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Cave in Obama puts Social Security and Medicare in budget deal

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(Article changed on March 22, 2013 at 14:47)

by Downing Street

(Washington, DC 3/22) Yesterday we found out that President Barack Obama put Medicare and Social Security in the budget deal mix; timely but not thoughtful.  Is this a profile in cowardice?  Maybe not.  Let's give him the benefit of the doubt and assume that cutting these two programs is part of the Obama Money Party agenda.  That's the elegant explanation and explained below. (Image: Downing Street)

Here's what Bloomberg reported (thanks to Lauren Hallahan's list for the tip):

"President Barack Obama told Senate Democrats that they should be open to changes in entitlement programs to achieve a long-term budget deal, according to several lawmakers who attended a meeting with him on Capitol Hill today." Bloomberg, March 21

Social Security does not contribute to the deficit.  In fact, without the annual appropriation of Social Security funds , cash flow for the government would experience serious cash flow prolems.  Each year, Treasury takes Social Security tax revenues to fund the general budget.  Treasury leaves an IOU promising to repay beneficiaries down the road.  The promise is guaranteed by the "full faith and credit of the United States of America."  Who would take the word of the (s)elected "crooks and liars" given all the betrayals we see on a regular basis?


Paul Krugman called the process of cutting Social Security and Medicare an "austerity bomb."

"We're going to have substantial spending cuts, substantial tax increases at a time when the economy is still very weak. And, of course, that's a recipe for sliding back into recession/depression.

"So, we set ourselves up with the land mine in the road in front of our economy, which is not based on anything real. It's just based on our political mess."  Paul Krugman, PBS, December 12

The Social Security program is secure. It doesn't need a backdoor fix like chained CPI which sneaks in cuts by redefining the consumer price index.  It certainly didn't need Bailout Tim Geithner of Wall Street as Chairman of the Social Security and Medicare Board of Trustees during a critical period.  Nor do those programs need the carefully crafted propaganda in Geithner's 2012 report from the trustees that justifies the Obama proposal.  Obama referred to Geithner as "my good friend Tim" when he nominated him for Secretary of the Treasury.  He should have called him "my good friend and future partner in crime."

Medicare is a victim of its success.  People are living longer.  As a result, the use benefits longer.  Medicare costs are actually stabilizing as a portion of gross domestic product (GDP), based on data from the last five years.  In an excellent article on future trends, Peter Orzag shows that a continuation of this trend puts Medicare at 3.8% of GDP by 2085 instead of the common projection of 6.7%.  Medicare was 3.6% of GDP in 2011. The flat rate projection is not firm but, clearly, the near doubling of Medicare as a percent of GDP needs some serious revision.

A major program contributed to cost reduction.  The federal government's Partnership for Patients developed and implemented successful efforts to reduce hospital re-admissions  (within 30 days of discharge).  It worked and the impact is substantial.

Two other actions would add a greater chance for Medicare's financial viability.

Allow Medicare to negotiate medication discounts with big pharma.  Congress barred the program this logical form of cost reduction.  The Veterans Administration achieved extraordinary savings with this tactic.  Barring Medicare from the same negotiated deals is a subsidy for the pharmaceutical companies.  It violates free market principles and hurts seniors.  How can Republicans and Democrats allow this to stand? (That's an ironic, rhetorical question.)

Michael Collins

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