CUTS TO MEDICARE, MEDICAID, SOCIAL SECURITY, SNAP, LIHEAP

The safety net, meant to take some of the rough edges off of capitalism, that has long been a part of America is being steeply eroded.  AARP has an article listing the cuts to health and assistance programs in the Federal government.  You are urged to read the whole article because I have summarized only a small part of the listings (the URL is long but I have tested it).

President Trump unveiled his federal budget proposal Monday, which takes aim at many of the health and safety net programs that older Americans rely on. The plan sharply reduces funding for Medicare, Medicaid, Social Security Disability Insurance and food stamps.
.............................................................. 
Medicare The budget cuts $237 billion over 10 years.

Medicaid The spending proposal give states more flexibility. The plan includes:

• Repealing the Affordable Care Act’s Medicaid expansion.

Food Stamps The budget would fundamentally change the way the program works. The proposal includes:

• Slashing the Supplemental Nutrition Assistance Program (SNAP) by $213.5 billion over a decade.

Social Security The budget plan would cut $72 billion over 10 years in the Social Security Disability Insurance and Supplemental Security Income programs. 

Low Income Home Energy Assistance Program (LIHEAP)

The budget would end this program. The proposal includes:

• Eliminating the $3.4 billion annual funding.

https://www.aarp.org/politics-society/government-elections/info-2018/trump-budget-affects-seniors-fd.html?cmp=EMC-DSO-NLC-WBLTR---MCTRL-021618-F1-2763397&ET_CID=2763397&ET_RID=10705690&mi_u=10705690&mi_ecmp=20180216_WEBLETTER_Member_Control_Winner_339600_465104&encparam=DSbpmFDpjN54nJMGDfr2hTFBOcS7LNFfJGOFYJjEh%2fc%3d

MY POSTS AND CORPORATE TAX CUTS - II

For awhile I thought that my average page views on items in this blog had risen into the 30-40 range, but this may not be true.  I've been writing this blog for 8 yrs now and haven't the slightest idea why some of my posts will get hundreds of page views and others less than 20.

For example, I think my post Corporate Tax Cuts; Unintended Consequences was one of the most important I have written (http://stopcontinentaldrift.blogspot.com/2017/11/corporate-taxes-cuts-unintended.html).  It has gotten 61 page views which is nice, but why isn't this one of my posts that has gotten in the hundreds of page views?

For example I point out in Corporate Tax Cuts that, if we lower our corporate tax cuts, there is nothing to prevent other countries from lowering theirs.  So far as I know, no one else has mentioned this possibility.  There was a time when I attended a lot of congressional hearings, and I was quite impressed by the general intelligence of Senators (but not so much Representative).  I can't believe that they haven't thought of this possibility.  Are we being lied to?

There is something weird with our Republican political leaders.  It appears that Gary Cohn, the top economic adviser, feels there is some direct relationship between corporate  tax cuts and increasing investments:

President Donald Trump's top economic adviser, Gary Cohn, looked out from the stage at a sea of CEOs and top executives in the audience Tuesday for The Wall Street Journal's CEO Council meeting. As Cohn sat comfortably on stage, a Journal editor asked the crowd to raise their hands if their company plans to invest more if the tax reform bill passes.

Very few hands went up.

Cohn looked surprised. "Why aren't the other hands up?" he said.*

Was Cohn faking his surprise at the lack of corporate interest in more investing by corporations with a decrease in corporate tax rates?  Do they really not realize that we are in a very good economy, that companies are supplying our needs with current plant and equipment, with current employment, and at current wages?  Do they not realize that corporations are rolling in money and could well expand if they thought the expansion would bring more business?

I am not alone in saying that corporations are likely in this economic environment to buy back stock and increase executive rewards as they did in the 2004 tax holiday for repatriating foreign profits. and maybe give a special dividend or raise their dividend.  Surely congress and the administration know this.

There are those who say the stock market will crash if we don't have a big tax reduction for business and the wealthy.  Companies are making excellent profits in recent years and the wealthy have done extremely well.

