The Debt Precipice

I had a conversation yesterday morning with a group of conservative gentlemen who are very pessimistic about the future of the American experiment.  They see our economy devolving into chaos soon.  So I asked myself, Are they right?

Fundamental premise of the problem

America’s debt is unsustainable.  With our debt currently at 108% of GDP, we are scheduled to become Greece in the next few years.  However, we’re unlikely to get a bailout, as Greece did, merely because of the enormous size of the U.S. economy (our economy is 48 times larger than Greece’s).

Our current level of debt is supported by our sovereign creditors, primarily Japan and China, who buy large portions of each debt issued by the U.S. government.  Japan and China invest heavily in U.S. debt, sometimes buying as much as 45% of the foreign debt issued in a U.S. Treasury auction.

If China and Japan were to cease being so “nice” to the U.S., and cut back on buying U.S. treasuries even by 5-10%, this would increase the yields of treasuries, cause our debt to be more expensive for us to finance, and have a negative impact on the American economy.  Eventually, we would be forced into one of three scenarios.

Scenario #1 – Cut Spending

Because the U.S. is residing on the edge of a debt precipice, there must be options that we can exercise to ease our debt situation.  The first situation that I discussed with my group was to cut spending.

Under this scenario, we would follow something like the budget proposed by Paul Ryan, overhaul Medicare and Social Security, and eliminate the national debt over the next 40 years.

This scenario would require that we re-train the way the American people think.  There is sacrifice under this solution.  Many Americans have become accustomed to living off the government.  We have encouraged government dependence over the last 50 years, so beginning to tell people, “No, the government will not pay for your entire standard of living” will not hit people very well.

We may have to slow the growth of Social Security benefits (raise the retirement age, means test, slow the annual COLA, etc.).  We may have to return Social Security to its original intent–to relieve poverty.  We may have to tell people that they must be responsible for part of their own retirement!

We may have to reform Medicare.  People may have to pay larger co-pays when they go to the doctor.  They may have to pay a larger portion of their insurance premiums.  We may have to reduce the number of procedures covered by Medicare.  We may have to tell people that they must be responsible for part of their own healthcare costs!

The outcome of this scenario is clear, and we’re seeing it in Greece today.  There is rioting in the streets when wise people talk about “austerity” measures (even if the cuts don’t actually happen).  People don’t like their government benefits being taken away, or even reduced.

Scenario #2 – Raise Taxes

This is the favored solution of the Left in the U.S.  However, federal government revenues have remained remarkably stable as a percentage of GDP, regardless of the tax rates on individuals and corporations, so this scenario is extremely unlikely to solve the debt problem in the U.S.

Scenario #3 – Continue Like It’s Not Happening

The second option is to continue on as we have for the last 20 years, pretending like our debt is not a problem.  The government can continue to spend $3 for every $2 that it brings in.

The outcome in this scenario is that, eventually, our debtors will stop buying our debt, or enough of them will stop buying our debt that we won’t be able to make our interest payments any longer.

After that happens, we will then continue to pay people, except the checks will bounce.  Or, the government will choose who to pay, and to whom to defer payment (as the government in Illinois is doing now).  Since we can’t stop making payments to Grandma, the government will stop paying producers like defense contractors and the doctors who provide services under Medicare.  Eventually, those contractors will say, “Enough,” and will stop providing those services.

This is also bad news for the economy, because people die when doctors refuse to provide care, and our enemies take advantage of us when defense contractors no longer build tanks.  The families of the dead Medicare patients and the unemployed riot in the streets, essentially creating the same outcome as Scenario #1.

What Are We To Do?

The conclusion of my group of thinkers was, “Prepare for the coming riots.”  They said that there will be rioting and death no matter which scenario the government takes, so it’s best for us to prepare to defend ourselves and our families.

I think that, while it’s quite likely that one of these two scenarios will come about in the next 20 years, both accompanied by a partial collapse of the U.S. economy, there is still hope.  It took us 40 years to get to where we are today.  If we begin TODAY to change the way we think about what we require our government to provide for us, we can avoid this supposedly inevitable collapse.  We can reform our government–require a balanced budget from our legislators; pay off our debt over the next 40 years; begin to deny the foolish claims of “This is my right!”

If we resolve to buckle down and live within our means, and begin to tell our countrymen, “Save for your own future,” then we can back away from the debt precipice which threatens our economic way of life.

