Ezra Klein's op-ed on Bloomberg View about the deficit posits that our projections with respect to the deficit are naturally misguided and that we cannot speculate as to what will happen with the deficit in the long-term.
I kind of like how he loves to use the word "muddle", while truly muddling around the point of his argument (as far as I can tell, there really isn't even a point). But hey, he's confident we'll muddle through this one and everything will be alright -- you don't really have to give a reason for it, it'll just happen y'all. I usually like Ezra's articles, but I'm not sure where I stand on this one. See below for the excerpt from the article.
What do you guys think -- deficit is just going to solve itself? We're just gonna "muddle" right through it?
In part for that reason, we don’t balance the budget for 70 years at a time. Indeed, we usually don’t even balance it for 10 years at a time. Instead, we muddle through, striking deals that are smaller than wonks like, but sufficient to keep us out of the woods. That’s what we did in the 1990s, which featured deficit-reduction bills in 1991, 1993, 1995 and 1997. We’ll probably follow a similar path in the decade to come.Of course, you can muddle wisely or muddle stupidly. I worry we’ll choose the latter. Evidence is already mounting: The sequester is a stupid way to cut spending. Letting the Bush tax cuts expire all at once is a stupid way to raise taxes. And repeatedly forcing the country to the brink of default is a stupid way to manage our budget.
Projections based on demographic information are highly valuable for SS & Medicare. Those programs need to be modified - period. If Obama truly attempted to change those programs (ie: reduce the level of benefits) he'd certainly be the greatest Democrat president. Those two programs, by far, will have the largest impact of future deficits.
2) Yeah, but with regard to Medicare - that'd leave even more people without the ability to do shit because they're drowning in medical bills. America's healthcare system is fucked up, plain and simple. Medicare is part of the problem, via its upward push on medical bills, but fixing Medicare alone isn't enough. Shit needs an overhaul.
Agreed. There are two arguments at play here:
The Ezra Klein argument: 'The future will be rough considering the large deficit, but we have been able to balance the budget before, at levels well above 100% debt to GDP.(late 1940's)'
The Bill Gross argument: 'It is true that we have been able to balance the budget in the past, but the situation is much different today. It is the most commonly ignored fact: The U.S. has unfunded liabilities in total, estimated at over a whopping 100 trillion.' This is all while america is becoming a more controlled economy, while our competing nations are becoming more free-market oriented. Indeed, there are U.S. citizens beginning to leave the country in droves, which will be increasingly eroding tax revenues in years to come. http://rt.com/usa/news/leaving-us-america-country-289/
Buy your gas masks and bandannas ahead of time folks.
This is all true. As much as people want the government to help them, we all need to cut back and accept that changes need to be made. There is nothing that will stop Medicare and SS from being 40% of the US budget in 15 years.
I love Ezra. My favorite Ezra classic:
Ultimately, fiat currency is enforced with brutality, which is part of why I FUCKING HATED how bush overextended US forces. Google salt currency
Educate yourself, the system has failed you
One aspect of healthcare which I believe is the largest issue for elderly is the cost of medications. This whole elderly living facility expense is new to the economy, My mom was showing me world cruises she wanted me to send her on that were 2k/month that had inclusive food and had on-board doctors lol. But I think that if the government extended patents on pharmaceuticals that could decrease many of the increases in healthcare costs in the country. I am a big fan of free market monopolies lol RIP J.D. Rockefeller.
Currently the patents for drugs last for 20 years, but that usually begins before clinical trials (because you want to protect it as soon as possible), by the time the hoops with the FDA are done they have about 10 years left on the patent to make back R&D costs and their cap rate. This relatively short amount of time to create return, coupled with the failure rate of products during clinical trials makes it such that the cap rates have to be high for drug companies to be profitable. Now I don't really believe that the FDA approval should be the side of the equation that can be removed, so you have the short life of the patent that should be amended. The reason the government did this initially was as a means to suppress monopolies and create competition in pharmaceuticals.
Whose to say Pharma companies are going to lower drug prices enough neutralize the additional income from increased patent protection? Sounds like payday for Pharma to me.
It would be difficult for them to do this when they are mostly dealing with insurance companies and the government since most people don't pay cash out of pocket at CVS.
At best you have a zero sum game where the overall cost to the system is the same but costs for individual drugs are spread out over longer time periods. Not much of a benefit IMO.
The other half to the Bill Gross argument is that it is easy to cut spending coming off a major war...you just demilitarize. How do you do that today? The middle east is a drop in the bucket. If we pulled out tomorrow, we would still be staring down a 1.1 trillion deficit.
We do need to slash medicare, medicaid and SS big time. Hike the eligibility age.
I think we also need to start asking hard economic questions about end of life care. 1/3 of healthcare costs are spent in the last year of life, and for most people that is a really shitty year. How much should your insurance co be expected to spend if XYZ treatment has a 5% chance of giving you 2 more months?
Likewise, 25% of healthcare costs are related to inefficiencies in billing. Setting rates in advance, and ending haggling between Dr.'s and insurance co's would have a huge impact. The administrative requirements are crippling.
Fair enough. I think that what it gets down to is a forecast of what would happen. Another thing to note is that Pfizer and Merck don't do the R&D themselves, they purchase the patents from small companies and/or universities that develop them which is funded primarily by government grants and secondarily by healthcare PE firms.
Although I believe the drug companies are the best at what they do by simply looking at their sheer size, I think the political climate would make them hard pressed to be given such an opportunity and use it to line their pockets when there is so much commotion over medicaid/medicaire and obamacare. I think politicians could enact it tactically within their own campaign cycles such that if this was occurring they could bring down the hammer for votes.
But it was just a curiosity of mine, I'm pretty sure the greatest variable cost for healthcare is medication, as wages are certainly not going up, and technology is amortized over a longer period of time, and I think that this could be one way to deal with future deficits.
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