Rollback to 2008: How Would It Impact Your Personal Life?

[ParticleGrl]

Income tax revenues for 2008 were $1.25T. The highest they have ever been.

Look at http://www.usgovernmentrevenue.com/#usgs302a Total revenue was slightly down in 2008- when revenue normally grows each year this is a bad revenue year. Revenue then dropped substantially in 2009- which is an extremely bad revenue year.

Now, mugaliens, looking at one year of tax receipts doesn't tell you a thing about where the growth is coming from, but if you look at multiple years, you'll see that the biggest long-term growth is in healthcare costs. Before the recession, healthcare costs were growing something like 3-4% faster than GDP, and medicare grows with healthcare costs.

Unemployment moved from between 4 and 5% to about 9%. If you don't think a doubling of unemployment (and tons more people dropped out of the labor market all together. The labor participation rate moved from about 67% to about 64%) is a ridiculously high shift in unemployment, then I'd hate to see what you think of as serious.

AL68, if you actually looked at those charts and don't believe that the Bush tax-cuts changed the revenue trend for the worse, then you aren't arguing in good faith. You are entitled to your own opinions, you aren't entitled to your own facts.

 

[Ryumast3r]

Standard & Poor gave a negative outlook yesterday on the federal budget and debt.

A cut in federal spending will affect everyone, some more than others, and some directly while others indirectly.

True on the second line, but I would like to address the first one.

Yes, S&P gave a negative outlook, but to say it in such a way is... disingenuous. S&P basically said that the U.S.A. is currently "Stable" however, if the debate over the budget continues it could turn "Negative."

Basically, if politicians in Washington keep refusing to agree on anything we'll go negative, if they find something to agree on, we'll remain stable. Most likely anyway.

It's normally around 6%, but lately has been averaging around 9%. That's not a "ridiculous" difference.

http://www.google.com/publicdata?ds...ue&dl=en&hl=en&q=unemployment+rates+in+the+us

In the last 11 years the average has been closer to 5%, if not closer to mid 4.something% (excepting the last few years due to the recession). And, at one point during the recession, unemployment was above 10.6%, which means one in 10 americans had no job. I'd say that's significant.

Either way, that's almost doubling the unemployment... from let's say 5% to 9%. I'd say that a jump like that is significant.

 

[Al68]

AL68, if you actually looked at those charts and don't believe that the Bush tax-cuts changed the revenue trend for the worse, then you aren't arguing in good faith.

Nonsense. After an initial dip, revenues started increasing faster than the previous "trend" as the marginal tax rate reductions gradually kicked in between 2001 and 2006, and continued rising until the mortgage/banking crisis:

In other words, the facts obviously support exactly what you claim I'm arguing in bad faith: that tax rate cuts are not only beneficial to the people and economy in general for the obvious reason that a smaller percentage of their wealth is being confiscated by government, they result in increased government revenues over time, because of economic growth and a greater tax base.

You are entitled to your own opinions, you aren't entitled to your own facts.

I'm using the facts from the link you provided.

 

[ParticleGrl]

Nonsense. After an initial dip, revenues started increasing faster than the previous "trend" as the marginal tax rate reductions gradually kicked in between 2001 and 2006

Draw out what the revenue would have looked like had revenue growth continued along the older trajectory (or plot a best fit line). Is the revenue higher or lower in 2002? 2003? 2004? 2005? 2007 is the only year that comes close to the old revenue trend (still below it slightly) and as we know now, we were at the height of unsustainable bubble. And then the economy blew up, so comparisons are somewhat meaningless.

 

[Vanadium 50]

Look at http://www.usgovernmentrevenue.com/#usgs302a Total revenue was slightly down in 2008- when revenue normally grows each year this is a bad revenue year. Revenue then dropped substantially in 2009- which is an extremely bad revenue year.

That's a very difficult site to navigate. If you aren't careful, it rolls in state income taxes.

Getting to federal income taxes, that site claims that 2008 was only the second best year of all time for income tax revenue: 2% lower than the 2007 taxes. Hard to call it a "particularly bad year" when your own reference gives it the silver medal.

I think that illustrates a key problem - people look at the best (or possibly second-best) revenue year and think that it is abnormally low, and that it is safe - indeed prudent - to plan for much higher revenues in the following years.

 

[WhoWee]

Nonsense. After an initial dip, revenues started increasing faster than the previous "trend" as the marginal tax rate reductions gradually kicked in between 2001 and 2006, and continued rising until the mortgage/banking crisis:

In other words, the facts obviously support exactly what you claim I'm arguing in bad faith: that tax rate cuts are not only beneficial to the people and economy in general for the obvious reason that a smaller percentage of their wealth is being confiscated by government, they result in increased government revenues over time, because of economic growth and a greater tax base.I'm using the facts from the link you provided.

