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CBO Report: We have three options, only one is viable – A different plan to consider?
This piece runs on a bit and gets wonkish toward the end. Sorry on both counts. BK
The Congressional Budget Office may have done the country a big favor. It put into blunt words what choices we face. In the report dated July 19th CBO had this to say:
I) Raise federal revenues significantly above their average share of GDP;
II) Make considerable changes to the sorts of federal benefits we provide for older Americans;
III) Substantially reduce the role of the rest of the federal government—that
is, defense (the largest single piece), Food Stamps, unemployment
compensation, other income security programs, veterans’ benefits,
federal civilian and military retirement benefits, transportation,
health research, education and training, and other programs—in our
economy and society.
is, defense (the largest single piece), Food Stamps, unemployment
compensation, other income security programs, veterans’ benefits,
federal civilian and military retirement benefits, transportation,
health research, education and training, and other programs—in our
economy and society.
‘I’ is necessary and it’s going to happen. While this may sound
easy it is not. Increased taxes from workers are just a drag on the
economy. If there must be new taxes, the money raised has to support more than just the rapidly growing aging population. The country is in desperate need of new investments (energy, infrastructure, education); it would be a mistake to channel more scarce financial resources to one segment of the population.
‘III” is also going to happen. Cut backs in defense are critical. The other programs in the “rest of the government” will also be part of the mix. But let’s get real about this.
The US can’t cut these programs by an amount that would move the
needle. Do we really want to eliminate a substantial portion of the
defense budget? It’s true that the US can no longer afford its huge
bases in Asia and Europe. And we certainly can’t afford to go off to
wars that last ten years. We don’t need a huge standing Army. There can
be cuts in the Navy’s carrier fleets. The Air Force doesn’t need new
combat fighters. But it would be the dumbest mistake we ever made to degrade the military so they could not react if and when needed.
So that leaves ‘II’. The baby boomers are the real problem. This chart from the CBO says it all:
Note that of the significant components in the budget there is the
assumption that they all remain about the same as a percentage of GDP
for the next ten years. The exceptions are Social Security and Medicare.
These two programs gobble up a greater and greater share of the pie.
It's simply not possible to change the direction of the deficit in the
USA unless spending for the older population is reduced.
There is no plan from any side of the budget debate that is addressing this simple reality. I have a plan. It goes like this:
Objectives:
-Decrease the number of those covered by Medicare by 20% (now and in the future).
-Maintain existing revenues sources for Medicare at their current (and projected future) levels.
-Provide a major economic stimulus to the health care industry.
It is very tempting to say that a means test is the mechanism to achieve these objectives. IMHO it's necessary that well off seniors have to take a sizable hit.
That may sound like an easy solution, but it is not. The tax codes only
address income, so there is no effective “means test” measuring system.
There would have to be an “asset test”; this is something that does not
exist and would be very unpopular. (Note: If one had $10mm in
the bank it would be very easy to make $500k a year tax free. This very
wealthy person would not be hit with a means test based on income.)
Probably the most significant factor against a means test is that it is
confiscation. While the results may be considered fair by a broad
segment of the population the fact is that this is stealing. I think the courts would not look favorably toward this type of approach. A means test is a very tough political sell.
So the question are:
How do we steal old rich people’s money?
How do we do it in a way that actually has some fairness (to all) attached to it?
And can we do it in a manner that would also act as a broad economic stimulus?
I think it might be possible to achieve these things. Rather than confiscate rich old people's money I want to sell that group something they desperately want. I want to sell them what they want at a very high price.
If those rich older folks don’t want to buy what I want
to offer them, there will be a price to pay. Those with significant
resources will have two choices in my plan. Either they can sign up for
what I’m offering or they have to pay a tax on the SS and Medicare
benefits they receive.
Here is a brief description of the new health care plan that I would offer to high net worth seniors. I call this the Gold Plan. Assume a 65 year old got this in the mail from Uncle Sam:
Your government is offering you a new health plan called the Gold Plan. Here are the features you will like:
-It will cost you nothing out of pocket to get this insurance.
-It will provide the best possible care with no deductions or co-pays.
-You can go to any Dr. you like, whenever you want.
-Your prescriptions are covered at no cost to you.
-There is no part A,B,C or any of that. No paper work at all. You get a Gold card and everything is covered.
