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.
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