Congratulations Mr. Obama, you have just inherited $10 trillion of debt and another $50 trillion in unfunded liabilities. Now what?

While Americans have long ignored the problems that will arise from an enormous federal debt, namely the insufficient funds for entitlement programs such as Medicare, Medicaid, and Social Security, we will see the manifestation of these problems sooner than Americans might think.  The consequences of our fiscal irresponsibility will be apparent within Mr. Obama’s first term.

In 2011, the Baby Boomers will start to retire, collecting entitlement benefits in overwhelmingly large numbers. By 2010, it is estimated that Medicare and Medicaid will absorb 25% of our federal spending. Medicare spending alone increased by 13% just in 2007 and will continue to increase between 7 and 8 percent a year as the number of Americans over 65 will surpass 62 million in 2025.

Before Mr. Obama has even stepped into the oval office, he has promised the expansion of the health care program. However, before expansion, the federal government must seriously reform the health care system, especially Medicare. Raising taxes and repealing the Bush tax cuts will be necessary to generate more revenue to fund entitlement programs, but it will not solve the problem alone.  The government must focus on decreasing the growth of health care spending. There are many proposed solutions to this problem such as raising the age of eligibility for Medicare and increasing health care cost sharing between the individual and the government.

If there is one lesson we can take from the Wall Street collapse, it is that we cannot rely on nor spend money we simply do not have. Millions of Americans are counting on the fact that they will receive health care benefits when they retire, but if the government continues on this path of recklessness, these promises will be hard to fulfill.

It will not be easy, nor popular, Mr Obama, but these tough decisions are undeniably necessary to ensure the fiscal health of our country and its citizens.

The coordinated care network of medical homes (CCNS) is essentially a model of care that enables a patient to get all of his or her treatments in a single location. Therefore, if patients choose this option, CCNS requires that they have a medical home within the coordinated system. Under this system, the state government would reimburse the network at a prepaid premium based on the patient’s health status and expected use of the system. This premium is then directly paid to cover the treatment costs. As a result, this forces doctors to be efficient and promotes evidence-based practices (because medical experts will have your medical records, they’ll be able to treat you more effectively). Health care providers are also encouraged to work together to effectively treat the patient.

Jindal’s central theme for health care reform is that he wants to give individuals the option of choosing their health care. He wants to give less power to the bureaucrats and more to the local communities, patients, and doctors. This central theme reflects the basic principles of the conservatives, which is less government control, fiscal responsibility, and the free-market. Jindal’s health care plan would politely force an individual to be more accountable for his health and for his spending. If individuals like the current Medicaid benefits package then they can keep it, if not, they have two other great options to choose from. Another great thing about these three choices is that they are designed to be affordable and effective to people of particular income levels. Jindal’s plan sounds like a great solution to the health care issue, but until we see the results from its implementation we can’t accurately judge the success of the plan.

Currently, Americans have a health care system that just isn’t working and more people are becoming uninsured or are going bankrupt because they lack the money to pay for these things. For the past several years, the issue of health care has steadily worsened. The Democrats seem to have interesting ideas for reform, but we’ve yet to see any tangible effects. The Republican Party, behind the face of Bobby Jindal, wants to try implementing new ideas for health care reform that may prove to be more effective that those of the Democrats.

Bobby Jindal, newly elected governor of Louisiana, has had a lot of experience in dealing with health care and his ideas are very interesting. First, he wants to expand Medicaid to cover more low income citizens while also giving everyone three different choices for health care. The first of these choices is that patients can stick with the Medicaid plan that they already have, which is a fee-for-service benefits package. Second, patients can choose a state-designed benchmark benefits package, which is still the Medicaid benefit package but revised to best fit the patient’s needs. Lastly, patients can choose to live in a coordinated care network of medical homes (CCNS). The first two choices are relatively straightforward, but the third choice is one that is most interesting.

In life, you have to learn to prioritize.  Right now, the world is in an economic crisis.  Banks are in trouble, industries are in trouble, and experts are predicting the biggest rise in unemployment since WWII.  In this turmoil, President-elect Obama has announced his intent to pass a stimulus plan to create or preserve 2.5 million jobs that some estimate will require $500-700 billion.  In addition, Obama is said to be reconsidering his promise to repeal the Bush tax cuts, instead letting them expire as scheduled in 2011.  Which raises the question: How is he going to pay for all his spending?

The government simply does not have all these billions to throw around.  As noted in my other blog post, “Will Change save us enough change,” Obama had planned to pay for his health care reforms by repealing the Bush tax cuts, but experts feel that repealing the tax cuts would not be enough.  Now, Obama is floating the idea of not annulling the tax cuts at all while at the same time increasing government spending even more. And of course, as evidenced by the $700 billion bailout plan’s mixed results, this stimulus package might not work as well as its supporters intend.