-This is the same level of coverage that a President would get.
-This is lifetime coverage, regardless of health outcome. It will never cost a dime out of pocket to get.
That sounds good doesn’t it?
Medicare has an out of pocket monthly cost of $500 (including
supplemental). There are co-pays, tons of forms and deductibles for
prescriptions. Not all doctors or treatments are covered. Medicare is
not cheap and it does not provide for the best level of care. Therefore
if someone 65 got that letter in the mail they would whoop for joy.
What does the new health insurance actually cost? 100% of ones monthly social security check. Sign that payment away and you have a Gold Plan.
Very quick numbers:
*The average cost per Medicare beneficiary is $11,000 per year. (Medicare annual report)
*The average SS check for high life time earners is $1,800 per month or
$21,600 a year. (A range of monthly SS income from $1,400-2,200+ would
be accepted as full payment. This is a progressive feature of the Gold
Plan.)
The math on this looks good from the government’s perspective. A
beneficiary would be "paying" $22k per year. That is more than double
the average cost of a Medicare beneficiary. A portion (approximately
$3,000) would go back to Medicare. The balance of $19,000 a year is
available to cover the benefits under the Gold Plan.
This is the "carrot" part of the plan. There has to be a "stick" to get one's attention. The stick would be a new tax. Those
that are high lifetime earners would be subject to a new tax on their
SS benefits (a flat tax of about 15%) if they don't go for the Gold.
There would be two doors to choose. Yes, either door is costly. But at
least one door has something valuable on the other side.
On the economics: Assuming a 20% participation rate, the Gold
Plan initial revenue pool would be ~$190 billion a year and rise with
annual COLA + 750,000 new enrollees every year (increasing by $20b or
10% PA). The objective would be for the Gold Plan to breakeven. This is a bailout of Medicare. That would be the "prize".
This would also be a huge boost to the medical industry.
In my example Medicare expenditures would go down by $140 billion (20%)
while Gold Plan medical expenditures would rise to ~$200 billion. The
net gain of +$50 billion (and growing) would be very supportive of the
health care industry. I am not a fan of Big Pharma or Big (private)
Hospital, but if you want to create jobs in America, health care is the place to do it. If you think that CAT, CSCO, INTL, GM are going to create the jobs we need, think again. Healthcare is the only growth industry the country has got.
Yes, this is a "backdoor" means test. I'm sorry, but something like a means test has to happen.
Note: If you’ve read me before on this topic you know I am apposed to an economic plan that entails a huge inter generational wealth transfer. Unfortunately, that is the plan we are currently following. My thinking is that we need a different plan. A plan that shifts the burden (substantially) to the generation where the problems reside. The foregoing was my effort to turn the arrow in a different direction.
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Boomers are toxic ?
Have they/we collected the benefits, or did they/we just pay for the program ?
Last I checked the prior gen. is the one enjoying the colas.
Bravo.
Save your pity and shove your opinions up your collective asses. The whole SS scam was set up by a top 1% fucktard from New York. It was systematically looted over the years by by the 535 asshats in DC who are owned by the top 1%. When I was 25 I would have killed to get out of SS. Couldn't even get any of those 535 asshats to listen. When the talk turned to privatizing SS, I tried to cheerlead, nobody wanted to hear it and still today, I see those SS taxes withheld. I am at the very tail end of the baby boom so I will get the maximum stroke withheld and have to buy my own t-shirt that says 'I got fucked by SS'. If you guys are so good at getting your legislators to respond to common sense, how did TARP get past you? (or Bertwinkie reconfirmed, the Patriot Act, etc, ad nauseum) Did any of you even call any of those 535 asshats about any of these or are you just blowing air? Here is an easy way to tell; if your representative will still take your phone calls or answer your email, you didn't do shit. Ask me how I know.
One of the guys at work turned 65 today and he was grousing about the proposed 'cut' to SS benefits. I suggested he buy a pitchfork while he was still working. The only consolation is there is very little on the horizon to prevent a global monetary collapse within the next 5 years (max). I bet I can find a way to make a little retirement cash off that.
I'd like to hear anyone's comment refuting anything you've said. I've stated before that all my protestations fell on deaf ears. I'm still raising hell but there is no swaying a Congress person once he/she takes office. They dance to a different fiddler upon swearing in.
