I promise you will feel better after reading this week’s column; just bear with me.
I spent the other day with a dear old friend, a soul sister. Before I moved away from her, she and I went to lunch once a week and “solved the problems of the world.” This past Monday, we sat in a wonderful little bookstore in Clayton and shared our hearts with one another, catching up on our lives apart. We eventually got around to the world’s problems, which we agreed are way beyond us now. We discussed what I suspect is a universal experience for those of us who are getting older – the feeling that the world is a strange place that doesn’t feel like home anymore. The politics, the economy, the popular culture – all of it feels unfamiliar and a little bit scary. We agreed that we sometimes want our old world back, knowing perfectly well we will never get it.
The world I grew up in was a much different place, one that somehow felt far more hopeful and secure, even if we were in the midst of the Cold War. We may have had a false sense of security in that pre-9/11 world, but we enjoyed it nonetheless. While I witnessed the turbulent Sixties on the TV news, it all seemed surreal and far away from my life in rural Georgia. The closest I ever came to being a hippie was to iron my long hair straight and wear bright orange bell-bottom pants with giant flowers all over them. (Yes, they were as ugly as you imagine.)
As a twelve-year-old girl, I spent long summer afternoons riding my bike down lonely dirt roads with my friends. My mom didn’t know where I was for hours at a time. Imagine letting your daughter do that today!
There were a few relatively mild recessions along the way, but I had no doubt that my standard of living would far surpass that of my parents. The future looked bright.
The most shocking thing in popular culture was the Beatle’s long hair, and even though I listened to songs about drugs, I didn’t even know it at the time! (I thought that horse in the desert really was a nameless horse, and it never occurred to me that Lucy in the Sky with Diamonds referred to LSD!)
It is all so different today. We lost our innocence on a bright September morning in 2001. We are currently experiencing the worst economic crisis since the Great Depression, and I do not expect my son to have a better standard of living than my husband and I have enjoyed. Our nation’s budget is unsustainable, and the entitlement programs we’ve come to rely on are in jeopardy. Politics is increasingly partisan and vitriolic. Healthcare costs continue to soar. Oil inundates the Gulf Coast while wildlife suffers. As for popular culture, I watched the American Music Awards a few months back (remember the Adam Lambert fiasco?) and wondered what planet I was on. It was sick.
But now for the good part… I have found the perfect remedy for those days when it all starts to get me down. I return to nature. Being outdoors working in the garden, taking a walk, or just sitting on the porch watching lightening streak across the mountaintops reminds me that the world God created is alive and well – and as amazingly beautiful as it has always been. Honeysuckle, mimosa, and rain-soaked woods still smell the way they did in my childhood days. Chiggers still hide amongst the blackberries, and tree frogs continue to make far more noise than their tiny size should allow. Dirt still feels good between my toes, and homegrown tomatoes still taste better than anything. (I can live off tomato sandwiches and corn-on-the-cob all summer long.)
Last week I hiked the trails of the Joyce Kilmer Memorial Forest. In the midst of those tall trees that have stood for centuries, the contemporary world and all its problems ceased to exist. I was reminded that God is still in his heaven, and life is good. That is something that people on both sides of the political aisle can agree on! (And yes, Mrs. Roberts, I am aware that I ended that sentence with a preposition.)
Thursday, June 17, 2010
Thursday, May 27, 2010
Will Entitilements do us in?
“I finally saw the light at the end of the tunnel, but it turned out to be the headlight of an oncoming train.” I don’t know who first made this darkly humorous statement, but I find it an apt description of our current economic situation.
There are those who do see the light at the end of the tunnel. Newsweek Magazine recently declared “America Is Back” on the cover of its April 19th issue. Indeed, there are positive signs. The Dow Jones industrial average has risen nearly 70% in the past 13 months. Auto sales were up 16% for the first quarter of 2010. GDP growth is projected to be 3.6% for the year, a respectable increase. 162,000 new jobs were created in March. All good news – but then there’s that approaching train I like to call the Entitlement Express.
Our nearly 13 trillion dollar national debt is just the tip of the iceberg. That is current debt. What is truly frightening is the size of future obligations. Our government has promised trillions more in the form of Social Security and Medicare payments, federal pensions, and retiree health care in the coming decades. Since the money is not going to be there to fulfill these promises, they are often called “unfunded obligations” or liabilities. Including these promised pay-outs makes our real debt more like 107 TRILLION dollars! That is about seven times the size of the entire US economy.
Now we could easily knock this thing out if every man, woman, and child who is an American citizen would just donate $200,000 to the government. (ha-ha) Unfortunately, real solutions involve making difficult choices and will require sacrifice on the part of all of us.
Social Security and Medicare are known as entitlements because American citizens have had taxes deducted from their paychecks to pay for these programs and are therefore entitled to a return on their “investment” when they reach the age of 65. (It should be noted that, according to a 1960 Supreme Court ruling, we are not legally entitled to that money.) The spending for these programs is also called “mandated” spending because Congress has passed laws requiring the government to make these pay-outs according to predetermined formulas. This spending is not up for debate when Congress passes its yearly budget.
Currently, there is a surplus in the social security trust fund. But that surplus is not in the form of cash! The law dictates that any surplus must be invested in US treasury bonds. Remember, if you or I or even the Social Security trust fund buys US treasury bonds, we are lending our money to the government in expectation of getting that money back plus interest. In other words, the social security trust fund has been loaned to the government to fund present spending in other areas. Of course, those treasury bonds are considered very safe assets. They will be repaid to the social security fund when needed. However, the government will have to find the money to do that by either raising taxes, cutting spending for other needs, or more borrowing, adding even more to the ever-growing debt.
When will that happen? The program is projected to begin cashing in those bonds in 2016, just six years from now. The surplus will run out by 2037. At that time, social security payroll taxes will provide only 75% of promised benefits.
As bad as the social security situation is, Medicare is in even worse shape. It is already drawing down its trust funds and costs are expected to rise exponentially as medical costs increase and the population ages. With Social Security, at least we know how to fix it, even if our political leaders don’t have the will to do so. But no one really knows how to fix Medicare.
Well, that’s not exactly true. We don’t seem to know how to reduce medical costs, but the Social Security and Medicare Boards of Trustees reports that Medicare can be brought into balance over the next 75 years IF we either increase the payroll tax by 134% immediately, or make an immediate 53% reduction in pay-outs. Imagine running for office by promising either of those solutions!
Most experts agree that our current economic situation is unsustainable. Fixing it will require either tax increases or cuts in spending or a combination of both. Since we, the people, refuse to support anyone who tells us they are willing to try either of those alternatives, it is unlikely that we will see any significant changes until a major crisis leaves us no other choice.
There are those who do see the light at the end of the tunnel. Newsweek Magazine recently declared “America Is Back” on the cover of its April 19th issue. Indeed, there are positive signs. The Dow Jones industrial average has risen nearly 70% in the past 13 months. Auto sales were up 16% for the first quarter of 2010. GDP growth is projected to be 3.6% for the year, a respectable increase. 162,000 new jobs were created in March. All good news – but then there’s that approaching train I like to call the Entitlement Express.
Our nearly 13 trillion dollar national debt is just the tip of the iceberg. That is current debt. What is truly frightening is the size of future obligations. Our government has promised trillions more in the form of Social Security and Medicare payments, federal pensions, and retiree health care in the coming decades. Since the money is not going to be there to fulfill these promises, they are often called “unfunded obligations” or liabilities. Including these promised pay-outs makes our real debt more like 107 TRILLION dollars! That is about seven times the size of the entire US economy.
Now we could easily knock this thing out if every man, woman, and child who is an American citizen would just donate $200,000 to the government. (ha-ha) Unfortunately, real solutions involve making difficult choices and will require sacrifice on the part of all of us.
Social Security and Medicare are known as entitlements because American citizens have had taxes deducted from their paychecks to pay for these programs and are therefore entitled to a return on their “investment” when they reach the age of 65. (It should be noted that, according to a 1960 Supreme Court ruling, we are not legally entitled to that money.) The spending for these programs is also called “mandated” spending because Congress has passed laws requiring the government to make these pay-outs according to predetermined formulas. This spending is not up for debate when Congress passes its yearly budget.
Currently, there is a surplus in the social security trust fund. But that surplus is not in the form of cash! The law dictates that any surplus must be invested in US treasury bonds. Remember, if you or I or even the Social Security trust fund buys US treasury bonds, we are lending our money to the government in expectation of getting that money back plus interest. In other words, the social security trust fund has been loaned to the government to fund present spending in other areas. Of course, those treasury bonds are considered very safe assets. They will be repaid to the social security fund when needed. However, the government will have to find the money to do that by either raising taxes, cutting spending for other needs, or more borrowing, adding even more to the ever-growing debt.
When will that happen? The program is projected to begin cashing in those bonds in 2016, just six years from now. The surplus will run out by 2037. At that time, social security payroll taxes will provide only 75% of promised benefits.
As bad as the social security situation is, Medicare is in even worse shape. It is already drawing down its trust funds and costs are expected to rise exponentially as medical costs increase and the population ages. With Social Security, at least we know how to fix it, even if our political leaders don’t have the will to do so. But no one really knows how to fix Medicare.
