Obama presents “gutsy” budget; Clinton begs in China; Treasury writes obituary

Obama presented Congress with an agenda described as “breathtaking in its scope and ambition,” “gutsy,” or “bold and courageous”—by his supporters. Passing it won’t be easy, Obama admits, because “it represents a threat to the status quo.” But his enormous popularity might make it possible to get a big share of what he wants (Charles Babington, Associated Press 3/1/09).

Some analysts called the budget “almost radical,” and the U.S. Chamber of Commerce noted that “You don’t rebuild a house by blowing up its foundations.”

Spending

The budget assumes a deficit of $1.75 trillion this year, quadrupling that from the year before: that is 12.7% of the GDP. Federal outlays will balloon in 2009 to $4 trillion, or 27.7% of GDP, up from $3 trillion or 21% of GDP in 2008, and 20% in 2007 (“The Obama Revolution,” Wall St J 2/27/09).

To “reform health care” by vastly expanding insurance coverage, Obama proposes a $630 billion fund for a national insurance program to cover all Americans. This amount will just be “a start.” Costs are soon expected to exceed $1 trillion. Savings will be achieved by cutting payments to providers, reducing hospital admissions, and “promoting efficiency.”

Revenue

The money will come from tax increases on “the rich”—for now defined as singles earning $200,000 or more, or couples earning $250,000 or more. High earners would also see limitations on personal exemptions and itemized deductions, including charitable contributions. The estate tax would be reinstated, and capital gains taxes increased. Revenue projections assume that taxpayer behavior will not change.

A key new source of revenue (“but don’t call it a ‘tax’!”) is an expected $78.7 billion from a cap-and-trade carbon emissions scheme, such as one recently rejected by the U.S. Senate, growing to more than $646 billion by 2019. In effect, this constitutes a very large tax increase on 100% of Americans.

Of the windfall, $15 billion/year is supposed to subsidize alternative energy—which can become relatively economical only if the cost of hydrocarbon fuels soars because of taxation, cap-and-trade, or EPA “Clean Air” regulations. The rest will help fund a promised $800 tax “rebate” or “credit” to people who pay little if any tax, creating a new constituency for keeping the current regime in power—and for “fighting global warming.” Recipients of this new entitlement may not notice that $800 is not nearly enough to offset a $4,000 loss in purchasing power owing to higher energy costs spread throughout the economy.

These revenue projections assume a robust market for carbon emissions permits. After peaking at nearly 30 euros ($38) in mid-2008, carbon dioxide traded at 9.95 euros ($12.60)/tonne on Feb 28 (AFP 3/1/09). Opposition to cap-and-trade schemes is building worldwide; it could bring down the Australian government (Business Spectator 3/2/09).

Until the Next Generation of Taxpayers Grows Up….

Secretary of State Hillary Clinton wrapped up her first overseas trip by urging China to continue buying U.S. debt, saying it would help jumpstart the flagging U.S. economy and stimulate the buying of Chinese imports. China is the top holder of U.S. Treasury bills, owning $696.2 billion worth in December, 2008. Its help is needed to finance the $787 billion stimulus package.

Clinton said that concern about the human rights situation in China should not be a distraction from the vital issues of the economy and climate change. A journalist reported seeing plainclothes police taking away some visitors attempting to enter a church where Clinton attended Sunday service (Britbart.com 2/22/09).

Is the U.S. Treasury Solvent?

Between January 2008 and January 2009, the M2 money supply increased from $7.3 trillion to $8.2 trillion, meaning that the Federal Reserve created $1 trillion out of thin air in one year. It has used this money to buy distressed assets. It claims that when the economy recovers it will sell the assets and retire the money before it causes runaway inflation. This assumes, of course, that somebody will want to buy these assets (Downsizer Dispatch 2/23/09).

The quality of the assets held by the Federal Reserve has deteriorated substantially, starting in August 2007, write Philip Baggus and Markus H. Schiml. The Fed’s leverage has increased from 22 to 50. This means that the Fed is insolvent if a mere 2% of its assets go into default.

In the “2008 Financial Report of the United States Government,” the Treasury wrote an obituary for the U.S. government, even before the “stimulus bill,” Secretary Geitner’s proposed TARP II, [and the proposed gutsy budget], states Craig Cantoni.

