Tuesday, December 08, 2009

The current state of our Government

Joseph Haubrich knows about Inflation modeling, having devoted much of his life to it. The major problem with Inflation modeling comes from it being a Time Series of continuous ascension, and base stability factors change under such conditions. Case in Point: At the time I started my economic career, it was estimated that a Retiree should have equity equivalent to around $40,000; I think the estimate Today is around $1.7 million. We developed Medicare, Senior support services, and slanted Senior Discounts in the interim. The facts states that Inflation modeling in the style of base years must change the date of the base year continually, else lose any relationship to the process itself. An alternate system is to determine the necessary time to obtain a 100% Inflation at the current rate of Inflation, and subtract it from previously determined numbers utilizing the same method; this way a table of absolute value numbers can be achieved for a series of years, and analysis of the series can be made. I will leave it to my Readers to estimate Why I would use absolute values, and Why what We are looking for is always deviation from the whole number.

The entire issue of health care could be eased with utilization of the Inflation modeling exhibited above. The real problem with health care consists of use of short-term base years because otherwise there is too much deviancy from placement values. This means you have to compare health care Costs to recent health care Costs, else the actual Inflation becomes hidden by the vast increase in dollar amounts. The short-term base years foreshorten too much, though, and the result is as mis-representative as the dollar injections. It becomes a real problem, as the one method suggests an irreparable fissure in health care finance, while the Other suggests a short-term fix which is inapplicable under the long-term. My table gives year over year spreads, and highlights the long-term implications of such spreads.

Here you can find the present federal expenditure program. Study the charts. Defense and Security has shrunk as a part of the budget due solely to the growth of Costs elsewhere; we are actually not spending any less here. People feed victorious about the little amount We spend on the Debt service, but it is a hidden Time Bomb which will quickly go back to about double its current level; it is all a Question of central banks raising their Interest rates again. The federal budget can only endure about 3 more years of sustaining a 10% increase in health care Costs, before Medicare, Medicaid, and CHIP grow beyond its resources. We are starting into the retirement of the Baby Boomers, and Social Security Costs are going to go way up. People, both in and out of the Government, fail to understand that We are in the Quiet before the Storm; something which will capture Us before the end of the current Obama administration. It is a factor which the devaluing dollar will not aid. Get ready for it! lgl

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