Health Care Reform, Dead Like Ted?
By Larry Johnson on August 26, 2009 at 2:33 PM in Current Affairs
It is ironic that the news of Ted Kennedy’s death follows on the heals of the death knell of health care reform that is on the front page of the Financial Times today. You would not know it from reading the headling, “US says debt outlook worsening,” but this is big trouble for the Obama goal of getting a healthcare bill thru the Congress in the fall. Not only will Teddy be missing in action and unable to speak out but the financial news about massive deficits will make it impossible for legislators to push the US economy further into the swamp of debt. The news was buried in the story reporting on Obama’s decision to reappoint Bernanke as the Fed Chief:
The announcement came as the White House pro jected the budget deficit would be $2,000bn higher over the next 10 years than it had predicted. Taken with a separate forecast by the independent Congressional Budget Office, the news presented a bleak picture of America’s deteriorating debt position.
The CBO released sharply higher deficit projections predicting the 10-year deficit would reach $7,140bn, some $2,700bn more than it had thought in March. Unlike the White House’s calculations, the CBO estimate assumes all policies will stay exactly as they are.
“If you include the administration’s fiscal plans, this implies a deficit increase way in excess of $10 trillion over the next decade – the numbers are deeply alarming,” said Bill Gale, a senior economist at the Brookings Institution.
The real news is that the deficit is likely to explode by an additional $2.7 trillion dollars. Why?
That’s the CBO projection. We now know that the CBO is far more accurate than the Obama White House of spin. And it is even worse. The CBO’s analysis is based on the current law and does not consider the impact of Obama’s budget proposals, which will further exacerbate the deficit. The real number, if Obama’s budget proposals go thru, is closer to an additional $4 trillion dollars.
Those are unsustainable numbers. As I have pointed out in previous posts the economic news is not sunny.
Although there is news that US home sales increased in August and durable goods orders jumped up, the other news is troubling.
Housing starts fell 1 per cent in July from the prior month to an adjusted annual rate of construction of 581,000. The result trailed economists’ expectations of a jump in starts, but the June figures were revised up to show a 6.5 per cent monthly increase after originally showing a 3.6 per cent jump. Data underlying the overall figure reflect a diverging market, with construction of single-family homes picking up as building of multi-family housing slows. Multi-family home construction was off by 16.7 per cent in July but single-family housing starts, which are considered less volatile, rose for the fifth month running, climbing by 1.7 per cent. “The underlying picture is still consistent with a slow bottoming in this key sector,” said Alan Ruskin, strategist at RBS Greenwich Capital.
More than one in every eight homeowners with a mortgage was behind on home loan payments or in some stage of foreclosure at the end of the second quarter, as mounting unemployment aggravated the housing crisis, the Mortgage Bankers Association said on Thursday. The percentage of loans that were in foreclosure or at least one payment past due rose to 13.16 per cent, the highest increase since the MBA began keeping records in 1972 and a jump of more than a percentage point since the first quarter.
Then there is the commercial real estate market, which will implode and take out more banks. This will also add to the deficit as the Federal Government will again be compelled to rush in to stabilize shaky financial markets.
Did I mention the flu? We are likely to face a significant H1N1 flu scare in the fall. That means people will stop eating out at restaurants and going to movies. Normally the service industry is relatively immune from the kind of economic collapse we have seen over the past year. But it is not safe from the flu. If the flu scares lasts for more than two months it will make it virtually impossible to see anything approaching a robust economic recovery in 2010.
The deficit tidal wave is going to drown hopes for health care reform. Just like brain cancer, dying is not a matter of if, but when.
by Ronald Scott
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