I'm cynical enough to think the whole reason for doing these tax cuts is to take money away from Medicare, Medicaid, food stamps and the like:
The G.O.P. budget would cut $5 trillion in spending over the next 10 years, with a trillion of those dollars coming from the Medicaid program and half a trillion from Medicare. (“Entitlements” like housing assistance and food stamps wouldn’t fare much better.) Meanwhile, the Pentagon’s budget would increase to $620 billion.**

That GDP has been under 3% for most of the post Great Recession years, is pointed to, to say we are in a slow economy.  But GDP is a spending metric.  One reason that GDP isn't higher is that corporations are not spending, but hoarding their profits and buying back stock.  Certainly the consumer is doing their part and household debt is at record highs.***

I certainly will be very, very surprised if the tax cut and tax holiday on repatriated profits result in much increase in the economy.  Also as I pointed out long ago, tax cuts for individuals is an inefficient way of stimulating the economy.****

* http://www.chicagotribune.com/business/ct-biz-trump-tax-plan-corporate-investment-20171115-story.html
** https://www.vanityfair.com/news/2017/10/republicans-propose-slashing-medicaid-to-pay-for-tax-cuts
*** http://stopcontinentaldrift.blogspot.com/2017/11/household-debt-at-new-high.html
**** http://stopcontinentaldrift.blogspot.com/2010/05/effectiveness-of-taxes.html

EXPAND MEDICARE TO REPEAL OBAMACARE?

In the August 1 WSJ, conservative Peggy Noonan (a spech writer for President Reagan) says she thinks Obamacare will gradually be replaced by expanding medicare.  What a surprise!  Is there a liberal out there that wouldn't love that?

A reason that conservatives have such a hard time coming up with an alternative to the Affordable Care Act (ACA) or Obamacare is that Obamacare IS the conservative health care plan.  It is not that liberals like the ACA, it is that it was the best plan that Democrats could get past.  There are DINOs in the Democratic Party (Democrats In Name Only) that had to be catered to.  So an attempt was made to appeal to DINOs and Republicans to vote for the plan.  Republicans voted against it and oppose it only because it was proposed by a Democratic administration.

An unusual feature of the ACA is that an attempt was made to PAY FOR IT.  Republicans don't like to pay for health care.  President Reagan, for example, instituted the plan where hospitals with emergency rooms had to take all comers whether they could pay for it or not.  But he left it up to the hospitals to find a way to pay for this service.  Ditto President Bush (Bush-43) with Medicare D, the prescription drug plan where no attempt was made to pay for it.  And Republicans seem to try to repeal all attempts to pay for Obamacare (e.g. the business mandate and the tax on artificial limbs and replacements).  It is a disappointment that Republicans, supposedly the party of fiscal responsibility are so irresponsible on health care.  It is as if Republicans don't want health care for the poor at all.  This is strange because the Republican Party has been taken over by Evangelicals.  They even criticize John Kasich, an evangelical with a small e, for accepting the Federal Medicaid money.  He believes that Christians need to take care of the less fortunate among us.  After all Poor and Poverty appear 446 times in the bible.*

* http://stopcontinentaldrift.blogspot.com/2014/03/poor-and-poverty-appear-446-times-in.html

MEDICARE/MEDICAID

Republicans don't like health care for the poor.  Republicans, along with Democrats and Independents, like Medicare, however

http://www.cnbc.com/2015/07/16/medicare-medicaid-popularity-high-ahead-of-birthday.html

THE PROBLEM WITH THE FEDERAL GOVERNMENT STICKING WITHIN ITS REVENUES

Senator Rand Paul says the $2.1627 trillion of Federal revenues for FY 2010 is plenty of government. Assuming that the FY 2012 Federal revenues are the same as in 2010, the military/security budget of FY 2012 of $1.2192 trillion* would be 56.4% of the Federal revenues, leaving only $0.9437 trillion ($943.7 billion) to fund the rest of the government. Even of this, about $290 billion of non-military/security interest payments on the Federal debt must be taken from the $943.7 billion leaving only $654.6 billion to fund the entire rest of the government. This sum must be used to pay entitlements (e.g. Medicare/Medicaid and Social Security) which in FY 2010 totaled $700.7 billion for Social Security and Medicare and Medicaid totaled $793 billion with Medicare being about 2/3rd of that total and Medicaid being 1/3rd.** Thus Social Security and Medicare/Medicaid payments by themselves massively exceed the $654.6 billion available for non-defense/security spending. The Social Security and Medicare/Medicaid budgets together total $1.4937 trillion or 69.1% of the $2.1627 trillion of Federal revenues, even a larger percentage than the military/security budget. The military/security and entitlement budgets together total 125.4% of the 2010 revenues, greatly exceeding the revenues available by about $550 billion. Thus nothing is available for the government as we know it, i.e. most of the discretionary budget (Departments of State, Treasury, Justice, Agriculture, Energy, Education, Interior, Commerce, National Park Service, etc. and the Administrations of EPA, NASA, etc., and such Authorities as the Tennessee Valley and Bonneville, etc. excluding the military/security budget). You could shut all these parts of the government down completely, and you would still run a deficit of about $550 billion.

