Obama’s “no spending problem” fallacy

This seems to be one of the semi-official pilllars of Obama’s thinking–that future deficits are driven by Medicare and Medicaid spending, not spending bloat generally. Even AEI’s James Pethokoukis concedes Obama is “more or less right about that.”** So what’s the problem with “no spending problem”? The problem is that money is fungible. If you’re spending too much on health care, one way to pay for it is to raise taxes. But another way to pay for it is to cut some spending elsewhere and use that money to pay for the health care. Suppose we had a retirement program (let’s call it “Social Security”) that was scheduled to soak up 6.2% of GDP a quarter of a century from now–but by cutting benefits for the most affluent third (mens-testing) we could lower that to, say, 5.2%. That’s a full percent of GDP we could apply instead to Medicare and Obamacare. …

Those are the sort of money-shifting tradeoffs Obama’s compartmentalized view irrationally rules out. He’s telling fat-and-happy Washington–all the redundant civil-rights enforcers and consultants and conference organizers–not to worry. They’re not the problem. They’re paid for! There’s no general crisis, or even a general “problem”–it’s all health care, and must be solved somehow by unspecified medical efficiencies we’ll think up later (plus tax increases). Why not instead get what Obamacare and Medicare care efficiencies we can and then use the government’s other giant program, Social Security, as a cash cow to pay for much of the rest? And maybe cut general government bloat to pay for even more? (Pethokoukis proposes a “Romney Commission.”) Every unnecessary federal employee RIFed today is an expensive operation we don’t have to deny Granny tomorrow …