Some highlights:

  • The government debt held by the public will be 650% of GDP by 2080, compared to “only” 109% during World War II (Chart 2, p 2).
  • The balance sheet (p 10) lists government assets of $1.9 trillion and liabilities of $12.1 trillion. The bonds of a corporation with such an unhealthy balance sheet would be rated as “junk.”
  • The footnote to the balance sheet states that the unfunded liability of $49 trillion for Social Security and Medicare is not counted as a liability on the balance sheet.
  • In an addendum entitled “Management’s Discussion and Analysis,” retirement benefits for veterans and civil servants increased from $90 billion to $550 billion from 2007 to 2008 (Table 1, p 3).
  • The net operating cost of the federal government increased 266.3% from 2007 to 2008.
  • A letter from the Government Accountability Office states that: “The material weaknesses discussed in our [audit] report continued to …. hinder the federal government from having reliable financial information to operate in an efficient and effective manner.” [Cantoni’s translation: “The government cooks the books.”]

Additional information:

10 thoughts on “Obama presents “gutsy” budget; Clinton begs in China; Treasury writes obituary

  1. The unrelenting and frequently misleading naysaying approach in this AAPS piece on Obama’s budget is unfortunately all too common in your e-mails. Finally we have a president talking honestly to all sides and actually counting the cost of the war in the budget. As he faces our current momentous crisis perhaps you could try supporting his efforts to find a way through it.

  2. Ah! Give the kid a break.He never did experience a business. And with brilliance , he was financed by the governement( successful taxpayers) to a first class education. True, he gave a little time as a community organizer, maybe 20% of the time given by the typical activists. And no military service. I voted for him and knew he’d need OJT training. I thought he was smart enough to get educated first, then wreck the economy by only unintended consquences rather than intended destruction. Bush had an 80% approval in the early years too.FDR did one thing at a time.Let’s change the world in one month. It took a week to make it.

  3. The Health Insurance Experiment (HIE), conducted by RAND in the 1970s and early 1980s revealed that patients with “free” medical care spent 67% more as outpatients and 30% more as inpatients in comparison to those with $1000 deductible insurance. HIE found no health benefit of “free” care.

    Those results predict yet another failure for socialism in health care or in any other sphere. I hope that the imminent damage threatened by government will eventually lead to recovery for our once free and prosperous nation.

  4. Dr. Scotton,

    Our president is not talking honestly to all sides. He summed his position up by saying “I won.” That means he will ram through his socialist agenda without regard to opposing viewpoints. Governments do not stimulate economies. They merely take money from one group and give it to another. All debt must be paid for eventually. Obama just leveled a one trillion dollar tax on the American people (or is it 8 trillion dollars.) It will be paid, now and in the future by all of us.

    It you want to understand the true meaning of the government stimulus package may I suggest you get a copy of Economics in One Lesson by Henry Hazlitt. Written in the 1940s it explains the tired socialist policies that always fail, and always result in disaster. That is where we are headed – at warp speed.

    The current crisis was caused by government policies that caused loans to be made to poor prospects. The implosion was predictable, and was predicted by Dr. Hazlitt. Failed government policy from Democrats and Republicans is the cause the of current crisis. Our new leader of ‘change’ has only changed the speed of socialist policy implementation. The speed of the demise of our nation will be directly proportional.

    Our new president is not honest. He talks only of the benefits to one group (the needy), while ignoring the costs to the other larger group – the American (taxpaying) people.

  5. Where is the outrage over the destruction of (what is left of) Medicare and the debt we owe to veterans?

    The Administration is saying they will cut payments to providers – and it’s already set up for just that with the 20% cut due next year in Medicare.

    The other cost-cutting scheme is Community Health Centers. Our current federally funded centers require that a midlevel be hired to see a certain number of patients.Dr. Nurse will see you, now.

    The AMA reported today that the trials with “care coordination” centers didn’t save any money and only 2 out of 15 of the model centers cut hospital time.
    The best part?
    “It doesn’t matter if you back up a truck to their offices and drop off bundles of money,” Dr. Norman said. “They don’t have the time, resources or expertise right now to put this all in place.”

    http://www.ama-assn.org/amednews/2009/03/02/gvsa0302.htm

  6. Most of you are missing the bigger point and that is that your government has been hijacked and it did not start with Obama although he seems to be the Socialist darling for the moment and most perfectly fit for the job.
    Go read the book….
    “The Creature From Jekyll Island” for a well done review of the undue influence of big money on our banking system. The Federal Reserve is no more federal than federal express and yet they determine our monetary policy, the rise and fall of interest rates, and now the destruction of the American Economy. The good “Dr Obama” who will “heal ” our financial disaster with his deceptive cash infusions is no better than his predecessor I suspect. He will do the bidding of his masters at the Fed as he already has done in lobbying for this bailout with our “representatives” in Washington.

