We haven't heard the end of the debt crisis

The good news is that Congress has settled on a debt deal. The bad news is that it took so much anguish to accomplish so little.

Any deal is better than none at all, of course, but the numbers show what a minor impact this proposal will have on our long-term debt problem.

The Congressional Budget Office says the federal government will spend $46 trillion over the next decade. This deal cuts slightly less than $1 trillion from discretionary spending over that time.

When a country borrows 40 cents of every dollar it spends, that's simply not enough.

What remains completely untouched is the real problem — entitlement spending, which is a code word for the care and support of old and poor Americans through Social Security, Medicare and Medicaid.

What's been done so far, after months of haggling and hand-wringing, will cut about 3 percent from federal spending, still adding more than $7 trillion to the deficit between now and 2011.

Sen. Lindsey Graham, D-South Carolina, said this of the package: "We're no longer running toward oblivion, we're walking toward it."

The dubious gimmick in this debt deal is a "trigger" mechanism that requires a task force of congressmen to find another $1.2 billion in cuts over the next four months.

If that fails, which seems likely in the run-up to next year's elections, automatic cuts will be made to Medicare, Medicaid and defense spending.

Maine might be particularly hard hit as the oldest state in the country and with its dependence on Bath Iron Works and Navy shipbuilding.

The history of Medicare/Medicaid cutting has not be reassuring. Medical providers have tended to increase the prices paid by private insurers to offset federal program cuts. Hospitals already complain that Medicare/Medicaid reimbursements do not cover the cost of services provided.

When cost-shifting occurs, private companies tend to reduce benefits or drop their insurance plans entirely.

So, in the end, working Americans are simply left paying for the care of elderly and poor Americans, just out of a different pocket.

What we've largely done in the U.S. is outsource the care of the elderly to the federal government through Medicare. This has largely relieved American families of the cost of caring for their very elderly parents and grandparents.

Simply cutting Medicare would shift that end-of-life cost burden back to American families, which they will neither enjoy nor tolerate for long.

It's hard to believe that more attention is not being paid to actually reducing the cost of medical services.

The decision locally by St. Mary's Regional Medical Center to open a satellite office in the local Walmart, and post prices for services, is a small example of the type of creative thinking required.

In the end, however, it will take a variety of approaches to solve this problem, from means-testing for benefits to eliminating tax loopholes and even raising taxes.

As much as we hate to say it, this debt/spending/tax struggle has only just begun.


The opinions expressed in this column reflect the views of the ownership and editorial board.

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Producing jobs?

It is true that government cannot produce "private sector" jobs. However it is also true that businesses do not exist to create jobs. They exist to create profit and there is no profit in creating jobs for which there is no demand. That is why our businesses are sitting on a pile of profit and not creating jobs for which they do not see a demand. It is government that can stimulate demand. Say the government decides to do a large infrastructure project paid for with our tax dollars. Lots of jobs for people who go shopping and that creates demand. Companies are swamped with orders they can't fill and since those jobs are stable companies feel they can hire. Now we have more jobs and more people shopping and all of them are paying taxes contributing to a balanced budget and that is called a booming economy. We have done this so many times before it stuns me how many people don't get it.


The bottom line

With all the gas and hot air flying around Washington these last 2 weeks it is not surprising that we would end up with a steaming pile of something too gross to describe. Judging by the outcome, this was not about reducing debt or balancing the budget since it accomplished little of either but about creating uncertainty in the markets by spreading out this debate over to the next election. This will freeze up investment in our economy harder than a brick given investors' hatred of uncertainty. It will discourage businesses from hiring or expanding and cause the states to lay off people due to uncertainty over federal funding. While it will give Republicans a nice issue to club Obama with by spinning it as his failure to produce jobs it will be too bad for anyone who needs to move, get a job, sell a house, buy a car, retire or go to college between now and the next election. Those folks are pretty well screwed. And as for the "Super Congress" ? Funny the Founding Fathers didn't think we needed that. Where are all those folks that are always quoting them now?

Jim Cyr's picture

The true bottom line is

Ms. Gamache is that no government can "produce" private sector jobs.

Jim Cyr's picture

Haven't heard?

It's about time and long over due. Mr. Rhoades, Social Security was never intended to be an "entitlement". We pay in directly. Food stamps,section 8, corporate and other welfares are entitlements. Stop scaring the elders and stick to the root of the problem,"SPENDING,SPENDING,SPENDING". And the last budget contained over "19,000 ear marks". And how about all those staff personnel of the current D.C. administration getting huge raises and yet those on fixed get no COLA for the past 3 years? You as well as congress have a misunderstanding of true Fiscal priorities!

 's picture

Too Many People Living off the Fat of the Land

If we were all working hard to make our own way, this fiscal mess that is the USA would be a different environment. But, sadly from my perspective, we are not. The "Great Society" of LBJ spawned an entitlement class that has grown to include nearly 50% of Americans.

It's grown to an extent that it is too large to disband. We are headed to oblivion, that I am absolutley certain of.

I expect to lose Social Security, Medicare, my 401-k, my job and likely my life to the "system."

As to the myth that more taxes will solve our national mess, I urge the reader to study the "Laffer Curve." We are over the top of the curve and on the way down the parabola.

And, remember, 45% of Americans contribute nothing to in income taxes to the tax rolls.


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