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How Bad Is Our Debt Problem, Anyway? And Will a Deal Fix It?

The U.S. is $16.4 trillion in debt. What exactly does that mean?

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President Obama is set to meet with congressional leaders today in another attempt to avoid the fiscal cliff. We take a step back to look at what it really means for the U.S. to be $16.4 trillion in debt. (Jacquelyn Martin/AP Photo)

President Obama will meet with congressional leaders today in another attempt to avert the fiscal cliff — the automatic tax increases and spending cuts set to take effect Jan. 1 unless Congress can strike a deal. The cuts and tax hikes, which total more than $500 billion, are so large and so sudden that many economists fear they would plunge the country back into recession.

As Washington tries to hash out a deal, we've taken a step back to break down the numbers behind our deficit — how it grew so big, why it is actually shrinking and whether a deal can bring it under control.

How much are we in debt?

The federal debt is just shy of $16.4 trillion at the moment, which also happens to be the debt limit that Congress set in 2011. Treasury Secretary Timothy F. Geithner announced on Wednesday that the nation would hit the limit on Dec. 31. The Treasury can take some "extraordinary measures" to keep paying its bills for a few weeks, but it'll run out of cash by February or March unless Congress raises the limit again.

And that's different from the deficit, right?

Yes. The debt is the total amount of the government's outstanding obligations. The deficit is how much the government is in the red in a given year. In the 2012 fiscal year, which ended Sept. 30, the deficit amounted to $1.1 trillion.

That seems like a huge number. How did the deficit get so big?

The 2012 deficit was actually the smallest one since 2008. But it's still a giant shortfall.

As Binyamin Appelbaum noted in The New York Times, the federal government has run a deficit in 45 of the last 50 years. (The exceptions were 1969 and 1998 through 2001.) The financial crisis in 2008, however, caused the deficit to skyrocket, as tax revenues fell because of the slump in incomes and production, and government spending on the stimulus and safety net measures such as unemployment insurance shot up. The deficit for the 2008 fiscal year was $455 billion. In 2009, it surged to more than $1.4 trillion.

Since then, the deficit has been falling, albeit very slowly. The government took in 6.4 percent more in taxes in 2012 than in 2011, as the economy improved a bit and several tax breaks expired. And it spent less on Medicaid, unemployment insurance and the continuing operations in Iraq and Afghanistan.

What about the total debt? How much of that is President Obama's fault?

The debt has grown by nearly $6 trillion since Obama took office, from $10.5 trillion to $16.4 trillion.

Figuring out how much of that is due to Obama is tougher. The Washington Post's Ezra Klein, working with the Center on Budget and Policy Priorities, calculated in January that the legislation Obama had actually signed — as opposed to factors like the economy — had added about $983 billion to the debt.

Klein has also rounded up several charts that break down exactly what's caused our debt to grow so large. The biggest single factor has been the weak economy; President George W. Bush's tax cuts and the wars in Iraq and Afghanistan also fueled the debt buildup, as did President Obama's stimulus.

Have debt levels ever been this high before?

Yes, proportionally. Economists like to talk about a country's debt in relation to its gross domestic product (a measure of the economy's total annual output). And instead of using a country's total outstanding debt to calculate this debt-to-GDP ratio, economists typically use the amount of debt held by the public. (Somewhat confusingly, the federal government holds about $5 trillion in obligations to itself, most of which is money owed to the funds that support Social Security and other programs.)

Using this measurement, our debt was about 67.7 percent of GDP last year. As this chart compiled by Quartz's Ritchie King shows, that's the highest our debt-to-GDP ratio has been since the 1940s, when the need to finance World War II caused the debt to surge to 112.7 percent of GDP. But the economy grew fast enough after the war that the debt soon became a much smaller percentage of the country's GDP.

It's worth noting that a number of other developed countries have higher debt-to-GDP ratios than the U.S. Germany's public debt is 80.6 percent of GDP, and Canada's is 87.4 percent. The euro zone's most troubled countries fare even worse: Italy's debt is 120.1 percent of GDP; Greece's is 165.3 percent.

At least we're not Greece. How much longer can we keep borrowing?

That's a tough one. Some commentators — including Paul Krugman, the Nobel-winning economist and columnist for The New York Times — have argued that our current deficits are mostly a product of the sluggish economy. The deficit, Krugman wrote last week, "is a side-effect of an economic depression, and the first order of business should be to end that depression — which means, among other things, leaving the deficit alone for now."

Other economists — including Carmen Reinhart and Kenneth Rogoff, who studied eight centuries' worth of financial crises for their book "This Time Is Different" — argue that countries with debt-to-GDP ratios above a certain level tend to experience slower economic growth. Reinhart and Rogoff suggest the level is around 90 percent of GDP — which the U.S. is rapidly approaching. A recent Congressional Research Service report concluded that while the debt-to-GDP ratio can't keep rising forever, "it can rise for a time." The report continued:

It is hard to predict at what point bond holders would deem it to be unsustainable. A few other advanced economies have debt-to-GDP ratios higher than that of the United States. Some of those countries in Europe have recently seen their financing costs rise to the point that they are unable to finance their deficits solely through private markets. But Japan has the highest debt-to-GDP ratio of any advanced economy, and it has continued to be able to finance its debt at extremely low costs.

How does all this fit into the fiscal cliff? Would a deal to avert it fix our debt problem?

Actually, going over the fiscal cliff would almost singlehandedly erase the deficit. Tax rates would shoot up, and the fiscal cliff's indiscriminate budget cuts would slash military and safety-net spending alike.

The problem is that all those tax increases and spending cuts would likely throw the economy back into a recession, causing the deficit to balloon again. "The economy will, I think, go off a cliff," said Ben Bernanke, the Federal Reserve chairman.

