Wednesday, September 1, 2010

2010 Isn't 1994, etc.

People in the political world like to sneer at generals for "fighting the last war." So what is all the talk of 1994, and the worrying about a Republican Congress overreaching in 2011 in a reprise of 1995?

As Ronald Reagan said: to say that Congress spends money like a drunken sailor is an insult to drunken sailors. And the re-fighting the wars of 1994 and 1995 is an insult to generals.

The only thing we know is that 2010 won't be a replay of 1994 and that 2011 won't be a replay of 1995. However, like any general that has studied recent wars, it certainly doesn't hurt for us to recall the lessons of 1994 and 1995.

First of all, 1995 may have been a tactical defeat for Republicans in that President Clinton "won" the government shutdown. But in the medium term Republicans actually did reduce the rate of increase in spending. The problem for Republicans was not 1995, it was 1998. That was the year when the budget went into surplus and President Clinton started saying telling Americans that, yes he could cut taxes and return money to the taxpayers but then maybe the taxpayers would waste it. That was voters started to think that we could relax the purse strings a little.

That sentiment gave us the 2000s and a Republican Congress that gorged itself on earmarks.

Anyway, all the talk about debt and deficits and bailouts rather misses the point. The whole key to the federal spending problem is, #1 Medicare, #2 Medicaid, and #3 Social Security. That's where the money is.

The Medicare problem is simple. Affluent middle-class seniors (like me) will have to pay full freight on health care. It is simply unjust for people with money (i.e., older people with savings) to tax the hides out of 30 somethings much less wealthy than they are. The fact is that most middle-class seniors can afford to pay for our own health care. And we should.

Of course, that might mean that a lot of seniors won't be able to afford to become snowbirds and winter down south.

When we affluent seniors start to pay full-freight on our health care we will start to find ways to economize on health care. We will revolutionize health care and all of a sudden health care costs will stop their exponential rise into the stratosphere.

Once the Medicare problem is solved, then Medicaid will follow. Don't know how, but it will. The American people will demand it.

Social Security? You can fix Social Security with a financial coup de main. For instance, you can capitalize current benefits by awarding Social Security beneficiaries special Treasury bonds that pay off Social Security benefits and then privatize the whole thing. Again, it's a matter of justice. People in their fifites and sixties should save, big time, for their retirement. And guess what: our savings will go to create the jobs for the 30 somethings. As is should be.

When will middle-class seniors be ready to pay full freight on health care? When Medicare is completely broken. And that won't be in 2011.

So Republicans won't be doing a grand reform on entitlements in 2011. But Republicans can start the ball rolling by offering, e.g., a New Medicare that offers a fixed subsidy that you can apply to your own health insurance plan.

One thing is for sure. We are living in interesting times.

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