Unless entitlements are substantially reformed, the U.S. will likely default on its debt; not in conventional ways, but via inflation, currency devaluation and low to negative real interest rates.
Gross says entitlements are where the money is so that’s where the cuts will need to be. True enough, but were we to end our various insane military adventures we would not only save money, we would save lives and have far more friends worldwide as well. I suggest that the belligerent militarism of the US is a primary cause of wars, unrest, and rebellions across the planet.
But Gross’ larger point is correct. Entitlement spending is not sustainable. Liberals and progressives who squeal about possible cutting of entitlements need to provide answers and solutions and not just lamenting that conservatives are grinches. Pretending there is no problem will not suffice.
The true but unrecorded debt of the U.S. Treasury is not $9.1 trillion or even $11-12 trillion when Agency and Student Loan liabilities are thrown in, but $65 trillion more! This country appears to have an off-balance-sheet, unrecorded debt burden of close to 500% of GDP! We are out-Greeking the Greeks.
Thus we will undoubtedly have inflation, which will help those with assets and hurts those who don’t. The possibility of the US defaulting on debt is indeed quite real.
Wow, the budget is a thing of beauty – if you like train wrecks. Spending increases again, and the deficit is projected to rise to a new record percentage of GDP. But fear not – taxes will rise. The 2012 projection is that personal income taxes will rise 27%, while corporate income taxes revenues will jump 65%. In the absence of actual tax rate increases, this assumes a rather rosy picture of the economy.
But let’s go back to Bill Gross’s second chart. Those are not real liabilities that exist on the books today, they are projected liabilities if spending continues at the present rate. Yes, it’s an attention-getter, but let’s not make it worse than the abomination it already is. Spending *cannot* continue the way it is. That’s a no-brainer to everyone outside Congress.
Here’s my question to you: In 2009 USA Today quoted the average family health insurance policy at $13,375, which was 27% of the median household income for that year. Insurance cost has been rising rapidly and is projected to rise further, while median income remains flat. Why on earth would we try to run a massive program like Medicare on a 2.9% tax that doesn’t even come close to covering costs? The very premise is flawed.
This suggests two approaches: reduce spending, or increase funding. Everyone seems to want the former, gutting Medicare or throwing it out. Yet Medicare is in terms of percent of costs spend on administration the most efficient health insurance in the country. Why not go in the other direction: make it available to everyone and charge what its actual value is, subsidizing only the poor? Rather than making it an entitlement, why not let it compete in the market?
Oh, wait: that would offend the health insurance companies, who did very well under ObamaCare and will do even better if Ryan’s (GOP) Medicare reform passes.
Excellent points DJ. One of the few places I think we agree. 😉
Interesting that they split up the two military costs to make it look smaller. I see the chart as saying 44% social programs, 49% military, and 7% interest. And that’s assuming the numbers are right, which is somewhat debatable.
The concept that spending has to be cut isn’t a bad one per-se. But it does need to include a reduction on military costs. I also think, for some things, like medicare and the other social safety nets, if it comes to a choice of cut or raise taxes, the later should be considered, and not rejected out of hand.
“Entitlement spending is not sustainable” is not a particularly helpful diagnosis of the situation. More accurately, health-care expenses are increasing at an unsustainable rate. As DJ points out, Medicare does a slightly better job of controlling expenses than does private insurance.
If health care cost us what it does in pretty much any other developed country, we wouldn’t have a budget problem at all.