Mandatory Spending, Net Interest Payments, and the General Fund
Absent major changes in law, the financial impacts on the General Fund budget from Medicare and Social Security OASDI reimbursements as well as general financing for Medicare, Medicaid, and “Other Mandatory” programs together with Net Interest payments on publicly held debt should be viewed quite seriously considering the related reduction of discretionary spending.
A growing portion of Federal discretionary spending will be crowded out, regardless of whether taxes are raised or not. A sizeable percentage of future tax increases, by necessity, will be devoted to supporting the financial requirements of net interest payments and mandatory programs funding, whether involving reimbursements to Medicare and Social Security trust funds or direct funding to Medicare, Medicaid, and Other Mandatory programs. The growth of these General Fund outlay requirements will become apparent in the latter part of this decade and throughout the next decade. As a point of reference, note the Net Mandatory and Net Interest funding obligations growth in the following comparison between FY2011 and FY2020.
Net Mandatory and Net Interest demands on General Fund direct financing and reimbursements (Medicare and SS) are as follows:
Projected Net Mandatory and Net Interest Outlays of the General Fund
Fiscal Year 2011 $50 billion – Social Security OASDI $301 billion – Medicare $276 billion – Medicaid $713 billion – Other Mandatory Programs $205 billion – Net interest $1,545 billion – Total Net Mandatory and Net Interest outlays
Fiscal Year 2020 $101 billion – Social Security OASDI $417 billion – Medicare $563 billion – Medicaid $741 billion – Other Mandatory Programs $863 billion – Net Interest $2,685 billion – Total Net Mandatory and Net Interest outlays
FY2020 Net Mandatory and Net Interest outlays represent a 73.8% increase (+$1.14 trillion) over FY2011 outlays.
Projected Net Mandatory outlays of the General Fund for 2012-2021 include $3.393 trillion for Medicare, $4.387 trillion for Medicaid, and $6.555 trillion for Other Mandatory programs. Medicare and Medicaid financing requirements are projected to continue to increase during the next decade.
Social Security OASDI funding reimbursements from the General Fund take on far greater significance from FY2021-2030 as such financing requirements increase to roughly $3 trillion. This represents a $2.7 trillion increase over the FY2010-2020 General Fund reimbursements of roughly $300 billion.
Net Interest payments will more than double during the next decade as such funding obligations are projected to exceed $1 trillion per fiscal year no later than FY2022. The increases are independent of a spike or significant run up in interest rates prior to FY2022. Net Interest payments during the period FY2021-2030 may exceed $14 trillion.
Obligations classified as Other Mandatory funding are noteworthy due to the current level of funding requirements placed on the General Fund. OMB projections do not indicate much growth in the funding requirements of such programs based on the FY2012 Federal Budget proposal. Whether those projections hold in the future is another matter. It may be the case that crowding out of discretionary funding is anticipated to also flow over to Other Mandatory funding, which excludes any reimbursements for Medicare and Social Security OASDI, and direct funding […]
What MG fails to note here is that Social Security pays for itself. It’s funding has nothing to do with “the budget” however the liars try to confuse the issue.
What the liars are saying is that we have pissed away so much money that we are going to have to take away your retirement in order to keep buying enough beer to keep everyone stupid enough to believe this.
What is “crowding out” spending is tax cuts.
I don’t care if they cut taxes, or stop spending so much on the stuff they like. But Social Security has nothing to do with any of that.
just between you and me, what exactly is the difference between 1.2T and 800B?
just to take a round number, what is your share of $1T ?
btw if you answer 400B you have missed the point of the question. I am asking if you were told the Spending was $800B without the other figure ever having been mentioned, would you feel any different about it? would you feel any different if it was 100B or 2T? I think the answer is no, because you…and I… have NO idea what numbers like that mean. or what they should be.
What exactly are you getting for your 800B?
Could you get it for less?
What other expenses go along with this much “national security spending” that isn’t being counted in THIS budget?
would you consider welfare payments to keep the next generation of soldiers alive when their parents can’t find a job “national security spending?”
