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2019-03-11 07:00 by Karl Denninger
in Health Reform , 211 references Ignore this thread
The DC Lie Factory: Budget
[Comments enabled]

Heh Larry... you absolutely sure there's nothing addling your brain these days?  Will you******in a bottle to prove it?

Trump's 2017 tax cut bears much of the blame for expanding the deficit, along with sharp increases in spending for both the Pentagon and domestic agencies and the growing federal retirement costs of the baby boom generation. Promises that the tax cut would stir so much economic growth that it would mostly pay for itself have been proved woefully wrong.

Historically those claims have never been right.

Trump's upcoming budget, however, won't address any of the main factors behind the growing, intractable deficits that have driven the U.S. debt above $22 trillion. Its most striking proposed cuts — to domestic agency operations — were rejected when Tea Party Republicans controlled the House, and they face equally grim prospects now that Democrats are in the majority.

Trump has given no indication he's interested in the deficit, and he has rejected any idea of curbing Medicare or Social Security, the massive federal retirement programs whose imbalances are the chief deficit drivers.

Again, half true and intentionally misleading.

The math is right here.

81% of $274 billion is $222 billion.  Social Security spent $251 billion.  That's a ~29 billion shortfall.  Not good but there are a lot of Treasuries held against that requirement, and by 2026 the budget impact as a percentage starts to fall because the boomers start to die, statistically speaking.  In other words Social Security had a ~12% shortfall over the first three months, indistinguishable from my last look (12% .vs. 13%.)  This is easily fixable on a forward basis without much economic pain.

Medicare, on the other hand, spent $153 billion but took in just $52 billion.  That's a shortfall of 66%; that is, two thirds of it is unfunded.  You would have to more than triple the Medicare Tax Rate in order to bring it to parity.

That's an "improvement" over the nearly 75% deficit in the first month but we are in fact talking about bleeding out in two minutes rather than three; the outcome does not change.

Add to that "Health" (Medicaid, mostly) and it's much worse; now you take in $52 billion but pay out nearly $300 billion.

These are not my numbers.  They are official government numbers -- by Treasury, not the CBO.

In other words they are produced by an Executive branch department, exactly the same branch that Trump heads and Larry Kudlow works for.

Kudlow knows good and damn well that the problem is almost entirely in Medicare.

It would be pretty easy to fix the Social Security cash-flow problem.  Leaving aside the disability scams in SSDI (of which there are many) we could resolve that with a fairly modest increase in the FICA tax rate, a relatively modest lift in the FICA tax cap, or some combination of the two.  Indexing that tax and/or the cap to the actual cash deficit in the program would be the one-time solution and as the boomers start to die, which I remind you will begin to happen on a actuarial basis within the next decade, that tax rate and cap increase would slowly bleed back off as well.

It's not possible to fix the Medicare problem with either taxes or "spending reductions" as the cash deficit is currently running between 66 and 75%, or two thirds of it is unbacked by taxes.  Add in Medicaid and it's much worse.

You'd have to more than quadruple the Medicare tax (which, I remind you, does not cap off already) to "close the gap" and that would leave Medicaid unfunded entirely.  To fund both you'd have to raise the Medicare tax by 600%.

That's completely impossible both politically and practically, never mind being insanely regressive with no means to fix said regression (attempting to do that would require raising said tax on "the progressively wealthier" by 1,000% or more!) and thus not going to happen.

Nor will minor, single or even low double-digit improvements in "cost control" overall (that is, small and modest improvements) in dollars spent on health care matter either -- the gap is too large.

The only means by which the problem can be addressed is to massively collapse the price of health care -- by at least 75%.

We can get there without killing one single Grandmother or child.

We do have to murder extortion and racketeering in the medical industry, however.  Not a little of it either -- all of it.

That's what has to happen.

And it has to happen now, because Medicare exposes its full operating deficit to the Federal Budget before the end of the next Presidential term and when it does the spiral of deficits and exposed cost will result in irreversible financial consequences.

This isn't politics -- it's mathematics and Kudlow knows it.

As someone who is well-aware of it and has in fact been in multiple Administrations and studying it for decades -- I note that I raised this point originally both with my employees at MCSNet and with my father who was a CPA in the 1990s -- those in public-policy positions who intentionally refuse to bring the truth of this matter to the forefront and demand it stay there and be addressed must be held personally responsible for the consequences of failing to do so.

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Bodhi
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Quote:
Medicare, on the other hand, spent $153 billion but took in just $52 billion. That's a shortfall of 66%; that is, two thirds of it is unfunded. You would have to more than triple the Medicare Tax Rate in order to bring it to parity.


