A Simple Picture

dump the debt

Dump The Debt, by Friends of the Earth International via Flickr

Trying to make sense of economics, the dismal science, is a pretty thankless task, especially with the sharp political divide in Washington and the myriad ways of expressing statistics. Nevertheless, with the Great Recession and stubbornly high unemployment, economics is at the core of our national budget deficit problem.

Recently I did a new search on Wikipedia while trying to answer a comment on another blog and I found some new clarity. The entry on the 2010 U.S. federal budget  has been updated, and it contains a couple of good charts. The first is a pie chart showing categories of spending for the year. But the more interesting one is a bar chart showing broad categories of spending, as a percent of GDP, against the expected receipts.

With this chart, you don’t even need numbers to make sense of the problem, you can do it by eye or print it and then cut it out. Let me explain.

The light yellow area marks discretionary spending while the peach-color marks mandatory spending. “Mandatory” means the funds are already committed by law. The dark blue of course is the money expected to come in, and you can see that it is only a little above the peach-colored mandatory category. This means the money coming in only slightly exceeds what Congress has irrevocably committed us to spend. This “mandatory spending” is mainly entitlements.

Please note that the largest single item is Social Security (about 20%), down at the bottom. While it makes sense to modify that program modestly (unless you are Rick Perry), I believe no one wants to change it significantly.

The next largest item is Defense (about 19%). While that is large, nobody in either party has suggested doing away entirely with the Army, Navy, Air Force and Marine Corps, and defense expenditures are in fact fairly low by historic standards, so I don’t see much opportunity for significant cuts there either. Some hawks are already screaming over the low level of forces available, with N. Korea, China and Iran as potential threats. (The president’s new plan proposes to save $1 Trillion over 10 years by ending the wars in Iraq and Afghanistan, which amounts to an average of $100 Billion per year.)

Now please look at “other” in the “mandatory” peach section. This is mostly unemployment and welfare (about16%). This money has also been committed, and it is what is keeping about 15% of Americans from living like Somali’s at the present time.

Notice that the next largest slice is interest on the national debt at 4.63% – that is increasing as the debt grows – no savings possible there. And the remaining stuff is small potatoes in comparison to the big ones, even though it includes running the whole government and all “discretionary” spending other than Defense.

So that leaves the remaining big two, both in the yellow “discretionary”: Medicare and Medicaid at a combined 21%. I chose those as the only hope of balancing the books because, as we have discussed, America pays double what socialized countries pay for comparable medical care. I think you can tell by eye that if you were to cut each of those in half, and cut Defense as the President plans, and if the economy improves some, then we at least have a fighting chance at a balanced budget.  That is why I say, fixing Medical by adopting a single-payer system is indispensable to solving the budget/debt dilemma. QED.

Advertisements

About Jim Wheeler

U. S. Naval Academy, BS, Engineering, 1959; Naval line officer and submariner, 1959 -1981, Commander, USN; The George Washington U., MSA, Management Eng.; Aerospace Engineer, 1981-1999; Resident Gadfly, 1999 - present. Political affiliation: Independent, tending progressive as the GOP recedes from its Eisenhower roots.
This entry was posted in Economics and tagged , , , , , , , , , , , , . Bookmark the permalink.

24 Responses to A Simple Picture

  1. John Erickson says:

    Thanks for the great chart. I’d be interested to find out what the “other” in the peach-coloured area all includes. Call me a cynic, but I bet there’s a whole lotta pork in that “mandatory” spending.
    My fear with defence spending is the heavy pressure on replacement programs. The F-22 is getting squeezed, the F-35 is fighting for its’ life (especially in STOVL form), a couple of Army ground combat programs have been axed or sharply cut back, and the number of future DDG-1000s being bought has been cut back. With the Air Force looking at an “off-the-shelf” trainer replacement for the T-38, and a lot of controversy hanging around the “Tanker X” program, it concerns me that Congress will look for false economies by forcing our troops to continue to use war-weary gear left over from our deployments in Iraq and Afghanistan.
    Let’s hope they don’t try to chase that elusive (and what I love to malign) “peace dividend”.

    Like

  2. IzaakMak says:

    I think you meant to say “both in the peach “mandatory”” there, didn’t you Jim? At any rate, I absolutely agree with your assessment. The thing is, even though you made no mention of tax increases of any kind – doing it all with cuts as the conservatives say they want, I doubt they’d be willing to go for the single-payer system for medical care. They’re just too vested in the status quo.

    Like

  3. ansonburlingame says:

    Jim,

    You make an astounding assumption herein. IF WE go to single payer HC for all Americans, we solve our financial problems or make real progress in doing so, right?

