One of the reasons that President Barack Obama and Speaker of the House John Boehner had difficulty agreeing to a "grand bargain" on deficit reduction and avoiding the "fiscal cliff" was that both men disagreed on the nature of the debt problem. Boehner believes that government spending is the problem while Obama believes the problem is the rising costs of health care, not government spending.
During those negotiations, Obama repeatedly told Boehner that "we don't have a spending problem," Boehner recalled in an interview with The Wall Street Journal's Stephen Moore.
A similar disagreement can be heard frequently on political talk shows. "We don't have a revenue problem, we have a spending problem," Republicans repeat often. "We don't have a spending problem, we have a health care problem," Democrats often counter.
Liberal economist Robert Reich, who served as Secretary of Labor under President Bill Clinton and is currently chancellor's professor of public policy at the University of California at Berkeley, illustrates the typical Democratic position well.
"Medicare and Medicaid costs are projected to soar. But here again, look closely and you'll see neither is really the problem," Reich wrote Sunday for The Huffington Post in an article called "The Hoax of Entitlement Reform." "The underlying problem is the soaring costs of health care -- as evidenced by soaring premiums, co-payments, and deductibles that all of us are bearing -- combined with the aging of the boomer generation."
Boehner told Obama he agreed that the rising costs of health care is straining the federal budget, but that the U.S. government also has a "very serious spending problem." He repeated that message so often that near the end of the negotiations Obama "became irritated and said: 'I'm getting tired of hearing you say that.'"
The reason that Boehner and Obama could not agree to a grand bargain to reduce deficits through tax reform and entitlement reform, according to Boehner, was that Obama was "so ideological" and "unwilling to take on the left wing of his own party."
Obama had agreed to entitlement reforms that would have raised the retirement age for Medicare, Boehner said, but had to back off that proposal when Democratic members of Congress objected.
"He admitted in meetings that he couldn't sell things to his own members," Boehner recalled, "But he didn't even want to try."
In a blog post for Reason, a libertarian publication, Matt Welch looked at the growth in government spending from 2001 to 2010 (in 2010 dollars). Health care programs grew rapidly: Medicare spending increased 75.8 percent and Medicaid spending grew 75.9 percent. But other parts of the federal budget saw dramatic increases as well: Defense spending increased 70.5 percent, non-defense discretionary spending increased 55.9 percent, Social Security increased 38.1 percent, and everything else (the "other" category) increased 64.1 percent.
If the federal government had only grown at the same rate of inflation and population growth, Welch calculated, it would be spending about $2.5 trillion per year (instead of nearly $3.8 trillion per year) and running a surplus.
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