Before the President delivered his much anticipated budget speech on Wednesday, my fellow GPP blogger asked, “Where are our leaders?” He’s right to ask the question, particularly after watching the President talk. For those looking for a detailed response to Cong. Paul Ryan’s budget plan, this was not the speech for you. The details were replaced with high-minded rhetoric about why government is needed to fix all of society’s ills and was basically just another campaign speech for Obama 2012.

The President also took the occasion to excoriate Mr. Ryan and his plan, claiming it will all but take food out of children’s mouths and kick grandma to the curb. Of course, Mr. Ryan graciously sat just a few feet away taking these blows because the President insisted he be there. And to think, this is the bipartisanship President Obama had in mind when he was talking about change.

Yesterday Mr. Ryan had a chance to respond to the President in the Washington Post. Here’s an excerpt:

“It [the GOP budget] offers a contrast in credibility. Unlike the president’s speech, which was rhetorically heated but substantively hollow, our budget contains specific solutions for confronting the debt and averting the most predictable crisis in our nation’s history. It also offers a contrast in visions. Unlike the speech, our budget advances a vision of America in which government both keeps its promises to seniors and lives within its means…

If you are someone who agrees with the president that we cannot avoid this outcome without resorting to large tax increases, know this: No amount of taxes can keep pace with the amount of money government is projected to spend on health care in the coming years. Medicare and Medicaid are growing twice as fast as the economy — and taxes cannot rise that fast without a devastating impact on jobs and growth.

If you believe that spending on these programs can be controlled by restricting what doctors and hospitals are paid, know this: Medicare is on track to pay doctors less than Medicaid pays, and Medicaid already pays so little that many doctors refuse to see Medicaid patients. These arbitrary cuts not only fail to control costs, they also leave our most vulnerable citizens with fewer health-care choices and reduced access to care.

And if you believe that we must eliminate waste, fraud and abuse in these programs, know this: Eliminating inefficient spending is critical, but the only way to do so is to reward providers who deliver high-quality, low-cost health care, while punishing those who don’t. Time and again, the federal government has proved incapable of doing that.”

Well said, Mr. Ryan. Now if only the President and Democrats would join the conversation.

Today we need a leader, not a politican or celebrity.

Senator Barack Obama in 2006 in reference to his ‘No’ vote on raising the debt limit:

The fact that we’re here today to debate raising America’s debt limit is a sign — is a sign of leadership failure. Leadership means the buck stops here. Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better. I therefore intend to oppose the effort to increase America’s debt limit.

Senator Obama was right. Today, President Obama is set to make a speech outlining how he would lead the country through our mounting fiscal crisis. I have the word ‘lead’ italicized because so far as President, Barack Obama, has done everything but lead on this issue. Just a few months ago he put out a budget for the next ten years that featured more than a $1 trillion dollars of debt annually. He used the fiscal crisis to pass another unfunded and uncontrollable entitlement program at a time when our current ones were becoming untenable. This is a time for leadership and so far President Barack Obama has refused to lead. Let’s hope today that changes.

Medicare is in serious trouble. This is not propaganda nor is this a secret. And this is also not a surprise. This is so for three very simple reasons. First, when Medicare was first created, the average American male was living into his 60’s and the average American female was living into her 70’s. Today, men are living into their 70’s and women are living into their 80’s and even 90’s. Second, when the program was created the Baby Boomers were just that – baby boomers. Today, they are retiring at a faster rate than there are young workers to support them.

Third, when Medicare was created its cost was expected to rise with inflation. It didn’t take long to realize how absurd this notion was, having grown at several times the rate of inflation for decades now. For example, at its inception in 1966, the program cost about $3 billion a year. The House Ways and Means Committee projected that in 1990 it would cost about $12 billion (a figure that accounted for inflation). What was the real price tag in 1990? $107 billion. And the out-of-control growth of the program has continued at a rapid rate. Today, the program consumes almost 15% of the federal budget. (Remember, this is separate from the additional funds spent on other big entitlements like Medicaid, SCHIP and of course, Social Security which have their own budget issues).

So it’s clear something needs to be done to alter the structure of the program. That is, if we are to have any faith that it will be around for us below 55 years old or that we will be able to honor its commitments to those over 55.