I also agree with you ping, and also I feel sorry for them at the same time. They could have made a paradise of the system, but they where more interested in themselves. Now when they are getting close to the "prized ring" of retirement they are running scared. Because they know deep down that the bills for the older people the govt. doesn't really get anything back on that investment, it's an expense. So one they know that one day the govt. might say sorry we have to cut. They kept quiet on so much because it was I got mine, so F everybody else. Well what they will be seeing real soon is the govt. taking away the thing that they thought they would be able to keep.
I also agree with you ping, and also I feel sorry for them at the same time. They could have made a paradise of the system, but they where more interested in themselves. Now when they are getting close to the "prized ring" of retirement they are running scared. Because they know deep down that the bills for the older people the govt. doesn't really get anything back on that investment, it's an expense. So one they know that one day the govt. might say sorry we have to cut. They kept quiet on so much because it was I got mine, so F everybody else. Well what they will be seeing real soon is the govt. taking away the thing that they thought they would be able to keep.
Also here's something to consider, if they do a means test on assets it will be fought tooth and nail by the younger prodigy of the older boomers. Because if the boom decides to take the Gold plan (I think it's a good idea), then the boomer will have to forego giving their assets to family members before they die because they will need it to live off of.
ping,
Agree with you 100%. Every boomer I know, including those in my family, are always "me, me, me" and "my kids, my kids" and "we were here first... that (whatever it is) is MINE".
Some I've worked with have the attitude that they know what they are doing but don't care because they'll be dead before the piper needs to be paid.
They've mortgaged the future of this country and now want someone else to pay the bill.
Well said Ping. My idea had a carrot AND a stick. You are quite right that there will be no "volunteerism on this one.
Hence the stick.
"I’m offering or they have to pay a tax on the SS and Medicare benefits they receive."
BK, with all due respect, pay a tax on a tax?
Sure. It already exists. It for 'double dippers'. Those who get benefits and continue to work. The total tax collected on this came to $24b in 2010.
So what was the target again?...the wealthy who can afford to live without SSI for the rest of their life or the middle/lower classer who decides to go back to work?
Wouldn't it be fairer to everyone to say, to a wealthy recipient, you paid in X and X is all you're going to get back no matter how long you live? This was forcibly taken from their pay afterall.
And to the middle class the same, with the stipulation that if you run out you won't have to sell your home in order to eat and beg on the streets.
The lower, of course, is always taken care of no matter what through the myriad of programs at their disposal, so they don't even enter into the discussion.
Again, this money was forcibly extracted from wage earners, I don't see how we get around the moral hazard of not giving it back as promised no matter what its value in todays terms.
It was/is a safety net.
Yup, that's my thinking as well. Any change to Social Security should be for those who haven't been paying into the system for decades. If you think about it, it's no different than defaulting when you impose haircuts after altering the deal unilaterally.
In truth, I want it dead for following generations. I've never hidden this fact.
Like every other social program it sits there, festers and grows until it becomes unsupportable...a social liability instead of a social asset.
I understand it is human nature to want to "do something" for the unfortunate, but to allow the government, of all entities, to have a pot of money sitting in front of it is asking for trouble.
They took the money and spent it on other things instead of its purpose..its gone, replaced with a government IOU, backed by a now bankrupt government.
Nothing more needs to be said...outside of the fact that they robbed us and they can keep everything I paid in over my lifetime, just quit robbing me now and the next generation to keep this ridiculous ponzi alive.
I think most wealthy and middle class (meaning me) would agree. Stop the theft, it didn't work as intended because we let someone else take care of the books.
Our "other" taxes paid for many things...start selling them off to pay back what was taken under false pretenses and relieve the next generation of any liability.
Oops, slipped and hit junk key.. sorry.
"They took the money and spent it"
A lot of that money is still there in the form of bank accounts and rich benefit programs for the grifters and skimmers.
Equalization should be sought.
Politicians and fat cat bureaucrats that are now living large after years of mismanagement and fraud need to be equalized with the society that they have created.
And then... time for the banksters and blatant corporate thieves.
"Oops, slipped and hit junk key.. sorry."
Saaaw right...I was starting to feel left out and considered junking myself...lol.
"Equalization should be sought."
Absolutely.
"Politicians and fat cat bureaucrats that are now living large after years of mismanagement and fraud need to be equalized with the society that they have created."
