Government Spending Myths (and Healthcare)

T

TahoeHorn

1,000+ Posts
Congressional Budget Office

There are many myths and misconceptions about government spending. Here are "Tahoe's Truths":

1. You can pretty much forget anything except Healthcare, Social Security, Defense and Interest. Everything else is chicken feed. Always has been and always will be. You fix the Big Four or you get nowhere. Interest is phenomenally well managed so your opportunities are down to the Big Three.

2. Spending 21% of GDP, taking in 18% of GDP and running a 3% deficit is not a problem. We have greater than 3% nominal growth. In fact we have about 3% to 3.5% real growth over the long haul.

3. A debt of 60% of GDP is ok but we're up to about 75% which is a little too high but not something which is of huge concern.

4. What is of enormous concern is that healthcare is structurally unsound. Its percentage of GDP is going to escalate dramatically even without new programs to care for the uninsured (or subsidize them).

5. The Iraq war has added to the deficit and debt but not by the numbers quoted by the cost accountants. A Marine in Iraq costs more than a marine in Camp Pendleton but the cost doesn't go up by the amount spent on him in Iraq; it goes up by the amount you spend extra. The high cost of Iraq will presumably drop back in time.


Please look at the numbers. If you take even one hour to study recent and historical numbers you will have your eyes opened. I have run through the numbers with smart people on numerous occaisions. The numbers destroy misconceptions.

Again HEALTHCARE IS A HUGE PROBLEM EVEN WITHOUT THE CURRENT PROPOSALS.
 
I had hoped this thread would be about the numbers more than the merits of any program. But thanks for responding. I knew it wouldn't be a popular subject.

I'm not advocating a particular healthcare solution on this thread. It's merely a discussion of what we can afford.
 
Addressing health care will have to involve removing insurance companies from the basic/preventative healthcare equation. They make up a substantial portion of the cost, some figures I've seen up to 40% of each dollar spent.

Think about it - you go to the doctor and pay a $30 fee for the office visit, it costs another $30 for the insurance company to process the claim. Just doesn't make sense.
 
judge,

I think that misses the point unless your approach is to commit to something we can't afford and assume we can lower the costs. Are you going to tell a recipient of the cash (whether it's a state, a hospital, an HMO or whatever) "I want X , and let's try to get the cost from $130 down to $100"? Or are you going to say, "I'm going to spend $100 and I want as close to X as I can"?

We are making implied commitments to our citizenry for an entitlement program we can't fund (unless there are cost reductions). I think we need to change to a system where we fund a certain amount and provide the best product we can with those limitations.
 
Insurance companies can be replaced with software and a risk algorithm. There is entirely too much money in the current set up to change it though.

Imagine a system that:
-Doctors must register their service offerings on.
-Patients must make their appointments through...and when they do they see all the prices and distances from their house.
-Patients must pay in their premiums through.
-Doctors receive their payments through the same system.
-Doctors write prescriptions through.
-Patients can review bills through...and communicate directly with the doctor.
-Patients can approve cost through.

We CAN build this now. It can run a couple of server in my garage. We could save billions.
 
Whew...good to know. Now I can let the elderly die dirty nursing homes with a good conscious.
________________________________________________

Why should it be my reponsibility to take care of the sick...that is what families are for. i should not have to pay higher taxes to take care of other people. the constitution grants a right to live your life the way you please, to say what you like without going to jail, the right to purchase property and a right to try and be happy. it doesnt say, lets tax the crap out of everyone so we can take care of everyone and feel good about ourselves. you want to start a home for the homeless go ahead, but i shouldnt have to pay for it. family is important, those who choose to have a family that cares for them is one choice in life, another is to grow old alone and die alone....it doesnt take a village, it takes some common sense and if you don't have it.. tough, perhaps a nice philanthropist can bail you out, if not, that's life....
 
Actually, I think a major effort needs to be spent dragging the Federal Government completely into the electronic age. Stop mailing out SS checks. Require a pensioner to have a bank account that the money is electronically wired to. Eliminate a fair amount of the employees of the SSA and minimize the amount of paperwork that goes back and forth. This is most likely chicken feed in the total SSA budget but let's stop with paper checks.

Social Security needs to be completely overhauled as well. Raise the wage limit that is subject to SS withholding. Means test SS and do that based on tax returns. Some one making, say, 250,000 shouldn't be getting a pension check (or at least a full share) from the rest of us. We do the same kind of thing with welfare. You have to be poor to get welfare. Why should you be rich and get SS?

