The total debt cost of medical school has become obnoxious. When I started medical school 15 years ago this month, I took out approximately $2,000 a month in loans. $1,000 a month for all living expenses, including food, rent, utilities and entertainment and $1,000 a month for tuition and related expenses. I got out of medical school with just under $110,000 in loans for which I am currently paying back at a rate of $500 month for 30 years.
I learned the other day that a family medicine resident recently completed medical school with almost $250,000 in medical school loans. Family medicine? $250,000? Are you crazy? If that resident can lock in a 30 year loan at 3.5%, they’re looking at monthly payments of $1,200 a month for the rest of their lives. With current tax rates, this family resident will need to earn at least Read more »
*This blog post was originally published at The Happy Hospitalist*
Joe Scarborough reminds us that the divisions in American government are hardly new, paraphrasing Benjamin Franklin’s observation that “When you assemble a number of men, to have the advantage of their joint wisdom, you inevitably assemble . . . all their prejudices, their passions, their errors of opinion, their local interests, and their selfish views. From such an assembly can a perfect production be expected?” (This comes from a September 17, 1787 speech by Mr. Franklin to urge ratification of the U.S. Constitution, read on his behalf because he was too ill to deliver it in person. The Constitution was ratified the same day.)
I suppose we should be encouraged that Congress’s prejudices, passions, errors of opinion, local interests and selfish views are as American as apple pie, and the Republic has somehow survived nonetheless. Still, I find it deeply troubling that today’s politicians can’t find their way to agree on the debt ceiling.
No one should expect a “perfect production” to come out of this Congress and this administration, given how far apart they are on the need for tax increases and entitlement reforms. But they need to agree to something, and they need to do it soon.
I will leave it to others, who know a lot more about global economics than me, to explain what likely will happen to the economy if the debt ceiling isn’t increased by August 2. Let’s talk about the impact on health care, something I know quite a bit about—and why physicians especially should be concerned: Read more »
*This blog post was originally published at The ACP Advocate Blog by Bob Doherty*
Out of the Federal Reserve Bank of Dallas, comes this excellent presentation by its President and CEO, Richard Fisher about the fiscal disaster we currently find ourselves living in. Found (Via Grand Rants)
Happy’s summary. We are all screwed. Every last one of us. Unless a massive shift of policy is instituted today, we leave no future for ourselves or our children. The entitlements we currently support are ponzi schemes a thousand times larger than Madoff and his thieves.
Tonight, I want to talk about a different matter. In keeping with Bill Martin’s advice, I have been scanning the horizon for danger signals even as we continue working to recover from the recent turmoil. In the distance, I see a frightful storm brewing in the form of untethered government debt. I choose the words—“frightful storm”—deliberately to avoid hyperbole. Unless we take steps to deal with it, the long-term fiscal situation of the federal government will be unimaginably more devastating to our economic prosperity than the subprime debacle and the recent debauching of credit markets that we are now working so hard to correct.
Stating the obvious, we are screwed. But how is Social Security you ask?
Now, fast forward 70 or so years and ask this question: What is the mathematical predicament of Social Security today? Answer: The amount of money the Social Security system would need today to cover all unfunded liabilities from now on—what fiscal economists call the “infinite horizon discounted value” of what has already been promised recipients but has no funding mechanism currently in place—is $13.6 trillion, an amount slightly less than the annual gross domestic product of the United States.
Sounds like a lot of money, but that’s the good news. Read on:
The good news is this Social Security shortfall might be manageable. While the issues regarding Social Security reform are complex, it is at least possible to imagine how Congress might find, within a $14 trillion economy, ways to wrestle with a $13 trillion unfunded liability. The bad news is that Social Security is the lesser of our entitlement worries. It is but the tip of the unfunded liability iceberg. The much bigger concern is Medicare, a program established in 1965, the same prosperous year that Bill Martin cautioned his Columbia University audience to be wary of complacency and storms on the horizon.
You should be afraid, very afraid of where we are heading.
Please sit tight while I walk you through the math of Medicare. As you may know, the program comes in three parts: Medicare Part A, which covers hospital stays; Medicare B, which covers doctor visits; and Medicare D, the drug benefit that went into effect just 29 months ago. The infinite-horizon present discounted value of the unfunded liability for Medicare A is $34.4 trillion. The unfunded liability of Medicare B is an additional $34 trillion. The shortfall for Medicare D adds another $17.2 trillion. The total? If you wanted to cover the unfunded liability of all three programs today, you would be stuck with an $85.6 trillion bill. That is more than six times as large as the bill for Social Security. It is more than six times the annual output of the entire U.S. economy.
And how much is that for you and me?
Let’s say you and I and Bruce Ericson and every U.S. citizen who is alive today decided to fully address this unfunded liability through lump-sum payments from our own pocketbooks, so that all of us and all future generations could be secure in the knowledge that we and they would receive promised benefits in perpetuity. How much would we have to pay if we split the tab? Again, the math is painful. With a total population of 304 million, from infants to the elderly, the per-person payment to the federal treasury would come to $330,000. This comes to $1.3 million per family of four—over 25 times the average household’s income.
What would you have to do to get the unfunded mandates funded?
- Either increase federal tax revenue 68% starting today, and continue it forever. Good luck with that. When you tax something, anything, you will get less of it. Nobody knows what tax rate could support that without destroying the economy in the process.
- Or cut discretionary spending 97% (that includes defense, education, environment and everything else under the sun), forever.
The issue isn’t not enough taxes. The issue is a government that cannot say no to its constituents. Now, I know some of you view Obama as your messiah, but I’m sure even he knows he can’t generate 99 trillion dollars on the backs of the rich. So the question is, does he have the guts to tell you no before it’s too late? It takes a real leader to tell his followers no. Right now, our leaders are promising everything and they will ultimately be able to deliver on nothing.
*This blog post was originally published at A Happy Hospitalist*