    Health care is the last bastion of freedom frankly. In many ways we have ourselves to blame for allowing them to come after us in this way. Obama’s plan will go through because everyone wants to keep the American people from screaming at the top of their lungs about the undue slavery which we are about to enter, so “we’ll throw the dog a bone” and tell them we’ve made their healthcare better and now you don’t even have to pay for it! What a joke, what a cruel joke.

  7. Thank you, Lee Welter, for mentioning the Rand Health Insurance Experiment (HIE). I searched online and quickly found the website with considerable information available: http://www.rand.org/health/projects/hie/ I don’t recall that the results of this 15 year study ending in 1982,and actually funded by the Department of Health, Education, and Welfare (now the Department of Health and Human Services), have been discussed in the media regarding any of the current state and federal government pushes for (more) taxpayer funded health care. Did I miss something?? Have these results – actually the entire study itself – purposely been ignored by government officials and journalists who have known of their existence? Has this study of 2,750 families encompassing more than 7,700 individuals been “swept under the rug”, so that the majority of those in the general public who never knew of this study would never come to know of it? Has there been an effort to purposely keep from these same individuals, often easily persuaded that government should and will provide for the “general welfare”, the fact that the better health results they think is the automatic outcome of “free” health care has already been shown by this study to not be the case? Maybe I am being very suspicious here, but I suspect that this is the case with a great portion of the mainstream media and virtually all politicians. The bottom line appears to be that the results of the HIE were not what those in government (and those who see gain for themselves in supporting it) wanted to read/hear then, and definitely not now.

    Staying with the HIE for a bit: “[T]he experiment examined whether shouldering more of their own health care costs leads people to take better care of themselves. It did not. Risky behaviors were not affected — rates of smoking and obesity, for instance, did not change.” (From the brief – http://www.rand.org/pubs/research_briefs/RB9174/index1.html ) This was over 20 years ago when the information available to the general public – and even many health practitioners – was lacking in the correlation evidence between risky behaviors and health status. While there are still health care providers who practice risky behaviors themselves, there have been studies showing that increasing numbers of people are seeking health related information – including preventative – from Internet sources. http://www.jabfm.org/cgi/content/full/19/1/39 In this 2006 paper, of the 1289 patients participating, 65% reported access to the Internet and 74% of them had used the Internet to find health information for themselves or family members. Disease-specific information was most frequently sought, followed by medication information, and then information about nutrition and exercise. This study was in addition to The Pew Internet and American Life Project estimates that on a typical day in 2004, 70 million Americans went on-line and 7 million looked for health or medical information. Based on these studies and my observations online, I think it highly likely that a similar study to HIE done today would find that people who are “shouldering more of their own health care costs leads [those] people to take better care of themselves”, because far more of them know that taking better care of themselves (using prevention measures) *does* make a health difference. How many health practitioners emphasize this in their contacts with patients and others, or instead take the view that at least some disorder/disease/disability is inevitable (especially as one ages), is another issue.

    Kitty Antonik Wakfer

    MoreLife for the rational – http://morelife.org
    Reality based tools for more life in quantity and quality
    Self-Sovereign Individual Project – http://selfsip.org
    Self-sovereignty, rational pursuit of optimal lifetime happiness,
    individual responsibility, social preferencing & social contracting

  8. Maybe Unknown Physician II truly considers himself “in many ways.. to blame for allowing them [federal government] to come after [physicians]” in the ways currently being done – and maybe in the past s/he did support many of the measures that have lead to the, once creeping but increasingly trotting, socialization of health care services. However, as a non-physician (in my first career a RN) I too am enormously effected by these same government intrusions into what should always have been and continue to be a voluntary provider/client interaction. And this applies to all others who at any time seek health care services. Once an entity participates directly in the payment arrangements for a service or product, that entity will always start calling the shots – it’s almost equivalent to the law of gravity. An insurance company can be replaced with another if the arrangements are unacceptable to the premium payer, until of course the available choices are meaningless as a result of government laws/edicts/mandates/directives/etc. And when it is the government itself funding (via extorted money of course) the services, with its legalized use of force or threat of it, all semblance of voluntary mutually beneficial physician/patient (provider/client) relationship evaporates.