  • http://brocmiddleton.blogspot.com/ Broc Middleton

    Ready or not, here I come!
    Bob, if this blob post is truly representative of the discussion you and your group of conservative “thinkers” had I would tell you that you need a new group of “thinkers”, possibly a group with more ideological diversity. 
    First America is not Greece, and will not be Greece “in a few years” unless your definition of “a few years” is more like a decade from now if there is no change in our economic status quo.  If that is your definition of “a few years” then I retract that critique.  Now I could quibble with you about Greece’s debt to GDP ratio and how America, even with similar numbers (which we don’t currently have), would fair much better because we are the global currency and our credit would be allowed much more latitude, however I don’t believe that was the intent of your post, so moving along…
    Yes moving along to your assessment of China and Japan buying U.S. treasuries.  The way you stated… “If China and Japan were to cease being so “nice” to the U.S., and cut back on buying U.S. treasuries even by 5-10%, this would increase the yields of treasuries”… you stated it in a way which implies that China and Japan are in some way doing us a favor.  China and Japan are not doing us any favors by purchasing US T-bills.  Do we benefit from it? Yes, but so do they.  Both China and Japan are INVESTING by purchasing US T-bills and if you look around the global economic landscape and see the problems globally, the United States is still the safest and best place to park your money.  So China and Japan are not being “nice”, they are simply accepting the economic reality that they need a place to put their money and United States is still the best option and give THEM the greatest economic security and benefit. 
     
     
    The 3 scenarios that your group of “conservative thinkers” discussed are ALL ridiculous and should ALL be rejected.
    Scenario 1 – Cut Spending:
    I assume you are familiar with saying “there are many ways to skin a cat”?  Well in budgets there are many ways to cut spending, and frankly Paul Ryan’s particular approach to where and how he has decided to cut spending is flat wrong.  Paul Ryan budget which your “group of thinkers” said they would generally follow, cuts spending to programs that directly assist the poor, elderly and most vulnerable in our society. Now spending cuts to these programs might be remotely debatable if spending cuts were as significant, or even existent, in all other areas of Paul Ryan’s budget but it isn’t. Defense spending does not get touched. Defense spending untouched for a country which spends more money then the other top 10 defense spending counties COMBINED?  Pentagon defense spending untouched despite NEVER being audited, are you tell me that there isn’t ANY waste we can go after in defense spending to help keep some of the funding for assistance programs? Do yourself and the country a favor and stop supporting Paul Ryan’s budget.  Budgets are all about priorities and frankly Paul Ryan’s priorities are screwed up, as seen in the Catholic Church rejecting the Paul Ryan budget because it fails the test of morality (as they put it).  I realize that there few plans to choose from but stop supporting a budget which cuts spending to programs which directly help those who need it most while at the same time cutting taxes in a way which most benefits those in the highest tax bracket and have already reaped the most benefits from the economy in the last 20 years.
     
    Now moving on to Social Security, Social Security benefits do NOT need to be cut.  There is a solution to fix social security which would make it solvent through even the longest of projections.  Raise the earning cap!  For those who are not aware, everyone pays social security taxes however the social security tax ONLY APPLIES to earning up to $106,800. Anything people make over $106,800 is not taxed, and due to the increase of income inequality a greater percentage of income is not being taxed because of the current $106,800 cap.  The Simpson-Bowles commission suggested raising the cap to $190,000. However, whatever the cap is raised to, the intent is to get 90% of all wage earnings covered by the cap as was the case in 1983 when cap was first implemented, with that simply change Social Security will be solvent indefinitely.    
    I am going to be quick on Medicare because this is already getting long and there are other topics which I want to address.  However recent reporting from CNN has shown a small number of people are responsible for a very large percentage of the medical costs in America.  It is these chronically ill individuals who need to be focused on. If we addressed those few people’s health problems more effectively and efficiently and also invest in prevention moving forward to lower the number of chronically ill individuals the health costs will shrink significantly and the burden of Medicare will dramatically reduce.
     
    Scenario 2 – Raise Taxes:
    You and I have discussed taxes before and the focus isn’t TAX RATES but as you stated FEDERAL REVENUES.  So a more appropriate title for this section might have been “Increased Revenues”, but more people understand the term “raising taxes” so I get it.  Any REAL debt reduction plan calls for increased revenues, and with Congress’s taxing power the options for how to do that are seemingly endless.  From small things (and a favorite of mine) like a “soda tax” similar that of the tobacco tax  or larger things like a  carbon-tax or a VAT Tax, increased revenues are obtainable.  However the more politically feasible option is comprehensive tax reform.   Both sides want it and both sides know that the country needs it.  The sticking point for many Republicans though is whether the tax reform plan will be “revenue neutral” or call for increased revenues.  For me it seems like a no brainer, when we have deficits like we do that tax reform should have a goal of bringing in more money. You can bring down tax rates and at the same time increase federal revenues; unfortunately Grover Norquist has Republicans bent over a barrel with his “tax pledge” and are afraid of getting a primary challenge if they break from it. There is so much more I could discuss in regards to taxes but the simple fact is we need TAX REFORM sooner rather than later. 
     
    Scenario 3 – Status Quo:
    For once Congress MUST act, the Bush tax cuts ARE going to expire at the end of the year.  If nothing happens then tax rates go up on everyone.  While that may help the nation’s long term debt outlook, it would not be good for the country RIGHT NOW because of the current economic weakness.  There will be SOMETHING done by Congress to address these issues by the end of the year, now that doesn’t mean it won’t be yet another short term fix to get us through the election but some action will be taken.
     
