Social Security and Medicare

[Don Levit]

Folks:

In a letter from the CBO which I found on today's Benefits Link, the director, Douglas Elmendorf, responds to the questions posed of "CBO's analysis of the effects of the Patient Protection and Affordable Care Act (PPACA), as passed by the Senate on Dec. 24.

In particular, the effect of the legislation on the Hospital Insurance (HI) trust fund, from which Medicare Part A benefits are paid."

"Gross federal debt consists of debt held by the public and debt issued to government accounts.

Debt held by the public is the most meaningful measure for assessing the relationship between federal debt and the economy because it represents the amount the government has borrowed; such borrowing competes with other participants for financial resources. In contrast, debt held by trust funds represents internal transactions of the government and thus has no effect on credit markets."

"Enacting PPACA would increase debt held by government accounts more than it would decrease debt held by the public, and would thus increase gross federal debt. However, that measure of debt conveys little information about the federal government's future financial burdens and has little economic meaning. In contrast, the effects of legislation on debt held by the public offer a more useful measure of that legislation's impact on the government's financial condition."

I agree with this analysis in the short run.

However, in the long run, as the various trust funds are depleted, the intragovernmental debt will evolve into public debt, with similar effects on competition for financial resources.

Intragovernmental debt, for today, is "good debt," but eventually, it will be treated like "bad debt."

This accounting of debt goes against my grandfather's sound philosophy,"What you own, you may not own.

What you owe, you owe."

Don Levit