(For more detail, see The Washington Post's exhaustive fiscal cliff explainer.)

What the two sides are trying to do is identify cuts that are ultimately deep enough to bring down the deficit — and thus, eventually, the debt — without stalling the economy. But negotiations collapsed last week after John Boehner, the Republican House speaker, tried and failed to pass a "Plan B" alternative to the president's proposal in the House. Obama is set to meet with congressional leaders today to try to strike a deal to block at least some of the cliff's impact by Monday night. But its prospects seem dim.

"I have to be very honest," Sen. Harry Reid, the majority leader, said on Thursday. "I don't know timewise how it can happen now."

Of course, some analysts have pointed out that people on both the Republican and the Democratic sides may actually want to move the cliff just slightly down the road into the next Congress, which convenes Thursday, Jan. 3. The advantages: Boehner can be safely re-elected as Speaker before he has to do serious twisting of arms of fellow GOP House members to get their votes for any compromise plan. And there will be a few more Democrats in the House and the Senate for the White House to rely on in enlisting the votes it needs to ratify any such deal. The disadvantage: Delay makes the risk of miscalculation greater for either or both sides — and for the public.

The Economic Pyramid CTC3
______CONSUMER
_____RECREATION
____COMMUNICATIONS
___TRANSPORTATION
__BUSINESS
_INDUSTRY
AGRICULTURE
|SOIL|MINERALS|FORESTS|WATER|
|WIND|SOLAR\GEOTHERMAL|ETC._\
Conservation is the wise-use, nanagement & development of the Earths natural resiources, including wise-use of CONSUMER (taxpayer money)
Conservation & revenue is needed at all levels of the Economic Pyramid!
http://www.twitter.com/CTC123GREEN

Looks like typical Washington smoke and mirrors to me; not to mention this ignores the tens of trillions in unfunded liabilities in coming years that David Walker, David Stockman and others have warned about.  I guess the ‘understood plan’ is to just keep printing money and see what happens.  Geez.

David S. Most

Dec. 28, 2012, 2:35 p.m.

After every period of deficit spending, a boom has followed.  Go back and look at the deficit/time curves in the USA.  Also, nobody is rushing to cash in US bonds!  The Chinese are happy to earn even the pittance being paid by the US Treasury in interest.  Remember in the 80s it was the Japanese holding “all our debt”.

Congress still thinks the US budget is like the “family” budget.  Big unspoken difference is that the US can and does supply alll liquidity!!  Once the gold standard was dropped, fiat currency became our MONEY.  If the govt. begins reducing its supply of “blood” into the economy inevitably a recession will follow.. Common sense 101 tells us that!!

Bruce Fernandes

Dec. 28, 2012, 2:41 p.m.

Funny how when Reagan ran deficits of $200B during his presidency the liberal media and democrats cried out as if the world would come to an end unless Reagan agreed to tax increases.  Reagan too many times agreed to tax increases never getting the demanded spending cuts.

Let’s face facts.  Both parties are in the business of buying votes through spending.  Each party has its own agenda but their central agreed-upon agenda is the neverending growth of government spending.

Such spending on entitlements has lulled a nation of consumers into believing they can keep on consuming; never saving near enough for their own retirement.  Milton Friedman once said we would have one doosy of a recession if Americans saved 7% of their earnings and put it toward their own eventual retirement and health needs.

This entire society is structured based upon 70% of GDP consisting of consumption.  We have a chance to change the equation if oil and natural gas is eventually exported after meeting almost all of our own internal needs.

But Americans need to come to grips with the following proposition.  Are you willing to look into your grandchildren’s faces and tell them to go to hell because I am entitled to my retirement and healthcare entitlements regardless of how little I contributed into these “ponzi-gamed” systems?

Greece, Italy, France, Spain, Portugal, and a few other European countries have reached the point where there are no more people to tax and too many people with their hands out.

This isn’t going to end well in America because we do not have any politicians that represent the best in all of us…. people who are profiles in courage that would put their career in jeopardy by telling the American people the full truth once and for all.

A true leader could lead his/her people out of this mess and ask for collective sacrifice.

Here is hoping that just as series of U.S. Presidents punted on the slavery issue we eventually get our “Lincoln” who will take on this mess and perhaps be a one-term president that history would look on so kindly that future presidents would want to emulate his/her courage under the fire of too many people lining up and taking from the payors.

David Most is right.  The US budget is not like the family budget.  The US, if it chooses to, can create money.  It can collect money from others, by force if necessary.  It can add fees onto things it didn’t produce.
More importantly, America is not Broke, as I point out in an article by the same name on Huffington Post.  See where $100 trillion is here: http://www.huffingtonpost.com/scott-baker/america-is-not-broke_1_b_1904062.html
Propublica has bought into the mainstream consensus, that there is such a thing as debt in a fiat economy with a sovereign right to create money (whether exercised or not), and that the “budget” is an accurate measure of government assets (it is FAR and away NOT an accurate measure, and completely ignores off-balance sheet CAFR accounts accumulated since WWII, totaling trillions).  For shame.

Gary Trabucco

Dec. 28, 2012, 3:17 p.m.

Thanks for a very helpful article.  As usual, you answered my questions. I was wondering what would happen to deficit with we went over the cliff. Thanks again for great work.

A few points that come to mind.  I guarantee they’ll anger a lot of people, but…hey, holiday weekend.

- First, let’s agree that the “household budget” analogies are idiotic.  The breadwinner doesn’t print money in the basement, whereas government does.  The family budget is communal, whereas money given to rich people doesn’t go to subsidizing my dinner.  The family breadwinner works harder when times are tight, rather than demanding the kids pull their weight.

