Balancing the Obama Budget With a Mandatory Gorilla

[youtube=http://www.youtube.com/watch?v=70lkobYY0Hc&hl=en&fs=1&]

After nearly two months of nothing, I figured I had to put something up. I’ve been tossing this idea around for a while looking for a metaphor that worked appropriately. I didn’t really push the metaphor of a household budget too far in the video because:

  • No one runs a household budget on $100 per month
  • Government does a lot of things that don’t correspond very well to household budgets
  • There is no good correspondence between mandatory spending and anything we budget for in real life.

But it is likely that you simply don’t care about the artistic matter of finding an appropriate metaphor and you only care about where the data came from.

Fair enough.

The data came from a couple of different places. First of all, the first data I’m using is a rough budget projection for 2017. This came from the CBO projection of President Obama’s budget extended to 2017. This is also where I got the federal reciept estimates I used to calculate how much we would have to decrease spending in order to balance the budget as well as the estimates for mandatory spending and interest.

For the purposes of the video, I combined what the CBO calls “mandatory spending” (which is mostly entitlement spending like Social Security, Medicare and Medicaid) and interest payments on the national debt into a single “mandatory spending” amount because both these parts of the budget are automatic and neither of them can be changed through the normal budget channels.

The next piece of data is the distribution of spending according to agency. In order to estimate how much we would spend on various departments and agencies, I took the latest projected data from President Obama’s budget, which is for 2014. I then calculated that, if we split up spending proportionally the same way in 2017 as we do in 2014 we would end up with the money distribution you see in the video (give or take a few cents).

Then, for the part where I take away the money until the budget is balanced, I simply looked at the amount of money we would have left over after we take care of all the mandatory spending with the receipts we expect to have.

That number was:

Federal Receipts – Mandatory Spending = Money Left To Spend

The “Money Left To Spend” number came out to $427 billion in 2017. The Defense spending in 2017 is anticipated to be about $662 billion, so I got rid of everything except defense spending. Then I started shaving off parts of the defense department until I got to a number small enough to roughly equal $427 billion.

Using this web site as a guide and calculating the proportional spending between the 2010 budget and the 2017 one, I subtracted the entire intelligence budget and the Navy. Then I reduced “Defense Wide” spending by half (I figure with the Navy gone, we don’t need quite as much military support bureaucracy) and I added up the Army, Air Force and the reduced bureaucracy.

That number came to $447 billion. Which means that we’re technically still running a deficit, but it’s a really small one.

One thing I did not do was calculate out how much more we would have to cut if we pass health care reform. This is because the legislation is so fluid and malleable at this point, it seemed pointless to put it into a number that would just change in a couple weeks.

But, I can say this one thing with an enormous level of certainty (and I’ll even put it into bold so you know I’m really serious):

President Obama, despite his best intentions, will not sign a “deficit neutral” bill.

This is because entitlement programs always start out with the best intentions and with rosy predictions. They almost always fail to meet those predictions, costing far more than was originally estimated. The problem is that the programs go on auto-pilot and neither the president nor Congress can do a damn thing to pull back on the costs.

What can be done about this? My suggestion is one that would satisfy no one.

I think President Obama should refuse to sign any legislation that doesn’t have an expiration date on it. If health care reform is really as wonderful as he says it will be, this shouldn’t be a problem. People will adore it, burn incense to it, throw ticker tape parades for it. Voting it back into law would be like raising Abraham Lincoln from the dead and having him run for another term.

But the fact of the matter is that it will never as wonderful as President Obama claims, which is why it can’t have an expiration date. Once people have a benefit, changing the status quo away from that benefit is often politically impossible. Just ask George W. Bush when he tried to change the clearly broken Social Security system. Everyone agreed that it was broken, but no one could muster the political wherewithal to fix it. So they just left it broken.

This is, I believe, exactly what will happen with health care reform. But that part is just my opinion.

48 comments

  1. Justin says:

    Fair warning: You’re going to get lots of “ZOMG RACISM” comments with this stuff.

    Why? Because the only thing leftists see is race.

  2. RR says:

    So the army and the air forces are the two most important functions of the US government? You have your priorities seriously mixed up.

    I guess you are aware that the US spends more on “defense” than the rest of the world combined.

    What comes to the projections of health care unit costs, it’s not very smart to extrapolate an unsustainable trend that’s just about to reach its top.

    Fortunately, there is also a lot of potential for additional revenue. Just start with a repeal of the Bush tax cuts.

    • politicalmath says:

      I figured that paying our men and women in uniform is probably a pretty high priority for the American people, so I put that off for last in the cuts.

      Also, we don’t need to repeal the Bush tax cuts. They expire all by themselves…

    • Justin says:

      America doesn’t spend more on the military than the rest of the world combined.

      http://www.globalissues.org/article/75/world-military-spending

      Strike one.

      Repealing the “Bush” tax cuts would not generate revenue.