To the credit of Rand Paul, he would not take Military/Security spending off the table for consideration of budget cuts though my understanding is that current plans do take them off the table; however he would not touch Social Security.*** The problem is caused to a significant extent in that Federal revenues are at a 60 year low as a percentage of GDP.**** I don’t see how we can balance the budget without tax increases in addition to budget cuts plus a rapidly increasing economy. And the budget cuts must be carefully made as they could easily push us into a recession or worse through large cuts in Federal and contractor employees and termination of contracts, many of which don’t have release clauses so will have to be paid anyway. This was true, for example, when President Obama terminated the manned missions to the moon project of NASA, though it does save follow-on contracts. * http://www.huffingtonpost.com/christopher-hellman/national-security-budget_b_829676.html.

Consider an article by charliebonds, post 353603, "2012 Military Budget 56.4% of Available" in Investment Analysis Clubs/Macro Economic Trends And Risks, 6 March 2011: For 2012, the White House has requested $558 billion for the Pentagon’s annual "base" budget, plus an additional $118 billion to fund military operations in Iraq and Afghanistan. At $676 billion, that’s already nothing to sneeze at, but it’s just the barest of beginnings when it comes to what American taxpayers will actually spend on national security. Think of it as the gigantic tip of a humongous iceberg. To get closer to a real figure, it’s necessary to start peeking at other parts of the federal budget where so many other pots of security spending are squirreled away. Missing from the Pentagon’s budget request, for example, is an additional $19.3 billion for nuclear-weapons-related activities like making sure our current stockpile of warheads will work as expected and cleaning up the waste created by seven decades of developing and producing them. That money, however, officially falls in the province of the Department of Energy. And then, don’t forget an additional $7.8 billion that the Pentagon lumps into a "miscellaneous" category -- a kind of department of chump change -- that is included in neither its base budget nor those war-fighting funds. So, even though we’re barely started, we’ve already hit a total official FY 2012 Pentagon budget request of: $703.1 billion dollars. Not usually included in national security spending are hundreds of billions of dollars that American taxpayers are asked to spend to pay for past wars, and to support our current and future national security strategy. For starters, that $117.8 billion war-funding request for the Department of Defense doesn’t include certain actual "war-related fighting" costs. Take, for instance, the counterterrorism activities of the State Department and the U.S. Agency for International Development. For the first time, just as with the Pentagon budget, the FY 2012 request divides what’s called "International Affairs" in two: that is, into an annual "base" budget as well as funding for "Overseas Contingency Operations" related to Iraq and Afghanistan. (In the Bush years, these used to be called the Global War on Terror.) The State Department’s contribution? $8.7 billion. That brings the grand but very partial total so far to: $711.8 billion. The White House has also requested $71.6 billion for a post-2001 category called "homeland security" -- of which $18.1 billion is funded through the Department of Defense. The remaining $53.5 billion goes through various other federal accounts, including the Department of Homeland Security ($37 billion), the Department of Health and Human Services ($4.6 billion), and the Department of Justice ($4.6 billion). All of it is, however, national security funding, which brings our total to: $765.3 billion. The U.S. intelligence budget was technically classified prior to 2007, although at roughly $40 billion annually, it was considered one of the worst-kept secrets in Washington. Since then, as a result of recommendations by the 9/11 Commission, Congress has required that the government reveal the total amount spent on intelligence work related to the National Intelligence Program (NIP). This work done by federal agencies like the CIA and the National Security Agency consists of keeping an eye on and trying to understand what other nations are doing and thinking, as well as a broad range of "covert operations" such as those being conducted in Pakistan. In this area, we won’t have figures until FY 2012 ends. The latest NIP funding figure we do have is $53.1 billion for FY 2010. There’s little question that the FY 2012 figure will be higher, but let’s be safe and stick with what we know. (Keep in mind that the government spends plenty more on "intelligence." Additional funds for the Military Intelligence Program (MIP), however, are already included in the Pentagon’s 2012 base budget and war-fighting supplemental, though we don’t know what they are. The FY 2010 funding for MIP, again the latest figure available, was $27 billion.) In any case, add that $53.1 billion and we’re at: $818.4 billion. Veterans programs are an important part of the national security budget with the projected funding figure for 2012 being $129.3 billion. Of this, $59 billion is for veterans’ hospital and medical care, $70.3 billion for disability pensions and education programs. This category of national security funding has been growing rapidly in recent years because of the soaring medical-care needs of veterans of the Iraq and Afghan wars. According to an analysis by the Congressional Budget Office, by 2020 total funding for health-care services for veterans will have risen another 45%-75%. In the meantime, for 2012 we’ve reached: $947.7 billion. If you include the part of the foreign affairs budget not directly related to U.S. military operations in Iraq and Afghanistan, as well as other counterterrorism operations, you have an additional $18 billion in direct security spending. Of this, $6.6 billion is for military aid to foreign countries, while almost $2 billion goes for "international peacekeeping" operations. A further $709 million has been designated for countering the proliferation of weapons of mass destruction, combating terrorism, and clearing landmines planted in regional conflicts around the globe. This leaves us at: $965.7 billion. As with all federal retirees, U.S. military retirees and former civilian Department of Defense employees receive pension benefits from the government. The 2012 figure is $48.5 billion for military personnel, $20 billion for those civilian employees, which means we’ve now hit: $1,034.2 billion. (Yes, that’s $1.03 trillion!) When the federal government lacks sufficient funds to pay all of its obligations, it borrows. Each year, it must pay the interest on this debt which, for FY 2012, is projected at $474.1 billion. The National Priorities Project calculates that 39 percent of that, or $185 billion, comes from borrowing related to past Pentagon spending. Add it all together, and the grand total for the known national security budget of the United States is: $1,219.2 billion. ** charliebonds post # 353603 in Investment Ananlysis Clubs/Macro Ecomonic Trends And Risks of Motley Fool, "Due to declining tax-receipts, increasing debt-service costs, etc., it is unlikely that US revenues in 2012 will be higher than 2010. In fact, it is unlikely they will even be the same. But let’s give the tax-collectors the benefit of doubt and say that revenues for the US Government in 2012 will be $2.1627 trillion. Therefore, the proposed military/security/ war budget of $1.2192 trillion will be 56.4% of total, available revenues." 