Does the projected change in tax revenues from 2009 to 2016 (nearly double) confuse (or terrify) anyone else?

 

[Ivan Seeking]

Tax revenues under Bush approximately track GDP, which we would expect.

It is interesting to consider what happened to growth in the GDP under Bush

We had diminishing growth under Bush I. Growth improved under Clinton but dives again under Bush II.

Not to mention the debt-to-GDP ratio, which worsened under Bush I, improved under Clinton, and takes off under Bush II. In fact, our debt problems began with Reagan.

 

[ParticleGrl]

Getting to federal income taxes, that site claims that 2008 was only the second best year of all time for income tax revenue: 2% lower than the 2007 taxes. Hard to call it a "particularly bad year" when your own reference gives it the silver medal.

Barring recession, GDP should grow every year. That means that (without changes in the tax code) most years are the "best year of all time" for revenue, so its a meaningless distinction. Economies grow. To decide if a year was a good or bad revenue year, you need to look at the trend in GDP growth, not if it was smaller than previous years. Any year that's not a "best year ever" signals a tax cut or a recession.

When you think about the deficit, you need to look at two issues- the short term "explosion" in the deficit that happened between Bush and Obama. This is a revenue problem. The economy is recovering, and this huge number will shrink down to numbers comparable (though larger) than Bush's.

The second issue is the long-term problem- the growth in spending is outpacing the growth of the GDP. To address this issue, we need to ask why. The answer is health-care costs. Health care costs are consistently growing faster than GDP, and for obvious reasons medicare is closely tied to these costs. Therefore, the way to address the long-term cost is a combination of rationing care under medicare, and reforming the health care system to try to slow the growth of cost. The debate over the health care law was largely a debate over the long term deficit problem, though most people don't seem to realize it.

Does the projected change in tax revenues from 2009 to 2016 (nearly double) confuse (or terrify) anyone else?

It should do neither. The assumption is (fair or not) is that the economy will grow rapidly once the recovery solidifies. After a recession, there are idle resources. A fast way to grow the GDP (and hence revenue) is to put those people back to work.

 

[Vanadium 50]

I am still objecting to this statement.

Also, 2008 was a particularly low year revenue wise

Which you defend with:

Barring recession, GDP should grow every year. That means that (without changes in the tax code) most years are the "best year of all time" for revenue, so its a meaningless distinction. Economies grow. To decide if a year was a good or bad revenue year, you need to look at the trend in GDP growth, not if it was smaller than previous years. Any year that's not a "best year ever" signals a tax cut or a recession.

Your source has 11 years of data for which the indiviual income tax for the previous year is available. In 6 of them, the total revenues are smaller than the year before.

I find it difficult to define a year as "particularly low" when a) it is the second highest ever, b) has only a 2% dip from the peak, and c) having a dip happened in 6 of the 11 years for which you have data.

 

[CAC1001]

Part of the problem with this whole issue of trying to figure out whether tax cuts increase or decrease revenues is that we have had bubbles. You could cut tax rates and assuming GDP continues growing at a normal rate, see an overall decline in revenues, but if you cut tax rates, and then get a bubble, in say the stock market or real-estate, you can see revenues increase irregardless.

We had diminishing growth under Bush I.

Bush I had to deal with a recession. Those things happen, just as Obama has had to deal with one. Bush I signed a tax increase, but I do not believe spending was reduced the way it should have been.

Growth improved under Clinton but dives again under Bush II.

Clinton benefited from the Dot Com bubble and had a lot of stuff occur under him that Democrats did not like (NAFTA, welfare reform). Bush II had a recession from the Dot Com bubble, and then a real-estate bubble, then a real-estate crash in 2007, then a really bad 2008.

Not to mention the debt-to-GDP ratio, which worsened under Bush I, improved under Clinton, and takes off under Bush II. In fact, our debt problems began with Reagan.

Due to the Fed repairing inflation and also Reagan did, to a degree, exactly what the Democrats saying we should do not: run a deficit to stimulate the economy. Only instead of spending money on stimulus, Reagan signed tax cuts, a good chunk of which was demand-side stimulus I think (Reagan also signed over a dozen tax increases in his eight years, but overall, he was a tax cutter).

 

[ParticleGrl]

Your source has 11 years of data for which the indiviual income tax for the previous year is available. In 6 of them, the total revenues are smaller than the year before.

Just to be clear, I'm consistently talking about total federal revenue.

That being said, the site has decades of data, not just 11 years. If you select a decade, you can then select the year by year data. i.e. select 1970, and then you can get 69-80 or so.

