AABP Award 728x90

Deficit vs. debt; health care legislation


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Dear Mr. Berko:

I listen to the TV news people talk about the economy, and they refer to the “deficit” or the “debt.” It sounds like both words mean the same thing. Several of us at the office think that they have different meanings as far as the economy is concerned, but that difference is too subtle for us to understand. Some of our co-workers suggest that there’s no difference. So I have been elected to write and ask for your help in telling us what those words mean. One more thing: Two of us will be retiring next year when both of us will be 68. Both of us are now on Medicare, which we know will change tremendously when the new legislation is passed by Congress. When the health-care bill is passed, I think President Obama may be picked as Time magazine’s Man of the Year. Do you think the new Medicare will be an excellent choice for Americans? So do you have any words of wisdom regarding this new legislation for two seniors who soon will, as you say, “hang up their tools”?

F.D.: Aurora, Ill.

Dear F.D.:

President Obama may be chosen as Time magazine’s Man of The Year, but I feel that distinction has lost its cachet. In 1938, Time’s Man of the Year was a failed artist whose infamy is known around the world. His name was Adolf Hitler. I know Barack and Adolf have as much in common as time and bacteria, which is why I don’t place any significance to any of Time’s choices. I don’t care to discuss this legislation, but I’ll share two thoughts with you: (1) None of us would have a problem with the new health-care legislation if every member of Congress who votes for it would be required to immediately commit suicide when costs exceed the projected amount by 25 percent. And (2) have all your elective surgery completed next year (new knees, prostate, back, etc.) and all elective testing done in 2010. If this legislation is passed, those procedures may not be available due to your ages.

I’m disappointed that few Americans know bupkis about simple economics and the effects of supply and demand. The following should answer your questions.

Assume that on Jan. 1 you budget $100,000 in spending for calendar year 2009. That $100,000 pays for your helicopter maintenance, food, clothing, office expenses, propofol injections, equipment purchases, credit card payments, health insurance and veterinarian bills for your white tiger. Well, it seems that your health insurance costs unexpectedly increase by $400, your office expenses increase $600, credit card payments rise by $700 and during the year, you had to spend $500 more for vet services than what was budgeted.

At the end of 2009, you have spent $2,200 more than you budgeted to maintain your comfort level. The difference between what you spent ($102,200) and what you budgeted ($100,000) is $2,200 and is called the 2009 deficit. In fact, you borrowed that $2,200 to maintain your comfort, because you had no cash in the bank. It seems that you also spent $1,945 more than you budgeted in 2008, $1,575 more than you budgeted in 2007 and $1,250 more than you budgeted in 2006, and each year you had to borrow that shortfall to maintain your status.

So in those four years in which your spending exceeded your budget, you accumulated a combined deficit of $6,970. And the combined total of those accumulated deficits is called the “debt” that you have borrowed incrementally each year and upon which you have been paying interest.

In government-speak, that accumulated debt is called the “national debt,” which is the combined total of every deficit of every administration since the First Continental Congress. The “deficit” for the 2009 fiscal (not calendar) year ending in September is expected to be over $2 trillion, and the combined deficits over the past five score years will exceed $12 trillion. At an interest cost of 4 percent, we are paying some $500 billion in vigorish. You can thank the 535 members of Congress for this abomination — they approved every penny of it. Imagine a country with a population of over 300 million that allows its decisions to be made by 535 members of Congress whose record of bribery, sexual assault, felonies, infidelity, theft, possession of stolen property, DUIs, drunkenness, bounced checks, etc., exceeds that of the public percentage by nearly threefold.

Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, Fla. 33775 or e-mail him at mjberko@yahoo.com. © 2009 Creators.Com

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