The Awful Responsibility Of Time

In the early 1990s I took a Time Management course that presented many impressive techniques for making your day more efficient – knocking many more items off your to-do list than you would have otherwise been able to accomplish.  Then the last half hour of the course the instructor inspirationally explained that the course was not really about knocking items off a list – it was about making sure the items on the list were important to you to ensure you were getting the most out of life – getting the most out of your most precious commodity: Time.  Now that is really the utmost in time management.

 

With the above as a backdrop I have wondered why so many Republican Congressmen have been announcing their retirements, resignations, or deciding to run for different offices – 35 House Republican incumbents leaving the House is more than twice the number of Democrats leaving.  After all current Republican Congressmen probably have the last Republican president of their lifetimes to work with – none of the other 16 Republican presidential candidates in 2016 could have beaten HRC, as rotten as she was, & Trump is a once in a lifetime high energy figure to lead America for the next seven years away from the political correctness that is destroying the country.

 

The biggest retirement surprise to me was Jason Chaffetz, Utah Congressman & Chairman of the powerful high-profile House Oversight & Government Reform Committee who won  re-election in November 2016 by a margin of 74% to 26%.  In April 2017 Chaffetz suddenly announced he would not run again in 2018 & then one month later announced he was retiring effective June 30, 2017 – less than six months into his 5th term.

 

I heard Chaffetz tell Brian Kilmeade on Brian's radio program that he had spent more than 1,500 nights away from his family in eight years – many of these nights in distasteful fund raising functions - & had missed too many family birthday parties & other celebrations.

 

Now all of this unpleasant hard work is certainly known when anyone decides to run for Congress which made me suspicious that something else was in play & that something else was the February 9, 2017 town hall meeting in Brighton High School in Chaffetz's congressional district in Utah that was more unpleasant than any fund raising function.  Click here to see Chaffetz peppered with questions from a disorderly, disrespectful, disruptive, out of control crowd inside the High School & here to see the uproarious protesters outside the building that far outnumbered those inside.

 

Chaffetz accused the crowd of being paid protesters.  Either the great majority of the 26% of the district that voted against Chaffetz all came out or the crowd was organized by social media & many were not even from the district.  I choose the latter.

 

In short, who would want to face this again?  Chaffetz never did. 

 

As bad as Chaffetz's town hall was it was child's play compared to NJ Congressman Tom MacArthur's Willingboro town hall on May 10 that ran for over five hours.  I saw more than two hours of the town hall including this belligerent menacing tirade by a man I thought several times was going to physically attack MacArthur.  In 2016 Trump had won 9% of Willingboro & MacArthur won 12% so this crowd seemed much more representative of the anger prevalent in the town than did Chaffetz's crowd in the High School.  MacArthur really walked into the lion's den but has not indicated he is resigning.

 

Now NJ Congressman Rodney Frelinghuysen certainly did not need the Chaffetz-Mac Arthur examples to forsake in-person town hall meetings; he had replaced them with telephone town hall meetings for quite some time before 2017 when the rash of belligerent town hall meetings began – in this respect Frelinghuysen derogatorily was a man ahead of his time.  So instead the protesters come every week to Frelinghuysen's district office to draw attention to both his votes to repeal ObamaCare & against the December tax reform bill – in other words Frelinghuysen can't win in NJ despite being in his 24th year in Congress.  Without giving a reason, Frelinghuysen – eligible to continue serving as chairman of the powerful

Appropriations Committee until 2023 – announced he is retiring after this session of Congress.

 

But SC Congressman Trey Gowdy's announced retirement is sincere & truthful & exemplifies the Time Management lesson explained above.  Congressman Gowdy has been the subject of or played a prominent part in several posts on this blog during his seven years in Congress.  Click here & go to the 33:00 minute mark to hear Congressman Gowdy tell Martha MacCallum that two thirds of his life is in the rear view mirror & that he wants to make sure the time he has left is spent on things he can make a difference in – & government service is not one of those things.  This is very similar to the message SC Senator Jim DeMint sent when he resigned from the Senate on January 1, 2013 saying he could get more done for America as the President of the Heritage Foundation than he could in the Senate.