Restructure how SS money is invested. The private account idea needs to happen. Even if it's only a portion of what comes out of your check, something needs to go to YOU and YOU only. And I want US to have control over the investment. Why shouldn't I have some control over where that money is invested? Hell, just give me an age weighted lifestyle set up. That's going to do far better in the long run than what we're doing now.
 
It's funny how no one ever talks seriously about reducing defense spending besides Ron Paul. Does the U.S. really need to outspend the rest of the world combined on defense? What are we so afraid of? It seems like our military adventurism (such as Iraq) just creates more problems that we deal with by spending more on the military. Much of the military's purpose seems to be to protect our oil supplies- maybe there should be an oil tax surcharge that goes directly to the military.

Social security spending can be reined in incrementally- raising retirement ages, phasing out benefits for high income/assets and putting the "trust fund" into something.

Healthcare is a tough issue. President's Bush Medicare prescription drug benefit severely worsened the coming crisis. I wish I knew the answer, but I do know in the case of healthcare our "free market" system provides worse average health outcomes at much greater cost as a % of GDP, which is the opposite of what a free market is supposed to do.

BTW Tahoe I was surprised when you said having a budget deficit of 3% of GDP was not that bad with 3% economic growth, but I ran a quick spreadsheet and noticed it was not as bad as I thought. If you run it out a number of years you realize that it is not indefinitely sustainable, i.e. government debt keeps going up as a % of GDP and interest payments keep going up as a % of the budget, but it works for a lot longer than I would have thought.

One thing is for sure, the Bush technique of massively increasing defense spending, massively increasing the future unfunded liabilities of Medicare and "fixing" social security by both keeping current benefits and borrowing massive amounts of money to create private accounts doesn't work.
 
Fatcat,

A 3% deficit is 3%. A 3.5% (and I said 3% to 3.5%) growth in GDP is 3.5% REAL growth. 3.5% plus inflation which comes to more like 5%. If the numerator is growing at 3% of GDP and debt is 75% of GDP then debt is growing at 4%, slower than the GDP growth. So debt as a percent of GDP is SHRINKING.
 
SS is a tax, the money that goes in from my check, isn't mine once it hits the SS progam any more than the money that I pay as federal taxes.

SS should be what it was intended for, a broad based tax collected to protect the most vulnerable -- the disabled and elderly who cannot work and are without a retirement. Nothing more, nothing less.

Compassionate, smart and adequate safety nets are a moral imperative. Waste is not.
 
Medicare should be treated much the same. If you can afford other insurance, you shouldn't be able to drop and enroll in Medicare. Change insurance to a consumer driven, consumer choice model and prices will plummet. Give the tax benefit to the consumer, not the employer, add HSAs and a vast portion of the uninsured will actually be able to afford adequate coverage. For the rest, a reformed Medicare system would work.
 
I agree wholeheartedly with your first point TahoeHorn. Non-defense discretionary spending is really an insignificant portion of the federal budget.

But why do you say the interest is phenomenally managed? In 2007 interest payments constituted 8% of the whole federal budget, $243.7 billion. That's a lot of money that could be spent on real programs.
 
HitH,

The US government competes in the credit markets with millions of other borrowers. There are more brilliant people analyzing these markets than you can imagine. Hell they have more second guessers than Greg Davis. But their second guessers are professionals who make millions on Wall Street. The rates the US Treasury gets in their auctions appear to be as good as could be done. The people managing these auctions are highly skilled. The level of secrecy and integrity is astounding. If the auction goes off at 5,24% you don't hear too many people think they could have gotten 5.23% by doing something different. Maybe once in a blue moon they could have done a basis point better by being smarter. The contention that you could manage that portfolio of trillions by getting lower rates is really fairly absurd. This is true of every President, every year, all the time. there are actually a few parts of our government which work phenomenally well. This is one of them.
 
Imagine how much better off we would be without acting like an imperlistic bunch overseas having military basis everywhere.

You think Western Europe could survive without us? What about Japan? What if South Korea paid for their defense?


Vietnam really hit the crapper after we left. How much do we spend on Egypt and Israel? Why crap do we spend any money there? Why are they important compared to say Canada or Mexico?
 
You all speak of healthcare like it's the market for IPODS or computers. It is so vastly complex that while a check-up for your kid might be a shop around type commodity, you still have a huge coordination of services to provide for many diseases (lab, radiology, ancillary testing, pharmacy, etc).

Imagine trying to buy your home computer buy going to several different stores to get the parts and hoping you can find someone to put it together. A major pain in the butt.

But we are not talking computers. We are talking people, and when you cheapen up your complicated illnesses or put off getting your diabetes checked because of "consumer driven" choices then you are screwed. People will pay for vacations and internet, they balk at paying out of pocket for healthcare.
 
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