US: Debt and goverment spending

Vitaliy_Kiselev

Looking at the March report income is 171 bln, expanses are 369 bln. Pretty balanced. :-) Deficit is 198 bln, or 115% of all income.

Compared to 2008 income dropped from 178 bln to 171 bln (including real inflation drop will look much bigger) , expenses were 227 and dificit only 48 bln (or 26% of income).

May be it'll be all easy to cut and go back to something remotely sane, like..... Greece?

Nope, around 173 bln are spend to support poor and old in various areas (food, medicine, etc) plus 63 bln is for defence. Not much left really (and most of it is alrso money spent on quite real things).

Via: http://fms.treas.gov/mts/mts0312.pdf

brianluce

That's why the only answer is the combination of...
Cut spending (Democrats never want that)
Increase taxes (Republicans never want that)

BOTH. Not one or the other. Both.

Vitaliy_Kiselev

@brianluce

I'll tell you big secret.
Any serious attempt to cut spending will result in huge problems.
Most probably economics won't hold such impact.

brianluce

There are painless ways, raising eligibility age for medicaid benefits, means testing for Social Security, and here's the biggie, eliminate the home mortgage deduction. People need to stop making their homes into hedge funds. And also, end the stupid wars and quit maintaining a military designed to take on the USSR. War is hell. http://costofwar.com/en/

Vitaliy_Kiselev

@brianluce

How about provide some numbers? Interesting to see how big will be your proposed cuts.

There are painless ways, raising eligibility age for medicaid benefits

I think many people who will be excluded by this proposal won't think of it as "painless".

brianluce

You're right, these suggestions are horribly unpopular and are political suicide for any lawmaker who proposes them. "Painless" was the wrong word. How about "Tolerable"?

Numbers? What you didn't like my war calculator?

For the home interest, 100 billion a year in new revenue seems to be the agreed upon figure. 100 billion here, a 100 billioin there, pretty soon you're talking about a lot of money. http://www.dailyfinance.com/2011/04/20/eliminate-mortgage-interest-tax-deduction/

Medicare is the giant elephant though.

Vitaliy_Kiselev

For the home interest, 100 billion a year in new revenue seems to be the agreed upon figure.

First, if you remove tax cuts in about 8blb month it'll mean that spending will drop by same amount and you'll loose other taxes in at least 50% of this. Next will come house selling problems and house building companies problems. So, in few month you can be back to 0, or, most probably in even more deficit.

Medicare is the giant elephant though.

Yep, but any attempt to cut in this areas will mean more problems.

About "100 billion here, a 100 billioin there". Deficit is about 200 bln / month, normal payments to start debt return are about 100-150 bln month minimum. Total expanses are about 370 bln. Generally, with proper cuts, we are talking at huge life level drop, closure of 80% of small businesses and return of wild capitalism without ANY goverment support, even police or schools.

brianluce

To my knowledge, it's not close to a 1:1 between tax increase and spending decrease. Currently, A lot of the tax savings go into investment funds that return nothing or at most 15% back to the government. Clinton raised taxes and next thing we know budget is balanced. A lot of money just sits in investments these days. About house selling problems, we already have that! Besides, US real estate is still way over valued. There has to be lots of changes, as you say as well, one of those changes is for people to start thinking of their house as a house. Not a Ponzi Scheme. A good start is dumping home mortgage deductions. About medicare, there are many things wrong with healthcare overall, and some of the fixes are in fact painless. Ever seen how fat most Americans are? Jesus Christ, no other country has so many fat asses, not even Samoa.

jrd

Believe it or not, the U.S. budget deficit would come into immediate balance if the U.S. spent the same amount on medical care, per capita, as the rest of the industrialized world -- countries which cover all their citizens, rich and poor, and get better medical outcomes than we see in the U.S. However, corporate America opposes socialized medicine (which, you may have noticed, isn't killing people in Canada, France Germany, Japan, etc.) , so Americans can't have it.

Much as some "conservatives" don't like to hear this, Social Security is an income transfer program with no effect -- zero -- on the deficit. And the mortgage income deduction is a drop in the bucket -- not even worth discussing, given the larger issues.

And despite the fact that American "defense" spending is bloated to the point of obscenity, and the rich in America are preposterously undertaxed compared to other countries, and some of our most profitable corporations (such as General Electric) pay "negative" taxes (the government actually pays them), the main cause of deficits in the U.S. today is the price of medical care. Even if the government eliminated Medicare entirely, medical costs will eventually bankrupt the country at their current rate of inflation.

