The United States of Enron

I’m writing today with some good news and some bad news.  The good news is that we’ve lowered our unfunded liabilities. This is the money that we should have (today’s present value of our future liabilities), but we don’t have.  Last year, we were underfunded by $52 trillion.  As you will see below, we’ve reduced that to $43 trillion.  Hooray for us!

6.-New-Closed-Group


Now, on to the bad news.  This reduction is a total fraud.  When the Trustees calculate the unfunded liabilities, they have to base this on current existing laws.  These laws resulted in the unfunded liability of Medicare dropping by $15 trillion.  You can see this below.  (Note: Medicare liabilities dropped by $15 trillion but other actuarial amounts increased by $6 trillion; therefore, the total liability dropped by $9 trillion.)

7.-15-billion

Here are a few assumptions (based on the news laws) which allowed us to drop our Medicare liability by $15 trillion:
1.     We will reduce our payments to Medicare providers by 30% within the next three years. We have never been able to do anything like this and I would argue that we never will be able to do this.
2.     Due to the Affordable Care Act, there are assumptions that “aggressive research and development has the potential to reduce Medicare costs in the future.”  This may well happen, but it’s speculative at best.  It certainly hasn’t happened in the past.  The reality is that research often results in technology which allows us to live longer and cost us more.
3.     Physicians must reduce the cost of medical services based on the productivity of the overall economy.  Unfortunately, as the government report admits, medical care is labor intensive and has not been able to increase productivity at the same rate as the overall economy.
As a recent op-ed piece argued in The Wall Street Journal, do you really believe that we can insure the uninsured and this will lower our debt and deficit?  It doesn’t make much sense.  Don’t get me wrong…I want everyone to have access to health care and I’m willing to help pay for it.  I’m personally willing to have less so that others can have more.  I know that many (maybe most?) people don’t agree with me.  Regardless, if we’re going to do this, I want to know the real cost and I want a plan concerning how we’re going to pay for it.  I don’t want to be told that it’s not only free…it will save me money!


If these kinds of assumptions are going to be the basis of our estimates, I would suggest that we rename our country the United States of Enron and we elect Bernie Madoff the president.  The real problem is that if we’re going to lie about our problems, we’re never going to solve them.