Those Little Cuts

I've observed this elsewhere, so it may as well go here, too.

When we had the so-called "fiscal cliff", we had roughly US$85billion in tax increases.  With the "sequester", we have had roughly US$85billion in spending cuts.  To be sure, those cuts are poorly focused.  If only we could get the Democrats to be responsible partners in passing a federal budget.

While I support an 80/20 ratio of cuts to tax increases, I also think that the above is "balanced".  Or at least, the perception of "balance" is a good test between a reasonable observer and a ideologue or a partisan.

It is hard to know exactly what the problem is with the Democrats in the Congress as well as our President.  I suspect that they see government spending as a means of power and control.  Anything that diminishes that power is something they oppose.

I also suspect that they may also suffer from a sense of denial.  Like every other person that has taken a real world look at our budgetary problems, they understand that the driving force behind our out of control spending is the unrestrained and unsustainable growth in social programs.  But because their "base" has been sold on the relative merit of those programs, they do not dare act as responsible legislators and begin limiting spending in that area.

Instead, we continue on an inexorable course towards national fiscal insolvency with plenty of pain for people that will find themselves dependent on government programs.

One disappointment is the lack of Presidential leadership on the issue.  Mr. Obama has said that we need to cut wasteful spending.  I have heard him issue such pronouncements in the past.

Yet he has not seen fit to demonstrate any leadership on the issue.  The White House has yet to issue a detailed list of programs to be cut.  Rather than work face to face with the Republicans to develop cuts that make sense, Mr. Obama has returned....again, and again...to the campaign trail.

The Democrats in the Senate are worse.  They haven't passed a budget for almost four years.  They won't pass their own budget.  They voted against Mr. Obama's budget in significant numbers.  And they refuse to bring any budget passed by the House to the floor of the Senate.

They are doing little more than closing their eyes and hoping that are nation's fiscal issues will somehow disappear.

Their eyes are closed. 

Ours are not.

They Just Are Not Serious

Recently, Mr. Obama signed a presidential order ending a current presidential order that freezes pay for all federal civilian employees.  As a result, federal wages will go up in April.  The cost per year is roughly US$1 billion.

And yet our federal deficit is running well past US$900 billion per year.

Apparently he is still not serious about solving our nation's deficit spending problems.  I'll start to take his proposals more seriously when he starts addressing the problem in a serious manner.

Making The Cut

This editorial cartoon was in our local rag recently.  I think it covers the issue nicely.  Have a look.

A Real Way 'Forward'

The Washington Post's Jonathan Rauch has suggested a path towards re-election for Mr. Obama.  While it isn't everything that I would hope for, it does represent modest real progress for the country.

The three elements that Mr. Rauch suggests are:

1.  Long term fiscal retrenchment - He suggests something along the lines of Simpson-Bowles; the national commission that Mr. Obama established to look at long term fiscal reform.  Given that he created the commission and established its objectives, it would be a pity to waste all that effort.

2.  Short term economic stimulus - Given the patronage and graft evident in the 2009 stimulus as well as the wholesale transfer of American funds to European banks, I have my doubts about Mr. Obama's ability to pull off a proper stimulus.  But if it were coupled with the other elements with an emphasis on the "fiscal retrenchment" now instead of in the ubiquitous "out years", then I am sure that we could survive another round of modest stimulus.

3.  A two-year extension on the debt ceiling - As with the stimulus, I think this is something that could be worked out if enough emphasis were placed on spending reductions.

But the problem is that Mr. Rauch has properly qualified his suggested course of action.

The president’s failure, so far, to show that he understands the scope of the economy’s problems and knows how to fix them does not stem from having nothing to say: investment in education, energy, innovation and infrastructure are reasonable things. But they are also slow-acting, small-bore stuff. Such talk does not include additional economic stimulus, an element that many economists, especially Democratic-leaning ones, consider crucial to prevent a double-dip recession. Nor does it deal realistically with long-term growth in spending.

Emphasis added.

The problem is that he does not understand how the economy works.  Instead he prefers to trade upon stoking class envy and the lust for unearned wealth. 

Unless that changes, Mr. Obama is doomed to be a one term President.

Our Medical Future?

Consider Product X.  It costs a store owner $95 to get Product X into their store.  They sell Product X for for $100 and make $5 per sale; less the cost of their building, staff, electicity, etc.

What happens when they can only get $90 for Product X?  Most store owners would stop selling it.

What happens when someone needs Product X to survive?  Not a very nice question.

But this is precisely what is about to happen in California where the state has decided to cut Medicaid prescription reimbursements by 10%.  It isn't a 10% cut in the margin that the store owner earns.  It is a 10% cut in total reimbursements.


What does this bode for our nation's future?  Nothing good.

I hardly need to point out that we can expect a lot more stories like this one in the future.  Reimbursements currently have some give in them, which allows the highest-cost providers to operate, and the lowest-cost providers to make some profit.  The natural political tendency is to squeeze reimbursements to the level where the lowest-cost providers are pinched--or even beyond.  And the best-case result of this is that in the long-run, the lowest-cost providers get bigger, while in the short term, the disruptions among the higher-cost providers compromise at least some patients' access to care.

Are we willing to put up with that short term disruption?  Not so far, unless the service exclusively benefits the very poor.  Maybe we'll get more willing as the tax bite goes deeper.  But either way, with a dramatic Medicaid expansion on its way, and more and more of the rest of the health care system under the control of the government, the fights are going to get uglier.

A modest warning for language at the link.