The Numb of the Moment: Slowed Growth vs. Stolen Money

Wednesday, August 15, 2012 at 12pm
By John Friedman

Ahhh . . . I now vividly remember that, four years ago, I could not but help myself from reading a lot of politics, pretty much every day — just like how, ever since the Ryan VP pick bubbled up on the Twitter-machine last Saturday night, I’ve found myself pulled back in, Al-Pacino-like. Now, as then, I feel like there is a whole lot at stake on the next Tuesday after the first Monday of November of every year evenly divisible by four — i.e., November 6, 2012.

Now, as I get ready to fully launch The John Friedman Blog, I’m torn between my long-held belief that, when discussing financial health, I should remain politically neutral on the one hand, and, on the other, my long-held belief that every aspect of a person’s financial health has a very intimately-intertwined political component to it.

And I wonder: maybe this is a false choice? Maybe I can discuss politics in a neutral way while still drawing attention to the deeply political nature of our economic lives?

And then there is also my belief that a reader capable of critical thought and analysis could easily divine my leanings. In fact, I think the Komen piece I wrote earlier this year might have cost me a long-term client, even though I tried my very best to remain neutral and, as best I can tell, succeeded.

Hmmm . . .

*  *  *

The Numb in the News right now is $716 billion. Last Sunday Mitt Romney went on 60 Minutes and stated,

There’s only one president that I know of in history that robbed Medicare, $716 billion to pay for a new risky program of his own that we call ‘ObamaCare.'”

That’s a lot of dough, isn’t it? And a whole heck of a lot of robbed-dough to take away from seniors and give to other people, yes?

So what is that number all about? And didn’t it used to be a number more like $500 billion?

*  *  *

When making financial decisions, the smart way to proceed is to compare two different futures against each other. I typically label them, at least temporarily, Scenario A and Scenario B. Usually Scenario A is what the future looks like if you change nothing, and then Scenario B is what the future looks like if you make a change in some part of your financial life.

To do the analysis, I figure out everything that stays the same under both scenarios and lock those down so they will remain in lock-step, and then I figure out everything that changes between the scenarios and have those as the main inputs with which to what-if.

And then, before I present the analysis to the client, I usually come up with more descriptive names for the Scenarios, with Scenario A usually becoming Status Quo and Scenario B becoming, say, Pay-off Your Mortgage (to just grab an example out of thin air).

As it happens, budget wonks figuring out what the future looks like after enactment of big legislative changes to Medicare do the same thing.

*  *  *

Sarah Kliff of, among other things, the Washington Post, has a good post today about that $716 billion number — the one that’s been in the news since Governor Romney’s 60 Minutes interview — and how it relates to the $500 billion number that we previously heard about.

I’ll let Sarah talk about the specifics of how the two numbers relate to one another (in brief, it’s a mere timing difference — a different chunk of time — with the smaller number covering a year-earlier 10-year chunk than the 10-year chunk the bigger number covers). Please do take a look at Sarah’s article, and, in general, please do think about having the WonkBlog on your radar screen. It’s a good place to do some reading of the political wonky and often number’y sort.

Instead, the topic I want to address here is how a phenomenon shown in a single graph can be seen, by one party, as a robbing, and by the other as a saving. And then, ever the Switzerland-of-Financial-Health-Writing-I, I’ll leave it to you, Rorschach-like, to decide which you think is the more appropriate perspective.

Here’s the main graph from the story; I think Sarah either took the graph directly from the Congressional Budget Office analysis or built the graph based on numbers in that analysis, but I am not 100% positive (and haven’t the time to figure it out):

 

Looking at this graph, you’ll see from the blue line that, left to its own devices and without ObamaCare — referred to here as the PPACA (the Patient Protection and Affordable Care Act) and the HCERA (the Health Care and Reconciliation Act) — coming online, annual Medicare spending would grow from about $500 billion in 2010 to $950 billion in 2019 (that’s a near-doubling folks, as in . . . yeeEEEE-OWWWWch). That’s what budget wonks call “the baseline”; it’s the status quo against which everything else is measured or, using the jargon I set out above, it’s Scenario A.

Scenario B is the red line; it shows what happens to Medicare spending when you bring the PPACA (which I like to pronounce PEA‘ Pack Uh, and others like to pronounce Oh BOMB‘ uh care) into the mix. And you see that skinny little wavy triangle between the two lines? When you cumulate the differences each year between the baseline and the PPACA line, you get a difference of $716 Billion (I am fluffing some details here, but that is the overall gist of the thing). 

So what do you see? Which one is it? Is it a robbing or is it a saving? What does your particular Mr. Rorschach see?

In 30-second soundbite-driven politics, it’s gotta be one or the other. The truth is, though, that it’s a lot more complicated than that. And that’s where Sarah’s post from yesterday comes in, talking about some of the details of from-whence the $716 billion delta truly derives.

And from there I’ll leave it to you to decide whether Sarah is, or is not, a neutral purveyor of information about the Numb of the Moment. I have an opinion, but in here I’m doing my best to remain neutral myself . . .

 

965 words

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