Fiscal Madhouse Run by Inmates

The chief concern of the United States Congress for most of the past year has been whether the Federal Government should enter the insurance business. While we have been thus at loggerheads over the public option, the Federal deficit for this year alone has swelled beyond the imagination of economists. From the New York Times:

The Obama administration said Friday that the federal budget deficit for the fiscal year that just ended was $1.4 trillion, nearly a trillion dollars greater than the year before and the largest shortfall relative to the size of the economy since 1945.

The shortfall for the fiscal year 2009, which ended Sept. 30, translates to 10 percent of the economy, according to a joint statement from the Treasury secretary, Timothy F. Geithner, and the director of the Office of Management and Budget, Peter R. Orszag. For the 2008 fiscal year, the deficit of $459 billion was 3.2 percent of the economy, as measured by the gross domestic product.

Economists generally agree that annual deficits should not exceed 3 percent of the G.D.P., and that is the level President Obama had vowed to reach by the end of his first term in 2013.

Allow me to ask a couple of questions. Is there any realistic prospect that these astronomical deficits can be paid off? And if not, what then are we facing? I doubt that anyone knows the answer to either question, but that is not reassuring.

So what is Congress and the White House bending their minds and wills to? Creating a new, gargantuan, public welfare program. We were told at the outset that we had to address the healthcare system in order to get our fiscal house in order. Then we got to see what Congress actually had in mind. The House plan would add hundreds of billions to the deficit. The Senate's Baucus plan is nominally revenue neutral, but it is now clear that that is a shell game. Revenues are front loaded to make the first ten years look like a fiscal wash, but even that is a canard. Savings that balance the Baucus books are just spent in parallel bills. Cuts in Medicare that the CBO scoring includes are the kind of cuts that Congress has never been able to make in the past.

If Congress and the President were to pay attention to fiscal realities, what might they do? Tony Blankley has a thought.

Here's a thought: As shrinking the unsustainable deficit is a critical pre-requisite for a healthy economy, why not just enact the $400 billion of Medicare cuts and $400 billion of health insurance tax increases [included in the Baucus Bill] - thereby reducing the 10-year deficit by about $1 trillion (when you count reduced interest payments) - but don't provide the new entitlement benefits that were the purpose of the bill.

Helping the uninsured might be a nice notion some day, but the first priority now is to avoid permanently destroying our economic capacity - as we are rapidly doing - by the insanity of adding to entitlement programs while the dollar begins to fail and the CBO predicts we will never recover from the current debt and deficit level. So cut the 10-year deficit by that almost $1 trillion.

That's the kind of thing you might think of doing if you were concerned about

Polls show that Americans are most concerned with the economy. Healthcare reform is a very distant concern. The Democrats are all about healthcare reform, and seem to regard the economic fortunes of the Republic as a minor annoyance. What is the President's big idea just now? Since Social Security recipients aren't going to get a cost of living increase, because the cost of living hasn't increased, President Obama wants to give every old person $250. Well, what's another $14 billion among friends?

The inmates are in charge of the asylum.

Comments

[William]

Giving money and power to government is like giving whiskey and car keys to teenage boys. P. J. O'Rourke

[KB]

This is more like giving whiskey and GM to teenage boys.

[A.I.]

Please forgive the snark, but Tony Blankley had a thought! Wow, I thought he was only capable of regurgitating conservative talking points, like those presented here, for the "Moonie Times". Do you have any examples of him actually thinking?

If being conservative has some connection with being Republican and managing debt is supposed to be the forte of both, history doesn't bear that out. Here are the stats on public debt under Republican and Democratic administrations: http://en.wikipedia.org/wiki/National_debt_by_U.S._presidential_terms. They may just indicate Republicans have borrowed attempting to buy prosperity while Democrats have borrowed to build self-sustaining economies. I'm not sure if that is a thought or liberal regurgitation, but it will have to do for now.

[KB]

A.I.: reply above.