- Every dollar is borrowed.  So the debt is money in the economy.  If we pay off the debt, none of us have any dollars.  Maybe coins.  So a high debt is not necessarily the end of the world for a country like ours unless the best possible state is for all of us to be penniless.

- The dollar’s value (most currencies, in fact) is based on faith in the government paying back what it borrows eventually.  The most damage anybody can do to our economy is to question whether Washington can afford to pay back its debts.  I don’t mean articles like this, I mean Obama and Boehner whose voices count and should know better.  You’d think they would have learned this after the Tea Partiers announced they wouldn’t raise the Debt Ceiling and the stock market tanked.

- Both parties are prolonging this for the drama.  They’ll come to an agreement at the last minute (and no sooner) because it’s not worth their time to agree a moment before the timer runs out, whereas it mystifies their job to hold off.

- The debate is which of us to tax, but no more than lip service goes to maybe demanding that every company that sells in the United States pay, say, 25% (a low rate) of their revenue in taxes, regardless of where they’re based or how they juggle the numbers, like GE’s $2,500 tax bill.  You would think that companies in the business of removing money from the country would be forced to pay something back.

- Similar to the corporate tax-dodgers, rather than figure out what “rich people” are, it seems terrifying to Washington to consider eliminating the distinction of capital gains.  Doing nothing to get money should be taxed higher, if anything, being contrary to capitalist views.

- In every case studied, providing useful services disproportionately boosts tax revenue.  Roll out municipal WiFi and bring in ten percent more money every year, because the economy expands.  The Apollo Program, due to the broad spectrum of technologies invented, created a return on investment (to the GDP, not the government) of nearly twenty-to-one!  For a government, the problem of a deficit is resolved by spending, counter-intuitive as that may sound.

- ...But not all spending.  The wars are a sinkhole of non-invention and are run in ways that outright avoid peace.  Right now, as much as I respect the men who enlist to defend our country, half the deficit is currently going to blowing up villages you and I can’t spell, which is radicalizing the people whose families get immolated.  That’s not sustainable and isn’t improving our finances.

- Likewise, freedom is a huge economy booster.  People free to interact innovate.  People afraid of speaking out (because FISA lets the NSA eavesdrop on everything and the FBI criminalizes whatever it likes) don’t.

- Lastly, let’s finally agree that trickle-down economics doesn’t work.  Rich people don’t spend more when you give them more, because they already have too much money to spend.  And considering the enormous skew between classes, it might be time to fix that.  Maybe stop framing it as “patriotic duty” to pay taxes so much as an enlightened self-interest of, “if the government tanks, the contract law protecting your assets goes away.”

Scott, one potential source of revenue you’re overlooking is a huge one, and one that got us through the Revolutionary War and (in the North) the Civil War:  Interest.

The banks (who were very happy to take bailout money, even though many deny it now) have proven that they’re opposed to this country’s government and its people, so even though they’ll complain, I don’t much care.  A government in the business of banking can easily cover costs.

I didn’t want to get into that, but since you’re already looking at revenue sources, I like that better than seizure.

Ronald Landingham

Dec. 28, 2012, 3:46 p.m.

The issue is not the deficit but the Republicans’ attempt to slash programs that benefit the majority of the population.  Government spending means income to the population which in turn translates into more income (through spending) which gets the economy running.  Increased income means higher tax revenue for the government which reduces the deficit.  Over time, the government needs to spend more-and-more to keep the economy going or else it would slide back into a depression that would eventually lead to a revolution.
The Marshall Plan, following WWII, which provided hugh amouts of money to Europe to rebuild with the requirement that the money be spent on purchasing goods and services from US corporations, was the major factor that prevented the US from slipping back into the Great Depression.
Since the time, the Government spending on the “Cold War” and on all of the other wars (Korean, Southeast Asian, etc.), followed by the “housing bubble” have kept things going since then.
So the deficit has increased which in-turn has kept the economy out of a depression.  What we need is actually more Government spending (but not handouts to banks and the wealthy which does not translate ing income-banks and corporations are already sitting on hugh reserves).

Bruce Fernandes

Dec. 28, 2012, 4:03 p.m.

The term “trickle down economics” has been so maligned that it has lost its true meaning.

When someone who has money decides it is in his/her best interest to hire someone, presumably who does not have as much money and who is seeking gainful employment…. and that person is hired….

THAT’S TRICKLE DOWN BABY SO GET OVER IT.

That being said the republican position about tax reductions and job creators is 100% pure bunk.  Employers hire when they need people without regard for tax rates.  Now when the big cut in rates from 70%/50% took place I have no doubt that incentivized more hiring because that drop in the Reagan administration was huge.  But today, the highest marginal rates are well below historical average and have no impact on hiring decisions.

I work as a CPA for the past 32 years and I have never had one client tell me that taxes would influence hiring needs.  It may result in hiring fewer employees because the owner has to pay higher taxes but the act of hiring is based upon demand for product or services and the need for the appropriate worker to provide the appropriate service such that the employer maintains goodwill with customers.

The most annoying thing about economists is that their observations are in a complete vacuum, as if the economy is some force of nature like gravity.  It is not; it is a mere artifice, which makes the hardships felt by citizens during economic depressions is an even more vile act.

The RULES matter in economics, more than the numbers (oh, no, I heard an economist faint).  The rules are what creates the system in which capital can exist and flow.  Unfortunately, we have a severe imbalance in the rules, where there are special strokes for hedge fund folks, and the rest of us get to pick what we can that falls off their tables. 