Well, that’s not exactly true. We don’t seem to know how to reduce medical costs, but the Social Security and Medicare Boards of Trustees reports that Medicare can be brought into balance over the next 75 years IF we either increase the payroll tax by 134% immediately, or make an immediate 53% reduction in pay-outs. Imagine running for office by promising either of those solutions!
Most experts agree that our current economic situation is unsustainable. Fixing it will require either tax increases or cuts in spending or a combination of both. Since we, the people, refuse to support anyone who tells us they are willing to try either of those alternatives, it is unlikely that we will see any significant changes until a major crisis leaves us no other choice.
Friday, May 21, 2010
How much debt is too much?
Last Tuesday’s primaries revealed what everyone suspected – voters are angry and ready to “throw the bums out.” Democrats might well ask, “Where was the anger when George W. Bush was spending billions and digger us deeper into a hole?” It’s a darn good question. If voters had started paying attention to Washington’s spendthrift ways years ago, we wouldn’t be in the mess we are in now.
In last week’s column, I looked at our currently projected deficit as a percentage of GDP (gross domestic product – the total value of all goods and services produced by a country in one year). At 11%, we are well above the 3-4% economists believe is a safe level of deficit spending. This week I want to consider our federal debt as a percentage of GDP. As of May 20, our debt, the accumulation of all past deficits, was a whopping $12,990,930,267,939 and growing at a rate of $4.13 billion a DAY! Just go to www.usdebtclock.org and watch the numbers roll – it’ll scare your socks off.
Our debt now stands at 90% of GDP. The IMF (International Monetary Fund) projects the ratio to be over 100% by 2015. I don’t have to tell you that is high, but the real question is, how much debt is too much? After hours of exhaustive research, I finally found the answer – nobody really knows. The best answer I found was “the amount of debt we will have if we continue spending the way we are now.”
The European Union requires states to have a debt-to-GDP ratio of 60% or less to gain entry to the union. It’s disconcerting to know the U.S. would not qualify. In fact, most European nations are above the limit as well, and the EU is being criticized for not enforcing its own rules. EU member states now have an average debt-to-GDP ratio of 80%, and worries about European debt are having a negative effect on U.S. markets.
Greece has been living way beyond its means for years with generous social programs and benefits. Its current deficit is 14% of GDP, compared to our 11%, and its debt-to-GDP ratio is 115%. In order to get a “bail-out” from the EU, they have been forced to make dramatic cuts to government programs, resulting in deadly riots in the streets of Athens. Is this our future? I hope not, but human nature being what it is, I wouldn’t be surprised.
According to a recent study by Reinhart and Rogoff, authors of This Time is Different: Eight Centuries of Financial Follies, whenever a country’s debt exceeds 90% of GDP, there is a significant slow-down in economic growth, which leads to even more deficit spending. It’s easy to see how things can quickly spiral out of control at that point.
Historically, our current debt-to-GDP ratio is not an all-time high. That occurred in 1946, immediately following WWII. Wars are very expensive and normally result in borrowing – remember the push to buy those war bonds? But once the war ended, the debt was gradually brought down to just 31% in 1981. Then things went crazy. The ratio rose to over 50% during the Reagan years, when a Republican president cut taxes and a Democratic Congress went on a spending spree.
What is really scary is the rate at which our debt is growing. It took the U.S. from its founding until 1996 to accumulate its first 5 trillion in debt. It took only twelve more years to acquire another 5 trillion. Projections now show we will accumulate our third 5 trillion in the years from 2008 – 2011. Wow.
So how will all this affect us? What are the results of so much debt? Next week…
In last week’s column, I looked at our currently projected deficit as a percentage of GDP (gross domestic product – the total value of all goods and services produced by a country in one year). At 11%, we are well above the 3-4% economists believe is a safe level of deficit spending. This week I want to consider our federal debt as a percentage of GDP. As of May 20, our debt, the accumulation of all past deficits, was a whopping $12,990,930,267,939 and growing at a rate of $4.13 billion a DAY! Just go to www.usdebtclock.org and watch the numbers roll – it’ll scare your socks off.
Our debt now stands at 90% of GDP. The IMF (International Monetary Fund) projects the ratio to be over 100% by 2015. I don’t have to tell you that is high, but the real question is, how much debt is too much? After hours of exhaustive research, I finally found the answer – nobody really knows. The best answer I found was “the amount of debt we will have if we continue spending the way we are now.”
The European Union requires states to have a debt-to-GDP ratio of 60% or less to gain entry to the union. It’s disconcerting to know the U.S. would not qualify. In fact, most European nations are above the limit as well, and the EU is being criticized for not enforcing its own rules. EU member states now have an average debt-to-GDP ratio of 80%, and worries about European debt are having a negative effect on U.S. markets.
Greece has been living way beyond its means for years with generous social programs and benefits. Its current deficit is 14% of GDP, compared to our 11%, and its debt-to-GDP ratio is 115%. In order to get a “bail-out” from the EU, they have been forced to make dramatic cuts to government programs, resulting in deadly riots in the streets of Athens. Is this our future? I hope not, but human nature being what it is, I wouldn’t be surprised.
According to a recent study by Reinhart and Rogoff, authors of This Time is Different: Eight Centuries of Financial Follies, whenever a country’s debt exceeds 90% of GDP, there is a significant slow-down in economic growth, which leads to even more deficit spending. It’s easy to see how things can quickly spiral out of control at that point.
Historically, our current debt-to-GDP ratio is not an all-time high. That occurred in 1946, immediately following WWII. Wars are very expensive and normally result in borrowing – remember the push to buy those war bonds? But once the war ended, the debt was gradually brought down to just 31% in 1981. Then things went crazy. The ratio rose to over 50% during the Reagan years, when a Republican president cut taxes and a Democratic Congress went on a spending spree.
What is really scary is the rate at which our debt is growing. It took the U.S. from its founding until 1996 to accumulate its first 5 trillion in debt. It took only twelve more years to acquire another 5 trillion. Projections now show we will accumulate our third 5 trillion in the years from 2008 – 2011. Wow.
So how will all this affect us? What are the results of so much debt? Next week…
Monday, May 10, 2010
Debt and Deficits - How much is too much?
Let’s quickly review: Our nation’s deficit is the difference between the money our government takes in and the money it spends in one year. That is projected to be around 1.3 trillion dollars for 2010. The accumulation of all our deficits over the years makes up our national debt, which is nearing 13 trillion dollars. We know that’s a lot of debt, but is it too much?
Economists like to measure deficits and debt as a percentage of GDP (gross domestic product). GDP is the total value of all the goods and services produced in a country in a fiscal year. It’s the way we measure a country’s wealth, and a good way to compare one country’s wealth with another’s. It makes sense to look at debt as a percentage of wealth; after all, rich people can afford to carry more debt than poor people can. When GDP is high, people are at work producing all those goods and services, and people at work pay lots of income tax, providing the government with money to pay its debts.
Let’s start with deficits. Currently, our projected 1.3 trillion dollar deficit is around 11% of GDP. That is too high. Economists would like to see it around 2 – 3%, a very manageable level of debt. As long as we keep that percentage low, the government can afford to “service” its debt, paying off government bonds and treasury notes as they come due. There is no danger of going bankrupt.
Even that 11% percentage has to be placed in context to mean anything. We have to look at interest rates. Right now, interest rates are extremely low, meaning it doesn’t cost the government very much to borrow money. In the year 2000, if you bought a ten-year treasury note, the government paid you over 6% interest on it. In February 2010, that same note only paid 3.6%. As long as interest rates remain low, the government can afford to make its “monthly payments.” The problem is, they won’t always be low. Many experts expect interest rates to rise in the near future.
Why? Well, like everything else in our economy, the price of borrowing money is based on supply and demand. As long as lots of people want to buy government bonds, the government can get away with paying a low return on them. In recent years, the Chinese have been buying up our bonds – lots of them. They have basically financed our government and our way of life here in the US. What if they stopped buying our bonds? We would have a serious problem. To get them to buy more bonds, we would have to make them more attractive by offering a higher rate of return. The cost of borrowing money would go up.
Many people believe the Chinese will continue “being our banker” because it is to their advantage to do so. If they ever decide it is not to their advantage, the money will dry up fast. People buy US treasury bonds because they consider them to be very safe investments. The United States is a stable country that has always paid its debt. If people ever lose confidence in the US government’s ability to pay its debts, they will not find those bonds desirable anymore. Already, the Chinese government has expressed concern about the size of our nation’s debt. They’ve hinted at downgrading those bonds, meaning they would give them a lower rating. Bonds and other securities are given a rating by agencies that exist to do just that. A very good, safe bond receives a AAA rating. People have lots of confidence in buying them. Bonds with lower ratings are not as safe. People won’t buy them unless they stand to gain more profit through higher interest rates.
That is a quick and admittedly simplistic way of explaining interest rates. Many factors affect them, and the financial world is very, very complicated. Frankly, most of it is far beyond my understanding. What all of us do understand is that high interest rates are good for the lender and bad for the borrower. When we buy government securities, we are the lender and the government is the borrower. Ironically, what is good for us individually may be bad for the government, and what is bad for the government will ultimately be bad for all of us. Hmmm…sounds like one of those no-win situations.
We can also look at the history of deficits as a percentage of GDP. That 11% is not the highest that has ever been. However, the only time it has been higher was during WWI and WWII, when it peaked at over 28%. Financing those wars was very expensive, but the government quickly brought the numbers down when the wars ended. Our current 11% is high for peacetime. Previously, the highest peacetime percentage was a little over 5% during the Reagan years (1980’s).