    Well you have already heard my rebuttal to that approach but for the sake of argument will try to repeat it very simply again.

    We currently spend about $2.5 Trillion on HC from all sources in America today (government, private insurance, businesses providing insurance, etc). IF we go to single payer some ASSUME we can cut that figure DOWN to about $1.2 Trillion. That means that the CURRENT cost of Medicaid and Medicare will be used to fund HC for ALL Americans. Said another way you currently pay Medicaid and Medicare costs for about 90 million people (45 M on Medicare and about 45 “unisured” on Medicaid and EMTALA). You propose to now “insure” 300 million at the same cost.

    You are going to at least TRIPLE the number of people covered and cut the costs of such coverage by well over a half, in total. Simply astounding to me.

    I look forward to the RULES imposed by any single payer to achieve that increase in coverage and cut costs by about 60%.

    But Europe does it (or tries to do it, or tried to do it and…, or…..) so we should do so as well, right?

    Oh yes, one other point. If a single payer spends $1.2 Trillion “tomorrow” on HC and it keeps going up at 8%- 12% a year then…….. But eveyone still gets a CAT scan and an MRI in the future, right? (or open heart surgery, or EOL care at the premium level, or……) And God Forebid, when we develop a “pill” to cure cancer we will pay $1000 a pill in the future for eveyone with cancer, right?

    Anson

    Like

  4. Jim,

    Amen to your conclusion, along with some revenue increases.

    Duane

    Like

  5. ansonburlingame says:

    To all,

    I “patiently” await a rebutal to my comment above related to how we try to cover 300 million Americans at the cost of covering 90 million Americans today for roughly the same amount of money.

    I also as an aside, wonder Jim, where exactly in your “stack chart” above the cost of Top Secret America might reside. For SURE it is NOT all in the DOD “stack”. “Go back” to intelligence collection pre-9/11 and I wonder how much smaller the various stacks might become, today?

    Anson

    Like

    • Jim Wheeler says:

      Anson,

      No, I am not saying the current cost of Medicare and Medicaid will cover everybody because that ignores the amounts currently being paid in by everyone who has health insurance, including businesses for their employees. What I’m saying is that under a single-payer plan the government’s cost for those currently under Medicare and Medicaid would be less than half of what it is now. That’s what the statistics say. I believe the system would work because the costs to everyone now ensured through their employers or self-insured would also be halved, and would be funded through taxes, and those taxes would be less than what people are currently paying in insurance premiums. In other words, people would pay tax for healthcare instead of insurance premiums.

      Look, I’m not saying my way is a panacea and all will be rosy. The change would be wrenching, difficult. But I am saying I see no other way out of this mess.

      When you assume that HC costs will keep going up at “8% – 12%”, you are missing another point. Under a single-payer system, that wouldn’t happen because government would be in a position to hold down costs, just as it does with Medicare. Evidence for this is when you see your Tricare EOB’s and note that the amount paid is a mere fraction of what the system tried to charge. I have seen that, so surely you must have. The same reasoning applies to your $1,000 cancer pill. Merck or whoever developed such a thing would capitalize on it big time – that’s why Big Pharma is the world’s “most profitable” industry. But under a single-payer system, those profits would be limited.

      Your question about TSA’s money is a good one. I went back to the Wiki page on the 2010 budget and found this:

      The GAO cited as the principal obstacle to its provision of an audit opinion ‘serious financial management problems at the Department of Defense that made its financial statements unauditable’.[6] The GAO identified during its audit work an estimated $125.4 billion of ‘improper payments’.[6] Thirteen of the twenty-four Government Agency Heads either qualified or withheld their assurance statements.[7]

      That would seem to answer your question. Depressing, isn’t it?

      Oh, one other thing. I seem to recall a question about “Other – Mandatory” spending and what might be hiding in that. It is all welfare and unemployment expenses. Below is a link and it said this:

      All other mandatory programs – $598 billion. These programs include Food Stamps, Unemployment Compensation, Child Nutrition and Tax Credits, Supplemental Security for the Disabled and Student Loans.

      Link: http://useconomy.about.com/od/fiscalpolicy/p/Mandatory.htm

      Jim

      Like

  6. ansonburlingame says:

    OK Jim,

    go single payer and we cut Medicare and Medicaid in half. Private insurance payments get cut in half as well, right? And all of that means that we can receive the same HC as today at half the cost, right? And that is because all the payments will come from one source and thus huge savings, right.

    I wonder how doctors and hospitals might react to that plan. After all they will only receive half of todays. “pay” which is $2.5 Trillion. HMMM? Wonder how many doctors and hospitals will be around after that coup de dat?

