Saturday, July 2, 2011

And the only dinner they bought us was Government-Cheese.

Just in case you nourished any speck of optimism about Washington DC getting the crushing national debt under some measure of control, the Wall Street Journal published an article by Lawerence B. Lindsey showing just how cooked the books are.

First, a normalization of interest rates would upend any budgetary deal if and when one should occur. At present, the average cost of Treasury borrowing is 2.5%. The average over the last two decades was 5.7%. Should we ramp up to the higher number, annual interest expenses would be roughly $420 billion higher in 2014 and $700 billion higher in 2020.
The 10-year rise in interest expense would be $4.9 trillion higher under "normalized" rates than under the current cost of borrowing. Compare that to the $2 trillion estimate of what the current talks about long-term deficit reduction may produce, and it becomes obvious that the gains from the current deficit-reduction efforts could be wiped out by normalization in the bond market.
 So instead of facing the true cost of borrowing all this money we are passing it on in the form of infation to anyone who owns US money in any amount.
The second reason for concern is that official growth forecasts are much higher than what the academic consensus believes we should expect after a financial crisis. That consensus holds that economies tend to return to trend growth of about 2.5%, without ever recapturing what was lost in the downturn.
 But the president's budget of February 2011 projects economic growth of 4% in 2012, 4.5% in 2013, and 4.2% in 2014. That budget also estimates that the 10-year budget cost of missing the growth estimate by just one point for one year is $750 billion. So, if we just grow at trend those three years, we will miss the president's forecast by a cumulative 5.2 percentage points and—using the numbers provided in his budget—incur additional debt of $4 trillion. That is the equivalent of all of the 10-year savings in Congressman Paul Ryan's budget, passed by the House in April, or in the Bowles-Simpson budget plan.
 So we should all actually pray really hard that Keynesian economics actually work for the first time in history so that we are only as screwed as the congressional budget office says.

Third, it is increasingly clear that the long-run cost estimates of ObamaCare were well short of the mark because of the incentive that employers will have under that plan to end private coverage and put employees on the public system. Health and Human Services Secretary Kathleen Sebelius has already issued 1,400 waivers from the act's regulations for employers as large as McDonald's to stop them from dumping their employees' coverage.
But a recent McKinsey survey, for example, found that 30% of employers with plans will likely take advantage of the system, with half of the more knowledgeable ones planning to do so. If this survey proves correct, the extra bill for taxpayers would be roughly $74 billion in 2014 rising to $85 billion in 2019, thanks to the subsidies provided to individuals and families purchasing coverage in the government's insurance exchanges.
 So the bill is now passed and just a Pelosi said we are finding out what is in it. Does anyone want to make a bet that this is the only "unintended" consequence of Obamacare?

So to sum up that raw chaffed feeling from your rectum isn't going away any time soon.


  1. O,

    Followed the link on HH's ''deputy'' encounter and found this post--may just half to steal this
    post (with credit of course)--good view of our future.......