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Hard As It Is To Believe, The Recession Isn’t Yet Bad Enough For Politicians To Be Serious About Fiscal Reform

Exhibit A - The 2009 Annual Report of the Board of Trustees of the Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds (in other words, a report on how Medicare is doing).  The diagnosis?  Not good.  The program has been in ill health since 2003, and has operated in a deficit since 2005.  At this rate the program will use up all of its surplus funds by 2017, much sooner than anticipated.

 But wait, where are those “surplus funds?”  Ah, they are squirreled away in special government bonds, meaning there is no surplus funds, instead the trust funds are just one more holder of US govt debt.  We all knew this, but it is worth repeating.

Exhibit B - The oddity of the current health care reform debate where Republicans respond to Democrat bills with a “Senior’s Bill of Rights” that further cements the place of Medicare Benefits with Social Security benefits as sitting on the third rail of politics.  

When the party that historically (not recently, by any stretch) is associated with fiscal restraint works to make sure that the level of benefits offered by a bankrupt program cannot be adjusted, we have a problem.  Again, we already knew this, but worth repeating.

Over the past decade as I’ve given speeches and interviews regarding our research, I have occasionally been asked about these unsustainable programs.  What will be done?  My answer was always the same, “Absolutely nothing, until the economic pain is so great that everyday Americans stand up and demand that their elected officials change the systems.”  We are not there yet.  Americans are standing up, but too few are calling for what we need - rationing. 

You read that correctly - rationing.  We need limitations set on the level of benefits that will be extended by the national treasury.  It doesn’t matter what the program, there must be a limit to what level taxpayers are on the hook to fund any program.  This is the only responsible way to approach any issue funded through the government.

The problem with rationing anything is that it sets the stage for what happens next - those with extraordinary assets are able to get more than the rationed level of benefits and class warfare ensues.  This is the real fight.  So far, we are still rich enough and optimistic enough to have politicians that gloss over the funding aspects of healthcare and give a wink and a nod to notions of rationing. 

We’ll get there, but it’s not today.