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1st Time User | Obama - Need New `Bargain` -  Barack Obama is saying
that long-term economic recovery won't be achieved
unless the government fixes Social Security and
Medicare.
These web sites are an attempt to contribute to that
process. I'd very much appreciate if you would take a few
minutes to review the material on these websites.
Any comments, suggestions,
criticisms, insights, etc. would be appreciated.
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| Summary - Faced with courage, honesty, and strength, the economic
and financial crisis facing us, is a once in a lifetime
opportunity to build a better future for not only ourselves
and our children, but all who follow us.
The simultaneous collapse of the housing, commercial real estate,
and stock markets is scary and dangerous. Worse, it
is well on its way to exposing the failures of three
generations of politicians, bureaucrats and corporate
executives to provide a solid basis for Federal, state,
and corporate guarantee programs. As those failures
take place, the current economic crisis will become
a political crisis.
They have promised far more health care (Medicare, Medicaid, and health
insurance), retirement security (Social Security, Federal
military and civilian pensions, state and corporate
pension plans, Pension Benefit Guarantees), financial
security (Federal Deposit Insurance (FDIC), mortgage
guarantees (Fannie Mae/Freddie Mac)), then can ever be
delivered.
No one will receive all that they were promised, but
everyone can come out better than they were. The only
positive solution is to give the people
of the United States (the voters and taxpayers)
direct control over the difficult choices that must be
made, both as individuals and at all levels of government.
Click for more information.
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| Feedback, Fixes, News, and Ideas - The goal of these websites is to be accurate in both
the facts and analyses and then to help solve the
problems that are presented.
We very much appreciate feedback, fixes, news, and ideas.
Click for more information.
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Big Disconnect
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Big Disconnect - Rewards Leaders - Damages Public
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There is a big disconnect between the interests,
ambitions, relationships, and world-views of the individuals who
work in businesses and governments and the theoretical
goals of those entities to serve their customers, stockholders,
and the public interest. The workers, especially, the
leadership have many incentives to act in ways that
benefit them at the cost of long and, sometimes, even
short-range damage to the constituencies that they
are paid to protect.
Presidents and Congressional leaders have known for 30
years that Federal entitlement spending was out of
control and would create the problems that we now face.
But to have dealt with those issues would have likely
cost them their jobs. So it was in their interest
to pass the buck.
Similarly bureaucrats in the SEC didn`t want to take
the risk associated with investigating Bernie Madoff.
We often talk about governments, businesses, courts,
regulatory agencies, etc. as if they had some existence
apart from the individuals who work in them. Of course,
they don`t.
To some extent the actions taken by the individuals
that make up these and other `entities` are guided and
constrained by their rules and, even more, by the culture
and traditions. Workers are also heavily influenced
by the official and unofficial incentive structures
that exist by and around businesses and organizations.
Some businesses are entrepreneurial. They encourage
and reward risk-taking and are relatively tolerant of
failure. Many businesses and most governmental agencies
reward `safe` decisions and punish failure.
While many people remain in one organization for much
of their working lives, others, especially the more
ambitious, have every intention of moving in order
to advance their position.
People`s actions are influenced not only by their perceived
self-interest but the full range of human motivations. Many
problems result from people`s worldviews, expectations,
social networks as well as their desires to promote their
own self-image and/or gain power and influence. The Madoff
Ponzi scheme illustrates a couple of these points. Many
of Madoff`s victims were Jewish. Other similar schemes
were the results of contacts within the fundamentalist
Christian community, Hatian immigrants, etc. In Madoff`s
case, many people would have had the expectation that
someone with his background would be `safe.` Others
invested because it put them in a group of people that
they considered to be `elite.` Those same beliefs
and expectations undoubtedly influenced the actions
of the people in the Securities and Exchange Commission.
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- Obama Nominees - President Obama`s choice to try to bring about health care
reform ran afoul of the president`s campaign to
`clean up both ends of Pennsylvania Avenue.` Tom Daschle, the
former Democratic Senate majority leader, admitted
to not having paid $140,000 in back taxes and requested
that his name be withdrawn
- Stimulus - Alternative Minimum Tax - About $70 billion or % of the so-called stimulus package
is a provision that stop about 24 million taxpayers from
being hit with the alternative minimum tax (AMT) in 2009.