    If individuals want unencumbered available actions – including who and which physician to consult or which type of patients/clients to include in a health care service business – then each must become self-responsible. This means each person taking care of hir own body using as much of and the type of services that sh/e values for that purpose and being responsible for the payment to the provider of those services. It is consistent self-responsibility that is sorely missing in very large numbers of people in the US (and elsewhere in the world), and has become increasingly so with every measure by governments to “take care” of whatever group(s) will result in the most votes being favorably cast. Getting and staying in political power is the politician’s purpose, with very rare exception.

    It is a weaning away from the idea that government is a necessity, despite it’s acknowledged evilness, which needs to occur. First though, significant numbers of truly concerned individuals need to understand that the the nature of human beings does not automatically lead to the conclusion that individuals must be ruled by some other person(s) or entities in order that there be orderly interactions between them. Society, just like any other natural system can be self-regulating by means of interactions between its members, if only humans are allowed to develop the methods by which such self-regulation can be effective, rather than the social system constantly being held in an unnatural (and very unoptimal) state of balance by the operations of its rulers and other influencers. The principles and general framework of this goal society is described in Paul Wakfer’s essay, “Social Meta-Needs: A New Basis for Optimal Interaction” – http://selfsip.org/fundamentals/socialmetaneeds.html Before movement towards a goal can reasonably begin, one must know what is that goal – where s/he is going and why it is desirable. However, I do not think that it is necessary that all people go through this process of study/understanding/agreement first before a self-orderly society comes into being. I think that once just a significant number come to understand and agree with the principles and put them into practice, the others will come to learn by, what could be simply described as, example. (Exactly what percentage is “significant”, I do not know at this point.)

    I know this has been a long comment (submitted in 2 parts when original met w/ a strange error message & then delayed in showing), but while the subject of (further) government intrusion in the healthcare provider/client relationship is of vast importance, it does not stand in isolation from more fundamental issues. And it cannot be seriously discussed with simple sound-bites.

    Kitty Antonik Wakfer
    Casa Grande AZ

  9. Ever since Nixon we have been designing a system specifically to leave the enemies of reform, doctors and patients, degraded and dissatisfied. ERISA, not the Medicare act may have been the most pivotal development.

    Where the Medicare act was limited and thus allowed for a free market, ERISA was universal in scope. HCQIA followed and then HIPAA etc. all for the purpose of stimulating and abetting our unique and universal private bureaucracy.

    Our private medical bureaucracy is more pernicious than any public bureaucracy ever realized. There is no cost savings or efficiency here. There is no better health. And it is “too big to fail.”

    Our medical cult has overwhelmingly consented to enslavement by our private bureaucracy, imperial hospital rule and non-free market insurance for fear of socialized medicine. This enslavement has been to protect others besides patients. Of all of the fully realized socialized medical systems which have been in existence in the last say 30 years, ours is the most expensive and truly wasteful or profitable depending on which side of the balance sheet you look at. As opposed to government owning hospital assets, it is all transfer payments to politically activated third parties. There can be never be any savings here. Their will be a Halliburton like final solution to healthcare in the US soon. All reward and no business risk. All pay cuts and diminished access savings will go to out of the treasury to profits. Pay with immunity from harm no matter who suffers.

    I personally like Obama and get no satisfaction from criticizing him but I don’t think he or any other culturally relevant politician today has any historical perspective on anything beyond the last 8 years. Australia has the most workable modern health system I have personally seen. 50% direct access (no private bureaucracy), 50% public (but the state owns the hospitals) health insurance is affordable and no they don’t pay higher taxes- we do and we will. The ratios are rough but determined by the patient and doctor in the market, due to waiting times and slight differences in quality of care. Over all, public & private care irrespective of waiting lists are roughly equal. I never see Australia listed in the rogues gallery of socialized medicine. Nor, for that matter, do I see the US but perhaps for different reasons.

  10. Pingback: Pelosi rams through $0.8 trillion tax increase, calls it a “jobs bill” « AAPS News of the Day

Comments are closed.