When I read the news that Blackstone Group multi-billionaire Peter Peterson has started a foundation, with a billion bucks behind it, to fight budget deficits, my first thought was "where the hell was this guy 6 or 7 years ago? Where were those billion bucks when we needed them?"
Because anyone who’s paid attention knows that after Clinton sucked it up and got control over the deficit that Reagan and Bush Sr. gave him, George Bush went on a drunken spending spree and trashed the place. And there were no multi-billionaires coughing up a billion bucks to fight against tax cuts for the rich, or drunken spending on stupid and unecessary wars back in 2002 and 2003, were there?
Now I’m an old-time conservative, from back in the days of yore when conservative didn’t mean "tax cuts we can’t afford" but meant "don’t charge it to the credit card". You know, the days when real men brained dinosaurs with slide rules.
So I love me a balanced budget, and despite my initial
livid anger mild indignation that these guys were missing in action back when saving the world from evil deficits meant opposing tax cuts for themselves, I’m certainly willing to welcome fellow fighters against budgetary malfeasance with open arms, even if I’m somewhat suspicious that just maybe if we weren’t looking at Democratic trifecta, just maybe, they wouldn’t be one billion dollars concerned.
So off I go to look at their solutions (pdf). Hmmmm. Off we go:
What needs to be done? Simply stated, our elected officials just start to close the gap between spending and revenues that results primarily from large and growing unfunded promises for Social Security and Medicare. Projections show that by 2027, if revenues stay at 18.3 percent of GDP—the level we are used to—they will not even cover net interest, Social Security, Medicare and Medicaid.
Hmmm. A danger sign. Putting Social Security, Medicare and Medicaid in the same phrase. Why’s it a danger sign? Well, here’s SS’s financial situation:
In FY2007, Social Security received $187 billion more in payroll taxes than it paid out in benefits. This annual surplus is credited to Social Security trust funds that hold special non-negotiable Treasury securities, although it is borrowed and spent by the government for other purposes. The total balance of the trust funds is $2.2 trillion in 2007 and is estimated to reach $4.3 trillion by 2017. At that point, payments will exceed payroll tax revenues, resulting in the gradual reduction of the trust funds balance as the securities are redeemed against other types of government revenues. By 2041, the trust funds will be exhausted. Under current law, Social Security payouts would be reduced by 22% at that time, as only payroll taxes are authorized to cover benefits
Assuming no changes. Zero. Social Security will run out of money in 33 years. Thirty three years. It will not even start paying out more than it is taking for another 9 years, and it won’t exhaust the huge reserves it has for another 24 years after that. Now, how much of a problem is "fixing" this problem that isn’t even a problem for 33 years? About 14% increase in income. How can you fix that? Well, folks above a certain income don’t have to pay any more into SS after that income. Take that cap off.
So whenever someone, anyone, talks about all 3 combined, I get annoyed, because SS just isn’t a significant problem. Now David Walker, ex-comptroller (who was an excellent one, by the way) notes this himself , calling it "an easy fix". But the group’s materials conflates the three. Really, in terms of entitlement spending, the problem is Medicaid and Medicare.
Click through on the pretty graph to the left. Most of the cost increases are not because of demographic issues, they’re because medical costs per person are just rising faster than inflation. That’s a big problem, and I don’t think anyone has a solution. This is happening in all countries. But here’s something interesting. Most other countries are spending two-thirds what the US does, per capita. Be clear, their governments are spending about the same, but the society as whole is spending 50% more. Why? Because they have universal health care, in most cases single payor. And it’s about a third cheaper than the inefficient US model. Switch to that model and while it won’t decrease the amount of money the US government has to pay (which should stay about what it would have been otherwise, maybe a few percent higher) it will reduce what the individuals and companies combined pay by about a third. Since they’ll be paying less, you can do something that the Peterson foundation doesn’t seem to like talking about much: increase taxes. And if you do it right, people will both pay more taxes, and still have more money left to spend, because the tax increase will be less than they used to lose for health insurance.
Something else that notably doesn’t get talked about by the Peterson foundation is the real third rail of US budgets—not Medicare or Social Security, but the military budget. The US spend half the world’s entirely military budget—no joke, but as much as everyone else combined. And for spending all that money it gets what exactly? The easiest fat to find in the US budget is definitely in the military budget. No country could invade the US if it spent one-tenth as much on its military and everyone knows it.
Now all of this isn’t to say that the Peterson foundation’s basic idea "live within your means" isn’t a good one. Many of us here in the blogosphere have been screaming this from the rooftops for years. (Welcome to the party, lads. Pass the ammo. And where were you the last 6 1/2 years. Hmmmm?) They’re absolutely right that debt services charges are an awful thing to spend money on. But somehow the problem for folks like Peterson is never the precipitous decline in capital gains taxes, or corporate tax rates, or estate taxes; nor is it spending too much on the military, the huge bleeding ulcer of Iraq, or the massive tax cuts for the rich. Somehow it’s people who need healthcare or old folks getting Social Security checks. Somehow there’s never a billion dollars to say ‘well, one way to fix medical costs is single payor, and every health care expert who isn’t paid not to know, knows it" but there is a billion bucks to go after "entitlements". Somehow there isn’t a billion bucks to go after the fat cats who benefit from bloated Pentagon budgets which don’t make the US one whit safer.
And somehow there wasn’t a billion bucks to stop Bush and the Republican Congress from going on a drunken warmongering spending and tax cutting binge, but now that there’s a possibility that Democrats might be in charge, fiscal responsibility is important again. Spending money on tax cuts for the rich and for unproductive foolish wars is one thing—but the very idea that it should be spent on old folks and sick people, well, that won’t do.
So while I want to believe the best of my fellow deficit slayers, I think I’ll wait to see whether their heart is with their wallet, or if they care as much about their fellow Americans as they claim.
Because I remember all the years where there was no billion bucks.