I find it difficult to define a year as "particularly low" when a) it is the second highest ever, b) has only a 2% dip from the peak, and c) having a dip happened in 6 of the 11 years for which you have data.

a. Highest ever is a totally meaningless distinction, and second highest ever is even more meaningless. GDP grows- if taxes aren't cut, and we aren't in recession, every year will be higher than the next. This point is meaningless.

b. A 2% dip when you are expecting 3-4% growth is a substantial change- its enough to double the 2007 deficit. When you add in the fact that state revenue dropped by about 1/4, and only the federal government can deficit spend (and hence must help prop up states in times or crisis), and you should expect massive growth in the deficit from the revenue side alone.

c. The 2000s saw two major tax cuts and the start of a massive recession, of course it will have more declines than most decades. Look at the 70s, 80s and 90s.

 

[CAC1001]

b. A 2% dip when you are expecting 3-4% growth is a substantial change- its enough to double the 2007 deficit. When you add in the fact that state revenue dropped by about 1/4, and only the federal government can deficit spend (and hence must help prop up states in times or crisis), and you should expect massive growth in the deficit from the revenue side alone.

States can deficit spend, but it is against some of their constitutions. New York and California have deficits for example.

 

[BobG]

The second issue is the long-term problem- the growth in spending is outpacing the growth of the GDP. To address this issue, we need to ask why. The answer is health-care costs. Health care costs are consistently growing faster than GDP, and for obvious reasons medicare is closely tied to these costs. Therefore, the way to address the long-term cost is a combination of rationing care under medicare, and reforming the health care system to try to slow the growth of cost. The debate over the health care law was largely a debate over the long term deficit problem, though most people don't seem to realize it.

This is somewhat true. Taking the data from the site you linked to previously and plugging it into my own spreadsheet, GDP increases about 5.37%, while spending increases at about 5.44%. Health care does indeed increase at a higher rate than spending overall at about 6.11% and it's rate of increase is increasing. So, it truly is a problem that has to be addressed.

None the less, the real reason spending outpaces GDP just slightly is that spending increases at a steady flat rate, while GDP has dips due to recessions. We never make up the difference from recessions (in fact, being an optimistic people, our Congress always forecasts strong growth in the future GDP and never forecasts recessions). Likewise, when we make one-time expenditures like the stimulus bill, we never make up that difference either. We nickel and dime ourselves into a chronic debt that only increases.

Generally, a recession reduces all revenue. Even without the Bush tax cuts, revenue would have decreased in 2001 and 2002. However, income tax cuts did make the decrease in revenues more severe and the tax cuts probably have no long term increase on the GDP (in fact, as Ivan's chart noted, the rate of growth was lower than normal even after the tax cuts). Taxes are a revenue/spending issue for government and, unless they get outrageously high, have a tiny impact on the overall economy if at all.

In fact, one could argue that high taxes encourage long term growth if the taxes are likely to become lower in the future. It becomes better to invest net 'profits' back into the company rather than take the profit out of the company and lose it to high tax rates. In other words, investing for the future is cheaper than it would be at low tax rates. Of course, that's predicated on the hope that one could eventually recoup those investments at some later time at a lower tax rate. Likewise, low current tax rates encourage one to pull those profits out of the company rather than reinvest them into the company if tax rates in the future are going to be higher.

Of course, that whole preceding paragraph pretends a company owner has enough to live on, plus enough extra money to invest/spend as he pleases. In reality, a very small business owner pulls out enough to live on, plus saves for the future, if he's lucky, and only reinvests money into the business when he can no longer keep up with demand from customers. He keeps costs low as long as possible regardless of the tax rates.

 

[WhoWee]

Tax revenues under Bush approximately track GDP, which we would expect.

It is interesting to consider what happened to growth in the GDP under Bush

We had diminishing growth under Bush I. Growth improved under Clinton but dives again under Bush II.

Not to mention the debt-to-GDP ratio, which worsened under Bush I, improved under Clinton, and takes off under Bush II. In fact, our debt problems began with Reagan.

Without re-hashing the past 30 years Ivan - I think we agree Reagan spent a lot of money (some will argue the space tech lead to advancements and others the collapse of USSR > wrong thread for both), we might also agree Bush I paved the way for Clinton and that Newt was influential in cutting costs, we might also agree that radical terrorist attacks on September 11, 2001 had a major impact on our economy and we might also agree the housing bubble may not be fully addressed for another 2 to 5 years, and I think we agree from your post that GDP expectations are not always met due to unforseen causes?

With all of that aside Ivan - (as per OP) would a roll back to 2008 spending have any impact on you personally or do you know of a specific situation that would be impacted?