So what will it be?  Tax cuts? Health reform?  Economic stimulus? Providing more aid to Afghanistan?  Our government didn’t have enough money to pay for all this before and it certainly doesn’t have enough money for all these new expenses.  It’s time for change but we don’t have the resources to change everything at once and we have to realize that.  Otherwise, the next few generations will have an impossibly large debt to pay off.  And that crisis would probably be much worse than the one we’re in now.

Sometimes, I lose a dollar bill or some change to the black hole that is my couch.  It’s annoying but it’s not that big of a deal.  Sometimes the Department of Defense misplaces fifty-six fighter jets and thirty-six missile launchers. That’s a slightly bigger deal, not to mention the fact that it’s much harder to lose a fighter jet than it is to drop a few coins.  This is jut the tip of the iceberg of waste that exists in the ocean of bureaucracy that is our government. In 2003, the Defense Department inspector general found that the department forgot where it spent $1 trillion and from 2002 to 2005, $33 billion in excess equipment was thrown away, with $4 billion of it being in new,unused, or excellent condition.  It’s not just that we’re throwing away money though; we’re also spending it on the wrong stuff.  Buying useless items such as warships that haven’t been used in over half a century has cost the country  $35 billion a year.  Meanwhile, fraud and administrative errors in Medicare have cost us over $10 billion annually and officials in the Department of Agriculture spent over $5 million on items such as Ozzy Osbourne tickets and lingerie.

Why? Why are 28% of government programs “not performing” and 28% only “adequate” according to the OMB? Why has the government failed all of its audits since Congress mandated that outside auditors have to review the finances of federal agencies? We don’t have enough money already; why are we wasting all those billions?

For more on inefficient government programs, check out this link-

The Office of Management and Budget’s assessment of government programs

Government programs like Social Security and Medicare that benefit the older generations are going to bankrupt our nation in the near future.  The baby boomers are retiring and there are fewer middle age workers to pay for the nation’s medical bills and Social Security checks. While you as current retired Americans will receive your benefits, in a few short years, there will be no benefits for your children or grandchildren. There will be a large financial strain on our nation’s economy and tough decisions to make. Middle age workers have paid into Social Security for so long; isn’t it only fair that they receive what they put into it? In order to finance these programs, either taxes have to skyrocket or benefits have to decrease. This is a difficult scenario to imagine, but unless something is done now, this is our future.

Many retirees do not realize how much they are consuming. Older Americans need to realize that if these programs are not reformed, they will be leaving the American economy in a very deep hole. As an 18 year old, I am concerned for my economic future. Obviously, when I am older, I don’t want to be paying so many taxes that I can’t afford for my children to go to college or to live comfortably. You have a responsibility to your children and grandchildren to help find a solution to this problem.

Health insurance. It’s something that everybody needs, yet seems to be without. As a child, I always understood health insurance to be something that I needed to be able to see the doctor. Unfortunately, many people, because they don’t have coverage, can’t see a doctor as often as they would like to. I was fortunate enough to have had health insurance all my life, but there’s a larger majority of people without it, a larger majority of young adults without it, and a larger majority of working families without it. Over the past several years, health insurance premiums have risen exponentially and as a result, many employers cannot afford to offer health benefits. In addition, large companies now require employees to contribute a larger share towards their coverage. Because of these rising costs, many employees have been living without it and are putting themselves and their families at risk. In 2006, over 1 million full-time workers lost their health insurance.  When you include part-time workers, over 37 million workers were uninsured because many businesses do not offer health insurance and/or many employees simply do not qualify for health insurance. Yes, workers “qualify” for health insurance. Not everyone is entitled to coverage like our grandparents: for them, Medicare AND Medicaid give them all the coverage they need. Who else is uninsured? Well, since workers are uninsured, naturally their children are uninsured as well. The loss of health coverage resulted in over 8 million children who are uninsured, and that number rises by 600,000 every year . No yearly checkups, no prescription medication, nothing. Without health insurance, people’s lives are at risk.

Senator Obama won the presidential election campaigning under the slogans of “Change,” and “Yes, we can,” but solving real problems is harder than getting a crowd to chant a few words.  Can Obama’s policies stop the impending national debt crisis?  Let’s take a look at how our next president plans to deal with the scariest beast attacking our future: health care.

Obama will attempt to reduce the number of uninsured while also cutting costs by eliminating inefficiencies in the system.  Most analysts think that he’ll  get the first part done, with projections showing 18.4 to 26.6 million people becoming insured once his plan is fully implemented.  Considering that the number of uninsured is presently around 45 million, Obama’s plan does a pretty good job.

