Which Spending Is Easier To Cut And By What Level Of Government?
by Professor Barkley Rosser
Reposted from Econospeak with permission from the author
Which Spending Is Easier To Cut And By What Level Of Government?
Back from his break, our former co-blogger, Dean Baker at Beat the Press, takes down WaPo ed page editor, Fred Hiatt, for his pushing yet again for cutting Social Security because it is supposedly “easy to do” in contrast to medical spending, with Hiatt pinning the blame on Dems for not supporting cutting either. Baker notes that putting med costs in line with those in other countries would alone completely eliminate the federal budget deficit, and that Dems are not the ones opposing cuts to drug companies or “overpaid medical specialists.” CEPR Hiatt barely nods at GOP opposition to tax increases and the possibility of cutting defense spending, even though the US is winding down some of its current active wars.
Dean kindly avoids noting that Hiatt is part of a group of established media mavens in Washington who long ago convinced themselves that somehow not only is Social Security “in crisis,” but that somehow it is the easiest program to cut (future) spending on politically, although that will do nearly nothing to limit near-term deficits and that there is nearly zero support among the public of both parties for such an action, and that efforts by various politicians of both parties in recent years to do this have ended up as embarrassing failures. But this gang does not give up easily, including Hiatt, back at it yet again.
Unfortunately, the alternative appears to be a trick buried in Paul Ryan’s budget proposal: send certain social safety net programs down to the states, with the leading candidate being Medicaid, which is already partly funded by the states. As much as any program, this is one that should be solely funded by the feds as that would help even the playing field across states, given that the states that need it the most are the states with the most poor people and thus least able to support their poor people. But no, Ryan thinks that Medicaid should be sent fully to the states, and some movement in this direction has already happened.
This hypocritical trend of Grover Norquist “no higher taxes” politicians sending important programs to lower levels of government so they can claim “savings” without tax increases is going on more widely, also reflecting Norquist’s influence at even state levels. So, in Virginia where I live, this most recent legislature, newly run fully by the GOP with our GOP governor, has in an effort to balance the state budget without raising taxes or appearing to cut programs, sent an unfunded mandate to the local governments, removing the funding but requiring that they contribute more to teacher pension funds.
This has led to a fairly astounding result, although the mayor or Harrisonburg, where I live, tells me that a lot of these legislators somehow convinced themselves it would not happen. Nearly every local government in the state, including the vast majority of ones run by Republicans, has raised local taxes, mostly property taxes, but also others as well. They have been cutting and cutting their budgets for the last several years, something manifesting itself nationally in the steady stream of layoffs at both state and local government levels. The expectations by citizens for continuing to have basic local public services of some sort simply overrode this idiocy of no new taxes in the face of this unfunded mandate from the state, which in turn at least partly reflects the ongoing rise of Medicaid costs, exacerbated by the feds pushing even more of those down to the states.
As it is, here in Harrisonburg, property taxes are going up, along with a small increase in the rate on restaurant meals. The alternative to the meals tax rise (much opposed by local restauranteurs) was to raise personal property taxes. Around the state, different combinations of such increases have been implemented, and it will be interesting to see whether local voters punish their leaders for doing this or will figure it out that they have been pushed to this by the irresponsibility of state politicians. This problem may well be worse for local Republican leaders than for Dems, given that in general the latter have not hobbled themselves so tightly with all these inane pledges about taxes, although so far, Grover Norquist has not gotten down to the local level guys with making them sign pledges and holding them publicly to them. There are just too many of them for him to keep track of all of them.
Posted by Barkley Rosser at 12:40 AM
What Barkley is making note of is that there is a basic truism in organized societal life that citizens are beginning to recognize and understand. That being, “pay me now or pay me later, but sooner or later you have to pay.” It is at the local level that people can more directly resist the continuous devolution of basic government services. There is a reason that governments exist. They didn’t just pop up like so many mushrooms or for the exclusive purpose of helping the rentier class maintain its social status and income. And the existence of government has associated costs such that the costs must be a burden to some group of the citizens. Of course the result of localities footing the bills for all services is that the poor end up with still less while the wealthiest can afford what they want, not just what they need.
