If You Are A Gen-Xer, Millennial or Anyone Under The Age of 40, You Better Read This. Now.

We read this stuff so you won't have to.

But we hope you will anyway.

If you click on the title below, that will take you to the full 134 pages of the CBO Long-Term Budget Outlook document. Go ahead; we dare you to tell anyone that you actually have read every word in this report by next Friday. You will deserve a Congressional Gold Star for your forehead for being such a good student and patriot.

If you are just a visual learner and don't want to read all these words and budget jargon, take a look at this slide show and see 26 slides that if they were a Disney Ride, they would probably be called the 'Tower of Terror' because they are so scary.

The 2014 Long-Term Budget Outlook in 26 Slides from Congressional Budget Office

If you just want to breeze through and read the highlights of the highlights (or the 'lowlights of the lowlights'), just skim through the document below we have highlighted in red or blue and be on your merry way.

There is a lot of work to do. We need serious citizen-politicians to run and get elected and make these important decisions for the rest of us before it is too late. According to CBO, we just don't know when it may happen but if we let the Debt Hounds from Hades loose, it may be sooner than you would think.

The 2014 Long-Term Budget Outlook

July 15, 2014

Between 2009 and 2012, the federal government recorded the largest budget deficits relative to the size of the economy since 1946, (because of WWII) causing its debt to soar. The total amount of federal debt held by the public is now equivalent to about 74 percent of the economy’s annual output, or gross domestic product (GDP)—a higher percentage than at any point in U.S. history except a brief period around World War II and almost twice the percentage at the end of 2008.

If current laws remained generally unchanged in the future, federal debt held by the public would decline slightly relative to GDP over the next few years, CBO projects. After that, however, growing budget deficits would push debt back to and above its current high level. Twenty-five years from now, in 2039, federal debt held by the public would exceed 100 percent of GDP, CBO projects. Moreover, debt would be on an upward path relative to the size of the economy, a trend that could not be sustained indefinitely.

What Is the Outlook for the Budget in the Next 10 Years?

The economy’s gradual recovery from the 2007–2009 recession, the waning budgetary effects of policies enacted in response to the weak economy, and other changes to tax and spending laws have caused the deficit to shrink this year to its smallest size since 2007: roughly 3 percent of GDP, compared with a peak of almost 10 percent in 2009. If current laws governing taxes and spending stayed generally the same—an assumption that underlies CBO’s 10-year baseline budget projections—the anticipated further strengthening of the economy and constraints on federal spending built into law would keep deficits between 2½ percent and 3 percent of GDP from 2015 through 2018, CBO estimates.

In succeeding years, however, deficits would become notably larger under current law. The pressures stemming from an aging population, rising health care costs, and an expansion of federal subsidies for health insurance (Obamacare) would cause spending for some of the largest federal programs to increase relative to GDP.

Moreover, CBO expects interest rates to rebound in coming years from their current unusually low levels, raising the government’s interest payments. That additional spending would contribute to larger budget deficits—equaling close to 4 percent of GDP—toward the end of the 10-year period spanned by the baseline, CBO anticipates. Altogether, deficits during that 2015–2024 period would total about $7.6 trillion.

With deficits expected to remain close to their current percentage of GDP for the next few years, federal debt held by the public is projected to stay between 72 percent and 74 percent of GDP from 2015 through 2020. Thereafter, larger deficits would boost debt to 78 percent of GDP by the end of 2024.

What Is the Outlook for the Budget in the Long Term?

CBO has extrapolated its baseline projections through 2039 (and, with even greater uncertainty, through later decades) by producing an extended baseline that generally reflects current law. The extended baseline projections show a substantial imbalance in the federal budget over the long term, with revenues falling well short of spending (see the figure below). As a result, budget deficits are projected to rise steadily and, by 2039, to push federal debt held by the public up to a percentage of GDP seen only once before in U.S. history (just after World War II). The harm that such growing debt would cause to the economy is not factored into CBO’s detailed long-term projections but is considered in further analysis presented in this report.

Components of Total Spending

Federal spending would increase to 26 percent of GDP by 2039 under the assumptions of the extended baseline, CBO projects, compared with 21 percent in 2013 and an average of 20½ percent over the past 40 years. That increase reflects the following projected paths for various types of federal spending if current laws remained generally unchanged (see the figure above):

Federal spending for Social Security and the government’s major health care programs—Medicare, Medicaid, the Children’s Health Insurance Program, and subsidies for health insurance purchased through the exchanges created under the Affordable Care Act—would rise sharply, to a total of 14 percent of GDP by 2039, twice the 7 percent average seen over the past 40 years. That boost in spending is expected to occur because of the aging of the population, growth in per capita spending on health care, and an expansion of federal health care programs. (Baby Boomers will say that the younger generations will have been 'berry, berry good to me!' during that whole period of time as 'Chico Escuela' would say on SNL) 

The government’s net interest payments would grow to 4½ percent of GDP by 2039, compared with an average of 2 percent over the past four decades. Net interest payments would be larger than that average mainly because federal debt would be much larger.

In contrast, total spending on everything other than Social Security, the major health care programs, and net interest payments would decline to 7 percent of GDP by 2039—well below the 11 percent average of the past 40 years and a smaller share of the economy than at any time since the late 1930s. (Domestic programs will take it on the chin)

Components of Total Revenues

Federal revenues would also increase relative to GDP under current law, but much more slowly than federal spending (see the figure above). (Why? Because of 'bracket creep' where people are pushed into higher tax brackets solely by inflation. Not real increases in real earnings from real wages)

Revenues would equal 19½ percent of GDP by 2039, CBO projects, compared with an average of 17½ percent over the past four decades. In the next 10 years, revenues are projected to rise to 18½ percent of GDP, from 16½ percent last year, reflecting structural features of the tax system and the ongoing economic recovery. (AND EVEN THEN WITH MUCH HIGHER REVENUES, WE WILL STILL NOT BE ABLE TO BALANCE THE BUDGET!!! (Our emphasis added)

((parenthetically speaking, us talking again) you can never balance the budget counting on higher tax revenues, mainly because people will find ways to avoid paying the higher taxes either legally with tax shelters or illegally in the black market. You can always find ways to balance the budget by controlling spending. It is the only surefire way to save us from fiscal disaster later. (see Budget Act of 1990 and the Balanced Budget Act of 1997 or any year under President Calving Coolidge referenced in other posts))

After 2024, revenues would increase gradually relative to GDP under the assumptions of the extended baseline, mainly because people’s income is expected to grow faster than the rate of inflation, pushing more income into higher tax brackets over time.

The gap between federal spending and revenues would widen after 2015 under the assumptions of the extended baseline, CBO projects. By 2039, the deficit would equal 6½ percent of GDP, larger than in any year between 1947 and 2008, and federal debt held by the public would reach 106 percent of GDP, more than in any year except 1946—even without factoring in the economic effects of growing debt.

Moreover, the harmful effects that such large debt would have on the economy would worsen the budget outlook. Under current law, the increase in debt relative to the size of the economy, combined with a gradual increase in marginal tax rates (the rates that would apply to an additional dollar of income), would reduce economic output and raise interest rates, compared with the benchmark economic projections that CBO used in producing the extended baseline. Those economic effects in turn would lead to lower federal revenues and higher interest payments on the debt. With those effects included, federal debt held by the public under the extended baseline would rise to 111 percent of GDP in 2039.

