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Samuelson on Budget Realities

John on February 6, 2010 at 10:34 am

One of the few sane voices at Newsweek offers some insight into federal deficits:

[F]rom 2011 to 2020, the administration projects total federal spending of $45.8 trillion against taxes and receipts of $37.3 trillion…The message: there’s a huge mismatch between Americans’ desire for high government services and low taxes.

Second, almost $20 trillion of the $45.8 trillion of spending involves three programs—Social Security, Medicare (health insurance for those 65 and over), and Medicaid (health insurance for the poor). The message: the budget is mainly a vehicle for transferring income to retirees from workers, who pay most taxes. As more baby boomers retire in the 2020s, deficits will grow.

Third, there is no way to close the massive deficits without big cuts in existing government programs or stupendous tax increases. Suppose we decided to cover all future deficits by raising taxes. Taxes would rise in the 2020s by roughly 50 percent from the average 1970–2009 tax burden.

Samuelson offers some real world solutions:

Eligibility for both Social Security and Medicare should be gradually raised to 70, coupled with a requirement for people to buy into Medicare at 65. Wealthier retirees should receive lower Social Security benefits and pay more for Medicare. Programs that have outlived their usefulness need to be abolished: farm subsidies, for instance. Even with these cuts, future taxes would need to rise. Unless you’re confronting these issues—and Obama isn’t—you’re evading the central budget problems.

But of course the President is doing none of this. Instead, he has hitched his wagon to a health reform agenda which is essentially medicare for all, or at least that what it is designed to become over time. His reform plan forces young healthy Americans to buy insurance and insures that “insurance” is available to anyone regardless of preexisting conditions. In practice, this means an even further transfer of wealth from the young to the old that we have now. It also means more unsustainable debt.

Americans need to get used to the idea that government has to do less for them, not more. The alternative is financial ruin.

Related: Don’t miss this examination of the chicanery in Obama’s budget designed to disguise precisely the realities that Samuelson lays out above. Entitlements are a pyramid scheme that will collapse in our lifetime unless serious cuts are made.

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Category: Energy & Economy |

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