      Strike two.

      Would you like to go for strike three?

      • Jake McKenzie says:

        The largest piece of our budget is the military. RR may have been exaggerating his point, but it makes sense why he would exaggerate it such. Many sources claim that around half the budget is spent each year on defense, past wars and now.

        http://www.warresisters.org/pages/piechart.htm

        The problem with the bush tax cuts is not the tax cut alone, Bush made no effort to cut any spending. Instead he continued the crash course with the healthcare crisis and got involved in two very large scale wars.

        Obama may have raised spending considerably, but he also raised taxes considerably while Bush lowered considerably taxes and continued spending uncontrollably. Now I am not anti-war(I support the Iraq and Afghanistan war), but if the money needs to be spent, Americans need to get taxed.

  3. hillrya says:

    nice video. you really do have a talent. don’t stop.

  4. Jonesy says:

    I’m having fun with the mental picture of having an army and air force but no navy. I imagine whole platoons crossing the Bering Strait in order to get to conflicts in other parts of the world. I picture bombers trying to ineffectually fly to hot spots but having to deliver their payloads in the middle of the Pacific and turn back because they don’t have aircraft carriers.

    Hilarity ensues.

  5. Mal says:

    The US just needs to raise taxes then.

    Since some European countries manage to be perfectly competitive with an effective tax rate (including local taxes/social security premiums etc of 40-45% of GDP), surely the US can raise taxes without ending up less competitive than Europe, right? After all, the US has a more flexible labour market, the best universities in the world and not nearly as much of a problem with an ageing population.

    • Jonesy says:

      Please tell me you are kidding. Please explain exactly why you think I would want to pay more taxes (or have product prices go up because businesses have to pay more taxes).

    • politicalmath says:

      Mal,

      I’m not sure how well that would work in the US. Our tax revenue – to- GDP has never been much higher than 20%… even when we taxed the ever living hell out of the rich in the 40s and 50s (the marginal tax rate was a mind-shattering 90%).

      I’m not in the economic school that says that we can’t raise taxes at all. It seems that we may very well have to in order to balance the budget. But our budget problem isn’t so much low taxes as it is out of control spending.

      • Jake McKenzie says:

        The low taxes have been a way to have the US economy show growth. This is why a country like Russia has almost no debt compared to the size of it’s economy and has seen a stagnation in growth. The problem has been with the neo-conservative movement(much like the tory socialist in England) they run as conservatives, yet when they feel those values are not working properly, they bend the rules. Those rule bending have lead to astronomical spending in times when the taxes are being lowered considerably. The market shows a false high, the national debt grows considerable and they continue preaching conservative values.

        http://en.wikipedia.org/wiki/Tory_socialism

        The republican party after Nixon became just like the Tories in England. Big government conservatives who ran on the platform of being infavor of the free market but often times interfere when they feel it is necessary.

    • Bill says:

      Here’s the part you missed. The Us is *already* taxed 40% of GDP.

      http://www.usgovernmentspending.com/downchart_gs.php?year=1994_2014&view=1&expand=&units=p&fy=fy10&chart=F1-total&bar=1&stack=1&size=m&title=Total%20Spending&state=US&color=c&local=s

      The thing that always gets missed is that the US, Unlike European nations is subdivided, so people see a national budget of 25% GDP and forget that the US also has state and local governments both of which collect taxes and spend money.

      Additionally, the frequency of the untruth on government spending on the military is pervasive, so here are the facts.

      http://www.federalbudget.com/

      The Us spends more on H&HS AND Social security than it does on military. Next year, the interest on the debt will also exceed military spending unless something drastic changes.

      • Jake McKenzie says:

        http://www.heritage.org/index/Country/UnitedStates

        The two sources you sited were not adequate in my mind Bill. The first having ads being anti-obama seems to put that website into question at objectively deliberating on this issue and the second looking like it was from the 90’s.

        Heriatage places the US taxation at about 28.2% of GDP and is a product of the Wall Street Journal, which is a very reputable source.

        In times of war, if the freeing of foreign nations is important to you and American security, taxes need to be raised proportionally, not decreased as we saw with the Bush administration.

      • Simon says:

        Addressed to Jake McKenzie below:

        I think this is a case of calling the kettle black.

        You posted that Bill put inadequate websites up to back up his argument when above you tried to back your argument by posting a website maintained by a clearly anti-war group.

        ???

      • Simon says:

        Sorry it should have been addressed to Jake McKenzie “above.” Didn’t know how the format would work out.

        Thanks

  6. ablur says:

    The answer is stop spending or reduce spending. Any government program that is started receives the equivalence of eternal life. You rarely if ever see a program canceled or removed. We need to stop and look at all programs to see if they are fulfilling their charter. If they are not, they should be canceled. We have thousands of programs and pet projects that need to be reviewed.
    If we could reduce bureaucracy and doubled up programs, we can start to cut into the debt. It will be a small dent but a dent indeed.