 

[Al68]

Draw out what the revenue would have looked like had revenue growth continued along the older trajectory (or plot a best fit line). Is the revenue higher or lower in 2002? 2003? 2004? 2005?.

Yes, it's lower, due to the initial dip, because of the parts of the tax bill that kicked in right away, like taking millions of taxpayers off the tax rolls altogether. The marginal rates were reduced in stages over time. Not the way I would have liked it done, but the way it was done nevertheless for political reasons. The revenues were trending upward at a very good pace until the recession. But more importantly is the reason why: growing tax revenues as a result of economic growth instead of as a result of government draining the economy.

That's one thing that left-wingers never seem to take into account: the financial health of government is secondary to the financial health of the people. Plus, in the long run, draining the economy and stifling growth through high taxes is not only bad for the people, it's bad for government revenues.

But you're sidetracking the point I was making with the graph: that the revenue drop we see now is obviously due to the recession, not the tax rates, and the recession would be worse, not better, with higher tax rates.

 

[OmCheeto]

The biggest reason that spending is growing so rapidly is health care costs.

http://www.thirdway.org/taxreceipt" .

Yup

ssi... 20.4%
defence... 20.2%
medicare... 13.1%
low inc.***;).. 9.3%
medicaid... 7.9%
etc... 22.0%
health(non-m).. 2.0%
more etc... 5.1%

total medical. 23.0%

Health care costs wins.

+1 ParticleGrl

 

[BobG]

With a discussion of a $14 Trillion national debt in the US and the need to raise the debt ceiling, coupled with more than $1.5 Trillion annual deficits scheduled, there is talk of rolling back all spending to 2008 levels. I'd like to ask a question of all PF members.

How would a rollback of US Government spending to 2008 levels impact YOUR personal life - would you be affected in any way whatsoever?

I've considered the question and found that I would not sacrifice any benefits personally. Please discuss actual impacts only 2011 versus 2008 - not a promise of some future benefit that is uncertain.

Would you lose a job or funding for a project or a specific benefit?

To answer your original question, I'd have to say probably, seeing as how 100% of my income comes from the government in one form or another. My job relies on defense spending, plus I receive a military pension and military retiree health benefits.

The problem is that overall government spending isn't as important as the details.

As long as there's adequate emphasis on modernizing the military (increasing use of remote controlled drones, investment in space assets, research into missile defense, etc), I have good job prospects. When the emphasis changes, such as when modernization played a subordinate role to operations in Iraq, my job market gets tighter. Still, defense spending decreases would affect everyone in defense to some extent. It may not cost me my job, but having fewer jobs available overall means an employer will feel more confident in offering lower pay raises.

And, while my military pension shouldn't change, the costs for retiree health benefits do change. Those benefits have already gone from "guaranteed free health care for life" to benefits that a retiree has to pay for. Granted, at $230 per year for an individual and $460 per year for a family, those costs are laughable compared to private health insurance plans, but I expect those costs to rise as soon as combat operations drop to a low enough level to push military veterans' affairs under the public radar.

 

[Al68]

Yup

ssi... 20.4%
defence... 20.2%
medicare... 13.1%
low inc.***;).. 9.3%
medicaid... 7.9%
etc... 22.0%
health(non-m).. 2.0%
more etc... 5.1%

total medical. 23.0%

Health care costs wins.

+1 ParticleGrl

Well, your conclusion may be right, but your math doesn't prove it. You can't just add the percentages that way to prove that health care costs are the biggest reason that "spending is growing so rapidly". I won't bother explaining why, because anyone who can't figure it out themselves can never be convinced of it.

Edit: I should use that principle full time: it would save me a lot of trouble on this board.

 

[OmCheeto]

Well, your conclusion may be right, but your math doesn't prove it. You can't just add the percentages that way to prove that health care costs are the biggest reason that "spending is growing so rapidly". I won't bother explaining why, because anyone who can't figure it out themselves can never be convinced of it.

Edit: I should use that principle full time: it would save me a lot of trouble on this board.

Depends on the time frame of course.

And I don't know why you would not bother trying to explain it to me. I'm very intelligent. Though there are certain things about my fellow humans that I find incomprehensible.

On a side note, I was listening to the radio yesterday and everyone was all googoo gaga over the new Atlas Shrugged movie. So I decided to go back and see what on Earth Ayn Rand was talking about, way back in 1957, when she wrote the novel.

I ended up looking at the http://www.taxfoundation.org/files/fed_individual_rate_history-20110323.xls" for the year. They were simply incredible. It's no wonder she wrote the book. The effective tax rate for people making $400k per year was 78.41%.