So, bottom line, 11% is not so terrible as long as interest rates remain low, but they probably won’t remain low. Next week, I’ll look at debt as a percentage of GDP. Yeah, I know, really exciting stuff – but we have GOT to understand this if we want to be responsible voters!
Economists like to measure deficits and debt as a percentage of GDP (gross domestic product). GDP is the total value of all the goods and services produced in a country in a fiscal year. It’s the way we measure a country’s wealth, and a good way to compare one country’s wealth with another’s. It makes sense to look at debt as a percentage of wealth; after all, rich people can afford to carry more debt than poor people can. When GDP is high, people are at work producing all those goods and services, and people at work pay lots of income tax, providing the government with money to pay its debts.
Let’s start with deficits. Currently, our projected 1.3 trillion dollar deficit is around 11% of GDP. That is too high. Economists would like to see it around 2 – 3%, a very manageable level of debt. As long as we keep that percentage low, the government can afford to “service” its debt, paying off government bonds and treasury notes as they come due. There is no danger of going bankrupt.
Even that 11% percentage has to be placed in context to mean anything. We have to look at interest rates. Right now, interest rates are extremely low, meaning it doesn’t cost the government very much to borrow money. In the year 2000, if you bought a ten-year treasury note, the government paid you over 6% interest on it. In February 2010, that same note only paid 3.6%. As long as interest rates remain low, the government can afford to make its “monthly payments.” The problem is, they won’t always be low. Many experts expect interest rates to rise in the near future.
Why? Well, like everything else in our economy, the price of borrowing money is based on supply and demand. As long as lots of people want to buy government bonds, the government can get away with paying a low return on them. In recent years, the Chinese have been buying up our bonds – lots of them. They have basically financed our government and our way of life here in the US. What if they stopped buying our bonds? We would have a serious problem. To get them to buy more bonds, we would have to make them more attractive by offering a higher rate of return. The cost of borrowing money would go up.
Many people believe the Chinese will continue “being our banker” because it is to their advantage to do so. If they ever decide it is not to their advantage, the money will dry up fast. People buy US treasury bonds because they consider them to be very safe investments. The United States is a stable country that has always paid its debt. If people ever lose confidence in the US government’s ability to pay its debts, they will not find those bonds desirable anymore. Already, the Chinese government has expressed concern about the size of our nation’s debt. They’ve hinted at downgrading those bonds, meaning they would give them a lower rating. Bonds and other securities are given a rating by agencies that exist to do just that. A very good, safe bond receives a AAA rating. People have lots of confidence in buying them. Bonds with lower ratings are not as safe. People won’t buy them unless they stand to gain more profit through higher interest rates.
That is a quick and admittedly simplistic way of explaining interest rates. Many factors affect them, and the financial world is very, very complicated. Frankly, most of it is far beyond my understanding. What all of us do understand is that high interest rates are good for the lender and bad for the borrower. When we buy government securities, we are the lender and the government is the borrower. Ironically, what is good for us individually may be bad for the government, and what is bad for the government will ultimately be bad for all of us. Hmmm…sounds like one of those no-win situations.
We can also look at the history of deficits as a percentage of GDP. That 11% is not the highest that has ever been. However, the only time it has been higher was during WWI and WWII, when it peaked at over 28%. Financing those wars was very expensive, but the government quickly brought the numbers down when the wars ended. Our current 11% is high for peacetime. Previously, the highest peacetime percentage was a little over 5% during the Reagan years (1980’s).
So, bottom line, 11% is not so terrible as long as interest rates remain low, but they probably won’t remain low. Next week, I’ll look at debt as a percentage of GDP. Yeah, I know, really exciting stuff – but we have GOT to understand this if we want to be responsible voters!
Friday, May 7, 2010
Debt and Deficits - defined
One night during the 2008 presidential campaign, Doug and I were watching the local news when the anchor woman gave a lead-in for a story that made me laugh – scornfully. She said that candidate Obama had promised to cut the debt in half during his first four years in office! Doug even backed up the DVR box to be sure we had heard right. We had. Wow! That would be quite a feat, given our current national debt is nearing 13 trillion dollars!
The anchor woman made a common mistake, though it shouldn’t be common for a journalist – she confused debt with deficit. What Obama actually promised was to cut the DEFICIT in half in four years. (Hmmm….wonder what happened to that promise!)
Each year the government takes in a huge amount of money (revenue) in the form of taxes, tariffs, and various fees. Unfortunately, most years the government spends an even larger amount of money (expenditures). When it does so, we have a deficit for that year. The amount of the deficit is equal to the difference between revenue and expenditures in one fiscal year. (The government’s fiscal, or financial, year begins on October 1st of one year and ends on September 30th of the following year.)
It is possible, of course, that the government could take in more revenue than it spends in a year’s time. When it does, the difference is called a surplus. We had a surplus at the end of the Clinton administration. Largely due to the dot.com bubble, the economy was doing well and people were making money. Consequently, the government took in lots of money in the form of income and social security taxes. All this led to a 230 billion surplus in 2000.
Then George W. Bush became president, and over the next eight years, that 230 billion surplus turned into a 400 billion deficit. Bush came into office promising a tax cut. He argued that the surplus was the people’s money and should be returned to them. It sounded logical at the time, but the timing was bad. The dot.com bubble burst and the stock market took a real hit. The economy slowed, income and profits fell, and so did the taxes paid to the government. Then there was 9/11, leading to our involvement in two very expensive wars. Congress continued its wild spending, and Bush, not acting at all like a conservative Republican, vetoed none of it. He even asked for and got Medicare part D, the new prescription drug program that has increased Medicare costs substantially. All of this contributed to the growing deficit.
Unfortunately, the government has had a budget deficit most years since 1969. And all those deficits pile up. The accumulation of all the deficits over the years makes up our national debt – that nearly thirteen trillion dollar monstrosity. That is an incomprehensible amount of money. In last week’s column, I tried to describe a trillion dollars in terms we can actually relate to. Remember, a trillion is a million million. (Here’s a trivia question – what comes after the trillions? Answer – quintillions.)
The debt is growing rapidly. You can actually watch it tick off in real time on the Internet. Just go to www.usdebtclock.org and watch those numbers fly! The debt is increasing over 4 billion dollars a day, and your share of that debt is $41,904.
As for our current deficit, it is projected to be 1.3 trillion for 2010, by far the largest in history. George W. Bush was roundly criticized for his 400 billion deficit. Obama has blown it out of the water. He has spent trillions on bail-outs and stimulus – and there is now healthcare to pay for.
1.3 trillion, 13 trillion – these are just numbers, albeit very large ones. To have any real meaning, however, they must be put in context. I’ll save that for next week’s column.
The anchor woman made a common mistake, though it shouldn’t be common for a journalist – she confused debt with deficit. What Obama actually promised was to cut the DEFICIT in half in four years. (Hmmm….wonder what happened to that promise!)
Each year the government takes in a huge amount of money (revenue) in the form of taxes, tariffs, and various fees. Unfortunately, most years the government spends an even larger amount of money (expenditures). When it does so, we have a deficit for that year. The amount of the deficit is equal to the difference between revenue and expenditures in one fiscal year. (The government’s fiscal, or financial, year begins on October 1st of one year and ends on September 30th of the following year.)
It is possible, of course, that the government could take in more revenue than it spends in a year’s time. When it does, the difference is called a surplus. We had a surplus at the end of the Clinton administration. Largely due to the dot.com bubble, the economy was doing well and people were making money. Consequently, the government took in lots of money in the form of income and social security taxes. All this led to a 230 billion surplus in 2000.
Then George W. Bush became president, and over the next eight years, that 230 billion surplus turned into a 400 billion deficit. Bush came into office promising a tax cut. He argued that the surplus was the people’s money and should be returned to them. It sounded logical at the time, but the timing was bad. The dot.com bubble burst and the stock market took a real hit. The economy slowed, income and profits fell, and so did the taxes paid to the government. Then there was 9/11, leading to our involvement in two very expensive wars. Congress continued its wild spending, and Bush, not acting at all like a conservative Republican, vetoed none of it. He even asked for and got Medicare part D, the new prescription drug program that has increased Medicare costs substantially. All of this contributed to the growing deficit.
Unfortunately, the government has had a budget deficit most years since 1969. And all those deficits pile up. The accumulation of all the deficits over the years makes up our national debt – that nearly thirteen trillion dollar monstrosity. That is an incomprehensible amount of money. In last week’s column, I tried to describe a trillion dollars in terms we can actually relate to. Remember, a trillion is a million million. (Here’s a trivia question – what comes after the trillions? Answer – quintillions.)
The debt is growing rapidly. You can actually watch it tick off in real time on the Internet. Just go to www.usdebtclock.org and watch those numbers fly! The debt is increasing over 4 billion dollars a day, and your share of that debt is $41,904.
As for our current deficit, it is projected to be 1.3 trillion for 2010, by far the largest in history. George W. Bush was roundly criticized for his 400 billion deficit. Obama has blown it out of the water. He has spent trillions on bail-outs and stimulus – and there is now healthcare to pay for.
1.3 trillion, 13 trillion – these are just numbers, albeit very large ones. To have any real meaning, however, they must be put in context. I’ll save that for next week’s column.
