[Rhodes22-list] Robert & Wally Ignorant
Steve
rhodes2282 at yahoo.com
Wed Dec 1 09:07:18 EST 2004
Robert & Wally
Try & digest this. Since my simple Economic 101
lesson was to hard for you 2 to understand; here is
even a better understanding of why the deficit is not
a problem. If you can set aside your mineless liberal
attitudes; the below is a simple understand of the
deficit and a GREAT Country like the USA can manage
not only this but several trillion more.
The Forty-Four Trillion Dollar Deficit Scare
by Dean Baker and David Rosnick[1]
Earlier this summer, a new study
projecting the size of the budget deficit made
headlines in the London Financial Times and many other
major newspapers and news magazines (e.g. “Bush
Shelved Report on $44,200bn Deficit Fears” Financial
Times, 5-29-03; A1; All Things Considered, National
Public Radio, 5-29-03; “The $44 Trillion Hole?”
CNN/Money 5-29-03). The study, Fiscal and Generational
Imbalances: New Budget Measures for New Budget
Priorities by Jagadeesh Gokhale and Kent Smetters,
projected that the value of future budget deficits
would be $44 trillion, more than four times current
GDP.[2] This projection was taken as a warning of the
government’s extraordinary profligacy, and the need to
radically reduce future spending commitments. In
particular, most news stories reported that the study
implied a need to reduce Social Security and Medicare
spending to more manageable levels.
A somewhat closer examination suggests
that there is less basis for concern than the $44
trillion figure implied. Furthermore, the major
underlying cause of this deficit is not demographics –
the growing population of elderly – as most reporting
indicated, but rather a private health care system
whose costs are exploding out of control. The
assumption in this study – that private sector health
care costs continue to explode for the next eighty
years – would have a devastating impact on the economy
even if we eliminated all publicly supported health
care programs. If health care costs are brought under
control, then the projected deficit would be
manageable, and not qualitatively different than what
comparable projections would have indicated in prior
years.
Putting $44 Trillion in Context
While the prospects of $44 trillion
deficits was attention grabbing, it is unlikely that
many people who heard this projection had a clear idea
of what it meant. The $44 trillion figure was the
study’s projection of the present discounted value of
all future deficits. In other words, the study
estimated annual deficits through eternity, under the
assumption that current tax and spending rules
remained in place. It then summed up these deficits by
discounting the value of future deficits at a 3.6
percent real (inflation adjusted) annual rate.
This figure would only be meaningful to
people who are accustomed to thinking of present
discounted values of future income. Since almost no
one is accustomed to making such calculations (which
require somewhat arbitrary assumptions about the
interest rate used, as well as the growth rate), as a
practical matter, this $44 trillion would be virtually
meaningless to anyone who heard it. Apart from being
obviously large, very few readers would be able to
place this number in a meaningful context.
It actually is quite easy to express this
deficit projection in a more meaningful way. If the
deficit is expressed as a share of future GDP, then it
is immediately possible to place it in context. The
study by Gokhale and Smetters actually provides this
information. The study projects the present discounted
value of future GDP as $682 trillion (p.37). This
means that its projected deficit is equal to 6.5
percent of future GDP, implying that a tax increase of
6.5 percent of GDP would be needed to close the gap.
This is far from a trivial sum, but it is not
necessarily an impossible burden either.
The tax rate in the United States has
increased by comparable amounts in prior periods. For
example, the federal tax burden as a share of GDP grew
by 4.6 percentage points of GDP between 1950 and 1952,
rising from 14.4 percent to 19.0 percent.[3] This
increase was due to the costs of the Korean War. While
the tax burden did decline somewhat in subsequent
years, it remained close to its 1952 level, as defense
spending soared due to the Cold War.
It is also worth noting that most other
industrialized nations face far higher tax burdens
than the United States. According to OECD data, the
2000 tax share of GDP in the United States, Belgium,
and Norway were 29.6, 45.6, and 40.3% respectively.
These higher tax burdens have not prevented the
economies of these nations from continuing to grow and
prosper. Belgium, France and Norway enjoyed higher
productivity levels than the United States throughout
the 1990s, despite their higher tax rates.[4] Many
countries with far higher tax burdens than the United
States, such as Denmark, Sweden, and the Netherlands,
enjoy lower unemployment rates.
Of course, the prospect of a tax increase
equal to 6.5 percent of GDP should be taken seriously.
But it is important to recognize that it is possible
for the United States to bear this cost, if the
purpose of the public spending is considered necessary
and desirable. The country has been willing to incur
comparable costs in prior periods for national defense
purposes – without undermining economic growth. In
principle it could incur these costs to serve other
ends as well.
The Health Care Cost Explosion
The other important factor, missing from
most coverage of this study, is the extent to which
this projected debt burden is driven by the assumption
that growth of health care costs would continue to
outstrip the overall rate of growth of the economy.
The study assumed that, in addition to the impact of
demographic factors, annual health care costs would
rise by 1 percentage point more than the nominal rate
of GDP growth.
This assumption about rising health care
costs is enormously important to the study’s deficit
projection. If the United States managed to contain
health care costs, so that apart from demographic
factors they grew at the same rate as nominal GDP,
then the projected deficit would be equal to just 1.5
percent of future GDP, or $10 trillion. While even
this figure is not a trivial sum, there would be
little basis for the nation to be too consumed with
such a deficit projection. This methodology would have
produced comparable deficit projections for most of
the last four decades.
The fact that most of the projected
deficit is due to projected increases in health costs
is extremely important. It means that the key problem
driving this deficit projection is not an out of
control budget situation, but rather out of control
health care costs. The rise in health care costs will
affect both the public and private sector. If the
projected rise in health care costs proves accurate,
it will have a devastating impact on the economy even
if public sector health care programs are eliminated
altogether. The rate of increase in health care costs
assumed in these projections implies that health care
expenditures will consume 30 percent of GDP by 2080.
