I have a Beef with Karl Denninger

Market-Ticker.Org 

Call Up The Unorganized Militia

We are just a few short years -- less than six -- from Medicare being unable to fund 75% of its spending.  When that happens the only choices are to either kill a huge percentage of those over the age of 65 by denying them medical care and drugs or instantly double the federal deficit on a permanent, perpetual basis.  

DYI:  As sharp of guy that Karl is he is confused as to how the financing of Medicare and Social Security works.  As we know or we should know those Trust Fund Securities are simply I.O.U.’s and can only be redeemed at the Treasury Department. 

The excess money used to purchase Trust Fund Securities went into the general fund of the Federal Government and has long ago been spent.  When Trust Fund bonds are redeemed at the Treasury for Medicare or Social Security to make good on their promise of benefit if the treasury has excess general tax receipts to pay then there is no harm.  If not then the Treasury borrows the money in the credit markets to pay Medicare and Social Security.

Here’s my beef.  These costs are already reflected.  There will NOT be a cost leap to the general budget as that cost is already reflected when Trust Fund Securities are redeemed. Period.

In 1935 the 74^th Congress and Franklin Roosevelt passed into law the Social Security Act [Medicare [1965] is run the same way].  It was designed primarily as a stand alone program through its own taxes with the Trust Funds for any future possible imbalances to funding caused by economic downturns, demographic changes etc.  When Trust Funds are redeemed moving Social Security/Medicare from a stand alone program to general taxation and borrowing power of the Federal government.

The question arises when the Trust Funds are exhausted as in the very soon case – less than 6 years – for Medicare; if Congress does not intervene with additional spending from general revenues/borrowings then Denninger is correct Medicare will have to lower their spending level by 75% to put the program back into balance OR increase Medicare taxes substantially [only Congress can authorize increasing taxes by legislation].

What will Congress do?

Congress will intervene with additional spending to shore up Medicare.  Of course there will be the typical scream fest dog and pony show between the two political parties all posturing for maximum T.V. time.  In the end some type of funding will occur.  The Medical Industrial Complex will see to this as Medicare is a huge money train for their benefit.  Campaign dollars will flow like the river Jordan ensuring its passage and who ever is President will sign it into law.

What SHOULD Congress and the President actually do?

Here is where Denninger is 100% on target.  The Medical Industrial Complex colludes in order to price fix and now has moved from local to regional monopolies.  What needs to happen is for the U.S. Attorney general along with Congressional hearing enforce 100 year old laws bringing into compliance with the Robinson/Patman, Clayton and Sherman Anti-Trust Acts.  These Acts not only have civil penalties but criminal as well.  Yep you could see many CEO going out the door with handcuffs on!

 

This will drop prices on average – depending on the complexity and severity of illness – by 75% plus.  That’s not a typo; 75%.  Many mundane illnesses will drop as high as 90%.

Legislation would needed to be passed for big pharma allowing for the re-importation of ethical drugs thus dropping prices around 75% on average and for drugs long since passed their patent but still very effective as much as 90% plus.

The Medical Industrial Complex now swallows up 21% our GDP is it any wonder this is the primary cause for bankruptcy among our citizens?  For those who don’t go into bankruptcy – even for those with insurance – remaining costs are usually borrowed creating more and more new debt slaves all caused by cronyism [corporate campaign dollars] for Presidents and Congressmen to ignore non competitive price gouging.

So many Millennials and the upcoming Cyber generation impossible to leave Mom and Dad as all costs from student loans, Medical, real estate, Insurance, and Military Industrial Complex is sucking the life blood out of the remaining economy.  Until these organizations are reined in Millennials and Cyber generation will delay household formation.  Of course this has effected all generations to one degree or another.  

What is happening America is drifting into the European disease of austerity all caused by cronyism and massive corporate/government/private debt build up thus starving the general economy.

Till Next Time…

DYI