Sequestration : Completely Unnecessary?

[Lord MJ]

http://blog.ourfuture.org/20130226/defi ... -know-that

There is no deficit problem. The deficit is down about 50 percent as a share of gross domestic product just since President Bush’s fiscal year 2009 deficit and is falling at the fastest rate since the end of World War II. Yet the Washington debate is about how and where to cut us back into recession. Why?

Congress should just repeal the sequester – we don’t need it. We have 10 years to fix the long-term deficit situation. We should not be stampeded by deficit-scare propaganda and instead take the time to carefully consider the right approach. That way we won’t make the mistakes that Europe is making.

Deficit Falling

Here is a chart of the deficit as a percent of GDP: (Data sources below)


Once again, because it might be hard to register due to the drumbeat of deficit-scare propaganda, this is a fact: the deficit is falling at the fastest rate since the end of World War II. It is down about 50 percent as a percent of GDP just since Bush’s huge $1.4 trillion fiscal 2009 deficit. And the deficit is projected to be stable for a decade.

All of that means that no, we do not have a “deficit emergency,” the deficit is not “out of control” and we have 10 years to decide how best to fix things.

So let’s stop listening to the drumbeat of “deficit shock” propaganda and not be rushed into doing any more stupid, destructive cuts in the things We, the People do to make our lives better.

Medicare Cost Growth Way Down, Too

You probably hear again and again that Medicare is the driver of future deficit trouble.

Here is something you probably didn’t know because of the drumbeat of deficit propaganda: Medicare cost growth is way down. From 2000 through 2009, Medicare spending climbed by an average of 9.7 percent a year. Now those increases are down to 1.9 percent and are still falling.

Take a look at this report from the U.S. Department of Health and Human Services, Growth In Medicare Spending Per Beneficiary Continues To Hit Historic Lows:

The very slow growth in Medicare spending in fiscal year 2012 follows slow growth in 2010 and 2011. In 2010, spending grew at only 1.8 percent per beneficiary, and in 2011 at 3.6 percent. Over the three year period from 2010-2012, Medicare spending per beneficiary grew an average of 1.9 percent annually, or more than 1 percentage point more slowly than the average annual growth of 3.2 percent in per capita GDP.
Public Does Not Know Deficit Is Falling

One reason there is so much pressure for cuts is that the public has overwhelmingly fallen for the deficit-scare propaganda drumbeat. Jed Lewison at Daily Kos explains the problem, in “94 percent of Americans don’t know the budget deficit is getting smaller,”

It’s an indisputable fact: The budget deficit is getting smaller.

… But when Bloomberg News commissioned a survey asking Americans whether they believed the budget deficit was growing or shrinking, just six percent answered the question correctly. Ninety-four percent had no clue. And 62 percent actually thought it was getting bigger.
Jed’s post points us to Steve Benen at the Maddow Blog, who has more details in the post “A well-kept fiscal secret“:

A 62 percent majority believe the deficit is getting bigger, 28 percent believe the deficit is staying roughly the same, and only 6 percent believe the deficit is shrinking.
Here it is, louder: Only 6 percent believe the deficit is shrinking! But here’s the thing: the deficit is shrinking dramatically. That is not a political opinion; it’s just math.

Here is Steve again, “A conversation-ending chart”:

Now, I think it’s probably safe to say deficit hawks are no longer capable of embarrassment, so the chart’s impact is likely limited. That said, there’s a policy point to keep in mind: “Here’s a pretty important fact that virtually everyone in Washington seems oblivious to: The federal deficit has never fallen as fast as it’s falling now without a coincident recession.”

Got that? Every time the nation has reduced the deficit this much, this quickly, economic growth suffers to the point that the economy actually shrinks.
Role Of Media In Democracy

Isn’t it the media’s job to inform the public, not misinform the public? Isn’t correct, accurate, objective information necessary for the proper functioning of a democracy?

