The Country’s Spending Problem

There isn’t a day that goes by when some GOP member says, “the US does not have a tax problem, it has a spending problem”.  The evidence they cite is the trillion dollar deficit projected as far as one can see.  The evidence is real, so should one conclude that the GOP analysis is real too.  I wonder?

By definition, a deficit means one has spent more than one has collected.  Is the Zebra black with white stripes, or white with black stripes?  It would seem reasonable to say a Zebra has black and white stripes.  And in the same spirit, the US might have a tax and spending problem.

So let’s zero in on the most frequently accused examples of too much spending, Medicare, Medicaid, and Social Security.  What would happen if the government spent less on these entitlements?

For most people, the absence of government spending would mean they would need to spend more to supplement the loss of government payments.  Medical costs would not go away.  And, there would not suddenly be some new source of money to offset reduced Social Security checks.  Medicaid recipients are already too poor to buy health care coverage (by definition) This means “no money, no health care (except in emergency room conditions)”.

This doesn’t seem to me a just a spending problem, it seems more a lack of imagination problem.

Let’s look at what is really going on.   First, the wage roll taxes collected specifically to cover future Medicare and Medicaid costs have been too low.  In essence, the US has put away too few acorns to provide for everyone winter’s of retirement.  The second, and unrelated factor, is that health care costs in general are out of control.  The US possesses the most expensive health care delivery system in the world.

The Social Security shortfall is very similar.  This defined benefit has not collected enough Social Security wage taxes in order to meet its defined benefit payout.  The yearly cost of living increase, while moderate today, is still increasing each year.   The consequences of reducing Social Security benefits should be no mystery.

If we consider the deficit situation, however, as a “tax and spending problem”, means testing might help reduce the amount the government (from taxing everyone else) must contribute for both Medicare and Social Security without hurting those who can’t afford to pay more.

But even more dramatically, a “tax and spending mentality” would lead us to recognize that fixing the deficit cannot be achieved without fixing the US health care delivery system.

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