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  • sky_walker616 sky_walker616 Oct 1, 2013 1:42 PM Flag

    The back story of Healthcare Reform and Immigration Reform

    (Part I)
    Many people wonder why expand the healthcare coverage to some 45 million uninsured American and legalize some 15 million undocumented immigrants at the time when US is running "perpetual" large fiscal deficit and having 100+% Debt-to-GDP ratio?

    If America is so broke, how could it add such human expenses on its balance sheet? ( I am in favor of both reform, though I suspect the timing.) The key is to manipulate the GDP number.

    According to usdebtclock org website, both CBO and OMG have projected real GDP to reach about $19.5 Trillion by 2017 while projecting the total outstanding debt to reach $20 Trillion. The close to 100% GDP-to-debt ratio will give an impression of long-run solvency of US finances.

    However, in order to go from the current $16 Trillion to $19.5 Trillion in four years, the compounded real GDP growth rate have to be averaged 5+% annually. Apparently the QE programs from Federal Reserve and massive runup in stock and housing markets have only accomplished 2.5% in the latest quarter. As the pump-up effect of these programs are wearing off, the Congress is forced to step in with the Healthcare Reform and the Immigration Reform to help the GDP numbers.

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    • There is no doubt that these are worthy programs. But whoever decides to implement them at this time is no magnanimous benefactor.

    • The fallacy of Obamacare is the democrats did not realize someone has to pay for those people that cannot afford to pay their own health care.
      Obamacare is expecting the less than 27 year healthy olds to pay for it. Think most under 27 do not make enough money to hardly support themselves much less the elderly, infirm, unhealthy, etc.
      99% of the healthy will be better off paying the fine for not having ins.

    • Will defer to Yellen for that one. The Fed has the numbers and will take the necessary action to stabilize the economy.

    • I sense the willingness of the people in charge to default eventually.

    • Who cares. Off topic. Ignored.

    • BDPS has Started Using SMS Alerts for Faster Delivery on Their Profiled Alerts. Text the word TRADES to 99158. These usually run up 300% to 500% in just Days After Being Alerted. Timing is Critical. 

    • I'm not sure how bonobocare will factor into the GDP. Transfer payments, welfare and social security, are not included in the number, but spending on healthcare by the individual is. Regardless;

      The 2012 GDP was $15.6 trillion.

      I tried to go to the Bureau of Economic Analysis website to get the GDP projections for out years and the web page has a sign that says;

      "Due to the lapse in government funding, w^ will be unavailable until further notice. This includes access to all data and the e-File system."...............LMAO!

      The poosies turned the website off because they're shut down, even though we paid for the information. Don't need them anyway....

      If 2% growth is compounded over 5 years the GDP would be $17.2 trillion.

      To get to a GDP of $19.5 Trillion in 5 years;

      15.6 x (1+x)^5 = 19.5

      (1+x)^5 = 19.5/15.6 = 1.25

      ((1+x)^5)^(1/5) = (1.25)^(1/5)

      1 + x = 1.0456 = 1 + 0.0456

      x = 4.6%. We'd need a growth rate of 4.6% compounded annually.

      Still far far above what bonobo is getting deficit spending 8% of GDP.

      Bush grew the economy on average by 5% deficit spending only 3% of GDP. Reagan grew it by between 5 and 10% deficit spending 3 to 5% of GDP.

      With a real president, the 19.5 trillion could be done without any bonobocare tricks or gimmicks.

      • 1 Reply to stocktor_evil
      • The current fake debate about the "debt ceiling" is a distraction from the real issue: the long-term solvency of the US finances.
        The short-term risk of default could be solved by the agreement between the Congress and the Whitehouse. But unless there is a viable long-term solution, the willingness of eventual default on the US Sovereign Debt is clear and present.

    • (Part II)
      Many people would wonder how can one raise the GDP growth by including tens of millions of people who have little means to pay into the system? Let us do some simple maths here:

      (1) Healthcare Reform
      Assuming $1000 healthcare expense for each of the 45 million uninsured, the increase in annual spending is $45 billion. However, the extra spending, even if all covered by government debt, will have multiplier effects to the entire healthcare industries and other related industries, the total positive effect on the GDP could be 5 x 45 = $225 Billion annually. The healthcare cost for the already insured people might increase due to sudden imbalance in supply and demand. That should contribute to the GDP growth nicely.
      My guess is that the insiders are hoping to healthcare reform to add 1.5% to 2% in GDP growth for the next four years.

      (2) Immigration Reform
      Assuming half of the newly legalized undocumented immigrants are on the benefit-roll, and assuming the annual total payout is $10,000 per person, including direct food assistance, housing assistance, free healthcare etc and indirect assistance, then the increase in annual spending for those on benefit-roll would be 7.5 million * 10,0000 = $75 billion. After adding the multiplier effect, the total contribution to GDP could be $375 billion. The other half could have higher contribution to the GDP.

      If (1) can generate $1-1.5 trillion new GDP growth over the next four years, and (2) $1.5-2 Trillion, then we could nicely fulfill the prediction made by OMG and CBO, by running $1+ trillion annual budget deficit. By 2017, we still have a 100% debt-to-GDP ratio.

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