Unfortunately, for many Americans, it’s a struggle to get this far in the conversation.

Moreover, once we get this far, we have only just acknowledged the problem. The trickier part is what follows – the conversation over how to put the program on a sustainable path. This is what Cong. Ryan’s aggressive budget proposal tries to do and why he should be lauded. Ryan’s plan attempts to springboard the political discussion past the question of whether we have a Medicare problem and demands that legitimate participants in the discussion talk about actual solutions for the way forward.

I’ll save for another post an analysis of Ryan’s budget and the Medicare solutions on the table but first, it’s important that we all at least acknowledge what has been glaringly obvious for far too long – Medicare as currently structured is unsustainable.

An often overlooked fact in the race to condemn America’s health care system is that of the roughly 48 million individuals listed as uninsured, only about 8-10 million of them cannot pay for health care due to chronic illness or pre-existing conditions. That’s right – about 3-4% of the U.S. population! So what happened to the other 40 million people?

* Roughly 30% of them (14million) are eligible for Medicare, Medicaid and SCHIP already but just haven’t signed up.

* Another 40% (18 million) earn over $50,000/year, many of which fall into the “young invincible” category that purposely decide not to buy insurance because they are healthy.

* And nearly a quarter (10 million) are merely residents of the U.S. in the form of legal and illegal aliens, thus most of them naturally fall outside our system – but nonetheless still receive care when they go to the ER.

Despite these facts, increasing access to care for “the 48 million uninsured Americans that don’t have health insurance” was a rallying cry during the health care fight. In fact, one of the biggest benefits claimed by proponents of the bill and the President is that 32 million people will be added to the insurance rolls because of the bill’s Medicaid expansion and federally-subsidized state exchanges. Roughly 16 million of these individuals are expected to join Medicaid’s already-overflowing rolls.

While this is sold as increasing access to care for those who were denied it before (which we see by the numbers above is an egregious mischaracterization of reality), it’s worth looking at the “increased access” that these 16 million new Medicaid recipients are likely to receive.

A new study by the Center for Studying Health System Change finds that the states facing the largest expansion of their Medicaid programs due to Obamacare’s mandate (South and Mountain West states) are unlikely to have an adequate number of primary care physicians (PCPs) to treat these new recipients.

And the costly incentive to attract PCPs to treat these Medicaid patients might also be for naught. Obamacare calls for a two year increase to 100% of Medicare reimbursement levels for PCP’s who see Medicaid recipients. Again, this sounds good but not only is the incentive a rather short one – reimbursements dropping precipitously to current levels in 2015 – the states that currently pay the lower rates already have the most expansive Medicaid programs (e.g., New York, California, New Jersey, etc). So any increase in payments to PCPs in these states will likely have minimal effect on adding recipients. Conversely, the states in the South and Mountain West that are facing the drastic shortages of PCPs already pay higher rates near 100% so this temporary incentive is unlikely to increase patients’ options there either.

Ultimately, we will have more people on government health insurance choosing from a smaller percentage of doctors at a higher cost to taxpayers. And what do we get for this? The ability to say we increased access to care for 16 million more individuals (I’ll touch the state exchanges another day).

I don’t know about you but, if these are the good intentions we hold so high, it must be true what they say about the destination…

For me the question of government subsidies for any industry or program comes down to the fundamental role of government. Does the government exist to keep in business or prop up companies that cannot compete in the marketplace on their own (btw, I think PBS/NPR would do just fine without federal funds)?

Is it the government’s role to subsidize radio and television in an age of unlimited choices in both sources of information and means of acquiring that information? Is it a worthwhile priority when we face massive budget deficits and a public desire for spending cuts, no matter if the cuts are but a fraction of the spending cuts requested? Is it fair for me as a taxpayer to be forced to subsidize radio and television programming that has a political slant opposite mine? Would a publicly-funded conservative radio station not raise the same complaints (I think even more ferociously) from those on the liberal side of the spectrum? And on an even more basic level, if the merits of public broadcasting are so worthwhile, why is there such concern that supporters of those programs will turn their attention away or not contribute to the stations once privately-owned?

