Debt Hysteria Housecall

A conservative Globe blogger is in serious need of some timely counsel, and, being a conscientious public servant, I am here to provide it. He commented on my recent post, Let’s Agree:

We, all of us, in America, today are facing a $65 Trillion HOLE (Ok, plus or minus a “little bit”). Said another way…each and every American is “in hock” for about $550,000 due and payable some day.

And the crazy thing is NO ONE talks about that number nor does ANYONE propose how to fix it, “on bite at a time”.

And:

Well it is possible for a man to eat an elephant. But he must do so one bite at a time. But while we all argue, the NUMBER just keeps on going up and up. THERE, Duane, is the curve that MUST be bent, NOW. Just how deep is a $65 Trillion “cliff” I wonder?

Richest nation in the world my hind foot. Not with that kind of balance sheet!!!

Anson 

Dear Anson,

Because I hate to see you in such a state, as your Doctor of Tranquility, I am offering my limited help (I’m not a Doctor of Finance, remember) in treating the unfortunate hysteria you are suffering over the issue of the alleged “65 trillion” dollar financial “HOLE” you claim the country is about to disappear into. (Or are we going off a cliff? Or eating elephants? I forget.)

You should know that people who make that frantic $65 trillion charge (or any of the other various amounts) in the way they do are using what I consider to be the accounting equivalent of junk science:

First of all, the term “unfunded liabilities” has normally been used in right-wing, fear-generating blogs and articles and Fox “reports” on this very long-term wild speculation you mention, but that term has been lately discredited (because a “liability” is more of a legal term and promises made by the government are not actually legally binding on it). I notice now many folks are using the proper term, “unfunded obligations,” which is more accurate, but still junk, when used in the kind of analysis you referenced.

To put it as simply as possible, what you are referring to with your scary high number is the difference between projected federal financial commitments under current law and the projected revenues available to cover those commitments—over a completely arbitrary time horizon of 75 years.

These obligations are not technically “debt,” since Congress is free to pass legislation that would eliminate them altogether (don’t try doing that with your debt, by the way). And it is beyond silly to say “each and every American is ‘in hock’ for about $550,000 due and payable some day.”

Second, that time horizon (did you even know what it was?) could just as well have been 750 years and that big and fat and scary number would have been even bigger and fatter and scarier. (Let me see, what comes after “trillion”?)

The truth is that no one—or almost no one—actually believes these numbers are accurate for a lot of reasons, most notably that policies and situations change quite frequently over even short periods of time (just look at budget surpluses under Clinton and deficits under Little Bush), and 75 bleeping years is sort of a long time, don’t you think?  Go back 75 years (1936?) and imagine a bureaucrat in the government, perhaps Newt Nostradamus, estimating “unfunded obligations” in 2011. It is absurd on its face.

And while we’re at it, the Social Security and Medicare Boards of Trustees have said that

Projected Medicare costs over 75 years are about 25 percent lower because of provisions in the Patient Protection and Affordable Care Act…

Do you believe that? Of course you don’t.

The reason some conservatives promote hysterical talk about such things as unfunded liabilities and use such frightening language is because they seek to dismantle or sharply reduce our social commitments and scaring the public is one way, they believe, they can do it. 

While it is true that Medicare funding is a big problem in the out years, it is not, as I demonstrated recently, an insurmountable one, if policies to control health care costs are implemented and other things are done, like, say, raising revenues.  And they will get implemented and revenues will get raised, in some way at some time. So, get some sleep and stop worrying about it, for God’s sake. (Or, if you can’t sleep, use the up time to write your favorite Republicans and urge them to get real about taxes.)

Third, there is a comparative fallacy involved in these numbers. The gap, instead of being put in the form of aggregate unfunded dollar commitments, should be put in the form of percentage of projected GDP, which would attempt to account for economic growth over the time period. That way future gaps could be more fairly compared with today’s gap.  But then those numbers wouldn’t look or sound so damn scary, would they?

Fourth, let’s look at those “unfunded obligations” in a way that conservatives won’t like.  Let’s discuss Pentagon spending in those terms.  Is defense spending an obligation? Yeah, sort of (see the Constitution). And, like Social Security and Medicare, is there a Pentagon tax dedicated to our national defense? Huh? Nope, there’s not.  So, using the analysis you are advancing, every single dollar of necessary future military spending is an unfunded obligation, right?  That means, projected over 75 years, the gap between revenues specifically dedicated to the Defense Department and the projected military spending is, well, it is more money than God, or even Mitt Romney, has!