The AMT was part of the Tax Reform Act of 1969
and was included to target 155 high-income households that
had been eligible for so many tax benefits that they owed
little or no income tax under the tax code of the time.
Because the AMT is not indexed to inflation an increasing
number of upper-middle-income taxpayers have been finding
themselves subject to this tax.
As a result, `patching` the AMT is a regular Congressional
ritual. Call the current AMT `patch` a tax cut or a
`stimulus` is a massive disconnect.
Click for more information.
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Federal Entitlement Programs
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Aging Work Force - Boomers Hit 60+
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As the graph right illustrates, the first of the baby boom
generation is entering its 60`s. Those born in 1946 can
already take early retirement. In 2011, they will be
eligible for Medicare.
As the chart below illustrates, the U.S. and most
other large nations will experience a dramatic fall in
the ratio between those eligible for retirement and
those who are normally in the workforce.
The ratio will fall steadily from a little less than
five workers per retiree now to just over 2.5 workers
per retiree by 2030.
The situation in Japan is much worse. Japan also had
about five workers per retiree in 1990. That ratio
is already down to around 3 to 1 and will continue
to drop until it reaches around 1.5 to 1 thirty years
from now.
As this chart illustrates, the U.S. went through a
similar fall beginning around 1950. In order to fund
that decrease, payroll tax rates exploded, jumping
from 2% to 15.3%.
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- Medicare - $36.2 Trillion - In its Fiscal Year 2008 Financial Report of the United States
Government, the GAO shows Medicare to be underfunded
by $36.2 trillion.
- Federal Hospital Insurance (Medicare Part A) - $12.7
- Federal Supplementary Medical Insurance (Medicare Part B) - $15.7
- Federal Supplementary Medical Insurance (Medicare Part D) - $7.8
Click for more information.
- Social Security - $6.6 Trillion - In its Fiscal Year 2008 Financial Report of the United States
Government, the GAO shows Social Security to be underfunded
by $6.6 trillion.
Part of the reason for this problem is that early beneficiaries
received benefits that were far higher than their payments
would have warranted, to the tune of
$17 trillion. This estimate was based upon
work done by Dean R. Leimer of the Social Security
Administration`s Office of Policy, Office of Research, Evaluation,
and Statistics.
Click for more information.
- Social Security - Return on Invement - When the Social Security program became law, the concept was
for payroll taxes to fund the long-range future of the program.
Taxes collected from current workers were supposed to create
a large trust fund that would support future payments.
That didn`t happen. Instead Congress and the President
got the support of current beneficiaries at the expense
of those paying into the system.
Congress delayed scheduled tax increases and moved up the
payment of benefits. Benefits were also increased.
Just as important, as life expectancies increased,
either taxes had to be increased, benefits cut, or the
retirement age increased. None of those corrective
actions were taken.
Click for more information.
- Disability Insurance (SSDI) - On top of the recipients of Social Security payments are over
7 million people who are paid under Social Security`s
Disability Insurance (SSDI) program. These 7 million
people comprise over 4.5% of the workforce.
The SSDI payments are a serious threat to Social Security`s
retirement payments because the funds to support the
program come from the same payroll taxes that fund the
retirement program.
In 2005, the program`s expenses exceeded the payroll tax revenues.
Since then the difference has been made up out of the
Federal government`s general revenue.
Click for more information.
- Medicaid - $16 Trillion - The Centers for Medicare and Medicaid Services
project that Medicaid will grow
at around 8% per year from 2007-2017. It currently
makes up 15% of the nation`s health care costs.
The GAO projects that it will consume around
5% of the GDP by 2080, up from around 2% in 2006.
Click for more information.
- Medicaid - Few Get Most Benefits - As with health care expenditures generally, a relatively
small percentage of Medicaid enrollees account from
over half of the program`s expenditures.
