America in Denial as Fiscal Tsunami Approaches

It's not just Congress that needs to change its expectations.

It's hard to hear yourself think over all the caterwauling on Capitol Hill about the looming sequestration "crisis." For opponents of the spending cuts—at $85 billion, 2.3 percent of the $3.6 trillion federal budget—the rallying cry is half Lord Keynes, half St. Augustine: "Grant me chastity and continence—but not yet."

But the time for a little fiscal continence has long since arrived. Economists have found that when a country's debt-to-GDP ratio surpasses 90 percent, you see slower economic growth; we're currently above 100 percent.

True, the sequester is somewhat ham-fisted in its execution; departments cannot prioritize the across-the-board percentage cuts. Still, too much discretion results in too little restraint, as we've learned from the 2011 budget deal, which cut $38 billion on paper.

Two weeks ago, the Washington Post looked at that deal, which President Obama called "the largest annual spending cut in our history." "Stuffed with gimmicks" and "phantom cuts," the deal was "an epic kind of Washington illusion," the Post reported. At least $17 billion of the ballyhooed $38 billion in reductions "cut nothing at all"; the feds absorbed the reductions "without losing a single employee."

The sequester may be a rough tool, but it doesn't allow for as much cooking the books.

Stories like this that encourage us to believe that our fiscal dilemma stems in the main from "weak-willed politicians." But as New York Times economics columnist and Washington Bureau Chief David Leonhardt writes in his crisp and informative new e-book "Here's the Deal," that lets the rest of us off too easily: "The problem is us—the voters."

I don't agree with many of the solutions he proposes but I can't fault his diagnosis: "[T]he coming deficits stem, above all, from the fact that most Americans are scheduled to receive far more in Medicare benefits than they have paid in Medicare taxes. Social Security contributes to the problem, too, as do the world's largest military" and an electorate that has decided "Republicans have won the debate on taxes, and Democrats have won the debate on benefits."

A new survey from the Pew Research Center underscores Leonhardt's point: "As Sequester Deadline Looms, Little Support for Cutting Most Programs." "For 18 of 19 programs tested," the survey finds, "majorities want either to increase spending or maintain it at current levels."

Of the 19 programs tested, not one earns a plurality of Democrats favoring decreased spending. Republicans talk tough in the abstract, but they're nearly as incontinent when it comes to specifics: Only cuts to foreign aid and unemployment assistance show majority support from GOP voters.

But, as Leonhardt makes clear, our looming fiscal calamity is hardly the result of freebies for poor people and foreigners. Much of it is the result of middle-class entitlements, particularly in health care. He cites research showing that in current dollars, a newly retired married couple with typical earnings will have paid roughly $88,000 in payroll taxes for Medicare (including the employer contribution); they can expect to receive program benefits more than four times that much.

The U.S. "already has a 'particularly strong age bias' in its government spending" relative to other rich nations, he writes, and the burden of fiscal restructuring is likely to fall hardest on the young. This complicates the "makers vs. takers" narrative that Mitt Romney, Rep. Paul Ryan and their supporters have indulged in to explain their loss. This class of net "takers"—older voters—tends to vote Republican.

In recent budget fights, the federal legislators most closely aligned with the Ron Paul wing of the Tea Party movement—Sen. Rand Paul (R-Ky.) and Rep. Justin Amash (R-Mich.)—have been most willing to embrace the sequester and call for further cuts. But they're a distinct minority: The fiscal reality-based community remains far too small.

This article originally appeared at The Washington Examiner.

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  • Pro Libertate||

    What would you rather have, a high-powered economy, with greater wealth and technological progress, or a big government that sucks us dry and gives little in return?

    Just what is the ROI on my tax investment, anyway? I know it's an investment, because Obama keeps telling me it is.

  • WTF||

    Just what is the ROI on my tax investment, anyway?

    Your ROI is ROADZ!!11!!!!

  • phandaal||

    Don't forget: cronyism. And Bush. Therefore, capitalism sucks.

    Trying to get in here before Tony.

  • Irish||

    I didn't say Bush was responsible, but if we're going to simplify the matter of blame to "whoever was president when the major causes of the economic conditions occurred," then that would have to be Bush.