Personally, I enjoy Charlie Rose and the occasional PBS documentary. And I wouldn’t mind if I had to watch a Ford Motors or Pizza Hut commercial in exchange for my tax dollars being diverted to support more basic government services which I believe, are currently being both ignored and mismanaged.

Stipulating that NPR/PBS do have a liberal bent, proponents argue the stations are merely providing a balance against the overwhelmingly conservative nature of talk radio and popularity of Fox News. This sounds good at first. Most people like the idea of balance and a level playing field. Unfortunately, when the government gives money to one company and not to its competitor, there playing field is inherently NOT level.

If the public wants balance in its radio and television broadcasting options, it is free to choose programs that provide that counterweight. In fact, Air America attempted to provide that counterweight on radio and it went bankrupt in less than six years. This didn’t occur because Rush Limbaugh and Sean Hannity cheated the system or even had more money backing their effort. It happened because Air America failed to provide broadcasting that the public wanted to listen to. The same can be said of MSNBC today relative to Fox News – they simply do not provide content that has attracted the majority of listeners/viewers. You can blame the public for their preferences but you certainly cannot fault the successful stations and entertainers for providing content that people want to listen to.

This is the way our system should work. People should be free to choose who and what they listen to, when they listen to it or even if they want to listen at all. The same principle applies to what cars people choose to drive or what stores they shop at. People should be allowed to vote with their feet (or hands, in the case of changing the station). And if that means NPR will go out of business because people do not want to listen to advertisements or commercials, then maybe it isn’t all its cracked up to be.

I would like to thank David Harsanyi of the Denver Post and The Detroit News for helping me compile this small list featuring just some of the bureaucratic web that is our federal government:

• 56 separate programs to help people better understand their finances
• 18 federal food and nutrition assistance programs, costing taxpayers $62.5 billion in 2008
• 10 agencies or departments administering 82 programs dealing with teacher quality
• 80 different economic development programs
• 15 different agencies overseeing food safety
• 18 programs responsible for delivering food assistance to the poor
• 24 federal agencies operating data centers
• 20 programs dealing with homelessness
• 44 programs among Education, Labor and Health and Human Services Departments delivering employment and job training programs
• 5 agencies within the Transportation Department administering more than 100 involved in surface transportation, highway, traffic safety, and railroads

I’m sure many of these programs serve a valuable purpose, but the redundancy of similar programs showcases a federal government that has grown to such a size that it is just feeding off it self. Bureaucracies by their nature grow they don’t wither and the plethora of these programs and departments listed above is proof. Eighty-two programs for promoting teacher quality! We are just talking federal level here, folks. Under President Obama, the budget of the Department of Education has more than doubled, with even this year, where ‘austerity’ is in vogue, seeing it grow another 4.2%. This is not money for books or better teachers, this is a raise for the bureaucracy known as the Department of Education.

In this chart below made by the Cato Institute, one can easily see the growth of all aspects of government from 2007-2012:

I would like to highlight the tremendous growth of ‘Other Mandatory’, which according to CATO features federal employee benefits, food stamps, etc and ‘Domestic Discretionary’, which of course features funding for bureaucracies like the Department of Education, Transportation, etc. President Obama has said that he wants to freeze spending on these sectors. Well, that’s nice, but how about we bring them back down to a level pre-Stimulus spending binge instead. It’s like our government has had 10 shots of patron and said ‘that’s enough, I’m done’. Unfortunately, that leaves us all in a sick and woozy position.

Since passage of Obamacare, Democrats of all stripes have been interested in talking about almost any subject other than health care. Put aside talk of a signature achievement, this has been a Pandora’s box of bad policies and politics that Democrats have had to either defend at their peril or run from without directly insulting their party’s leadership and President. At this point, it’s almost a contest to see what claim proved the most outrageous, non-sensical or downright not true.

One of the first claims to fall apart was President Obama’s oft-repeated promise, “If you’ve got health insurance, you like your doctors, you like your plan, you can keep your doctor, you can keep your plan.” Since passage, health care providers have begun consolidating to avoid business-killing taxes and regulations. Insurance companies have been forced to raise premiums to account for scores of new benefit mandates and restrictions on what types of plans they can offer. And small businesses are looking to cut costs by dropping coverage for their employees who will now have to look to the expanded Medicaid program and the state exchanges to cover them. All of these adding tremendous costs and weight to a system that was supposed to become more efficient and cost-effective.