According to Kaiser Commission in 2004 over $151
billion was spent on 5% of Medicaid`s enrollees or
less than 3 million people
Just over $110 billion was spent on the remain 54 million
people.
Click for more information.
- Medicaid Long Term Care - The cost of Medicaid`s Long-Term Care program have
grown by almost 350% since 1990.
Currently about 40% of the program`s costs go for
long-term care. This growth has largely been the
result of the easing of standards to participate
in the program by Congress.
Click for more information.
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Health Care |
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- Big Problems Ahead -
As bad as the projections for Medicare and Medicaid are,
($36.3 and $16 trillion respectively), the
Congressional Budget Office is projecting that the
situation will be twice as bad ($52 trillion?) for
the rest of the health care system.
Realistically that won't happen. Instead the number of
people covered by private health insurance will shrink
dramatically.
Since 2000 the percentage of the population covered by
employer-based health care plans has fallen by 5%. During
roughly the same time period (1999-2008), the cost
to employers and to individuals (co-pays and deductibles)
rose almost 120%.
Layoffs and cut backs by employers are likely to have dropped
that number another 2% or 3%.
The current stimulus plan includes $30 billion to extend Medicaid
to the unemployed as well as $87 billion to reduce the state's
portion of current Medicaid expenditures. Together those
number total amount to almost 15% of the 'stimulus' spending.
Click for more information.
- Where Does the Money Go? - The breakdown of health care expenditures over the last 10 years
has remained relatively stable with hospital and physicians
costs amounting to over 50% of the total. The `other`
categories `Other Personal Health Care` and `Other Health
Spending` account for about 30% of the remaining half.
Prescription drug costs have risen about 30% (from 6.9%
to 10.1%) during the period 1997-2007. That time frame
featured the addition of a prescription drug benefit
to the Medicare program.
Click for more information.
- Spending Concentrated - In any given year, health care spending is concentrated among
a very few patients. Over 20% of the total spending goes
toward the care of just 1% of the population.
Almost half (47.7%) is spent on just 5% of the population.
By contrast, it only takes 3% of the total to take care
of most of the country (50%).
Expenditures are also concentrated on five costly conditions.
Almost a third of the total expenditures are spent on
heart conditions, cancer, trauma care, mental disorders,
and pulmonary (lung) conditions. While spending
on heart conditions is the highest (8.3%), per patient
spending is highest on cancer care.
When total medical spending for people with these
conditions are added together, it accounts for almost
half of total medical spending.
Click for more information.
- Lifestyle Choices - While the number of people that smoke has fallen to
below 20%, those classified as either overweight or
obese has risen steadily.
According to the Centers for Disease Control and Prevention (CDC),
over 33% of the U.S. population is considered obese, while
about half that number (16%) of the nation`s children
are obese.
Obesity increases the risk of many diseases and health
conditions, including:
- Coronary heart disease
- Type 2 diabetes
- Cancers (endometrial, breast, and colon)
- Hypertension (high blood pressure)
- Dyslipidemia (for example, high total cholesterol or high levels of triglycerides)
- Stroke
- Liver and Gallbladder disease
- Sleep apnea and respiratory problems
- Osteoarthritis (a degeneration of cartilage and its underlying bone within a joint)
- Gynecological problems (abnormal menses, infertility)
While the CDC doesn`t list it, a number of
studies have shown a link between obesity and mental
disorders.
Click for more information.
- Spending Doesn`t Equal Improved Outcomes - The Congressional Budget Office estimates
that about 1/3rd of the $2.2 trillion spent on health
care could be saved.
The CBO found that there was basically no relationship
between a quality of care measure and the total spending.
Then CBO Director Peter Orszag said, `roughly $700
billion each year goes to health care spending that cannot
be shown to improve health outcomes.
Orszag cites cost differences between the Mayo Clinic
and UCLA Medical Center. Costs per Medicare beneficiary
during their last six months of life at the Mayo Clinic
were $26,000 while the cost at the UCLA Medical Center
was almost twice that amount.