    Did you watch the Republican debate last night and listen to how Herb Cain told “us” that he would have DIED had Obamacare been the “rule” in March of 2006 (or was it 2007) in dealing with his cancer? Do you believe he was exagerating? I don’t.

    Your single pay system is the traditional 10 lbs of stuff in a 5 pound sock. It just won’t fit without a huge reduction in “stuff” or an extraordinary “sock growth”. We don’t have the money to grow socks and NO ONE wants their “stuff” cut, just someone else’s.

    Now for errors in defense accounting. The last time I checked the CIA budget was NOT part of the defense budget, nor was Homeland Security, nor was DOE (Energy) and I could go on. Recall there are 16 agencies involved in TSA according to the book and DOD only makes up about 50% (or so) of them.

    And I bet the other 50% just like the DOD segment related to intelligence are BLACK budgets. Actually they now seem like BLACK HOLES, sucking in “everything” that gets into their orbit, 16 different orbits (or thereabouts)

    You, me, GAO and Wickipedia don’t stand a chance against black holes or black budgets. Neither does Dana Priest. She can’t tell us much of substance of what goes on therein. She can only tell us to watch out. But the last time I checked one cannot “watch” a black hole. No light comes forth from such things.

    But I do know how to destroy such black holes today. Cut the Top Secret (actually do the same for Secret and Confidential as well) clearances across the board by at least 75%. Then duck when you hear an airplane. Hell, do it by 90% and we MIGHT get back to pre 9/11 levels of secrecy in government.

    Anson

    Like

    • Jim Wheeler says:

      You are right about one thing, Anson. Doctors and hospitals would be very unhappy with a single-payer plan. Did you ever wonder why the ACA (Obamacare) plan was endorsed by the AMA? Because it was far preferable,financially, to a single-payer system. I wonder if you remember discussing doctors’ wealth in past posts? Like other college graduates, only more so, doctors typically graduate with a mountain of debt, and this currently is impelling most of them into the more lucrative specialties rather than family practice which the country desperately needs. I believe I also mentioned that once situated in affiliation with a hospital, it is not at all unusual for the hospital to underwrite a major part, or even all, of that debt. Doctors require no financial sympathy in my opinion. Many of them are gaming the system, big time, by owning testing machines and facilities to which they themselves send patients.

      In fact, by questioning how doctors would feel about it you reveal the central problem. There is no standard of costs for medical services. None that is except for what is set by Medicare, Medicaid, and individual health insurance plans like HMO’s. Those have been weak, but I read about one insurance company yesterday in USA Today that had introduced a unique plan for its members. It has scouted numerous providers of testing and other services, including hip replacements and other procedures, and set up a price list. It reimburses the members in the median amount and encourages them to choose according to price. If they choose a provider who charges above that value, they must pay the difference, thus giving the patient incentive to care about cost. The ranges of prices were astounding, thus proving that your assumption about the 10 lb. sock is flat wrong.

      You know, there was a time when people went into the medical fields as much for humanitarian reasons as for money, so if you argue that nobody would become a doctor without a 6-figure salary to start, I would disagree. I see nothing wrong, in fact, with the government underwriting a medical education for promising graduates with bachelor’s degrees in return for a minimum period of service in needed areas of the country, much like the NROTC program does. Do you? Hell, if they can get people like you to devote their lives single-mindedly like you did to the nuclear navy and pay them peanuts (your words), then why can’t they do that for medicine?

      As for classification of information, a la TSA, clearly we agree on that at least. The system is totally out of control. But I fear you are doomed to failure with your percentage plan because it ignores the quality of the information in favor of just quantity. Think about it.

      Jim

      Like

  7. hlgaskins says:

    Jim

    An excellent analysis, especially in the “peach colored” area of the graph. Here’s how I see some of it. Social Security should have been secured for some time but for its carelessly borrowed surplus, which in turn accrued a sizable portion of f the interest. Those two areas are apart on the graph but mathematically tied together.

    The greatest concern however is in “other, or unemployment/welfare.” There are fewer disposable dollars floating around, too few jobs, too many unqualified workers to fill them, and all of them are impacted by unfairly low wages. result! Welfare state, and decreased tax-base. My greatest concern however is that if we know that’s true, then shouldn’t the wealthy, who stand to gain it all or nothing? If they know this, then what is the game plan?

    Like

  8. hlgaskins says:

    “You are right about one thing, Anson. Doctors and hospitals would be very unhappy with a single-payer plan.”

