Good news comes and goes rather quickly in the 2010 Medicare Trustees’ Report. It begins with the optimistic news that Medicare’s finances have improved substantially as a result of this year’s health care reform bill, the Affordable Care Act (ACA). However, the report then goes on to explain in great detail why this apparently good news is probably not as good as it sounds.
According to the trustees, “actual future Medicare expenditures are likely to exceed the intermediate projections shown in this report, possibly by quite large amounts.” A separate memo prepared by the Center for Medicare and Medicaid Services (CMS) Office of the Actuary bluntly states that “the projections in the report do not represent the ‘best estimate’ of actual future Medicare expenditures.”
For those seeking solutions to our nation’s long-term structural deficit, understanding the complex message of the trustees’ report is crucial. Despite the buoyant headlines, the trustees warn, “The financial projections in this report indicate a need for additional steps to address Medicare’s remaining financial challenges.”
On paper, Medicare’s finances have indeed improved. The ACA reduced future non-physician Medicare provider reimbursements and added dedicated...
Social Security’s contribution to the overall fiscal gap over the coming decades is smaller than Medicare’s, as the program’s trustees have again made clear in their annual report. If Social Security contributes so much less to the fiscal gap than Medicare, some people ask, why do we have to talk about reforming Social Security?
It would be a mistake, however, to ignore the pressure that Social Security will put on the federal budget in the future -- and how that problem, if it is not addressed, will steadily grow. The difference between Social Security’s annual income (without interest) and its annual costs would stay close to 1 percent of GDP for decades but grows closer to 1.5 percent later in the 75-year window under the trustees’ “intermediate” assumptions. The longer we wait, the more difficult fixing the problem will become.
Closing the gap on Social Security certainly won’t be fun and will involve sacrifice. We would not want implement immediate changes that would weaken the economic recovery, nor would we want to place undue burdens on current...
If President Obama was looking for Congress to rubber-stamp his request for additional “emergency” funding for military operations in Iraq and Afghanistan this year, he was sorely disappointed. He asked for the money last February but a wary Congress didn’t approve the funding until just last week, and only after considerable debate over the war effort and U.S. spending priorities.
Rep. Jay Inslee, a Democrat from Washington state, offered a striking example of the trade-offs that are involved in heavy spending abroad at a time when communities around the country are struggling financially: A police department in his district could lose as many as 23 jobs.
“We can’t pay for them – our first line of security in our neighborhood – but today we would be voting for something on the order of several years of about $4 billion to train police officers in Kabul,” Inslee said. Another notable dissent came from House Appropriations Chairman David Obey of Wisconsin, who expressed concern about the high cost of the war and doubts about the Afghan government.
The legislation provides for $59 billion in additional spending this year, with $33.5 billion going to the Department of Defense and the rest...
FY 2011 APPROPRIATIONS: Prior to departing for the August recess, the House passed the first two FY 2011 appropriations bills. The Military Construction-Veterans Affairs bill passed by a vote of 411-6 and the Transportation-HUD bill passed by a vote of 251-167. House subcommittees reported the...
New projections released on Friday afternoon by the Obama administration show that the nation’s finances remain in a deep deficit ditch. This was hardly “news,” but it served as a pointed reminder that much hard work needs to be done to get us back on the road to fiscal sustainability.
In updating the President’s Fiscal Year 2011 budget proposals, the Mid-Session Review (MSR) does not pretend that all will be well once the economy recovers or that getting tough with earmarks and waste will meet the fiscal challenge. The MSR assumes a swift economic recovery and a three-year freeze on non-security appropriations. Yet even with these optimistic assumptions, the budget remains on a path that the administration concedes is unsustainable.
As stated in the MSR Summary, “the economy is still struggling; too many Americans are still out of work; and the Nation’s long-term fiscal trajectory is unsustainable, threatening future prosperity.”
Those looking for good news could point to the fact that the deficit for Fiscal Year 2010, which ends Sept. 30, is now projected to be $1.47 trillion instead of $1.56 trillion. However, a deficit equaling 10 percent of the economy (GDP) as opposed to 10.6 percent is hardly cause for celebration....
Prime Minister David Cameron’s visit last week to the United States underscored the important relationship between the U.S. and Britain, both politically and economically.
Britain’s new coalition government faces tremendous challenges, many of which are similar to the United States’ problems. Britain’s public debt was 68 percent of GDP at the end of 2009; the comparable figure for the U.S. was 53 percent.
Cameron’s coalition aims to slash government spending over the next five years. The eventual goal is to cut Britain’s annual budget deficits in half over five years, which will mean some ministries will face funding reductions of up to 40 percent. Even the popular National Health Service (NHS) will be ordered to make personnel cuts, although overall it will face much lighter cuts than other ministries. About 75 percent of deficit reduction will be achieved with budget cuts while the other quarter presumably will come from raising revenues.
The proposed cuts in Britain stand in stark contrast to the three-year freeze on domestic discretionary spending President Obama has proposed. Although broad generalizations cannot—and, indeed, should not—be drawn from these figures, it is clear that both the U.S...
COMMITTEES REPORT ADDITIONAL FY 2011 APPROPRIATIONS BILLS: Last week the House Appropriations Committee continued to make progress on the FY 2011 bills. The full committee reported the Military Construction-Veterans Affairs bill as well as the Transportation- Housing and Urban Development bill. Both bills are expected...
Last week President Obama nominated Jacob “Jack” Lew to be the new head of the Office of Management and Budget (OMB), replacing Peter Orszag, who is stepping down at the end of July. OMB is primarily responsible for developing the President’s budget.
If confirmed by the Senate, as expected, Lew will become OMB director for the second time. He served as President Clinton’s director from 1998 through the end of the Clinton administration in 2001.
While Lew is familiar with the job, the budget picture has changed considerably. Lew was OMB director during the only four years of budget surpluses since the late 1960’s. He was also a key negotiator on the bipartisan balanced budget agreement in 1997. Now the budget environment is even more partisan and the country is experiencing the largest deficits since the end of World War II.
The change in OMB leadership provides an opportunity to review the changes that have taken place since Lew’s last stint as budget director and also gives us another chance to review the major decisions looming for the federal budget.
The final budget presented by Lew for the Clinton administration in February of 2000 (FY 2001)...
The International Monetary Fund has given Americans a tough-minded analysis of the challenges we face in putting the country on a more responsible fiscal course. While a recent IMF report points to some bright spots in the U.S. economy and praises federal policies in some key areas, it offers less upbeat predictions than the Obama administration has issued. More belt-tightening, the international organization warns, will be needed in the next few years and beyond.
“The (U.S.) authorities’ commitment to halve the budget deficit by 2013, and intention to stabilize public debt at just over 70 percent of GDP by 2015 are welcome, although much remains to be done to achieve these aims,” the report says. “Given that we use less optimistic economic assumptions than the (Obama) administration, we see the need for more ambitious adjustment to stabilize debt than that envisioned by the authorities . . . “
The IMF praises the Obama administration’s plans for a freeze on non-security domestic spending. But it also cautions that more tax revenue will be necessary as well. The report bolsters The Concord Coalition’s long-standing contention that both spending cuts and tax increases will likely be needed...