The cart below demonstrates what happens to U.S. deficits, if U.S. spending on medical care were at the same levels as the other indicated countries. You'll see that the U.S. would actually be running budget surpluses, if in future years we spent the same per capita amount that they do in (for example) Canada or Germany . If we spent what they do in Britain, our budget surpluses would be even higher -- nearly 10% of GDP.

Vitaliy_Kiselev

Believe it or not, the U.S. budget deficit would come into immediate balance if the U.S. spent the same amount on medical care, per capita, as the rest of the industrialized world

What do you mean under it?
Can you provide me numbers for this month, how you want US budget spending to look like?
And how big must be cuts.

Generally, three "simple solutions" as I hear them sound the following:

Cut help to poor and Medicaid (and get huge social explosion).
Cut defence spending (and be slowly thrown out from many countries).
Tax rich motherfuckers (rich motherfuckers are very good at avoiding tax, so it'll just result on cutting life level of top middle class).

jrd

V.K.: as a matter of social policy , I'd tax the hell out of the rich, eliminate all wasteful tax breaks for corporations and drastically cut military spending, whether or not any of that was necessary to reduce the current deficit. But, unfortunately, the U.S. government doesn't consult me on these questions!

However, the U.S. budget deficit could be eliminated entirely without doing these socially useful things. The U.S. currently spends about $8000 per person on medical care. And even this high level of spending still leaves tens of millions of American uninsured, with no access to medical care outside hospital emergency rooms.

By contrast, Japan spends a little over $3000 per person -- despite the fact that the Japanese system covers every Japanese citizen, and also despite the fact that the Japanese make heavier use of the health care system than do Americans.

If the U.S. spent what the Japanese do, starting next month, the U.S. budget deficit would disappear. This is thanks to high costs associated with Medicare, Medicaid, the Veterans Administration and other government funded health-care programs.

Of course, in order to pay what the Japanese do, we'd need a socialized system of medical care which earns much lower profits for hospitals, drug companies and doctors. And given the choice between restricting the profits of big business and accepting the kind of socialized medicine which has been adopted in every other industrial democracy, with great success, most American politicians would prefer to drive the American economy into bankruptcy.

Vitaliy_Kiselev

@jrd

I think I asked the numbers and links to documents (like my link above) backing your statements.

Looking at

Via: http://www.usgovernmentspending.com/federal_budget_detail_fy10bs12012n

You propose to cut expanses from 106 bln (prognose from picture was 92,5 bln ) to about 40 bln.
This, of course, include closure of many clinics, cut of new equipment contracts, and cut of medicine salaries. It makes 66 bln in savings.
And defcit is 198 bln. And according to your words deficit will become zero :-)

jrd

@Vitaliy_Kiselev

Your chart indicates that health care accounts for 25% of the budget -- nearly $1 trillion dollars annually, and it goes up very steeply every year, thanks to the high rate of medical inflation and an aging population. In addition, there are substantial hidden medical costs in the 32% which goes to "Welfare" and "Defense". And we haven't even begun calculating the effect on the private sector -- businesses and individuals would see their health insurance premiums, and/or their medical bills, cut in half, or more, under a socialized medical care system.

Currently, about 17% of the US GDP goes to medical costs -- this is a HUGE drag on American productivity and its competitive position world-wide. The country would be far more competitive and prosperous if it reverted to the 9% norm in the rest of the industrialized world.

So let the Bush tax cuts expire as they're scheduled to do (about $400 billion a year), and add up these cost savings, and the budget deficit goes to zero or surplus within the next 5 years.

It's true that the medical care industry would see recessionary effects. But the overall gain in national wealth, diverting money wasted on health care (government economists estimate that about 30% of this money is wasted) to more productive uses, will more than compensate.

ghkqn

Unfortunately, VK pointed out the real issues with US budget and deficit. Mandatory spendings which include social security, medicare, medicaid, unemployment benefits essentially eat up all the available incomes. Non mandatory spending like Defence, FAA, various incentives to jump start economy, etc. essentially drive the deficits. But this is only the picture today and in the past few years. When you look at the trends, where the spending growths are, they show up in social security and healthcare. This means even if we cut all discretionary spending, aka non mandatory spendings, the deficit will be growing still. Even the mammoth defence budget is being eaten up by retirement and healthcare spending (it is already at 35% and growing).