What does it say about our country’s information channels, when only 6 percent of the public knows that the deficit is shrinking? Shouldn’t that be a signal to the media to run headlines for a month informing the public, instead of continuing to scare people that the deficit is going to eat them up?

When only 6 percent of the public knows the facts (the deficit is falling fast, it is just math, not political opinion) about the most serious policy discussion that is occurring, with the most serious consequences for our jobs, standard of living, our future … a 94 percent misinformation rate is so far beyond just media incompetence that it has to be looked at as something else.

Propaganda And Its Policy Consequences

“Blowback” is a term that means propaganda you use against a target comes back and hurts you. Anti-government propaganda has convinced the public that “government takes money out of the economy” and “government is in the way of business.” Other propaganda has convinced people that we have a “deficit emergency.” This propaganda is paid for by billionaires and the corporations that mask them, with a vast apparatus that distributes the misinformation.

The billionaires and giant multinational corporations want to cut their taxes and get government rules out of their way. But now they’re killing the economy that laid their golden egg.

Austerity – budget cuts – hurt the economy. They reduce the pressure to make the wealthy pay their taxes, but they cut economic growth for the rest of us. Europe is engaged in a grand experiment with austerity, and we can see the results. They cut their budgets, their economies decline, less tax revenue comes in the door, and their deficits as a percent of GDP actually go up making the problem worse.

Unfortunately, their leaders think that means they should cut even more. The result has been that their economies decline even more, revenue falls even more, and their deficits as a percent of GDP actually go up, making the problem worse.

Unfortunately, their leaders think that means they should cut even more. The result has been that their economies decline even more, revenue falls even more, and their deficits as a percent of GDP actually go up, making the problem worse.

Unfortunately … you get the picture. Unfortunately they don’t.

No Deficit Emergency – Repeal The Sequester

So we don’t have a “deficit emergency” or a “fiscal crisis” or an “out-of-control” deficit after all.

But we still have the “sequester” budget cuts starting Friday, and the consequences to our economy are really bad.

Congress needs to just repeal the sequester. They do not need a “deal” to cut something else out of the budget.

President Obama does not need to make a deal involving cuts that will just make things worse. That’s just falling into the Republican framing of demanding cuts as a solution to everything, strangling our government’s ability to make our lives better. From last week’s post, “Obama Says Cuts Bad, Proposes Cuts”:

Common sense might suggest that if a thug is holding a kid hostage and demanding money you don’t offer him half the money and say he can shoot half the kid. That is a “balanced” response to hostage-taking. But it is not the correct response.
Just repeal the sequester. And instead of cutting, how about repairing the country’s infrastructure, which means a lot of people get hired! And it means we have a modern, competitive infrastructure making our lives and businesses better.

–

Chart data sources:
GDP Source: http://www.bea.gov/national/index.htm#gdp
2013 forcast using low 2.5%: http://www.bloomberg.com/news/2012-09-1 ... -2014.html
Deficit: http://www.whitehouse.gov/omb/budget/Historicals
2013, 2014 deficit estimates: http://www.foxbusiness.com/government/2 ... -since-08/?

So yeah, deficit falling under Obama. I do not agree with the assessment that Medicare will not be a problem area, it may be falling now, but rising health care costs, and the influx of new retirees will reverse that quickly.

But it does mean that we do not need Sequestration. At all....

And if goes to give question to what the Republican's motives really are.

[Zwinmar]

It is stupid, in a word, to think that a 10% cut across the board will do anything, such an idea needs to be implemented smartly not at the tip of a 20lbs sledge hammer.

[Flagg]

Austerity doesn't work. But hey, the Defense budget got nailed, too.

[Lord MJ]

I'm all for shrinking the deficit faster (more deficit reduction equals less debt in the long run) but we don't need Sequestration, and quite frankly we don't need any of these fiscal fights we've been having the last 2 years. Especially if it denies us needed growth mechanisms.