Beyond the next 25 years, the pressures caused by rising budget deficits and debt would become even greater unless laws governing taxes and spending were changed. With deficits as big as the ones that CBO projects, federal debt would be growing faster than GDP, a path that would ultimately be unsustainable.

What Consequences Would a Large and Growing Federal Debt Have?

How long the nation could sustain such growth in federal debt is impossible to predict with any confidence.

At some point, investors would begin to doubt the government’s willingness or ability to pay its debt obligations, which would require the government to pay much higher interest costs to borrow money. Such a fiscal crisis would present policymakers with extremely difficult choices and would probably have a substantial negative impact on the country. (duh!)

Even before that point was reached, the high and rising amount of federal debt that CBO projects under the extended baseline would have significant negative consequences for both the economy and the federal budget:

The large amount of federal borrowing would draw money away from private investment in productive capital in the long term, because the portion of people’s savings used to buy government securities would not be available to finance private investment. The result would be a smaller stock of capital and lower output and income than would otherwise be the case, all else being equal. (Despite those reductions, the continued growth of productivity would make output and income per person, adjusted for inflation, higher in the future than they are now.)

Federal spending on interest payments would rise, thus requiring higher taxes, lower spending for benefits and services, or both to achieve any chosen targets for budget deficits and debt.

The large amount of debt would restrict policymakers’ ability to use tax and spending policies to respond to unexpected challenges, such as economic downturns or financial crises. As a result, those challenges would tend to have larger negative effects on the economy and on people’s well-being than they would otherwise. The large amount of debt could also compromise national security by constraining defense spending in times of international crisis or by limiting the country’s ability to prepare for such a crisis (such as today in Russia and the Middle East)

What Effects Would Alternative Fiscal Policies Have?
Most of the projections in this report are based on the assumption that laws governing federal taxes and spending will remain generally the same over time—not because CBO expects that to occur but because the budgetary and economic implications of current law are a useful benchmark for policymakers when they consider changing laws. If tax and spending policies differed significantly from those specified in current law, budgetary and economic outcomes could differ substantially as well. To illustrate some possible differences, CBO analyzed the effects of three additional sets of fiscal policies.

Under one set of alternative policies (1)—referred to as the extended alternative fiscal scenario—certain policies that are now in place but are scheduled to change under current law would be continued, and some provisions of law that might be difficult to sustain for a long period would be modified. With those changes to current law, deficits excluding interest payments would be about $2 trillion higher over the next decade than in CBO’s baseline; in subsequent years, such deficits would exceed those projected in the extended baseline by rapidly growing amounts. The harmful effects on the economy from the resulting increase in federal debt would be partly offset by the lower marginal tax rates that would be in place under that scenario. Nevertheless, in the long term, economic output would be lower and interest rates would be higher under that set of policies than under the extended baseline. With those economic changes incorporated, federal debt held by the public would exceed 180 percent of GDP in 2039, CBO projects.

Under a different scenario (2), budget deficits would be smaller than those projected under current law: Deficit reduction would be phased in such that deficits excluding interest payments would be a total of $2 trillion lower through 2024 than in CBO’s baseline, and the amount of deficit reduction as a percentage of GDP in 2024 would be continued in later years. In that case, output would be higher and interest rates would be lower in the long term than under the extended baseline. Factoring in the effects of those economic changes on the budget, CBO projects that federal debt held by the public would equal about 75 percent of GDP in 2039, close to its percentage in 2013.

Under yet another scenario (3), with twice as much deficit reduction—a total decrease of $4 trillion in deficits excluding interest payments through 2024—CBO projects that federal debt held by the public would fall to 42 percent of GDP in 2039. That percentage would be slightly above the ratio of debt to GDP in 2008 and the average ratio over the past 40 years (both 39 percent). As in the preceding scenario, output would be higher and interest rates would be lower in the long term than under the extended baseline.

Such alternative fiscal policies would have differing effects on the economy in the short term as well as in the long term, reflecting the short-term impact of tax and spending policies on the demand for goods and services. The spending increases and tax reductions in the alternative fiscal scenario (relative to what would happen under current law) would increase the demand for goods and services and thereby raise output and employment in the next few years. The deficit reduction under the other scenarios, by contrast, would decrease the demand for goods and services and thus reduce output and employment in the next few years.

How Uncertain Are the Long-Term Budget Projections?

Even if future tax and spending policies match what is specified in current law, budgetary outcomes will undoubtedly differ from CBO’s projections because of unexpected changes in the economy, demographics, and other factors. To illustrate the uncertainty of its projections, CBO examined how altering its estimates of future mortality rates, productivity, interest rates on federal debt, and federal spending on health care would affect the projections in the extended baseline. For that purpose, CBO projected budgetary outcomes with those factors varying by amounts that are based on their past variation as well as on CBO’s consideration of possible future developments. Those estimates show the following:

1) In cases in which only one of those factors varies from the values used for the extended baseline, CBO’s projections of federal debt held by the public in 2039 range from about 90 percent of GDP to 135 percent, compared with 111 percent under the extended baseline including the economic effects of future fiscal policies.

2) In a case in which all four factors vary simultaneously in a way that raises projected deficits, but they vary only half as much as in the individual cases, federal debt is projected to reach about 160 percent of GDP in 2039. 3) Conversely, in a case in which all four factors vary in a way that lowers deficits but, again, vary by only half as much as in the individual cases, debt in 2039 is projected to equal 75 percent of GDP, about what it is now.

Those calculations do not cover the full range of possible outcomes, nor do they address other sources of uncertainty in the budget projections, such as the risk of an economic depression or major war or the possibility of unexpected changes in birth rates, immigration, or labor force participation. Nonetheless, CBO’s analysis shows that the main implication of the central estimates in this report applies under a wide range of possible values for some key factors that influence federal spending and revenues. That implication is that if current laws remained generally unchanged, federal debt, which is already high by historical standards, would be at least as high and probably much higher 25 years from now.

What Choices Do Policymakers Have?

The unsustainable nature of the federal tax and spending policies specified in current law presents lawmakers and the public with difficult choices. Unless substantial changes are made to the major health care programs and Social Security, spending for those programs will equal a much larger percentage of GDP in the future than it has in the past. At the same time, under current law, spending for all other federal benefits and services would be on track to make up a smaller percentage of GDP by 2024 than at any point in more than 70 years.

Federal revenues would also represent a larger percentage of GDP in the future than they have, on average, in the past few decades. Even so, spending would soon start to outpace revenues by increasing amounts (relative to GDP), generating rising budget deficits. As a result, federal debt held by the public is projected to grow faster than the economy starting a few years from now, and because debt is already unusually high relative to GDP, further increases could be especially harmful.

To put the federal budget on a sustainable path for the long term, lawmakers would have to make significant changes to tax and spending policies: reducing spending for large benefit programs below the projected levels, letting revenues rise more than they would under current law, or adopting some combination of those approaches.

The size of such changes would depend on the amount of federal debt that lawmakers considered appropriate. For example, lawmakers might set a goal of bringing debt held by the public back down to the average percentage of GDP seen over the past 40 years—39 percent. Meeting that goal by 2039 would require a combination of increases in revenues and cuts in noninterest spending, relative to current law, totaling 2.6 percent of GDP in each year beginning in 2015 (without accounting for the economic effects of the reduction in debt or of the policy changes that might be used to achieve it); in 2015, 2.6 percent of GDP would equal about $465 billion. If those changes came entirely from revenues, they would represent an increase of 14 percent from the revenues projected for the 2015–2039 period under the extended baseline.

