It’s not about the numbers… yet. (Part One)
I have a hard time with this. The numbers surrounding the US debt, deficit, government spending, and Federal revenue are all easily obtained. This is about the math. Right?
Well, no, apparently it’s not. I’ve discovered that it’s really about the “full faith and credit” of the United States Government.
Full faith and credit. Federal and municipal governments can promise repayment of debt securities they issue because they can raise money through taxes, borrowing, and other sources of revenue. That power is described as full faith and credit. (Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.)
The US Budget Deficit and Federal Reserve policy is NOT a mathematical problem. It’s a perception issue!
To get an idea of what I mean, take a few moments to review Fareed Zakaria’s commentary in the first two minutes of his CNN show on April 24th. Essentially, he’s stated that we’ve got fewer problems than everyone else, therefore the world continues to buy US Treasuries. As long as Europe has more sovereign debt crises than we do, and because the Japanese committed atrocities in China during World War II, the Chinese see us as the best source of investment in the global marketplace.
OK, I guess I can accept that in the short term. But what happens when we’re not the least risky investment source in the world? What does it mean when S&P downgrades US Treasuries given that they issued a credit outlook warning on this a few weeks ago? Why am I even talking about this in a healthcare management blog!?!
Of all the costs involved in driving the US deficit out of control, entitlement programs are on the fastest track to insolvency. The effect appears catastrophic over time.
My practice receives more than half of its patient care revenue from Medicare and Medicaid, and I bet yours does too. There should be tremendous pressure to get these program costs under control. There’s a high likelihood of declining payments (or at least no raises) to hospitals and providers in the future. Meanwhile, the rest of the world is placing bets on the safest place to invest money. Commodities such as gold, oil, and foods are all rising in price as a result of US Treasury policy and the perception of the direction of the US dollar and economy.
As usual, reviewing the math is quite helpful. It’s not hard to find… Presto (and thanks to The Washington Post), the US Federal Government should bring in $2.57 Trillion, yet spend $3.83 Trillion for fiscal 2011. Also, review the associated graphics on sources of revenue and spending.
This seems like a big problem. What is the real source of the problem anyway? The answer depends on who we ask. As with all issues in the American public square, the answers are polarized by ideology and politics, and its likely our leaders will argue about solutions rather than agree to enact reasonable policies. We’ll look at those potential solutions in a week or two.