Too bad, it will be next to impossible to retake the house in 2014. But the dems really need to head off any GOP campaigning in 2016 about the deficit. They need to nip that in the bud quickly, so the GOP can not make a credible argument about fiscal policy in the 2016 elections.

[Simon_Jester]

I'm kind of hoping this will be remembered as a low point- that the sequester will last long enough and affect enough Americans to make, say, another 4-5% of Americans stop and go "wait, shit, that was a really bad idea." So that the anti-government Kool-Aid will wear off and they'll begin to reconsider the borderline-anarchist rhetoric coming out of the far right.

It wouldn't really take much more than that to make a tipping point.

[J]

Ummm...wow...treat 2013 estimates as if they were facts set in stone when the 2nd month isn't even over
Assumes GDP will grow 30-50% faster than CBO estimates.
I also like how he uses medicare costs per beneficiary rather than the total cost
(I do recall Obamacare and the aging population adding lots of extra people to the medicare rolls).

Which gives this from one of the sites which was linked:


Not to mention CBO deficit projections are always low

[Lord MJ]

I tend to ignore projections based on GDP because it is so uncertain, espescially given factors that can negatively effect GDP. But we do have past results.

But I do want to ask, assuming we know what GDP is, what is the viability and accuracy of using Deficit to GDP ratio as a determinator of deficit growth or shrinkage?

I've had someone tell me using Deficit to GDP (once again assuming we know what GDP is, which we do for time that has already past) is nothing but Snake Oil to fool people into thinking the deficit has decreased over the last few years.

[Sea Skimmer]

A huge portion of the deficit reduction is simply because the US is no longer paying to fight in Iraq, and a very large portion of future reductions are projected on the basis of an end to ground combat operations in Afghanistan. This is hardly a resounding basis on which to declare no problem exists.

The deficit is also currently being heavily suppressed by the very low interest rates the US is paying to rollover existing debt, if the economy does recover those rates will rise and add hundreds of billions of dollars of spending each year. It will be very easy for those cost increases to outrun any gain in tax revenue from an expanded economy unless the US also raised tax rates, which doesn't sound bloody likely. In the long term an expanded economy and moderate inflation can make any amount of debt go away as a problem, but only if we near completely stop adding to the pile.

[Simon_Jester]

Personally, I agree that arbitrarily big deficits are a problem in the long run (duh). But when I think about what a sane-governance solution to that problem looks like, I'm pretty sure this isn't it. I'd rather have no solution this year and a government that can function and get shit done on a basic level than have everything totally paralyzed by the demand that we solve the problem MY WAY OR ELSE RAAAH.

[J]

But I do want to ask, assuming we know what GDP is, what is the viability and accuracy of using Deficit to GDP ratio as a determinator of deficit growth or shrinkage?

I've had someone tell me using Deficit to GDP (once again assuming we know what GDP is, which we do for time that has already past) is nothing but Snake Oil to fool people into thinking the deficit has decreased over the last few years.

It isn't, not with the way GDP is counted and the way our modern economic & monetary systems work, and especially with all the funny games now being played by central banks & so forth. At best it's one of the measuring sticks to see if things are going in the right direction, it is not THE key indicator, just one of many and a rough one at that. To use an extreme example, the Fed could print $15 trillion and give it to the banks, which would count as a doubling of GDP and halve the deficit:GDP ratio.

[Lord MJ]

But in this case, we know how much GDP has grown or fallen over the past 4 years. We also know what the GDP to deficit ratio is. So we can gauge how the deficit is performing over the past 4 years, (not so much for future years) can't we?

If you are just dealing with dollars and cents, I believe the deficit has fallen $600 billion over the last four years. Now some of that is due to the war, some of that is decreased interest rates, and it certainly doesn't mean we are out of the woods yet. What it does mean though is that the GOPs deficit hawking has nothing to do with a fiscal emergency, and everything to do with political posturing (except for the Tea Party which honestly does believe we are in a fiscal emergency).