If the changes came entirely from noninterest spending, they would represent a cut of 13 percent from the amount of noninterest spending projected for that period. A similar level of debt in 2039 would result under the third scenario discussed above (a $4 trillion total reduction in deficits excluding interest payments through 2024, with the amount of deficit reduction in 2024 as a percentage of GDP continuing in later years).

In deciding how quickly to carry out policies to put federal debt on a sustainable path, lawmakers face trade-offs:

• The sooner significant deficit reduction was implemented, the smaller the government’s accumulated debt would be, the smaller policy changes would need to be to achieve a particular long-term outcome, and the less uncertainty there would be about what policies would be adopted. However, if lawmakers implemented spending cuts or tax increases quickly, people would have little time to plan and adjust to the policy changes, and those changes would weaken the economic expansion during the next few years.
• Reductions in federal spending or increases in taxes that were implemented several years from now would have a smaller effect on output and employment in the short term. However, waiting for some time before reducing federal spending or increasing taxes would result in a greater accumulation of debt, which would represent a greater drag on output and income in the long term and would increase the size of the policy changes needed to reach any chosen target for debt.
• If lawmakers wanted to minimize both the short-term economic costs of reducing deficits quickly and the longer-term costs of running large deficits, they could enact a combination of changes in tax and spending policies that increased the deficit in the next few years relative to what it would be under current law but reduced the deficit thereafter.

Even if policy changes to shrink deficits in the long term were not implemented for several years, making decisions about them sooner rather than later would offer significant advantages. If decisions were reached sooner, people would have more time to alter their behavior to be prepared for the time when the changes would be carried out. In addition, decisions about policy changes that would reduce future debt relative to the amounts projected under current law would tend to increase output and employment in the next few years by holding down longer-term interest rates, reducing uncertainty, and enhancing businesses’ and consumers’ confidence.

Do You Want Better People to Run for Public Office?
Support the Institute for the Public Trust Today

Visit The Institute for the Public Trust to contribute today

The 'Debbie Downer' 'Slow Growth Economy' of President Obama vs. Jimmy Carter's 'Malaise'

The Obama Economy: 'Wah-Wah!'

Ardent supporters of the President will point to the new stock market highs, the falling unemployment rate and a few other economic reports and say: 'See? His policies worked! All we needed to do was more of the same and think about how great things would be today!'

If that is true, how come so many people feel so despondent about the future of America today?

Even a newspaper that has been literally in the tank for President Obama since before his election in 2008, The (Venerable) New York Times, says things are not going so great in this recent article:

U.S. Economic Growth Looks Distant As Growth Stalls

Here's just a few choice quotes from this article:

• 'If you’re 40 now,' Mr. Cowen said, 'I don’t see why you ever see (faster economic growth), or enjoy it as a worker.'

• 'The share of adults with jobs fell sharply during the recession and has rebounded only slightly because many people have simply stopped looking for work'

• 'The Federal Reserve, persistently optimistic in its previous forecasts, said in March that it no longer expected a full recovery in the foreseeable future.'

Talk about a 'Debbie Downer' for our future American economic prospects! (click through title link if you can't see video)



We have been struck not only by this recent NY Times article but also by the somewhat amazing general downbeat feeling in economic activity and general spirits in the US economy since 2008.

Granted, President Obama did not cause the economic meltdown. Wall Street seemed pretty capable of doing that by themselves not unlike many other times in our history, roughly about every 20 years or so once you dig into it more deeply.

However, since Presidents generally get the lion's share of the credit when things go well in the economy (Reagan, Clinton), they also, unfairly or not, get the lion's share of the blame when things do not go well in the economy (Hoover, Bush 41).

We think the current economic cycle under President Obama strangely resembles the desultory years under President Jimmy Carter who didn't know what to do to get us out of a really bad downward economic spiral from 1977-1981.

Many of you are too young to remember those halcyon days. When we graduated from college, we graduated into an economic pullback of huge proportions caused by the triple threats of high inflation (12%/year); high interest rates (21%) and gasoline shortages and sky-rocketing (at the time) prices at the pump.

A period of loose monetary policy coupled with an international crisis, the taking of American hostages in the embassy in Tehran, combined to produce one of the worst recessions the United States had experienced since the Great Depression.

We don't know for sure but that recession which lasted until 1982 sure seemed like one of the historically worst ones, even compared to the most recent Great Recession we all experienced.

President Jimmy Carter somewhat clumsily took to the airwaves in 1979 to deliver what was supposed to be a 'comforting' speech on our economic prospects. 'We are in this together. We will face any burden together and come out of it on the other side stronger and more united and prosperous than ever'. That sort of pep talk speech.

It could not have come out any worse. President Carter's 'Crisis of Confidence' speech turned out to be known as his 'malaise' speech although he never used that word.

In short, it became a laundry list of all of the reasons why the American people had come to lose confidence, not in their ability to live prosperous lives but in his ability to lead the nation.

Carter went on to lose in a landslide in 1980 to an optimistic Ronald Reagan who told us that 'our brightest days are ahead of us, not behind us'.

It was the largest landslide ever over an incumbent sitting president in US history. The American people had had enough under President Carter and his defeatist approach to America's future.

Based on the comments noted in the New York Times article above by President Obama's advisors, it appears that we have another President who seems to think America has settled into a 'new normal' of below historical economic growth rates and job creation. The desultory sluggish economy, and the fact that the Middle East seems to have fallen apart during Obama's reign reminds many old-timers of Ayatollah Khomeini in Iran and, unfortunately, of Jimmy Carter's ineptitude as President of the United States of America in the late 1970's.

We have repeatedly said that we think America's best days are ahead of us.

We have met and worked with any number of very exceptionally talented undergrads who see the new technologies budding before their very eyes and can't wait to set out to use them to develop new products and services for the world to see, buy and use. Younger doctors we know are confident they will see the end to the scourge of most cancers.

We believe they will achieve it. We believe the policies of this President have thrown a wet blanket on the otherwise dynamic American free enterprise system and so stifled it that it can't grow and produce new jobs as we have seen after virtually every serious recession in America. We should be in the midst of a 4-5% economic boom to our GDP today given the depths of where this past recession took us. Not ~2% per annum.

We recently re-financed 2 mortgages into one. The process that normally should have taken 30-45 days took 4 months and over 500 different emails, phone calls and submissions of faxes and other documents to their website.

That is no way to fuel the fires of economic growth and expansion. The banking industry is now so saddled with rules and regulations from Washington that they seem to be afraid to make a loan and make a profit which is the core of their business.

Even Debbie Downer sounds like Pollyanna the Eternal Optimist compared to these Obama advisors and President Obama himself most days. Maybe she should run in 2016.

Do You Want Better People to Run for Public Office?
Support the Institute for the Public Trust Today

Visit The Institute for the Public Trust to contribute today

'Intervention: Will North Carolina Clean Up its Medicaid Program?'

Louisiana Governor Bobby Jindal:
'MCOs are good!'