 

In the last post I challenged the readership to use the insight gained from reading RTE over the years to make a clear, definite, & tangible contribution to the future success of our country.  Because ultimately, none of us have the luxury to think we will not be held to account or be affected as America slips away.  We are all no different than Trey Gowdy - going "into the convulsion of the world, out of history into history & the awful responsibility of Time."¹ 

______________________

 

1. Robert Penn Warren, All The King's Men.

 

Increased Government Spending Means Less Robust Economy For America's Youth

"It seems the only thing we can do on a bipartisan basis is spend more money than we have." - Senator Jeff Flake (R, AZ)

 

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The graphic below clearly shows what President Trump was referring to in the above tweet after he signed a short-term 640-page funding bill known as the Bipartisan Budget Act of 2018 on February 9 that reopened the government by funding it until March 23 following a brief overnight shut down.  Before March 23 detailed appropriation bills must be developed into an omnibus spending bill based on a two year budget outline that was part of the Bipartisan Budget Act which added $300 billion in new spending for military & nondefense programs plus $90 billion in disaster relief aid.  Note: in the graphic below federal government payments to individuals (71%) are over 4 times larger than payments for national defense (17%).  Net interest on the national debt is 7.4% of the federal budget in 2018.  71+17+7.4 = not much left for other programs going forward meaning deficit spending will continue as far as the eye can see.

 

 

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The following graph shows the growth of federal government payments to individuals – 71% of the total 2017 federal outlays was dedicated to payments to individuals, up from 28% in 1966 & 17% in FY 1953.   

 

 

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Click here to hear part of Rand Paul's excellent protest to deaf ears in the Senate on the evening of February 8 & the early morning hours of February 9 pleading for his colleagues to show some financial responsibility.  In summary Senator Paul says "The bill is nearly 700 pages.  It was given to us @ midnight last night & I would venture to say no one has read the bill . . . the dirty little secret is Republicans are clamoring for military spending but they can't get it unless they give the Democrats welfare spending so they raise all the spending, it's a compromise in the wrong direction . . . when Democrats are in power Republicans appear to be the conservative party, but when Republicans are in power it seems there is no conservative party." 

 

In brief, the budget bill lifts the sequester spending caps that were put in place in 2011 to control both defense & non-defense spending with all of the money agreed to earlier this month ($390 billion) adding to the deficit which may now exceed $1 trillion in the next two years.

 

The Treasury Department shows the national debt increased under GW Bush from $5.73 trillion in 2001 to $10.63 trillion when he left office in January 2009.  BO took the national debt from there to $19.95 trillion.  As of February 6 the official debt of the United States government was $20.5 trillion.  In June 2017 the Congressional Budget Office projected the national debt would rise to $30.7 trillion by 2027.

 

The federal government divides the national debt into two main categories: 1) $14.8 trillion in publicly held debt like that held by individuals, corporations, local governments, & foreign governments like China, & 2) $5.7 trillion in intergovernmental debt which is owed to special funds like the Social Security Trust Fund.

 

The national debt is sometimes called the Federal Debt Held By The Public (see graphic below) to distinguish it from the debt totals that include unfunded liabilities tabulated @ the close of fiscal year 2016 like: 1) $8.5 trillion in unfunded liabilities for federal employee retirement benefits & other miscellaneous unaccounted for items, 2) $29.0 trillion in obligations for current Social Security participants above & beyond both projected revenues from their payroll & benefit taxes & the IOUs in the Social Security Trust Fund, & 3) $32.9 trillion in obligations for current Medicare participants above & beyond both projected revenues from their payroll & benefit taxes & IOUs in the Medicare Trust Fund.

 

Accordingly, @ the end of fiscal year 2016, the federal debt held by the public plus the unfunded liabilities detailed above comes to $84.3 trillion after subtracting the value of assets like cash on hand.

 

The enormity of the above debt figures is incomprehensible to even the 1,000 richest men in the world combined as far as visualizing the debt's magnitude compared to anything any human being has ever grasped.

 

The above statistics are from the excellent work done by Just Facts. 

 

 

Over six years ago I presented four solutions to problems like the out of control spending problem described above.  The last two posts have re-presented the solutions specifically for Social Security & Medicare which were the first two points of the post Four Points Highlight The Needed Change In Mindset made on January 31, 2012.

 

The third point of the aforementioned post specifically addressed budgetary matters; namely, it endorsed the "cut, cap, & balance" plan of Ken Blackwell & others in which federal spending would be controlled so that projected borrowing is cut in half the first year (not 10 years from now), spending would be capped @ 18% of GDP - the norm of much of the past 65 years - (it's 21% of GDP now with a projected deficit of 4% of GDP this fiscal year), & under a balanced-budget amendment the president would be required to submit a balanced budget within the foregoing spending guidelines that call for super congressional majorities to raise future debt limits or tax rates.

 

The balanced budget amendment part of the plan would work hand in glove with the cut & cap parts of the plan – i.e., you need all three in order for it to work.  Professor Friedman taught that he is more worried about how much money government spends than he is about deficits & the cut, cap, & balance plan meets his test.