    Scenario 4 – ?: Hmm, I feel like you left out an option…what could that be…Right, a BALANCED approach! Not Paul Ryan’s insane plan or trying to balance the budget solely through jacking up taxes.  No a BALANCED approach which uses increased revenues AND spending cuts to put the country on a sustainable path moving forward.  This type of agreement will also not lead to “rioting and death” because it will be a COMPROMSE by both sides of the political isle and not heavily burden one group of people, the sacrifices will be shared by all in some way . Also since both sides are getting something and giving up something it will give the private sector what it needs to invest and grow.  CERTAINTY and CONFIDENCE! Certainty in that since both sides agreed to a deal it is much less likely to get repeal/overturned/replace by something else at the next election, and confidence in that the government actually address the problem and dealt with it appropriately.
    …whew…all done

    • http://bobewoldt.com Robert Ewoldt

      Broc, liberals (like yourself) advocate for raising taxes in order to raise revenues. However, as I stated under Scenario #2, raising revenues (at least through taxation) is not really an option, since collected revenues MAX OUT at 19% of GDP, no matter what the tax policy is.

      We can argue all day about the BEST way to reform Social Security and Medicare (and I think you and I could come to some agreement), but in the end, the amount that we SPEND on these programs needs to decrease (with the exception of raising the cap on Social Security taxes, on which I agree with you, I think).

      So, you and your fellow Democrats can continue to talk about a “balanced approach” all you want, but no matter what the tax policy is (and we could give all the tax burden to the rich, for all I care), you’re not going to raise more revenue through taxation.

      • http://brocmiddleton.blogspot.com/ Broc Middleton

        Bob,

        I don’t think that it’s all a bad thing to be considered “liberal”
        right now on economic issues considering the radical pull to the extreme right
        that Republicans have made.  If your
        perception is that I am “liberal” because I advocate for COMPROMISE in divided government and a
        BALANCED approach which everyone has to sacrifice then perhaps that says more about where the state of the “conservative”
        economic policy is than anything else.

        Also I would say that you simply misspoke but since you put
        it in all caps I assume that you intended to use MAXED OUT, meaning that
        federal revenues do not rising above 19%. 
        As it turns out in 2000 federal revenues as a percentage of GDP were
        20.6%. 1.6% higher than what you stated to be the MAX.  Now if you meant to say “normally” or on
        average, then I feel free to restate your point.  But the fact remains that 19% is NOT a
        ceiling on federal revenues. 

        Your approach to Medicare is simplistic and doesn’t actually
        address any problem.  Just spend less
        does not DO ANYTHING for the American people. 
        You need to look at the WHY.  WHY
        do we spend some much on these programs? WHY is our healthcare system so much
        more expensive than other modern industrialized nations? You cannot get the
        right answer if you are not asking the question.  Your approach is simply looking at a balance
        sheet and seeing red ink, this is not an approach which will fix Medicare or
        more importantly won’t help the American people.

        As for the Social Security solution I am glad you agree…

        Bob you are very articulate and state your positions remarkably well,
        however you allow your ideology about the role of government and political
        leanings to cloud your interpretation of reality and the facts.  Instead of allows the facts of situation to
        help mold the solution, you seem to allow your ideology to help mold your solutions.  I know I am guilty of this very same thing
        quite often, however we all need to aware of it so we can see past our own
        ideals and prejudices to see what is the BEST solution.  The Paul Ryan budget is NOT the best solution
        for America, its barely even a good one.  

        • http://bobewoldt.com Robert Ewoldt

          I’m glad that you agree that the Paul Ryan budget is a good one, even if only “barely.” That brought to mind the Winston Churchill quote, “Democracy is the worst form of government, except for all the others.” “Paul Ryan’s budget is the worst budget solution, except for all the others.” Ha ha.

          In regards to federal revenues being 19% of GDP… you may be able to temporarily increase federal revenues above that ceiling, but only temporarily. For example, if we were to change tax policy and say that the government were going to take 50% of everyone’s income in taxes, we would see a large spike in tax revenues in 2012. We might even hit 30% of GDP. However, I would venture an educated guess that the following year (2013), tax revenues would crater, and you would probably also see a decline in GDP. If you look back to the mid-1940s, there was a spike in federal government revenues up to 23-24%. However, in the following years, federal tax revenues collapsed down to almost 15% by 1950. You cannot have a tax rate that consistently raises tax revenues over the 19% ceiling. To say otherwise would be to “allow your ideology about the role of government and political leanings to cloud your interpretation of reality and the facts.”

          Broc, my solution to Medicare is not simplistic, because I really didn’t offer a specific solution. I was looking at the situation and observing, “We are not able to sustain the current level of spending.” I am not
          unclear as to WHY we have the Medicare program. We have the Medicare
          program because we want to provide medical care for our seniors who can’t
          provide it for themselves. If Medicare goes bankrupt, we will not be able
          to provide that care for our seniors. The right question to ask, which you
          are not asking, is, “How can we save Medicare so we can continue to provide
          them a good standard of care?” Liberals say, “We MUST continue to forever
          provide the same level of coverage as we do today,” without really
          addressing the question of how to make Medicare solvent. Even you fell
          into this unhelpful line of thinking. The question is not WHY we do it;
          everyone knows why we do it. The question is how to make it solvent in the
          long run.