I paid into Medicare for over 40 years before starting coverage. Do I assume correctly that all of the premiums that workers and employers had confiscated was all pissed away?
Tickerguy
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Well, yes and no.

It wasn't "pissed away" -- you were taxed at a rate that was appropriate FOR A HEALTH CARE SYSTEM THAT WAS 3-4% OF GDP.

The health scam was empowered by government -- but the tax rate to pay for it was NOT adjusted.


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Winding it down.
Aztrader
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Any cuts to medicare coverage should be keeping people alive that are basically brain dead or comatose. That costs a lot of money to maintain someone in this no win position. I know a caregiver that sees it all the time. Beds of comatose patients in their 80's and 90's plugged into a machine. That is no way to live.

On Medicaid, they need to put maximum usage per person/family. Right now they can run to the doctor or hospital anytime they want for any reason. They use ambulance services as taxi's and this waste needs to stop. There are no deductibles or co-pays. All is free no matter what their issue. Here in Arizona, the cost of medical transportation under Medicaid was 7% of $12 billion. This is insane waste. Medicaid needs a cap on all unnecessary services and they also need to account for all the illegals that use the system.
I completely agree with Karl on the fraud and waste in the system, but these thugs in Congress will never give up their bribes for anything.
Tickerguy
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@Aztrader -
Quote:
I completely agree with Karl on the fraud and waste in the system, but these thugs in Congress will never give up their bribes for anything.

Either the people of this country demand that it stop and enforce that demand using whatever means are necessary to do so or we're ALL ****ed, and soon.

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Winding it down.
Masintx
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I tried to explain the Medicare catastrophe in the making to a former teacher, my 40 year old SIL this weekend, in the context of the "Medicare For All" meme presently popular with the left. The response...a blank stare and he resumes watching golf. Maybe my analogy of an ever shrinking share of the Medicare pie was too graphic?!
Click
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It's being reported that Trump's new budget proposal balances the budget in 2034.... 15 years from now.

Tells me everything I need to know.

Everytime I read these jokers' budget proposals, I get the urge to run out and stockpile more food, fuel, firearms and fungible assets, e.g., gold, silver and even nickel and copper.

I used to have a place up in Dallas. A few years back (6 or 7 years ago, I think) there was a country club Republican living in Dallas named, Kyle Bass, who stockpiled 20 million U.S. Nickels. He did this because the melt value was worth more than the face value.

My family did the same thing back in the 1960s with silver dimes and quarters. We stockpiled those sons of bitches... I think I'm going to do the same thing with U.S. nickels. History repeats. I can see the day when a metal nickel will be worth more than a paper dollar.

Maybe in 2034 I'll pay my doctor visit with nickels.

Balance budget, indeed...



Wa9jml
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DeKalb, Illinois
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Hundreds of thousands of criminal invaders are storming over our southern and northern borders. Catholic Charities, and Lutheran Social Services will ensure that they get on Medicaid, in Section 8 housing, and access a panoply of various welfare scams. So the states where these freeloaders are concentrated will start feeling the fiscal pinch pretty shortly. Most of these states are already insolvent, and this massive migration will finish them off. They are all hoping for a federal bailout, but the feds are not in much better fiscal shape. The feds have not had a truly balanced budget in living memory. Everybody thinks that they can spend more than their revenues, and that is going to bite all levels of government, and the taxpayers right in the ass.
Aztrader
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Scottsdale, AZ
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I saw in Trumps budget that he wants to pass Medicaid management to the states. That will mean more illegals then ever in those sanctuary states. He wants to make cuts in places that need cutting, but more money for defense? For what?
The budget will be DOA in the house and nothing will get done. The libs want their insanity bill HR1 passed along with gun control. If Trump even considers any of this BS, then the crap hits the fan. Anyone with the slightest knowledge of history knows where this ends.
I agree that the people need to act, but know right now that using elections is a complete waste of time. The dems will have millions of illegals registered by 2020 and there will be no turning back. America will no longer exist as we know it.
Gmh
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"It's being reported that Trump's new budget proposal balances the budget in 2034..."

Such utter horse**** (OP aside)...
Tickerguy
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I would tip a glass if he had his budget shoved up his ass -- sideways.

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Winding it down.
Kochevnik
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NE WA state
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Quote:
because Medicare exposes its full operating deficit to the Federal Budget before the end of the next Presidential term


Are there actually Treasuries in file cabinet somewhere (like Social Security) that are currently keeping some of this cost of the Deficit or Budget right now ?

I've read all Karl's posts on this and tried to google this question and did not get anywhere.

How would we be able to gauge exactly when all this 'gap' shows up in the actual Fed Debt number ?
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