Write your member of Congress and say that if they do not put their pledge of continued support for Social Security in writing, they lose your vote.
Write your member of Congress and say that if they do not put their pledge of continued support for Social Security in writing, they lose your vote.
Write your member of Congress and say that if they do not put their pledge of continued support for Social Security in writing, they lose your vote.
Means testing Social Security and Medicare would be a pretty painless cut. By definition they don’t need it.
Sammy, forever the dirt bag dissembler. They don’t need it by hwat measure and how do you determine what womone needs after they’ve already paid there share into it? One sure way to killl Social Security is to means test it. if those who are welathy enough don’t need what they’ve already paid into then you’re stealing their benefits. Sounds like a tax increase to me. Social Security is an insurance plan. Remember Federal Insurance Contribution Act, FICA. It says so on every pay check. You pay a premium during your working life time so that you qualify for the benefit of being guranteed a minimal amount in your retirement. This is not a Robin Hood scheme.
Sammy:
I agree; but if we can disqualify them for SS, why can’t we disqualify them for the 2001/2003 tax breaks which are not subsidizing the General Funds and forcing a higher draw giving cause to argue about not paying out SS benefits??? For that matter, inheritance tax should be restricted to $1-2 million and the balance subject to a 50% tax also as this is not retirement either.
Jack
Social Security is an insurance plan.
I agree. Insurance against what? A : ____________ [fill in blank].
run,
The question was about “spending cuts” not tax breaks. They are two different things.
Sammy the problem with means testing Social Security is that to save any significant money you have to dip down to the $30/yr of retirement income level. In this case and this case only does the right define ‘wealthy’ to include the broad swaths of the middle class even as they insist that $250k a year is not ‘really’ wealthy when it comes to tax increases.
Which is to say that without numbers your “by definition they don’t need it” is spurious. Try starting by defining “they” and specifying the incidence of income that subjects them to means testing and go from there.
We see this bait and switch all the time. For example with tax reformers who insist we can maintain constant revenues while cutting top rates simply by eliminating “loopholes”. Which when you drill down to details usually means eliminating tax deductions for employer provided insurance and so cost shifting huge amounts onto middle class workers. By the same people who propose tax sheltered HSAs that most benefit top earners in the individual insurance market.
In fact if you examine who gets hit worst in both cases it is that shrinking share of American workers who have defined benefit pensions (for example the Ryan Plan exempts investment returns and so private pensions from taxation) AND have employer paid insurance. Which is to say unionized workers. This is characteristic of ALL right economic policy and always has been, directing all benefits to holders of capital while doing everything they can to attack all forms of collective worker action from unionization to democratic moves to establish minimum wage.
To return to the point Social Security is set up in a way that holders of capital neither pay in or conversely benefit much. As such means testing benefits BY DEFINITION hardly at all has ANY incidence on those who truly DON’T NEED IT.
No matter how often the right tries to invoke Gates, Buffet and Soros it is never about dinging the billionaires and always about screwing over the middle class wage worker/retiree.
Bruce,
always about screwing over the middle class wage worker/retiree.
No, excluding the wealthy from recieving social security and medicare benefits is the opposite of screwing over the middle class.
That’s easy Sammy. First, assurance of at least a minimal level of retirement income. Also, a disability income in the event of severe disablement prior to retirement age or, in the event of an early death, financial benefit to one’s surviving spouse and minor children. That’s pretty damned good protection and cheap at that. Cutting back on someone’s benefits because they have other earnings is contrary to the agreement between the insured and the insurer (Social Security).
Sammy are you claiming that $30k of retirement is “wealthy”? If not at what level of income would you start that means testing? And how much would you save in doing so?
Are your reading comprehension skills that poor? Or are you just admitting that either you or your proposal are innumerate?
Put some numbers together and get back to us. Hint the very existence of the income cap and the existence of the two bend points for benefits arithmetically insures that absent total confiscation of benefits from say the top 40% or so of retirees it just doesn’t add up. You don’t get anywhere taking even max benefits away from a couple thousand millionaires.
