The General Accounting Office Says ‘the End Draweth Nigh’ Bleak future for U.S. as Congress continues to undermine efforts to balance the federal budget
by Bill Sardi by Bill Sardi
The General Accounting Office (GAO) has issued a sobering picture of the future economic condition of the United States, a scenario where a full economic collapse is inevitable, with the only remaining questions being "how and when the nation’s current imprudent and unsustainable path will end."
The faster the US begins to address this problem the easier it will be to correct it, says the GAO report. The present course of the "ship of state" is to ignore warnings that "economic icebergs lie ahead," a course which will result in unprecedented tax increases (37—78%).
The 14-page GAO report, which reveals a disconnect between politicians and economic reality (and can be read online), is written in government-speak and is more easily understood when translated into plain language.
The term "discretionary spending" used by the GAO is simply one-time spending the US Congress votes, such as add-ons to the war budget, which affect the overall federal budget in that year. For example, the $700 billion economic bailout of the financial industry is an off-budget item. The 2005 $2.08 trillion Federal budget had $402 billion added in off-budget spending.
From fiscal 1995 through fiscal year 2000 all additions to the Federal budget totaled $21 billion. For comparison, supplemental spending since the start of fiscal 2001 thru 2006 (the GW Bush years) was $577 billion.
This means a balanced budget, even if attained, is subverted by add-on spending bills in Congress. It’s like dieting all year and losing 20 pounds and then engorging yourself with food in the last 2 weeks of the year and gaining it all back, and still bragging you lost all that weight. Congressional representatives can then boast they authored budget-balancing legislation that was passed, but forget to mention that their budget cuts on paper later became meaningless because of off-budget "discretionary" spending.
Voting for cost reductions, then rescinding them
"Alternative simulation" is a term used by GAO in its report to describe what Congress does annually, such as reverse the legislated 5% annual cut in Medicare physicians fees, which makes any budget-cutting legislation simply become lip service.
Under current law, physician payments are scheduled to be reduced by 10 percent in 2008 and 2009 and by 5 percent for nearly every year from 2010 through 2016. The GAO report says: "In practice, Congress is virtually certain to prevent some or all of the scheduled reductions through new legislation, as it has for 2003 through the first half of 2008."
Medicare costs dwarf other budget items
The growth in Social Security, Medicare, Medicaid, and interest on debt held by the public dwarfs the growth in all other types of spending. Already the first members of the baby boom generation have begun receiving Social Security retirement benefits and in 2011 will become eligible for Medicare benefits. A $75 trillion budget shortfall is predicted just for Social Security and Medicare. Medicare costs represent $62 trillion of that shortfall.
Unless something is done to change the current disease-care system into a true preventive health care system, the country will become insolvent. Currently, preventive medicine is a subterfuge where colonoscopies, mammograms, PSA tests, etc. are performed to find more disease to treat and bill Medicare, not to cut healthcare costs. Expensive new medical technology must be replaced by 10-cent cures, such as vitamin D, folic acid, fish oil, vitamin C, and resveratrol. Modern medicine is taking no steps in this direction.
Fortunately, medical costs are soaring to the point where Americans can’t afford health insurance and consumers will likely be forced to search for alternatives, such as ways to avoid doctoring and insurance altogether by staying healthy. The healthcare industry knows this and is pushing for universal health insurance which is designed to benefit doctors and drug companies, not consumers.
Another government give-away will obviously raise taxes
The public doesn’t understand this money grab and believes their medical bills will be covered with passage of a universal health insurance package, not recognizing their tax bill will rise overall and that their country is headed for insolvency even without universal health care. Passing legislation like universal health care, that will further impoverish the American people, should not even be on the legislative agenda. This is no time for more government entitlements.
Also, with Medicare, there is no incentive for consumers to save money and only incentives to "get services you have been paying for all your life."
Health plans in league with pharmaceutical companies have collaborated to produce drug plans that cost consumers only $1 in out-of-pocket costs per prescription, but presents exorbitant costs to Medicare since Congress refuses to mandate competitive bidding for medications. Less problematic dietary supplements, which more appropriately address the cause of disease, cost ten to twenty times more than prescription drugs in out-of-pocket costs because Medicare does not pay for vitamins.
Increase taxes or cut costs?
To balance the budget in the year 2040, federal revenue as a share of Gross Domestic Product would have to increase by one-third or non-interest federal spending would have to be cut by one-quarter. Don’t count on Congress being able to significantly cut any Federal spending. It’s not their modus operandi.
Congress could significantly reduce Federal debt if it had the resolve to cut military spending, which represents 54% of the current federal budget ($1.449 trillion a year according to the War Resisters League). Yet the moment defense spending is cut, critics claim the country is not adequately supporting its troops in war zones.
By the year 2040, if changes in federal individual income taxes were the sole means used to balance the budget, taxes would have to increase by almost 60 percent in that year, says the GAO report. The "worst-case" scenario shows a $54 trillion budget shortfall requiring a 78.3% increase in individual income taxes. At this point, the Federal government takes so much tax from wage earners that the country becomes a socialist state. The idea that America is a capitalist country becomes a thing of the past.
Voters haven’t the gumption to throw the bums out
Many taxpayers are dismayed that the most developed country in the world has so rapidly become "the late, great United States of America." The financial minister in Germany says "the United States will lose its status as the superpower in the world financial system.”
Despite this, Congressmen are still tacking on "earmarks" to other spending bills for pet projects as well as voting for the $700 billion financial industry bailout with money it either has to borrow from foreign governments or print at the inflationary printing press. Yet the public keeps them in office.
There is a huge disconnect between voters and Congress. Congress has a dismal 15% approval rating, but Senators and Representatives keep getting re-elected. Better than 9 of 10 incumbent Congressional candidates are elected to office, despite the gloomy state of the economy.
According to a recent Gallup poll, just 36% of U.S. registered voters say most members of Congress deserve re-election. Furthermore, in the past 16 years, never more than 58% of voters have said most members of Congress deserve re-election, but election after election the incumbents win.
The masses would rather point fingers at the opposing political party rather than fix the problems. Both sides of the political aisle are to blame for the nation’s financial mess.
For example, Democrats Chris Dodd and Barney Frank claimed Fannie Mae and Freddie Mac were financially sound in July, while both financial organizations were cooking their books to overinflate their value by $28 billion and $36 billion respectively and were hiding tens of thousands of home loan foreclosures. Christopher Cox, the Republican appointee to the Securities and Exchange Commission, admits failure of a self-regulatory program over financial institutions. And the chief law enforcement officer of the republic, the President, blamed Wall Street for its greed, but did nothing to stop it in 8 years in office. In fact, the Executive Branch bailed out the crooks and sent the bail-bondsman’s bill to the taxpayers.