Friday, April 30, 2010
One reason healthcare costs so much...
Don’t stand too close to me. My blood is boiling after watching a video on You Tube just now, and the heat is liable to burn you. The video is of a representative from Martin Memorial Medical Center in Martin County, FL, testifying before the members of the Florida legislature in April of 2009. The representative, Carol Plato, is sharing her frustration over the costs of healthcare for illegal immigrants – costs that her hospital has been forced to absorb over the years.
For example, one patient, an illegal from Guatemala, was in the hospital from 2001 until 2003, racking up medical bills of over 1.5 million dollars. The hospital eventually spent $30,000 to return the patient, against his will, to his home country. Then the patient’s family sued Martin Memorial, claiming that forcibly returning the patient was “inappropriate.” The hospital spent over a quarter million dollars in legal fees over the next several years before a jury finally ruled in its favor.
The hospital had also been treating another patient from Mexico for over two years. His bills topped 1.5 million as well. Administrators had contacted the Mexican Consulate and US immigration officials repeatedly but had received no help. Federal authorities told them they can do nothing unless a crime has been committed. Apparently, the crime of coming into the country illegally doesn’t count.
The law forces hospitals to treat anyone who comes to their emergency rooms. At the time of Plato’s testimony, Martin Memorial was treating six illegal immigrants who came to the hospital every three days for renal dialysis. It was unlikely the hospital would receive any compensation for its costs in doing so.
These are the stories of just one hospital. I’m sure such stories are being repeated all over the country, particularly in states where illegal immigrants are more numerous. For example, Parkland Memorial Hospital in Dallas, Texas reported that 70% of the women who gave birth in the first three months of 2006 were illegal. Not only do these women seldom pay for their medical bills, but the children born to them are automatically made US citizens as a result of being born on United States soil. As a nation, we are legally obligated to provide education and other services for them for the rest of their lives.
Hospitals and other facilities are sometimes forced to shut down because they cannot continue absorbing the costs of treating people with no insurance and no means of paying for their care. And, of course, much of the cost is passed on to patients who do have insurance, forcing the cost of insurance and health care to go ever higher for the rest of us.
I would not advocate turning away people who are in need of medical care. The answer is to secure our borders. I know that is a huge challenge, but if we don’t do something, we are going to see health care and education costs continue to rise, and we just cannot afford it with our current deficits.
For example, one patient, an illegal from Guatemala, was in the hospital from 2001 until 2003, racking up medical bills of over 1.5 million dollars. The hospital eventually spent $30,000 to return the patient, against his will, to his home country. Then the patient’s family sued Martin Memorial, claiming that forcibly returning the patient was “inappropriate.” The hospital spent over a quarter million dollars in legal fees over the next several years before a jury finally ruled in its favor.
The hospital had also been treating another patient from Mexico for over two years. His bills topped 1.5 million as well. Administrators had contacted the Mexican Consulate and US immigration officials repeatedly but had received no help. Federal authorities told them they can do nothing unless a crime has been committed. Apparently, the crime of coming into the country illegally doesn’t count.
The law forces hospitals to treat anyone who comes to their emergency rooms. At the time of Plato’s testimony, Martin Memorial was treating six illegal immigrants who came to the hospital every three days for renal dialysis. It was unlikely the hospital would receive any compensation for its costs in doing so.
These are the stories of just one hospital. I’m sure such stories are being repeated all over the country, particularly in states where illegal immigrants are more numerous. For example, Parkland Memorial Hospital in Dallas, Texas reported that 70% of the women who gave birth in the first three months of 2006 were illegal. Not only do these women seldom pay for their medical bills, but the children born to them are automatically made US citizens as a result of being born on United States soil. As a nation, we are legally obligated to provide education and other services for them for the rest of their lives.
Hospitals and other facilities are sometimes forced to shut down because they cannot continue absorbing the costs of treating people with no insurance and no means of paying for their care. And, of course, much of the cost is passed on to patients who do have insurance, forcing the cost of insurance and health care to go ever higher for the rest of us.
I would not advocate turning away people who are in need of medical care. The answer is to secure our borders. I know that is a huge challenge, but if we don’t do something, we are going to see health care and education costs continue to rise, and we just cannot afford it with our current deficits.
Monday, April 19, 2010
Book Review: Everyone Communicates; Few Connect by John C. Maxwell
Everyone Communicates Few Connect is the title of prolific writer John C. Maxwell’s latest book. Maxwell is an expert on leadership and has trained over 5 million leaders in 126 countries through his organization known as EQUIP. This book deals with relating to the people you want to influence, whether it be one on one, with a small group, or before a large audience. I found the book enjoyable to read, especially since there were many personal anecdotes. Maxwell published part of the book on his blog before it was released so his potential readers could comment on his writing. Many of the reader comments were included in the final book, making it somewhat interactive. I found that interesting.
Maxwell is definitely a people person; he believes in people and wishes to empower them. The message that comes through loud and clear in this book is that communication has to be focused on the other person and not on self. There are many thought-provoking gems throughout the book. I would highly recommend it for teachers, preachers, and anyone who does public speaking. I give this book four out of five stars. The only reason I did not give it five is because it seemed a bit redundant after a while. The book could have been shorter and still had just as much impact.
A copy of this book was supplied to me by Thomas Nelson Publishers for the purpose of review.
Maxwell is definitely a people person; he believes in people and wishes to empower them. The message that comes through loud and clear in this book is that communication has to be focused on the other person and not on self. There are many thought-provoking gems throughout the book. I would highly recommend it for teachers, preachers, and anyone who does public speaking. I give this book four out of five stars. The only reason I did not give it five is because it seemed a bit redundant after a while. The book could have been shorter and still had just as much impact.
A copy of this book was supplied to me by Thomas Nelson Publishers for the purpose of review.
Thursday, April 15, 2010
Lies and the Internet
In last week’s column, I urged both Democrats and Republicans to tone down the rhetoric, stick to the facts, and have civil debates about the serious challenges we face as a nation. I also mentioned that people should stop the spread of false and malicious emails. Well, it so happened I was on the receiving end of two such emails this week. I seem to get a lot of those in my inbox, and since most, though by no means all of my friends and family are quite conservative, the vast majority of what I receive is aimed at Obama and the Democrats in Congress.
The first email suggested that Barack Obama never actually attended Columbia University where he claims to have graduated in 1983 before attending Harvard Law School. It said that NO ONE has ever come forward who actually remembers being there with him. Mysteriously, Obama has refused to release his transcript from the school or any of the papers he wrote while in attendance. This dearth of information has led to wild speculation on the part of ultraconservatives. Did he lie about his education? It took me less than three minutes to type “Obama Columbia University” into Google, and right away, I was directed to a web site that debunks urban legends and other falsehoods. It turns out it is true that Obama has never released any papers from his time at Columbia, making it appear that he has something to hide. However, it is NOT true that no one remembers him from his time at the school. Columbia claims him as one of their graduates. A former professor remembers that he easily aced the class he taught in foreign affairs. A school publication contained an article written by Obama. A former roommate has also come forward with information about their time there. And finally, there is no way Obama would have been admitted to Harvard Law School without having graduated from somewhere!
The second email claimed that Obama had cancelled the 2009 National Day of Prayer, held each year by Christians throughout the country, and then sanctioned a National Day of Prayer for Muslims on Capitol Hill. This time I went to www.snopes.com and checked it out. The National Day of Prayer was not cancelled. Obama did decide not to have the public White House ceremony which was held annually during the eight years of the Bush administration. Instead, he signed a proclamation announcing the day of prayer and urged Americans everywhere to pray for their country and leaders. There was never a publicly-sanctioned National Day of Prayer for Muslims. There was a privately organized event for Muslims to pray for America that took place in the nation’s capital in September of 2009. A little something called freedom of speech allows them to do that, just as it allows Christians to gather around the flagpoles in communities all over America on the National Day of Prayer. We Christians had better not try to take that right away from others, because if we do, it will soon be taken away from us.
Frankly, what we know about Obama is enough to worry me – I don’t need people going around making stuff up! I don’t buy all these conspiracy theories and outlandish accusations. There are well-respected conservative journalists like George Will and William Kristol who would be all over these stories if there were anything to them. Occasionally, bloggers do uncover stories that turn out to be true and eventually get picked up by the mainstream media (like the ACORN scandal). Until that happens, it seems to me we should ignore rumors and speculation.
Such falsehoods are spread by members of both political parties. Another email that made the rounds a few years ago claimed that President George W. Bush had the lowest IQ of any president from the past fifty years. This information supposedly came from a study by an organization that does not even exist. It listed the twelve presidents that have served in the past 50 years in their order of IQ. Interestingly, all those with top IQ’s were Democrats, with Bill Clinton having the highest one of all!
I used to just delete these emails, but I am now engaged in a campaign to stamp out ignorance. As soon as I get one, I check it out on sites such as Snopes or www.factcheck.org. Then I send the link to the person who forwarded me the email and suggest that they check out future emails for themselves.
The Internet provides a wealth of valuable information. Unfortunately, it is also the source of rumors and outright lies. We all need to make it our personal responsibility to verify information before we pass it on to others.