I agree with VK that in reality, you cannot really do massive cuts, because when you do this some one or many will be unemployed, and that too carries a budgetary cost. At least for several months, you have to pay for unemployments. No pay, means fewer consumer spending which our US economy highly depends upon, no taxable incomes and therefore the deficit may actually gets worse, and the vicious circle continues.

There is little doubt in my mind that something needs to be done on healthcare and social security. More and more americans are hitting retirement ages and truth is we all live longer (even though among all developed economies, the US is the only country that actually sees a reduction in lifespan, for both men and women, during the 2007 crisis!). And when you look at businesses, healthcare is already a major cost contributor, including the Dept. of Defence. There is a sizable cost for doing nothing as well. Uninsured folks when they are too sick and hit the Emergency room and Intensice Care Unit, I doubt anyone sane can just stand back and say "let them die". In the end, we all pay for the costs of uninsured health care.

I do not believe there is a simple magic cure, such as 'cut spending" or "tax billionnaires and millionaires", as touted by politicians from both parties. Whatever the solutions are, I believe it will be very painful for all Americans and for at least a decade or longer. Unfortunately, the current political climate in the US is not conducive for any intelligent discussions and negotiations. When a politician is basically lobbying for the doctrines of his or her parties, it is the interests of the nation that are not being served.

jrd

@ghkqn

Since social security is a "pay as you go" system -- current workers pay for the benefits going to retirees --and is not funded from general revenue or other taxes, how exactly does it contribute to the deficit?

It's true that the social security trust fund will be exhausted in 2037, and that the system will only be able to pay around 75% of scheduled benefits thereafter, if nothing is done to shore up the finances in the next 25 years, as has been previously done several times before.

But to listen to politicians, the only way to avert this terrible potential result (75% benefits) is to cut benefits now! In other words, to avoid potential benefit cuts in 2038, we need to cut benefits now.... Make sense? Didn't think so.

Finally, I'm sure you're not going to say that the trust fund is an "accounting fiction", unless you believe that American treasury bonds are worthless, in which case, it won't much matter what we do about any spending....

Vitaliy_Kiselev

@jrd

I provided you calculations that prove that your words have no foundation.
Generally, it is road to immediate disaster.

this is a HUGE drag on American productivity and its competitive position world-wide.

I think it is wrong POV. Yep, spending is ineffective. But. ANy attemp to use simple solution and try to cut it result in social problems, fast emerging problems in medical production sectors.

US people have big deficiency. They still really belive in simple solutions.
Spend less (or more) on medicine, tax the rich, fuck the military.
ANY solution from this list fully implemented means so big problems so 2008 will be remembered as best year ever.

Vitaliy_Kiselev

@jrd

I can even tell you US goverment plans (in many parts it is same as global rulers plan).

Fight for resources and try to control as much as you can.
Actual military spending increases fast, but is being transferred to private armies who get their income from controller resources.
Use all power to force partners and big bank clans to buy treasures. Media is used now only to cover this.
Repeat steps 1-3 until some really big problems (preferable one with nuclear weapon usage) occure. Use this problem to drop life level to reasonable amounts. But still control big amount of resources that you got on early stages.
Global clans will use problem to throw out local goverments. I expect about 30-50% of countries will be completely eliminated and teir goverments will lost all military and financial soverinity.

jrd

@Vitaliy_Kiselev

If the U.S. government spent the same proportion of GDP on healthcare as other rich industrialized democracies, it wouldn't be running budget deficits -- using the figures you provided. But I don't think we'll agree on this one, so perhaps it's best to leave it there....

Vitaliy_Kiselev

it wouldn't be running budget deficits -- using the figures you provided.

How this is related to my calculations (all of them are based on official documents contrary to your unbacked words)? My calculations clearly shows that you can't even remotely solve deficit even cutting ALL medicine spending.

jrd

@Vitaliy_Kiselev

Let me give it one more shot. U.S. GDP is about $13.5 trillion. 17% of that goes to health care spending in the U.S., which is about $3 trillion. More than 50% of healthcare spending is paid by the U.S. government, so that means that the US. government is spending at least $1.5 trillion on health care annually.

If U.S. medical costs were brought into line with the rest of the industrialized world, it would immediately save $750 billion or more -- in one year. As noted, the rest of the world spends only about 9% (and in many cases, less than that) of GDP on medical care.