  7. Mal says:

    If its out of control spending, then lets start there. What exactly would you want to cut, and how much money does that save?

    Generally I see that people vastly overestimate the benefits of spending cuts. Unless you cut social security, medicare or the defence budget, there is not much you can do by cutting spending.

    And if you can’t find enough spending you are willing/able to cut, then the only solution is tax increases.

    Of course, noone wants to pay more taxes. But sometimes it just comes down to what is more important.

    Do you want people who get cancer to get good treatment, or do you wanna drive an SUV instead of a normal car?

    Do you want those over 65 to fend for themselves, and starve if they don’t have a private pension, or do you want that third vacation a year, or that 2nd bigscreen TV?

    Because that it what it comes down to IMO. Either you let people die from disease because they can’t afford insurance, or if you’re rich, you pay some extra taxes and don’t spend as much as you do now.’

    And I don’t know why you say that the problem is spending more than taxes. Some countries manage perfectly fine with spending relative to GDP that is significantly higher than the US. It might not be what the US is used to, but then again, every country changes. I bet that the US is very different from what it was in 1900, which was very different from what the US was in 1800, 1700 or 1600. Just saying the US isn’t used to high taxes is not really a good argument in favor of low taxes is it, is it?

    • John says:

      Why is this blog getting “European countries manage to be competitive” or “some countries manage perfectly fine” as motivation to shape our policy? Our goal as a country is not to match other countries. If that were our goal we would have to reduce our economy, cut back on civil liberties, weaken our currency, reduce quality of care, raise taxes, build up government, and reduce our international influence politically and culturally, among other things.
      America may have faults, but we are a country like none other, either current or past. This is not a matter of patriotic posturing, but evident from numbers such as GDP, charitable contributions, survival rates for those receiving health care in the states as opposed to abroad, tax rates, sale of albums, movies, books, number of patents, inventions, breakthroughs coming from this country etc.
      This country was formed because the founding fathers wanted something different than all the European countries.
      That being the case, have some pride in your country.
      Also… Yes. the US is very different from what it was in 1900, 1800, 1700 and 1600. Also it’s different from what it was in 2500 BC, as long as we’re going to be ignorant of the history of our country.
      Finally, you give the impression of most people over 65 as poor, sick, and uninsured, while everyone who is being taxed is affluent, more than capable of being taxed without any substantial reduction in quality of life. Clearly this is done in order to create an emotional drive to sell your policies. While it might be effective, it is not the best method if you’re looking for what’s good for the country.

      • Mal says:

        I guess I should state again that I am not a US citizen. I mentioned it in a previous topic, but you might not have read that.

        I understand the US is a different country from others, but my main question would be, what is it that makes you different? Is it really the healthcare or how its organised? I can see where you would call your civil liberties as proof of being different.

        However, defining it as the fact you manage to provide care for only 80% of the people at twice the cost of other countries, seems a bit awkward to me. Regardless of how good it is, is it really that much better than other countries?

        Secondly, higher taxes. Do you really define the US by the fact you have low taxes? In the 1950’s, didn’t the US have very high tax rates? When Reagan left power in 1988, tax rates were still several percentage points higher than they are now, weren’t they? Was America not America back then?

        Finally, I don’t dispute that cutting spending is far more preferable than raising taxes. Anyone who works for a living probably prefers keeping 70% of their money over keeping 50 or 60%. But you need to look at the facts. What spending can you realistically cut? I know people like to point at thousands of earmarks and other silly, stupid or even (IMO) outright corrupt porkbarrel spending, but if you add em up, you don’t get anywhere near the amount of savings needed.

        So tell me, if you don’t wanna raise taxes, what are you gonna cut? Social Security, Medicare/Medicaid, the military. Your choice.

      • Efialtis says:

        John said, “Our goal as a country is not to match other countries.”
        I agree with that. Our goal isn’t and shouldn’t be to emulate other countries. But not for the reasons you list:
        “If that were our goal we would have to reduce our economy,”
        We are attempting to borrow ourselves out of economic troubles…um, that has reduced our economy…DONE
        “cut back on civil liberties,”
        Gitmo, RealID, Patriot Act, etc…DONE
        “weaken our currency,”
        We are 13 TRILLION in Debt. How much more until we have to re-value the Dollar? How much more until we cannot pay the Debt? With the Dollar at an all time LOW, how much more can it take? …WORKING ON IT
        “reduce quality of care,”
        Has been reduced, or maybe you haven’t tried to get VA benefits, or get your Crippled wife on Medicare and/or Medicaid? … DONE
        “raise taxes,”
        VAT, Sales Tax, Gas Tax, and others…they are ALL GOING UP…DONE and WORKING ON IT
        “build up government,”
        The Government is the LARGEST EMPLOYER in the USA, and in a time where people are loosing jobs, the Government is opening new ones…DONE
        “and reduce our international influence politically and culturally,”
        Do I have to say it? DONE…

