Gale Force Robert Waldmann | August 1, 2010 9:00 pm This column is excellent. I can’t decide what to quote, so I suggest you just go read the whole thing. Comments (10) | Digg Facebook Twitter |
Gale: “The tax cuts also raised government debt — and higher government debt leads to higher interest rates.”
That is an unproven assertion, right?
Gale: “In 2007, well after the tax cuts took effect, the budget deficit stood at 1.2 percent of GDP. By 2009, it had increased to 9.9 percent of the economy.”
Not to disagree, exactly, but this is poorly stated. Assuming that by the economy he means GDP, the second sentence makes it sound like the GDP was steady while the deficit increased. That, OC, is not the case.
I think that this is more important than it seems, because it facilitates thinking that the deficit is the problem, rather than the GDP.
Gale: “Continuing the tax cuts won’t doom the long-term fiscal picture; entitlements are the real problem. . . .
“Democrats like it because it makes the recent health-care package seem like even more of a triumph.”
Really? What do Democrats have against Social Security and Medicare?
Gale: “Based on projections by the CBO, Alan Auerbach of the University of California at Berkeley and myself, among others, even if the economy returns to full employment by 2014 and stays there for the rest of the decade, the continuation of current fiscal policies, . . .”
Now, once the economy returns to full employment, why should we continue current fiscal policies?
Back during the Reagan boom, I wondered, “Haven’t these people heard about the Seven Fat Years and the Seven Lean Years?” Today it’s different people, but why isn’t counter-cyclical policy more popular?
Gale: “and higher government debt leads to higher interest rates.”
Except when they don’t. Like now. Christ even poor Dorothy Gale flown from Kansas to Oz in a tornado knew enough to recognize the Man Behind the Curtain for what he was in the end. What excuse for her (I guess) great nephew Robert to spout this kind of nonsense?
Somehow those economic/accounting identities seem to be breaking down in light of something I like to call Reality. I found the Gale article interesting even after it ran up on the Rocks of What is Actually Happening but am not sure we are really well served by closing one eye and squinting with the other.
While we’re looking at CBO projections, in their report “The Long-Term Budget Outlook,” released at the end of June, “the major mandatory health care programs and Social Security will grow from 10% of GDP today to 16% of GDP in 25 years if current laws are not changed.”
With tax revenues averaging 18% of GDP for the past 65 years, the CBO is telling us that Social Security and health care will use virtually our entire budget within 25 years.
SS will grow by about 2% of GDP. 2% of GDP is not a huge amount to pay for the housing and groceries of 25% of the population, especially when you remember that they paid for it themselves, in advance, but a very clever idea called pay as you go financing of SS.
Medicare is projected, then, to cost another 4% of GDP. This is a lot of money to pay for living longer and healthier after you retire. Certainly a waste of money you could otherwise spend in Las Vegas… if you were alive and healthy enough to get to Vegas.
But what is confusing you is that the extra 6% of GDP that it will cost you to live longer, and healthier, you think is going to come out of “government spending.” In the first place, SS and Medicare are not “government spending.” They were created “off budget” for a reason. They are the people paying fairly directly for their own needs.
YOu are suffering from percent paresis. YOu think that “governmetn” can only spend 20% (or so) of GDP. Of course you’d be willing to spend a lot more for a big war. But not even a little more to live longer and healthier. Even if…
And here is the kicker… even if in the meanwhile your wages had grown by a hundred percent, so that while your SS and Medcare have indeed grown as a percent of your wages, you have twice as much money after paying for them to spend on other things as you have today. It’s a little like being successful and doubling your income, and finding that you have more of it to spend on fast cars. Only in this case you’d rather have the fast cars than live longer and healthier.
Well, the good news is you can have both. But maybe not as MANY fast cars, if you want to live longer and healthier too.
by the way
i am fully aware that not all of Medicare is “off budget.” It should be. But when I say it “is” off budget I am saying “the grass is green, the sky is blue,” even though i know my friends will be unable to restrain themselves from jumping in and saying “no no no, the grass is yellow and brown sometimes, and the sky is gray, and sometimes there is “red sky in morning.” and my enemies will tell me how utterly stupid i am not to know that.
so thank you my professorial friends and sophomore enemies. but, for those of you old enough to remember the Winston commercial, I’d rather have good taste than good grammar.
You are confused.
Provide one quote that says that dedicated taxes go directly into Social Security.
Dedicated taxes is an oxymoron.
All taxes, including FICA and SECA, go directly into the Treasury’s general fund to use for the general welfare.
From there, the monies are credited to the trust funds, which means, bookkeeping entries; the actual dollars are in the Treasury, unless you want to double count.
Those who have been paying FicA and SECA taxes have been paying for the general welfare, which includes not only Social Security and Medicare, but battleships and education.
And, to add fuel to the fire, the bookkeeping credits to the trust fund were spent, too.
This is worse than a Ponzi scheme.
At least in a Ponzi scheme, some money protects the early investors.
I am not against Social Security.
I am against how it evolved versus how it was intended to be.
Don Levit: “I am not against Social Security.
I am against how it evolved versus how it was intended to be.”
Yes. Darn Greenspan, anyway!
And darn Simpson, Bowles, et al.
but you are completely ignorant. not an insult; a statement of fact. i haven’t got the time, and frankly no longer have the heart, to educate the willfully ignorant.
for anyone out there who doesn’t already know this but has an open mind: social security was carefully structured NOT to be “on budget.” your payroll tax goes directly to Social Security. from there what is need to pay current benefits goes right to the people who paid their tax in their turn, and the “surplus” is LENT to the government. the government borrows this money quite formally and issue a bond… exactly like a savings bond… which guarantees the money will be repaid.
money is NOT kept in a lock box. when you buy a bond, or a stock, or put it in the bank, the other party immediately puts it to work… lends it to someone who will spend it. that someone will literally “make money” with the money and repay the bank which will repay you. similarly with a bond. with a stock, the person you give the money to will go out and spend it or buy another stock. but at the end of the day (you hope) someone will buy the stock from you… just the way Social Security will pay your benefit out of money someone else pays in as “tax” because they want the same deal you got: which is that everyone who pays their social security tax gets their money back when they need it most plus an effective interest equal to inflation plus the general rise in wages… something like a five percent return on your money, though it can vary from about 10% at the low end to about 2% (real) at the high end.
when you read someone like levit you are reading someone who has swallowed the Big Lie whole because he is too lazy or too dumb to check his own damn facts.
You may take me for an idiot, but why would I believe your discourse without any facts to back it up?
Do you think this knowledge of yours (which is incorrect) is so widespread that you need not back it up with facts?
Your talk is cheap – the supply way exceeds the demand.
Don’t even respond without the proper documentation.
I am afraid I do take you for an idiot. But I can’t supply any documentation for that other than what you have offered us here.