The first email suggested that Barack Obama never actually attended Columbia University where he claims to have graduated in 1983 before attending Harvard Law School. It said that NO ONE has ever come forward who actually remembers being there with him. Mysteriously, Obama has refused to release his transcript from the school or any of the papers he wrote while in attendance. This dearth of information has led to wild speculation on the part of ultraconservatives. Did he lie about his education? It took me less than three minutes to type “Obama Columbia University” into Google, and right away, I was directed to a web site that debunks urban legends and other falsehoods. It turns out it is true that Obama has never released any papers from his time at Columbia, making it appear that he has something to hide. However, it is NOT true that no one remembers him from his time at the school. Columbia claims him as one of their graduates. A former professor remembers that he easily aced the class he taught in foreign affairs. A school publication contained an article written by Obama. A former roommate has also come forward with information about their time there. And finally, there is no way Obama would have been admitted to Harvard Law School without having graduated from somewhere!
The second email claimed that Obama had cancelled the 2009 National Day of Prayer, held each year by Christians throughout the country, and then sanctioned a National Day of Prayer for Muslims on Capitol Hill. This time I went to www.snopes.com and checked it out. The National Day of Prayer was not cancelled. Obama did decide not to have the public White House ceremony which was held annually during the eight years of the Bush administration. Instead, he signed a proclamation announcing the day of prayer and urged Americans everywhere to pray for their country and leaders. There was never a publicly-sanctioned National Day of Prayer for Muslims. There was a privately organized event for Muslims to pray for America that took place in the nation’s capital in September of 2009. A little something called freedom of speech allows them to do that, just as it allows Christians to gather around the flagpoles in communities all over America on the National Day of Prayer. We Christians had better not try to take that right away from others, because if we do, it will soon be taken away from us.
Frankly, what we know about Obama is enough to worry me – I don’t need people going around making stuff up! I don’t buy all these conspiracy theories and outlandish accusations. There are well-respected conservative journalists like George Will and William Kristol who would be all over these stories if there were anything to them. Occasionally, bloggers do uncover stories that turn out to be true and eventually get picked up by the mainstream media (like the ACORN scandal). Until that happens, it seems to me we should ignore rumors and speculation.
Such falsehoods are spread by members of both political parties. Another email that made the rounds a few years ago claimed that President George W. Bush had the lowest IQ of any president from the past fifty years. This information supposedly came from a study by an organization that does not even exist. It listed the twelve presidents that have served in the past 50 years in their order of IQ. Interestingly, all those with top IQ’s were Democrats, with Bill Clinton having the highest one of all!
I used to just delete these emails, but I am now engaged in a campaign to stamp out ignorance. As soon as I get one, I check it out on sites such as Snopes or www.factcheck.org. Then I send the link to the person who forwarded me the email and suggest that they check out future emails for themselves.
The Internet provides a wealth of valuable information. Unfortunately, it is also the source of rumors and outright lies. We all need to make it our personal responsibility to verify information before we pass it on to others.
Tuesday, April 13, 2010
Our Debt - How bad is it?
As a teacher, the class I enjoyed most was senior economics. I took it very seriously, since I knew I had one semester to convey as much information as possible about the very important topic of money. Think about that – five months out of twelve years of school devoted to economics. I always felt it was a travesty that we do so little to educate young people about something that will have such a profound effect on their lives. I spent about half the semester talking to my students about managing their own money, but I also introduced them to economics in general. In a democratic-republic, it is important that people understand how our economy works so we can elect people who will make wise decisions concerning jobs, taxes, and spending. After all, we cannot continue to be a strong country unless we maintain a strong economy.
One of the topics I spent a great deal of time on was debt – both personal debt and public. Young people are known for getting themselves in trouble with that first credit card, and I hoped I could prevent that from happening to my students. But I also warned them about our national debt and tried to help them see that THEY were the ones who would have to deal with it. First I informed them of the size of our country’s indebtedness, which is currently over 12,729,000,000 dollars! That’s TRILLIONS. That is a very big number, and most of us really cannot conceive of it.
A trillion is a million million. Now if I had a million dollars, I would feel very rich. Imagine if I had a million million! Not even Bill Gates can conceive of having so much money!
One trillion seconds is 31,688 years. Western civilization has not even existed for a trillion seconds!
A stack of $1000 bills equal to a trillion dollars would be 67.9 miles high! (Yes, there used to be $1000 bills, with President Grover Cleveland’s picture on them. The highest denomination printed today is the $100 bill.) A stack of one dollar bills equal to a trillion would reach a quarter of the way to the moon!
A trillion barrels of oil would be enough to run the entire world for about 33 years if our level of consumption remained constant.
So you get the idea. A trillion dollars is a whole lot of money! And our country owes over 12 trillion. And it’s even worse than that – much worse. Besides the money we’ve already borrowed, we’ve made promises to pay a lot more money in the future, money we don’t have. We’ve promised to pay social security benefits, Medicare, and federal retiree pensions. The US Treasury Department recently reported that our nation has a staggering $62 trillion in these “unfunded obligations.”
Invariably, when I told my students about our nation’s debt, one of them would say, “But don’t we just owe the money to ourselves? What’s the big deal?” I imagine some adults have a similar misconception. I taught my students that our government owes real money to real people just like them! I explained to them that when the government needs money, it sells treasury bills, notes, or bonds to individuals, corporations, local governments, and foreign investors. These securities are basically IOU’s from the federal government. They must be repaid with interest. As with any other debt, the government will, at some point, have to pay back more than it has borrowed.
Now we all know that there is such a thing as too much debt in our personal finances. But as individuals, we have fewer options for paying debt than the government has. It’s also more difficult for us to continue borrowing. Government securities are backed by the full faith and credit of the United States. As long as our government is stable, treasury bonds should be a very safe investment, so people will continue buying them, thus loaning the government additional money. You and I are only backed by the total value of our assets. Once you’ve run through your bank accounts and sold everything you own to pay your debt, there is nothing left. Unlike the government, you can’t raise taxes or print more money. You’ve reached the limit of your credit-worthiness, and no one reputable is going to loan you money. Your last resort is to declare bankruptcy.
The government does have the ability to raise taxes and print money, so there seems to be no limit to the amount of debt it can accumulate. Of course, there are real problems with both those options, but I’ll save that for a later column.
In the past, some economists have believed that our national debt really doesn’t matter. It’s not like all those treasury securities are going to come due at once. As long as we can pay the interest due on the debt, some people believe the amount of the debt itself is not that important. It’s kind of like when people go buy a car and only worry about the size of the monthly payment without giving much thought to the length of the loan or the total amount to be paid. That’s lousy money management, but people do it all the time.
These days, you will have a hard time finding any knowledgeable person who doesn’t believe our economy is headed for disaster if our debt continues to grow as it has the past few decades. So what is so bad about debt? How much debt is too much? Most importantly, how will our growing debt affect us in the years to come? In future columns, I will attempt to answer those questions in terms that people of all ages and from all walks of life can understand. Only when we understand our economic difficulties will we hold our congressmen’s feet to the fire and demand they make desperately-needed changes.
One of the topics I spent a great deal of time on was debt – both personal debt and public. Young people are known for getting themselves in trouble with that first credit card, and I hoped I could prevent that from happening to my students. But I also warned them about our national debt and tried to help them see that THEY were the ones who would have to deal with it. First I informed them of the size of our country’s indebtedness, which is currently over 12,729,000,000 dollars! That’s TRILLIONS. That is a very big number, and most of us really cannot conceive of it.
A trillion is a million million. Now if I had a million dollars, I would feel very rich. Imagine if I had a million million! Not even Bill Gates can conceive of having so much money!
One trillion seconds is 31,688 years. Western civilization has not even existed for a trillion seconds!
A stack of $1000 bills equal to a trillion dollars would be 67.9 miles high! (Yes, there used to be $1000 bills, with President Grover Cleveland’s picture on them. The highest denomination printed today is the $100 bill.) A stack of one dollar bills equal to a trillion would reach a quarter of the way to the moon!
A trillion barrels of oil would be enough to run the entire world for about 33 years if our level of consumption remained constant.
So you get the idea. A trillion dollars is a whole lot of money! And our country owes over 12 trillion. And it’s even worse than that – much worse. Besides the money we’ve already borrowed, we’ve made promises to pay a lot more money in the future, money we don’t have. We’ve promised to pay social security benefits, Medicare, and federal retiree pensions. The US Treasury Department recently reported that our nation has a staggering $62 trillion in these “unfunded obligations.”
Invariably, when I told my students about our nation’s debt, one of them would say, “But don’t we just owe the money to ourselves? What’s the big deal?” I imagine some adults have a similar misconception. I taught my students that our government owes real money to real people just like them! I explained to them that when the government needs money, it sells treasury bills, notes, or bonds to individuals, corporations, local governments, and foreign investors. These securities are basically IOU’s from the federal government. They must be repaid with interest. As with any other debt, the government will, at some point, have to pay back more than it has borrowed.
Now we all know that there is such a thing as too much debt in our personal finances. But as individuals, we have fewer options for paying debt than the government has. It’s also more difficult for us to continue borrowing. Government securities are backed by the full faith and credit of the United States. As long as our government is stable, treasury bonds should be a very safe investment, so people will continue buying them, thus loaning the government additional money. You and I are only backed by the total value of our assets. Once you’ve run through your bank accounts and sold everything you own to pay your debt, there is nothing left. Unlike the government, you can’t raise taxes or print more money. You’ve reached the limit of your credit-worthiness, and no one reputable is going to loan you money. Your last resort is to declare bankruptcy.