Forbes magazine has an article we highly commend to you to read today if you care about the following things in North Carolina:

• Higher teacher pay for public education
• The University of North Carolina higher education system
• The Community College System of North Carolina
• Tax cuts
• Better health care outcomes for Medicaid patients

Not necessarily in that order.

What does the Medicaid program in North Carolina, or any state in the Union for that matter, have to with public education or tax cuts?

Everything it turns out.

We have written extensively about the massive growth in the federal health care programs, Medicare and Medicaid over the past 30 years. Not only have both been the primary drivers in the reason why we have massive budget deficits in Washington, Medicaid has been the primary driver behind the reason why public school teachers have not been afforded major pay increases as well. Plus any other constraints on investments in higher education or the other major duties of the state legislature.

Medicaid cost overruns soak up all of the financial resources (your tax money) that could be used to pay for the other essential functions of state government.

(Somehow, roads keep being built and repaved throughout all this, ostensibly because it has had a 'dedicated funding source', the gas tax at the state and federal level. But even that fund is falling short now as more and more cars get more efficient and use less gas to go more miles)

In this Forbes article, you will clearly see and understand why North Carolina has to join the other 37 states in the Union and adopt a MCO model for Medicaid, or Managed Care Organizations.

Put very simply, MCOs are private corporations that come into states and then contract out with the state to manage the care of the patient. They assume full financial risk for that patient and get paid a previously-agreed upon amount of money per patient (capitated) each month to monitor that patient's health care.

When we say 'full financial risk', what that means is the private company takes that risk from the taxpayer (you) and puts it on their shareholders and financial reserves. No more running back to the legislature every summer for an additional $500 million to pay for unexpected and un-budgeted Medicaid cost overruns.

We just saw in the last post how much waste, fraud and abuse actually occurs in both the Medicaid and Medicare programs anyway. These managed care companies also take over the implementation of the bill-paying to the doctors and the hospitals so it becomes important to them that none of this money is wasted or abused in the first place.

We met Louisiana Governor Bobby Jindal this past week at a function for Thom Tillis who is running for the US Senate in North Carolina. He said the most important thing they did early in his term as Governor was to pass and implement the MCO system in Louisiana.

Listen to what Governor Jindal had to say:

'The most important thing was not that we started to save $100M per year in the State of Louisiana. The most important thing that happened that we started to see much better health care being delivered to our poorest citizens.

MCOs targeted each individual and dealt with their problems on an individual basis with assigned caseworkers and case management systems. 

We had hundreds of premature babies before MCOs that went into hospitals and cost the state Medicaid program millions of dollars. After MCOs started, we were able to effectively deal with the health problems and conditions of these pregnant mothers who were on Medicaid and help them bring their babies to full-term and much healthier birth weights and that saved the state millions of dollars each year'

Notice the direct correlation here. "Better Health Outcomes' leading to 'Saved Taxpayer Dollars'.

All of which could be spent on: A) higher teacher salaries in North Carolina this year; B) more investment in research facilities or professor pay in all of the UNC System universities or 3) tax cuts for you, the steady and beleaguered North Carolina taxpayer.

Or anything else the General Assembly wants to spend those savings on.

North Carolina has always been a leader in many ways as The New South took over from the Old South.

This is one area where North Carolina sadly lags far, far behind 37 other states which have already taken the steps towards providing more effective health care for its most at-risk citizens while saving money at the same time.

It seems to be a 'no-brainer', doesn't it?

Read the Forbes article in detail. Call and write your elected representative to tell him or her that you agree that North Carolina should move to MCOs as soon as possible.

*disclaimer: we have been working to help pass Managed Care in North Carolina for the past year but we would not be doing so if we believed it was going to cost the state more money or not help Medicaid patients receive better care

Do You Want Better People to Run for Public Office?
Support the Institute for the Public Trust Today

Visit The Institute for the Public Trust to contribute today

$106 Billion in Improper Federal Payments. In 2013. Alone.

The GAO (General Accounting Office) just came out with a report that ought to curl your hair, boil your grits and infuriate you no end:

'The US Federal Government Made $106 BILLION In Improper Payments in 2013. Alone.

Here's the news report; read it for yourself.

Here's the full actual GAO Report. Read it and weep.

What does this mean exactly?

It means that over the past decade, over $1 TRILLION of your tax dollars have been wasted, spit into the wind, taken from you for no reason other than to waste it.

$1 Trillion.

Know what some of the largest tax increases in history have amounted to?
About $1 trillion over 10 years.

Know what the wars in Iraq and Afghanistan cost over a 10-year period?

About $1 trillion or so, give or take a $100 billion either way.

The US federal government has just admitted that they have frittered away the monetary equivalent of what the United States of America spent prosecuting the War on Terror in the Middle East for the past 13 years.

Doesn't that just fry your bacon?

If it doesn't, then something is seriously wrong.

Guess what the bad news is? Most of these improper payments last year occurred in the largest federal health care program, Medicare. Guess what program will one day exceed Medicare?

Obamacare. Think that will be run any more efficiently than Medicare?

Doubtful. Highly improbable.

For one thing, this report points out that many people received incorrect tax credits when they really were not eligible for them. Know what is at the core of Obamacare?

That is right:  Federal subsidy payment credits based on self-reported income.

The chances of Obamacare being run better than Medicare is slim to none. Look at the start of the program itself! You think it is going to all of a sudden become some paradigm of efficiency the longer it stays in effect?

The next time someone advocates raising taxes on anyone, print this GAO report out and give it to them on a silver platter. Highlight the most damning findings in yellow highlighter so they will be absolutely sure to read them.

Then ask them this silly question:

'Why are you supporting higher taxes when all it is going to go towards is more waste, fraud and abuse?'

There is no justification for any tax increase as long as $1 is unaccounted for by the federal government. Not a single solitary reason.

We have to admit: This is one report we just couldn't finish in its entirety by reading it all.

Our grits have just been turned to toast.

Do You Want Better People to Run for Public Office?
Support the Institute for the Public Trust Today

Visit The Institute for the Public Trust to contribute today

Dico Tibi Verum, Libertas Optima Rerum: Nunquam Servili Sub Nexu Vivito, Fili

'You Will Never Take Our Freedom!'

'My Son, Freedom is best, I tell thee true, of all things to be won. Then never live within the Bond of Slavery.* 

The Latin quote is a direct quote attributable to William Wallace, the patron saint of freedom for Scotland.



The speech by Mel Gibson on horseback in the movie 'Braveheart' is a Hollywood adaptation of what William Wallace may have been like back in 1297 before the Battle of Stirling Bridge, the first victory over the British towards Scottish independence.

We bring this up on this Independence Day in America, the 238th in a row in a remarkable string of survival despite all sorts of wars, pestilence, economic depressions and less-than-stellar national leadership for far too many years and times.

'Freedom!' for us in relatively safe and calm 2014 America was purchased by many brave souls over the years who sought freedom from tyranny and injustice.

We take it far too lightly, don't we? Those of us who never wore the uniform of a soldier in combat or faced an enemy bullet, cannonball or IED planted in a road in distant Afghanistan or Iraq have a huge debt owed to those who did that we can never really ever fully repay.

We bring this up because of some interesting conversations we had this week with some old friends. We talked about how life's paths had taken us various ways through the ups-and-downs none of us ever really expected life to throw at us.

