First, some reality:
At the close of business on Jan. 20, 2009, the day Obama was inaugurated, the U.S. government debt held by the public was $6,307,311,000,000, according to the Daily Treasury Statement for that day.
At the close of business on Sept. 30, 2013—the last day of fiscal 2013—the Daily Treasury Statement said the U.S. government debt held by the public was $11,976,279,000,000.
I think that it is fair to attribute a lot of this debt increase to policies and economic conditions created under President Bush. Still, I find it ironic that President Obama would tell Wall Street that investors should be concerned about a potential default.
My views of the current situation:
1. Our politicians are like a family with a huge credit card debt. The Republicans are threatening not to make the minimum payment, and that is clearly a case of brinkmanship. However, the Democrats have no plan to keep the debt from growing out of control, and that in its own way is brinkmanship.
2. It is almost as if our political system and the news media are designed to conjure up short-term symbolic conflicts to distract attention from long-term problems.
3. A good rule of thumb in politics is that fiscal conservatives make noise, but spenders win in the end.
Regarding view #1. The Dems do have a plan to reduce the debt. The plan is to raise taxes. You may not like the plan, or think it won’t work. Then please say that. Don’t say they don’t have a plan.
You also imply, by omission, that the GOP does have a plan to keep the debt from spiraling out of control. Please show your work. My recollection is that 2001-2006 showed that the current incarnation of the GOP has no fiscal discipline when it controls the purse.
Perhaps it is your opinion that the current GOP are not fiscal conservatives. On this we would agree.
I’d add that the President’s signature legislation attempts to bend the healthcare cost curve. Again, saying “well I don’t think it will work” is not the same thing as saying “the President has no plan.” He also endorsed tying SSI to chained CPI in the last grand bargain negotiations and made noises about raising the retirement age at the same time. So he’s got plans on the cost side as well as the revenue side.
And while you are talking long term, I think it’s important that, over the the short term, the healthcare cost curve is bending and the debt to GDP ratio is projected to be stable for the next decade. You can pooh-pooh short term solutions, but any time you are planning based on predictions of what the economy will be like 70 years from now, I think buying yourself some breathing room to wait and see how trends are developing is smart and laudable.
Michael, a citation would be welcome. Taxing the rich doesn’t appear to provide enough money to overcome the deficit. Today, the deficit is at $1trillion and taxes are at $2trillion, so using taxes only would mean that taxes have to go up 50% on the whole population. That’s already implausible, but if you just want to tax the rich, then their percentage has to be even higher. It’s worse than that, though. Going forward, if there are no changes in spending, then the deficits are slated to get worse in the future. Thus, a taxes-only solution would have to increase taxes indefinitely. I would be interested in contrary analysis, but so far it looks pretty clear to me that the deficit can only be eliminated on the spending side.
Robert, when a plan is past a certain point of implausibility, it starts to just look like political rhetoric rather than a real plan. Obama claims he will reduce administrative overhead, but empirically, both companies and the government are spending enormous amounts of time on compliance with Obamacare. Moreover, he seems to want to increase access to medical care, not on net decrease it, and more medical care means more money. In short, he has taken the most expensive item in the federal budget and made it more expensive.
It’s a “spender’s” strategy, as Arnold describes. It’s very popular up and until someone finds a way to actually pay for all of it. Myself, I’ve lost a lot of the mysticism I used to have about the feds. I used to think that special rules apply to them, but now I’m trying to remember why. What would you think if any other agency–say, a pension program perhaps–were to announce a bunch of benefits and then say they would fund it with credit cards until they figure out how to do it better? I would think it terrible, and I don’t think why a government office should have lower standards.
“In short, he has taken the most expensive item in the federal budget and made it more expensive.”
Further to that comment, recall that the initial CBO scoring indicated more-or-less a wash between costs and benefits of ACA. However, since then the long term care provision (which IIRC was front-loaded 6-years for premiums before payments out kicked in) has been eliminated, and now they’re considering eliminated the medical device tax (which I am for: any tax on GROSS revenues is a business killer). And the government is now on the hook for subsidies for WH and Congressional members/staff, which I don’t believe was in the original scoring. All of that now makes a farce out of the argument that ACA pays for itself. …and it still will, from what I’m seeing in news commentary, leave millions of Americans without health care access — which was the entire justification for federalization of 1/6th of our economy. Bah humbug.
If you could roll back the tape, and re-propose ACA to Congress and to the American public based upon its now-current cost/benefit ratios, I’d argue dollars to donuts that you’d never get it passed (even using the “reconciliation” procedures that enabled passage.)