[Simon_Jester]

Or rather:

We have a very serious deficit problem. This has been true for decades, in one form or another. We are approaching the limits, so it's getting more serious. But it is both stupid and dangerous to allow our fear of the deficit to shut down the government entirely, and the Republicans are more or less saying they'll do that.

If we have to pick one single issue to settle, maybe it should be straightening out the budget. But there is no way we'll get a rational budget as long as the Republicans are playing chicken. And the situation is not so desperate that America should settle for a foolish, irrational budget in exchange for the Republicans playing chicken.

[UnderAGreySky]

We have a very serious deficit problem. This has been true for decades, in one form or another.

Do these two sentences not contradict each other?

[Ziggy Stardust]

We are approaching the limits, so it's getting more serious.

What is the limit for an arbitrarily high deficit? Why is this the limit, and what happens when we pass it?

[J]

But in this case, we know how much GDP has grown or fallen over the past 4 years. We also know what the GDP to deficit ratio is. So we can gauge how the deficit is performing over the past 4 years, (not so much for future years) can't we?

Not really. All government spending including deficit spending counts towards GDP as does money printing by the Federal Reserve, so before we can compare deficit:GDP for a given time period we need to back out and/or adjust the GDP numbers to account for it.

If you are just dealing with dollars and cents, I believe the deficit has fallen $600 billion over the last four years. Now some of that is due to the war, some of that is decreased interest rates, and it certainly doesn't mean we are out of the woods yet. What it does mean though is that the GOPs deficit hawking has nothing to do with a fiscal emergency, and everything to do with political posturing (except for the Tea Party which honestly does believe we are in a fiscal emergency).

The deficit peaked at $1.4 trillion and has fallen to $1.1 trillion for 2012, which is the final year we have numbers for. $300 billion, not 600. The CBO's estimates are always optimistic because of the rules under which it's forced to operate (see the linked article in my first post), Congress usually finds a way to spend more money via various interim measures and revenues often fall short for a variety of reasons. The CBO isn't allowed to account for that in its estimates.

For the big picture, you're right, the endless bickering over the budget doesn't matter, it's all kabuki theatre. No one has addressed healthcare, tax code, and financial system reform, and unless all three are resolved the US will not have real sustainable growth. The deficit won't kill you today but the structural problems in the economy & the country as a whole are a cancer which can metastasize with little warning at some point in the future with fatal results. Until the tumor is removed, nothing else really matters in the long run.

[Simon_Jester]

We have a very serious deficit problem. This has been true for decades, in one form or another.

Do these two sentences not contradict each other?

They do not. Consider:

I have a very serious cancer problem. This has been true for years.

I have a very serious drinking problem. This has been true for months.

I have a very serious house on fire problem. This has been true for hours.

Any of these is plausible. A problem (like the US deficit) which if untreated leads to disaster... that is "very serious" to me.

We are approaching the limits, so it's getting more serious.

What is the limit for an arbitrarily high deficit? Why is this the limit, and what happens when we pass it?

The problem isn't so much that there's an exact number, as that there has to be a limit somewhere: no one with any common sense thinks we can afford to borrow 1000% of GDP. We're not that far away from a debt of 100% of GDP, and we're maybe a decade or a little more from hitting 200% after that.

Clearly, something is going to change before that happens- but if we project present trends forward, we're bound to run into practical limits somewhere. Exactly where I don't know, but I've never yet heard of a country that could keep borrowing forever.

That said, the reason the deficit and debt are so harmful is that we can't outgrow them. And J's right about why that can't happen: health care and education are too expensive, the financial markets skim off too big a slice of the pie, and the government skims off not enough of the elite's fortunes

[dragon]

Yeah be nice if they would get it through there heads. Here at Corpus Christi Army Depot we are losing 10 contractors from our office all of them basically and the 6 civil servants left have to do all of our regular work plus theirs. Oh plus the civil servants get a 20% cut in hours and we're still expected to keep up.