The government does have the ability to raise taxes and print money, so there seems to be no limit to the amount of debt it can accumulate. Of course, there are real problems with both those options, but I’ll save that for a later column.
In the past, some economists have believed that our national debt really doesn’t matter. It’s not like all those treasury securities are going to come due at once. As long as we can pay the interest due on the debt, some people believe the amount of the debt itself is not that important. It’s kind of like when people go buy a car and only worry about the size of the monthly payment without giving much thought to the length of the loan or the total amount to be paid. That’s lousy money management, but people do it all the time.
These days, you will have a hard time finding any knowledgeable person who doesn’t believe our economy is headed for disaster if our debt continues to grow as it has the past few decades. So what is so bad about debt? How much debt is too much? Most importantly, how will our growing debt affect us in the years to come? In future columns, I will attempt to answer those questions in terms that people of all ages and from all walks of life can understand. Only when we understand our economic difficulties will we hold our congressmen’s feet to the fire and demand they make desperately-needed changes.
Sunday, April 11, 2010
Let's take the hate out of politics
I don’t know if the editor planned it or not, but I had to chuckle when I turned to the editorial page of last week’s paper. My column was flanked on the right by Jim Davis’ article, “Who are the hateful ones?” and on the left by Jim Fitzgerald’s piece proclaiming, “The Republicans are the hateful ones.” I didn’t laugh long. The truth is, there is plenty of hate on both sides of the aisle. The vitriolic partisanship that divides our nation is no laughing matter. We have serious issues that threaten the economic future of our country and our children, and if we don’t pull together and address those issues in an honest and forthright manner soon, we are in a world of trouble.
As a friend of mine says, politics is not a sporting event, where one team must win while the other loses. We, the people, are not mere spectators sitting in the bleachers, pulling for our favorite team to come out ahead no matter what. News anchors are not sportscasters, just reporting who is ahead in the latest poll. Government is not a game - it is deadly serious, as our leaders must confront a dangerous world and make decisions that will affect every single American for years to come.
I’m tired of politicians. Our economy is on an unsustainable path; we need statesmen who will tell us the truth about what lies ahead and what must be done to get us going in the right direction again. We need leaders who care more about this country than they do the next election.
We need a news media that does its job. Here’s a news flash for the news media – I DON’T CARE whether the Democrats will be helped or hurt by health care legislation in the next election. I DON’T CARE if the Republicans are hurt by this scandal or that. I care about how new policies and legislation are going to affect our lives. I want answers, not controversial sound bites from one politician attacking another. And enough with the spin doctors! When did government become a public relations game?
I’ve had it with the endless back and forth that goes on between Democrats and Republicans. When one party is in power, all the other party does is criticize and obstruct in every way possible. Then there is an election and power shifts from one party to the other. The parties just reverse roles, each doing the exact same things they’ve been criticizing the other for. No wonder so many people hate politics! Others are saying, “A pox on both their houses,” and threatening to “reelect nobody.” The public is losing patience with the constant bickering in Washington. It’s as though the crew of the Titanic is embroiled in a huge argument over which life boats to lower first while the ship is rapidly sinking.
We need to take the hate out of politics and start talking to one another in a civil manner. Only then can we work together to solve problems and maybe even prevent the collapse of our economy.
Republicans should stop making wild accusations about Obama, calling him everything from a communist to the Antichrist. He is a progressive liberal who seems to like the European model of government and is moving us in that direction. Conservatives can certainly attack him on those grounds, but should stop spreading rumors and emails about him being a secret Muslim or a non-citizen. People who do so destroy their own credibility, making themselves look like right-wing nut cases in the eyes of Democrats.
Democrats should stop dismissing the Tea Partiers as an angry mob or a fringe group of ignorant people who don’t think for themselves. Doing so just comes across as arrogant. Liberals need to acknowledge that many Americans have legitimate concerns about our mounting debt and the growth of big government.
It’s time to realize that we are not just Democrats or Republicans, but Americans, and we are all in this together.
As a friend of mine says, politics is not a sporting event, where one team must win while the other loses. We, the people, are not mere spectators sitting in the bleachers, pulling for our favorite team to come out ahead no matter what. News anchors are not sportscasters, just reporting who is ahead in the latest poll. Government is not a game - it is deadly serious, as our leaders must confront a dangerous world and make decisions that will affect every single American for years to come.
I’m tired of politicians. Our economy is on an unsustainable path; we need statesmen who will tell us the truth about what lies ahead and what must be done to get us going in the right direction again. We need leaders who care more about this country than they do the next election.
We need a news media that does its job. Here’s a news flash for the news media – I DON’T CARE whether the Democrats will be helped or hurt by health care legislation in the next election. I DON’T CARE if the Republicans are hurt by this scandal or that. I care about how new policies and legislation are going to affect our lives. I want answers, not controversial sound bites from one politician attacking another. And enough with the spin doctors! When did government become a public relations game?
I’ve had it with the endless back and forth that goes on between Democrats and Republicans. When one party is in power, all the other party does is criticize and obstruct in every way possible. Then there is an election and power shifts from one party to the other. The parties just reverse roles, each doing the exact same things they’ve been criticizing the other for. No wonder so many people hate politics! Others are saying, “A pox on both their houses,” and threatening to “reelect nobody.” The public is losing patience with the constant bickering in Washington. It’s as though the crew of the Titanic is embroiled in a huge argument over which life boats to lower first while the ship is rapidly sinking.
We need to take the hate out of politics and start talking to one another in a civil manner. Only then can we work together to solve problems and maybe even prevent the collapse of our economy.
Republicans should stop making wild accusations about Obama, calling him everything from a communist to the Antichrist. He is a progressive liberal who seems to like the European model of government and is moving us in that direction. Conservatives can certainly attack him on those grounds, but should stop spreading rumors and emails about him being a secret Muslim or a non-citizen. People who do so destroy their own credibility, making themselves look like right-wing nut cases in the eyes of Democrats.
Democrats should stop dismissing the Tea Partiers as an angry mob or a fringe group of ignorant people who don’t think for themselves. Doing so just comes across as arrogant. Liberals need to acknowledge that many Americans have legitimate concerns about our mounting debt and the growth of big government.
It’s time to realize that we are not just Democrats or Republicans, but Americans, and we are all in this together.
Monday, March 29, 2010
So How Will We Save?
After reading my column from last week, my sister asked, “Will someone please explain to me how we are supposed to save money when Medicaid, Medicare, and Social Security are going broke, and we are going to cover 32 million more people? Why don’t I understand this?” She is certainly not alone in finding it difficult to understand how health care reform can reduce the deficit. In fact, a recent Rasmussen poll reveals that a whopping 81% of Americans believe the reform will cost more than the CBO projections. Since every other large entitlement program has mushroomed in size and cost, it’s no wonder Americans are skeptical about this one.
It’s easy to see how reform is going to cost us – the government will subsidize the premiums of many of those buying insurance and will add many more to the Medicaid rolls. It’s not so easy to understand the saving part. Frankly, I don’t think the Democrats have done a very good job of explaining it in terms that ordinary folks like me can understand. I’ve been doing my own research online and found a recent Newsweek article that attempted to explain it in five easy steps.
First, the formation of health insurance exchanges should create more competition among insurance companies. Now any good capitalist knows that competition results in better quality and lower prices. I get that. But I really didn’t know what the exchanges would be and how they would work, so I’ve been looking that up as well. My understanding is that the exchanges will be created by individual states, and states can decide to join together to create regional exchanges if they choose. The exchange will simply be marketplaces managed and regulated by the government. They will consist of private insurance companies that desire to be a part of the exchange. It stands to reason that companies would want to participate because that is where most customers would go to buy insurance. It will have a web site where various policies and prices can be compared Theoretically, the companies will seek to offer better coverage at lower prices to get your business. Companies within the exchange will have to meet certain standards of coverage.
Obama admits that not everyone will have lower-cost premiums as a result of the exchanges. Some people now have low-cost plans that have high deductibles and not-so-great coverage, because that is all they can afford or want to pay for. They will be required to buy better insurance under the new legislation and can expect to pay more as a result. If they earn less than 400% of the poverty level, that higher cost will be offset by government subsidies to help pay for their premiums. People who make more than that will pay more for their insurance; the CBO projects premiums will increase 10 – 13%.
There is considerable question as to whether the exchanges will actually work as they are intended. Massachusetts already has an exchange like the ones that will be created nationwide beginning in 2014. The state also has some of the highest insurance costs in the country.
A second means of saving money will be the Independent Medicare Advisory Board. One reason Medicare continues to cost so much is that Congress does not have the political will to cut benefits. The advisory board will do it for them. It will be made of 15 members appointed by the President and approved by the Senate. IMAC will write proposals for limiting Medicare’s costs. These measures will go into effect automatically unless Congress votes to reject them, and if they do, they must find another way to cut costs by the same amount. The idea is to make it easier for tough decisions to be made. Obviously, older adults may find this worrisome. Young people, on the other hand, may be tired of paying so much for the elderly and welcome the change.
A third method of controlling costs is called “bundling.” Right now, doctors get paid for each service they provide – every office visit, procedure or test. The more they do for a patient, the more money they stand to earn. It’s easy to see how greed might enter the picture here. With bundling, doctors would get paid one price to treat a condition for a certain period of time. If you have diabetes, you pay a set price for treating it for a year. It would no longer be in the doctor’s interest to prescribe more procedures. Fewer procedures means fewer insurance claims, thereby lowering costs for everyone – theoretically. Of course, it would now be in the doctor’s interest NOT to order procedures, and it remains to be seen if this will result in poorer care.