        So while I agree with your first statement, you obviously haven’t put a lot of thought into this…we SHOULDN’T be emulating what other countries are doing, but we ARE and we HAVE and this is part of the problem…we say one thing and do another…

    • Mal – There are many reasons why the USA and European nations shouldn’t be categorized the same way. I also don’t accept your premise that the nations with “socialized” health care are;

      A. providing health care to everyone (they most certainly are not since there are shortages & rationing of goods as a necessary consequence of the system). They are providing payment for health-care assuming you are lucky enough to get it. Promise of payment for a good, and getting the good itself are two separate things which shouldn’t be conflated – and in the health care debate, are confused daily. Insurance ≠ Health Care. Government payment ≠ Health Care.

      and…

      B. These systems are crumbling financially throughout the world. The British & Canadian systems are effectively bankrupt already and the French system keeps trying desperately to cut costs by excluding treatments or increasing eligibility requirements.

      So I reject that from the start… But there are some major reasons why Europe & Canada have been able to do those things to begin with.

      1. American military protection allows other nations security without having to pay for it:

      Due to the Marshall Plan, WWII and our subsequent 60 years of hegemony, virtually all of Europe, Canada, Mexico, Puerto Rico & the Caribbean, Japan, S. Korea… and frankly, most “ally” nations fall under a massive umbrella of our excessive military spending. This means that European nations simply don’t spend that much on their own military protections. As a result, much of these nations’ taxed revenue can go towards all encompassing social programs. Frankly – if you are European, you really don’t *want* the US to cut military spending precisely because it allows your governments to pay for other things…

      That said, honestly – America shouldn’t be in the “world police” business. I, for one, am sick of paying for the protection of 50 other nations, especially since we’re already borrowing & inflating our currency to pay for it.

      2. The US subsidizes much of the cost of health care for Europe/Canada/etc.:

      Europe keeps some of their Health Care costs at bay by imposing price controls on medical technology, drugs & other medicines… Which are primarily innovated & produced by and in the United States. Of course, when the prices the EU sets are below the market clearing level – that is, below what the company could get in a free enterprise system – or more problematically, when the prices set by the EU are lower than what the producers actually need to break even, these companies necessarily have to increase their prices on those of us who aren’t as tightly controlling their prices. Namely: The average U.S. consumer!

      Your price controls push your high costs back onto (primarily) the American people.

      So why not impose price controls of our own? Because soon enough, as has already happened with vaccine manufacturers – they ultimately put producers out of business by forcing them to operate at a loss. This isn’t sustainable and the real-world implications are massive shortages of everything we need to survive. Also, I should note that since we are the world leader in medical innovation & production of resources… This means massive shortages for everyone in Europe too!

      3. Scaling Bureaucracy:

      The entirety of Sweden for example is under 10 million people. Assuming even that the pyramid-scheme economics of social programs like we’re discussing was functional and sustainable, which it most certainly is not, then a big factor in implementation and the ability of people to game the system has to do with the bureaucracy itself. 10 million people is roughly the size of New York city & it’s surrounding areas. Sweden is also geographically the equivalent to just the state of California.

      Bureaucracies don’t scale up well. Even if we took the European model as a functional one – which I fundamentally don’t – there’s plenty of reason to question its efficacy in the United States.

      4. Unemployment, Taxation & Production:

      Right now, America’s economy is on the ropes. We have massive amounts of debt. We have spent the last 100 years or so operating on deficit spending & inflationary policy. The only thing that is saving us right now is the productivity of our population and the (outside of recent events) comparatively high employment rates. Raising taxes will increase unemployment, which will decrease America’s overall productivity and which will negatively effect all of us AND harm the world economy as well.

      So what do I suggest for spending cuts?

      1. Military (see above)… Time for everyone else to take care of their own national defense.
      2. Axe redundant federal departments – such as the Dept. of Homeland Security, consolidate FBI & CIA, abolish the Dept. of Education (which has been a major cause of the decline in quality of American public schools for the last 50 years).
      3. Reduce public employee salaries, pensions & benefits across the board – This may sound harsh, but on the whole they not only do much better than the average American, even within the tough economy, their benefits & wages are *increasing*. (Also, I think politicians salaries should be reduced for other reasons). We’re forced to pay for these people after all, we need to be getting our money’s worth and we’re not.
      4. Start offering across the board cuts in corporate taxes and decrease the regulatory burden on international investment: encourage more people to move here, set up international headquarters here and invest in real production in the US again. = More jobs, more revenue without raising tax rates, more production and thus increased standard of living.

      There’s more… but this is long enough.

      • Mal says:

        Thank you for your elaborate response. There are some points where I don’t agree with you though.

