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Re: Gale and Auerbach’s “Problematic” Budget Outlook
by
Anonymous
Much of the problem with long term spending is Medicare and Medicaid. If doctors stop seeing patients under these programs, you know we have cut too much - which is why they got raises when Part D was passed. BTW, part D has been cheaper than projected - and that was before the Drug companies made concessions yesterday.
If you have cut all you can, the only place to turn is the revenue side. Comprehensive tax reform as I propose it will bury the Medicare trust fund issues in the Business Income Tax. If you don't bury it, the Medicare tax will have to be increased from the current levy of 2.9% of payroll to 5% of payroll or higher. Of course, this calculation is about 16 years old - so the likely calculation my be about 6% - in other words - double the Medicare tax while the Republicans don't have the votes to stop it.
The other problem over the long term is the lack of workers to fund the retirement of the baby boomers and the generations beyond. One reason that some have proposed Personal Retirement Accounts (as a cutout from FICA) or USA Accounts (as an addition to FICA) is that this taps the productive capability of overseas workers as if they were taxed, since regardless of where the profits are taxed, the dividends will go to American shareholders with these accounts. The problem with this is that eventually these workers will demand the kind of pay and benefits that make exploiting them as a cash cow for the old impractical. The history of the advance of capitalism has factory after factory improve worker wages to middle class levels when at first the workes were treated as peons. This happened in Mexico, it is happening in Asia and will happen in Africa.
The only alternative is to correct the demographic imbalance by shifting more money to families with children, especially by the tax benefit changes above.
The gloom in the out-years is kind of a reverse Malthusianism. It is based on conjecture and may be overcome by reality, especially if more tax benefits are tied to family size.
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