I wonder what the deficit would look like today if we had maintained such usurious tax levels. And what would the country be like? What would the world be like?

 

[ParticleGrl]

Well, your conclusion may be right, but your math doesn't prove it. You can't just add the percentages that way to prove that health care costs are the biggest reason that "spending is growing so rapidly".

What adding the percentages does is show that health care is the largest outlay today. To look at growth, you obviously have to look at multiple years. Check out:

http://www.cbo.gov/ftpdocs/87xx/doc8758/11-13-LT-Health.pdf

or really any discussion of health care spending. The growth in entitlement spending is really growth in health-care spending (both public and private).

And in the short-term, the deficit is exploding because of recession.

That's one thing that left-wingers never seem to take into account: the financial health of government is secondary to the financial health of the people. Plus, in the long run, draining the economy and stifling growth through high taxes is not only bad for the people, it's bad for government revenues.

First, I don't think anyone would argue with you that the end goal is a financially healthy populace. You are mischaracterizing the argument. The argument is that the government can and does play a necessary role in a strong economy.

The idea that high taxes stifle growth is probably true at some level, but GDP has grown both in high tax periods and in lower tax periods. GDP growth was worse under Bush's tax cuts than Clinton's tax hikes. The tax rate is NOT the most important factor in growth.

Keep in mind that government spending can also create innovation and growth (despite the mistaken belief that the government doesn't produce anything). The backbone of the internet was developed with government money and has resulted in a tremendous amount of job creation. The government sector is still the primary source of basic R&D, etc. That innovation does lead to jobs. The government is also the primary provider of infrastructure, which is hugely necessary for job creation.

Also, consider the role of the welfare type safety net in job creation. How many people aren't free to start a company because they need their employer health coverage?

And finally- certain regulations can create better market outcomes by helping to fix market failures. Starving the government of the funds needed to effectively regulate would lead to worse outcomes for all.

An effective policy needs to balance the need to fund innovation and maintain infrastructure, maintain regulation, and encourage private investment. Its not as simple as "cut taxes" and "all government is bad." There is no one magic cure- believing that tax cuts are always a good thing is naive. Markets are great when they work- but the drive to privatize has lead to bloated corporate-government partnerships like medicare-advantage and the medicare prescription drug plan. Rent seeking abounds.

 

[CAC1001]

First, I don't think anyone would argue with you that the end goal is a financially healthy populace. You are mischaracterizing the argument. The argument is that the government can and does play a necessary role in a strong economy.

The idea that high taxes stifle growth is probably true at some level, but GDP has grown both in high tax periods and in lower tax periods. GDP growth was worse under Bush's tax cuts than Clinton's tax hikes. The tax rate is NOT the most important factor in growth.

Remember that Clinton signed a tax cut too. Bush had to deal with a minor recession early in his term, then a secondary recession near the end.

Keep in mind that government spending can also create innovation and growth (despite the mistaken belief that the government doesn't produce anything). The backbone of the internet was developed with government money and has resulted in a tremendous amount of job creation. The government sector is still the primary source of basic R&D, etc. That innovation does lead to jobs. The government is also the primary provider of infrastructure, which is hugely necessary for job creation.

Government doesn't really produce anything. That's not a mistaken belief. If government could produce, there'd be little need to tax. Even infrastructure, government hires private contractors to build it. The government then provides the funding. Government spending can however do as you mentioned. Over a long period, it can be very beneficial. The Internet was started by the government. The GPS system was started by the government. Many of the modern technologes we have were created from research money provided by DARPA (in this sense, the defense budget has helped serve as a form of industrial policy I think).

Many of the infrastructure projects done during the New Deal helped with America's economic growth later on. Also the Interstate Highway System Eisenhower started.

But none of these things per se are government growing the economy, they are the government providing the foundation so that the market economy can then go to work at producing wealth.

Also, consider the role of the welfare type safety net in job creation. How many people aren't free to start a company because they need their employer health coverage?

This is a good point.

And finally- certain regulations can create better market outcomes by helping to fix market failures. Starving the government of the funds needed to effectively regulate would lead to worse outcomes for all.

I agree here.

An effective policy needs to balance the need to fund innovation and maintain infrastructure, maintain regulation, and encourage private investment. Its not as simple as "cut taxes" and "all government is bad." There is no one magic cure- believing that tax cuts are always a good thing is naive. Markets are great when they work- but the drive to privatize has lead to bloated corporate-government partnerships like medicare-advantage and the medicare prescription drug plan. Rent seeking abounds.

The Medicare Prescription Drug Program is pretty much the only government healthcare program ever created that is actually managing to pay for itself (http://www.politico.com/news/stories/1109/29545.html). Medicare and Medicaid as they currently are (single-payer systems) are plagued with fraud and abuse and ballooning costs.