    Look, you libertarians would rather some capitalist own a yacht and have poor people starving in the street than have that same capitalist own a smaller yacht and those same poor people live. By definition, you cannot have both poor people and rich people get better off at the same time, because there's only so much money and when rich people get it the poor do not.

    Plus, you guys just want to run people's lives by not running their lives. So how is that different than what the two major parties are doing? Touche, libertarians. /Tony

  • Jeff||

    Well done. Until I got to the end I was wondering why Tony had changed his name.

  • sarcasmic||

    Plus, you guys just want to run people's lives by not running their lives.

    Close, but not quite. For libertarians to stop those who currently use coercion to run the lives of other people, some force would be required. These people would have to be forced out of power, and new legislation / regulation would be needed to undo offending legislation / registration.
    Thus libertarians are tyrants who want to use force and legislation / regulation to impose liberty onto society.

  • phandaal||

    You don't have to force them out so much as you've got to be ready to repel them by force when they come after you for ignoring their rules.

    It's like "coercing" a robber to turn and run by gun in his face after he pulls a knife on you.

  • phandaal||

    *by sticking a gun in his face

    The bad type is go around today.

  • sarcasmic||

    You forget that libtards like Tony see no distinction between self defense and vigilante justice.

    To them there is no difference between sticking a gun in a robbers face to stop him from robbing you, and shooting him in the back a week after he robbed you.

    Force was used by someone other than government, and to libtards that is a sin.

  • Loki||

    For a second there I thought was actually Tony posting under a different handle. You know what they about good satire. Good job, sir. *Golf clap*

  • Loki||

    *they say...

    Fucking typing, how does it work?

  • JWatts||

    Your argument was a little too good to be Tony. Next time go with a little more emotion and a little less logic.

  • phandaal||

    That was beautiful.

  • sarcasmic||

    You forgot the wealth inequality that comes with great wealth creation.

    When poor people in rich countries enjoy a higher standard of living than most of the rest of the world, but have rich people to envy, it just isn't fair.

    So it's fairer that the government reduce that inequality, even if it means lowering everyone's standard of living.

    The point of big government sucking us dry is not to give back something in return, but to reduce wealth inequality.

  • Pro Libertate||

    I'd rather have billionaires than super-mega Leviathan.

  • Hugh Akston||

    This is a Democracy, ProLib, nobody gives a shit what you want.

  • Pro Libertate||

    Yes, I noticed. Why are all of these people oppressing me?

  • SugarFree||

    They want want you got. I say we give it to them. I say we revive my old idea of an unlimited hunt of the poor with bullets made out of compressed money.

  • Pro Libertate||

    I'll have you know that I'm a dues-paying American.

  • Hugh Akston||

    Hey you got to vote right? You get jury duty? You have the privilege of paying taxes? Have you forgotten that the chocolate ration has been increased?

    Okay then, you're not oppressed. Quit whining and queue up.

  • Pro Libertate||

    Who made you the oppression czar? If I say I'm oppressed, I'm oppressed. I demand special, over-the-top minority rights.

  • Hugh Akston||

    Look, we'd love to help you and your, uh... people ProLib. Really we would. But unfortunately there's no money in the budget.

    We've hired tens of thousands of accountants who assure us up and down that there is no fat left to trim. We had to build an entire new building to contain the thousands of people it takes to run the Office of Government Austerity, all to make sure that your tax dollars are spent as justly and efficiently as possible. We have monthly conferences in Europe, Asia, and Hawai'i to ensure we are on the cutting edge of budgetary leanness.

    I wish we could help. Maybe come back when your minority has a lobbyist?

  • buybuydandavis||

    Better billionaires who get your dollars by selling you something you want, than trillionaires who get your money at the point of a gun.

  • Irish||

    One of my favorite aspects of modern progressiveness is that I can list dozens of countries that have become hyper wealthy as a result of capitalism, and the progressives respond by telling me about how great some socialist South American strongman overseeing a country with $9000 per capita GDP is. They're beyond parody.