[SirNitram]

I'm gonna go with Sequester wholly unnecessary, mind-blazingly stupid, and possibly self defeating(Like EVERY INSTANCE of Austerity recently). The government can probably reduce the deficit faster by targetted spending, enforcement of new laws, etc. Or do we pretend it's not cheaper to do basic maintence on a car instead of letting it fester, rot, and fall apart, and get a whole new one? Once of prevention better than a pound of cure.

[aerius]

I'm going with fucking stupid and pointless. You have a budget that's about $3.8 trillion, a deficit which will realistically end up at around $1 trillion, and you're going to argue over $85 billion. Really? Is your fucking government on crack? What the hell is wrong with those numbnuts? Were dropped on their heads as babies or did they have crack whore mothers?

[UnderAGreySky]

I have a very serious cancer problem. This has been true for years.

I have a very serious drinking problem. This has been true for months.

I have a very serious house on fire problem. This has been true for hours.

Simon, I generally like your posts, but including example number 3 borders on dishonesty. The question, in all cases, is whether you can see serious deterioration through the issue at hand. With a fire, you see more and more stuff burning. With alcohol, you see liver cells dying. With cancer, you see it spreading.

If your fire is in the fireplace, if your liver is not deteriorating through alcohol consumption (or you're not putting on weight) or if your cancer remains localised and it doesn't affect your daily life.... how does it make it serious?

I reckon that since unemployment and market rates for bonds are indicators of economic health, and I believe that the deficit hasn't directly influenced either over 30 years. Now, there is a case to be made to run surpluses in the good times and draw debt down, but to say that the deficit has always been an issue is outright wrong.

If I had to use your analogy, I would treat the gangrene on the limbs first before I tried to treat the cancer that has really not affected the patient's health. The latter can wait, I'd rather a limb not be lost.

[Simon_Jester]

I could point out examples of 'slow burn' eating through timbers gradually, but that's beside the point.

As to the deficit, here's the problem: hopefully, current low interest rates cannot last forever. If they do we have other problems- but it seems unlikely that they'll last forever. But if interest rates climb again, the interest payments on our accumulated debt suddenly increase- and we've been packing on a lot of low-interest debt lately.

http://www.gao.gov/special.pubs/longter ... tdebt.html

Paying interest on that debt would have much, much higher opportunity costs in healthier economic times. Ignoring any questions of magic debt/GDP ratios, it is a problem if the US has to spend 10% or more of the federal budget on debt service. The only reason we don't have to do that right now is because interest rates are so low; at Clinton-era interest rates we were paying that share on a smaller debt with higher taxes.

So at the very least, I'm worried about opportunity cost from future interest payments. And it has the potential to become a "very serious" problem easily, if we don't figure out some way to at least more-or-less balance the budget kinda sorta.



Dealing with the recession? More urgent. Keeping the government running so things don't crash and burn? More urgent. But just because the national debt isn't an urgent problem that has to be solved right the fuck now, doesn't mean we can ignore it indefinitely. I'm kind of skeptical of the idea that it'll all blow over on its own after we've borrowed this many trillions.

[UnderAGreySky]

But just because the national debt isn't an urgent problem that has to be solved right the fuck now, doesn't mean we can ignore it indefinitely.

I've never made that argument and I will not make it.

I'm kind of skeptical of the idea that it'll all blow over on its own after we've borrowed this many trillions.

I'm not sceptical of the concept that with a little more inflation, higher growth and lesser unemployment, the US can bring its debt down over time. The only radical change I would like to see as an outsider is better universal healthcare, but I know that's not happening any time soon.

[aerius]

I reckon that since unemployment and market rates for bonds are indicators of economic health, and I believe that the deficit hasn't directly influenced either over 30 years. Now, there is a case to be made to run surpluses in the good times and draw debt down, but to say that the deficit has always been an issue is outright wrong.

