News Rollback to 2008: How Would It Impact Your Personal Life?

[OmCheeto]

The biggest reason that spending is growing so rapidly is health care costs.

http://www.thirdway.org/taxreceipt" .

Yup

ssi... 20.4%
defence... 20.2%
medicare... 13.1%
low inc.***;).. 9.3%
medicaid... 7.9%
etc... 22.0%
health(non-m).. 2.0%
more etc... 5.1%

total medical. 23.0%

Health care costs wins.

+1 ParticleGrl

 

[BobG]

With a discussion of a $14 Trillion national debt in the US and the need to raise the debt ceiling, coupled with more than $1.5 Trillion annual deficits scheduled, there is talk of rolling back all spending to 2008 levels. I'd like to ask a question of all PF members.

How would a rollback of US Government spending to 2008 levels impact YOUR personal life - would you be affected in any way whatsoever?

I've considered the question and found that I would not sacrifice any benefits personally. Please discuss actual impacts only 2011 versus 2008 - not a promise of some future benefit that is uncertain.

Would you lose a job or funding for a project or a specific benefit?

To answer your original question, I'd have to say probably, seeing as how 100% of my income comes from the government in one form or another. My job relies on defense spending, plus I receive a military pension and military retiree health benefits.

The problem is that overall government spending isn't as important as the details.

As long as there's adequate emphasis on modernizing the military (increasing use of remote controlled drones, investment in space assets, research into missile defense, etc), I have good job prospects. When the emphasis changes, such as when modernization played a subordinate role to operations in Iraq, my job market gets tighter. Still, defense spending decreases would affect everyone in defense to some extent. It may not cost me my job, but having fewer jobs available overall means an employer will feel more confident in offering lower pay raises.

And, while my military pension shouldn't change, the costs for retiree health benefits do change. Those benefits have already gone from "guaranteed free health care for life" to benefits that a retiree has to pay for. Granted, at $230 per year for an individual and $460 per year for a family, those costs are laughable compared to private health insurance plans, but I expect those costs to rise as soon as combat operations drop to a low enough level to push military veterans' affairs under the public radar.

 

[Al68]

Yup

ssi... 20.4%
defence... 20.2%
medicare... 13.1%
low inc.***;).. 9.3%
medicaid... 7.9%
etc... 22.0%
health(non-m).. 2.0%
more etc... 5.1%

total medical. 23.0%

Health care costs wins.

+1 ParticleGrl

Well, your conclusion may be right, but your math doesn't prove it. You can't just add the percentages that way to prove that health care costs are the biggest reason that "spending is growing so rapidly". I won't bother explaining why, because anyone who can't figure it out themselves can never be convinced of it.

Edit: I should use that principle full time: it would save me a lot of trouble on this board.

 

[OmCheeto]

Well, your conclusion may be right, but your math doesn't prove it. You can't just add the percentages that way to prove that health care costs are the biggest reason that "spending is growing so rapidly". I won't bother explaining why, because anyone who can't figure it out themselves can never be convinced of it.

Edit: I should use that principle full time: it would save me a lot of trouble on this board.

Depends on the time frame of course.

And I don't know why you would not bother trying to explain it to me. I'm very intelligent. Though there are certain things about my fellow humans that I find incomprehensible.

On a side note, I was listening to the radio yesterday and everyone was all googoo gaga over the new Atlas Shrugged movie. So I decided to go back and see what on Earth Ayn Rand was talking about, way back in 1957, when she wrote the novel.

I ended up looking at the http://www.taxfoundation.org/files/fed_individual_rate_history-20110323.xls" for the year. They were simply incredible. It's no wonder she wrote the book. The effective tax rate for people making $400k per year was 78.41%.

I wonder what the deficit would look like today if we had maintained such usurious tax levels. And what would the country be like? What would the world be like?

 

[ParticleGrl]

Well, your conclusion may be right, but your math doesn't prove it. You can't just add the percentages that way to prove that health care costs are the biggest reason that "spending is growing so rapidly".

What adding the percentages does is show that health care is the largest outlay today. To look at growth, you obviously have to look at multiple years. Check out:

http://www.cbo.gov/ftpdocs/87xx/doc8758/11-13-LT-Health.pdf

or really any discussion of health care spending. The growth in entitlement spending is really growth in health-care spending (both public and private).

And in the short-term, the deficit is exploding because of recession.

That's one thing that left-wingers never seem to take into account: the financial health of government is secondary to the financial health of the people. Plus, in the long run, draining the economy and stifling growth through high taxes is not only bad for the people, it's bad for government revenues.

