to incur?"
Municipal Death Spiral
The next bubble, financial crisis, or whatever you'd like to term it is ... the Death Spiral.
"Former mayor Richard Riordan has been roiling the civic waters by arguing that the surest -- and perhaps the only -- way out of Los Angeles' fiscal crisis is a declaration of municipal bankruptcy, which he believes ought to come sooner rather than later."
"In a conversation with The Times over the weekend, Riordan argued that bankruptcy may be the only way to attack the structural problem gnawing the heart out of the city budget: unsustainable public employee pension costs. Currently, Riordan says, the city is struggling to meet its pension obligations, and that's assuming it will receive 8% annually on the money invested on retirees' behalf. In fact, the average return over the past decade has been just 4%. Over the next few years, L.A. may be looking at $1.5 billion in pension obligations it can't meet. "We need some adults to come alive in the city and to talk through how to meet that liability," he said. "If that doesn't happen, we shouldn't rule out bankruptcy."
This bit is absolutely fascinating. "Moreover, while federal law lets bankruptcy judges reduce negotiated pension and health benefits in the private sector, it forbids changes in public employees' agreements.
So the Feds have decreed that no matter how badly you are treating the citizenry, or badly their economic lives are affected, you cannot undo the absurd over-promises of long dead politicians to make right the local budget. Could there be a better illustration of the absurdity of promising to pay municipal, state and local employees a set future amount? How about a constitutional amendment that politicians can't promise the money of anyone not yet born to anyone else for anything. How about it further specify that, the incompetence of politicians to manage these things being a given, all government employees have to work for the wages they earn today, and save for their own futures just like the citizens they "serve?"
"This year, the city will need to come up with $423 million to cover those costs. Over the next five years, the annual bill escalates thus: $526 million (2011-12); $643 million (2012-13); $788 million (2013-14); $902 million (2014-15). In 2015-16, Los Angeles will have to come up with more than $1 billion just to pay its retired police officers and firefighters their pensions and to cover their healthcare. As Hansell put it, "Those are astonishing numbers." They're also unsustainable.
"Who wants to live in a city without decent police or fire protection or libraries or parks? Unless we get these pension costs under control, we won't be able to afford any of those things."
"Nobody likes any of these choices, but the question now is whether we want to make the future of this city and its people hostage to the bad decisions of the past.""
http://www.latimes.com/news/opinion/commentary/la-oe-rutten14-2010apr14,0,3958891,print.column
"Former mayor Richard Riordan has been roiling the civic waters by arguing that the surest -- and perhaps the only -- way out of Los Angeles' fiscal crisis is a declaration of municipal bankruptcy, which he believes ought to come sooner rather than later."
"In a conversation with The Times over the weekend, Riordan argued that bankruptcy may be the only way to attack the structural problem gnawing the heart out of the city budget: unsustainable public employee pension costs. Currently, Riordan says, the city is struggling to meet its pension obligations, and that's assuming it will receive 8% annually on the money invested on retirees' behalf. In fact, the average return over the past decade has been just 4%. Over the next few years, L.A. may be looking at $1.5 billion in pension obligations it can't meet. "We need some adults to come alive in the city and to talk through how to meet that liability," he said. "If that doesn't happen, we shouldn't rule out bankruptcy."
This bit is absolutely fascinating. "Moreover, while federal law lets bankruptcy judges reduce negotiated pension and health benefits in the private sector, it forbids changes in public employees' agreements.
So the Feds have decreed that no matter how badly you are treating the citizenry, or badly their economic lives are affected, you cannot undo the absurd over-promises of long dead politicians to make right the local budget. Could there be a better illustration of the absurdity of promising to pay municipal, state and local employees a set future amount? How about a constitutional amendment that politicians can't promise the money of anyone not yet born to anyone else for anything. How about it further specify that, the incompetence of politicians to manage these things being a given, all government employees have to work for the wages they earn today, and save for their own futures just like the citizens they "serve?"
"This year, the city will need to come up with $423 million to cover those costs. Over the next five years, the annual bill escalates thus: $526 million (2011-12); $643 million (2012-13); $788 million (2013-14); $902 million (2014-15). In 2015-16, Los Angeles will have to come up with more than $1 billion just to pay its retired police officers and firefighters their pensions and to cover their healthcare. As Hansell put it, "Those are astonishing numbers." They're also unsustainable.
"Who wants to live in a city without decent police or fire protection or libraries or parks? Unless we get these pension costs under control, we won't be able to afford any of those things."
"Nobody likes any of these choices, but the question now is whether we want to make the future of this city and its people hostage to the bad decisions of the past.""
http://www.latimes.com/news/opinion/commentary/la-oe-rutten14-2010apr14,0,3958891,print.column
Classic Quotes - Jefferson
"If a nation expects to be ignorant and free, in a state of civilization, it expects what never was and never will be."
~ Thomas Jefferson courtesy of http://www.constitutingamerica.org/
A bit smug for my taste but true nonetheless.
