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Here’s What Your Leaders are Discussing

There’s been remarkably little detail out there about the substance of the deficit reduction negotiations, so I thought I’d point you to a piece by Keith Hennessey. Hennessey, who blogs at keithhennessey.com, appears to have some of the specifics.

He doesn’t source it, but I trust his information because Hennessey has contacts all over the place, having served as the National Economic Council Director to George W. Bush and as a senior adviser to Sen. Trent Lott (R-Miss.) when Lott was Senate GOP leader.

First, a note on the state of journalism. Reporters are focusing almost entirely on the politics of the discussions, the outbursts, the struggles – the big football game.

My experience is that people want to know what’s actually going on too. It now apparently takes an economist with no journalism experience that I know of prior to establishing his blog to ferret out the details, while actual reporters provide their expert “analysis,” like a bunch of ESPN talking heads at halftime.

Hennessey REPORTS  that the Biden groups has come up with $1.7-$1.8 trillion in spending reductions, including about $200 billion to Medicare and Medicaid and another $220 billion in miscellaneous mandatory program spending.

The widely ridiculed $2 billion in discretionary savings next year would get to about $1 trillion over ten years because it would set the “baseline” lower for spending and then increase by only two thirds of inflation, multiplying the effect.

Of course, future Congresses could always change this. And Hennessey notes that $195 billion of the Medicare and Medicaid cuts “comes from traditional cuts in how much the government pays a doctor, hospital, or other health provider for a given service.”

Wait ’til their lobbyists get ahold of that one. For example, the doctors’ Medicare fee cuts mandated by the 1997 Balanced Budget Agreement never actually occur.

Add on $300 billion in interest savings. We only get to $2 trillion plus – a number bandied about – if you include new taxes.

Obama would do all this as well as cut projected Medicare benefits in ways Hennessey describes, add some more discretionary cuts – I assuming a big chunk from Defense – and tax the “rich.”

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8 Responses to Here’s What Your Leaders are Discussing

  1. If Mr. Hennessey’s article is accurate, it’s still not enough. Pushing spending cuts off to “later” inevitably results in no changes. It’s really easy to promise that something will happen that you won’t actually be around to do.

  2. Thank you for sharing Keith Hennessey’s take on the negotiations. William is right, it is not enough. Less than $2 trillion over 10 years is a pittance. These guys know you can’t obligate future spending, problem for them is we know it too. Why do they always start with Medicare cuts? Any program the taxpayer is forced to contribute to is NOT an entitlement. Obamacare is the motherload of all entitlement programs…why can’t we cut there? What about all the green projects and foreign aid? Doesn’t look like Obama put ANY of his boondoggle projects on the cutting board.

  3. ECON 101:

    I make “X”$.
    I owe “Y”$ (bills, debts, etc.)

    If I have less than “X” to pay for “Y” = “Z” (I AM IN TROUBLE)

    WHY DOES NO ONE (Dem/Rep) IN WASHINGTON UNDERSTAND “BASIC ECON”?

    I WISH I WAS A “Politican” THEN I WOULD NEVER HAVE TO WORRY ABOUT $ AGAIN…(and I could Lie, Cheat & Steal for the rest of my Life)

    • That’s because, unlike everyone else, the employee (government) can go to its employer (taxpayer) and demand more money. If the employer doesn’t give more money, the employee can seize all the employer’s assets and throw the employer in jail. That’s why they’ll never get it.

    • …my bad.
      The scantily-clad bimbos & frat-boy metrosexuals of ‘cable news/main stream media’ are NOT allowed/DO NOT KNOW how to ask real ‘journalism’ questions to arrogant-ignorant-talking point spewing “Politicans”