Obama’s cost cutting proposals are slightly more problem ridden.  Obama plans to cut costs by comparing the effectiveness of different drugs and techniques, investing in health information technology systems, increasing access to disease management programs, preventing private insurance waste and abuse, and importing cheap drugs.  However, the CBO has shown that research on comparative effectiveness will not bring major reductions in health spending within the next decade.  In addition, the CBO has pointed out that adopting health information technology is “not sufficient to produce significant cost savings,” and that Obama’s savings estimates are based on a study that is misleading due to methodological issues.  Increasing access to disease management programs and importing drugs have both not been shown to reduce overall health spending by much and stopping insurance abuse and waste is expensive, providing only minor savings.  Taking everything into account, the Lewin group estimates Obama’s health care plan to increase government spending by roughly $1.17 trillion from 2010 to 2019, and Obama doesn’t seem to have a way to pay for all of it.

Video Produced by John O’Malley and William Son

This leads us back to our domestic issues which have spurred us to sell more and more of our mounting debt in order to continue to finance our expensive programs. In order to finance these programs independently, we would need to pay exorbitant taxes, nearly fifty percent of our paychecks, or we have to decrease our benefits by nearly fifty percent. A combination of the two could be successful, but this would require political acumen, public support, and restraint as a society. As those who are working now, you may feel that by the time this scenario comes about, you won’t be affected by higher taxes. You have paid your dues! But what about your benefits? Would it not be more beneficial to determine what must be cut now from what is truly necessary before the program becomes bankrupt (around the year 2040) and causes lawmakers to slash programs that are costly regardless of the good that they do? Also, it is imperative to consider your children. It will be harder for them to find jobs that pay enough to buy a house or to support a family. They will find it difficult to send their children to college and to pay their health care costs, which are growing at a far more rapid pace than our economy and will continue to do so until reforms are made.

As a college student, I am worried that the market will not be able to accommodate my generation and that this country will be so heavily indebted to other growing nations that my peers and I will not be able to compete and succeed at the same levels that my grandparents and parents were able to in previous years. Will people my age be so crippled by taxes in the future that we won’t be able to own homes, or will our health care costs be so high that we will not have access to the medical procedures that we need? We must make Washington realize that this is a severe issue that cannot be ignored any longer. Also, save your money and encourage your children to do the same. Open a trust fund or a college fund for your grandchildren. To learn more information about this topic and other economic issues that affect our nation, visit http://www.concordcoalition.org/. The Concord Coalition is a non-partisan, grassroots organization dedicated to educating Americans about fiscal responsibility. Please, do all that you can to ensure a sound future for yourselves and for your children.

So you’ve been working for over twenty-five years. You’ve watched government expand, spending increase, borrowing from foreign investors reach discomforting levels, and have, perhaps, believed for quite some time that your payroll and income taxes have been sufficient for caring for you and for covering the many public services that you and other Americans enjoy every day. Unfortunately, we are now beginning to experience an era in which, if we do not reform our costly programs and simply stop spending irresponsibly, all generations will begin to feel the negative consequences of years of negligence. Moreover, the working generation is at risk of being the first to feel the faltering of our benefit system and will, with the oldest generation, begin a trend of leaving this nation in a worse state than it was when they were growing up and working.

As you have made the transition from young adult, to member of the work force, to someone who is now looking into retirement plans, the world community has experienced a number of changes while, domestically, the U.S. has received a makeover, and not necessarily one that makes our economic status more attractive. Within the global community, the economic prosperity of the United States has served as a cornerstone for the success of numerous other world states, and, though we will continue to be an economic “superpower” in years to come, we may quickly lose our footing in the future as we empower the other nations that have the potential to challenge us.

I was reading a bit about Social Security and I came across this quote from a Supreme Court case (Steward Machine Company v. Davis: 1937) that affirmed the act:

“[It] is too late today for the argument to be heard with tolerance that in a crisis so extreme the use of the moneys of the nation to relieve the unemployed and their dependents is a use for any purpose narrower than the promotion of the general welfare”.

The problem with Social Security is that it was created right out of the Depression, as a way to help people should times become that bad again in the future. Roosevelt thought he was helping the general welfare for all those in the future. In this way, it’s the same as how we fought World War II– afraid of World War I. The US without Social Security (as it is now) would be much better, because today Social Security is the main cost causing what those who created it were afraid of…a US recession 2nd to the Great Depression. During the 1930s, people didn’t realize that average life spans would get longer and that baby boomers would cause less people to pay for this program than people who need it. And it’s not as if the system is working as it was supposed to. Money isn’t being kept in a lockbox where it can be grown for those who paid the tax in the first place, it is being funneled directly into the government’s tax system. There was less foresight and more hindsight in the act’s drafting.