        A. Providing healthcare. Plenty of European countries do provide all the necessary care quickly and of high quality. You are right that there are waiting lists for some procedures, and like in every system, screwups happen. If you have non-essential surgery, you might need to wait a bit, but for surgery which needs to be done quickly, I see no evidence that generally that is a problem. Of course there is anecdotal evidence where things go wrong, but overall, European healthcare systems are rated substantially higher than the US system.

        Also, in my opinion, some rationing is good. Healthcare demand can essentially be infinite. Because of the insurance, few people bear the cost of healthcare themselves. And as with all systems where those who get something out of it without paying the costs, demand tends to be higher than needed. A bit of rationing brings some rationality back in the system IMO (probably not the most popular view I admit).

        B. I don’t see crumbling systems. I do see difficult choices being made on how much healthcare should cost. Those same decisions are made in the US, but by insurance companies. Those might be less transparant, but that doesn’t mean that there are no difficult choices being made there.

        1. I agree with you that the US spends more on military, though I am also pretty sure that Europe would not spend more if the US cuts its spending.

        2. If that really is the case, then the US should bring this up internationally, because it would be unfair to let the US shoulder the burden by itself. I doubt whether research into medicines is really that expensive though, seeing how much profit these companies are making and seeing how much money they can pour into bribing doctors and Congressmen to do their bidding.

        3. You don’t need to scale them up. Seeing how much in the US is done at the State level, this seems like an excellent choice to delegate completely to the States. Much closer to the people, and much better able to respond to immediate problems. I would never advocate a Europe-wide social security system (it would be a dismal failure). And it would have the benefit of keeping the federal government a bit smaller.

        4. Raising taxes, it all depends on how you do it. You have a lot of loopholes that could be fixed. You could stop protecting people from the inheritence/estate tax/ Of course, simply raising tax rates, especially on lower paid workers will increase unemployment.

        But an estate tax, if done properly and without being able to avoid it, would hardly influence unemployment, if at all. Or are you saying that you would work less now if you can’t give 80% to your children in 30 years time, but only 60%?

        Secondly, you don’t have a massive amount of debt. Italy has a debt of over 100% GDP. Japan has a debt which is probably approaching 180-200% of GDP right now. Those are massive debt. The US overall has a pretty low tax rates, and a debt which is certainly not small, but also not unbearably large. The only issue is whether you are willing to pay it, not whether you can.

      • Mal:

        The ratings for European vs. US health care are highly misleading in several ways. For example, life expectancy is a large factor that gets brought up in such discussions and while its true many nations have a higher life-expectancy than the US, there is only a minimal and certainly not causal link to the health care system being employed. This factor is much more greatly effected by lifestyle, diet, exercise habits and race/ethnicity.

        Certainly you aren’t suggesting Bosnia has better health care than the US: http://en.wikipedia.org/wiki/List_of_countries_by_life_expectancy

        Another rating metric that’s commonly used is infant mortality rates, which is even MORE misleading. Different countries measure infant mortality by different standards. Many nations don’t count a baby as ever having been alive at all if it dies within the first few weeks. Some within the first 24 hours. The US counts all babies who were not stillborn – which is reason one our stats wind up inflated. That said, that isn’t a complete explanation – the other half of this a sort of ironic statistical artifact of the US’ tendency to work harder than other nations to save premature babies. We have a much higher percentage of premature births than most other nations… Some look at this as a bad thing, but regardless, it is what it is. Premature babies are obviously at a much higher risk for dying within the first year than full-term babies. So put it all together, and we have a nation that is able to save babies’ lives that would have either been stillborn or died in the hospital in other nations, and we count all of them – and then some of those babies die later, making our statistics look horrible.

        Also, an even more comprehensive article: http://www.reason.com/news/show/135603.html

        Additionally, the WTO rankings often don’t take into consideration the details very well. For instance, the US has the highest survival rate for cancer and other major diseases of anywhere in the world.

        http://www.ncpa.org/pub/ba596

        The reality is, we do a lot of the hard stuff vastly better than Europe. The only real problem, with the U.S. system is the extremely high cost of Medical Care – which also limits access for some people.

        The high cost is a consequence of government intervention however.

        History found here: http://findarticles.com/p/articles/mi_m1094/is_n2_v28/ai_13834930/

        and from today actually, there’s this: http://www.americanthinker.com/2009/09/understanding_the_cause_of_hea.html

        As for broken & crumbling systems around the world… You just need to read more:

        Britain – http://www.timesonline.co.uk/tol/comment/leading_article/article6742040.ece

        “A recent report from the King’s Fund and the Institute for Fiscal Studies (IFS) showed how the NHS cannot provide a comprehensive service on current assumptions after 2011. To freeze the budget again would require an extra £10.6 billion over the next spending review period. Some of the shortfall could, in principle, come from increased productivity, up to 7.7 per cent per annum, according to the IFS. This is an heroic assumption in a service in which, as the Office for National Statistics recently showed, productivity fell 4.3 per cent over the decade from 1997.”

