Rep. Paul Gosar last week warned a jam-packed Payson Tea Party gathering that the nation is headed for financial disaster by not controlling the federal debt and the cost of Medicare and Social Security.
“We’re chasing our tails,” said the Prescott Republican who represents Northern Gila County in Congress. “Mayday, Mayday, Mayday,” he said, dramatically invoking the international radio distress calls derived from the French “venez m’aider” (come help me).
Much of Gosar’s talk focused on decrying assorted controversies that have enveloped the administration of President Barack Obama, including extra questions the Internal Revenue Service directed at Tea Party organizations applying for tax-exempt status and growing information that early pleas to protect the U.S. diplomatic facilities in Benghazi went unheeded. However, Gosar launched his talk to more than 150 people at the Tea Party meeting at Tiny’s restaurant with a series of slides depicting the federal budget problems.
Gosar pointed out that the budget will still face a deficit even if Congress eliminated all discretionary spending — including the $670 billion in discretionary defense and $615 billion in domestic programs. The “mandatory” portion of the budget includes formula-driven payments for Social Security, Medicare, Medicaid and interest on the debt.
Projections suggest that as the number of retirees on Social Security and Medicare swell, federal spending as a percentage of the economy will spiral. Gosar’s slides suggested federal spending would rise from about 23 percent of Gross Domestic Product at present to about 40 percent by 2041. Given the deficit trends, the interest on the debt would increase from about 3 percent of the economy to about 25 percent of the economy.
Another slide showed that foreign investors hold an increasing share of the U.S. debt. Foreigners now hold 48 percent of the debt, compared to about 6 percent in 1970, he said.
He said federal spending is “skyrocketing” and added, “if we spend zero on discretionary spending, you’re still running a deficit.”
The federal deficit this year has declined from last year’s $1.1 trillion to just under $642 billion according to the latest projections, buoyed by economic recovery, modest tax increases and spending reductions.
The drivers of the federal budget woes remain Social Security, Medicare and Medicaid, which provides medical care for the poor and for impoverished, elderly nursing home residents.
The government reported last week that Medicare projections had brightened somewhat, thanks to a slow-down in medical inflation and changes made as a result of federal health care reforms. The latest projections show that Medicare will have to cut benefits in 2026, two years later than previously forecast.
Savings include the elimination of a premium paid to Medicare Advantage health plans and Medicare payment penalties on hospitals that quickly re-admit discharged patients for the same condition, which reduced readmissions by 70,000 — at a savings of $10,000 per readmission.
The latest projections show that Social Security’s condition remains relatively unchanged. The program will have to cut benefits by about 25 percent in 2033 without changes now. The Social Security disability fund, however, will have to start cutting benefits in about three years, unless Congress shifts more money from the main Social Security program.
The inexorable rise in health care costs coupled with the aging of the population pose a long-term problem for both Medicare and Social Security. Currently, Social Security covers 57 million people, including 11 million on disability. Medicare covers 51 million people, mainly retirees. By 2060, projections say just the number of retirees on Medicare will rise to 92 million.
Gosar didn’t offer suggestions for changing the trajectory of the projections on his slides at the Tea Party meeting, beyond reducing federal spending, interjecting more competition into medicine and repealing “Obamacare.”
In Washington, the two parties remain largely deadlocked on conflicting plans for dealing with deficit spending and entitlement reform. That deadlock has already resulted in the automatic sequester cuts, which reduced federal spending across the board by just under 3 percent.
Republican budget proposals Gosar has supported have proposed deep cuts in federal discretionary spending, added cuts in income tax rates and the conversion of Medicare into a voucher program that caps federal spending by giving retirees a set amount of money to buy health insurance on the open market.
Supporters say that such an approach would give seniors the clout to shop for insurance and select the lowest-cost plans, ultimately driving down the cost of health care. Critics say that the plan would instead result in far higher out-of-pocket costs.
The Obama administration has proposed a different set of reforms, including cutting subsidies to drug companies and charging wealthy retirees much more for their Medicare coverage. Administration proposals could also reduce cost-of-living increases for retirees and reduce Medicare payments by $400 million, mostly payouts to doctors and hospitals.
Neither side has focused seriously on Social Security reform since President George Bush’s plan to phase in individually controlled investment retirement accounts died in Congress.
The sharp reduction in deficit projections and the small improvement in Medicare’s prospects have whittled away at the never-impressive appetite for a painful budget compromise.
Currently, workers and employers each pay a 6.2 percent Social Security payroll tax on the first $113,000 of income, plus a 1.45 percent Medicare payroll tax. The non-partisan Social Security Trustees say the system could eliminate the projected shortfall in Social Security by boosting the joint worker/employer Social Security tax to 15.1 percent. But if Congress delays until 2033, the tax would have to go to 16.5 percent. If Congress instead balances the books with benefit cuts for future retirees, it would have to cut payments by 20 percent. The increases and cuts grow greater the longer Congress waits.
Gosar said the only real solution now lies in turning the Republican majority in the House into a veto-proof “supermajority” and retaking control of the U.S. Senate from the Democrats.
He said the Republicans politically can’t afford to shut down the government by refusing to raise the debt ceiling. “If we don’t raise the debt ceiling, this whole thing collapses. If you’re on Social Security and Medicare, you will not get paid.”
Besides, shutting down the government costs more than it saves, he said, in reference to a budget standoff between then-President Bill Clinton and House Speaker Newt Gingrich. “The last time we did that, for every $1 we saved we ended up spending $1.50 and I’m not going to take a chance of losing (the election) in 2014.”
He said, “This has been going on for a long period of time. We have to fight to get this back. Everything relies on 2014 — getting a supermajority in the House and taking back the Senate.”
Gosar also came to the defense of Republican Gov. Jan Brewer, currently locked in a budget standoff with the Republican legislative leadership about accepting federal money to add an estimated 400,000 residents to the state’s Medicaid Program (AHCCCS) as part of Obamacare.
“I’m not willing to bite off the head of my governor. She’s going to make some decisions that are tough. There is not a great answer. Don’t destroy people in the conservative movement — that is how the liberals and Democrats have won.”