  • ||

    Yeah, and they'll give vague "happiness" or "quality-of-life" indicators as proof.

  • Irish||

    Or they'll claim Cuba's healthcare is better than ours because they have lower infant mortality rates. They conveniently forget that Mexican immigrants have among the lowest infant mortality rates of any American group, implying that Hispanics are simply not prone to high rates of infant mortality. It might have something to do with their diets.

    They also take statistics coming out of fucking Cuba and believe them at face value.

  • Kyfho Myoba||

    Probably more to do with the female hip size.

  • ||

    I love comparing the images in the advocacy/criticisms sections of the wikipedia page on capitalism.

    The criticisms section shows a propaganda poster from the Industrial Workers of the World, depicting worker exploitation.

    The advocacy section includes two charts: one showing skyrocketing world GDP with the emergence of the modern world capitalist system, and another showing skyrocketing GDP in China after their market reforms.

    One would hope human beings, in general, would prefer embracing clear, historic economic data over silly propaganda narratives. Unfortunately, modern progressives disappoint.

  • grey||

    "The point of big government sucking us dry is not to give back something in return, but to reduce wealth inequality." -Sarcasmic

    I explained seen and unseen to a socialist friend of mine, finally having overcome his baseless idea that a government dollar has a higher multiplier than a private dollar, we ended up with a version of sarcasmics words. While he wouldn't admit how little we reveiced from government, or how inefficient, or dangerous to our civil liberties; I at least cornered him in to admitting liberalism was now about wealth redistribution to reduce the spread between rich and poor.

    I'll never get him to admit that as inequality expands so does opportunity and the reduction of real poverty.

  • AlmightyJB||

    Getting your tax money is the unions return on their investment of getting Obama elected. You weren't expecting a return were you silly?

  • Pro Libertate||

    Very well, I will sell my interest in the U.S. and buy some stock in the Moon.

  • JWatts||

    Oh, you don't need to worry about buying any stock in the Moon jailbird. When the roundup comes you'll be one of the first on the ship for an all expense paid trip to Luna.

    http://en.wikipedia.org/wiki/T.....h_Mistress

  • Terry87df||

    just as Daniel said I cant believe that anyone can earn $8297 in one month on the computer. did you see this site... www.Snag4.com

  • GroundTruth||

    Read the OMB report (http://www.whitehouse.gov/ sites/default/files/omb/assets/ legislative_reports/stareport.pdf) [take the spaces out to hit the link.... 50 character word max filter]. The "payload" of Social Security, Medicare, SNAP, etc and military spending are all listed as "exempt" from sequestration. Administrative operations of these functions have about an 8% "cut" (from the mystical continuing budget basline). Other agencies (NSF, EPA, NASA, i.e. the small potatoes) take up to about an 8% across the board hit... difficult if you rely on them but hardly the sort of thing that is going to shut down the economy of put grandma out on the street or cause grampa to be thrown out of the ICU at the hospital.

    "It is full of sound and fury... signifying nothing"

  • ChrisO||

    We should stop using the word "cut", since (AFAIK) it's simply a reduction in the rate of growth. The feds will still be spending more money this year than last. As such, there's really nothing difficult about it.

  • GroundTruth||

    Agreed. I would like to see OMB folks be required to produce a proper spreadsheet that can be easily read and allow for easy comparisons (the "machine readable format" perhaps?) rather than OMB's foolish 20000 line listing (in pdf no less!). That right there would allow people to see that most of the things so precious to them personally (social welfare programs and foreign wars) are not being touched and are in fact growing.

    Of course, that presumes and ability to do math and manipulate a simple Excel spreadsheet... perhaps I give my fellow Americans too much credit?

  • KDN||

    Of course, that presumes and ability to do math and manipulate a simple Excel spreadsheet... perhaps I give my fellow Americans too much credit?

    You absolutely do. Having to explain simple budgeting and billing issues to ordinary professionals is difficult enough (I have some experience here), expecting people with less natural ability and normal exposure to the subject matter to wade into such a project and glean something useful is setting yourself up for failure.

  • ||

    My only question is whether a fiscal tsunami is worse than a fiscal cliff. Oh, and one other question: how does this relate to signs that suggest you climb a cliff in case of tsunami?