        France – http://online.wsj.com/article/SB124958049241511735.html

        “The problem is that Assurance Maladie has been in the red since 1989. This year the annual shortfall is expected to reach €9.4 billion ($13.5 billion), and €15 billion in 2010, or roughly 10% of its budget.”

        Canada – http://www.vancouversun.com/story_print.html?id=1878506&sponsor=

        “Dix said a Vancouver Coastal Health Authority document shows it is considering chopping more than 6,000 surgeries in an effort to make up for a dramatic budgetary shortfall that could reach $200 million.”

        You’re also wrong that the decisions are made by “insurance companies”. There is a gigantic difference between access to health care resources and getting someone else to pay for the resources you use. An insurance company does not have the power to actually deny care. It can only prevent you from using their money from paying for it – as a result, you have many other options to fund treatment if you deem it worth the cost. Government rationing doesn’t really work that way.

        I talk about that here: http://seanwmalone.blogspot.com/2009/07/why-we-must-not-ration-health-care.html

        and… here: http://seanwmalone.blogspot.com/2009/06/economics-lesson-of-day-public-vs.html

        As for wait times, see the following: http://www.waittimealliance.ca/June2009/Report-card-June2009_e.pdf

        What else…

        Umm… Talking about the US way of adopting “universal health care” as a state, rather than federal situation: Massachusetts *already* did that and it’s a nightmare… http://www.cato.org/pub_display.php?pub_id=10488

        Every state has always been free to do something like Massachusetts… In fact, one of the main reasons we are “united states” to begin with was the idea of having regional democratic experiments allowing local communities to try their own systems and rules and have those little laboratories show what works & what doesn’t. Clearly, MA’s system *doesn’t* work. But none of that actually matters because having a state-run systems is not the option on the table. What’s being debated is a MASSIVE Federal government program, so my point about such systems not scaling up well remains a critical problem.

        Look, I mean – I can go on about this (obviously) just about all day, but I hope I’ve generally made my point. There are some other issues I haven’t really addressed which I can touch on briefly –

        1. Re: Military Spending, whatever European countries decide to do with their armies is of no concern to me provided they don’t start attacking people. I’m just saying that Europe and most of the world has been free-rider to American protection, and that’s caused many problems for the US, and given some in Europe license to do things we couldn’t afford to do.
        2. Raising taxes is a bad, bad, bad, BAD idea. + Taxes = + Unemployment almost without fail. Higher taxes reduce economic activity, and ultimately lowers the standard of living or inhibits its growth for everyone in general, especially beyond where we are now. I frankly also think we’re in Laffer Curve territory already – especially since we can look around the world and find better, freer economies in Asia right now.
        3. Japan/Debt/etc.: Debt as a percentage of GDP is hardly important in this case because it’s just a snapshot, and a poor one at that… We have the largest nominal debt of all time, and regardless of the percentage *today*, in just a few years, our debt will easily double due to continued deficit spending and interest. Beyond that, I assume you’re only looking at the $11 trillion figure, which is equally misleading because the United States government currently has somewhere in the realm of $100 Trillion in unfunded liabilities to tack on to that debt. All this stuff has to get paid eventually…
        3. The US is BY FAR the world leader in medical innovation, I don’t have time now to find you dozens of links, but google is a tool we all have… And here’s one thing: http://www.nytimes.com/2006/10/05/business/05scene.html

        “In the last 10 years, for instance, 12 Nobel Prizes in medicine have gone to American-born scientists working in the United States, 3 have gone to foreign-born scientists working in the United States, and just 7 have gone to researchers outside the country.”

        There are many sources to back up this claim.

        Annnnnnnnnnyway….. This is a bad, bad, bad idea, and it will have severe repercussions to the rest of the world. At any rate, the US system is currently far closer to that of France than what any free-market advocate like myself would suggest, so I should point out as my final little note that the US does NOT have “private health care” in reality. The high cost has everything to do with the government involvement, and certainly doesn’t have anything to do with the limited market component, which were it actually free would drive prices down and quality up.

  8. Al says:

    As I recall (and could easily be wrong), federal revenue increased following the Bush tax cuts. I suppose it is difficult to nail down to what extent tax cuts/tax increases alter the nation’s tax revenue as opposed to other unrelated forces in the economy.

    Is it true that tax cuts can generate sufficient growth in the economy to offset the static measured loss? Probably not a question worth getting into while the spending side is getting so out of control.

    • Mal says:

      Its called the Laffer curve, part of supply side ecoomics. In theory, it works. In practice, its impossible to pin down the Laffer curve, so you never know where it is. Also, it will be distorted because there are lots of different taxes, with lots of different tax loopholes.

      Also, it doesn’t mean that taxrates should only be cut.

      Easily shown by examples:

      If the taxrate is 100%, nobody will want to work, so tax revenue will be 0. It makes sense to lower the tax rate then. Lets put the tax rate at 50% and assume the size of the economy is 100. 50 is collected in taxes. Now reduce the taxrate 1% to 49%.