They are if you're not actively tampering with them. The US government has redefined the definition for unemployment a few times in the last 30 years or so and the Fed has been massively dicking around with government bonds for the last 5 years. The government will have you believe that unemployment is falling and is down significantly from 2009, but when you look at the actual number of people who have jobs it's been flatlined since then.

I'm not sceptical of the concept that with a little more inflation, higher growth and lesser unemployment, the US can bring its debt down over time. The only radical change I would like to see as an outsider is better universal healthcare, but I know that's not happening any time soon.

The problem is a) the negative effects of attempting to inflate a debt away and b) where this growth and employment is going to come from?

Inflation hurts the poor and middle class the most and the problem is the majority of tax revenues still come from the middle class. Hitting them with inflation pushes more & more of them into the poor class where they can't pay as much taxes since their spending habits are limited by their take home income. Revenues drop, plus you need to pay out more benefits for these newly poor people so expenditures go up.

Then, there's the longer term effects. By keeping interest rates low, the Fed had destroyed the income base for nearly every retirement fund. Add inflation on top of that and it becomes nearly impossible to save for retirement, everyone needs to put a lot more in to get a lot less out, and all that money comes out of disposable income. Given that the US economy is 70% consumer spending, you've just taken a giant chunk out of it. Workers can either save now and spend less in which case the economy is screwed now, or they can spend now and have nothing left when they retire in which case the economy tanks when the boomers retire.

As for growth, I have a hard time seeing where it's going to come from. Healthcare is just fucking ridiculous and with Obamacare the IRS gets added to the shitstorm. Employers now need to be in compliance with this abortion among other things which is going to drive up the cost of business and healthcare while dicking over workers on coverage. Which means once again, less take home pay & spending in a consumer economy. Plus businesses now have to waste a bunch of money to deal with the new regulations. Expect to see more jobs get moved out of the country as a result of this.

And while all that's going on, the financial & healthcare industries are sucking you dry and bankrupting you.

[Surlethe]

The dramatic impact of sequestration on the economy.

Also, I couldn't let this slip by:

Inflation hurts the poor and middle class the most and the problem is the majority of tax revenues still come from the middle class. Hitting them with inflation pushes more & more of them into the poor class where they can't pay as much taxes since their spending habits are limited by their take home income. Revenues drop, plus you need to pay out more benefits for these newly poor people so expenditures go up.

This is wrong, wrong, wrong.* Inflation doesn't push people into poverty unless it's being induced by a supply shock - and in that case, it's better to share the pain across society than to dump a bunch of people out of jobs. Otherwise, it's completely neutral and claiming it pushes people into poverty is just plain wrong.

* With the sole exception that over the long haul, inflation pushes people into fixed nominal tax brackets.

Then, there's the longer term effects. By keeping interest rates low, the Fed had destroyed the income base for nearly every retirement fund. Add inflation on top of that and it becomes nearly impossible to save for retirement, everyone needs to put a lot more in to get a lot less out, and all that money comes out of disposable income.

If inflation rises, interest rates will rise as well: The reason interest rates are low is because the Fed is keeping inflation (more broadly, income) low. If the Fed announced tomorrow that the new trend inflation rate was 8%, interest rates would skyrocket.

The government will have you believe that unemployment is falling and is down significantly from 2009, but when you look at the actual number of people who have jobs it's been flatlined since then.

That's because people are exiting the labor force and relying on friends/family/UI/welfare checks. Since they're not looking for jobs any more, unemployment is falling -- labor market hysteresis is one of the correction mechanisms by which a real output gap closes.

PS- I didn't quote the part about Obamacare because I pretty much agree with you. Fuck Obamacare and its poorly-thought-out, pseudo-fascist, Heritage Foundation-inspired corporate insurance company handouts.

[Simon_Jester]

I'm not even going to bring up aerius's points- not because I reject them but because GreySky seems to have missed part of my counterpoint before.