Fourth, the so-called “Cadillac” plans offered by some employers will be taxed a hefty 40%. The idea is to discourage employers from offering such plans. That would mean fewer people seeking medical services that are no longer covered. That would lower demand, and lower demand leads to lower prices.
Finally, the government will now have a huge stake in keeping costs down, since it will be subsidizing so much of health care. If they fail to do so, they will have to face angry voters who are upset about rising deficits and/or higher premiums. Of course, the fact that they have already been on the hook for Medicaid and Medicare has not resulted in keeping costs under control so far.
These measures should produce savings – we just don’t know how much. What we do know is that the CBO projects the cost of reform to be $940 billion dollars over the next ten years. Whether or not we can really offset those costs and actually cut the deficit remains to be seen.
.
It’s easy to see how reform is going to cost us – the government will subsidize the premiums of many of those buying insurance and will add many more to the Medicaid rolls. It’s not so easy to understand the saving part. Frankly, I don’t think the Democrats have done a very good job of explaining it in terms that ordinary folks like me can understand. I’ve been doing my own research online and found a recent Newsweek article that attempted to explain it in five easy steps.
First, the formation of health insurance exchanges should create more competition among insurance companies. Now any good capitalist knows that competition results in better quality and lower prices. I get that. But I really didn’t know what the exchanges would be and how they would work, so I’ve been looking that up as well. My understanding is that the exchanges will be created by individual states, and states can decide to join together to create regional exchanges if they choose. The exchange will simply be marketplaces managed and regulated by the government. They will consist of private insurance companies that desire to be a part of the exchange. It stands to reason that companies would want to participate because that is where most customers would go to buy insurance. It will have a web site where various policies and prices can be compared Theoretically, the companies will seek to offer better coverage at lower prices to get your business. Companies within the exchange will have to meet certain standards of coverage.
Obama admits that not everyone will have lower-cost premiums as a result of the exchanges. Some people now have low-cost plans that have high deductibles and not-so-great coverage, because that is all they can afford or want to pay for. They will be required to buy better insurance under the new legislation and can expect to pay more as a result. If they earn less than 400% of the poverty level, that higher cost will be offset by government subsidies to help pay for their premiums. People who make more than that will pay more for their insurance; the CBO projects premiums will increase 10 – 13%.
There is considerable question as to whether the exchanges will actually work as they are intended. Massachusetts already has an exchange like the ones that will be created nationwide beginning in 2014. The state also has some of the highest insurance costs in the country.
A second means of saving money will be the Independent Medicare Advisory Board. One reason Medicare continues to cost so much is that Congress does not have the political will to cut benefits. The advisory board will do it for them. It will be made of 15 members appointed by the President and approved by the Senate. IMAC will write proposals for limiting Medicare’s costs. These measures will go into effect automatically unless Congress votes to reject them, and if they do, they must find another way to cut costs by the same amount. The idea is to make it easier for tough decisions to be made. Obviously, older adults may find this worrisome. Young people, on the other hand, may be tired of paying so much for the elderly and welcome the change.
A third method of controlling costs is called “bundling.” Right now, doctors get paid for each service they provide – every office visit, procedure or test. The more they do for a patient, the more money they stand to earn. It’s easy to see how greed might enter the picture here. With bundling, doctors would get paid one price to treat a condition for a certain period of time. If you have diabetes, you pay a set price for treating it for a year. It would no longer be in the doctor’s interest to prescribe more procedures. Fewer procedures means fewer insurance claims, thereby lowering costs for everyone – theoretically. Of course, it would now be in the doctor’s interest NOT to order procedures, and it remains to be seen if this will result in poorer care.
Fourth, the so-called “Cadillac” plans offered by some employers will be taxed a hefty 40%. The idea is to discourage employers from offering such plans. That would mean fewer people seeking medical services that are no longer covered. That would lower demand, and lower demand leads to lower prices.
Finally, the government will now have a huge stake in keeping costs down, since it will be subsidizing so much of health care. If they fail to do so, they will have to face angry voters who are upset about rising deficits and/or higher premiums. Of course, the fact that they have already been on the hook for Medicaid and Medicare has not resulted in keeping costs under control so far.
These measures should produce savings – we just don’t know how much. What we do know is that the CBO projects the cost of reform to be $940 billion dollars over the next ten years. Whether or not we can really offset those costs and actually cut the deficit remains to be seen.
.
Thursday, March 25, 2010
Pay or Save - Which will it be?
Well, for better or worse, the deed is done. On March 23, 2010, President Obama signed the Senate version of health care reform into law. Of course, the fight will continue as Congress debates whether or not to approve the House fixes to the bill. Meanwhile, the attorney generals of several states are filing law suits based on their belief that the bill’s requirement that everyone buy insurance is unconstitutional. Republicans talk of taking back the House and Senate come November, and then repealing the bill – highly unlikely as they would have to have a 3/5 majority to override a presidential veto. We are going to be hearing arguments about this for a very long time.
One of the most heated arguments revolves around whether or not this reform will save us money or send our deficits spiraling out of control. We’ve all heard the analysis from the CBO (Congressional Budget Office). It predicts the bill - with the House fixes – will save the federal government $138 billion from the years 2010 – 2019 and as much as $1.3 trillion over the next twenty years. If this is true, we should all be dancing in the streets! We just managed to insure 31 million more people AND save money. Trouble is, many people, and I’m one of them, find that a little too good to be true.
It’s not that anyone doubts the integrity or reliability of the CBO. The problem lies in the fact that the CBO can only predict the cost of a bill based on the numbers and information given them by Congress. Does anyone doubt the integrity and reliability of Congress? (That was a rhetorical question!)
For example, there is the double-counting in the Congressional figures given to the CBO. Part of the legislation includes collecting tax for a new long-term care policy. That money is counted as revenue to pay for the cost of this bill. HOWEVER, the money will be needed down the road when people stop paying into it and instead draw it out as they go into nursing homes. The same money can’t pay for both that AND insuring 31 million new people!
Congress tells the CBO that it will recover much of the cost for health care by taxing those “Cadillac” insurance plans. That plan is so unpopular, however, that it has already been postponed until 2013. Labor Unions, which typically win these employer-provided plans for their members, will fight implementation of the tax. If the tax does go into effect, employers will almost certainly start providing lower-cost (meaning lower-coverage) plans to their workers to avoid the tax. I wouldn’t count on much revenue there. Likewise, high earners will fight additional taxes on their investment income. Even if enacted, revenue from that will depend on how the economy is doing, something no one can predict.
The CBO also assumes there will be large cuts in Medicare and reimbursements to doctors and hospitals. Politically, this would be very difficult to enact. Already, Congress is promising a $200 billion “doctor fix” to increase payments to doctors. This is not counted as part of future health care costs because it will be in a separate bill, and the CBO can only score the bill placed in front of it.
History teaches us that the costs of entitlement programs are greatly underestimated. When Medicare was signed into law in 1965, it was projected to cost around $9 billion by 1990. It turned out to be $67 billion – over seven times as much! And now it turns out that Social Security will be out of funds even sooner than we had thought.
The CBO estimates the cost of the current health reform legislation at around $950 billion dollars over a ten-year period. Congress has proposed cuts and policies that they say will more than offset that cost. The problem is that we have to count on all those cuts being made and the policies working the way they are supposed to. That is assuming a lot. Future legislation can prevent any or all of it from ever taking place.
To be fair, there are parts of this legislation which do hold promise for cutting healthcare costs and reducing the deficit – if they are implemented wisely. More on that in next week’s column.
One of the most heated arguments revolves around whether or not this reform will save us money or send our deficits spiraling out of control. We’ve all heard the analysis from the CBO (Congressional Budget Office). It predicts the bill - with the House fixes – will save the federal government $138 billion from the years 2010 – 2019 and as much as $1.3 trillion over the next twenty years. If this is true, we should all be dancing in the streets! We just managed to insure 31 million more people AND save money. Trouble is, many people, and I’m one of them, find that a little too good to be true.
It’s not that anyone doubts the integrity or reliability of the CBO. The problem lies in the fact that the CBO can only predict the cost of a bill based on the numbers and information given them by Congress. Does anyone doubt the integrity and reliability of Congress? (That was a rhetorical question!)
For example, there is the double-counting in the Congressional figures given to the CBO. Part of the legislation includes collecting tax for a new long-term care policy. That money is counted as revenue to pay for the cost of this bill. HOWEVER, the money will be needed down the road when people stop paying into it and instead draw it out as they go into nursing homes. The same money can’t pay for both that AND insuring 31 million new people!
Congress tells the CBO that it will recover much of the cost for health care by taxing those “Cadillac” insurance plans. That plan is so unpopular, however, that it has already been postponed until 2013. Labor Unions, which typically win these employer-provided plans for their members, will fight implementation of the tax. If the tax does go into effect, employers will almost certainly start providing lower-cost (meaning lower-coverage) plans to their workers to avoid the tax. I wouldn’t count on much revenue there. Likewise, high earners will fight additional taxes on their investment income. Even if enacted, revenue from that will depend on how the economy is doing, something no one can predict.
