Flaherty Warns of Entitlement Crisis on CNBC; Blasts Obama’s $250 Checks for Elderly

Today I debated Julie Roginsky of the Comprehensive Communications Group on CNBC’s The Call on how we will ever pay for benefits now being promised the elderly. Our exchange begins at about 2:45 of the clip. Co-hosts were Trish Regan and Larry Kudlow.

Here’s a transcipt:

Trish Regan: So at a time when the Administration is looking to cut health care costs. Fears here over health care costs, we were just talking about all of that. Can the government really afford big benefits for the elderly? It is our Call of the Wild debate. We want to bring in Peter Flaherty, President of the National Legal and Policy Center and Julie Roginsky, Democratic strategist at the Comprehensive Communications Group and a CNBC contributor. Great to see both of you. Peter, I will begin with you. Can we really afford this and do you see this as essentially a case of someone trying to buy a few votes out there.

Peter Flaherty: Trish, this two hundred and fifty dollar check being distributed to seniors does not even have to be spent on drugs. Your senior can take it down to the local liquor store and I am sure they will be happy to cash it because it is a government check. Even if you take Obamacare out of the equation, Social Security has an unfunded liability of sixteen trillion dollars. Medicare has an unfunded liability of thirty eight trillion dollars. Some estimates are higher. So the government is sucking up twenty five percent of our gross domestic product now and by mid century it will be forty percent. Something has got to give. It means higher taxes and lower benefits.

Trish Regan: Why doesn’t anyone want to make some hard choices Peter? What, you know, you can’t have your cake and eat it too. Why don’t they seem to be willing to really come out and confront that reality?

Peter Flaherty: Well because I think that the plan is to strangle the private practice of medicine in this Country so it can be replaced with a Socialist system. Now they can’t do it overnight as we found out earlier this year, but they are doing it gradually. Kathleen Sebelius sends a letter to the Medicare Advantage providers saying that you can’t raise rates this year. It was simply a threat. The government sends out a pamphlet saying that Medicare benefits are gong to be enhanced and costs are going to go down which is just flat out false. I think the goals here are much different from what is being communicated by the White House.

Larry Kudlow: Let me, all right, let me get to Julie. Julie, two new large entitlements in Obamacare, the CBO has just reestimated upward the cost of Obamacare, now a one time rebate for drugs. I think you have to be taking drugs to think that this stuff will not bankrupt America.

Julie Roginsky: Listen, in the long term we have to do something. And Peter and I actually agree on this. Of course it is unsustainable right now. And the health care bill actually goes a long way toward curbing some of those costs.

Peter Flaherty: Oh, come on. Come on.

Julie Roginsky: Well it certainly does, but, and I can list for you how it does that. But I can also tell you…

Peter Flaherty: What? The doc fix maybe?

Julie Roginsky: Excuse me?

Peter Flaherty: The doc fix maybe?

Julie Roginsky: We are not talking about the doc fix right now. We are talking about the fact that. No.  Listen. We are talking about the fact that it does pair down Medicare Advantage because of the fact that Medicare advantage overall pays thirteen percent more than a regular Medicare prescription. So on and so on. But I will say to Trish’s point that we do need to make some tough choices. The one thing that I think is very encouraging in this bill is that there is an independent commission being set up to make those tough choices…..

Peter Flaherty: The same commission that just announced they are over budget and need more money themselves?

Julie Roginsky: No, no, no. Listen. The bottom line is the politicians have not made those tough choices. Everything does need to be on the table. Unfortunately, members of both parties have not made those tough choices and it is time to do that.

Larry Kudlow: The bottom line is…Right, right, now you are talking. And the time is now, it isn’t a futuristic thing.

Julie Roginsky: I agree.

Larry Kudlow: The time is now for heavens sakes. We are spending out of control. How are we going to pay for it? The answer is higher taxes which will sink the economy. This is easy. This is easy. President Obama should be ashamed of himself for trying to buy votes from seniors. Ashamed of himself.

Julie Roginsky: Larry, why does it have to be higher taxes? It could be potentially raising the legibility age. It could be doing a whole bunch of different things.

Larry Kudlow: I would love to see spending cuts.

Peter Flaherty: Yeah, it could be repealing Obamacare.

Trish Regan: You can’t have a deficit like we have and not at some point…

Larry Kudlow: You are right Julie, I just don’t trust it. You are right Julie, I just don’t trust it.

Trish Regan: …not have to raise taxes.

Julie Roginsky: I am glad we agree on this. I do think the tough choices need to be made we do agree on.

Trish Regan: And this of course goes back to Art Laffer’s point that he was making last night on taxes. But we are going to leave it there because we are out of time. END

Here are a few points for which there was not enough time on the air:

We are being asked to exchange our personal freedom for promises of security. Forfeiting one’s freedom is always a bad idea, but in this case it is even worse because the promises of security cannot be fulfilled.

The United States will soon be a big, fat Greece. Government spending last year consumed almost 25% of GDP.  By mid-century, it will be over 40%. Corporate and individual taxes will have to rise to something like 88% to pay for all this. This doesn’t even include the newest entitlement, ObamaCare.

Government’s requirement for new capital will lead to the seizure of private retirement accounts. In fact, the idea has already been hinted at by Vice-President Biden in his report on the middle class.

We’ve been told to put as much as we can in tax-deferred accounts while we are working but that may no longer be good advice because the government can grab it. We should start saving for retirement in non-retirement accounts.

Obama just selected David Berwick to run Medicare. He’s is a big fan of Britain’s government health system. HHS Secretary Kathleen Sebelius just threatened Medicare Advantage providers not to raise premiums. It is clear that the plan is to destroy or health cares system to make everyone a ward of the state.