    “Mar 31, 2008 5:00pm EDT

    (Reuters) – More than half of U.S. doctors now favor switching to a national health care plan and fewer than a third oppose the idea, according to a survey published on Monday.”

    http://www.reuters.com/article/2008/03/31/idUSN31432035

    Wikipedia:

    “Family physicians in Canada make an average of $202,000 a year (2006, before expenses). Alberta has the highest average salary of around $230,000, while Quebec has the lowest average annual salary at $165,000, arguably creating interprovincial competition for doctors and contributing to local shortages.”

    Canada as I’ve mentioned in other posts has a “Two-Tier” healthcare system. The cost of education
    http://en.wikipedia.org/wiki/Health_care_in_Canada

    NPR September, 2009:

    “Most doctors — 63 percent — say they favor giving patients a choice that would include both public and private insurance. That’s the position of President Obama and of many congressional Democrats. In addition, another 10 percent of doctors say they favor a public option only; they’d like to see a single-payer health care system. Together, the two groups add up to 73 percent.”

    http://www.npr.org/templates/story/story.php?storyId=112818960

    Like

    • Jim Wheeler says:

      Thank you, HL, for this insightful and documented information on the discussion. My statement was based purely on assumption and your information surprised me. Kudos to you and the internet!

      Like

  9. ansonburlingame says:

    Jim,

    You said (with bold emphasis), “. There is no standard of costs for medical services.” Yes , there is or should be. It is called the MARKET for medical services. That is the standard by which almost all prices ared determined in America or should be. And when government tinkers with setting such PRICE standards, we always get in big trouble.

    We have all kinds of “standards” today in terms of “safety” (OSHA, air traffic control, speed limits on highways, helmets on bicycles, etc. etc) and “cleanliness” (air, water, nuclear waste, etc. etc.) and now you want to set price standards for HC.

    Well hell, look at comments from me on the EC blog of late related to JUSTICE. Why not price standards on lawyers, like $20 bucks an hour so everyone can afford a lawyer when needed!!!

    Given our “safety net” today, hardly anyone starves or lacks some kind of shelter. But a helluva lot of “poor” people go to jail or middle class people get sued (like doctors) without clear justification. But no calls for single payer legal representation that I hear of lately or ever for that matter.

    You know how I have written (ad naseaum) about fundamental economic laws. Well supply and demand are two of them. No government can regulate, successfully, such a law over time. If it could we would be paying maybe $1 per gallon for auto fuel today, at least until the fuel ran out.

    Same fundamentals apply to any commodity and HC IS a commodity in that regard just like food. Do you want price controls on groceries through a single payer system. After all, everyone must have food!!

    Anson

    Like

    • Jim Wheeler says:

      Anson,

      Market forces work quite well in many circumstances, such as people looking for the lowest gasoline price, but you of all people (with your recent healthcare experiences)must know that the present system gives you, the consumer, little incentive to shop with cost as a factor. That’s because your insurance covers whatever the cost is. Just to demonstrate the point I looked up the article I previously referred to – it’s a good one. I will give you a quote and then the link. Please read it before you level both barrels at me again. You could shoot your other foot off.

      Before the new program, workers’ incentive to shop around was limited because they had no idea — or any easy way to find out — that prices for many types of medical treatments varied widely. A test at one center might be $3,700, while “right down the street they could get it for $900,” says Gardner, the vice president of benefits at Prodigy, which provides benefit management for self-insured employers.

      Link: http://www.usatoday.com/money/industries/health/story/2011-09-21/employee-incentives-lower-cost-health-care/50499608/1

      Jim

      Like

  10. Excellent article!

    This is a bit off topic, but I had to send this your way. I was reading this article and I thought I was reading your blog for a moment. The bit about the tribal reaction is classic Jim Wheeler!

    http://nymag.com/daily/intel/2011/09/reconsidering_romneys_chances.html

    Like

    • Jim Wheeler says:

      Thanks, Keith. An interesting article, very insightful. Indeed, the successful candidate must be he who can voice the message of the party faithful and yet still leave himself room to maneuver to the middle for the general election.

      Like

  11. Jim Wheeler says:

    For those interested in the healthcare debate and who might not follow Anson Burlingame’s posts, I would like to recommend the below link to one of his posts. The comments among him, ANonnyMoose and me were lively and germane to the issue, and especially links to a USA Today article and editorial on the subject.

    Link: http://ansonburlingame.wordpress.com/2011/09/27/a-new-force-on-the-supreme-court/#comment-2530

    Like

  12. hlgaskins says:

    “You make an astounding assumption herein.”

    An assumption is a hypothesis assumed to be true, sometimes based on arrogant guessing. Jim, like Duane, always provides solid data to back his “assumptions.”