I think these systems function best when they are a combination of public-private (trying to use the elements of both).

 

[OmCheeto]

Without re-hashing the past 30 years Ivan - I think we agree Reagan spent a lot of money (some will argue the space tech lead to advancements and others the collapse of USSR > wrong thread for both)

Funny you should mention the USSR. I've been surfing the web all day looking at facts and figures for the last 50 years. (Did you know that the average National League Baseball players salary in 1960 was $18,000?)

Anyways, I ended up on the debt to GDP page over at wiki.

It looked very peculiar.


rank.nation.debt/gdp
1...Japan...225.80
33.5.World...59.30
36...USA...58.90
121..USSR...9.50
138..Libya...3.30

Japan's debt to gdp ratio is almost 4 times worse than ours. Is anyone worried about that?

And the USSR. It's ratio is 17 from the bottom. Didn't we supposedly win the cold war? How did they end up in such good shape?

And who's #1 in the Dave Ramsey "I'm debt free" contest? Libya?

Phhhhhht...

But in answer to your question:

Would you lose a job or funding for a project or a specific benefit?

# 2011 United States federal budget - $3.8 trillion (submitted 2010 by President Obama)
# 2008 United States federal budget - $2.9 trillion (submitted 2007 by President Bush)

That looks like about a 25% cut to me. Does anyone know where those extra 900 billion dollars are going? It strikes me that the question is impossible to answer unless we know where the extra cash is being spent. And where the 900 billion dollars would be cut.

hmmm... That's weird. 900 billion dollars a year is equivalent to 22.5 million $40k/year jobs.

hmmm...

 

[ParticleGrl]

Remember that Clinton signed a tax cut too. Bush had to deal with a minor recession early in his term, then a secondary recession near the end.

My point was simply that the tax rate alone doesn't determine growth. Other factors are more important. The correlation between top marginal rate and growth isn't particularly strong.

Government doesn't really produce anything. That's not a mistaken belief. If government could produce, there'd be little need to tax. Even infrastructure, government hires private contractors to build it.

When the government charges for the infrastructure it has produced, it is usually considered as levying a tax. Also, things aren't always done through private contractors. Look at the national lab system- government scientists producing beneficial research.

But none of these things per se are government growing the economy, they are the government providing the foundation so that the market economy can then go to work at producing wealth.

All right- let's phrase it differently. Government infrastructure provides an increased opportunity to generate wealth. Under funding government diminishes opportunity, and hence diminishes wealth. The point is that government spending isn't just consumption, its also investment.

The Medicare Prescription Drug Program is pretty much the only government healthcare program ever created that is actually managing to pay for itself

No, it isn't paying for itself, its just costing less than it was originally thought it would. The government is explicitly forbidden from bargaining for better prices (the way that it does when it purchases for the VA system). As such, the same drug costs more purchased through the medicare's prescription plan than through the VA.

The reasons the costs are lower than predicted have to do with declining innovation in prescription drugs (so consumers can shift to more generics), and the shift away from expensive drugs can be seen system wide.

Medicare and Medicaid as they currently are (single-payer systems) are plagued with fraud and abuse and ballooning costs.

Medicare does have some fraud, but its not overwhelming. The ballooning costs are NOT a feature specific to medicare, which has costs growing slightly SLOWER than private sector health costs. The reason costs are ballooning is that health care costs in general are ballooning.

Medicare advantage (public/private mixtures) costs more and looses more in overhead than traditional medicare plans. In general, public/private mixtures rarely seem to deliver on the promised cost reduction. See the long threads in this forum about health care.

I think these systems function best when they are a combination of public-private (trying to use the elements of both).

The urge to privatize seems to have created opportunities for rent-seeking and regulatory capture. As the line between corporate employee/lobbyist/senator gets blurrier, corruption grows.

 

[CAC1001]

All right- let's phrase it differently. Government infrastructure provides an increased opportunity to generate wealth. Under funding government diminishes opportunity, and hence diminishes wealth. The point is that government spending isn't just consumption, its also investment.

I think it depends. A lot of it can legitimately be investment, but it can also turn into just spending on various pointless schemes. There is a base minimum amount of government spending needed for infrastructure, regulations, safety nets, public services like police, firefighters, etc...but after that, spending can easily become excessive and wasteful. I view it like the public education system: there's a base amount of money needed for good quality schools, facilities, computers, books, etc...but eventually, pouring more and more money into education will produce less and less to even negative results.

No, it isn't paying for itself, its just costing less than it was originally thought it would.

Costing less than what originally thought, if it can keep doing so, is still a pretty big accomplishment I think, especially since more people than initially projected are using the system.