“Fiscal Cliff” is the rant of short-term thinking politicians that can’t see beyond their noses or the next election cycle.  Merely fixing the numbers does nothing, but set the house of cards up for the next big fall.  And each time the house falls, the bottom 80% has it fall on their backs.  Perhaps not so ironically, the bottom 80% are also the ones supporting the house with their backs in the first place.  And, I’m sure the top 1% is really excited to see when that back will break. 

We are headed for economic disaster not because of some stupid tax policies.  Tax policy alone does not make or break an economy.  Lack of demand, lack of economic equality and economic opportunity, lack of innovation (not in money or insurance, but actual things people make and do) will lead us to economic disaster and become another China or India (no, not something we should aspire to: they are 3rd World Countries).

In the 1930s, during the first Great Depression, the citizens of this country seemed to understand all of this, and they looked far into the future to create safety nets like Social Security, and level the playing field with agencies like the SEC.  Instead of looking 2, 3, or even 4 years down the line, perhaps we need to engage in a bit longer term thinking today.  What do we want this country to be in 2025, not just 2015?

walter d. shutter, jr.

Dec. 28, 2012, 4:31 p.m.

“What we need is more Government spending”?  Even deficit spending?
Those who support this position assure us that Government spending ultimately results in more revenue collected by the Government in taxes than was spent in “priming the pump”.  This is the fiscal equivalent of a perpetual motion machine. And, as the perpetual motion machine is an impossibility because some energy to run the machine is constantly lost to friction and must be replaced from outside the system, running the economy on deficit government spending must necessarily include servicing the deficit.  Eventually, if governmental deficit spending continues as it has of late, servicing the national debt will consume all the revenue.  This concept should be familiar to anyone who has a credit card in his wallet.

Some thoughts.

“(Somewhat confusingly, the federal government holds about $5 trillion in obligations to itself, most of which is money owed to the funds that support Social Security and other programs.) .” It is confusing, but the confusion is not what it seems. The five trillion is supposedly a reserve against accrued obligations for the entitlements. But then the Federal governmnent runs a cash budget, which is not be allowed to any similar business. Proper accruals (extra liabilities) would run into the tens of trillions of dollars additionally.

All discussion is of the Federal indebtedness as a percentage of GDP.Forgotten are the debts of our States, Cites, quasi public entities (Fannie Mae, Freddie Mac, etc), guranteed obligations, and of course various and sundry accruals (pensions, health care, etc.).

“the highest our debt-to-GDP ratio has been since the 1940s, when the need to finance World War II caused the debt to surge to 112.7 percent of GDP. But the economy grew fast enough after the war that the debt soon became a much smaller percentage of the country’s GDP.”  Not quite true. Between 1946 and 1970 (25 years - about a generation) the CPI increased from 18.2 to 37.8. By inflating the currency the government managed to wipe out 52% of the debt. Inflation is a tax, not all that different from any other tax. Unfortunately though it is the worse of all taxes. It hits those that are thrifty in particular seniors and it encourages behavior that destroys the economic fabric.

After the First World War Germany suffered a hyper-inflation that was burned deeply into its national psyche. Their financing has been more conservative than others and is a major factor for their relatively successful financial performance.

The dollar is currently the reserve currency. We have managed to use our ability to print money, to live well above our means. International attitudes can change rapidly and there is no assurance that others will continue to allow our profligacy.

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Last time I checked the debt are swaps of non interest notes (dollars) for interest bearing notes (treasuries). There is no “borrowing” do you worry about your bank selling to many CD’s?  They are functionally similar. 

I have not checked lately but I believe in 2012 there was about 120 trillion of “debt” rolled over.  Every auction sells out.  And now with the Fed doing the twist they are actually crowding out the market. 

The selling of treasuries does not fund anything.  It is a misguided overdraft law that was passed about 100 years ago that says that any appropriation by the congress must be matched by selling treasuries.  There are some good reasons for selling treasuries but funding spending is not the purpose.

Not sure why this is so difficult to understand.  The debt is an indicator of how well the economy is functioning.  If you want to lower the debt fix unemployment.

John has it right. Under our fiat money system the government debt represents how much money is in the economy. Money is debt. If all the government debt is repaid there will be no money. Cutting the debt actually reduces the money available to private enterprise. It’s counter intuitive but true nonetheless. Think about where the money goes that we think of as debt. Mostly to private individuals and companies.

The very nature of work is changing rapidly and the worry that there will soon be only two or three workers to every retiree is unfounded. We don’t all work in factories making minimum wage. The number of people needed to run a huge coal mine has fallen by a factor of about 100. What used to take 300 men is now done by 3 technicians. Same in most areas of production.

Cutting debt must be done very carefully as it is actually the destruction of liquidity. That’s why it could cause a recession. The tax hikes won’t cause a recession but the removal of so much money from the system will. Tax money is still in the system, just flowing in a different direction.

All it really means is our elected officials spend like drunken sailors to buy votes. Starting with the president. Debt is not acceptable. Stop spending to buy votes. Stop spending to further your socialist agenda. Just because your family has millions of dollars and are the royalty of the US does not give you the right to spend the publics children into poverty.  Can’t people see it it for what it is. It is failure on the part of the senate and president to not accept spending cuts. True cuts. Cut 10% from all spending. Every single item. No exceptions. Problem solved. No more debt. No more issues. No tax increase for the 47% that actually still pull the cart and pay taxes. But no Obama wants to spend and spend and fly to Hawaii and have a hollywood party, he is the consumate Nero fiddleing while Rome burns to the ground.