          In terms of Social Security, I agreed with you that raising the SS tax cap
          might do some good, but it’s not a solution. You don’t solve the Social
          Security problem merely by raising the cap. Here are a couple of articles
          that you should read:

          http://www.aei.org/article/economics/fiscal-policy/taxes/the-case-against-raising-the-social-security-tax-max/
          http://www.nationalreview.com/corner/262893/case-against-raising-social-security-tax-veronique-de-rugy#

          I’m planning on writing more on Social Security later, so I’ll keep my
          powder dry for then.

          Lastly, you cannot say that you advocate for a BALANCED approach, if half
          of the BALANCE that you’re advocating really won’t work. Raising taxes
          won’t work, because it doesn’t raise REVENUES. Revenues, as I’ve stated
          before, don’t go consistently above 19% of GDP. So, really, the CORRECT
          approach is to scale back government. We can do a LOT of good for our
          country while only spending 19% of GDP, but we can’t do ANY good if our
          debt causes a Greek-like collapse.

          • http://brocmiddleton.blogspot.com/ Broc Middleton

            I consider Paul Ryan’s budget in the smallest way “good” because it addresses the national debt, however its approach is terrible and its affects would be adverse to the American people.  You have not addressed the critique I put forward of the Ryan plan, do you support the burden of balancing the budget to be placed on those who can afford it the least?  Do you see the Ryan plan as a “necessary evil”, if so how do you justify that with other alternatives out there? Why don’t you embrace a plan with more COMPROMISE?  Why not Simpson-Bowles? 
             
            I don’t think you are looking at the full tax picture. We are just not talking about the tax rates and what the government brings in from those tax rates.  When we are talking increasing revenues we are also talking about lowering the amount of taxes loopholes and expenditures, the amount the government has to pay out.  By eliminating the deductions the federal government gets to keep more of its revenues and thus its revenues are INCREASED. This is why the majority economists believe by doing tax REFORM we can bring in more revenues… Let me try this is Republican speak: If we lower the tax rates and eliminate deductions and loopholes, we can broaden the base and increase revenues. Yes some people are going to have to pay more in taxes, even some poor but tax reform doesn’t have to done in the same way the Ryan plan does which gives a huge tax cuts to the wealthy.  Also, your 1940’s reference is not a parallel to this situation because of the end of WWII government spending stopped which led to the drop in tax revenues. 
             
            Bob you misinterpreted the meaning of my question of “WHY”. I was not asking about the legitimately or importance of the programs but WHY, or in other words, what are the causes for the rising healthcare cost.  You need to find out what is causing the rise in healthcare costs and find a solution to that. I will restate again from my original comment “recent reporting from CNN has shown a small number of people are responsible for a very large percentage of the medical costs in America.  It is these chronically ill individuals who need to be focused on. If we addressed those few people’s health problems more effectively and efficiently and also invest in prevention moving forward to lower the number of chronically ill individuals the health costs will shrink significantly and the burden of Medicare will dramatically reduce.”  http://globalpublicsquare.blogs.cnn.com/2012/03/15/zakaria-5-of-u-s-patients-account-for-50-of-health-care-costs/
             
            As for social security, AEI is a conservative think tank; I wouldn’t expect them to take any other position.  The other link states its argument as we shouldn’t raise the tax cap because it would make the social security books clean but the government would just raid the social security trust fund and spend more. This is the same argument made in 2000 by the Bush Administration who was looking to pass the bush tax cuts.  They said the government shouldn’t have a surplus because it will just spend more money, yes instead lets spend that money through a tax cut and create a deficit on purpose…asinine.  Anyways, the fact remains benefit reduction is not necessary to make social security solvent. 
            Lastly to your “correct” approach, I have no problem scaling back government.  I simply do not agree with you that gutting assistance programs first is the right way to do it.  You want to cut defense, go right ahead.  You want to go by the GAO report on fraud/waste/abuse, and cut out $300B, sounds great.  You want to do real tax reform that WILL increase revenues, cool.  You want to raise the retirement age, I am good with that. Then once we have done that, IF it is NECESSARY to cut benefits, IF other solutions have not worked, then fine. But we haven’t done those things and so NO I do not support going after assistance programs. 
             

          • http://bobewoldt.com Robert Ewoldt

            I don’t think we’re going to get anywhere with the tax revenue thing… I’ve offered the historical evidence that tax revenues have never consistently risen above 19% of GDP, and your response has been, “Yes, we can raise more revenues… we just need to do x or y or z.” If you’d like to offer evidence that shows that we can, indeed, raise more than 19% of GDP in tax revenues, I’d love to see it, but from my perspective, it just isn’t there. That view just doesn’t correspond to reality.

            Here’s my solution: Instead of changing the tax code with the goal of raising federal revenue as a percent of GDP, the changes that we make to the tax code should have the goal of maximizing economic growth, and thus increasing total GDP, and therefore increasing federal tax revenue. So, I’m all for increasing tax revenue to the federal government, but as a by-product of having a pro-growth tax code, rather than as the goal of the tax code.

