Unlimited Wants.  Limited Means.

Viking Pundit points us to this story and accompanying graph. 

...the cost of government benefits for seniors reached $27,289 per senior in 2007. Social Security, Medicare and Medicaid benefits continue to grow much faster than inflation, and as 77 million baby boomers reach retirement in the coming decades, the taxpayer costs of these programs will be enormous. The article highlights the fact that these programs are unsustainable in their current form and that we are on the leading edge of a large intergenerational transfer of wealth from younger workers to retirees.

I have an idea.  Let’s add even more outlays to it and just hope that we have the revenue to pay for it. 

1. Owen, I don’t think your idea (spending the money without worrying until later how to pay for it) is indeed typical of the GOP---that’s how the Medicare prescription benefit was done---but not very good in practice.

   BTW, the graph is even more interesting if you separate Social Security from Medicare and Medicaid, something the Right simply refuses to do because Social Security is doing pretty well.

   Posted by Leisureguy on February 16, 2008 at 1230 hrs




2. Did I say it was typical of the GOP?  They’ve been spending like morons for years.  I even criticized them, Medicare Part D, and Bush in my latest column.

   Posted by Owen on February 16, 2008 at 1236 hrs




3. Owen, you made no party-specific comments in the post. I was just commenting that your approach ("I have an idea.  Let’s add even more outlays to it and just hope that we have the revenue to pay for it.") is typical of the GOP and that I thought it was not a good way to proceed. Oh, and I suggest that you break out the graph to separate Social Security and Medicaid and Medicare.

   Posted by Leisureguy on February 16, 2008 at 1244 hrs




4. Actually, Leisureguy, if you click on the CBO link you’ll see that Social Security is good for about eight more years and then it starts doing the widening of outlays and revenues.

   Thanks for the link, Owen!

   Posted by Eric Lindholm on February 16, 2008 at 1318 hrs




5. Why is it such a mystery that during a time of baby-boom retirements outlays would outpace income?  Doesn’t it also follow that after a decade or two the reverse may be true again?  Why does everyone treat this as a permanent trend indicating the totally untenable nature of the system?  it’s not.

   Also, I bet if we had taxes at the level they were at in, say, 99 we would be instantly able to cover the difference between SS income and outlays.  No?

   Posted by scott on February 16, 2008 at 1412 hrs




6. I find it funny, that back in 2005, when Bush wanted to have private accounts for a portion of social security, the Dems were screaming that social security is fine and nothing needs to be done and there is enough money to cover future retirees.  That this was just a ploy by the GOP to scare people.

   Now we have Obama stating the SS needs to be fixed.  Which is it?

   Posted by on February 16, 2008 at 1422 hrs




7. John, Obama is wrong.

   The problem is not with Social Security, but rather with the desire among the political set to protect the wealthy from paying taxes.

   This was Reagan and Greenspan’s deal with the devil:  For almost 30 years, the burden of SS has fallen most heavily on the working class--i.e., someone earning $50k a years pays a higher percentage of income to payroll taxes than someone earning $500k.  When outlays pass revenue, suddenly the burden will fall to that higher class, which pays much more in income taxes than the working classes--because the income tax will pay the T-bills that make up the “trust fund.” Republicans, eager to protect the higher classes, want us to renege on that bargain and, usually, cut benefits to protect the higher classes from paying their share when it comes their turn.*

   Obama should recognize this, as it fits well with his current rhetoric about pols protecting moneyed interests.  Fact is, if we lifted the cap on taxable revenue for payroll taxes, or if we raised the marginal rates on, say, the top 5% of income earners, we could easily cover the shortfall for many years--and fulfill Reagan’s promise that the wealthy would finally pay their share.

   *The other Republican solution is to double the amount we spend by simultaneously paying out benefits and re-directing the income into “private accounts.” Where they think the money to do this would come from is beyond my comprehension, as it would likely cost $3 trillion over the next 15 years or so of transition.

   Posted by folkbum on February 17, 2008 at 1409 hrs




8. Folkbum:

   First of all the social security cap was in place when the program first started, it is only fair.  Would you support then lifting the cap when it comes to benefits?  If the cap is raised and the dollar amount subject to social security increases, would it not be only fair for the benefit level then to be raised also.  Otherwise this is just a wealth distribution program.  The program is already progressive on the benefit side.  If you raised the cap you are going to hurt the people in the $150,000 - $250,000 range the most, is that what you are proposing?  This would be a massive tax increase for these people, who are usually professional people and small business owners.  These people are already being hit with the AMT, no large benefit from the Bush tax cuts. 

   I believe Paul Krugman, a liberal economist, has stated that social security is fine, and any deficits will be made up with increases in the economy.

   What is a more fair proposal is if the retirement age is increased.  People are living much longer than when the program was originally enacted.  Collecting social security should begin at age 70, not at age 62 or 65. 