And, of course, we talked about politics at the state and federal level.

One thing that struck us once again is how no one ever really equates 'freedom!' with being 'free from the uncertainty of massive federal debt!' and the catastrophic impact it has had on various republics, democracies, monarchies and dictatorships over the past millennia of human history.

There is a presumption out there in the public's mind that 'every dollar spent on federal programs is essential!' and therefore, 'we must raise taxes to pay for it, mainly only on the rich!'

We have pointed out the fallacy of any effort to pay off our annual deficits and national debt solely by raising taxes many times. For one thing, there is not enough revenue to collect from the Bill Gates and Warren Buffetts of the world; we could confiscate both of their entire mass of wealth and run the federal government for perhaps 3 days.

One way to look at our federal deficit is to look at it from the other end of the telescope. Perhaps we don't need to raise any more tax revenue to pay for federal programs (or borrow money ever again from the Chinese or the Saudis etc).

Perhaps all we need to do is reduce federal spending. As we continuously pare down not only the rate of growth and increase across-the-board in every federal program but also in actual amounts year-over-year, wouldn't that in and of itself obviate the need to raise taxes from their current level on anyone?

As we talked, we told them that we had been on the House Budget Committee for 4 years in Congress and had read every page of the federal budget at least once during that time. Beyond that, we had read dozens if not hundreds of CBO publications, documents and reports about the federal budget and felt comfortable saying that we had some cursory knowledge of every federal line-item function in the federal budget.

We made this bold claim:

'50% of the federal budget could be reformed, reduced or eliminated.....and we would STILL have an effective national defense capability; a reasonable safety net and the funds to build roads and do the other necessary functions our Founders wanted the federal government to do'

No one believed it.

We'll amend it to 80% of the federal budget if that makes it any more believable. But it can be done with some serious effort by serious people.

The amount of waste and redundancy in the federal budget is beyond comprehension to the average person who only soaks up information on the federal budget from 'their' side of the slanted news media be it MSNBC for the left or Fox News for the right.

Many times, if not all of the time, the news media producers and assistants have not read the base core documents either about the federal budget! They read the talking points given them by the staff assistants on the Democrat or Republican Policy Committee teams of the various congressional committees or national political party apparatus, most of whom have not read the core documents either!

We really do have a case of 'the blind leading the blind who are also leading the blind'. The elected officials don't read the core documents; the news media doesn't read the core documents and the public doesn't read the core documents!

How can we really have a reasoned national debate when everybody doesn't know anything about nothing?

We believe our freedom is directly tied to getting our fiscal and financial house in order. We had hoped President Obama would take a stronger step towards financial and fiscal sanity leadership than President Bush but we have been miserably disappointed along now with the majority of Americans in that regard.

Congress has to be the arm of our federal government to take the lead on spending priorities. For decades, under both Republican and Democratic control, Congress has been hampered in doing much to reduce the amount of federal spending primarily because of their abject fear and loathing of having to do anything with federal entitlement spending in Medicare and Medicaid, primarily and then Social Security and the other mandatory programs.

What can be done?

Well, the only thing left that can make a difference is for the American voting public (sad to say this again but if you are not registered to vote, you really don't figure into the calculus of elections at all) to become educated on ways that the federal government can be controlled and reformed and run more efficiently.

And that means reading and understanding and getting up to speed on the federal budget and all of its components.

One friend somewhat facetiously suggested that we start an on-line tutorial where every night, we start flipping through the pages of the federal budget and go through it in a year like some people go through reading the Bible in a year during their morning devotional readings.

We might do this, assuming there is any interest in it. We could charge $5 to be a part of this course and MOOC (Massive Open Online Course) it to all parts of the nation.

You will not believe how much fluff is in the federal budget until you actually read it for yourself. We would be honored to be your sherpa guide through it all.

Here's the link to the federal budget once again if you want to get a head-start on the class: http://www.whitehouse.gov/sites/default/files/omb/budget/fy2015/assets/appendix.pdf

Benjamin Franklin was approached by Mrs. Powel once the signing of the Declaration of Independence was completed on July 2, 1776 (not the 4th as many people believe).

“Well, Doctor, what have we got, a republic or a monarchy?”

With no hesitation whatsoever, the sage Mr. Franklin responded: 'A Republic. If you can keep it'

Freedom. We have it today. As long as we can keep it. (yes, that means you, too!)

Getting our fiscal house in order would be a monumental step in that right direction. Let's start putting pressure on our elected officials to do the right thing this July 4, 2014 by learning how to do it after reading the federal budget.

*As quoted in William Wallace, Guardian of Scotland (1948) by Sir James Fergusson, p. 4
** If you don't see the clip from 'Braveheart', click on the title and that will take you to the website where you can see it

Do You Want Better People to Run for Public Office?
Support the Institute for the Public Trust Today

Visit The Institute for the Public Trust to contribute today

The 'Lost' (sic) IRS Emails of Lois Lerner, Watergate and Howard Baker

'What did the President know...and when
did the President know it? Senator Howard Baker

We had more than few younger folks look at us quizzically this past week when we brought up the similarities between the current 'lost' (sic) emails and destroyed hard drives at the IRS and Watergate which was 'the greatest constitutional crisis since the beginning of time' according to the Washington Post and other liberal opponents of President Richard Nixon.

• 'Do you know who 'Senator Sam' Ervin of North Carolina was and what role he played in the Watergate hearings? 
• Do you know who Rufus Edmisten was and what role he played in the Watergate hearings? 
• Did you know Hillary Rodham (later Clinton) was fired from her job on the investigations committee?' we asked.

'Crickets' was all we heard.

Before you pooh-pooh the comparison between Watergate and this current IRS scandal if you are a staunch defender of President Obama and his Administration, take a look at the similarities between Watergate and the facts as we know them today about the IRS:

1.  'Watergate' started as a bungled burglary at Democratic National Headquarters located in the Watergate Hotel in Washington, D.C. when Richard Nixon's CREEP (Committee to Re-Elect The President) tried to intimidate or subvert the 1972 Presidential Campaign of Senator George McGovern.
2. 'Loisgate' (for lack of a better name) started as an heavy-handed effort to intimidate hundreds of Tea Party organizations and deny them non-profit status after Obamacare was passed in early 2010.
3. Both were ignored by the mainstream media when uncovered as insignificant random occurrences.
4. Both Presidents in office at the time had very strong and insular advisors close to the President who defended him at every turn and at every cost. (Nixon had Haldeman and Erhlichman; Obama has Valerie Jarrett)
5. Both Presidents were very secretive and protected a lot of information from becoming public.
   
   President Obama and his handlers have famously spent more money sealing his documents from his childhood, before college, through college and grad school than probably has been spent on sealing and storing the Kennedy Assassination records.
   
   President Nixon once famously broke into one of his law school professor's office at Duke University during the weekend of final exams, not to steal the test before it was given but simply to find out if he had aced the final or not before final grades were posted Monday morning.
   
   He just couldn't stand the suspense of not knowing he had been perfect on the exam as it turned out to be.
6. Lois Lerner pleaded the Fifth Amendment so as to prevent her testimony from incriminating her in any wrong-doing with the IRS scandal.
   
   G.Gordon Liddy, perhaps the mastermind of the Watergate 'plumbers' who broke into the DNC HQ in 1972, pleaded the Fifth Amendment as well.
   