            In other words, instead of saying, “Let’s raise tax revenues from 19% of GDP to 22% of GDP, and then bring down spending from 24% to 22%,” as liberals do, I’m saying, “Let’s grow the economy overall, so 19% of GDP will be $2.9T instead of $2.3T, and then bring down spending from 24% to 19% of GDP.” In order to do this, it requires a more efficient tax system.
            Let me also quibble with something that you said… you said that by closing loopholes, the federal government would increase revenues. That
            MAY be true, but it’s not NECESSARILY true. The reason that it might NOT
            be true is that tax rules drive behavior. So, if a company or individual
            gets a tax deduction for doing something, it’s more likely that they’ll do
            it. If they no longer get a deduction for doing something, then they might
            not do that action any more, unless they were already going to do
            it. For instance, if the government, for the last 5 years, has been giving
            companies a deduction if they keep certain jobs in the United States, that
            gives the company an incentive to keep those jobs here, and provides some
            revenue for the federal government (payroll taxes, etc.). However, if we
            say, “Let’s eliminate all deductions to make the tax code more efficient,”
            that company might decide to then move that job overseas, thus DECREASING
            the revenue to the government, not INCREASING.

            So, eliminating deductions and “loopholes” from the tax code won’t increase
            revenues in all cases (though in some cases it will). In some cases, it
            might DECREASE revenues to the federal government, because individuals and
            companies will change their behavior in order to minimize the amount of
            money that they pay to the government.

          • http://brocmiddleton.blogspot.com/ Broc Middleton

            Ok you want some history
            You stated…”In regards to federal revenues being 19% of GDP… you may be able to temporarily increase federal revenues above that ceiling, but only temporarily. For example, if we were to change tax policy and say that the government were going to take 50% of everyone’s income in taxes, we would see a large spike in tax revenues in 2012. We might even hit 30% of GDP. However, I would venture an educated guess that the following year (2013), tax revenues would crater, and you would probably also see a decline in GDP…”
             
            So the magically cap of 19%… You brought up the 1940’s in 1944 it was 20.9% and  in 1945 it was 20.3% in 1946 it went down to 17.7% BECAUSE THE WAR WAS OVER and federal spending reduced dramatically.  Now that was two years of over 19% but I don’t particularly like this time period used as an argument for either side because of the war.  However a recent and much relevant example would be years between 1997-2001. Here are the numbers for the Clinton years which are so often ignored by conservatives who want to talk economic policy and how supply side “trickle down” economics works…1997-19.2%, 1998-19.9%, 1999-19.8%, 2000-20.6%, and 2001-19.5%.  Now you can look at this and say see only one year it got about 19%, we can argue about whether you meant 19% as 19.0% or 19.9%, because when you talking about trillions of dollars .9% is a lot of money.  BUT that is not the point I am making here, the point is Clinton RAISED the tax rates and while also cutting spending and almost got a real balanced budget.  A BALANCED APPROACH!!
             
            You claim to be for supported a “pro-growth” tax policy but when a plan to actually do that is out there like Simpson-Bowles which would lower tax rates, which would get rid of loops and create of more competitive private sector, which does simply the tax code, instead you support the Ryan Plan??? 

          • http://bobewoldt.com Robert Ewoldt

            OK, so we take the average of the Clinton years (1992-2000)… no, let’s be charitable and use only the years after the Clinton tax increases of 1993 (so 1994-2000), we have an average tax revenue of 19.24% of GDP. What I hear you saying is that this is an example of the highest sustainable tax levels. I can go with that. Would you concede that we should get federal spending down to THAT level?

            (Aside: in case anyone reading this was wondering, 0.9% of current GDP amounts to $134.6 billion, which amounts to about 25% of the Medicare budget, or about 17% of the stimulus bill).

          • http://brocmiddleton.blogspot.com/ Broc Middleton

            I will try to be clear here. If your question is…are those years under Clinton (1994-2000) the highest POSSIBLE sustainable federal revenue levels?  No, I don’t believe those are the highest POSSIBLE sustainable federal revenue levels. I do know that those years are the best we have done TO DATE.  However increasing our federal revenues beyond that 19.24% average is not impossible or a fairy tale, other nations raise more revenues that 19% as a percentage of GDP consistently. If we want to raise the revenues as a percent of GDP, we must only look around the world to see what other nations are doing, see if it works for them, and how we could reproduce that here.  Isn’t that what Republicans do with the states, look at what is working and then copy it?  We could look at a VAT tax, a national sales tax, a carbon tax, you may not like those options because it offends your ideology of what you think America should be but that doesn’t change the reality that those possibilities are out there. 
             
            (Aside: I think we are alone, but also keep in mind that America spends 17% of our ENTIRE GDP on healthcare, which is why healthcare reform is so needed.  Even countries with government run “socialized medicine”, a single payer system, pay significantly less than we do for healthcare and some get better results too…as for stimulus both sides have to responsibility for that in both is size and mediocre effectiveness.)
             