I'm not sceptical of the concept that with a little more inflation, higher growth and lesser unemployment, the US can bring its debt down over time. The only radical change I would like to see as an outsider is better universal healthcare, but I know that's not happening any time soon.

The difficulty lies in the interest payments- those went down, sharply, during the 2000s, which is the main reason the current national debt is supportable. If the interest on the debt ever goes up again, current (or future, higher) levels of debt will cost a lot more, and we'll be left in one of four positions:

1) Raise taxes to pay the interest- and of all the reasons to raise taxes, doing it to pay a interest on borrowed money you should have raised taxes to pay twenty years ago is one of the dumbest.
2) Cut spending to pay the interest- a disaster for all involved.
3) Borrow money to pay the interest on last decade's borrowing, which is a losing game.
4) Default- which is bad for the government's future ability to borrow money even for short term practical needs.

None of those options are pleasant, any or all of them may be necessary as the national debt continues to increase and as interest rates almost inevitably rise. All the things you cite would tend to increase interest rates- they're good, sure. But even assuming that the economy recovers and starts growing again, we still have a problem.

The US is not merely borrowing money to cover government spending during a recession: it is, but that's not all that's going on. We had a continuous deficit during the Bush years, which were a textbook case of 'good economic times.' The Republicans in charge weren't doing anything to increase our expenses (except fight wars that only cost a few hundred billion a year... ), but they cut taxes in 2000 and our income never matched our expenses since.

I believe this is what's called a "structural deficit." Borrowing, purely as borrowing money now to be paid back later, isn't a problem. Having a long term structural deficit in which your income never matches your expenses, even on your best day, is a problem.

The dramatic impact of sequestration on the economy.

What on Earth makes you think you can measure the long term effects of a change in government budget that take weeks or months to manifest by observing today's change in a stock market that responds hourly to news?

All this proves is that stockbrokers didn't change their buying and selling patterns in response to the news that the sequester was going to happen. Big whoop, anyone with any brains knew it would happen days in advance, and its physical, tangible consequences won't come due for some time yet.

This is like saying global warming must be a hoax because the stock market didn't crash on the day scientists release a major climate change report.

Also, I couldn't let this slip by:

Inflation hurts the poor and middle class the most and the problem is the majority of tax revenues still come from the middle class. Hitting them with inflation pushes more & more of them into the poor class where they can't pay as much taxes since their spending habits are limited by their take home income. Revenues drop, plus you need to pay out more benefits for these newly poor people so expenditures go up.

This is wrong, wrong, wrong.* Inflation doesn't push people into poverty unless it's being induced by a supply shock - and in that case, it's better to share the pain across society than to dump a bunch of people out of jobs. Otherwise, it's completely neutral and claiming it pushes people into poverty is just plain wrong.

What inflation does is shrivel up savings and increase the cost of living.

Increased cost of living is a problem if salaries don't rise to match. In the US since the '80s they don't, so increased cost of living is a problem for Americans, even if it's not a problem for ideal frictionless spherical homo economicus specimens living in Abstractia. For a US employer, it's so often more profitable to invent a new means to outsource another job, or get everyone to work another hour or two of unpaid overtime a week, than it is to increase everyone's salary by 5% for this year's COLA.

Losing your savings isn't a problem for typical people hovering around the poverty line (who have none). It is a huge problem for the middle class, as that is the 'capital' which they 'invest' in improving their own standard of living. Or that of their children.

If inflation eats everyone's savings, then "middle class" living conditions will start to converge on those experienced by the poor. Even if the middle class household can theoretically afford a higher level of creature comforts today, they share the poor household's vulnerability to sudden disasters that cause them to lose jobs and earning potential. They're also likely to see their children's education shift downward, leaving the next generation poorer yet.

PS- I didn't quote the part about Obamacare because I pretty much agree with you. Fuck Obamacare and its poorly-thought-out, pseudo-fascist, Heritage Foundation-inspired corporate insurance company handouts.

All things considered I'd rather go to single-payer.