What this has mean for the private sector so far is an effort to get out. And one year out, over 1,000 waivers have been granted by the Department of Health and Human Services (HHS) to unions, non-profits and companies negatively affected by the legislation. Ironically, a cursory review of the waiver list shows a disproportionate number of unions, whom you may remember, were some of the bill’s loudest proponents while it was being debated. Unsurprisingly, when forced to comply with its provisions, unions demonstrated their special status with the Obama Administration and demanded to be saved from this very expensive law.

And it’s not just the basic health care plans that are being altered. Millions of Americans who rely on their FSA’s (Flexible Spending Account) to pay for their child’s special education schooling or HSA’s (Health Saving Account) to pay for over-the-counter medicines will have to find other, likely more expensive options , to get these benefits or pay for these services. Unfortunately, those seeking to actually restrain health care costs are the real losers because it was programs like HSA’s, FSA’s and Medicare Advantage – which also took a major hit under Obamacare – that sought to inject competition into the process and more importantly, give more control over health care costs to the consumer.

Strangely, Nancy Pelosi’s statement that “we have to pass it to find out what’s in it” has proven quite prescient. Slowly but surely, as more of the law’s thousands of provisions are painfully unearthed, we are forced to deal with the explosion of costs, rosy revenue projections, overly burdensome nature of the regulations, and generally unconstitutional nature of the bill’s central provision. I could go on – and I plan to in future posts – but I feel each (broken) promise and corresponding reality deserves its own special attention.

Perhaps next time I’ll discuss what I think could be the biggest whopper of them all, “Obamacare is going to add 30 million people to the insurance rolls AND save billions of dollars doing it.” I know, try not to laugh too hard.

So, what’s your favorite broken promise of Obamacare?

This picture cost the Pentagon $25 million dollars

My blogging colleague FMFP’s recent writings on the ongoing struggle for the US government to agree on a budget for this coming year highlighted the discrepancy between mandatory (entitlement programs such as Social Security, Medicare, and Medicaid) and discretionary funding, basically everything else the government pays for, including defense spending. FMFP cited a poll that showed that far too many Americans are unaware of the fact that entitlement spending is what is really driving our country toward insolvency and another poll by WSJ/NBC also portrays an American populace unwilling to give up any ‘significant’ portion of these program’s benefits to fix the budget. FMFP, after using Tarrance Group poll results showing that a majority of Americans think the government spends more on defense than on entitlements, accurately pointed out defense/security procurements take up roughly 20% of the budget while Social Security and Medicare take up almost twice as much and are expected to explode in coming decades.

It is this context, that I recently read Robert Kagan’s article ‘The Price of Power‘. Here’s his intro:

In other words, if the US really wants to cut down on our defense spending we are going to have to change or adjust our strategic posture. To some, specifically Jeffersonians and domestic liberals, a smaller US military would be overall beneficial: more money for social programs/less military adventures abroad. For others, a lessening of our international presence will lead us and the world down a potentially dangerous path (great power war, global instability) that will cost us much more than 20% of our budget to get out from under.

I have to admit, though I’m clearly in the ‘US military and global presence is a source for good’ camp, I have to admit that our modern defense industry is bloated and could use some trimming. Greg Scoblete of Real Clear World rightly points out that overall the US currently finds itself in more sure security surroundings compared to the Cold War, WW II, etc. I believe the US needs a strong presence in East Asia to combat a growing China and keep allies such as Japan, Indonesia, and South Korea secure. The scourge of Islamic terrorism is as real as ever and demands a secure homeland and strong military, diplomatic, and intelligence network in numerous hot spots around the globe to deter and defeat. Global trade, which still depends largely on maritime travel, demands safe passage through the earth’s oceans and seas and there is no better guarantor of that than the US Navy. The Middle East, which includes a menacing regime in Tehran, a Turkey posturing away from the West, a vulnerable ally in Israel, oil supplies and pathways up the wazoo, is cauldron of instability and no one knows where these popular uprisings may lead. I could go on…

So in short, yes, I do think the United States could sustain some cuts in our defense spending, but we have to admit that this will come with some costs. which we must choose wisely. and we must not let these cuts distract us from our real budget calamity, ever expanding entitlement programs. This country and the world need a strong American presence and for this to be maintained now and in the future we need not only a capable military, but a fiscal future that doesn’t look so much like present day Greece.