The government is explicitly forbidden from bargaining for better prices (the way that it does when it purchases for the VA system). As such, the same drug costs more purchased through the medicare's prescription plan than through the VA.

The reasons the costs are lower than predicted have to do with declining innovation in prescription drugs (so consumers can shift to more generics), and the shift away from expensive drugs can be seen system wide.

Wouldn't declining innovation cause prices to increase?

Medicare does have some fraud, but its not overwhelming. The ballooning costs are NOT a feature specific to medicare, which has costs growing slightly SLOWER than private sector health costs. The reason costs are ballooning is that health care costs in general are ballooning.

Do balooning Medicare costs also cotnribute to rising private-sector costs. For example, I know that despite the acutal cost of treatment, that hospitals have a limit on how much they can charge Medicare patients.

Medicare advantage (public/private mixtures) costs more and looses more in overhead than traditional medicare plans. In general, public/private mixtures rarely seem to deliver on the promised cost reduction. See the long threads in this forum about health care.

I know Germany and France have multi-payer universal healthcare systems that also have for-profit private insurance for those willing to pay, I am not sure how much better/worse cost-wise they are to say the British NHS, or the Canadian, or Japanese systems (although the Canadian system has had privatization occurring for some time now).

The urge to privatize seems to have created opportunities for rent-seeking and regulatory capture. As the line between corporate employee/lobbyist/senator gets blurrier, corruption grows.

In Canada, due to wait times, a lot of private clinics have been popping up:
http://www.nytimes.com/2006/02/28/international/americas/28canada.html
http://www.foxnews.com/politics/2009/06/30/canada-sees-boom-private-health-care-business/

 

[Al68]

And I don't know why you would not bother trying to explain it to me. I'm very intelligent.

That is exactly why.

 

[Al68]

My point was simply that the tax rate alone doesn't determine growth. Other factors are more important.

I don't think anyone is saying otherwise. We're saying that tax rates matter, not that they are all that matter.

Government infrastructure provides an increased opportunity to generate wealth.

I haven't heard anyone oppose roads and bridges, either, in general. Just the wasteful projects.

Under funding government diminishes opportunity, and hence diminishes wealth. The point is that government spending isn't just consumption, its also investment.

That's true of roads, but not government in general. And the biggest reason is that building/maintaining roads isn't practical for private individuals/businesses. That, and the fact that they are funded by vehicle fuel taxes by those who use them, make roads a very poor representation of other government spending.

 

[ParticleGrl]

I think it depends. A lot of it can legitimately be investment, but it can also turn into just spending on various pointless schemes. There is a base minimum amount of government spending needed for infrastructure, regulations, safety nets, public services like police, firefighters, etc...but after that, spending can easily become excessive and wasteful.

But is there really evidence of this excessive spending? Keep in mind, spending is growing mostly because of medicare. Also, remember that our infrastructure is underfunded and crumbling- http://www.infrastructurereportcard.org/report-cards

Wouldn't declining innovation (in pharmaceuticals) cause prices to increase?

Older drugs go off-patent and have to compete with generics. As innovation declines, generic use goes up. The rate of output of new prescription medications has dropped by half.

http://www.dailyfinance.com/2011/02/17/successful-drug-development-gets-harder/

The reason that medicare plan D is costing less than assumed is almost entirely do to the lower cost of prescription drugs. It would have cost far less if the government could bargain for price (the VA pays far less for drugs).

Innovation in health care is an odd things- it drives prices up rather than down.

Do balooning Medicare costs also cotnribute to rising private-sector costs. For example, I know that despite the acutal cost of treatment, that hospitals have a limit on how much they can charge Medicare patients.

Medicare and private-insurance price bargaining almost certainly means the uninsured pay more than they otherwise would for health-care (when they can afford to pay). But costs are rising in all sectors of health-care- the uninsured, insured, and government provided. And they are rising in all nations (though its worse here by far).

Part of the issue is that (as mentioned above) innovation is raising costs. Part of the issue is a lack of efficacy data- money is being spent on procedures and no one knows if they actually do anything.

 

[CAC1001]

But is there really evidence of this excessive spending? Keep in mind, spending is growing mostly because of medicare. Also, remember that our infrastructure is underfunded and crumbling- http://www.infrastructurereportcard.org/report-cards

I think at the state level, in some of the states (such as California), there is excessive spending. At the federal level, I don't know enough about that. Regarding infrastructure, is that so much a problem of lack of money, or bureaucrats spending the money on things besides infrastructure?

The reason that medicare plan D is costing less than assumed is almost entirely do to the lower cost of prescription drugs. It would have cost far less if the government could bargain for price (the VA pays far less for drugs).