   Very strange to see anyone who is completely innocent of any charges against them plead the Fifth Amendment, yes?
7. Both Presidents at the time dismissed each incident as nothing more than a trivial matter. Nixon said 'I am not a crook!'. Obama has just laughed off the IRS scandal as certain rogue agents in Ohio overstepping their bounds.
   
   
8. Both incidents have significant 'memory loss' in the form of erasure of pertinent evidence.
   
   Rosemary Woods, secretary to President Nixon, somehow performed a yoga-like stretch for 18.5-minutes (!) where her foot pushed a pedal that erased those critical 18.5 (!) minutes of White House Oval Office taped sessions between Nixon and his aides.
   
   EVERY email between Lois Lerner and 6 of her closest aides working on these non-profit applications from Tea Party groups were lost in a complicated computer crash that just affected those 7 computers (!). EACH of those hard drives were subsequently destroyed after the House Ways and Means Committee requested both the emails and the hard drives.

We asked a computer expert last week about the chances of only these 7 computers at the IRS all crashing at the same time such that their hard drives were rendered useless and had to be destroyed. Some were in Washington D.C., the others were in Cincinnati, Ohio. The 'crashes' (sic) occurred in 2 different parts of the country at exactly the same time in two different time zones.

The computer expert explained those chances thusly:

'The chances of all of these specific 7 computers crashing at the same time in Ohio and Washington DC, all independent of a broader computer system crash that destroyed both the entire IRS system in both Ohio and Washington DC, is 100,000 times less probable than you and I both being struck by a double bolt of lightning right now out of a rogue thundercloud popping up on this bright sunny day and then both of us being swallowed up by a huge gaping hole here on Hillsborough Street in Raleigh North Carolina caused by an enormous earthquake that usually only happens on the San Andreas Fault in California

In other words: 'Not. Likely'.

And this computer expert voted for President Obama! Twice!

Just to continue on this history lesson for the younger folks but also to remind the older folks, Nixon was not forced to resign because of the bungled Watergate burglary. He was forced to resign when members of his own Republican Party in the House and the Senate began to believe he was involved in the cover-up and lied about his involvement in the cover-up.

It wasn't the idiotic burglary that did in Nixon. It was the cover-up. It is almost always the cover-up that does in politicians.

Former Tennessee Senator Howard Baker, who passed away last week at age 88, posed the significant turning point question of the entire Watergate hearings in 1973 when he asked this one simple question:

'What did the President know and when did he know it?'

When the line of evidence kept leading up to the Oval Office in the White House, that is when leading Members in the House and Senators in the Senate went to President Nixon and told him they had lost confidence in his leadership and he should resign because they would support his impeachment.

Right now, we have not yet seen that direct line of evidence between Lois Lerner and President Obama and his advisors in the White House. In fact, if history is any pattern, President Obama will keep saying that the first time he ever heard of this IRS scandal was when he read it in the papers and heard it on the news.

If President Obama had no knowledge of anything going on wrong at the IRS; the NSA; Benghazi, in Iraq with the ISIS invasion and on and on and on, then 1 of 2 things must be true but not both:

He is either the most out of touch President we have ever had in American history or he is completely insulated so that he can claim 'plausible deniability' as they used to say in the Nixon White House. In either case, one has to wonder what good it is to have a President who is neither engaged in the serious work of running this nation's business or interested in running as clean of an operation as possible while serving as the Chief Executive.

Those lost emails and destroyed hard drives at the IRS makes it almost laughable to believe they did not contain any incriminating evidence that would implicate officials higher up in the Obama Administration.

When will Members of the Democratic Party start to lose confidence in President Obama and start to run for the hills? They have their own political futures to defend this year, you know. We have never seen an elected Member of Congress or Senate in his/her right mind in a contested district or state fall on their sword for a failing President from either party.

All it took in Watergate was one break, one direct link to connect the dots which led to the White House. Assistant FBI Director Mark Felt, otherwise known as 'Deep Throat' told intrepid Washington Post reporters Woodward and Bernstein to 'follow the money'.

Which they did.

Maybe American journalism is not totally dead  and some intrepid reporter will connect the dots in 2014 on this IRS Scandal.

Maybe a modern-day Mark Felt will step forward from the shadows and help some reporter get to the bottom of this, missing emails, destroyed hard drives and all.

Maybe Lois Lerner will turn state's evidence once it becomes clear that she may be facing some serious time in a federal penitentiary unless she cooperates with House Republicans and other prosecutors to turn over incriminating evidence.

And then again, maybe this really was the work of some seriously overzealous IRS staffers led by Lois Lerner and no one else but a bunch of Watergate burglars who are still alive and well somewhere.

Where is G. Gordon Liddy lately anyway?

Do You Want Better People to Run for Public Office?
Support the Institute for the Public Trust Today

Visit The Institute for the Public Trust to contribute today

CBO Graphics Part V: 'Guns Or Butter' In Discretionary Spending

Origins of 'Guns and Butter' by Robert Schlesinger

This is our final installment on the great CBO Infographics series, one which several of you have commented on how helpful it has been to get your head and hands around the US Federal Budget.

One of the craziest, most frustrating, slippery salamanders you will ever try to grab ahold of: The US Federal Budget.

But grab it and understand it you must. Because without a pretty good understanding of what this CBO Infographics Series has presented, we will not make a lot of progress towards solving our budget/fiscal problems.

We need you to be an active participant in this thing called participatory democracy, perhaps as a candidate yourself, perhaps as a behind-the-scenes worker but especially as a concerned registered voter who can put pressure on your elected officials to 'do the right thing' and do it regularly.

Today, we take a look at the 'Discretionary' part of the Federal Budget which is nothing more than the 'Guns versus Butter' part of the budget before there were such things as entitlements which got birthed in a big way in 1965 with the passage of the Medicare and Medicaid Acts.

We have already pretty much clearly established that the main cause of our budget imbalance over the past 30 years has been the exorbitant rise in health care costs which have driven Medicare and Medicaid from relatively minor programs in the 60's to well over 23% of entire federal budget today.

If we could curtail the cost in medical inflation and hold it to around the general rate of inflation in the general economy, we will return to balanced budgets rather quickly, assuming we ever return to any sort of 'normal' rates of growth which creates millions of new jobs one day. 

That being said, we are going to make another bold statement that some people may not like:

'Discretionary Programs are not the main problems in the federal budget!' 

We can already hear the people who hate foreign aid say: 'If we just could get rid of fereign aid, we would balance the budget.' ($47 billion, less than 1.3% of the federal budget per year)

We can already hear the people who hate the Department of Education say: 'If we could just get rid of the Department of Education, we could balance the budget!'  ($60-some odd billion dollars, about 1.6% of the federal budget per year)

We can already hear the people who hate anything in the federal budget that is not expressly enumerated in Article 1 Section 8 of the US Constitution say: 'We hate anything in the federal budget that is not expressly enumerated in Article 1 Section 8 of the US Constitution!' ($?)

We hate to disappoint those folks but nothing in the discretionary side of the budget is directly causing the fiscal imbalance between revenues and spending as much as the two main federal health care programs. That has been the case for the past 2 decades or more.

'Hey! What are you, an ignoramus?' we can also already hear some people say. 'What about the trillion dollars we blew in Afghanistan and Iraq on two wars that now seem to be for naught given the ISIS invasion of Iraq? We could have saved that $1 trillion in spending and not added that to our huge national debt, right?'

