Pelosi Needs To Be Ejected From Office
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2012-09-05 20:45 by Karl Denninger
in Politics , 7 references Ignore this thread
Pelosi Needs To Be Ejected From Office

So, according to Nancy Pelosi, both Medicare and Social Security are on the ballot, and therefore you must vote for Obama, because if you don't you're going to lose your Medicare and Social Security.

There's one problem that Nancy hasn't addressed -- if you vote for Obama you will definitely lose your Social Security and Medicare.

The reason is here:

Now note this is a geometric series.  When the pond is covered entirely, the fish die as there is no oxygen.

Note that the first few times the count doubles it doesn't look like a big deal.  But once you get here (to 25% coverage) there are only two more doublings that can physically happen, since more than 100% of something is impossible.  Likewise, more than 100% of the budget can never be achieved for the same reason.

Now let's put some figures to this. 

In 1980 this is what the Federal Budget looked like:

Health Care (all programs) was $55.3 billion.

In 2011 the Federal Budget looked like this:

And Health Care spending was $858.2 billion.

That is approximately a 9.3% annualized growth over that period of time.

Note that as a percentage of the budget Pensions (that is, Social Security) and Defense did not materially change.  Health care exploded. 

This is where the problem is.

This is where the Democrats and Republicans and Libertarians don't want to get into details.

But it is where we must, because if we do not this growth in Health Care spending will absolutely, with certainty, destroy the Federal Budget and our government.

Now refer back to the top graph again.

I want to talk specifically about what you're probably not taking from that graph, but must.  It is what people like Adrian Wyllie, who is the chair of the Libertarian Party of Florida and just today commented in public that the above chart "wasn't really that clever", obviously doesn't understand.

Let us presume for a minute that we are where the dark blue squares are.  How many squares must you destroy (that is, how much excess spending must you cut) to halt the advance of the geometric function? 

The answer is that you must destroy 16 squares.  That is, you must destroy half of the geometric series at that point in time to halt it's advance.  You must do so immediately, for each day that you delay part of another square appears and thus the problem gets bigger.  If you wait for another doubling time you must now destroy twice as many squares, or 32 instead of 16.

If you wait for where we are now, which is what's depicted above, you must destroy 1,024 squares or sixty-four times as many, even though you only waited for five more doubling times.

And so it goes.

The key item to this chart is that if you pretend you can set up some sort of "glide path" for these kinds of problems and eliminate them "over the medium term" (usually defined as "after the next election so I don't have to deal with it now") you will find that you are then unable to eliminate them at all as the amount of adjustment that must taken "later" exceeds the ability of the economy or people to absorb it.

That is, there is only one solution to all such geometric progressions -- halt them immediately as soon as you detect them, because the damage becomes worse literally by the day if you do not do so.

Remember the key here -- all geometric functions will, in a universe where all things are finite, eventually extinguish all resources.

This will always eventually happen. 

It happens every single time, without fail, because it is the immutable laws of mathematics that controls what is going to occur.  The only remedy is also set forth by those same laws of mathematics.  There is no negotiation, there is no arguing, there is no debate. 

There is only mathematics when it comes to this issue.

So let's talk about Health Care, particularly.  It is doubling every 7.7 years, approximately.  The next doubling is $858 billion, approximately. We have repeatedly argued that we can "slow" the rate of the advance and thus avoid the disastrous outcome.

That is a lie.

The last doubling required approximately 10 years.  That is, in 2002 Health Spending was $427.4 billion, or about half what it is now.  So how did the "glide path" of extending the time to double from 7.7 years to 10 years work out for us?

It made the problem much worse; instead of having to cut health spending by $427 billion over the next ten years from 2002-2012 we must now cut spending by more than $858 billion over the same period of time!

Got it? 

By settling for the "glide path" and buying into this lie instead of actually making the spending cuts we made the problem twice as worse, we made the required cuts in spending twice as large, and we got closer to the point where we cannot make the cuts without causing an immediate collapse of the government, of society or both.

In short you cannot advance spending more slowly, you must actually cut it.  That is, you can't use "baseline budgeting" (where some advance happens and then you advance more-slowly) because if you do then the advance is still going on and the outcome is the same.

What's worse is that we now spend about 18% of GDP, or roughly $2,700 billion, on health care both privately and publicly.  This is up from 5.1% in 1960 and 10.1% in 1985.  While you can look at this and say that the escalation has slowed, as noted above this doesn't matter as the outcome is the same -- only the time to death changes and the longer you wait the worse the required adjustment is.

This is what you probably don't understand because political hacks of all stripes, including the current alleged Libertarians, refuse to talk about it and make damn sure you "get it."

It is also why nobody who is in a political leadership position at any level has any excuse for endorsing, supporting, or campaigning for any candidate for President or any person with budgetary responsibility irrespective of party until and unless they put forward a detailed plan for exactly how they're going to put a stop to this, in detail, with specifics, including $425 billion in actual, hard spending cuts right now (on day #1) that will stick over the next 7-10 years in Federal Health spending.

Not one dollar less will do.

Not one cost-shifted dollar (e.g. "block grants") will do.

The cuts must be real, they must be in actual dollars, they must be detailed, they must stick for the entire period and they must be made now, in the present tense, not "later" or "over time."

This is not politics.  It is mathematics.  If it is not dealt with it will destroy this nation with certainty.  It will destroy the government -- with certainty.

The means by which it does so -- outright collapse, destruction of purchasing power by Fed currency games, taxation to the point that people revolt or a bond market revolt that instantly cuts off federal financing resulting in not only the cessation of all Medicare and Medicaid spending but also immediate cutoffs of EBT cards and other entitlements, leading to every large city in the nation going feral within hours, is a matter of debate.

But the outcome is not.

This is the existential threat to our survival as a nation.  All others are properly subjects for political debate.  This is not, as it is about mathematics, not politics and mathematics is about immutable natural laws, not suggestions or talking points.