The bunch of hemorrhoids that we have running our country should all join hands and jump off a cliff. The banks sit on the corporations that sit on the government that sits on us. The fascist government is nothing more than corporate muscle and a collection agency for the bankers. The president is nothing more that a bank employee. You will live within the confines of the reality that they create for you. That includes how far up your a$$ they reach for what little you have left of your income, assets or privacy. There are 16 global banks involved in the LIBOR interest rate fixing scandal and the best we can get is a bunch of bitche$ whining about how much more they can extract from us. The central bank should be nationalized, congress needs to create the money supply and lend it to the banks. The discussion in congress should be how much interest to charge the bastard$ as your tax burden evaporates.

Mixed Economies which allow for an inter-play of private and public influence to stabilize cyclic gain and loss is an ideal regulator essential to monetary creation and destruction; this stabilizes the value of currency. There are many approaches to systematically apply this ratio to real world economies,but to fulfill it’s purpose, economic decline whether it be unemployment, inflation, debt deflation or a host of loss indicators must be addressed by the creation and destruction of money. It is primary to sound economics to realize the private economy is debt based and unable to create money without it being balanced by debt. If it were left to it’s own devises it could only continue to function until debts can no longer be paid and default crashes it’s expansion. Only the active intervention of government economic policy can bring new monies into the real economy that will balance the over extension of private debt. This counter-cyclic intervention is paramount to a stable economy and is only made possible by some form of government spending. Under performance of any economy reflects unused productive capacity and absence of demand. This is the present fiscal dilemma in a nut shell. Imprudent policy to force a government to increase revenues and cut expenditures during a period of economic decline runs counter to the primary issue of managing a productive growth based economy. The political battle being waged over government fiscal policy should immediately be diffused. In a real economy taxes and spending are secondary to the many aspects of under performance that are evident. Only in a healthy economic atmosphere can taxes and government spending be directed to fulfill their functions of creating and destroying money.

E Henry Schoenberger

Dec. 29, 2012, 5:20 p.m.

TREASONOUS SABOTAGE: THE FISCAL CLIFF: TO HOLD ENTITLEMENTS HOSTAGE
Posted on December 11, 2012 by ehenry

Treason is a violation of allegiance towards one’s sovereign or country.  Sabotage is any underhanded activity to obstruct normal functioning; an underhanded effort to defeat or do harm to an endeavor.  (Refer to the American Heritage Dictionary.)

It is logical to conclude the public good of the United States and the ability of its government to properly function has been obstructed, by a large band of Saboteurs calling themselves Tea Party Republicans, who pledged allegiance (with all Republicans) to their leader - Saboteur Norquist. This has created a phony cliff as well as the 2nd worst economy since 1776 along with financial inequality of historic proportions which has resulted in an American tragedy.

Thomas Jefferson said the role of government is to protect the public. However, a radicalized group of Republicans, funded and motivated by sociopathically greedy narcissists, like the koch Bros, has done everything possible to obstruct anything for the public good.

Much of the media has neglected to objectively report the truth, because it has been parsing sides which has confused the public and provided a non-partisan platform to debate the partisan nature of Washington Politics. An objectively accurate analysis of the truth clearly reveals the treasonous substance of what has been termed – partisan politics.  It is self-evident both sides are not equally responsible for obstructionism.  Clearly one side is for protecting the public. The partisan blockade is the radicalized Republican Party, voting in lockstep against the public good, and creating a cliff by refusing to raise taxes on the top 2%.

Obviously the Republican Party is only concerned about protecting the rich, with little concern for the other 98%, especially economically displaced Americans who desperately need help.

Saboteurs have held America hostage by obstructing Congress to create a Fiscal Cliff.  And the cliff is all about not raising taxes with a disregard for what their obstructionism has done or will do.  Certainly there is no real discussion about cutting totally superfluous military bases in Europe, Japan and Korea established more than ½ a century ago in the shadows of WWII and the Korean “police action,” when only the U.S. had the wherewithal to protect these geographical areas.

Where is the concern for protecting the lives of American citizens, and properly spending government funds (when the private sector is hoarding profits offshore) to grow our economy in lieu of maintaining an over sized military industrial complex?  What about stopping all the wasteful spending primarily concerned with the financial welfare of the military industrial complex at the expense of our growing deficit and continuing financial tragedy for so many.

It is vital to realize the Saboteurs have government paid health insurance, while they relentlessly fight to never increase taxes on the wealthiest Americans, (still talk about getting rid of Obama care),  and simultaneously fight to cut Medicare, Medicaid and Social Security.

So-called entitlements are held hostage; especially, Medicare, because the Saboteurs hate anyone having health insurance from the government except for their fellow Saboteurs.

From 4 decades of experience arranging group health benefits and negotiating renewal bids, I know (along others with similar experience) how to fix Medicare.  Why has no one said anything?  Because the fix is certainly not to raise the age of entry, which is worse than dumb.  To raise the eligibility age would only make it more costly to provide coverage for older insureds; everyone experiences more health problems as bodies wear out over time - common sense?

The FIX: GROUP HEALTH INSURANCE 101:

  LOWER ENTRY AGE TO 55 ADD YOUNGER, HEALTHIER INSUREDS TO POOL
        LOWERS AVERAGE POOL AGE
  IMPROVES POOLED CLAIMS: SPREADS RISK
  LOWERS ADMINISTRATION COSTS, FEWER CLAIMS PER CAPITA
  LESS ADVERSE SELECTION (TO INSURE HIGHER RISKS)
  RETAIN SAME PREMIUM LEVEL FOR OLDER GROUP, ADJUST FOR 55 TO 65 IN ACCORDANCE WITH AFFORDABLE CARE ACT
  NO CHANGE IN BENEFITS
  IMPROVED BOTTOM LINE – FOR GOVERNMENT
  IMPROVED LONG-TERM FINANCIAL STABILITY = FIXED!