“Absent major changes in law, the financial impacts on the General Fund budget from Medicare and Social Security OASDI reimbursements as well as general financing for Medicare, Medicaid, and “Other Mandatory” programs together with Net Interest payments on publicly held debt should be viewed quite seriously considering the related reduction of discretionary spending.”
The first thing to note is that this paragraph doesn’t actually say anything. “should be viewed quite seriously.” okay, i’m viewing quite seriously. now what?
The Second thing to note is that “OASDI reimbursements” doesn’t mean anything. is he talking about paying back the money borrowed from the trust fund? or paying the benefits that people paid their taxes for? or is he talking about the”pay as you go” part of SS disbursements by which the SS system uses the dedicated SS tax as it comes in to pay (repay?) the benefits earned by the people who paid taxes in their turn? is he suggesting subtly that we “consider” the effect of paying our bills, keeping our promises, on the “discretionary” spending?
and are we to do this wihout “considering” raising the taxes to cover the expenses… a huge part of which is interest on the money we borrowed so we could cut taxes, knowing it would have to be repaid… or maybe hoping it wouldn’t.
“A growing portion of Federal discretionary spending will be crowded out, regardless of whether taxes are raised or not. A sizeable percentage of future tax increases, by necessity, will be devoted to supporting the financial requirements of net interest payments and mandatory programs funding, whether involving reimbursements to Medicare and Social Security trust funds or direct funding to Medicare, Medicaid, and Other Mandatory programs. The growth of these General Fund outlay requirements will become apparent in the latter part of this decade and throughout the next decade. As a point of reference, note the Net Mandatory and Net Interest funding obligations growth in the following comparison between FY2011 and FY2020. “
“will be crowded out regardless of whether taxes are raised…” seems to me that depends on how much taxes are raised. since a lot of this is interest on stuff we already bought but didn’t pay for, it strikes me that maybe we ought to raise the taxes to pay for it. note that none of that stuff that was bought and not paid for was Social Security.
“mandatory programs.” as we have seen nothing is mandatory. congress can change the law any time it wants. i am not recommending this, but i think we ought to take some of the air out of words like “mandatory programs.” Maybe if we just said what they were. We might, for example, note that Social Security has its own funding stream. And Medicare should have. but hell, that would mean we’d have to actually know what we are talking about and make specific plans to deal with it according to our needs and priorities.
but here at least we see that “reimbursements” may mean “paying back the money we borrowed from Social Security and Medicare. As long as we understand that, so far at least, we are talking about paying BACK money we borrowed FROM them… hopefully we can keep clear about that as we press ahead.
“Projected Net Mandatory and Net Interest Outlays of the General Fund”
some big numbers here all right. hard to tell if they reflect inflation or exactly what they mean.
but let me take some guesses.
we already knew that we owed some money to OASDI we were going to have to pay back over this time.
we already knew that medical costs were going up, and that if we don’t find a way to control them we are going to spend a lot on Medicare and Medicaid… or just tell people to do without medical care. Me, i’d ask them if they are going to want the medical care, then tell them they are going to have to pay for it. It won’t break them. but it will be a choice between medical care and trips to Las Vegas.
I don’tknow what “other mandatory programs are”. we ought to find out.
But I do note that Net Interest is the elephant in the room. And that interest comes from paying for the Bush Wars, The Arms Buildup That Won the Cold War, and the Stimulus that saved us from the Banks… or didn’t.
I’d agree those interest payments look quite alarming. but they keep going up if you don’t pay for them, you know. Since Social Security had nothing to do with those interest payments, it hardly seems fair or honest to keep talking about cutting social security to pay down the deficit.
MG is not doing that here. But there are about a hundred pundits and congressliars saying that every day as they smell blood in the water.
