The Financial State of the Union

Guns. Yesterday’s analysis of President Obama’s State of the Union address was obsessed with them. Understandably so, it was about the only part of his speech that has not been playing like a broken record for the last 4 years. For fear of beating a dead horse I am not going to write any more about gun control; in fact, that was not even the most important part of the speech that I heard Tuesday night. To me, the most important line was his promise that new programs would not add a dime to the deficit. If we gave President Obama everything he is asking for on gun control it would make no difference regarding violence in America—some research suggest it will make it worse. However, if we give the President Obama everything he asked for in discretionary spending—I counted around 30 separate programs—getting control of our debt and avoiding severe measures like those being taken in Europe seems, at best, a fairy tale.

Crunching the numbers, you cannot actually call President Obama a liar, as many on the right no doubt will. If we were to use all the money from the close of the Iraq and Afghanistan wars, all the money from the recent tax increases, and all the money from the projected slower-than-great-depression-recovery growth the president is right. The programs will not add to our deficit, but our deficit will never come close to the 3% of our GDP level that any worthwhile economist says we need to meet.

In fact, when you factor in the President’s assertion that Medicare and Social Security not face any significant reforms, our deficit will only grow, and grow, and grow. At what point do our creditors refuse to lend us money? Were that to happen, Medicare would end completely.

However, none of this is to say that President Obama’s ideas are bad ideas. High speed rails would be great. I lived in Australia and found their extensive railroad system to be enviable. Though I never rode on high speed rail, even a standard rail at 80mph was an amenity I wish our nation had. I would love to invest more money in our education system. I think government funded research and development is great. I know there are failures like Solyndra, but R&D creates jobs. Without government subsidized research you would not even have the internet to read my ramblings. I live in Kentucky, so I understand as well as any American the need to fix bridges and highways. So many of these ideas would help America.2013 Bidget Breakdown

The biggest problem, and forgive the cliché, is the president wants to have his cake and eat it too. To explain what I mean by this I need to bore you with budget talk for a few sentences. There are generally two broad categories of government spending; discretionary and mandatory. Mandatory spending is the obligations the United States has to retirees and others through our Medicare, Medicaid, Social Security, pensions and so on. Discretionary spending is everything else not mandatory—defense, education, infrastructure, research and development, and so on. We are currently at one of the lowest levels of non-defense discretionary spending in history. In fact, Military and Entitlement spending make up 80% of our budget. You would have to do a whole lot of work to find a President that has cut more discretionary spending than President Obama. Our deficit is driven by the entitlement spending.

My point is, President Obama cannot have both. Leaving entitlements largely untouched and adding 30 new government programs simply is not possible without Greek level debt. If we reach that kind of debt crumbling bridges will be the least of our worries; we may not even have a stable nation for our children to drive around on, let alone worry about the roads they use. My argument is simple; it does not make sense to leave the entitlements untouched if the nation we hand to your children and my children is a shadow of what we have now.Life Expectance Graph

Life expectancy has increased about a decade since the baby boomers were born. This means someone who retires now will receive almost ten more years of entitlements than their parents did, on average. Entitlements are a good thing, but to truly deal with our nation’s problems, we need to raise the age of retirement. With smart tax reform and smart entitlement reform we can afford to invest in critical discretionary programs that will ensure our children have the same opportunity, the same capability, the same playing field, and the same possibilities open to them that our current retirees had; and if that means you and I will not receive quite as much in Social Security than we otherwise would have, so be it. America was built on sacrifice. Asking this small price is the ultimate investment for the future of this country. At this point we can have roads, or we can keep entitlements untouched, but we cannot have both.

Trying to have both is the European philosophy—the continent in a crisis philosophy. Uncertainty is now the thing that restrains our economy most. Debt is the high speed rail that carries uncertainty. Entitlement reform may be the very thing that unfetters our economy. If we try to have both, we may give nothing to our children. Happy Valentine’s Day kids; this nation sure loves you.

–Matt Young

14 February 2013

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About patriotslog

I am studying to achieve a double major in political science and journalism from the University of Kentucky. I am married to a wonderful woman named Sierra. I am starting this blog because I feel the political climate in Washington is carving deep canyons for our children to climb out of. Our representatives, on both sides of the isle, do not represent us, they represent the lobbyists.This blog is not to give answers, but to make people think. I believe the more we think about our ideas the better they will become; as opposed to becoming more and more intrenched in far left or right wing brainwash, where it seems nobody thinks anymore. I hope y'all enjoy.

Posted on February 14, 2013, in Patriotslog Articles and tagged , , , , , , , , , , , , , , , , , , . Bookmark the permalink. 2 Comments.

  1. I wonder how much the voucher idea for medicare would have conserved. Any ideas? I liked the idea it, but that’s because I’m a big fan of vouchers for school instead of public schools. I don’t know how the two relate.

    • Well the school voucher is very different than the healthcare voucher for many reasons. One of the biggest reasons is that using a school voucher you can go to a school of your choice; for many people this is a better option. With Medicare, beneficiaries already have options with supplement and advantage plans and can already go to a private market plan rather than original Medicare. With schools, if you do not have a voucher, your stuck in the school you are assigned to. The Medicare voucher plan is very controversial because the original idea in the Paul Ryan budget would have cost seniors thousands of extra dollars out of their own pocket. Also, the government would not be able to negotiate on behalf of a senior for the cost of their care if Medicare were just a voucher program. Assuming a voucher program gave seniors the enough money to buy a plan similar to Medicare (they get equivalent care without higher out of pocket expenses) than there is only 2 ways a voucher plan could save money. First, administration costs would be passed from the Government onto the insurer…ideally. Second, the competition of private markets would result in lowers costs than government insurance; this is heavily debated in the healthcare world, because private healthcare costs are exploding, so there is no certainty this would work. To sum it up, it would be difficult, though not impossible, for a voucher type Medicare system to save money without harming seniors’ care. I will be happy to answer any follow up questions too.

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