Private health carriers are against making Medicare solvent along with their mercenary armies of lobbyists.  Congress, assisted by the media and the American people who vote for Saboteurs, has enabled Saboteurs to obstruct something as realistic as Group Health 101; which simply would establish long-term stability for Medicare.  Therefore, it is self-evident the Saboteurs have no interest in the protecting the Public Good.

Is it possible to indict the Saboteurs for treason, I wonder…?

Originally appeared at: http://www.the5thestate.net

klein? krugman? applebaum? schoenberger? sounds like old germany. this economy has been and is worse than anyone ever speculates. the components of GDP can include things like (disasters), overblown medical expenses, inflated real-estate, etc. unlike the past brick and mortar economies, the current one hinges greatly on services of nonvalue. ok, so the big Storm wiped out a lot of people.. That means there will be a lot of jobs cleaning up etc. that does not add to the economic viability of the country, it just documents money. when you pay 18 bucks for a tylenol at a hospital through insurance, that doesn’t help the economy. real goods have taken a back seat for the most part. when the shit hits the fan and people are looking for food, clothing, and shelter as opposed to cable, tax preparation, disaster relief, insurance, etc. we will then know the state of the economy

Jerry Lee Mayeux

Dec. 30, 2012, 7:48 a.m.

Consider the Connection to:
The Economic Pyramid CTC3
There are 2 sides to the Economic Pyramid,  NEGATIVE(-) & POSITIVE(+).
AUSTERITY is on the (-) side, PROSPERITY is on the (+) side.
http://www.twitter.com/CTC123GREEN
http://www.pbckt.com/aY.8V1o

clarence swinney

Dec. 30, 2012, 2:28 p.m.

BIG SPENDERS
Increases by:
Reagan=10% per year
Bush II=11% per year
Obama=1.1% per year
Amazing is it not

So called “entitlements” are not entitlements at all.  You pay into SSDI and hope you never have to use it.  But, if like myself you have to, you become disabled and get a whole $1000 plus a month get to apply for food stamps and medicare/ medicaid and even then they take a premium out of that $1000 plus a month to pay for your medicare.  Living high on the hog?  Hardly, and then some republican right winger complains about how this is an entitlement and it ought to be taken away.  if you believe this right wing nonsense, then I hope you never have to use your disability or social security and find out just how it is set up to keep you poor by counting any assets against you, but in the long run I’m glad that the ssdi is there for those who become disabled and while it is just barely enough to live on per month it is better than having nothing at all.  Social security, medicare, and medicaid also count nothing against the defecit despite what these right wingnuts would tell you.

We will never pay the debt down. We are headed for collapse.

Thanks for this interesting article, Theodoic. I hope you will read all these comments and this one in particular. There is another issue that needs to be addressed: the U.S. govt’s. promised future obligations for social security and medicare. These are future liabilities that grow by large amounts each year. These liabilities are ‘off the books’, as were the financing of some recent wars. In your next article, please take a look at these issues. For starters, look up the articles written or produced by Boston college professor Lawence Kotlikoff, former Chief Budget officer David Stockman, and the Pete Petersen foundation.

This article and the following comments demonstrate how much confusion there is on how the American economy functions. At least the family budget comparison is put to bed.

The American government cannot go bankrupt because it can create its own money. Its not a question of not paying debt, its a question of whether any creditor will accept an American dollar as payment. This stage has not yet been reached and may never be reached.

Both the deficit and the debt can be reduced, as they stand today, but as people point out there are continuing future commitments that will continue to push it upwards. It is nonsense to think the debt can go zero or should go to zero. Balanced budget initiatives are ludicrous.

The America recession is a result (it never got out of it) of too much consumer debt. Consumers are not spending at the level needed to keep the economy spinning at a faster enough pace to both reduce unemployment and increase tax revenue to the government (both federal and state).

The government is part of the American economy. That is, what it spends matters to the America economy, despite what many people think. Therefore the large deficit expenditure has been helping the economy stay afloat, albeit with a relatively large unemployment level.

Consumers have not been spending and businesses have not been spending at the level required to keep the deficit manageable. The government did not need to step in with deficit spending but it did. I leave to the reader to work out what happens if the government does not deficit spend. Think ugly, do not think good as too many. people do who do not understand

The economy is not really improving. So to take more money away from consumers and businesses in tax increases and for the government to spend less in the economy can only hurt the economy. That is the fiscal cliff will hurt.

It is no longer a problem that America has on its own and its not a problem that America can resolve on its own. America, along with Japan and Europe are now influence by being part of the global economy. Europe has already tried what some people in America think is the right thing to do. Europe clearly shows austerity is not the best path at this time.

Parts of Europe are unlike America and Japan in that the separate countries using the euro cannot create the euros for themselves. Those European countries that do not use the euro can create their own money, e.g. the UK. The UK is doing this.

clarence swinney

Dec. 31, 2012, 12:55 p.m.

CORRECTION
Big Spenders
Increases by year(avg)
Reagan=10%
Bush =11%
Obama=2.2% (not 1.1 as listed prior)
Obama numbers
Bush last fiscal year=3500B
Obama 2013 fiscal budget=3800B
8.8% increase or 2.2% per year

Bruce Fernandes

Dec. 31, 2012, 1:11 p.m.

Clarence,

Your analysis of big spenders is the most misleading ever.  When Obamacare starts kicking in and $150B of tax credits go out the door to subsidize healthcare for the poor plus all other unfunded aspects of Obamacare kick in and the economy fails to recover enough to offset Obama’s spending will continue at over $1T/year.