The CBO also assumes there will be large cuts in Medicare and reimbursements to doctors and hospitals. Politically, this would be very difficult to enact. Already, Congress is promising a $200 billion “doctor fix” to increase payments to doctors. This is not counted as part of future health care costs because it will be in a separate bill, and the CBO can only score the bill placed in front of it.
History teaches us that the costs of entitlement programs are greatly underestimated. When Medicare was signed into law in 1965, it was projected to cost around $9 billion by 1990. It turned out to be $67 billion – over seven times as much! And now it turns out that Social Security will be out of funds even sooner than we had thought.
The CBO estimates the cost of the current health reform legislation at around $950 billion dollars over a ten-year period. Congress has proposed cuts and policies that they say will more than offset that cost. The problem is that we have to count on all those cuts being made and the policies working the way they are supposed to. That is assuming a lot. Future legislation can prevent any or all of it from ever taking place.
To be fair, there are parts of this legislation which do hold promise for cutting healthcare costs and reducing the deficit – if they are implemented wisely. More on that in next week’s column.
Saturday, March 6, 2010
Book Review: A Century Turns by William J. Bennett
This latest offering in a three-volume American history series by Bill Bennett, conservative pundit, author, and politician, covers the years from 1988-2008. Volumes I and II, entitled America: The Last Best Hope, describe the years from the discovery of America to the end of Reagan’s presidency. According to Bennett, teachers have built entire history curricula from these two books, and schools have added them to their supplemental reading lists. I have not read the first two volumes; in fact, I was unaware of their existence until I began reading A Century Turns. Thomas Nelson Publishing provided me with a complimentary copy of the book for the purpose of reviewing it. I began reading with three main questions in mind: 1. Would reading this book make me want to read the earlier volumes? 2. As a former history teacher myself, would I use these books for my curriculum or supplemental material? 3. Would Bennett’s conservative beliefs make the book overly biased?
Now that I have finished the book, I can answer these questions. I do not feel the urge to rush out and buy the first two volumes and doubt if I will read them. It’s not that A Century Turns is bad. It’s easily read and would be interesting to anyone who wants to know more about the political history of the past twenty years. The book naturally focuses on politics, since Bennett was heavily involved in government himself during these years. He does occasionally veer off into popular culture and other events, but it seems like an afterthought when he does – it doesn’t flow smoothly in my opinion. As a history teacher and CNN junkie, I learned very little from reading this book that I didn’t already know. Like many history books covering a long period of time in a short volume, it is somewhat superficial. Anyone who has paid close attention to current events in recent history may enjoy being reminded of what they have seen on TV news, but it will not be new to them.
I don’t know about the first two volumes, but I cannot see building an entire curriculum from A Century Turns. It would, however, be a good reference book, and I would have no qualms about adding it to a reading list for my classes.
As for bias, I feel Bennett does a fairly good job of being objective in his reporting of events. He was part of the government during this time period and occasionally offers personal anecdotes. When he does offer his opinion, he makes it clear that he is doing so. Readers will have no doubt that Bennett is a conservative, but he doesn’t get preachy about it.
In conclusion, if you have not been that tuned into current events and would like to know more about the politics, government, and some popular culture of the past twenty years, you may enjoy this book.
Now that I have finished the book, I can answer these questions. I do not feel the urge to rush out and buy the first two volumes and doubt if I will read them. It’s not that A Century Turns is bad. It’s easily read and would be interesting to anyone who wants to know more about the political history of the past twenty years. The book naturally focuses on politics, since Bennett was heavily involved in government himself during these years. He does occasionally veer off into popular culture and other events, but it seems like an afterthought when he does – it doesn’t flow smoothly in my opinion. As a history teacher and CNN junkie, I learned very little from reading this book that I didn’t already know. Like many history books covering a long period of time in a short volume, it is somewhat superficial. Anyone who has paid close attention to current events in recent history may enjoy being reminded of what they have seen on TV news, but it will not be new to them.
I don’t know about the first two volumes, but I cannot see building an entire curriculum from A Century Turns. It would, however, be a good reference book, and I would have no qualms about adding it to a reading list for my classes.
As for bias, I feel Bennett does a fairly good job of being objective in his reporting of events. He was part of the government during this time period and occasionally offers personal anecdotes. When he does offer his opinion, he makes it clear that he is doing so. Readers will have no doubt that Bennett is a conservative, but he doesn’t get preachy about it.
In conclusion, if you have not been that tuned into current events and would like to know more about the politics, government, and some popular culture of the past twenty years, you may enjoy this book.
Wednesday, January 27, 2010
What Can One Person Do?
Most of us have become so jaded by the propaganda dispensed from Washington, we no longer trust our leaders to tell it to us straight, or do what they say they will do. We hear so many versions of the “truth” we don’t know what to believe anymore. It’s tempting to wash our hands of it all, leaving it to the professional politicians to do what they will, for good or for ill. After all, we have busy lives. We elected these people to run the country for us so we could go about our daily business. Besides, one person can’t really make any difference, can he?
But we can’t avoid the consequences of our leaders’ actions. If they run our economy into the ground, you and I will suffer. So what can we do? I have ten suggestions:
1. Do your own thinking. No matter how much you like Glen Beck or James Carvell, don’t become a disciple of any mere mortal. Neither Hannity nor Colmes has cornered the market on truth. I may like some of the things Rush says, but I would consider it a condescending insult to be called one of his “ditto heads.” Don’t blindly follow any one political party; maintain your independence.
2. Educate yourself. Read widely from quality books, magazines, and newspapers rather than relying on biased TV and radio talk shows for all your information. Learn how government works. Study the basics of economics.
3. Do some fact-checking. Go to the source when you can. There are good web sites like FactCheck.org that analyze the words of politicians to see if they are true or false. Do some research on the issues. With the Internet at our fingertips, there is no excuse for ignorance.
4. Acknowledge your own biases and entertain the notion that you just might be wrong about some things. Truly listen to opposing arguments and be willing to change your mind if the evidence suggests that you should.
5. As a teacher, I used to tell my students that the truth is often in the middle. Be wary of extremists on either side. They are usually far more concerned with proving themselves right and their opponents wrong than they are with discovering the truth.
6. Don’t demonize those with whom you disagree. If we all stay entrenched in enemy camps, taking potshots at each other, nothing will ever be accomplished. There are good people who are conservatives. There are good people who are liberals. They just have different ideas of how our government should operate. Right or wrong, they are sincere in their beliefs. Most Americans truly love their country and want what is best for it. Can’t we meet on that common ground and start talking to each other in a civil manner?
7. Make yourself heard. You can write and call your representatives; it does make a difference. They listen to the constituents who care enough to pick up the phone and call to express their opinions. Write letters to the editor of your local paper. Attend meetings where issues will be discussed.
8. If you have children, talk to them about world and national events. Watch and discuss the news with them. Help them become involved citizens who care about the world beyond their personal lives.
9. Volunteer in your community to bring about changes you want to see. Be the difference. If you are so inclined, run for office or support someone else who espouses your views.
10. It should go without saying, but VOTE.
Maybe one person is limited in what he can do, but if a whole lot of us started doing these ten things, it WOULD make a difference!
But we can’t avoid the consequences of our leaders’ actions. If they run our economy into the ground, you and I will suffer. So what can we do? I have ten suggestions:
1. Do your own thinking. No matter how much you like Glen Beck or James Carvell, don’t become a disciple of any mere mortal. Neither Hannity nor Colmes has cornered the market on truth. I may like some of the things Rush says, but I would consider it a condescending insult to be called one of his “ditto heads.” Don’t blindly follow any one political party; maintain your independence.
2. Educate yourself. Read widely from quality books, magazines, and newspapers rather than relying on biased TV and radio talk shows for all your information. Learn how government works. Study the basics of economics.
3. Do some fact-checking. Go to the source when you can. There are good web sites like FactCheck.org that analyze the words of politicians to see if they are true or false. Do some research on the issues. With the Internet at our fingertips, there is no excuse for ignorance.
4. Acknowledge your own biases and entertain the notion that you just might be wrong about some things. Truly listen to opposing arguments and be willing to change your mind if the evidence suggests that you should.
5. As a teacher, I used to tell my students that the truth is often in the middle. Be wary of extremists on either side. They are usually far more concerned with proving themselves right and their opponents wrong than they are with discovering the truth.
6. Don’t demonize those with whom you disagree. If we all stay entrenched in enemy camps, taking potshots at each other, nothing will ever be accomplished. There are good people who are conservatives. There are good people who are liberals. They just have different ideas of how our government should operate. Right or wrong, they are sincere in their beliefs. Most Americans truly love their country and want what is best for it. Can’t we meet on that common ground and start talking to each other in a civil manner?
7. Make yourself heard. You can write and call your representatives; it does make a difference. They listen to the constituents who care enough to pick up the phone and call to express their opinions. Write letters to the editor of your local paper. Attend meetings where issues will be discussed.
8. If you have children, talk to them about world and national events. Watch and discuss the news with them. Help them become involved citizens who care about the world beyond their personal lives.
9. Volunteer in your community to bring about changes you want to see. Be the difference. If you are so inclined, run for office or support someone else who espouses your views.
10. It should go without saying, but VOTE.
Maybe one person is limited in what he can do, but if a whole lot of us started doing these ten things, it WOULD make a difference!
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