First, I don't think anyone would argue with you that the end goal is a financially healthy populace. You are mischaracterizing the argument. The argument is that the government can and does play a necessary role in a strong economy.

The idea that high taxes stifle growth is probably true at some level, but GDP has grown both in high tax periods and in lower tax periods. GDP growth was worse under Bush's tax cuts than Clinton's tax hikes. The tax rate is NOT the most important factor in growth.

Keep in mind that government spending can also create innovation and growth (despite the mistaken belief that the government doesn't produce anything). The backbone of the internet was developed with government money and has resulted in a tremendous amount of job creation. The government sector is still the primary source of basic R&D, etc. That innovation does lead to jobs. The government is also the primary provider of infrastructure, which is hugely necessary for job creation.

Also, consider the role of the welfare type safety net in job creation. How many people aren't free to start a company because they need their employer health coverage?

And finally- certain regulations can create better market outcomes by helping to fix market failures. Starving the government of the funds needed to effectively regulate would lead to worse outcomes for all.

An effective policy needs to balance the need to fund innovation and maintain infrastructure, maintain regulation, and encourage private investment. Its not as simple as "cut taxes" and "all government is bad." There is no one magic cure- believing that tax cuts are always a good thing is naive. Markets are great when they work- but the drive to privatize has lead to bloated corporate-government partnerships like medicare-advantage and the medicare prescription drug plan. Rent seeking abounds.

 

[CAC1001]

First, I don't think anyone would argue with you that the end goal is a financially healthy populace. You are mischaracterizing the argument. The argument is that the government can and does play a necessary role in a strong economy.

The idea that high taxes stifle growth is probably true at some level, but GDP has grown both in high tax periods and in lower tax periods. GDP growth was worse under Bush's tax cuts than Clinton's tax hikes. The tax rate is NOT the most important factor in growth.

Remember that Clinton signed a tax cut too. Bush had to deal with a minor recession early in his term, then a secondary recession near the end.

Keep in mind that government spending can also create innovation and growth (despite the mistaken belief that the government doesn't produce anything). The backbone of the internet was developed with government money and has resulted in a tremendous amount of job creation. The government sector is still the primary source of basic R&D, etc. That innovation does lead to jobs. The government is also the primary provider of infrastructure, which is hugely necessary for job creation.

Government doesn't really produce anything. That's not a mistaken belief. If government could produce, there'd be little need to tax. Even infrastructure, government hires private contractors to build it. The government then provides the funding. Government spending can however do as you mentioned. Over a long period, it can be very beneficial. The Internet was started by the government. The GPS system was started by the government. Many of the modern technologes we have were created from research money provided by DARPA (in this sense, the defense budget has helped serve as a form of industrial policy I think).

Many of the infrastructure projects done during the New Deal helped with America's economic growth later on. Also the Interstate Highway System Eisenhower started.

But none of these things per se are government growing the economy, they are the government providing the foundation so that the market economy can then go to work at producing wealth.

Also, consider the role of the welfare type safety net in job creation. How many people aren't free to start a company because they need their employer health coverage?

This is a good point.

And finally- certain regulations can create better market outcomes by helping to fix market failures. Starving the government of the funds needed to effectively regulate would lead to worse outcomes for all.

I agree here.

An effective policy needs to balance the need to fund innovation and maintain infrastructure, maintain regulation, and encourage private investment. Its not as simple as "cut taxes" and "all government is bad." There is no one magic cure- believing that tax cuts are always a good thing is naive. Markets are great when they work- but the drive to privatize has lead to bloated corporate-government partnerships like medicare-advantage and the medicare prescription drug plan. Rent seeking abounds.

The Medicare Prescription Drug Program is pretty much the only government healthcare program ever created that is actually managing to pay for itself (http://www.politico.com/news/stories/1109/29545.html). Medicare and Medicaid as they currently are (single-payer systems) are plagued with fraud and abuse and ballooning costs.

I think these systems function best when they are a combination of public-private (trying to use the elements of both).

 

[OmCheeto]

Without re-hashing the past 30 years Ivan - I think we agree Reagan spent a lot of money (some will argue the space tech lead to advancements and others the collapse of USSR > wrong thread for both)

Funny you should mention the USSR. I've been surfing the web all day looking at facts and figures for the last 50 years. (Did you know that the average National League Baseball players salary in 1960 was $18,000?)

Anyways, I ended up on the debt to GDP page over at wiki.