~ Thomas Jefferson courtesy of http://www.constitutingamerica.org/
A bit smug for my taste but true nonetheless.
Mathews Headline
"Matthews: GOP Uses Dishonesty To Score Political Points"
This is a headline?
NO! This would be a headline:
WE CAN DETECT NO DISHONESTY - AND WE REALLY TRIED!!
In a stunning turnaround to 200 years of precedence, the GOP spoke the unvarnished truth today, with no equivocation, hedging, or clever parsing. Democrats were initially so thrown off, they could muster no response. Their suspicion was reflected in late, terse response: "The GOP clearly will stop at nothing to win elections! We, however, have principles to guide our operations. We will not engage in some 'race-to-the-top' truth telling escalation!" The initial results show that voters will continue the time tested tradition of only voting for "their" party, truth be damned.
This is a headline?
NO! This would be a headline:
WE CAN DETECT NO DISHONESTY - AND WE REALLY TRIED!!
In a stunning turnaround to 200 years of precedence, the GOP spoke the unvarnished truth today, with no equivocation, hedging, or clever parsing. Democrats were initially so thrown off, they could muster no response. Their suspicion was reflected in late, terse response: "The GOP clearly will stop at nothing to win elections! We, however, have principles to guide our operations. We will not engage in some 'race-to-the-top' truth telling escalation!" The initial results show that voters will continue the time tested tradition of only voting for "their" party, truth be damned.
Wednesday, April 14, 2010
Presidential Legacy - Who Cares and Why?
The article linked below asks whether "Bush will be the next Truman." Why would anyone possibly care about the 'legacy' of a president? Could there be anything less relevant to a free man than how history of a politician will be written? We already know exactly what will be written by 'history' - anything and everything, as suits the needs of the authors.
There is one group with an interest in gaining our interest on this topic - those who wish to ensnare as participants in 'their' party. They benefit when we delude ourselves by thinking any political aspirant is serving anything greater than their own ambition.
By our human need to identify with those in power, we seduce ourselves to care about them as if they mattered in some special way. This does us great disservice by displacing those who really do matter in our lives - our friends, family and those in our circles of influence and/or control.
http://www.thedailybeast.com/blogs-and-stories/2010-04-12/will-bush-be-the-next-truman/?cid=bs:archive5
There is one group with an interest in gaining our interest on this topic - those who wish to ensnare as participants in 'their' party. They benefit when we delude ourselves by thinking any political aspirant is serving anything greater than their own ambition.
By our human need to identify with those in power, we seduce ourselves to care about them as if they mattered in some special way. This does us great disservice by displacing those who really do matter in our lives - our friends, family and those in our circles of influence and/or control.
http://www.thedailybeast.com/blogs-and-stories/2010-04-12/will-bush-be-the-next-truman/?cid=bs:archive5
"Fair Trade" Nudge Nudge Wink Wink Say No More
Question: Hey you libertarians, what's your beef with Fair Trade? It is voluntary!!
Answer: "They're right that Fair Trade is just another form of voluntary free trade and that the hostility some libertarians express toward the idea of paying more for coffee to help poor farmers is distasteful at times. However at the risk of being one of those smug contrarians Henley dislikes so much, I'm going to defend the libertarians on this one. Partially, anyway.
The simplest reason to object to Fair Trade coffee is that it's just a stupid name. It suggests that all other coffee is unfair and exploitative. As a sign at one coffee shop I visited put it, "Fair or Unfair? It's that simple." Well, it's not that simple. And if, as I do, you think the insights of Adam Smith, David Ricardo, and other economists are hard-won intellectual achievements, then a label that implicitly opposes those ideas is going to rub you the wrong way. This could have been avoided if we labeled Fair Trade as something like "Charity Coffee" instead, which would be more accurate and avoid disparaging any economic theories. But then it might not have caught on as well because buying it wouldn't let people signal their opposition to globalization, which brings us back to why so many libertarians dislike Fair Trade in the first place."
http://www.jacobgrier.com/blog/archives/3773.html
Answer: "They're right that Fair Trade is just another form of voluntary free trade and that the hostility some libertarians express toward the idea of paying more for coffee to help poor farmers is distasteful at times. However at the risk of being one of those smug contrarians Henley dislikes so much, I'm going to defend the libertarians on this one. Partially, anyway.
The simplest reason to object to Fair Trade coffee is that it's just a stupid name. It suggests that all other coffee is unfair and exploitative. As a sign at one coffee shop I visited put it, "Fair or Unfair? It's that simple." Well, it's not that simple. And if, as I do, you think the insights of Adam Smith, David Ricardo, and other economists are hard-won intellectual achievements, then a label that implicitly opposes those ideas is going to rub you the wrong way. This could have been avoided if we labeled Fair Trade as something like "Charity Coffee" instead, which would be more accurate and avoid disparaging any economic theories. But then it might not have caught on as well because buying it wouldn't let people signal their opposition to globalization, which brings us back to why so many libertarians dislike Fair Trade in the first place."
http://www.jacobgrier.com/blog/archives/3773.html
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