Very few CEOs earn anything like $10 million a year, and no matter what their compensation mix their maximum SS tax would be 12.4% of $110k and their replacement ratio on even THAT is under 30%. How many $28k a year checks do you have to confiscate to significantly cut into an actuarial deficit in the trillions? And if you don’t take 100% how much less a percentage? And how far do you have to go down the income scale?
Your numbers don’t add up. Or wouldn’t if you actually had any rather than stale “Gee I thought YOU guys wanted to tax the WEALTHY” crap talking points. None of this is about Soros or Gates and only idiots think we will bite on that bait.
Jack,
First, assurance of at least a minimal level of retirement income.
Bing! If the participant already has above a minimal level of retirement income, then the insurance is not necessary. It is redundant and a waste of taxpayer money. That’s why I say it is the easiest place to cut spending.
$30K a year at a 5% yield is an asset worth $600K. It’s not wealthy but it sure ain’t poor.
Bruce,
I get my numbers from this AB post: http://www.angrybearblog.com/2011/03/means-testing-for-social-security.html (see comments).
I would recommend you switch your defense of Social Security away from Ayn Rand and the Trust Fund to more the more practical means test.
Sammy
means testing your fire insurance would be a good way for your insurance company to save money and even lower premiums. they will only pay for your fire in the future if you can prove you don’t have any money.
of course this might make it harder for them to attract customers, but it should be pretty painless.
sammy
you are an idiot. 30 k a year is 30 k a year. if that is “an asset worth $600k” then it’s an asset worth 600k if you had 600k. since 20k of that 30k might be SS, maybe your SS is an asset worth 400k?
point here is you can garbage up your thinking to mean anything you want to yourself. but the real facts on the ground remain what they are.
but here is a hint for you: SS is insurance. and the way it works is by providing a reasonable return on the money you pay in, a return that is guaranteed against inflation and market losses by the pay as you go financing, and guaranteed against personal losses by the “mutual” insurance the workers provide each other by a payout system that takes some of the earinings (interest on savings) of those who are more successful and uses it to help out those whose earnings are not sufficient, after a lifetime of work, to provide a barely sufficient retirement.
just playing with yourself with numbers doesn’t begin to solve the problem that SS was designed to solve, and has done so successfully for 75 years, in spite of the bullshit the republicans (mostly) have been feeding themselves with all of that time.
sammy
insurance against loss of savings due to inflation
insurance against loss of savings due to market losses
insurance against insufficient savings due to a lifetime of low pay
insurance against personal imrovidence (because it’s a tax you have to pay).
that adds up to insurance against finding yourself too old to work without enough money to live on.
sammy
you are a fool. it isnot “taxpayer money.” it is money the worker paid in to his insurance.
you might be able to lower the premium ten cents a week if you gave no benefits at all to those who had “other means” but then you ‘d have to tax (a real tax) people in order to provide welfare to those who ended up poor….. people who by definition would not have been able to pay a high enough premium to pay for their own benefits.
you are just throwing words around because you like the sound of them. you don’t know a damn thing about Social Security. but then, neither does Our President.
unfortunately i skipped a lot of steps in my above ‘argument’ to Sammy, and there isn’t much hope he or anyone will fill in those steps.
one could point out that even if that 30k is income above what they would receive from SS, it might affect the popularity of the plan if after contributing, say, 12k per year for forty years (assuming earning at the cap, adjusted dollars, for your whole life), about a 480k “contribution,” you would be happy to see the government come in and say, “well, we see you have another 30k in income, so we won’t bother to send you the 26k/yr that your SS would have paid you if you didn’t have that “wealth.”
at the least this would lead to people gaming the system, if not tearing it down. by paying those people their 26k per year they will get their money back in a retirement that lasts 18 years… about their life expectancy… and remember this is “adjusted” dollars… that is there is an effective “interest” in the calculation that is at least as high as inflation and the average real growth in the economy.
sammy’s problem would be to find a way to let the workers insure themselves against poverty in old age that works as well as SS has for 75 years. but since he doesn’t understand the first thing about SS, and has no ability to do any arithmetic that has to be checked against real world facts…. or a complex set of real world facts… i don’t think he is gong to be able to it.
the problem for me, is that Sammy is hardly the only idiot in the country. The congress has the same problem he has.