It looked very peculiar.


rank.nation.debt/gdp
1...Japan...225.80
33.5.World...59.30
36...USA...58.90
121..USSR...9.50
138..Libya...3.30

Japan's debt to gdp ratio is almost 4 times worse than ours. Is anyone worried about that?

And the USSR. It's ratio is 17 from the bottom. Didn't we supposedly win the cold war? How did they end up in such good shape?

And who's #1 in the Dave Ramsey "I'm debt free" contest? Libya?

Phhhhhht...

But in answer to your question:

Would you lose a job or funding for a project or a specific benefit?

# 2011 United States federal budget - $3.8 trillion (submitted 2010 by President Obama)
# 2008 United States federal budget - $2.9 trillion (submitted 2007 by President Bush)

That looks like about a 25% cut to me. Does anyone know where those extra 900 billion dollars are going? It strikes me that the question is impossible to answer unless we know where the extra cash is being spent. And where the 900 billion dollars would be cut.

hmmm... That's weird. 900 billion dollars a year is equivalent to 22.5 million $40k/year jobs.

hmmm...

 

[ParticleGrl]

Remember that Clinton signed a tax cut too. Bush had to deal with a minor recession early in his term, then a secondary recession near the end.

My point was simply that the tax rate alone doesn't determine growth. Other factors are more important. The correlation between top marginal rate and growth isn't particularly strong.

Government doesn't really produce anything. That's not a mistaken belief. If government could produce, there'd be little need to tax. Even infrastructure, government hires private contractors to build it.

When the government charges for the infrastructure it has produced, it is usually considered as levying a tax. Also, things aren't always done through private contractors. Look at the national lab system- government scientists producing beneficial research.

But none of these things per se are government growing the economy, they are the government providing the foundation so that the market economy can then go to work at producing wealth.

All right- let's phrase it differently. Government infrastructure provides an increased opportunity to generate wealth. Under funding government diminishes opportunity, and hence diminishes wealth. The point is that government spending isn't just consumption, its also investment.

The Medicare Prescription Drug Program is pretty much the only government healthcare program ever created that is actually managing to pay for itself

No, it isn't paying for itself, its just costing less than it was originally thought it would. The government is explicitly forbidden from bargaining for better prices (the way that it does when it purchases for the VA system). As such, the same drug costs more purchased through the medicare's prescription plan than through the VA.

The reasons the costs are lower than predicted have to do with declining innovation in prescription drugs (so consumers can shift to more generics), and the shift away from expensive drugs can be seen system wide.

Medicare and Medicaid as they currently are (single-payer systems) are plagued with fraud and abuse and ballooning costs.

Medicare does have some fraud, but its not overwhelming. The ballooning costs are NOT a feature specific to medicare, which has costs growing slightly SLOWER than private sector health costs. The reason costs are ballooning is that health care costs in general are ballooning.

Medicare advantage (public/private mixtures) costs more and looses more in overhead than traditional medicare plans. In general, public/private mixtures rarely seem to deliver on the promised cost reduction. See the long threads in this forum about health care.

I think these systems function best when they are a combination of public-private (trying to use the elements of both).

The urge to privatize seems to have created opportunities for rent-seeking and regulatory capture. As the line between corporate employee/lobbyist/senator gets blurrier, corruption grows.

 

[CAC1001]

All right- let's phrase it differently. Government infrastructure provides an increased opportunity to generate wealth. Under funding government diminishes opportunity, and hence diminishes wealth. The point is that government spending isn't just consumption, its also investment.

I think it depends. A lot of it can legitimately be investment, but it can also turn into just spending on various pointless schemes. There is a base minimum amount of government spending needed for infrastructure, regulations, safety nets, public services like police, firefighters, etc...but after that, spending can easily become excessive and wasteful. I view it like the public education system: there's a base amount of money needed for good quality schools, facilities, computers, books, etc...but eventually, pouring more and more money into education will produce less and less to even negative results.

No, it isn't paying for itself, its just costing less than it was originally thought it would.

Costing less than what originally thought, if it can keep doing so, is still a pretty big accomplishment I think, especially since more people than initially projected are using the system.

The government is explicitly forbidden from bargaining for better prices (the way that it does when it purchases for the VA system). As such, the same drug costs more purchased through the medicare's prescription plan than through the VA.

The reasons the costs are lower than predicted have to do with declining innovation in prescription drugs (so consumers can shift to more generics), and the shift away from expensive drugs can be seen system wide.

Wouldn't declining innovation cause prices to increase?