I've long held the opinion we (the people) need a Clawback Amendment. For every year they don't balance the nations books (their only real purpose for being there) they lose three years of benefits.
"And then... time for the banksters and blatant corporate thieves."
A target rich enviroment ;-)
My fear in posting this is it may be taken seriously and actually be implemented. What the hell:
"cut all food stamps, eliminate deposit insurance. raise the Social Security Age of eligibility to 90. Throw all health care over to the Veterans' Adiminstration. eliminate the postal service and "end NASA as we know it." downsize the budget of the Deparment of Education to "as many bibles as you need...but nothing more." declare all debt odius. declare all wars over and we'll get around to getting you a plane ticket home. go on a Gold Standard. elect General Petraeus for life...in fact form a "Petraeus Party" to "keep the flame alive." Implement a "tempory enslavement program" just in case things get dicey. Declare the media illegal. That includes "oracle like individuals" who act "as a medium between worlds" who as we all know are truly the most dangerous human beings in existence.
Boomers are going to love the Gold Card health plan, as long as it doesn't affect their Social Security Checks.
To say we could have more money if we didn't give so much money to voting seniors is like saying we could have bacon and eggs, if we had bacon, and then bought some eggs.
Well, it's not free. The point is you are trading one thing (all future SS payments) in exchange for a better health plan.
So after having the socialists/progressives reap the political benefits/votes of promising Medicare to several generations since the 1960's, we now realize that we can't possibly pay for it. So we must shift gears and place the costs where they truly belong - on the beneficiaries. Nice evil racket/ponzi scheme. I say let the system burn to the ground since we were so stupid to believe that such a system could ever work as initially promised. We deserve it for the naive belief that the government is Santa Claus.
Re: I say let the system burn to the ground since we were so stupid to believe that such a system could ever work as initially promised. We deserve it for the naive belief that the government is Santa Claus.
People love to believe in things that don't exist. (there are many examples).
Unfortunately, in a country this size it's very easy for a small number of sociopaths and sycophants to create fantasies in the brains of these who believe in magic and then run a cool scam on them to get more power for themselves. You can't fight human nature, human brains LOVE to believe.
I wouldn't junk you Oppressed. The Santa comment is right on. We got to where we are in large part based on:
"Don't worry. The Government will figure it out."
Bruce, I don't see the problem as "who will pay the bills". I say it's the fact that the actual costs of medical care are unreal and unsustainable. Reducing many things in the medical arena and streamlining procedures should be the first objective. Paying some reduced bills could go a long way in fixing things. Who was the genius who came up with the idea that drugs should not be put out for lowest bids? The guy(s) who benefited from drug company largess, that's who. It's not the ability to pay that is broke, it's the cretins who are giving away the available funds to the medical system that is milking the populace. Yes, that may include some restrictions on care and available treatments. Sort of a cost benefit analysis. The military does it all the time with healthy young men, so what's the problem with sick old folks? Off we go into the values and morals department!
Interesting plan, Bruce, but I would say focusing more investment and jobs into healthcare is on the verge of blowing more economic bubbles. There is already such a large portion of our population working in healthcare and the amount of money flowing into the system per capita is unsustainable.
(Wrong reply)
I say let the economy default--that's how we take rich old people's money. They had their chance to tell their congressmen to let there be higher taxes, now they will face the greatest tax of their life for their greed-- a complete devaluation of their bank accounts. This conundrum is akin to a 5 year old brat telling their parents they will hold their breath until they get what they want. Go ahead its your life is all that needs to be said. Those with the most to lose are not only holding the gun to our collective heads, but perhaps more frightful (to them) themselves!!!! I still dont get it....
Bwahahaha..."They had their chance to tell their congressmen to let there be higher taxes..."
If we can find a way to directly tax "stupid" you will surely balance the budget all by yourself. Repeat after me, "raising taxes to fix our deficit is like using a bandaid to fix arterial bleeding."
And just to cut you off, I'm 30 years old and am well aware I will never see a dime of SS or Medicare. Our deficit increased four fold in ONE year, from 400 billion to over 1.5 trillion, and now that we're reaping the benefits of going from unsustainable to window-licking retarded, we get to hear cocksucker after cocksucker prattle on about how we need to raise taxes. Give me a motherfucking break. Cut something, anything, in a meaningful fashion and maybe then we can talk. Hell, you would be burnt in effigy for even suggesting we go back to 2008 spending levels.
