I’m Shocked, Simply Shocked!!!

Last week brought us news that, faced with the threat that if the “Supercommittee” fails to find $1.5 trillion in budget cuts, there will follow automatic cuts of $600 billion each to the defense budget and medicare, lobbyists decided to pull together and help identify budget cuts they could live with.

NOT!  Wasn’t the fantasy nice, for just a minute, to think of people in Washington taking constructive action?

But no, what the lobbyists for the defense industries and medicare recipients (primarily hospitals) announced was that they were gearing up for a fight to make it clear to Congress that any cuts to defense would jeopardize the nation’s security in perilous times, and that any cuts to medicare would hurt the poorest and neediest and (what matters more) those taking care of them.

Apparently they are SHOCKED, SIMPLY SHOCKED to discover that after endless debates on the vital need to cut government spending, government spending on the largest (military) and fast growing (health care) elements of government spending might actually have to fall!

OK — that’s what lobbyists do and they have earned a fine living generating increased government spending for their clients.

But really, where do people who are demanding cuts think they will come from?  Michele Bachmann came out on Monday (Washington Post, 8 August) saying that “Obama came out just long enough today to again declare that raising taxes and cutting Medicare are his only solutions to our nation’s economic crisis.”

Well, of course that’s not even remotely true — Obama also is proposing changes to Social Security, a cut in payroll taxes, and other measures.  (If bloggers spent all our time identifying blatantly false statements by certain Republican politicians we would not be able to keep up and would do little else–can’t the media do a better job on this?).

But even if it were true, why can’t people grasp the simple reality that there IS NO OTHER WAY to evade a future government fiscal collapse than raising taxes and cutting medicare.  Medicare is one of the largest areas of government spending, and due to the baby boomers suddenly becoming eligible for Medicare and our fast-rising medical costs medicare — if nothing is done — will gobble up the US economy.

On current Congressional Budget Office projections, Medicare will grow from 3.6% to 12% of GDP by 2050 and (although I don’t endorse projections this far out) to 18% for GDP by 2080.  What exactly does that mean in real dollars?

If we assume that the US economy grows by 2.5% per year (which would be nice but is assured), then the US GDP would be $40 trillion by 2050.   If Federal spending is still about 20% of GDP, then the total Federal Budget would be $8 trillion.  And medicare spending is projected (if not changed) to be $4.8 trillion, or what would in this case be 60% OF ALL FEDERAL SPENDING.

I don’t think anyone can imagine a world in which Medicare spending is six out every ten dollars spent by the federal government, leaving only 40% of the federal budget for defense, social security, interest, and everything else.

SO MEDICARE HAS TO BE CHANGED.  There is no evading that.

Paul Ryan’s plan was far too harsh, but it recognized the reality.  Michele Bachman’s distance from reality can be summed up by her thinking there IS another plan conceivable that does not involve cutting Medicare and raising taxes.

About jackgoldstone

Hazel Professor of Public Policy at George Mason University
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