Dang, I wish we had an edit button.
“…eliminatING the medical device tax (to clarify: I am FOR elimination of that tax: any tax on GROSS revenues is a business killer).
The CBO can’t score any claim that the AFA will bend the cost curve, plausible or not.
Personally, I don’t really know how plausible those claims are, especially over a 70 year time frame, since over that much time the question isn’t “what will things be like in 70 years if we hold the AFA constant” but “how will passing the AFA now affect things in 70 years.” Maybe it will initiate a long term shift from subsidizing healthcare with tax subsidies to subsidizing it with direct payments, and maybe that will make the public more budget conscious on this issue. Maybe subsidized healthcare with administrative cost-cutting and oversight will be cheaper than subsidized healthcare without it. Maybe giving the indigent subsidized healthcare plans is cheaper than giving them subsidized emergency care. Maybe not, who knows? It’s a super complex question. We’ll see in a few years if the cost curve keeps bending back. This is, again, why it matters that the debt to GDP ratio is stable over the next ten years — it gives us more time to see how this sort of stuff will play out.
As for whether the AFA will come in costing more or less than expected, again it’s hard to say. You point out that it is losing out on some revenue and getting some extra costs, but I could point out that the failure of a lot of states to expand medicaid saves massively on costs (as well as leaving millions of Americans without healthcare access). Who knows where all that ends up? As far as I know the CBO hasn’t re-scored the act lately.
Anyways, it’s fine if you have enough faith in your powers of prophesy to say “Obama’s plans for dealing with our long term deficit problems won’t work.” But then you say “Obama’s plans for dealing with our long term deficit problem won’t work.” You don’t say, “he doesn’t have any.”
Also, again, he’s stated a willingness to link SSI benefits to chained CPI and also endorsed deficit reduction packages that raise the retirement age (IE, Bowles/Simpson). Those plans *would* work. Now unrealized plans provide fodder for Kling’s “politicians talk a big deficit reduction game but it never happens” claim, they just also hurt his “there is no plan” claim.
Where did AFA come from? ACA, I meant.
No wonder all businesses have gone out of business due to the sales tax.
Daubin,
Federal receipts are 2.4 trillion (1). Latest numbers I can find on the FY 2013 deficit is $606 billion (2). We don’t need to clear the deficit to $0 to keep the debt/gdp growing. Paul Krugman says with a deficit of $460 billion, the nominal debt grows more slowly than nominal GDP (3). Not an ambitious goal, but it keeps the debt from spiralling out of control. So we need revenues to go up by 1% of GDP (16.6 trillion [4]) to get the deficit below that. Now, revenues have come back up to 17% of GDP (5). Which means we’ll have to get revenues over 18% of GDP to stabilize the debt in the short term. In fact, we expect deficit to fall to 2.1% of GDP in 2015 (6).
Now boosting revenues from 17% of 18% to GDP (via tax increases, not for cyclical reasons) is nothing to sneeze at, but a <20% tax increase is a far cry from the 50% revenue increase you claim we need.
Of course this buys us at best 3-4 years before the long-term projections begin to look ugly again. But the driver of long-term deficits is health care expenditures. We may not be able to assume that the ACA will produce cost control. but it has a chance of generating effective cost controls. If those don't pan out, we experiment with something new in a few years. A plan to experiment until we find something that works is a plan. A plan to use gridlock to keep in place a system that is unsustainable is not a plan.
(1) http://research.stlouisfed.org/fred2/graph/?id=FYFR
(2) http://www.cbo.gov/publication/44495
(3) http://krugman.blogs.nytimes.com/2013/03/09/gone-deficit-gone/
(4) http://research.stlouisfed.org/fred2/series/GDP
(5) http://www.cbo.gov/publication/44521
(6) http://www.calculatedriskblog.com/2013/08/update-shrinking-deficit.html
“If those don’t pan out, we experiment with something new in a few years. A plan to experiment until we find something that works is a plan.”
But that’s not what will happen. To try something different that works, one must first admit that the first attempt did not work. But admitting that your initial plan didn’t work is political suicide. It won’t happen. That’s why we’re still stuck with NCLB, or quotas for ethanol in gasoline.
The truth is the Democrats are the fiscal conservatives but they realize any attempt to cut spending will just lead to more tax cuts and won’t improve fiscal situation. All we have are radicals on the Republican side only interested in fiscal posturing and more tax cuts.