You're right -- this savings isn't enough to wipe out deficits immediately. However, allowing the Bush tax cuts to expire, as they're scheduled to do, would bring in another $400 billion annually.

In any event, NOT bringing U.S. medical costs into line with the rest of the industrialized world will have disastrous consequences for the U.S. economy. So whether we think it's politically possible or not -- there's no choice in the matter, if the U.S. is to survive as a nation.

Beyond that, I'd love to drastically cut military spending and increase taxes on the rich. But you asked for a solution to the debt crisis, and I proposed one.

Vitaliy_Kiselev

@jrd

I provided calculations for one month. And it shows that this savings (that are absolutely impossible) are not enough. Any tax cuts "savings" require links to models proving that they, indeed mean savings and not disaster. As far as I am aware, most normal economicsts support POV that NONE of your proposed solutions can be realized.

Politics is the art of the possible.

Always remember this.

jrd

@Vitaliy_Kiselev

In this case, the "possible" is a single-payer socialized medical care system -- like they have in Canada, most of Europe and Asia -- which is far cheaper than the American system, covers everyone (unlike the American system) and provides better care.

You may be right: such a system may be politically impossible in the U.S., despite the fact that it's a proven method in the rest of the world. But eventually, I suspect that even the U.S. will have no choice but to adopt it.

As for my math, which is based on annual computations, not monthly ones -- I don't know what else I could do to persuade you that my figures add up, so I'll leave it there.

brianluce

Vitaliy I don't for an instant believe cutting defense would have profound negative impact. It's corporate welfare and I'd be happy to be "Thrown out of other countries". Why are we in Japan and Germany? And PLEASE throw us out of Afghanistan. I think your long standing premise that war is good for the economy is a failed one. And why do we have a military that can fight a cold war? Why do we need all those Top Guns? Unmanned drones are far more efficient. 23% of budget goes to defense, I don't think any other country spends such a high amount. Defense industry is a big fat hog and that's not what's needed in the world of Terrorism and rogue nukes. You accuse us of providing simple solution, your predicted outcomes of these solutions are just as simple. Big changes are needed.

Vitaliy_Kiselev

@brianluce

Cutting defence is worse from ALL provided "solutions".
Whole generation is US somehow thinks that everybody loves them and resources are provided because they "pay more on competitive market".

Why are we in Japan and Germany?

To support your life level :-) Both are strategic countries and bases ensure that they won't turn into full fledged empires who'll compete with US. Remove the bases and in few years you'll be surprised :-)

And PLEASE throw us out of Afghanistan.

Thing is that Afganixtan is also very important, as having army here allowed to rise narcotics production, eliminating huge amout of people in Asia and Europe.
Strategic placement is also very important allowing to tightly control Pakistan and be near India.

That amazes me is logic in this proposals. Assuming that goverments, military and analists working whole life in this and having acess to all information are somehow stupid and making always completely wrong decisions, but we... ouch we are mightly ducks basing our opinions on TV and few blog posts, we know better.

brianluce

Sorry I just don't believe today's wars are fought with carrier battle groups and 200 million dollar strike fighters and billion dollar bombers that don't work.

And I can't speak for Germany or Japan but I'm skeptical of your claim they'd bring back militarized governments as it didn't work out last time they tried that. Most Germans I know won't even talk about it. Further, Japan and Germany seem to do a good job of competing with us already , in part because they're not saddled with an archaic cold war military that consumes huge amounts of money and gives zero in return.

And drugs have always been Afghanistan's rice bowl, the Taliban couldn't even control it. Drugs will flow if we're there or not.

Vitaliy_Kiselev

Sorry I just don't believe today's wars are fought with carrier battle groups and 200 million dollar strike fighters and billion dollar bombers that don't work.

They are. You need all this and carrier groups are tools that played extremely important role in all US wars.

And I can't speak for Germany or Japan but I'm skeptical of your claim they'd bring back militarized governments as it didn't work out last time they tried that.

No one is talking about some "militarized governments ".
They'll just start to protect their interests, not US ones.
This will require good army, development will require more resources, etc.
It is nature. And it is completely different that US citizens think about it.

And drugs have always been Afghanistan's rice bowl, the Taliban couldn't even control it.

Documents and numbers contradict with this words.

Howdy, Stranger!

Categories

Tags in Topic

Top Posters