Wednesday, April 21, 2010

President Obama’s Change Brings Debt and Doubts

President Obama’s Change Brings Debt and Doubts
By Kirkwood Callahan

Plunging public support for Obamacare accelerates presidential efforts to convince the nation that great healthcare savings are in our future. However, common sense leads most citizens to conclude that giving services to more people requires more dollars.

People’s common sense conclusions are reinforced by the words of Timothy Cahill, the state treasurer of Massachusetts. In a Wall Street Journal article he reminds us that Presidential adviser David Axelrod hailed Massachusetts’ universal healthcare as the “template” for Obamacare. This is not reassuring as the state’s program was supposed to cost taxpayers $88 million a year, but since adoption in 2006 costs have exceeded $4 billion. Mr. Cahill explains that MassCare, as it is called, survived only because of Medicaid reimbursements and federal bailouts.

Mr. Cahill forecasts that Obamacare will cause healthcare inflation, and grow federal deficits to “frightening” levels. This rebuts the Congressional Budget Office which said the legislation would reduce the budget deficit over 10 years by $138 billion.

This conflict of forecasts is explained by the role of the CBO. The “scores”, or cost impact studies, provided by CBO for proposed legislation reflect only what Congress says it intends to do. The “scores” are not based on independent assessments of political and economic realities. For example, when Democrat lawmakers sought the CBO’s score for the proposed healthcare legislation Congress said it would cut Medicare spending by a half trillion dollars. The CBO was required to assume this reduction would become a reality, but this spending cut is as likely as a snow storm in Miami in July.

In spite of the CBO’s favorable “score” of Obamacare its forecast for the future is disheartening. A $1.3 trillion deficit is expected this year after last year’s $1.4 trillion deficit. It assumes lower deficits thereafter but predicts a doubling of debt from 2009 to 2020 to a total of $15 billion or 67 percent of GDP. Interest expense will triple in the decade ahead. Some analysts see even more debt unless political leadership changes.

The United States government is embarking on an extended term of indebtedness without equal in our history. Financial markets reacted in late March to this reality as sales of U.S. Treasury debt encountered wary buyers.

The status of financial affairs at the state level also portends future grief for taxpayers.

In its December 2009 “Review” of North Carolina’s budgeting affairs, the Civitas Institute of Raleigh reported that in the budget periods from 2004-05 through 2007-08 the state collected a $3.4 billion surplus. However only $787 million was left in the “rainy day” fund by 2008. The budget years that followed increased taxes on citizens while legislators failed to make necessary spending cuts. As in Massachusetts a federal government bailout made a great difference. In our present budget cycle the state will spend a total of about $20.7 billion, but over eight percent will come from the federal government and over half of Washington’s dollars will be spent on Medicaid and childcare subsidies.

Spending attitudes at the local level also reflect a disconnect between taxpayers’ burdens and public officials’ wants. Readers of this paper recently learned that Haywood County Community College proposed to spend over $10 million for a new complex for teaching arts and crafts. Taxpayers and county commissioners coping with a deep recession and a 11.2 percent state unemployment rate are right to question this expenditure.

For decades the big spenders of both parties skillfully manipulated the political system. Entitlements such as Social Security and Medicare offered great benefits to the elderly as a declining number of the young labored. Agricultural subsidies and increasing federal aid to states and cities concentrated the benefits of public largess on a few while the costs were dispersed upon the many. It could not last.

Public apathy has been replaced with citizen activism. Middle class Americans have seen their future, and the futures of their children and grandchildren erode before their eyes. Thousands of citizens have protested publicly. They will not shut up and go home. Last week in this paper Bruce Gardner made a compelling case why Haywood’s 9/12 Project and the Tea Party Movement will change America.

But there is also another transformation. A new Republican Party has emerged. It is young, dynamic and will not compromise its fiscal integrity. (Full disclosure: I am a member of the Haywood Republican Executive Committee.)

On the national scene articulate Republican Congressmen like Eric Cantor of Virginia, Mike Pence of Indiana, and Paul Ryan of Wisconsin are fighting for fiscal reform as is former Florida House Speaker Marco Rubio, the primary front runner for a U.S. Senate seat.

On the local scene the Republican primary offers a lineup of qualified conservatives. Our standard bearers will bring real change.

Stay tuned. The best is yet to come.


Kirkwood Callahan is retired and lives in Waynesville, NC. He has taught government courses at four southern universities. This article was published in the Smoky Mountain News. It is reprinted here with the author’s permission.

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