  • Hugh Akston||

    Obviously it means that the only way to avoid the problems brought on by unfunded liabilities is to increase debt spending.

  • ||

    You really have the makings of a national officeholder, Hugh.

  • Hugh Akston||

    That's the worst thing anyone's ever said about me.

  • ||

    It doesn't really count if a woman says it, though.

  • ||

    Ok then:

    You really have the makings of a national officeholder, Hugh.

  • ||

    For one hopeful second, I thought your handle was Shine on, Nikki Dial.

    (Do not google Nikki Dial at work)

  • ||

    I'm sure SF had her in mind when he came up with the "Diamond." We have a lot in common: Italian heritage, very similar height, and, according to IMDb, similar courses of study in college. She's older though. Plus, you know, the other thing.

  • ||

    That she's done way less dudes than you? I knew there was something special about you and I'm not just saying that 'cause you're a whore, but you are a total whore.

  • ||

    Look, some people do it for the money, others for the love of the game. And by "game" I mean "dick."

  • Irish||

    She's older though. Plus, you know, the other thing.

    She was in Nikki's Secrets of Sexcess whereas you were in Nikki's Sexcess Secrets?

  • SugarFree||

    I'm sure SF had her in mind when he came up with the "Diamond."

    Not really. I was just coming up with a generic stripper name. I wasn't thinking of anyone but you, baby. I swear. I mean it. Put down the knife, baby. You don't want to do this! No, Nik...

  • Heroic Mulatto||

    Well Debi Diamond was in the first movie of the "Gangbang Girl" series back in the day.

    Good times.

  • ||

    Your defense would be more believable if you didn't try to claim that "[no]one but [me]" = "generic." This is why there are no female...

  • SugarFree||

    Dammit, baby. You ain't got to be that way. Just give me something to stop the bleeding.

  • ||

    Oh fine.

  • Heroic Mulatto||

    If you look closely at the sign, you'll notice that he is holding a can on Mountain Dew in his left hand, because HE IS TOTALLY RADICAL TO THE MAXX!!!

  • Loki||

    Are you sure that's not Brawndo? It's got electrolytes!

  • JBinMO||

    "Republicans talk tough in the abstract, but they're nearly as incontinent when it comes to specifics:"

    A truer sentence was never made by a spellchecker.

  • Hugh Akston||

    So it was Republicans that leaked Obama's immigration bill?

  • JBinMO||

    They leak. We can leave it at that.

  • sarcasmic||

    Everything must be on the table when it comes to spending cuts. Everything except defense which is sacred, entitlements because the boomers have earned them, and anything else that might have a political cost by putting someone out of work or taking away their entitlement.

    Everything is on the table. Everything except everything.

  • wakeup||

  • Gladstone||

    Gay Marriage and pot. Duh.

  • The Late P Brooks||

    What would you rather have, a high-powered economy, with greater wealth and technological progress, or a big government that sucks us dry and gives little in return?

    Don't you see? That powerful economy, that wealth-creation machine, lures immigrants! Hordes of stinky, non white foreigners, coming to steal our wealths. Much better to embrace Big Brother. Love Him.

    He loves you.

  • sarcasmic||

    GDP = C + I + G + (X - M)
    The bigger the government is, the bigger the economy is!

  • robc||

    Since X-M is always zero (with slight amounts of lag) is including G is bullshit, does anyone have a chart of just C+I?

  • sarcasmic||

    If anything G should be negative, since government is a destroyer of wealth.

  • The Late P Brooks||

    We're all wards of the government, now.

  • robc||

    The GDP framework cannot tell us whether final goods and services that were produced during a particular period of time are a reflection of real wealth expansion, or a reflection of capital consumption. For instance, if a government embarks on the building of a pyramid, which adds absolutely nothing to the well-being of individuals, the GDP framework will regard this as economic growth. In reality, however, the building of the pyramid will divert real funding from wealth-generating activities, thereby stifling the production of wealth.