      In order to achieve the same amount (50) in taxes, you need to have an additional economic growth of 2.05%. Already difficult to believe (IMO). Now reduce the tax rate to 30% and the economy back to 100. If you lower the tax rate to 29%, you need to grow the economy by an additional 3.45%.

      I’ve seen something like the Laffer effect in practice in a few isolated instances. It can happen for example with excise duties on cigarettes. If you put a big tax increase on them, you run the risk of reducing cigarette consumption by so much, that your total revenue goes down. But those are just isolated incidents, and with really big tax increases. If you look at what kind of tax increase (or closing of loopholes) you need to balance the budget, I don’t expect a significant impact on the economy really.

  9. Dan says:

    If they haven’t already, you know someone on the left will say that you using the 800 lb gorilla metaphor is racist code language.

    I like the bubbles metaphor, though, spot on.

  10. […] To die free is a responsibility." – Brig. General James Sehorn Click Here for More Broken News Political Math knocks another one out of the park. With help from Bubbles, the baby gorilla. (video) Maureen Dowd goes full retard. China files WTO complaint over US's enacting WTO order. Welcome to […]

  11. […] Political Math gives a reasonable idea of how Mandatory and Discretionary Spending will work. […]

  12. Garrett says:

    don’t you love the dissertations many go into by being so piceune? generalization of complex situatinos for the purpose of clarity always brings out the politially correct nerds, geeks, etc…

    and those with two cents of wisdom have seen what the politcally correct have done with life in general with all their watering everything down to the point that black and white no longer exists as everything is grey…

    the let is like a lion – will only go for the weakest of the strong, has a mighty roar and will only bite the weakest of the strong… it’s no wonder their political sysmbol is a jackass… thank God they were not around 230 years ago other wise instead of the eagle our nation bird would be the turkey…

    IF we would have lasted that long with the likes the of the 111th Congress (and many others in the 91st through the 111th for that matter)…

  13. […] Balancing the Obama Budget With a Mandatory Gorilla – Political Math […]

  14. Todd Fitchette says:

    You also nailed why cities and counties, particularly in California, are bankrupt. It’s because programs get marked “entitlements” and therefore become “mandatory.” Couple that with poison pills that require frequent cost-of-living adjustments to these budgets, and they can NEVER decrease in size. They merely grow, like your gorilla in your illustration.
    I say we shoot the gorilla and feed it to the starving masses and get back to only those programs directly delineated by the US Constitution, such as national defense. As for the entitlement programs such a social security, start scaling it back now and let (force) folks to fund their own retirement through private sector savings plans.

  15. Mal says:

    Sean, thanks again for the lengthy reply. A few points I’d like to make:

    1. I’m not saying you have a bad medical system. But for the price you pay, you’re not getting a system that is significantly better than a lot of countries out there. For all the supposed terrible effects of government controlled systems, they are doing pretty ok. And not only its twice as expensive as some other systems, you still fail to cover some 20% of americans, and a significant number of people that are insured, can still go bankrupt due to high medical costs which are not covered.

    2. Other countries may have some funding shortages, but in terms of percentages of GDP, those are easily fixable. 10 billion pounds is around 1% of GDP for Britain, quite a manageable amount. For France, 15 billion USD equals about 0.5% of GDP. And of course none of those systems are ideal either. But in some aspects they have elements that the US could actually learn from, rather than assume that everything is better there.

    3. Your point on insurance companies not making decisions, because individuals can still pay with their own money is incorrect IMO. No government system I know of actually bans people from buying their own healthcare outside of the system. But the fact is, most people can’t afford healthcare if it wasn’t for insurance. So the decisions by insurance companies do materially affect the ability of people to get healthcare just as much as any government system.

    4. I am not saying that the US actually needs a public system. I can think of a number of reforms or even whole systems that would be far better than the current system. The Netherlands for example (just to be transparent about this, I am Dutch), has a system without a ‘public’ option. It has no medicare or medicaid. Rather, its all private insurers, although in a market with plenty of government regulations.

    Just to list a few things the US should certainly address IMO, even if no public option is introduced.
    – Remove state barriers to insurers. All insurers should be able to operate nationally and offer the same insurance policies in every state.
    – Tort reform.

    Then I would introduce a few rules for insurance companies and hospitals.

    – Force insurance companies to insure everyone at the same premium. No lower premium for young, healthy people, no lower premiums for insurance through the workplace, and don’t allow them to refuse or cancel insurance policies.

    – Force hospitals to charge the same price to everyone. An operation paid for by Medicare or by private insurance should not be cheaper than paid for by someone without insurance.

    Then there are a few things I would change, that probably would not be very popular in the US, but would in my opinion improve it overall.

    – The people should realize that healthcare through their jobs is actually just another form of wages. And that its not very efficient to tie insurance to a specific job, as it hinders people from finding new jobs. I think the US should remove the tax exemption for job related healthcare, and use the money for a big tax break/tax credit for lower income people so they can afford healthcare outside of the workplace. In the end, its much more efficient.