Trying to dismiss his spending by using today’s GDP to compare to Reagan’s GDP is misleading.  The fact is the media and their democratic co-conspirators pressured Reagan into raising taxes a multiple of times w/o any spending cuts.  That is the story, the democratic party standing firmly in favor of the takers believing you can simply milk the makers for more and more and more.  Lady Thatcher reminds us that when you run out of people to tax to death socialism will begin its death spiral…. which we are now seeing in all of Europe.

So why do we want to socialize medicine when it has been an abject failure in Europe?  The elite of Europe choose private healthcare over state run healthcare leaving the middle class and poor to the vagaries of the POS state run system.

I am looking for a consierge doctor next year to be my lead into all my medical so that when I am forced to insure myself for the eventual state run POS healthcare system Obamacare assures will occur that I can go in with solid information to at least get my tests done at the POS system and hope against hope they are reliable tests.

kevan scottkk

Dec. 31, 2012, 3:46 p.m.

dEMOCRATIC CONTROLLED MEDIA? hARDLY, AND i THINK YOU’VE BEEN WATCHING TOO MUCH OF THE FOX NETWORK, AGAIN!I’VE BEEN NOTING THESE CLIFF NEGOTIATIONS AND SADLY THIS IS SET UP TO TAKE FROM THE POOR TO GIVE TO THE RICH.  wHEN WILL THINGS CHANGE?  wHEN WE AS A PEOPLE COLLECTIVELY SAY nO MORE!  UNTIL THEN,  THINGS WILL JUST STAY THE SAME AND WE WILL CONTINUE TO WALK TOWARDS A MUCH LARGER AND DESTRUCTIVE CLIFF, AND ONCE WE GO OVER THAT CLIFF THERE IS NO RETURN

Bruce, No it is you that is misleading in your anaylsis.  Reagan was the first in a long line of Republican leaders that began privatizing everything and deregulation ran rampant from Reagan to Bush 43.  Those 2 things alone have contributed much to the condition we find ourselves in today.  Clarence is right on in his analysis and figures.  i am sure he can give you his link to where he got the figures.  Go ahead and get your consigere doctor but i know frompersonal experience that there are a growing number of doctors that look at me as a medicare/medicaid patient and do as little as possible for me and eventually force me to go looking for a doctor with compassion who has not abandoned his oath .  i am excited to see the affordable health care act and it’s provisions that no one can be denied because of pre-existing conditions.  the only thing that is missing is single payer and that will come in the future when we finally vote out these people who have gotten us in this mess to begin with.  By the way, Europe’s ‘socialized’ medicine works fine there as well as in canada and one day it will work well here too.  disappointed?  don’t be, for when people realize that the conditions of obama care work for them they will not be happy with any republican or democrat that wants to take it away.  it is the 1% who have controlled us long enough and it is now time that we rise up and take the country back for the 99%!  you only have to look at the romney campaign and his allegiance to the 1%‘s welfare above all else to see why the american people did not elect him.  That was only a syptom of the disease and we who are progressive are doing our best to exterminate it!

Bruce Fernandes

Jan. 1, 2013, 2:31 p.m.

Kevan,

You are so naive about universal healthcare.  My first wife died of a brain tumor in 1999.  Her neurosurgeon, neurologist, and her chemotherapy doctor were all transplants from the Canadian system.

When I noted on the neurosurgeon’s wall that he had Canadian credentials I asked him why he moved to the US.  He told my wife and me that under the Canadian system my wife would never be given the tumor removal surgery because her prognosis was so dire and her condition so weakened that having less than six months of life meant being provided painkillers and palliative care to the end.  My wife survived 25 glorious months.

Maybe you do not care where US healthcare goes but imagine yourself sitting in a room (someday) and being told your spouse doesn’t merit surgery and that she should just go off and die for the good of the collective.

That is rationing.  Furthermore, evidently, you are unaware that in the Canadian healthcare system when the budget runs out of money the entire system literally shuts down weeks before the end of their fiscal year.  Better not need any lifesaving surgery otherwise you have to come to the US and pay for it yourself.

In England where I have many friends… they all are part of the private pay system because the government system is simply overrun, underfunded, and under doctored because any doctor with the ability to participate in the private system does so leaving the doctors in the public system overrun, overworked, underpaid.

Let’s see how you feel if some doctor is forced to tell you to just go off and die for the good of the collective and see if you think government-run healthcare is such a great thing.  Those with money will have better healthcare so for those of you who think you are taking the rich down with higher taxes whose monies will be dedicated to paying off society’s takers….. you are sadly mistaken.  We will have the better healthcare in spite of all efforts to permanently transform our society into some vision of European socialism.  BTW European socialism is coming apart at the seams because they have finally run out of makers sufficient to keep pay the tab for the takers.

Bruce,

I don’t know how this suddenly became a debate about cost of healthcare, but, sorry to hear about your wife as I am, you are merely throwing anecdotal epithets out there to justify what you perceive to be a better system. 

The economics of health insurance is actually quite simple: the larger the pool of insureds, the lower the cost.  That is the basic premise of single payer systems.  And, the proof is in the veritable pudding, as the cost of healthcare in single payer systems is about 5-8% of GDP whereas our costs are now over 16% of GDP. 

Also, from your claim about getting a concierge physician for yourself, you must be far better off than the rest of the population in terms of wealth.  The vast majority of Americans cannot afford concierge medicine, as the vast majority of the UK’s population cannot afford private healthcare. 

Finally, you seemed to have glossed over a particularly substantial fact when disapproving of UK healthcare:  BOTH private and public systems exist.  The single payer system has not replaced the private system, and these ideas are not mutually exclusive.  For those that can afford it, they can still get private health insurance.  For the vast majority that can’t afford it, single payer is a cost effective way to get access to basic healthcare.