To some extent, that is true. We could have saved $1 trillion in spending had we not invaded both Afghanistan and Iraq. However, from 2001 to 2014, we have added on at least $8.6 trillion of new debt held by the public. $1 trillion spent on the 2 wars accounts for 11.6% of that additional debt, hardly the main reason why the debt has exploded over the past 14 years.

We endured a major recession, one far greater than anyone thought we were going to endure, which contributed to the debt buildup, that is a given. The Bush tax cuts which Obama extended forever (so now they will be forever remembered as the Bush/Obama Tax Cuts?) also took away perhaps $1 trillion of revenue stream from the federal treasury which added to the budget deficits over the years.

However, take a close look at the graphs below. Keep in mind that in budgeting circles, the mantra is:

'Control what you can which is spending. Plan ahead for ups-and-downs in the economy and tax revenues to smooth out those fluctuations. Balance the budget with prudence and foresight, not ignorance and hindsight'

Defense spending has hovered at or below 4.3% of GDP since 1993. The low for defense spending was 3.0% of GDP in 1998 after the 1st Gulf War (apparently people knew we would be going back because that is what people called it at the time)

Non-defense spending was at 3.6% of GDP in 1993; today, it clocks in at 3.5% of GDP.

Compare both to the Medicare/Medicaid programs, both of which more than doubled their size in terms of share of GDP in only 20 years. Both are expected to continue that growth over the next 20 years as well.

We can't control tax revenues; they are subject to the economy and the basic 'animal spirits' that drive people to work and invest when they see an opportunity to make a profit. They stop doing so when they don't see a favorable return on that investment and hard work.

Responsible government leaders throughout the ages have always been frugal, responsible, sober and balanced leaders. They have not been spendthrifts and they have not been irresponsible with the public fisc as we have for the past 14 years for sure.

We can fight all we want about 'fereign aid', the Department of Education and 'The Bridge to Nowhere'. Those are all legitimate debates about the proper role of government in our lives.

We happen to believe that: 1) as long as a program is open to everyone and benefits the entire nation as a whole; 2) fits into a reasonable interpretation of the Constitution which pretty clearly establishes a twin-government rule for our nation, one federal and the other state-directed, and 3) gets passed by 50%+1 of both the House and Senate and is signed into law by the President in a White House ceremony, that is a 'legitimate' federal program.

Because discretionary programs are not contributing significantly to our explosive debt, or the deficits that cause that debt, or the interest rate time bomb that will truly explode once interest rates return to 'just normal' rates in the not-too-distant future, we don't worry about them as much as we do about the federal healthcare entitlement programs.

We can control discretionary programs. We can eliminate them all if we had a Congress that wanted to do so and a public to support it. We just ask that at the end of the year, the budget is balanced and no more debt is issued to finance current consumption.

Certain public works projects we support. The Erie Canal, for example, led to a tripling! of the US GDP in the 7 years after it opened and trade from the Midwest flowed through its channels to New York and beyond. The Interstate Highway System is another. It says we can build roads in the Constitution, doesn't it?

What scares us to death is the proclivity of Congress to not only NOT control spending in our national entitlement programs but to constantly ADD ON to them! Obamacare, for one is so expensive and complicated that the CBO recently said they could not even score just how much it was going to ultimately cost!

How crazy and loony is that?

The clear and present danger to any government of any style or persuasion is its inability to restrain itself from trying to spend more of your money on government programs to attract votes and stay in office. That inability inevitably leads to imbalanced budgets and deficits which means more money has to be borrowed to pay for them.

Once the level of debt gets so high that the credit markets start to believe the government can't make their scheduled interest payments on time, the currency starts to implode...and then it is just a race between more inflation and higher interest rates to attract more money to pay off the debt.

Maybe the United States of America will never get to that point. Let's hope we won't. But just be forewarned that hundreds, if not thousands of republics, democracies, dictatorships and communist states have fallen prey to hyperinflation and depression of their currency over the past 800 years of recorded human history.

That is not a good track record. So why take a chance?

Discretionary programs will not be the prime reason why we get to that point if we do.

Entitlement programs will be.

That, hopefully, will be the main lesson of all 5 of these simply terrific CBO Infographics.

Share them all with your friends and neighbors. And people you don't even know.

Do You Want Better People to Run for Public Office?
Support the Institute for the Public Trust Today

Visit The Institute for the Public Trust to contribute today

CBO Graphics: Part IV 'What Are 'Mandatory Programs' Anyway?'

'I propose a lockbox for Social Security'

'Mandatory programs in the federal budget are an easy way for politicians to avoid making tough decisions'

What politicians are saying when they say they won't touch mandatory programs is this:

'They are too tough politically for me to do anything about them! The AARP, the NAACP, the ACLU...they'll kill me in the next election if I say we have to reform Social Security, Medicare and Medicaid!

When politicians say a program is an 'entitlement' or 'mandatory' and they 'can't touch them', they are flat-out lying through their teeth.

They are the US Congress and US Senate, for gosh sakes! The US Constitution gives them massive power to do just about whatever they want, assuming they can get to 50%+1 in each chamber, that is, including reforming, cutting, changing, adding to or subtracting from any entitlement program now in force in America.

We participated in such a process dozens of times. It is called 'budget reconciliation' and it is a term you have rarely heard during the Obama Administration except for one glaring example: when they used budget reconciliation to cram Obamacare down the over-matched GOP minority's throats.

'Mandatory' programs are considered 'benefit' programs based on formulas and meeting such thresholds as age 66 (for SS); 65 (Medicaid) or living at or below federal poverty levels (Medicaid).

There is no other consideration other than meeting these standards to be eligible to receive benefits.

The one glaring truth of the matter is that if we would just arrest the rate of inflation in health care delivery in America to around the general rate of inflation in the rest of the economy, we could balance the federal budget in no time flat.

No kidding. We have written about this in great depth in past posts but the bottom line is that the upward explosive growth in Medicare and Medicaid, as well as the military health programs and the VA to some smaller extent, are the most prominent upwards cost-drivers in the federal budget and have been for much of the past 4 decades.

Take a close look at the infographics below detailing the growth in entitlements from 1993-2013.

Mandatory spending account for 67% of ALL federal spending in 2013 or about 5.2% of GDP. 20 years ago, mandatory spending account for 2.6% of GDP in 1993. Mandatory spending has doubled as a share of GDP in 20 years.

Medicare alone has grown 66% relative to its share of GDP during that time. Medicaid has expanded about 45% as a share of GDP during the same period of time, from around 1.3% to 1.8% of GDP.

SS has expanded about 10% in terms of its percentage of GDP consumed during that time, mostly because so many Boomers got older and started retiring. It would have gone up faster expect for the steady increase in the retirement age set into motion in the 1983 SS Reform Act where the retirement age went up from age 65 to age 66 in small increments from 1984 to now.

You didn't even notice it didja? We think it should go up on the same scale to age 67 in the next 5 years and then eventually to 70 since we are living so much longer lifespans.

But other than those health care-related programs and to a lesser extent, SS, entitlements are relatively tame by comparison. Sure, they are still huge programs but they are not the factors driving up the federal deficits and therefore the debt.