    So what are we to make out of the periodical pronouncements that the economy, as depicted by real GDP, grew by a particular percentage? All we can say is that this percentage has nothing to do with real economic growth and that it most likely mirrors the pace of monetary pumping. We can thus conclude that the GDP framework is an empty abstraction devoid of any link to the real world. -- Frank Shostak

  • The Late P Brooks||

    It's like a tsunami of Kabuki dancers!

    perilous austere

    degradation and despair

    washing over us

  • T||

    Better than a tsunami of bukkake dancers, I suppose.

  • JJK||

    +1

  • Boehm Houle||

    I question the math. If an average couple is going to use more than $352,000 (4*88,000) of Medicare benefits, how can that level of health care be sustainable on an aggregate level. Even in a private system that was somewhat more efficient, the average couple is not going to be able to expend that amount. You can have the government ration health care or the market ration it, but either way, the current level of care would have to be reduced, and the consequences are ugly.

  • JWatts||

    "I question the math."

    That's your problem right there.

  • The Late P Brooks||

    If an average couple is going to use more than $352,000 (4*88,000) of Medicare benefits, how can that level of health care be sustainable on an aggregate level.

    Hey, look over there!

  • DarrenM||

    He cites research showing that in current dollars, a newly retired married couple with typical earnings will have paid roughly $88,000 in payroll taxes for Medicare (including the employer contribution); they can expect to receive program benefits more than four times that much.

    Is 4 times really that much? What would that be after including interest compounding if this amount was saved over 30 or 40 years?

  • JWatts||

    Except that Medicare is pay as you go. Which means it's paid for out of current tax receipts.

    So the critical figure is the ratio of workers to Medicare enrollees. The current ratio is 3 to 1 ... and falling.

  • JJK||

    well, 88,000 paid in in monthly increments of $184 over 40 years, compunded monthly, would require an annual rate of return of 5.58% to reach the 4x number of 352,000. This is also fairly optimistic, considering this simple example uses equal payments throughout ones career, not the more accurate picture of payments increasing as one (hopefully) advances in their career. So in reality, yes, for the government that would be a challenge, especially considering the liability is unfunded and they actually pay interest instead of accrue it. DERP. Government fail.

  • XM||

    Are there "middle class" entitlements that are unavailable to the very poor, very old, and foreigners?

    If you're 29 and belong to the middle class, you won't reap the benefits of medicare or SS benefits immediately. You might make just enough money not to qualify for food stamp or deferment on student loans. Paying insurance under Obamacare should not be an issue for billionaires and the low income folks, they're either already covered or have state programs ready to take them in. If you're upper middle class, you'll probably lose a couple thou every month. I was piss poor ten years ago and was able to borrow a boatload of money to attend a UC school.

    The nation just about exists for the sake of the very poor and the very rich. The "freebies" might not be as significant as SS or medicare, but they still eat up state budgets. And states can't print their own money, or borrow from their own programs..... I think.

  • buybuydandavis||

    " Much of it is the result of middle-class entitlements, particularly in health care. "

    Wrong. Health care spending isn't entitlement spending- it's crony capitalism at it's worst.

    Take away the rights of consumers to provide for their health care on their own, to make their own choices in a free market of providers, devices, services, and drugs, then hand out payments to the crony capitalists in those "markets".

    Take away your right to buy drugs from the lowest cost provider, then set rates for those drugs in regulatory back room deals. That's the pattern across all of medicine - take away your freedom, then bargain in back rooms over who gets what.

  • StackOfCoins||

    The old people are sucking up all the tax dollars, and the young people think govt can print money forever without consequence. Everyone is fucked.

  • Thomas O.||

    I remember as a kid reading about the national debt first getting into the trillions. And I was rightly concerned that I might have to pay for that one day.

    I can't do anything but shake my head at these polls. Do the majority of Americans believe money grows on trees?

    It's probably going to take some kind of huge financial disaster for everyone to wake up and get serious about controlling spending and balancing the budget. What's it gonna be: the Dow plunging 5000? $25.00/gallon gas? The Treasury bond rating at D minus? The rest of the world rejecting the dollar?

    The further the can gets kicked, the more I'm convinced things are going to get a lot worse before they get better.

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