President Obama appears to be digging a very deep financial pit, and it seems likely that all his ambitions for great legislation are doomed to fall into it. It may well be deep and broad enough to consume everything else as well.
I posted yesterday on the story that the deficit for this year and next look to be significantly larger than the Administration projected. This is no surprise. I predicted the same a while ago. We are looking at almost two trillion dollars added to the federal debt this year alone, and more than a trillion next year. Everything points to larger numbers once the real totals are in.
Meanwhile there is the structural problem which President Obama inherits and for which he is now responsible. The biggest items on the federal budget are Social Security and Medicare. These are structural in the sense that they are built in costs that Congress cannot control except by changing the laws. Until recently, both programs took in more money than they put out, a fact that has long underwritten irresponsible federal spending. They are about to become really big liabilities. From CBS News:
The financial health of Social Security and Medicare, the government's two biggest benefit programs, have worsened because of the severe recession, and Medicare is now paying out more than it receives.
Trustees of the programs said Tuesday that Social Security will start paying out more in benefits than it collects in taxes in 2016, one year sooner than projected last year, and the giant trust fund will be depleted by 2037, four years sooner.
Medicare is in even worse shape. The trustees said the program for hospital expenses will pay out more in benefits than it collects this year and will be insolvent by 2017, two years earlier than the date projected in last year's report.
The first rule of holes is this: when you want to get out of one, stop digging. President Obama has been furiously digging with a larger shovel than ever before, deeper than ever before. Meanwhile, larger machines over which he has no control are digging steadily right beside him.
Now in this situation, the President wants to provide an expensive universal health care program and a cap and trade environmental law that is designed to retard the economy that pays for all this. This, Ladies and Gentleman, doesn't look like reality based policy. Maybe there is some secret here that I am not privy to. But it is hard not to think that we are now in a hole we won't get out of in our lifetime.
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