   My point is that in 2005, dems said social security was fine, now in 2008, Obama is stating that the cap on wages should be lifted to protect it.  I thought in 2005 it was fine.

   Posted by on February 17, 2008 at 1437 hrs




9. John, please read the first sentence in my comment again.  I’m telling you, I believe Obama is wrong, and, outside of a few other odd ducks in Congress, no Democrats agree with him.  (There’s a suspicion among the liberal blogs that Obama uses the SS crisis language because it endears him to the pundits who, without a shred of common sense or credibility, somehow control a big chunk of our national discourse.  And you have to admit--those pundits like him.)

   As for higher benefits upon lifting the cap, I laid out what I thought was a reasonable proposal in a post I wrote a long time ago.  I agree that if the economy hums along for the next 20 years as it has for the last 20, there will be no need to dip into the trust fund in the next 75-year horizon.  There seems to be a great slowing of the economy now, though, and some disagreement about whether the economy we’ve seen is sustainable.

   However, I like lifting the cap.  The biggest advantages to it, short-term, is that it can help us kill the deficit and pay down some debt--all of which would make it easier to deficit-spend to cover parts of the trust fund if we need to, not to mention handle Medicare and Medicaid.  I like to say that we don’t have a Social Security crisis; we have a debt crisis.

   Posted by folkbum on February 17, 2008 at 1710 hrs




10. folkbum:

    I guess we will have to see what happens.  In general I am against raising taxes on one group of people to give it to another group.

    Also, I believe that you are a teacher, right?  Am I correct that teachers do not pay into social security?  If this is true than that needs to be changed.

    I also disagree with means testing.  If I am someone who saved during my lifetime and did not spend recklessly and built up nice retirement funds, why should I receive less SS income than someone who made the same money as me but choice to spend instead of save?

    I also love how easy it is for you to tax other people’s money.

    Instead of taxing more, how about cutting spending in other areas of government that are wasteful and using that money to fund any deficits.

    The economy should be fine, as long as the liberals do not screw it up with overtaxation.

    Posted by on February 17, 2008 at 1737 hrs




11. John P:  Are you also prepared to take out only what you put in?

    As to the economy, what’s going to happen when all those people in the graph start retiring and selling off their investments?

    Posted by on February 17, 2008 at 1745 hrs




12. John, I pay into Social Security (and Medicare and Medicaid) just like everyone else.  There are some places--Wisconsin is not one of them, I believe--where some government employees get opted out of the federal system and into a state system.  I’m in a state pension system, too, but that’s negotiated as a part of my contract as opposed to state law.
    

    In general I am against raising taxes on one group of people to give it to another group.

    Well, since 1983--when Greenspan and Reagan worked their voodoo--the feds have been taking a bigger chunk than necessary of working-class incomes as a payroll tax to cover social security (hence, the surpluses).  Because those surpluses are being spent, they are being used to keep income taxes down.  As I explained above, income taxes are paid more by the wealthy than he working class, so, to a real extent, Reagan raised taxes on the working class to give breaks to the wealthy.

    Clinton and a Democratic Congress started the process of bringing that back into line--still spending the surpluses, but raising marginal rates at the top to bring deficits under control and pay back some debt.  Bush killed that, and got us involved in an expensive, unnecessary war, and had the biggest deficit ever and proposed (in his new budget) the second-biggest.  All the while, the working class keeps overpaying Social Security and Bush is agitating to extend tax cuts on the wealthy.

    Posted by folkbum on February 17, 2008 at 1806 hrs




13. Folkbum:

    I notice you did not say anything about spending, except for the Iraq war.  What about all of the other wasteful spending?  I think that we should have had a war tax to pay for the iraq war, but that is another story.  I also disagree with you regarding the Reagan/Greenspan logic, so do many reputable economists.

    Posted by on February 17, 2008 at 1824 hrs




14. I notice you did not say anything about spending

    Well, the current budget deficit, plus the SS surplus, is about half a trillion bucks.  The total budget is about 3 trillion.  So if we wanted a balance without raising taxes--i.e., cutting spending alone--we would have to cut one-sixth of our total spending.

    Aside from the damage we would do to the overall economy by suddenly implementing such a massive austerity package, there is the question of where to make those cuts.  Every dollar of spending has a constituency that will fight you tooth and nail and I doubt, given the flavor of the conversation so far, that we would agree on a dime of it between us.  In any case, we can’t cut our way out of defict and debt; we’ll have to raise revenue somewhere, somehow.
    

    I also disagree with you regarding the Reagan/Greenspan logic, so do many reputable economists.

    Links?  If you follow the link I gave above, there are links to my supporting arguments there.  But I’m not wrong about the Reagan-Greenspan plan, which was to build a “trust fund” (made of t-bills) that would eventually have to be emptied (paid out from the budget, like every other t-bill we’ve ever issued).  How else would we repay it except through the taxes we collect?

