The White Board Doesn’t Address the Real Fiscal Problem

Mitt Romney pulled out a white board in discussing his plan for Medicare today. What is most interesting in it is that no actual plan was illustrated. Seriously, this is not a shot at the presumptive nominee, but a reality check to what people hear. Let me illustrate.

He divided the board into four sections. In those section he listed “Obama’s plan” and “His plan.” then he had a column for “Seniors” and “Next Generation.”

In the Senior’s column he placed that Barack Obama would be cutting $716 billion on Medicare, four million people will lose Medicare, and that fifteen percent of hospitals and nursing homes will stop taking Medicare. Fair enough. There is no question that Barack Obama even affirmed the fact that he would cut $700 billion out of Medicare to fund Obamacare. But remember, it’s not a real cut. It’s a cut of projected spending, over a decade, in federal budgets that continually go up several percentage points every year, which means that spending will increase in the Medicare area also.

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Romney then said he would leave Medicare unchanged. In other words, he claims he would do nothing, just leave it as it.

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So what are the results for the next generation? He claims that Obama’s plan would make Medicare bankrupt in twelve years, while his plan would keep it solvent. He just doesn’t tell you what the plan is except to leave it alone and Obama, though claiming he’s cutting, is merely taking that money and moving it into Obamacare which will in effect produce the same results, more debt. It’s not like the federal government is giving any of that $700 billion back to taxpayers. They’re spending it and they’re spending it on making people dependent upon them. This is a really bad move.

The reality is this: neither Mitt Romney or Barack Obama will stop the mess we are in. They do not have plan to save the America economically. Let me demonstrate.

Laurence Kotlikoff, a Professor of Economics as Boston University and one of the top economists in the nation, along with Scott Burns takes on the bigger issue which is not Medicare, but American debt. After all does it matter to try and save $100 when you are in debt $1 billion and you only have a salary of $50,000 a year? This is what all the talk about Medicare is.

According to Kotlikoff and Burns,

Republicans and Democrats spent last summer battling how best to save $2.1 trillion over the next decade. They are spending this summer battling how best to not save $2.1 trillion over the next decade.

In the course of that year, the U.S. government’s fiscal gap — the true measure of the nation’s indebtedness — rose by $11 trillion.

The fiscal gap is the present value difference between projected future spending and revenue. It captures all government liabilities, whether they are official obligations to service Treasury bonds or unofficial commitments, such as paying for food stamps or buying drones.

Both parties bear some blame in this as spending comes through Congress and we have not had solid leadership in the Republican party there and of course, the Senate has been controlled by the Democrats. But here’s the big picture. The article goes on to state:

The U.S. fiscal gap, calculated (by us) using the Congressional Budget Office’s realistic long-term budget forecast — the Alternative Fiscal Scenario — is now $222 trillion. Last year, it was $211 trillion. The $11 trillion difference — this year’s true federal deficit — is 10 times larger than the official deficit and roughly as large as the entire stock of official debt in public hands.

This fantastic and dangerous growth in the fiscal gap is not new. In 2003 and 2004, the economists Alan Auerbach and William Gale extended the CBO’s short-term forecast and measured fiscal gaps of $60 trillion and $86 trillion, respectively. In 2007, the first year the CBO produced the Alternative Fiscal Scenario, the gap, by our reckoning, stood at $175 trillion. By 2009, when the CBO began reporting the AFS annually, the gap was $184 trillion. In 2010, it was $202 trillion, followed by $211 trillion in 2011 and $222 trillion in 2012.

That’s right, for the most part we hear the numbers of $15 or $16 trillion, but the reality is more like $222 trillion! So what does this mean? Well what it means is this is the total amount of money America has indebted itself, including bonds, future entitlements and the entire kit and kaboodle. It also means that unless we have today $222 trillion on hand, earning 5% to pay this, then by definition we are in default and also insolvent.

My fellow Americans we are being lied to on both sides. Medicare is insolvent because the American economy is insolvent. That is a reality now, not twelve years down the road. What we are living in is an economy propped up by fiat money with the illusion of value and it’s only going to get worse because deficit spending will continue to increase no matter if Democrats or Republicans are in control, unless someone is willing to take radical, drastic measures and make real cuts each and every year to the entire budget beginning now. With the spending Barack Obama wants, we won’t get that. With the budget of Paul Ryan we won’t get that and well we haven’t actually seen a budget proposal from Mitt Romney yet, but we know he isn’t using Ryan’s.

Ben Swann examined Romney’s claim about what he thought concerning budgets back in March and compared them to his running mates: Gingrich, Santorum and Paul. Of all of those none of them balanced the budget and all of them increased the national debt, except one. One proposal actually cut the national debt by $2.6 trillion.

Is mine an attempt to get you to vote for someone other than who you are set on? Not necessarily. After all, I’m sure people have made up their minds already. What I want my fellow Americans to do is demand that elected officials quit pandering to the welfare state and tip toeing around the issue of real spending cuts and start acting responsibly. I want my fellow Americans to demand that politicians stop shoveling this kind of stuff. We smell it. We know what it is and we know what to call it.

Eventually, this will all come down around our ears. I’m an optimistic person, but as long as elected leaders, be they Democrat or Republican, are going to fuss about a few hundred billion in Medicare, while we are $222 trillion in real debt, then we are just not dealing honestly with the issue and we will continue to move in the same direction. That direction is more spending and more debt, until it finally collapses. It’s called kicking the can down the road, because we don’t want to touch the political “hot potato” of government entitlements and government programs and introduce real cuts and real conservative fiscal policy.

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