Where even fools fear to tread
May 29th 2011
I came across a hilarious table today that Think Progress, the liberal web site, gleefully posted on their Yfrog page. ( http://yfrog.com/h7rjekp ) The table was a listing of projections of when Medicare would go insolvent, on an annual basis dating back to 1970, when the Hospital Insurance Trustees solemnly affirmed that Medicare was going to go bust in 1972.
The Hospital Insurance Trustees released this annual report, and in all but three of the subsequent years, declared that Medicare was on the ropes, and would go belly up in the sweet bye-and-bye. The length of time varied enormously. Two years was the lowest, but by 1975 they, with seeming reluctance, concluded that the Trust might last into the late 1990s. The previous two years must have shown sharp improvement, because those were two of the three years they didn’t make any forecast at all.
The brightest forecasts came in 2001 and 2002, when Medicare was projected to hang on desperately for just 28 more years. But then Bush and the GOP worked one of their standard economic miracles, and now the projection is down to just eight years again. As of 2009, the Trustees were certain that Medicare would breathe its last in 2017.
I’m guessing that by the time 2017 rolls around, if we’re still here then Medicare will be too, and the Trustees will release a report saying, subject to the state of the economy, that Medicare will die in 2019, or maybe 2023, or maybe 2056. It will definitely die on one of those dates, just like it died on 18 of the 29 previous dates they listed. In fairness, 11 of the projected dates haven’t happened yet, but there does seem to be a trend here. Medicare failed to die in 1972, or on any of the other projected dates prior to this year.
Of course, the chances that it might happen increase significantly should the GOP manage to win the election in 2012. For the first time in American history, there is a major political party that is determined to deliberately smash the economy in hopes of political and economic gain.
Paul Ryan apparently got tired of just sitting around waiting for Medicare to die like it was a rich uncle, and so he put forth his budget that, if enacted (it died a well-deserved death in the Senate this week, 57-40) would have privatized Medicare, and put it on a means-based voucher program, which would have made it far more complex and expensive whilst delivering less medical care. This would have really killed it in fairly short order, but would have made it unpopular with the public first.
Of course, upon the results of the 2004 election, George W. Bush tried to do something similar with Social Security, and the groundswell of public animus quickly killed that notion before it could even get to the point of being a formal bill in Congress. And before that, the Republicans did Medicare significant damage in 2004 with their “Medicare reform Act”. That was the “doughnut hole” law that weakened coverage and caused significant suffering among the nation’s elderly. (It’s worth noting that the Trustees’ projected death frame for Medicare dropped fairly sharply in the years following that).
The Republicans have always wanted to destroy Social Security and Medicare, going back to the days when each program came into existence. They want American workers to be completely dependent on employers for their pensions, and for their health care. As over a hundred million Americans will tell you, they will be a lot more careful to keep the boss happy if their children’s health care depends on his good mood. As for pensions, Republicans just can’t see spending money on workers who are no longer productive, but pension funds are wonderful piggy banks for the owners to loot.
None of this is new, of course. Republicans have always represented the richest 1% of the country, and get their electoral support by pandering to perceived hayseeds they despise. The Teabaggers are a great example of pandering gone out of control. A pseudo-populist movement bifurcated into the fake populists like Rand Paul and the actual people who signed up for this “grass roots movement” who are now in revolt against the GOP.
But the party has, since 2009, gone into a new stage. Moving beyond destroying the middle class, workers’ rights and individual freedoms, all things they hate, they are now actively trying to sabotage the economy, and, as with the Teabaggers, there is reason to believe they won’t know when to end the brinkmanship and avert an actual catastrophe.
The Administration says that unless the debt limit is revised upward, August 2nd is the “hard and fast” date on which the government will run out of funds to pay its bills, and the government will be in default.