    Perhaps Reagan and Greenspan never laid their plan out in the kind of stark language I’ve used here, but that was the plan.  It always has been, unless Reagan was counting on some disciple to come along later and try to weasel the wealthy out of their part of the bargain.  Oh, wait ...

    Posted by folkbum on February 17, 2008 at 2205 hrs




15. "We can’t cut our way out of deficit and debt”.  Yes, actually, we can.

    Posted by on February 17, 2008 at 2212 hrs




16. BVBigBro, you think there’s $600+ billion in federal spending we can axe that would a) not send our economy into a tailspin and b) pass two houses of Congress and a president that are all facing re-election?

    I’ll settle for anser to just a.

    Posted by folkbum on February 18, 2008 at 0651 hrs




17. Yes.

    Folkbum, do you think you can raise taxes $600 billion and not hurt the economy?  Do you think if you actually raised revenue the deficit would actually be eliminated?

    Posted by on February 18, 2008 at 0909 hrs




18. do you think you can raise taxes $600 billion and not hurt the economy?

    I wouldn’t raise taxes $600b alone, just like you can’t cut $600b alone.  That’s why I suggested a combination.

    Do you think if you actually raised revenue the deficit would actually be eliminated?

    It worked in the 1990s, didn’t it?

    Posted by folkbum on February 18, 2008 at 0936 hrs




19. "It worked in the 1990’s.” No, actually it didn’t. 
    
    And certainly we can cut $600 billion.  “I don’t want to” and “we can’t” are not synonyms.

    Posted by on February 18, 2008 at 0950 hrs




20. And certainly we can cut $600 billion.

    Where?  You could eliminate the entire Department of Defense, and still need to cut.  Or stop paying Social Security entirely, and you’d barely make it.  (But then you’d be pressured to stop collecting the payroll tax and you’ve have a big hole again.)

    Add up all of the “liberal” departments:  Education, Agriculture, NASA, HUD, Labor, and you’re not even halfway.

    HHS, which pays medicare and medicaid, would cover it; but that one would, above and beyond any of the others, spiral this economy downward so far and so fast we’d never recover.

    I think there are pieces within most of those departments to make some cuts--stop most ag subsidies, quit militarizing space, get out of Iraq--but even then you’ll need to enhance revenue if you want to gte back into the black.

    And you might not remember, but Clinton ran budget surplusses from 1998-2001.  Bush got elected in part by promising to give people that surplus money back.

    Posted by folkbum on February 18, 2008 at 1117 hrs




21. Clinton did not run surpluses in 1998-2000.  If you want to say we cannot cut medicaid and medicare then you cannot argue that we were in surplus in 1998-2000.

    Military spending can be cut.  The prescription drug benefit can be eliminated.  The Iraq war spending in fact includes all sorts of things utterly unrelated to the Iraq war.  NASA HUD, Labor, can all be cut or eliminated.  HHS can be cut.

    These cuts will occur.  They will be forced on us.  The only question is how painful you want it to be when they occur.

    Posted by on February 18, 2008 at 1128 hrs




22. First of all, When Reagan was in office their was a democratic controlled congress, in fact it was heavily democratic controlled.  Reagan’s lowering of marginal tax rates was done in combination of eliminating many tax shelters that the rich were taking advantage of.  This is partially why revenue to the government has increased.  JFK understood this concept, which is why he lowered marginal tax rates.  In fact many democrats were involved in writing the new code of 1986.

    Regarding social security, Reagan made a deal with House speaker Tip O’Neil to increase the payroll tax rate and to increase the wage cap each year. 

    Folkbum is right about the IOU’s, the problem is that spending was increased not that tax revenues were decreased.  Social security was deemed in crisis in 1983, which is why their was an amendment to it. 

    Folkbum, a $600 billion tax increase would be terrible for the economy.  You think we are in a recession now.  You do not raise taxes when the economy is in a downturn. 

    John P is correct, spending should be cut before any tax increases.  Spending should be cut in all areas, and then a tax increase to cover any shortfalls.  But it seems that liberals only want to cut in areas not related to social spending.  I am sorry, in order to get out of our current fiscal mess, spending needs to be cut and possible a tax increase.

    I do think Folkbum’s social security idea is intriging.  I like lowering the rate and broadening the base.  You do offer a carrot stick, that the benefit cap would be raised also.  Has the plan you propose been examined by some reputable financial people?  No offense, but by your profile, you are an English teacher, not an economist or someone educated in finance

    Posted by on February 18, 2008 at 1220 hrs




23. The more you know about site
    http://anthony.hostsnake.com/ford4011.html ford http://clarenceflores.hostsnake.com/ford6089.html ford

    Posted by Leonidas on April 16, 2008 at 0608 hrs




24. Well, this is good news. I hope this will be happening soon. It is for our own good so cheer up people. No one is going to do us harm. So relax and enjoy the ride.

    Posted by Debt Settlement on May 06, 2008 at 0939 hrs