Wednesday, April 20, 2011

What About the Budget Deficit and the National Debt?

Anybody serious about solving the national debt/budget deficit problem has to consider both expenditure cuts and revenue increases. We should cut back some government programs, and we should increase some taxes. Until there is a serious debate about what to cut and what to tax, there is no serious effort to reduce the deficit/debt. S&P is right; the US is on a slippery slope towards bankruptcy.

On the expense side, people talk about Medicare and Medicaid, but they never mention doctors themselves. Many doctors are basically government employees with fees set by Medicare, but they earn much more than the average government employee, around $200,000 annually for doctors, compared with about $75,000 for federal government employees and about $50,000 for state government employees. Doctors who specialize in hot areas like cardiology or neurosurgery earn much more, often more than $500,000 annually. As a result, it is hard to attract doctors to lower paying, but more important areas like family practice. Somebody needs to come up with some original ideas for dealing with that, for example, using more nurse-practitioners to do triage, take care of simple things, and refer more difficult cases to specialists. Part of the problem is the cost of medical school. You can't ask students to incur thousands of dollars of debt for lengthy, expensive education and then take lower paying jobs. Government programs could subsidize medical education in return for an obligation to be a family practitioner, see "Northern Exposure." Also, one of the most expensive programs is the new drug assistance program under Medicare part D, passed under Bush. It is basically just a subsidy for the giant drug companies.

It's true that there is some unfairness about taxation. Some things are unquestioned duties of government: national defense, police, firemen, etc. Some are generally accepted and have been for a long time: public school teachers. Others are relatively new: extensive welfare programs. However, a legitimate comparison is how much people used to pay for these services and how much they pay today. Today, in general, federal taxes are much lower than they were fifty years ago, although they are higher than they were 100 years ago. A hundred years ago, people were still drinking milk with formaldehyde in it, starving to death if they fell on hard times unless some neighbor helped. If we are not rich enough to provide these services anymore, we need to have a debate what the most important services are and how we can maintain them. One area that has taken an enormous hit in recent years is education, particularly higher education, which has become more and more expensive. By cutting off universal access to higher education we are dooming ourselves to second class status among the nations of the world.

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