This stuff the right-wind peddles is analytical junk, Anson.  There really are no such things as “unfunded” obligations because the government has the power to tax to meet them. And using such language in the context you and others use it unnecessarily scares people who don’t know any better, and it doesn’t help arrive at rational solutions to our very real problems with long-term debt. 

The fact is you don’t need those misleading large numbers to make the point—which nearly everyone understands by now—that some important changes in Medicare (and a tweak or two in Social Security) are necessary to keep us fiscally sound.  Indeed, distorting the picture so grossly tends to lead away from careful, reasonable solutions in favor of distinctly reactionary and irrational ones. (Of course, as I said, some folks on the right wouldn’t mind that one bit, as long as the New Deal fell victim to such panic.)

But I am under no illusion that you, in your zeal to save the country, will stop worrying and stop trying to scare the bejesus out of people because you are fixated on our debt problem and therefore welcome uncritically any analysis that generates fear over it.  And I am certain you will not now listen to,

Your  Doctor of Tranquility,

Duane

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4 Comments

  1. As usual the EC only cherry pick’s that which promotes the minority left wing view and ignores the reality of the actual situation.
    While the statement about Obamacare lengthening Medicare is true on the surface, we all know the truth is in the details.
    And the details in this case are that the rosy Medicare situation the EC wants you to believe is it relies upon provider payments being reduced and phasing out Medicare advantage; two things that Congress has not done, cannot do, and will not do. And let’s not forget the double dipping of 500 billion in Medicare savings, transferred over and then spent on the new entitlements of the ACA.
    There is a reason for the 2010 shellacking the EC’s left wing and the Dems took. The majority of America actually gets the fact that the federal government is far too large, far too expensive, and far to intrusive in their daily lives. They understand, like Anson, that the debt issue facing America today is almost as dangerous as left wing bloggers spewing out half-truths and understatements in an attempt to convince the public to just “move along” and “all will be fine”.
    Today starts the first step down the path to November 6, 2012 and the end of one of the most inept administrations in history.

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  2. ansonburlingame

     /  January 3, 2012

    Duane,

    You actually surprised me with this blog. I thought you would use far more substance than rhetoric to refut the David Walker article that I have linked. HE, not me was the Comptroller General of the U.S. for 20 years and I am sure knows far more, technically, not politically than either of us knows about this subject.

    NOW, if no one knows anything about unfunded liabilitites, why did the Obama administration put such a chart (see page 43) own THEIR own report.

    I must have posted my more detailed blog on some of the specific contents of the report, with a direct link to same, after this rebuttal. You can find it “over there” if you like.

    But I do agree that the $65 Trillion can be wiped out by votes from Congress, like abolishing SS and Medicare completely for starters. I also submit that the Ryan Plan WOULD have put a dent in that number.

    Now please try to tell me what our CURRENT, real debt might be? We will even argue over THAT number.

    Now there is more than enough “stuff” written by the administration lackeys for you to cherry pick in the report to make you very comfortable and think that all is well in River City. I of course will disagree with such an assessment.

    And thus we can all meet on Nov 6th, and make a decision as a nation. But for me this federal government report underpins the whole fallacy of the current administration and its crazy economic politices.

    And I for one have had more than needed to disregard your “quakery” as a Doctor of whatever. You have been spinning your “wives tales” of economics for a long time now.

    We all know that much MUST be done, starting now, in my view, to gain control over our terrible financial condition. And what do you propose? Why of course MORE DEBT NOW for your universal HC schemes.

    But fear not America, Duane assures us all that AFTER he gets universal HC we will get serious about debt and deficit. No that is not correct either. We have to regain all our old jobs, at much higher union mandated wages as well, before we worry about deficits and debt, right?

    Whatever it is that you are smoking, Duane, best leave it for recreational uses and not while blogging!!

    Anson

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  3. If we are to eat the elephant, let’s start with ending the unpopular Bush tax cuts.

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  4. ansonburlingame

     /  January 3, 2012

    No Sekan,

    What you really want is the end Bush tax cuts on the “rich” only, is it not?

    And you know as well as I do that any revenue enhancements from such tax increases will NOT be used to migtigate the deficit. You will use such chump change to pay current bills AND implement NEW programs, like your crazy HC reform ideas.

    Try this one, liberals. Avow that any revenue increases from INCOME tax increases will ONLY go to pay down the debt, period!!

    Raise $70 Billion and year and watch $17.492Trillion go DOWN to $17.422!!! next year. And NO “actuarial gimmicks” please to show that happening. Keep apples to apples for comparisons!

    Anson

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