            (Aside P.S. Also for contrast, that $134.6B number is approximately the same amount needed to fund the discretionary spending of these departments: Department of Education, Commerce, Labor, Treasury, Interior, Environmental Protection Agency, Social Security Administration, National Science Foundation, Corps of Engineers and the National Infrastructure Bank.  That totals about $137B but pretty close.  On the other hand that $134.6B is only about 1/5 (only 20%) of the Department of Defense budget.  The Department of Defense budget is larger than all the other discretionary spending COMBINED.)

  • http://bobewoldt.com Robert Ewoldt

    I’m replying here… so healthcare is 17% of GDP.  What’s magical about that number?  If an industry gets to be 15% of the economy, then the government should come in and start setting price controls?  I don’t think so.  I also don’t think that’s what you meant.
     
    However, are there costs that are necessarily a part of the U.S. healthcare system that aren’t part of a socialized healthcare system?  I think so.  For example, a socialized healthcare system is one that discourages innovation (because profit is removed for the equation).  So, the socialized healthcare system is one that poaches from the U.S. innovation (i.e. they get the final products without having to pay for the development of the product).  However, if the U.S. goes to a socialized system, like some other countries in the world, who will innovate in the healthcare field?  Not many countries.  The U.S. currently pays more for healthcare, because we are on the cutting edge.  Sure, we may be able to have a single-payer system that will “bring costs down” (though even that is in doubt), but we then lose much of the innovation that we currently have.

    • http://brocmiddleton.blogspot.com/ Broc Middleton
    • http://brocmiddleton.blogspot.com/ Broc Middleton

      Sorry about that Bob, I looked back and, yes, I threw out that 17% of GDP lazily without really explaining why or how I was relating it to our discussion.  The reason I stated that America spends 17% of our GDP on healthcare was to put the Medicare cost which you sited into perceptive.  Of course Medicare is going to be expensive when the American healthcare industry (as a percentage of GDP) is the MOST EXPENSIVE system in the world.  Now if Americans were also getting the BEST medical results and outcomes then that amount of spending could be understood, however we NOT.  We as Americans love to believe that we are best and we are always NUMBER 1.  But the only thing we are number 1 at in healthcare is how much money we spend on it.  Americans are spending the MOST money on our healthcare and getting “middle of the pack” results/outcomes.  Our healthcare system as rated by the World Health Organization is 37th , here are some countries that are better rated: France (#1), Italy (#2), Spain (#7), Japan (#10), United Kingdom (#18), Sweden (#23), Israel (#28), Australia (#32).  All these countries are doing healthcare BETTER than we are and SPENDING LESS to get it.  They all ranked better in infant mortality and life expectancy, America is ranked 34th in infant mortality and 38th in life expectancy.  Now your explanations for our huge costs in healthcare are “innovation” and “being on the cutting edge”.  This doesn’t hold any water, Japan for example has an electronic medical record system which allows them to know what they are spending on healthcare at any given time.  This gives them critical information on medical spending trends or outbreaks and allows them identify problems much more rapidly than we are here in America.  Yes in America we do “innovate” but so do other countries, and given the numbers it seems they are utilizing the “innovation” much more effectively than we are.

      • http://bobewoldt.com Robert Ewoldt

        Just copying from Wikipedia here:

        “The WHO rankings have been subject to much criticism concerning their methodology, scientificity, and usefulness. Dr Richard G. Fessler called the rankings “misleading” and said that tens of thousands of foreigners travel to the United States every year for care. In addition, he claims that the United States leads the world in survival rates for 13 of the 16 most common types of cancer. He also noted that the financial fairness measure was automatically designed to “make countries that rely on free market incentives look inferior”. Dr Philip Musgrove wrote that the rankings are meaningless because they oversimplify: “numbers confer a spurious precision”.

        “Journalist John Stossel notes that the use of life expectancy figures is misleading and the life expectancy in the United States is held down by homicides, accidents, poor diet, and lack of exercise. When controlled for these facts, Stossel claims that American life expectancy is actually one of the highest in the world. A publication by the right-wing Pacific Research Institute in 2006 claims to have found that Americans outlive people in every other Western country, when controlled for homicides and car accidents. Stossel also criticizes the ranking for favoring socialized healthcare, noting that “a country with high-quality care overall but ‘unequal distribution’ would rank below a country with lower quality care but equal distribution.”

        “Glen Whitman claims that “it looks an awful lot like someone cherry-picked the results to make the U.S.’s relative performance look worse than it is.” He also notes that the rankings favor countries where individuals or families spend little of their income directly on health care. In an article in The American Spectator, Whitman notes how the rankings favor government intervention, which has nothing to do with quality of care. The rankings assume literacy rate is indicative of healthcare, but ignore many factors, such as tobacco use, nutrition, and luck. Regarding the distribution factors, Whitman says “neither measures healthcare performance” since a “healthcare system [can be] characterized by both extensive inequality and good care for everyone.” If healthcare improves for one group, but remains the same for the rest of the population, that would mean an increase in inequality, despite there being an improvement in quality. Dr Fessler echoed these sentiments.”