From my understanding of it, the lower cost of the drugs is because it increased competition between the drug companies. Why would it have cost far less if the government could bargain for price?

Innovation in health care is an odd things- it drives prices up rather than down.

Why do you think this is? Also, is this just in certain parts of healthcare? For example, I would imagine with regards to medical equipment, that innovation drives costs down.

 

[ParticleGrl]

I think at the state level, in some of the states (such as California), there is excessive spending. At the federal level, I don't know enough about that. Regarding infrastructure, is that so much a problem of lack of money, or bureaucrats spending the money on things besides infrastructure?

What are specific examples of spending you consider excessive? Does CA have excessive regulations? Too much spent on higher ed?

From my understanding of it, the lower cost of the drugs is because it increased competition between the drug companies. Why would it have cost far less if the government could bargain for price?

What about the law do you think increased competition among drug companies?

The reason it would cost less with bargaining is purchasing power. The VA pays 58% less for drugs, on average, than medicare does. You would expect with its purchasing power, medicare could be paying less than the VA.

Why do you think this is? Also, is this just in certain parts of healthcare? For example, I would imagine with regards to medical equipment, that innovation drives costs down.

Its probably because health care isn't an ideal market. Demand, especially for life saving care, is very inelastic.

As far as medical equipment- an MRI costs maybe $2000, an x-ray costs $200.

 

[CAC1001]

What are specific examples of spending you consider excessive? Does CA have excessive regulations? Too much spent on higher ed?

From what I understand of it, California does over-regulate to the point of making it too costly to do business in the state for many companies. On spending, one culprit I believe is that they have among the most generous welfare systems in the country. Another problem I believe is the public unions in the state and their healthcare and pension costs.

What about the law do you think increased competition among drug companies?

I don't know the specifics, but I remember reading that that was the method by which the law was going to lower prices (increasing competition). Some thought it was nonsense and wouldn't work at the time.

The reason it would cost less with bargaining is purchasing power. The VA pays 58% less for drugs, on average, than medicare does. You would expect with its purchasing power, medicare could be paying less than the VA.

I see.

Its probably because health care isn't an ideal market. Demand, especially for life saving care, is very inelastic.

Definitely something to study more I think.

 

[Al68]

Innovation in health care is an odd things- it drives prices up rather than down.

That's just not true. It drives up "costs", not prices. The cost of Viagra may have been $0.00 twenty years ago, but its price was infinite. It's cost technically increased, but its price dropped dramatically.

The same goes for any new innovation: comparing it's cost or price to when it didn't exist at all can lead to odd conclusions, if one pretends they're talking about a change in the price of an existing product over time.

 

[Al68]

On a side note, I was listening to the radio yesterday and everyone was all googoo gaga over the new Atlas Shrugged movie. So I decided to go back and see what on Earth Ayn Rand was talking about, way back in 1957, when she wrote the novel.

I ended up looking at the http://www.taxfoundation.org/files/fed_individual_rate_history-20110323.xls" for the year. They were simply incredible. It's no wonder she wrote the book.

Atlas Shrugged was far more about government regulation and control than tax rates.

Having reread it recently myself, after reading it the first time at a young age, what stood out the most were the lines she gave the "villains" in the book. When I read it the first time, I remember thinking that no one could be so delusional and moronic as to actually say such things. I thought Rand was just giving them such over-the-top idiotic lines as exaggeration, to portray them as moronic as humanly possible. And I was 100% sure that even if a politician were to say such things, people were not so stupid as to believe them.

I was very young and naive, apparently. Virtually everything said by Democrats today about economic policy can be found in those villains' lines in Atlas Shrugged. And vice versa.

And far too people believe them.

 

[OmCheeto]

I won't bother explaining why, because anyone who can't figure it out themselves can never be convinced of it.

And I don't know why you would not bother trying to explain it to me. I'm very intelligent.

That is exactly why.

So... only an idiot would understand your explanation?

hmm...

 

[Al68]

So... only an idiot would understand your explanation?

hmm...

LOL. No, that's the opposite of what I said. Someone intelligent like you has no need for my explanation, while idiots wouldn't understand it.

 

[WhoWee]

That looks like about a 25% cut to me. Does anyone know where those extra 900 billion dollars are going? It strikes me that the question is impossible to answer unless we know where the extra cash is being spent. And where the 900 billion dollars would be cut.

hmmm... That's weird. 900 billion dollars a year is equivalent to 22.5 million $40k/year jobs.

hmmm...

You've hi-lited my point. Thus far we have one respondent that concludes he might be impacted personally. So far, nobody else has a personal connection to describe?