[Rhodes22-list] Economics and Health Care

[Brad Haslett]

Here is the 900 pound elephant in the room that refuses to go away.
"Elephant?  What elephant?" When a candidate promises you a new benefit, the
question you should be asking is, "how are we going to pay for that when we
can't pay for what we've already promised?" Happy talk and wishful thinking
is not going to solve this!  Brad

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from the Financial Times

US's triple-A credit rating 'under threat'

By Francesco Guerrera, Aline van Duyn and Daniel Pimlott,in New York

Published: January 11 2008 02:00 | Last updated: January 11 2008 02:00

The US is at risk of losing its top-notch triple-A credit rating within a
decade unless it takes radical action to curb soaring healthcare and social
security spending, Moody's, the credit rating agency, said yesterday.

The warning over the future of the triple-A rating - granted to US
government debt since it was first assessed in 1917 - reflects growing
concerns over the country's ability to retain its financial and economic
supremacy.

It could also put further pressure on candidates from both the Republican
and Democratic parties to sharpen their focus on healthcare and pensions in
the run-up to November's presidential election.

Most analysts expect future administrations to deal with the costs of
healthcare and social security and there is no reflection of any long-term
concern about the US's financial health in the value of its debt.

But Moody's warning comes at a time when US confidence in its economic
prowess has been challenged by the rising threat of a recession, a weak
dollar and the credit crunch.

In its annual report on the US, Moody's signalled increased concern that
rapid rises in Medicare and Medicaid - the government-funded healthcare
programmes for the old and the poor - would "cause major fiscal pressures"
in years to come.

Unlike Moody's previous assessment of US government debt in 2005,
yesterday's report specifically links rises in healthcare and social
security spending to the credit rating.

"The combination of the medical programmes and social security is the most
important threat to the triple-A rating over the long term," it said.

Steven Hess, Moody's lead analyst for the US, told the Financial Times that
in order to protect the country's top rating, future administrations would
have to rein in healthcare and social security costs.

"If no policy changes are made, in 10 years from now we would have to look
very seriously at whether the US is still a triple-A credit," he said.

Mr Hess said any downgrade in the US rating would have serious consequences
for the global economy. "The US rating is the anchor of the world's
financial system. If you have a downgrade, you have a problem," he said.

Moody's did once threaten to cut the rating of some of the US Treasury's
debt when Congress refused to pass the president's budget in the mid-1990s.
Other large economies, notably Japan in the 1990s, have had to suffer the
symbolic blow of losing their top-notch credit rating.

Last year, David Walker, comptroller general of the US, caused controversy
when he compared America's current situation with the dying days of the
Roman empire and warned the country was on "a burning platform" of
unsustainable policies.

Medicare and Medicaid spending, which has risen sharply over the past few
decades and now accounts for about 45 per cent of total federal spending, up
from about 25 per cent in 1975, has long been a source of concern.

Last month, Peter Orszag, director of the Congressional Budget Office, which
advises Congress on the federal budget, said the issue was "the central
fiscal challenge" facing the US.

Most presidential candidates have vowed to reform the healthcare system but
many of them, especially on the Democratic side, have focused on extending
coverage to the 40m-plus uninsured Americans rather than on cutting costs