    – If you want to go a step further, there is even a way to abolish medicare and medicaid and put them in the private system as well.

    What would happen if the government required private insurers that want to compete in the market, to provide a base package of healthcare, decided on by the government to include all the stuff in medicare. That package has to be exactly the same for all insurance companies, thus enforcing transparancy in the market. It also has to accept everyone who applies, at the same price (each insurance company decides for itself what that price should be of course, but if company A asks 500$ a month of it from a 25 year old, they have to offer to any 75 year old also at 500$. Though another insurance company offers it at 450 to both the 25 year old and the 75 year old. Competition between insurers should be able to push prices down, certainly if all insurance companies can operate nationally.

    Subsequently, the government pays/reimburses the average price that insurers charge for this package to all seniors eligible for medicare etc. If insurance companies are so much more efficient than government-provided medicare, that should even mean a cost-saver. And at the same time it would still ensure that all seniors can get the benefits of medicare, but through the private market instead.

    Then you would, through government regulation, create real competition for healthcare, but only on price.

    5. Your fear of taxation is highly amusing. There are plenty of taxes that, if done properly, do not need to hurt the economy in any major way. How else do you explain some European countries having twice the tax levels you have, and still competing just fine? Of course you should not increase taxes on wages, that would be counterproductive. But a tax on gasoline, offset by a reduction of wage tax and corporate income tax would help make people more efficient in their energy use. Especially for the US, that buys so much from abroad, a tax on consumption, i.e. VAT, makes a lot of sense. It would help reduce your trade deficit as well. And you still need to face the fact that without tax increases, you won’t balance your budget. That is of course, unless the government gets inflation up to 5% or 10%.

    6. I don’t fully understand your point about the debt. It is relevant as to your payment capacity. And I am quite aware of the large liabilities. However, two things you should keep in mind:
    – Other countries have the same. Don’t assume you are an exception.
    – The figure is presented as a lump sum, rather than an annual amount. If looked at it from that perspective, the figure is much less impressive. Same goes for all the other figures. I never understood the reason why you would present figures over a 10 year period. Its not relevant. Yes, healthcare might cost a trillion dollar over 10 years. Over that same amount of time, your economy will amount to 150 trillion or more. So how much is 1 trillion then really…

  16. Justin says:

    I’m having a hard time getting best the “healthcare will not add a dime to the defict” line form the president. I thought the point of reform was to “bend the cost curve” in a positive direction. If we’re funding a new mandate out “medicare savings” plus tax increases, how are we saving money? (i.e., bending the cost curve).

    If at the end of the day, the current 800 lbs guerilla is slimmed down to a projected 1600 lbs guerilla verse a 2000 lbs guerilla we’re expecting in 10 years, but we’re adding a new guerilla which will weigh in at 400 lbs in 10 years, you’re still looking at 2000 lbs of guerilla. People might be happier with the extra guerilla to play with, but you’ve still got to feed 2000 lbs of guerilla. You haven’t really improved the company’s financial stability. This is also assuming your weight watchers plan for the current guerilla or the new one isn’t overally optimistic – which history doesn’t seem to back up.

    I’m just wondering why the media isn’t picking up on this lack of improvement on the 86 TRILLION current value liability (based on 2007 estimates before recent issues) which doesn’t get fixed by a “deficit neutral” plan as scored by CBO rules. Maybe basic math just doesn’t read well on a tele-promter…

  17. […] Understanding the long-term forecast for the federal budget Watch this 2 minute video from Political Math. […]

  18. […] October 9, 2009 in Political Commentary | Tags: budget, debt, economics I had to pass this one on from the blog “Political Math.”  […]

  19. Chaz says:

    This level of Mandatory spending will kill us eventually even if we keep feeding the gorilla folks.

    You’re missing the point!

    It’s not the spending on the left (discretionary) side of the line that’s going to kill us… it’s the spending on the right (mandatory) side that’s going to do us in! Raising taxes or cutting back on discretionary spending will only delay the inevitable…

    if we are to fiscally survive, we’re going to have to find some way to cut back on mandatory spending.

    So we either have to shrink the gorilla, or shoot him.

    I don’t see any other viable alternative!

    • Simon says:

      Unfortunately I think it will be death by either heart attack or starvation that will do him in Chaz. Either the gorilla will die from eating too much and collapsing in on itself or it will just simply have nothing left to eat at all because it ate up everything it had.

      At this point, shrinking it or shooting it may not be possible options. I see it starving to death at this point.

  20. […] Balancing the Obama Budget With a Mandatory Gorilla – Political Math […]

  21. […] manner.  Instead, the costs for the programs outlined in the legislation will grow like the 800-lb. gorilla that will beat us to death unless we keep feeding it our hard-earned tax […]

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