Forget the 'trust' (sic) funds cause they don't exist.

Forget the 'Social Security Surplus' cause that is just a made-up moniker to disguise the fact that the 1983 SS Act raised payroll taxes WAY over what was needed to fund the retirees from 1984 to about 2007 before the surplus started drying up.

Forget any sort of 'lockbox' despite what VP Al Gore said in 2000:



Entitlement programs are just like any other federal program in history: The IRS takes taxpayer money which is used to pay for the programs Congress authorizes. Politicians can't hide behind the 'mandatory' facade any more and we as voters shouldn't let them.

There is no way the American people are going to tolerate a major hike in their payroll taxes, are they? The only way to deal with the rate of growth in spending in SS, Medicare and Medicaid is to deal with the rate of growth in spending!

Senior Boomers had better hope that the foreign credit lines stay open through their retirement because without it, benefits will start to be pared back and in some cases, quite substantially.

We believe there are a million ways to restrain the growth of Medicare. For example, we just heard that a senior we know who is about 70 years old is going to have 1) knee replacement surgery followed by 2) hip replacement surgery later this year.

All paid for by Medicare.

We don't know exactly what the costs of each surgery will be but we have heard that knee replacement surgery can cost upwards of $65,000 and hip replacement surgery can cost over $85,000.

This 70-year old guy is going to have $150,000 of your taxpayer money (and what we can borrow overseas) put into his right leg this year!

All we can say is: 'He better win the Boston Marathon next year! Cause we sure are investing a heckuva lot of American taxpayer resources into his right leg to do so!'

Study these charts below. They are important to understand. Show them to all your friends of all ages.

We are all in this together. We better figure out how to fix it all together before paying interest on the debt/deficit bomb does it for us.

Do You Want Better People to Run for Public Office?
Support the Institute for the Public Trust Today

Visit The Institute for the Public Trust to contribute today

What Does 'As Far As Practicable' Mean Anyway?

Where does UNC get its funding?

 prac·ti·ca·ble  [prak-ti-kuh-buhl] adjective

1. capable of being done, effected, or put into practice, with the available means; feasible: a practicable solution.

This one word in the North Carolina Constitution is always brought up when the issue of higher education is discussed and the method and means of how to pay for it are considered.

Article IX, Section 9 of the North Carolina Constitution which was rewritten and clarified in 1971 reads as follows:

'Benefits of public institutions of higher education.
The General Assembly shall provide that the benefits of The University of North Carolina and other public institutions of higher education, as far as practicable, be extended to the people of the State free of expense'

That is not the only place in North Carolina constitutional history where the word 'practicable' is used. In the 1868 version, there also reads this:

'As soon as practicable after the adoption of this Constitution, the General Assembly shall establish and maintain, in conjunction with the University, a Department of Agriculture, of Mechanics, of Mining and of Normal Instruction'

Notice which words accompany 'practicable' in both cases: 'as far as' and 'as soon as'.

Neither clause conveys the sense of 'absolute' or 'now', do they?

Both clauses convey the sense of 'if at all possible' or 'when it is possible', do these things.

Proponents of freezing in-state tuition in North Carolina often seem to misunderstand or mis-read these clauses. They would have you believe that the Founders of the North Carolina Constitution 'demanded' that in-state tuition would 'always be free'.

Nothing could be further from the truth. They knew that money did not fall from the long-leaf pine tree indigenous to North Carolina like pine cones or pine needles.

They knew there would come a time when there would be more than one student, Hinton James who walked all the way to Chapel Hill from Wilmington to enter the first class in 1795. Or at least they should have known.

It was far easier to teach one student at Chapel Hill and give him a 'free' education in 1795 than it is today for the 18,430 undergrads who are there, 15,112 of which come from within North Carolina state borders.

All that being said, what does that have to do with anything?

It has to do with everything that is going on in the North Carolina state legislature right now and at the Board of Governors of the entire system and the Board of Trustees at every state institution. In-state tuitions have risen a lot in the last several years and there has been a hue and cry to freeze them or at least decelerate the rate of growth in future increases.

This is all done in the vacuum bracketed by the 'as far as practicable' clause of the state constitution and the pressing fiscal budget realities of 2014, not 1795 or 1868.

Let's get some of the basics out of the way that you never read in the papers or hear on the evening news:

1. It costs, on average, roughly $21,000/year to teach every undergrad in the UNC System, from Elizabeth City State University to Western Carolina.
2. For 2010-11, the latest year for official figures, in-state students in the UNC system paid 33% of the cost of their degrees on average which includes all the tuition and fees they pay.
3. The percent ranged from 19% at UNC School of the Arts to 43% at App State.
4. That means that the in-state tuition of roughly $8000 at UNC-Chapel Hill and NC State leaves about $13,000 per year to be covered by other sources.
5. The University of North Carolina at Chapel Hill receives about 20% of their funding from the state legislature which means the balance comes from sources including federal and state research contracts and grants, hospital-generated revenues, athletics, and private funding from endowments and annual gifts. 

We can remember a time when the state legislature was able to fund 39% of the entire university budget in the 1980's.

What has happened since then to cause the shift?

For one thing, academic cost-inflation has been second only to health care cost inflation during that time span. University presidents and administrators embarked on a massive spending, building and investment spree since 1980 that could rival the arms race between the US and the now-defunct Soviet Union.

Some of that can be attributed to the massive influx of the Baby Boomer 'echo' generation (our sons and daughters) entering our nation's colleges and universities. However, the peak of that boomlet entering college was in 2010. It is downhill from now on and many colleges will see declining enrollments and many will be forced to close.

The main culprit, however, as we have noted before is the unabated growth of state Medicaid programs. Medicaid is an 'entitlement'. University education is not an entitlement. Medicaid bills have to be paid every year in cold hard cash by the states or else they have to declare bankruptcy much as Detroit had to declare bankruptcy. States do not have to pay for higher educational support each year as they do in Medicaid.

That is the choice most states have to make nowadays: fund higher education or pay for more Medicaid services. It is pretty much that simple.

We believe moving to Managed Care Organizations (MCOs) for Medicaid is the prudent and responsible way to not only provide better health care at a lower cost for our fellow Medicaid-eligible North Carolinians but also to lance the boil on limited funding for our state's higher education institutions.

You want to see more funding for UNC, NC State and other universities in the state system? You should be for MCOs as well.

And while we are at it, perhaps we should amend the NC Constitution while we are at it to use a more modern word than 'practicable'. No one ever uses that word anymore, do they?

The new clause should read:

'The General Assembly shall provide that the benefits of The University of North Carolina and other public institutions of higher education be extended to the people of the State at an in-state tuition rate that is no more than 90% of the in-state tuition rate in Virginia ($13,400+/year in 2014-15) or South Carolina ($11,000) adjusted for inflation each academic year.'

The University of North Carolina at Chapel Hill and NC State and the other universities in the system would still be a 'better value' than either of our neighbors to the north and the south. In-state tuition to UNC will be about $8200 for the 2014-15 academic year and about $8000 for NC State. Both are about a 38% discount to UVA and 27% discount to USC.

The new clause would be a more 'practical' realization of the immutable laws of economics and political reality nowadays.

Not 'practicable'.

Do You Want Better People to Run for Public Office?
Support the Institute for the Public Trust Today

Visit The Institute for the Public Trust to contribute today