Social Security should have been privatized from the start. I think during the Depression, people definitely didn’t trust Wall Street or the stock market and that’s a big reason things were set up as a trust. The government was looking for a way to avoid people being ruined by another crash. I don’t think the model of a 401k or IRA system existed at that time because people didn’t want it to exist–they didn’t think it was safe. I understand that the government was trying to show an active role in ending the Depression and preventing a future one, but private Social Security not only would be more effective and less costly, but also would be more in keeping with our capitalistic ideals. I understand that poorer Americans benefit more from the public entitlement program, but they’d probably benefit more from communism as well, and it’s not like we’re going to adopt that.

Obviously that is not an option now, but I do think we should slowly try to privatize Social Security. It wouldn’t be easy, but we should start by telling high income Americans (sorry, folks!) that they are no longer eligible to receive the entitlement. Then it must be phased out. It’s not popular, but people should seriously plan for the future themselves in any case. Things that are unexpected are different, such as medical issues or temporary unemployment. If you know you’re going to age and retire though, shouldn’t you be required to prepare for that?

Let’s take the first of the Big 3, Social Security. When your parents retire, they can choose to receive Social Security checks, beginning at age 62. Currently, they are paying for their parents, and later we will pay for them. But America as a whole is aging. By 2047 around 21% of the population will be over 65 as opposed to the 12% now. By 2018, the Social Security and Medicare Trustees report that Social Security will begin to pay out more than it collects in taxes, meaning either higher taxes for you or slashed benefits for your parents. And out of the Big 3, Social Security is the least of our worries.

Medicare and Medicaid are already paying out more than they take in from payroll taxes. Their costs are expected to increase five times faster than Social Security’s. They are also going to be much harder to fix.

If we do nothing, by 2028, the Big 3 will consume all of the federal revenue. This means no other program will be able to get a dollar’s worth of funding. Think homeland security, education, clean energy, and housing. This problem is real so get out there and start taking hold of your future!

Our generation entered this world at an extremely exciting time, when progress and change are not only possible, but happening. But unfortunately this progress might come to a screeching halt. We currently have a debt of over $10 trillion and growing. And we are going to bear the brunt of it. Let’s take a closer look at what makes up most of the debt, entitlements. Currently, Social Security, Medicaid, and Medicare take up 42% of our budget, and that number is projected to grow. Currently our parents’ tax dollars are paying for these entitlements, but soon we will join the workforce, and the government will be leaning heavily on us to keep these programs running.

Many people categorize Medicare and Social Security together. Why? For starters they both take a chunk of your paycheck every month and they both go to serving mainly the elderly. But they are different programs with very different problems: Social Security pays monthly to retirees to help them cover expenses when they are no longer receiving an income. Medicare and Medicaid are health insurance programs for the elderly and those with low incomes, which includes children, people with disabilities, and the elderly again.

President Bush isn’t officially out of office until January 20th next year, but with the presidential election happening tomorrow, it seemed appropriate and interesting to look at Bush’s national debt legacy.  The day he took office, the national debt was at $5.727 trillion, but the government had a $230 billion surplus for the 2000 fiscal year.  The Congressional Budget Office projected a fiscal surplus of $5.6 trillion for fiscal 2002-11, putting the nation on track to pay off publicly held debt by the end of the decade.  Today, things are slightly different.  The debt has increased by over 70% to $10.5 trillion dollars, and our fiscal 2002-11 outlook is a $2.1 trillion deficit.  Now, it’s unfair to put all the blame on Bush’s administration, just as it’s wrong to give Clinton all the credit for the surpluses under his administration, but Bush’s tax cuts, which have cost over $1.3 trillion and have hurt 99% of Pennsylvanian residents, haven’t helped, and neither has the War on Terror, which has cost over $800 billion already and is estimated to cost over $3 trillion by Nobel economics laureate Joseph Stiglitz.

Bush missed a chance to eliminate our nation’s debt, but it’s not too late.  Tomorrow, we will have the chance to choose our head of state for the next four years (and in some states, the chance to choose our senators too).  Our next leaders will have to deal with not only the worldwide economic crisis, the constant threat of terrorism. and global warming, but also with a less obvious yet just as dangerous threat, our unsustainable spending habits.  We must urge Washington to act.  We must let them know that we are willing to sacrifice for our country’s well-being.  Because the question isn’t “how many presidents does it take to bankrupt the nation?” The guilt does not lie solely with our presidents or even with our politicians in general.  It is our collective fault for encouraging irresponsible government spending through inaction or worse, active support.  Tomorrow, go out and vote for our future.

For more information on the candidates’ positions, check out these links:
Votesmart

Brookings analysis of candidates on fiscal responsibility

Video Produced by John O’Malley and William Son