 

But the Congress has shown no appetite for cutting anything or living within the means of a spending cap that is 3% of GDP lower than the current level of spending.  Senator Flake points out above that Congress is only good @ spending more money than they have.

 

Students of economics know that the budget is always in balance from an accounting standpoint – there is no such thing as an unbalanced federal budget. The staggering numbers of the deficits & national debt resulting from out of control government spending really mean that there will be a less robust economy especially for younger & future generations.

 

And younger generations don't understand this because they have been taught a sanitized history with regard to socialism – a history that leaves out the fact that socialism has failed dramatically, often disastrously, everywhere it has been tried. 

 

A recent study found nearly half of all Millennials said they would rather live in a socialist or even communist country than a capitalist republic with heavy reliance on democracy – like the U.S.  Witness Bernie Sanders, an avowed Socialist, who received overwhelming support from young people in the 2016 Democrat Party presidential primary – receiving nearly three-fourths of the total vote of Millennials (18 – 29 year olders).  Source: Hillsdale College.

 

The following graphic from a Kaiser Family Foundation survey in January shows 50% of Americans want more spending on Social Security & only 5% want less; 45% want more on Medicare & 7% less; & 38% want more on Medicaid & 12% less.

 

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Every indication is that the majority of Americans want more government – in fact big government.

 

But as a reader of RTE you know better.  What you do with the insight you have gained is crucial to the future success or failure of our country.

 

Premium Support Provides Solution To Medicare Funding Problems

The last post explained the problem with future funding of Social Security & provided a solution based on Susan Lee's column in the WSJ dated November 23, 2004 entitled All You Need To Know About Social Security.  Had the points from Dr. Lee's column been followed, when written fourteen years ago, Social Security would be a solvent program today & Americans would have a much improved mindset regarding limited government, personal responsibility, & free enterprise – the founding libertarian principles of America.  Although time is running out before the demographics described in the column just cannot work we still have enough time to avoid the obvious predictable financial shortfalls, suffering, & distress that will be realized by unsuspecting people who are counting on Social Security in the not too distant future.  I hope everyone who read the preceding post & understood it can help make the solution described therein a reality.

 

In a similar vein this post covers Medicare problems & solutions.

 

In brief, the problem is that Medicare Part A is facing a funding shortfall that will require a 12% reduction in hospital benefits by 2029 & the cost of Parts B & D, which are 81% funded by general revenue from the Treasury, are growing too fast to be sustained.  The solution is to implement a premium support system, unindexed to inflation, that will wean people off the Medicare program before it overwhelms our ability to pay for it.

 

The Boards of Trustees for Medicare issued their most recent annual report to the Congress on July 13, 2017 regarding the financial operation & actuarial status of both the Hospital Insurance program (Medicare Part A) & the Supplementary Medical Insurance program (Medicare Part B & Prescription Drug Coverage – Part D).

 

The technical information & graphs in this post regarding the Medicare problems are principally based on the aforementioned report entitled 2017 Annual Report of The Boards Of Trustees Of the Federal Hospital Insurance & Federal Supplementary Medical Insurance Trusts Funds – click on link to read the entire report – the 52nd annual. 

 

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On July 30, 1965 LBJ signed HR 6675 in Independence, Missouri & former President Harry Truman was issued the first Medicare card.  The Medicare budget was $10 billion & 19 million individuals were enrolled.  Medicare coverage took effect in 1966.  By 2016 the program had grown to cover 56.8 million Medicare beneficiaries & total expenditures were $679 billion.

 

The Tax Cuts & Jobs Act of 2017 did not directly affect Medicare; however, in previous legislation there are mandatory spending cuts to Medicare that can occur as a result of deficits - but these cuts were waived by Congress as part of a temporary spending bill to prevent a government shut down in December.

 

Medicare has two separate trust funds, the Hospital Insurance Trust Fund (HI) & the Supplementary Medical Insurance Trust Fund (SMI).

 

The Medicare Part A HI trust fund is financed by the payroll tax on covered earnings, 1.45% of worker's wages paid by both the employee & employer, plus an additional 0.9% tax on the earnings of high income workers, defined as $200,000 per year for individuals & $250,000 for married couples, plus a portion of the Federal income taxes that some Social Security recipients pay on their benefits, as well as interest paid from the general fund on the U.S. Treasury securities held in the HI trust fund.  The aforementioned income thresholds that make people responsible for the additional 0.9% HI tax are not indexed for inflation & it is estimated that 79% of workers will be subject to this tax by the end of the long-range projection period covered by the report.  The taxation of Social Security benefits also is not indexed for inflation so more people come under it every year. 

