A Washington Post piece this weekend was a reminder that Congresswoman Pelosi is angling to regain her Speaker seat in 2013. Her plan to make up for the historic defeat she led her party to in 2010: “Medicare, Medicare and Medicare.” She’s not talking about preserving the quickly sinking trust fund or reforming the problematic SGR Medicare payment formula that was left out of the massive ObamaCare law. Nope, she’s talking about opposing any attempt to reform Medicare so that the Democrats can present themselves as the heroes of seniors.
For example, Senators Lieberman and Coburn have developed a bipartisan Medicare reform plan that proposes changes so minimal that even seniors having nightmares about Paul Ryan after seeing misleading ads about his plan can sleep easy:
The senators’ plan would save an estimated $600 billion over ten years and extend Medicare’s solvencey by “at least 30 years” by instituting a number of cost-saving structural reforms. These include:
- “Streamlining” the program by combining the Part A and Part B deductibles.
- Raising the age of eligibility from 65 to 67 by the year 2025 (a rate of two months each year) to reflect the dramatic increase in life expectancy since Medicare was passed (from 70.2 in 1965 to 77.7 in 2006).
- Means-testing requiring wealthy individuals to cover a larger percentage of their premiums and pay higher out-of-pocket costs. “We simply do not believe that tax dollars should be used to pay premiums for those who can afford to pay on their own,” Lieberman said.
Senator Reid and Congresswoman Pelosi both denounced the plan, begging the question of what reforms they would consider if not something so simple. None. And they think this is a winning approach for 2012. The games don’t stop with Medicare either.
In the debt negotiation, it’s convenient that the Democrats are proposing tax increases that would force Republicans to choose between raises taxes in a sluggish economy or being subjected to attacks on supporting oil companies and the wealthy. Nevermind that such tax increases would barely make a dent in the debt, which might be worse than we think.
Writing in today’s WSJ, former Federal Reserve governor Lawrence B. Lindsey has a chilling reminder about how normalizing interest rates would raise our debt to levels that would dwarf any reductions considered in budget negotiations at this point:
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.
He also points out that missing the White House’s economic growth projections by just one percentage point for one year would result in $750 billion more in shortages (more than the tax revenue increases Democrats are proposing), and that if we remain on our current growth trend, we could add $4 trillion more in debt. His proposal: addressing long-term entitlement spending. Too bad the current Democrat leadership won’t allow it.
You may not like Congressman Ryan’s plan, and you might not even like the much smaller plan offered by Senators Lieberman and Coburn, but if you believe that we indeed need to address entitlement spending to avoid unsustainable debt, then you should remember that a vote for the Democrats in 2012 is a vote to return to 2009 and 2010 with Reid, Pelosi, and Obama in charge and without a plan to save entitlements.
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