In case you hadn’t been glued to CNBC today, the stock market took another tumble, with both the Dow Jones Industrial Average and S&P 500 index closing at their lowest levels in more than a year. One of the reasons for the sell-off came early in the day, when Greece announced it would not meet its deficit targets for the current fiscal year. Greece is now projected to run a budget deficit of €18.69, or about $25 billion, this year, and a further deficit of €14.65 billion, or just under $20 billion.
Unfortunately, the Greek budget deficits – which have created a fiscal crisis in Europe, and the threat of financial contagion spreading to the American banking system – are dwarfed by the ongoing deficits facing the Medicare program. The Congressional Budget Office projects that Medicare Part A will spend nearly $40 billion more than it takes in this fiscal year, and run a further deficit of nearly $30 billion next year. The only thing keeping the Medicare program afloat currently are the paper IOUs in the Medicare trust fund, and the Congressional Budget Office projects that even those will be exhausted within the decade.
The fiscal turmoil in Greece and throughout Europe provides the prime example of why our entitlements like Medicare should be fixed NOW; after all, the President’s own chief of staff admitted that the program “will run out of money in five years if we don’t do something.” But what has the President proposed to solve these looming problems? A deficit plan that would actually INCREASE Medicare spending, unless the President finds another $300 billion to pay for a long-term physician payment “doc fix” that the White House magically assumes would be offset.
In other words, if you liked today’s stock market rout, just wait until global financial markets stop focusing on Greek and European debt and start scrutinizing America’s (in)ability to fund its own unsustainable entitlement programs. Then the consequences of the President’s failure to lead on fiscal policy will come into full view.