        • http://brocmiddleton.blogspot.com/ Broc Middleton

          I know, I was aware of criticism regarding the WHO rankings when I posted them, its not a perfect method and its impossible to fully incorporate all the factors of a complex system like healthcare but I don’t think their rankings were rigged or fixed to benefit one nation or disparage another.  They applied a less than perfect standard to TRY and rank an endlessly complex system.  Take the information as you would like. 

          • http://bobewoldt.com Robert Ewoldt

            Was it really a “less than perfect method” of ranking, or was it a deliberate method of ranking free-market-based health care systems lower than socialized systems?

          • http://brocmiddleton.blogspot.com/ Broc Middleton

            If you have proof of that I will listen otherwise you have a conspiracy theory. 

          • http://bobewoldt.com Robert Ewoldt

            It’s not a conspiracy theory.  The methodology is flawed, there’s no question about it.  They’re putting a higher rank to the countries that have a socialized system.  It’s just a question of what motive one ascribes to that methodology.  You say it was “less than perfect” because you want to assign good motives to the authors of the rankings.  I don’t necessarily ascribe bad motives to the authors, but I think that they designed the methodology based upon their own pre-conceived opinions about what makes a good healthcare system.

      • http://bobewoldt.com Robert Ewoldt

        Also, much has been made about how the U.K. holds its costs down in its system (in 2009, the U.K. spent $3,487 per capita on healthcare, vs. the U.S.’ $7,960).  Since the U.K. is a “first-world” country that I assume would be at or near the top of every person’s list of countries using socialized medicine, I think I can use it as a representative example.  Here’s a few examples:

        http://www.kingsfund.org.uk/blog/care_rationing.html
        http://mjperry.blogspot.com/2009/07/top-10-ways-uk-rations-healthcare-to.html
        http://www.independent.co.uk/life-style/health-and-families/health-news/cataracts-hips-knees-and-tonsils-nhs-begins-rationing-operations-2327268.html
        http://www.telegraph.co.uk/health/men_shealth/8797295/NHS-rationing-body-rejects-prostate-cancer-drug.html
        http://www.dailymail.co.uk/health/article-1263223/NHS-rationing-body-denies-15-life-saving-drugs-cancer-patients.html

        So, while they may be keeping their costs down, they’re doing it at the expense of a higher standard of care.

        This may be OK for the English.  They may be OK with saying, “In order to keep the cost of healthcare low for everyone, we will say that we’re not going to pay for the people that cost us the most.  We won’t spend $50,000 to save one person’s life using a very expensive cancer drug.”

        As Americans, I don’t think we’re ready to say that.

        • http://brocmiddleton.blogspot.com/ Broc Middleton

          Actually if you are going to use a “representative example” of socialized medicine from first world country I would prefer you use France since it was ranked #1 in that WHO healthcare assessment.  But no matter, Yes you have shown example of rationing care in the UK.  However do you think decisions like that are not made in the American health care system.  I could show you links of insurance companies refusing to cover a NEWBORN for “pre-existing conditions”(birth defects): http://www.star-telegram.com/2010/03/25/2068267/crowley-newborn-with-heart-defect.html#tvg I could show you links to children being denied life saving surgery because they don’t have insurance: http://weap.org/humanrights/the-pursuit-of-justice/teenager-denied-lifesaving-transplant-in-us-national-appeal-to-save-eduardo-s-life.htm I could show you links of Americans dying on the floor of an emergency room waiting room:(http://articles.cnn.com/2008-07-01/us/waiting.room.death_1_hospital-staff-hospital-employee-kings-county-hospital-center?_s=PM:US)  
          You stated “This may be OK for the English.  They may be OK with saying, In order to keep the cost of healthcare low for everyone, we will say that we’re not going to pay for the people that cost us the most.  We won’t spend $50,000 to save one person’s life using a very expensive cancer drug.  As Americans, I don’t think we’re ready to say that.” In America those EXACT same things were happening, however instead of it being through the government program it is through insurance companies. So since insurance companies are for-profit entities then its ok for them to do cost-benefit analysis and deny coverage, but when government programs do it, it’s called “rationing”?  It was situations like these that Obamacare was directly trying to address; Obamacare is trying to minimize the “cost-benefit/rationing” that insurance companies were doing everyday.
           
          Furthermore if your sentiment is that everyone should have access to healthcare, which your statement implies, wouldn’t it be a good idea for everyone to have health insurance?  If you are going to be against “socialized medicine” and you want a free market healthcare system, wouldn’t it best to have EVERYONE purchase health insurance? 

          • http://bobewoldt.com Robert Ewoldt

            Regarding the teenager (Eduardo Loredo) who was denied a transplant… first, he likely wouldn’t have gotten it under a socialized healthcare, because it’s an expensive procedure ($500,000), and that’s the type of procedure that’s being denied by NICE in the U.K.  Furthermore, it’s an example of a uninsured person.  If he’d had insurance in the U.S., it probably would have been covered, at least partially.

