The Budget Debate: Diane Rhem show today with Steven Moore and Robert Greenstein
The Diane Rhem show today featured a debate on the budget by two budget experts, Stephen Moore and Robert Greenstein... The show web page introduces them as follows:
Guests
Stephen Moore, member of the Wall Street Journal's editorial board and former President of the Club for Growth
Robert Greenstein, founder and executive director of the Center on Budget and Policy Priorities
The show was great because it took two people from both sides of the spectrum and allowed them to debate the budget, however, Stephen Moore got continuously ambushed and berated from liberal listeners on heart string issues that kept these two commentators from finding middle ground on positives about the budget, which they tried to do a couple times.The budget proposed by the Bush Administration argues to make permanent the tax cuts and make a series of cuts to federal programs while increasing spending on defense. There are a wide range of cuts both small and large, but most of the dollars come from Medicare including a program to mean test for wealthy seniors to pay higher premiums for Medicare. There are 141 small programs that are being cut that are earmarks and programs from both sides of congress. I don't want to focus too much on the actual cuts, because the information is out there. I think that special interest groups consistently draw our attention away from the meat and potatoes problems and harp on small issues that make one or the other party, whoever is in control, look bad.
I think there are several problems that face the US Budget and the way we go about approving it.
1. The main issues and problems around the budget revolve around our ballooning spending on Medicare and Medicaid. These programs are growing at double digits rates every year. There have been back and forth discussion about this, Stephen Moore argued to turn it over to the states, Robert Greenstein didn't have a solution, but commented that the growth rates are similar to private sector growth rates. However, these two things don't address the issue. The United States either needs a comprehensive universal health plan that provides a minimum level of coverage, a type of low premium high deductible plan and an option for premium service
2. When the Bush administration or another President cuts a program that affects, children, the elderly, or minorities, even if that program is a very small fraction of the budget, the tax cut is painted as rewarding the rich at the expense of the poor. Or the tax cuts hurt widows, orphans, single mothers, etc. which is not accurate and is used to further a special interest agenda, as government departments swell and budgets go out of control.
3. The New Deal is something is a seventy year old battle that we have been fighting which has been framing American domestic politics. Politicians play this game on both sides of the aisle to justify their programs or justify the cutting of them. The truth is that we need a new paradigm that has some social safety nets but turns certain things over to the market. In my mind, health care should have more government involvement while social security should become more private. These are the giant elephants in the room that need to be addressed. Nitpicking over $10 million dollar programs in a budget many times larger is ridiculous. Yes, these programs affect people, but their effects are grossly exaggerated.
4. Income inequality has grown and this is a problem. The truth is many people have become rich from asset bubbles of late from stocks to housing to commodities. The diminished strength of the union, which can only be attributed to globalization (which is positive on the larger scale), the loss of pensions and benefits at many companies, and the increasing cost of health care has put increased pressure on the middle class. The truth is that income inequality is due to the fact that most wealth in the United States is created through asset ownership, whether those assets be stocks, housing, small business, or any number of asset classes. The hard working middle class worker does not participate in these markets except through intermediaries such as pension funds. The middle class needs greater access to wealth creation, the first step of which is home ownership, and then later other assets such as stocks through 401(k) plans.
5. Most of the time, tax cuts do benefit the economy. It's that simple. Sometimes they don't have as great an affect, but they do spur innovation, more money chasing ideas and venture capital, as well as investment in assets. Bush's tax cuts fueled the housing boom and kept the stock market moving after the technology bubble crash. Of course, the main driver of this was the Fed, but the tax cuts freed cash that was spent on goods and services that kept the world economy humming.
In summary, the budget needs to refocus the income gap discussion. We need to refocus our "social safety nets" so that people's health is a higher governmental priority than their financial health, which they should become more engaged in through a culture of ownership. The two main issues are health care and social security discussed below. The way we handle these two large items in the future could determine the future success of the United States as a world leader and superpower.
America needs some kind of universal baseline coverage, with a higher level plan to be purchased from private carriers. America effectively already has a baseline plan, except that as the numbers of people with insurance decline, the remaining are paying for those people anyway. I believe that a three tiered system can achieve the goals of insuring the country. The first tier will involve standard checkups, testing, shots, all to be administered by nurses and physician's assistants. This tier of service will be completely paid for by the government. A second tier will be a high deductible low premium plan to be offered by or through the government (with a number of providers or just government administered) that will cover emergencies and other high cost medical items. The first two tiers will be mandatory and be paid through a tax increase on corporations for the first tier and the second tier will be paid by each individual or for a family. The third tier will be an elevated service level that will be entirely private, with private insurers, doctors, and hospitals. The second and third tier will overlap as necessary. Just a thought. I could write more in another post.
As low income people pay into social security, they need to feel that the money is going somewhere that they can access when the time comes, and they need to be the judge of what is sufficient and what is not. We need to have financial safety nets, but they need to be spread wider and not be the result of passing fancies of whomever is in office. Those safety nets must help people in tough situations and provide for a reasonable retirement and pension. I think we will get there faster through privatizing social security than from continuing to fund it.