Now, the Wall Street Journal quoted Bill Clinton as saying “If we defaulted on the debt once for a few days, it might not be calamitous, but if people thought we were literally not going to pay our bills anymore, then they would stop buying our debt.” The WSJ added at the bottom of the article, “Bill Clinton, through a spokesman, said he ‘inadvertently misspoke’ and ‘did not in any way mean to suggest that a default would not be highly damaging for the economy even for a very short period of time.’”
Being a few days late on the bills normally doesn’t bring about calamity, but Clinton belatedly realized that it wasn’t quite as simple as waiting for the final cut-off notice to pay the power bill.
There’s an old saying that when the US sneezes, the rest of the world catches a cold. As the informal reserve currency of the world, and still the world’s biggest economy, the actions of the US have a huge effect on the rest of the world’s economy.
If you pay your electric bill when the shut-off notice comes, your lights will stay on, but your credit rating will suffer.
Similarly, and on a much vaster scale, the United States will see its creditworthiness open to question more and more as the deadline approaches. And as that happens, the stock market, bonds in particular, will begin to show signs of panic. The slide in stocks over the past three weeks is an early indication of this.
Imagine, for a minute, that you are a creditor, and there is a married couple that you do business with, and they have a running tab with you. One day, you overhear them having a loud, public argument, and the wife is telling the husband, “You will do everything I tell you to do or I’m going to mess up your credit rating by not paying the bills!” As the creditor, how much faith would you place in the creditworthiness of that couple in the future? Wouldn’t you be tempted to step in and tell them to pay off their tab now? The US has a $14 trillion tab.
The Republicans have decided to turn America’s willingness to pay its debts into a political football.
They are demanding that Democrats enact the Republican platform entire, or they won’t raise the debt limit.
The most egregious example came this week, when Senator Mitch McConnell, reportedly the most corrupt member of the Senate ( http://www.crewsmostcorrupt.org/mitch_mcconnell ) said, “We are going to discuss what ought to be done. I can assure you that to get my vote to raise the debt ceiling, for whatever that is worth… Medicare will be a part of it.” In other words, pass the plan the Senate defeated just this week, or America won’t be allowed to pay its bills.
The technical term for that is extortion, and McConnell should be in prison, either on racketeering charges or treason.
The stupidest example came from supposed “moderate Republican” Tim Pawlenty, who said “I don’t think we should raise the debt ceiling and if the Congress moves in that direction, and the president, they’d better get something really good for it and it better be permanent and it better be structural, like a balanced budget amendment and like permanent caps and limits on spending that are specific, not just aspirational.”
Ok, Pawlenty, tell us how we get a constitutional amendment through by August 2nd—especially a crazed and unpopular one like the BBA? OK, so Pawlenty is no moderate, but he is an idiot.
The standoff is doing damage already. A default won’t be a ‘mere technicality,’ and, thanks to the idiot Republican loudmouths, won’t be a transitory dislocation with no real consequences. If the markets become convinced that the Republicans aren’t just bluffing, there will be panic, and an eventual crash, possibly even before the August 2nd deadline rolls around.
There’s precedent for this: in 1931 the UK defaulted on its loans because it lacked the gold reserves needed to meet them. At the time, the UK still had the biggest economy on earth. The default lasted only a few weeks, long enough for the UK to drop the gold standard and start printing money to pay the bills, but the damage was done. The Great Depression, then still largely an American phenomenon, spread to the rest of the western world, and the UK economy declined sharply and didn’t recover for nearly 50 years.
It would be much worse this time. The world economy is already in crisis, and would be hit by an American default based on nothing more significant than ill-considered brinkmanship.
That they are even playing this game is foolhardy beyond belief. It would be like an American president in the 60s feinting a nuclear strike at the Russians in order to scare them, something Nixon is reputed to have done. If the Russians were as stable then as the world market is today, the northern hemisphere would be a radioactive wasteland right now. Brinkmanship is for fools, and the GOP has a lot of fools.
They need to get some common sense, some integrity, and some patriotism. Or they are going to destroy this country in hopes of gaining some seats in the next election.