As I wrote yesterday, the Continuing Resolution (CR) likely to arrive at the President’s desk today or tomorrow will grant the government a two week reprieve from what many people were preparing for – a government shutdown. Rightly criticized for simply kicking the can down the road, I’m curious to see what will happen in two weeks considering the broader divide between the Senate Democrats and House Republicans has not really been addressed. In fact, all sides knew this deadline was coming since the 111^th Congress passed their CR back in December. So passing this two week CR doesn’t exactly inspire confidence that an agreement to fund the government through September is imminent.

Like many major budget battles, much of the dispute (and ultimately, the resolution) resides in the varying effectiveness of each side’s public relations effort. The Republicans’ position is that America’s high debt and stagnant economy are symptoms of the larger problem – a government that is bloated and spending at unsustainable levels. Therefore, we need to cut the size of government starting with discretionary spending (as opposed to entitlement spending that is considered mandatory). The Republicans claim these cuts are both a down payment on further spending reforms to come and a fulfillment of their campaign promise to rein in our debt (roughly $14.3 trillion) and deficit (projected at $1.6 trillion for 2011).

The Democrats’ position is that our economy is fragile right now and any major cuts like the ones proposed by the Republicans will deflate our current recovery (see yesterday’s reference to Goldman Sachs and Moody’s analysis claiming a loss of 700,000 jobs if Republicans plans to cut $61 billion are adopted). In a nutshell, their argument is that now is not the right time for cuts (without necessarily stipulating that cuts in the future are altogether necessary).

So who’s right and perhaps more importantly for our current discussion, who is winning the public relations battle? Well that’s obviously a complicated question but it just might be the Democrats. On one hand, we see a sustained interest among the public in reining in government spending – cutting the Republicans’ direction.

But on the other hand, we see a real misunderstanding among the public over the composition of government outlays (spending in real people language). For instance, a recent poll released by Tarrance Group shows:

“A majority of voters incorrectly believes the federal government spends more on defense/foreign aid than it does on Medicare and Social Security (63%). Also, a similar majority (60%) incorrectly believes problems with the federal budget can be fixed by just eliminating waste, fraud and abuse. Voters do not casually agree with these untruths- at least 40% strongly agree. Further, less than half (44%) believe Medicare and Social Security costs are a major source of problems for the federal budget (49% disagree).”

These numbers should hearten Democrats because they cut against (factually correct) claims made by Republicans that 1) entitlements/mandatory spending remains the biggest budgetary problem and 2) spending on non-defense discretionary programs (where most of the stimulus dollars were allocated) is also out of control. I’ll back up the assertions just made in a second, but first one more point for the Democrats. The poll demonstrates the prevalence of a long-standing liberal position among the public. Specifically, the claim that defense spending is at least as much – or more, depending how liberal you lean – to blame as entitlements for our budget problems.

Now for the facts. Discretionary spending – including defense – is roughly 1/3 of the federal budget. The other 2/3? You guessed it – mandatory spending, made up primarily of the big three: Social Security, Medicare and Medicaid.

Even if we were to take the poll’s findings head on, we would still find the public’s beliefs dubious. Defense/security spending equals roughly 20% of the federal budget. Social Security and Medicare? Roughly 35%. And even scarier, mandatory spending is growing nearly five times the pace of discretionary spending. So it’s really not even a close call. (Btw, I used a liberal-leaning think tank for these numbers in case you were wondering – the Center on Budget and Policy Priorities).

Since I’m trying to keep these posts at a manageable length (and not really succeeding), I’ll close with my main points. The Democrats seem to be in a strong position if they can sell their position that the real problem is defense spending and the fragile economic recovery is dependent on maintaining government’s current level of support.

Meanwhile, Republicans have a long road uphill to educate the average American on the serious budget problems facing the country and the relatively minor impact the discretionary cuts they’re proposing will have on the economy. Ultimately, they need to convince Americans that the problem lies not just in eliminating waste, fraud and abuse, but rather setting priorities on what we can afford as opposed to what we would like to be able to pay for.