Medicare does have some fraud, but its not overwhelming. The ballooning costs are NOT a feature specific to medicare, which has costs growing slightly SLOWER than private sector health costs. The reason costs are ballooning is that health care costs in general are ballooning.

Do balooning Medicare costs also cotnribute to rising private-sector costs. For example, I know that despite the acutal cost of treatment, that hospitals have a limit on how much they can charge Medicare patients.

Medicare advantage (public/private mixtures) costs more and looses more in overhead than traditional medicare plans. In general, public/private mixtures rarely seem to deliver on the promised cost reduction. See the long threads in this forum about health care.

I know Germany and France have multi-payer universal healthcare systems that also have for-profit private insurance for those willing to pay, I am not sure how much better/worse cost-wise they are to say the British NHS, or the Canadian, or Japanese systems (although the Canadian system has had privatization occurring for some time now).

The urge to privatize seems to have created opportunities for rent-seeking and regulatory capture. As the line between corporate employee/lobbyist/senator gets blurrier, corruption grows.

In Canada, due to wait times, a lot of private clinics have been popping up:
http://www.nytimes.com/2006/02/28/international/americas/28canada.html
http://www.foxnews.com/politics/2009/06/30/canada-sees-boom-private-health-care-business/

 

[Al68]

And I don't know why you would not bother trying to explain it to me. I'm very intelligent.

That is exactly why.

 

[Al68]

My point was simply that the tax rate alone doesn't determine growth. Other factors are more important.

I don't think anyone is saying otherwise. We're saying that tax rates matter, not that they are all that matter.

Government infrastructure provides an increased opportunity to generate wealth.

I haven't heard anyone oppose roads and bridges, either, in general. Just the wasteful projects.

Under funding government diminishes opportunity, and hence diminishes wealth. The point is that government spending isn't just consumption, its also investment.

That's true of roads, but not government in general. And the biggest reason is that building/maintaining roads isn't practical for private individuals/businesses. That, and the fact that they are funded by vehicle fuel taxes by those who use them, make roads a very poor representation of other government spending.

 

[ParticleGrl]

I think it depends. A lot of it can legitimately be investment, but it can also turn into just spending on various pointless schemes. There is a base minimum amount of government spending needed for infrastructure, regulations, safety nets, public services like police, firefighters, etc...but after that, spending can easily become excessive and wasteful.

But is there really evidence of this excessive spending? Keep in mind, spending is growing mostly because of medicare. Also, remember that our infrastructure is underfunded and crumbling- http://www.infrastructurereportcard.org/report-cards

Wouldn't declining innovation (in pharmaceuticals) cause prices to increase?

Older drugs go off-patent and have to compete with generics. As innovation declines, generic use goes up. The rate of output of new prescription medications has dropped by half.

http://www.dailyfinance.com/2011/02/17/successful-drug-development-gets-harder/

The reason that medicare plan D is costing less than assumed is almost entirely do to the lower cost of prescription drugs. It would have cost far less if the government could bargain for price (the VA pays far less for drugs).

Innovation in health care is an odd things- it drives prices up rather than down.

Do balooning Medicare costs also cotnribute to rising private-sector costs. For example, I know that despite the acutal cost of treatment, that hospitals have a limit on how much they can charge Medicare patients.

Medicare and private-insurance price bargaining almost certainly means the uninsured pay more than they otherwise would for health-care (when they can afford to pay). But costs are rising in all sectors of health-care- the uninsured, insured, and government provided. And they are rising in all nations (though its worse here by far).

Part of the issue is that (as mentioned above) innovation is raising costs. Part of the issue is a lack of efficacy data- money is being spent on procedures and no one knows if they actually do anything.

 

[CAC1001]

But is there really evidence of this excessive spending? Keep in mind, spending is growing mostly because of medicare. Also, remember that our infrastructure is underfunded and crumbling- http://www.infrastructurereportcard.org/report-cards

I think at the state level, in some of the states (such as California), there is excessive spending. At the federal level, I don't know enough about that. Regarding infrastructure, is that so much a problem of lack of money, or bureaucrats spending the money on things besides infrastructure?

The reason that medicare plan D is costing less than assumed is almost entirely do to the lower cost of prescription drugs. It would have cost far less if the government could bargain for price (the VA pays far less for drugs).

From my understanding of it, the lower cost of the drugs is because it increased competition between the drug companies. Why would it have cost far less if the government could bargain for price?

Innovation in health care is an odd things- it drives prices up rather than down.

Why do you think this is? Also, is this just in certain parts of healthcare? For example, I would imagine with regards to medical equipment, that innovation drives costs down.