    ” IF WE go to single payer HC for all Americans, we solve our financial problems or make real progress in doing so, right?” Right!!

    “Well you have already heard my rebuttal to that approach but for the sake of argument will try to repeat it very simply again.”

    I’m betting “simply,” is the best “assumption” you can make unsupported by honest data.

    “Said another way you currently pay Medicaid and Medicare costs for about 90 million people (45 M on Medicare and about 45 “uninsured” on Medicaid and EMTALA). You propose to now “insure” 300 million at the same cost.”

    Yes, and with savings if we get it right!

    Medicaid is only available to low income people with few or no resources and Medicare obviously to retirees over the age of 65. Most Americans already have a health plan, though less than perfect, sponges most of our health dollars. The reality is, our healthcare system is so fragmented in funding and administration; it’s a miracle it works at all.

    Then there’s the 45 to 50 million uninsured. Do you believe we should turn them away in their need? If your answers is no, and I suspect it is, then how do we pay for them?

    Answer is, we pay for it in increased medical costs which are even further exacerbated, by living conditions and late-term illnesses. These fragmentation’s of our healthcare delivery system are killing our economy, and sucking money out of our pockets to serve no purpose beyond filling fat pockets.

    Is Social Security running a deficit? Of course it is, so let’s as you’ve suggested in other blogs, raise the “caps.” Want more money to pay for things! Then let’s end pointless wars, stop policing the planet, slap the hands of greedy parasites groping our nations till, and focus our attention more here at home. We need to rebuild our infrastructure to 1st world standards, retool and diversify our educational system, and bring us into the 21st century with a plan that includes all of us.

    Like

  13. Pingback: Insurance | Still Skeptical After All These Years

  14. Jim Wheeler says:

    In this post, “A Simple Picture”, I tried to sum up the economic problem, and the principal point of it was that our financial debt problems can not be fixed without fixing Medicare. Eighteen people contributed comments, so there was considerable interest. Now, I offer this news item which just came in with my weekly Navy Newsletter. It was entitled, “SUPER COMMITTEE TAKES A SCOLDING” (i.e., from former members of previous deficit-reduction committees.) (emphasis is mine)

    Rivlin and Domenici also asked the Super Committee to tell congressional committees to work on pro-growth tax reform, as well as structural reforms to Medicare. “Let me be blunt,” said Domenici. “A plan that does not fundamentally restructure Medicare…will fail to adequately address the debt crisis that we face.”

    Like

  15. Re-read this one again today. This is one of the most cogent, well-reasoned arguments I’ve read about the budget. You really got it here. Thanks Jim!

    Like

  16. hlgaskins says:

    “A plan that does not fundamentally restructure Medicare…will fail to adequately address the debt crisis that we face.”

    No disagreements from me except some minor adjustments. Medicare serves a more expensive to treat aging population. Republicans submit that Medicare is more expensive to administrate and Democrats suggests the reverse. We have several health insurers fighting to profit, and more than a few small to medium sized business employers, budgeting to provide health plans, to attract the best employees. The truth is that no one knows the actual costs of our healthcare system, because no one is really in control of how its administered. Who’s to decide which services are needed, and how they’re delivered? How many ready-to-die or already “brain-dead” patients, are kept alive to drive up the costs? Just ask Anson?

    If it depends on who’s delivering it, who’s requesting it, and who’s insuring it, then how do we fix it? We could have “End of Life Counseling” if not for Palin’s “death panels.” Far too many unneeded diagnostic services are being recommended by doctors who are either being paid to recommend them, or who’re too afraid not to recommend them, because of potential lawsuits. Then of course, there’s Medicaid, which also fills a sizable portion of the above graph. Many of, if not most Medicaid recipients, will never be a part of our federal tax base, and yet many of them will live long enough to appreciate Medicare services. More than a few will have offspring to repeat the cycle. By all accounts, as many as 50 million Americans use emergency out-patient services that are buried in the overall private and government healthcare costs. Are they among the other on the graph?

    American healthcare is so fragmented and unregulated that if nothing is done soon it will own us!

    Like

  17. Jim Wheeler says:

    To all who read or commented on my post about healthcare costs, “A Simple Picture”, I recommend the below link to a post on an excellent site called “Daily Infographic”. It specializes in displaying facts and statistics about subjects of interest of all kinds, and is complete with source references at the bottom. In this case, a post called, “Why America’s Healthcare Sucks”, I found much of my notions confirmed, but two of them surprised me. Please, check it out and let me know if you see any you disagree with.

    http://dailyinfographic.com/why-americas-healthcare-sucks-infographic

    Like

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s