            In regards to the third story that you published, I’m not sure what you’re stating here… are you stating that this wouldn’t have happened under a socialized medicine system?  It seems (to me, at least), like this was an unfortunate incident that shouldn’t have happened.  The organization admits that it shouldn’t have happened, and fired six people because of the incident (which I’m not sure would have happened in a government-run institution).  I’m fairly certain things would not have been better under a socialized program.

            In regards to the baby who was denied insurance coverage… if you’ll notice later on in the news story, the baby was, in fact, given the surgery that was needed.  Also, the story is incomplete, because the baby wasn’t YET covered by insurance, and may in the future be covered by the insurance plan (the story doesn’t say).  In my own experience, I had insurance claims initially denied for my children, because I hadn’t yet added them to my insurance.  Then, when they were added, the insurance company came through and paid up.
            In addition, in that case, hospitals usually end up paying for most or all of those procedures, if the parents are unable to pay.

            The difference is, today, a person in the U.S. can choose between different levels of insurance.  If a healthy person wants to pay for a bare-bones insurance plan, then they can do that.  If they want to pay for a “Cadillac” plan, they can do that, too.  In the U.K., they can’t choose to have a higher level of care, even if they want it and can pay for it.  The only exception to this is if they have enough money to fly to the United States for the care that they want (an option that is only available to the very rich).

            Lastly, if you recall, I wrote a blog post called “Health Care Rationing Is Coming” (http://bobewoldt.com/health-care-rationing/) in which I state that rationing is coming, whether it’s government rationing, insurance rationing, or individual rationing, and concluded that I’d rather have a system where, instead of a panel of 15 people in Washington deciding what’s covered and what’s not, there are 100s of insurance people deciding whether what I want will be covered, and then if it’s not, I can pay for it myself, or appeal to the charity of the hospital boards to pay for it.

          • http://brocmiddleton.blogspot.com/ Broc Middleton

            You completely dodged my question. So I will restate it… Furthermore if your sentiment is that everyone should have access to healthcare, which your statement implies, wouldn’t it be a good idea for everyone to have health insurance?  If you are going to be against “socialized medicine” and you want a free market healthcare system, wouldn’t it best to have EVERYONE purchase health insurance? 
             
            Second, the uninsured teenager is an example of why everyone should have insurance, but if they did purchase the “bare-bones” insurance, as you called it, there is a good possibility it wouldn’t be covered. “Bare-bones insurance normally means they only cover catastrophic injury or accident (ie car accidents, ER visits, etc.)    
             
            Third the infant story, No this is not a case of simply forgetting to the put the kid on the family insurance.  Quote “Surgery would correct it, but within days of Houston’s birth March 15, Tracy learned that his application for health insurance to cover his son had been denied. The reason: a pre-existing condition.” This must have been a case of an individual purchasing health care insurance, because employer based insurance cannot deny coverage to family members for “pre-existing conditions” private insurance on the other could before Obamacare and may again if the whole thing is overturned by the SPOTUS.
             
            Fourth the story about the person dying in the waiting room is just to show how screwed up even our system is and that is needs serious reform.  Also you mentioned how people fly into the US for medical treatments, there are also times where US citizen are flying out of the US for treatment to Canada, Sweden, Germany etc. 
             
            Lastly your link wouldn’t work said “Error 404” but I got your position government cost-benefit analysis bad, private cost benefit analysis ok. 

          • http://bobewoldt.com Robert Ewoldt

            No, it’s not a good idea for everyone to have health insurance!  If a millionaire doesn’t want health insurance, becaues he can pay for everything out of his own pocket, then he shouldn’t be required to have health insurance.

            Health insurance is only the financial tool for which to pay for health services.  If someone wants to pay out-of-pocket for those services, they should be able to.

            But, apart from millionaires, it would probably be good if everyone had health insurance, but it should be their choice!  Health insurance should be readily available, and should have different price points, just as other products have, and people should be able to choose what level of coverage they want.  People should have that freedom.

            But, really, if we’re going to be talking about the  alternatives to socialized medicine, there’s a better string for that… my post on Republican alternatives to Obamacare :)

          • http://brocmiddleton.blogspot.com/ Broc Middleton

            Ok

          • http://bobewoldt.com Robert Ewoldt

            Here’s an interesting article about the French system: http://online.wsj.com/article/SB124958049241511735.html

          • http://brocmiddleton.blogspot.com/ Broc Middleton

            Really you post an article on how France is paying too much for thier healthcare system when we pay more than they do? 

            What am I suppose to take from that?

          • http://bobewoldt.com Robert Ewoldt

            The article was on the problems with the French healthcare system. Also, I think I’ve said two things (and if I haven’t, I’ll say them here): first, we can do things to decrease the cost of U.S. healthcare (the solution, though, isn’t to have people pay more for it, or to have more people pay for it); second, the U.S. will naturally pay more for our health system than other countries, because we are a major center of innovation in the healthcare world, which costs more to be.

  • http://brocmiddleton.blogspot.com/ Broc Middleton

    OBAMACARE UPHELD!!!!!!!!!!!!