OUR DEBT IS NOT 16 TRILLION

Chris Cox and Bill archer pointed out in a Wall Street Journal article on
November 27th that our government has not been including Social
Security and Medicare liabilities when computing our national debt.

“The actual liabilities of the federal government—including Social Security, Medicare, and federal employees' future retirement benefits—already exceed $86.8 trillion, or 550% of GDP. For the year ending Dec. 31, 2011, the annual accrued expense of Medicare and Social Security was $7 trillion. Nothing like that figure is used in calculating the deficit. In reality, the reported budget deficit is less than one-fifth of the more accurate figure.”

“Why haven't Americans heard about the titanic $86.8 trillion liability from these programs? One reason: The actual figures do not appear in black and white on any balance sheet. But it is possible to discover them. Included in the annual Medicare Trustees' report are separate actuarial estimates of the unfunded liability for Medicare Part A (the hospital portion), Part B (medical insurance) and Part D (prescription drug coverage).

“As of the most recent Trustees' report in April, the net present value of the unfunded liability of Medicare was $42.8 trillion. The comparable balance sheet liability for Social Security is $20.5 trillion. The realworld impact will be felt when currently unfunded liabilities need to be paid. In theory, the Medicare and Social Security trust funds have at least some money to pay a portion of the bills that are coming due. In actuality, the cupboard is bare: 100% of the payroll taxes for these programs was spent in the same year they were collected.

“In exchange for the payroll taxes that aren't paid out in benefits to current retirees in any given year, the trust funds got nonmarketable Treasury debt. Now, as the baby boomers' promised benefits swamp the payroll-tax collections from today's workers, the government has to swap the trust funds' nonmarketable securities for marketable Treasury debt. The Treasury will then have to sell not only this debt, but far more, in order to pay the benefits as they come due. “

Mr. Cox, a former chairman of the House Republican Policy Committee
and the Securities and Exchange Commission, is president of Bingham
Consulting LLC. Mr. Archer, a former chairman of the House Ways &
Means Committee, is a senior policy adviser at
PricewaterhouseCoopers LLP.

Some Inconvenient Truths About Medicare and the New 'Public Plan'

By Regina Herzlinger and Robert Book

[Remember, Medicare is also a government program that has run, already, into serious trouble.]

The fundamental problem with health care reform is the absence of realistic plans to reduce unit costs. Without cost controls, tens of millions of newly-insured people will further cripple U.S. global competitiveness, which is already grievously injured because the U.S. spends roughly 70 percent more on health care, as a percentage of GDP, than other developed nations, yet cannot point to commensurate 70 percent increases in value.

[Those who ignore the past are condemned to repeat it!]

Medicare's alleged cost-controlling ability is illusory, driven by faulty math, regulatory power to shift costs to the private sector, and pricing formulas that pass expenses to taxpayers and future generations.

The 800-pound gorilla is Medicare's unfunded liability for future benefits, estimated by Medicare Trustees at $38 trillion. Medicare created this massive liability by charging current enrollees too low a price: government used the payments by working non-beneficiaries to make up the shortfall. If Medicare were a private insurance company, it would have to increase its costs by an additional trillion dollars annually to account for the interest on this debt (assuming 3% interest). But the federal government's accounting ignores this expense. [What would happen if you pretended that you really didn't have certain expenses? You'd end up in jail where I'm convinced at least half these crooks belong!]

Will government continue to rob Peter to pay Paul when it prices the new public plan? If so, an estimated 83 million people would eventually move out of private plans into a grossly underpriced Medicare, vastly increasing the liability. At $38 trillion, it already equals than two and a half times 2008 GDP.

Medicare's cost advantages are dubious in other ways...

Read the whole thing