**http://www.bankruptingamerica.org/tag/social-security/ (Scroll down to Budget Process: Perception vs. Reality)
*** http://washingtonexaminer.com/blogs/beltway-confidential/2011/01/detailed-look-rand-paul-spending-bill He would cut the Federal budget by $500 billion.
**** http://www.suntimes.com/business/3706985-420/taxes-too-high-theyre-actually-at-60-year-low.html

"AFTER YOU ALPHONSE*

No, after you Gaston."* The president has recommended small but substantial cuts to the Federal Budget on an amount totaling only about $500 billion of the Federal Budget (Freeze the budgets of these agencies at 2011 levels. Freeze Federal Employee's salaries for two years.). Note that the $500 billion of agencies being considered for cuts (Commerce, Interior, DOD, DOE, EPA, HUD, Agriculture, etc.) is only about 40% of the Federal deficit so you could eliminate them completely and not come close to balancing the budget. The congressional opposition says he punted.

What they want is the president to propose substantial cuts in entitlements (Social Security-23% and Medicare-12%) which, along with payments on the Federal debt(11%), are a substantial part of the budget - 46% in 2003, for example.** This is the "After you Alphonse." But the president was the Republicans to propose the cuts first which is the "No, after you Gaston." Certainly, you cannot approach a balanced budget without substantial cutting of Social Security and Medicare and perhaps other entitlements (Medicaid-7%, means tested entitlements-6%, and mandatory payments such as pensions-6%).

So far Republicans have refused to approve any increased taxes, particularly on the wealthy, which must be another part of the equation toward a balanced budget.

So this is what I think may happen. The president will continue to offer small but substantial cuts to the Federal budget. Eventually there will be a horse trade with the president approving some cuts to Social Security and Medicare as well as core agencies and departments with Republicans agreeing to some increases in income tax on the wealthy and oil companies. It must be done together.

What kind of cuts? For details of the presidents proposals for 2012, see: http://www.huffingtonpost.com/2011/02/13/obama-budget-proposal-cut_n_822689.html (Scroll down to see cuts to Departments and Agencies. Note that some agencies are recommended for massive budget increases: Dept. Education - 38.5%!)

But to really get to a balanced budget, we need a rapidly growing economy with significantly increasing employment. After all, the Federal revenues as a share of the nation's economy are near a 60 year low: http://www.suntimes.com/business/3706985-420/taxes-too-high-theyre-actually-at-60-year-low.html.

Something that should be seriously considered is to let corporations repatriate foreign profits at a 5% tax rate. This might generate something like $50 billion that could be applied to the deficit, another small step but a significant one. And the repatriated funds might also add to the economy, even if they were distributed as special dividends by the corporations (but not purchase of existing stock). Although this has been mentioned, I don't know if anyone in congress or the president has actually proposed it.

* http://en.wikipedia.org/wiki/Alphonse_and_Gaston

**http://wiki.answers.com/Q/What_percentage_of_the_U.S._federal_budget_is_spent_on_entitlements