Bruce Fernandes

Jan. 2, 2013, 5:03 p.m.

Before you sing the praises of the British system you need to be aware of the fact that one of the rations that occurs is for people over age 55 who need kidney dialysis.  The answer is you are SOL and you need to find a way to get to Canada and then the US to get kidney dialysis.

There is extreme rationing of all sorts.  Maybe getting basic healthcare for all is worth this price but I suppose you need to ask the people who are being denied services like kidney dialysis whether they think they are participants in a good healthcare system.

We are already seeing forms of rationing in the US system.  For the record, I think some of these decisions being made by the health board are spot on.  Like eliminating PSA tests because they are not a very good diagnostic tool to uncover prostate cancers.  Women are not happy with the recent edict that the age to start mamograms has been increased. 

These new rules from the health board will continue to stream in and I think many will be smart ways to lower costs but I think everyone needs to be afraid that over time and as US healthcare budgets come under severe strain we may reach a pivot point where people with brain tumors and other cancers where the five year survival rate is less than 2% will not get any care beyond palliative to a shortened end for them…. what I refer to is going off to die for the good of the collective.

The movie Soylent Green tells a story of government solutions to aging… dying for the good of the collective.  Do not believe for a moment that cannot become a possibility far enough in the future that the current generation that would never stand for that eventually dies away and slowly, bit by bit, piece by piece, government installs such rationing policies that make people realize that the words “death panels” were in fact where government drifted to because they always knew they could never keep all of their healthcare promises.

Bruce, do you think I’m a taker?  if you do you are very much mistaken.  I’ve worked since i was 15 up until the day I suddenly became blind.  Thank God that all those years I worked I had contributed to SSDI and due to that I am able to collect disability from that insurance that I had paid into all those years.  Do you really think that people like me want to be poor?  most people that you call takers are just trying to survive.  Europe’s problems are with those countries that have chosen austerity.  Those governments like germany who have refuse d austerity as a path to follow are now finding more prosperity for all it’s citizens.  They know that gov’t spending contributes to a vibrant economy and that cutting gov’t spending actually keeps the economy from growing.  Those governments that choose to spend their money on things like unemployment and disability, among other things, find that because their citizens have a little money to spend that the citizen spending contributes to keeping the economy moving in a positive direction.  As sam says, your evidence is anecdotale and I can match your horror stories with postive stories of my own about the socialized medicine of canada and the u. k.  I’m somewhat of a disability advocate and as such I, haveing lived the pain of becomeing disabled want everyone here in america to have equal acess to health care.  our system here is aprofit driven system and without checks from things like the ahca people here in america would be refused health care.  I’ve seen it happen and mostly to those who are disabled,

Bruce Fernandes

Jan. 2, 2013, 6:29 p.m.

The term “takers” is reserved for those who choose to live their lives seeking government largess.  They are like the woman in Detroit in 2009 lining up for hours to get a grant that she believes is being paid out of “Obama’s stash”.  They are the woman getting her free Obama phone.  They are the people who were totally lost on the day of the LA Rodney King riots when the post office burned down and they had nowhere to go to get their entitlement checks.

We have an entire cross-section of population that receive so much in government welfare and other largess they are unable to get off the dole because they would earn so much less than the sum of what they take from others who make it and pay for it.

Now democrats want higher taxes before the ink on yesterday’s deal dries.  We are going to hit an inflection point when one of the US TBill or TBond auctions fails and that will signal the end of free money and that will signal the beginning of a vicious forced austerity on the US.

Before Spain was forced into austerity their unemployment rate surpassed 25%.  They have run out of other people’s money to tax away and give to the taker class.

To: kevan scott - re: “Bruce, do you think I’m a taker?”

there is much that you said with which I disagree, but it is your opinion and has as much right to an airing as anything I may offer.

When it comes however to facts you should be more careful. You stated “Those governments like germany who have refused austerity as a path to follow are now finding more prosperity for all it’s citizens”.

You picked the worse example. As a result of the hypper-inflation that Germany suffered in the 1920s, their national psyche finds fiscal stimulation abhorent. Of all the countries in the Euro zone, Germany is in the forefront of fiscal conservatism. As to their being prosperous, you are correct. They have one of the lowest unemployment rates and despite what most people believe of China, Germany, with a much smaller population, has the highest balance of payment surplus of any nation.

@Abe:  Yes, you are correct, somehow hyper-inflation is the master boogeyman for the German banks and government.  However, to say that they are some sort of shining example of fiscal responsibility is somewhat naive.  Their economy, like China’s, was fueled by the Euro Zone countries now facing fiscal problems, and it was German banks who dolled out the money to make it happen (much like China loans to the US).  Both Germany and China are primarily export driven economies, and that imbalanced approach is leading to higher unemployment in both countries as the world’s economy slows down.  It truly is a global economy, and we are all in the sinking ship together.

@Bruce:  Your example of a 2% survival rate for someone with advanced brain cancer is excellent.  Unfortunately, the cost of care skyrockets in exactly those circumstances.  However, this is not to say that the procedure is unavailable.  In fact, it is.  The only question is, who is going to pay for it?  Certainly, those who are more well to do in this world will pay for it out of pocket.  The rest of us, I guess, might be out of luck, or will have to sign up for some experimental treatment.  But, that’s kind of how it goes with the majority of insurance today in the US.  More people in our country now go bankrupt because of healthcare than any other reason, and that is a travesty.  Also, I agree with you, one of the larger problems with our healthcare industry is a lack of science-based medicine.  Things like the PSA test were never proven through rigorous testing to prove its efficacy and cost in use.  But, we have large lobbies for pharma, hospitals, and doctors that keep this kind of nonsense going.

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