 

[ParticleGrl]

I think at the state level, in some of the states (such as California), there is excessive spending. At the federal level, I don't know enough about that. Regarding infrastructure, is that so much a problem of lack of money, or bureaucrats spending the money on things besides infrastructure?

What are specific examples of spending you consider excessive? Does CA have excessive regulations? Too much spent on higher ed?

From my understanding of it, the lower cost of the drugs is because it increased competition between the drug companies. Why would it have cost far less if the government could bargain for price?

What about the law do you think increased competition among drug companies?

The reason it would cost less with bargaining is purchasing power. The VA pays 58% less for drugs, on average, than medicare does. You would expect with its purchasing power, medicare could be paying less than the VA.

Why do you think this is? Also, is this just in certain parts of healthcare? For example, I would imagine with regards to medical equipment, that innovation drives costs down.

Its probably because health care isn't an ideal market. Demand, especially for life saving care, is very inelastic.

As far as medical equipment- an MRI costs maybe $2000, an x-ray costs $200.

 

[CAC1001]

What are specific examples of spending you consider excessive? Does CA have excessive regulations? Too much spent on higher ed?

From what I understand of it, California does over-regulate to the point of making it too costly to do business in the state for many companies. On spending, one culprit I believe is that they have among the most generous welfare systems in the country. Another problem I believe is the public unions in the state and their healthcare and pension costs.

What about the law do you think increased competition among drug companies?

I don't know the specifics, but I remember reading that that was the method by which the law was going to lower prices (increasing competition). Some thought it was nonsense and wouldn't work at the time.

The reason it would cost less with bargaining is purchasing power. The VA pays 58% less for drugs, on average, than medicare does. You would expect with its purchasing power, medicare could be paying less than the VA.

I see.

Its probably because health care isn't an ideal market. Demand, especially for life saving care, is very inelastic.

Definitely something to study more I think.

 

[Al68]

Innovation in health care is an odd things- it drives prices up rather than down.

That's just not true. It drives up "costs", not prices. The cost of Viagra may have been $0.00 twenty years ago, but its price was infinite. It's cost technically increased, but its price dropped dramatically.

The same goes for any new innovation: comparing it's cost or price to when it didn't exist at all can lead to odd conclusions, if one pretends they're talking about a change in the price of an existing product over time.

 

[Al68]

On a side note, I was listening to the radio yesterday and everyone was all googoo gaga over the new Atlas Shrugged movie. So I decided to go back and see what on Earth Ayn Rand was talking about, way back in 1957, when she wrote the novel.

I ended up looking at the http://www.taxfoundation.org/files/fed_individual_rate_history-20110323.xls" for the year. They were simply incredible. It's no wonder she wrote the book.

Atlas Shrugged was far more about government regulation and control than tax rates.

Having reread it recently myself, after reading it the first time at a young age, what stood out the most were the lines she gave the "villains" in the book. When I read it the first time, I remember thinking that no one could be so delusional and moronic as to actually say such things. I thought Rand was just giving them such over-the-top idiotic lines as exaggeration, to portray them as moronic as humanly possible. And I was 100% sure that even if a politician were to say such things, people were not so stupid as to believe them.

I was very young and naive, apparently. Virtually everything said by Democrats today about economic policy can be found in those villains' lines in Atlas Shrugged. And vice versa.

And far too people believe them.

 

[OmCheeto]

I won't bother explaining why, because anyone who can't figure it out themselves can never be convinced of it.

And I don't know why you would not bother trying to explain it to me. I'm very intelligent.

That is exactly why.

So... only an idiot would understand your explanation?

hmm...

 

[Al68]

So... only an idiot would understand your explanation?

hmm...

LOL. No, that's the opposite of what I said. Someone intelligent like you has no need for my explanation, while idiots wouldn't understand it.

 

[WhoWee]

That looks like about a 25% cut to me. Does anyone know where those extra 900 billion dollars are going? It strikes me that the question is impossible to answer unless we know where the extra cash is being spent. And where the 900 billion dollars would be cut.

hmmm... That's weird. 900 billion dollars a year is equivalent to 22.5 million $40k/year jobs.

hmmm...

You've hi-lited my point. Thus far we have one respondent that concludes he might be impacted personally. So far, nobody else has a personal connection to describe?

 

[WhoWee]

The reason that medicare plan D is costing less than assumed is almost entirely do to the lower cost of prescription drugs. It would have cost far less if the government could bargain for price (the VA pays far less for drugs).

Another factor is that many drugs were dropped from the formulaies in 2011 - with CMS approval of course.