Click for more information.
- Health Care Disconnect - There is a massive disconnect between who pays for health
care and who benefits. The result is that all the incentives
in the system are designed to raise spending.
Among the people who pay for health care, but have little
direct benefit are employers, employee, and taxpayers.
Employers pay for health care through their sponsorship
of health insurance for their employees as well as their
Medicare matching payments. Since employer health care
payments are tax deductible, the taxpayers also are
paying a portion of those costs. To an extent, uninsured
taxpayers are subsidizing health insurance for employer
supported plans.
Employees support Medicare recipients through the
Medicare deduction. They support Medicaid recipients
through their income and other tax payments. Finally,
they indirectly pay for their own health insurance
through lower wages. Finally, they may pay some
of their own health care costs, either as partial
payment of their health insurance and/or co-pays,
deductibles, or other payments.
Almost all taxpayers support Medicare and Medicaid
recipients as well as Federal military and civilian
retiree health care.
Click for more information.
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Federal Financial Guarantee Programs
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- Federal Deposit Insurance Corporation (FDIC) - The Federal Deposit Insurance Corporation (FDIC) is
a United States government corporation created by the
Glass-Steagall Act of 1933.
The FDIC is currently projected to be guaranteeing deposit of
almost $4.5 trillion. To do that it has an estimated
reserves of just over $55 billion.
Click for more information.
- Fannie Mae and Freddie Mac -
Fannie Mae was established in 1938 as a mechanism to make
mortgages more available to low-income families. It was added
to the Federal Home Mortgage association, a government agency
in the wake of the Great Depression in 1938, as part of
Franklin Delano Roosevelt's New Deal in order to facilitate
liquidity within the mortgage market. In 1968, the government
converted Fannie Mae into a private shareholder-owned
corporation in order to remove its activity from the annual
balance sheet of the federal budget.
Fannie Mae and Freddie Mac (Federal Home Loan
Mortgage Corporation) are estimated to have guaranteed
about $6 trillion or 50% of the U.S.'s $12 trillion
in mortgages.
Click for more information.
- Federal Debt - The Treasury maintains a web site detailing the `The Debt to the
Penny and Who Holds It.` As of January 15th, the
total was 6,309,144,617,619.47.
The Treasury also provides information on ` MAJOR FOREIGN HOLDERS OF TREASURY SECURITIES.`
That listing is updated on the 16th of each month but
is two months behind. On January 15th, the end of
November total was $3,085,900,000.
Of that amount, China, Japan, and the United Kingdom,
in that order, were owed over 50%.
It is thatChina has $1.9 trillion in foreign reserves.
But many analysts expect China to buy less at a time when
the United States is trying to sell more.
Click for more information.
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Federal Regulatory Programs
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State and Local Governments
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- Pensions - In 2006, the
Boston Globe reported that state pension plans covered
12.8 million Americans and had assets worth $2.3 trillion.
Depending on their asset losses and actual liabilities,
the funds could be facing deficits of up to $2 trillion.
Click for more information.
- State Health Benefits - According to a report from the GAO released in January of 2008, nearly 20
million employees and 7 million retirees and dependents
have been promised pension and health benefits.
State and local retiree benefits are not subject to the
strict federal funding requirements that have been applied
to private pension plans.
For state and local governments` retiree health benefits,
studies have estimated unfunded liabilities nationwide
to be between $600 million and $1.6 trillion.
Click for more information.
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Corporate
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- Pensions - According to a report in Time a study by Mercer, the financial consulting
firm, the pension funds of the companies in the
Standard & Poor`s 1,500 went from having from an estimated
104% (a surplus) of the assets needed to fund their plans
to 80% (a deficit), or a loss of around $300 billion.
Click for more information.
- Health Insurance - The unfunded liabilities of private companies for
retiree health benefits is relatively small because
the benefit is being cut or eliminated by many companies.
Among those with relatively large unfunded liabilities
for retiree health coverage are IBM at $5.89 billion,
Verizon at $22.5 billion and General Motors at $61 billion.
Click for more information.
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