 

Medicare Part A (HI) helps pay for hospital, home health services following hospital stays, skilled nursing facility, & hospice care.  The HI trust fund is projected to be depleted by 2029 @ which time it will be able to pay only 88% of the hospital & related expenses it is responsible for under the Medicare program.  See graph below.

 

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The Medicare Part B portion of the SMI trust fund helps pay for physician, outpatient hospital, home health, & the like for the aged & disabled who have voluntarily enrolled.  The Medicare Part D portion of the SMI trust fund provides subsidized access to drug insurance coverage on a voluntary basis for all beneficiaries & premium & cost sharing subsidies for low income enrollees.

 

Eighty-one percent of the Medicare SMI trust fund that cover Medicare Parts B & D is financed by transfers from the general fund of the Treasury meaning that the government pays over four-fifths of the physician & prescription drug costs of the 47.8 million people aged 65 & older & the 9.0 million disabled covered by Medicare.  Premiums, including late filing penalty fees & Part D income-related monthly adjustment amounts charged to high income earners make up the rest of the costs.  See graphic below that shows the Medicare Parts B & D expenditures & premiums on both an historic & projected basis as a percentage of GDP based on current law.

 

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Based on current law total Medicare expenditures (Parts A, B, & D) represented 3.6% of GDP in 2016, are projected to climb to 5.6% by 2041, & then level off asymptotically just below 6.0% of GDP for the remainder of the projection period covered by the subject report.  See graphics below.

 

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Like Social Security, the Medicare problem, with 10,000 baby boomers reaching age 65 every day, is that its costs are increasing significantly faster than that of the U.S. economy thereby making the Medicare program financially unsustainable.

 

The above statistics & graphs are based on current law which include a significant one-time reduction for most physicians starting in 2025 followed by a slow rate of reimbursement growth that is notably lower than projected physician cost increases – i.e., it is not going to work when projected costs exceed projected reimbursements.  Accordingly, the Trustee's report also included a section under a hypothetical modification to current law that mostly dealt with maintaining physicians' reimbursement schedules – see dotted line on graphic below that portrays a more accurate condition than the current law condition described above, which is bad enough.

 

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I have advocated a premium support system as the solution for Medicare's financial problems since @ least 2012 – premium support will gradually phase-in thereby weaning people off Medicare while providing the freedom to choose whatever healthcare level of coverage each person prefers.

 

The premium support system would not affect anyone age 55 or older or those currently on disability.  Anyone age 54 or younger would switch to the premium support system when they turned 65 meaning the government would provide a demogrant for beneficiaries to purchase private insurance.  The original amount of the demogrant would be sufficient for people age 65 the first year of the premium support program to buy the equivalent Medicare coverage in the open market.

 

The premium support dynamic is clearly illustrated by looking @ the bottom curve on the following graphic that shows four cost trajectories illustrating the Medicare burden.  The bottom curve is the only one that bends down – it is for premium support with a growth rate based on the Consumer Price Index (CPI).  The cost curve bends down even faster if the premium support demogrant is frozen with no increase due to inflation.  People age 54 & younger would follow a sliding scale with people in their 50s receiving appreciably more purchasing power from the demogrant than those just entering the workforce who would not rely on the government @ all when they turn 65.

 

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Ever since the early 1990s many companies, such as IBM, ConocoPhillips, Delta Airlines, & Coca Cola, set ceilings on how much money they would ever pay for retiree healthcare costs – this follows the principle of unindexed to inflation premium support that needs to be applied to Medicare as well.  Younger employees & future retirees can see that their private sector employers or federal government will be providing less & less healthcare benefits each year as inflation keeps increasing their share but not their employers' or the government's.

 

But not only large companies are trending in this direction to solve their healthcare cost problems – in 2017 sixteen percent of small businesses (3 to 49 employees) that did not provide specific healthcare insurance policies did give their employees some money toward purchasing their own plan themselves & in 2012 Michigan stopped offering retiree healthcare to new employees but instead, in a form of premium support, contributed an additional 2% of salaries to new employee 401(k) plans with the idea that this money could be used for healthcare needs in retirement.  Michigan's retiree healthcare liabilities dropped about $20 billion since the program started.

 

Medicare is well liked by seniors & what's not to like – good coverage (if you have supplementary Medigap coverage also) @ a subsidized rate where beneficiaries pay a fraction of the real cost – except that it is not financially sustainable.  The above description of Medicare's funding problems presents a clear account of what lies ahead for unsuspecting seniors if a solution like the premium support system is not implemented.  How unkind is it for our elected representatives to let the current Medicare condition continue until benefits start to be curtailed?  It is the elderly & people over age 55 who are dependent on the Medicare programs who will be hurt the most when spending cuts occur.  Just what will these people do then?