"30 and... I will never see a dime of SS or Medicare." Try this on for size. I have paid into this system since I was 12 with my first job. I'd be thrilled to get back just what contributed with 3% interest. So try paying in for 38 years knowing I'll be lucky to get half of the 'benefits.'
To add insult, let's add in the huge SS tax increase in the 1980s, then find out, (a) that the government spent the damn money, (b) they can tell you to f-off because its not really an obligation, (c) that "we" just spent and/or are going to spend ~5 trillion to bail out f'g bankers (twice the amount of phantom money in the SS trust fund).
Totally agree with the rest of your statements. +1.
If all the monies collected for SS, less payouts, had actually been kept in some sort of "lock box" there would be outcries from all quarters to "tap" the resource to pay the nation's bills.
So, what the hell is the difference? It would be gone -- either way. There are IOUs in the "lock box" at this point, sufficient to carry the system. In this sense the government actually owes a debt. Saying that the payments are onerous and unsustainable is a ruse. It's like saying that I don't owe my credit card debts run up at Safeway 'cause I already ate the food so there are no assets to offset the debt. Go figger.
I don't think he's advocating raising taxes now. I believe his comment is referring to the fact that the older generation went right up to the point that they are due to start receiving their SS and Medicare entitlements and now they want to raise taxes on those who are still working so their benefits don't get cut.
Good point. My apologies Mr. Kurtz if that was your meaning.
none taken, we are on the same side ;)
Logan's Run time, bitchezzz!
Effing morons, there is 1 option - revalue the currency and then live within the means.
Bruce Krasting is a very sick and dangerous man!
What he is talking about is no different than Jewish thugs-Bolsheviks have done in Russia.
So, this shit-head is offering to legalize a plunder of the segments of US population that has made America the most powerful and rich country in the world. He offers to exterminate people who worked hard and saved & wisely invested their money.
Bruce Krasting is an imbecile who does not understand that he is offering a very slippery road to "prosperity". This asshole does not understand elderly people will be just first victims. It will not stop just there. It will like a cancer spreading through the entire American civil fabric with new and new segments of population being plundered, tortured and exterminated.
I hope it will start with Bruce Krasting.
PS
I am just appalled that ZeroHedge allowed such an article that openly advocates criminal and terrorist activities against most productive Americans based on their age.
Freedom of speech has nothing to do with calls to plunder people. Nobody has right to threaten other people lives and well-being.
Govenrment workers have better coverage and more advantages then private workers.
SO!
MAKE GOVERNMENT SALARIES FLEXIBLE!
Flexible salaries that stay 7.5% BELOW private sector wages because all the extras make up for it.
And you've got yourself some serious savings!
In the past, government salaries used to be a lot lower then private sector wages, now they are surpassing them on a big scale. Socialisme has cought up on their paychecks a bit to much.
damn man, can you tell me where i can get this super awesome government insurance? i just had a cavity filled with my less than awesome government insurance and it cost me 500 dollars out of pocket, not including the copay
Mine cost $1K out of pocket. NO dental coverage at all. Buck up there fella.
So the Baby Boomers (option II) are the problem? Forget "Rise of the Planet of the Apes"...we're seeing the seeds being sown for "Logan's Run".
The boomers (I would be one of those) allowed the system to get to this point, knowing full well what the population bulge in the python was going to be. They should pay the price.
If my fellow boomers want to chime in, feel free.
The Hope & Change.
Bruce, you missed one big savings change:
2 TIER price structure based on healthy lifestyle.
Non smokers, slim, exercise, non alcoholic SAVE.
Free annual phsyical gets certified "Healthy Lifestyle Discount" for Medicare, Private Insurance, Etc...
OBESE / SMOKERS PAY DOUBLE RATES!
which will get these lazy fat asses to live healthy
that lowers diseases like diabetes and heart disease
that cuts national health care costs.
Much more difficult to implement than one paragraph. There are no bright lines separating "healthy" and "fat/lazy". A one or two pound weight difference can change one's coverage. Accounting for body types must be taken into account? That's only a small list of the possible ways to game a yet to exist system. I'm wholeheartedly on board with your idea but fear that its implementation would be yet another government intrusion into our lives. If you are a Republi-Ken then you'd have to concede this one caveat.