This compares to 14 percent of GDP in 2001.
The projections for rising health care
costs can be expressed in comparable terms to the
projections for the budget deficit. We can define a
prospective “health care deficit” as the extent to
which health care spending is projected to exceed the
rate of growth of nominal GDP, adjusted for the aging
of the population. Using the assumptions in the study,
this health care deficit is equal to $69 trillion, or
9.3 percent of GDP. This prospective health care
deficit is a far greater threat to future living
standards than the budget deficit.
Among the industrialized nations, only the
United States faces this sort of dramatic increase in
health care costs. Measured as a share of GDP, the
United States already spends twice as much as the
average for other OECD nations. In other OECD nations
the share of GDP devoted to health care spending,
adjusted for demographic change, has largely
stabilized in the last two decades. Remarkably, the
United States has little to show for these vast
expenditures on health care. Its health care outcomes,
such as life expectancy and infant mortality rates,
are near the bottom among industrialized nations. In
short, there is a compelling case for a fundamental
reform of the U.S. health care system.
This is the most fundamental, albeit
hidden, point of the $44 trillion deficit scare study.
The United States health care system is broken, and
desperately needs to be fixed. If nothing is done to
fix the system, then rising health care costs will
have a devastating impact on the economy. Part of this
impact will be felt in the public sector, which pays
for approximately half of all health care in the
United States, but the impact on the private sector
will be equally harmful. Rather than presenting a
compelling case for the need to get the deficit under
control, the study by Gokhale and Smetters
demonstrated the importance of fixing the U.S. health
care system. If costs continue to rise out of control,
it will have a devastating impact on the economic
well-being of future generations.
--- Steve <rhodes2282 at yahoo.com> wrote:
> Robert
> Kerry tried this with the swift boat Veterans and it
> didn't work with the American people and your lame
> attempt to try it with me is useless too!!!!!!!!
>
> It you know anything about the economy and/or
> economic; post your facts. I have posted mine and
> they are verifiable and factural.
>
> You & Wally are just blowing wind!!!!!!!! This is
> just Typical Liberalism. When you don't know the
> answer, attack. You can attack all you & Wally want
> but you are doing nothing but showing your Ignorant.
>
> You have no facts to support your claims on the
> economy.
> Steve
>
>
> --- Robert Skinner <robert at squirrelhaven.com> wrote:
>
> > Steve wrote:
> > > Robert
> > > If you have an brains at all, you would go
> > research
> > > this stuff so you might actually educated
> > yourself.
> >
> > On the subject of brains, Mortimer, ipsat
> loquitor.
> >
> > When it comes to education, you show me yours, and
>
> > I'll post mine. Showdown! Still waiting...
> >
> > > You sound like Kerry; just a lot of
> > bullshit!!!!!!!!
> >
> > See above. See below. Eschew obfuscation. Stick
> > to the point.
> >
> > > The facts I am saying are easily justified.
> LOOK
> > IT
> > > UP!!!!!!!!!!!!
> >
> > Give me one specific, current, and undisputed
> > reference
> > in the field of economics that supports your
> > statements.
> > Further, facts, if they be that, do not require
> > justification. They require revelation.
> >
> > * That's specific as in title, author, and
> > publisher.
> >
> > * That's current, as in the last 5 years.
> >
> > * That's undisputed, as in accepted by all
> economic
> >
> > theorists.
> >
> > Frankly, I don't think even one such a book
> exists.
> >
> > Therefore, unless or until you produce it, your
> "Go
> > look it up!" admonitions are meaningless.
> >
> > However, I look forward to enlightenment if you
> can
> > provide the citation, and show how it supports
> your
> > assertions.
> >
> > Failing that, a clear summary of your economic
> > theory
> > or theories with clear citations would provide at
> > least some basis for rational debate.
> >
> > Your Nemesis (male, in this case),
> > Robert Skinner
> >
>
http://www.britannica.com/eb/article?tocId=9055233&query=nemesis&ct=
> >
> > P.S. I must thank you for this continuing
> badminton
> > match of messages, Mortimer. I hope you are
> > enjoying
> > it as much as I am. Edgar Burgen never had it so
> > good.
> >
> > RWS
> >
> >
> ---------------------------------------------------
> >
> > > Steve
> > >
> > > --- Robert Skinner <robert at squirrelhaven.com>
> > wrote:
> > >
> > > > Steve wrote:
> > > > > Have you ever even heard of
> > > > > supply & demand.
> > > >
> > --------------------------------------------------
> > > > Of course, Steve. The question is whether you
> > have
> > > > any education that justifies your
> "ex-cathedra"
> > > > statements. You make a statement, and when
> > someone
> > > > disagrees with you, you tell them to go to
> some
> > > > unspecified document which you claim as
> > supporting
> > > > your position. Nowhere in your rants have I
> > seen
> > > > any list of references that anyone can examine
> > to
> > > > see if you have any real basis for your
> points.
> > > >
> > > > Having seen not one shred of credential or
> > reference
> > > > to support your position, I have to strongly
> > doubt
> > > > your claim to any expertise in matters
> economic.
> > > >
> > > > Some might say: "Put up or shut up."
> > > >
> > > > I am content to invite you to reply in a clear
> > and
> > > > well-reasoned way, if possible.
> > > >
> > > > /Robert Skinner
> > __________________________________________________
> > Use Rhodes22-list at rhodes22.org, Help?
> > www.rhodes22.org/list
> >
>
>
>
>
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