MG was not bad here. The real fault of this “Budget Reality Check” is that it is so abstract that we really don’t know what we are talking about, and it subtly invites us to “blame” the Budget problems on SS and “entitlements.” That is more the fault of the Congressliars and Petersons than MG here… but we really need to try much harder to think clearly about exactly what we are talking about and what we need to do, and not just be stapeeded by a vague sense of Big Numbers gonna Eat US Alive!
thanks. I am not a national security expert, so I really wouldn’t know what was “redundant.” I tend to ilsm’s view of things military.
i am just opposed to throwing around meaningless numbers. and i am deeply suspicious of what’s “on” somebody’s budget and what just got left off, or put on someone else’s budget. y’know. or is off it sometimes and on it other times whenever it suits the propaganda needs of the moment.
Get concerned about a couple other big trust funds, around 1.2T in “federal debt”: OPM retirement and military retirement/Medicare accruals for the soldiers (no cash sent to Medicare from DoD appn).
The OPM retirement fund needed $97B from the general fund in 2010.
The OPM retirement trust fund balance was $748.2B actual end of 2009, $777.2B est. 2010 and 806.1B est. 2011 year end.How does this trust fund grow?A very small employee contribution $3,6B, a bit of interest and almost $50B of agency contributions and transfers from general fund. For outlays at $101.%B.
MG, CoRev and other reactionary war mongers, Why doesn’t your analysis of the deficit include war spending? Why deesn’t your analysis include the tax holiday, over a decade long now, for the wealthiest Americans? Why doesn’t your analysis inlcude the special priveledge given to estate income taxation? Why does your analysis only include the spending that supports the middle and working classes?
The war budget and the tax holiday account for well over a trillion dollars each year. Wouldn’t that go a long way to resolving the deficit that you are all so concerned about? Or, is your only concern the any effort made to support people in need?
I had entirely forgotten the wars. I had also forgotten the Great Recession which cuts tax revenues.. and may have something to do with the lack of bank regulation, or a firm belief in outsourcing to China.
No doubt when we get those pesky public employee unions under control we can reduce taxes. Of course the public employees won’t be buying much at Walmart, unless of course they learn how to take bribes like they do in other countries ruled by plutocrats.
/Sarc On/ Whoop, whoop, whoop, the BS alarm went off. first ILSM you claimed, “… $1,2T for the wars, including the fictional ones.” Actually the more accurate description would be “military, defense, and security spending for current, past and future actions.” But, even this is a wrong total for that category.
They completely forgot the SS payments for those who were part of or supported the past wars. Today that amounts to ~ 10% of the population, but for WWII that was closer to 50%. And, they are nearly all receiving today’s SS benefits. So to be fair ~ 25% of the overall SS payouts are for those folks, totalling ~ $185B. Then we can take the investment for infrastructure improvements, in particlular those related to the interstate highways which were directly related to defense spending to allow for quick movement of troops and materiel.
We can add much of the energy budget, Interior budget, even the Agriculture budget, which are there to protect (another word for secure/security) our valuable resources. Oops, I almost forgot the medicare and medicaid spending for that same demographic who fought, supported the WWII effort. Add to those the borrowing done to make those apyments. Finally, we can take the administrative agencies, OMB, Treasury, personnel, and add significant portions of their budgets which support current and past federal and military employees pensions, and care programs.
Yup! If we’re careful we can probably make a case that 75% or more of the budget is related to military/defense/security spending. You see it is the first order function of the Federal Government.
So, I’m going to trump your $1.2T with $2.78T, over twice your estimate. Of which probably 20-25% is redundant. So let’s start cutting. When we can’t cut anymore then let’s talk about taxes. We have 3/4 of the 2012 budget on the table for you who want to cut military/defense/security spending.
Jack, the auick answer is because we are talking budget issues and not political/historical.
BTW, jack you are less than precise with numbers. ILSM’s reference says: “For 2012, the White House has requested $558 billion for the Pentagon’s annual “base” budget, plus an additional $118 billion to fund military operations in Iraq and Afghanistan….” That’s a budget issue. ?Tax holidays? are an interesting term for tax cuts authorized by law, and is a political/historical issue. Change the law to make it a budget issue.
Jack, the quick answer is because we are talking budget issues and not political/historical.
BTW, Jack you are less than precise with numbers. ILSM’s reference says: “For 2012, the White House has requested $558 billion for the Pentagon’s annual “base” budget, plus an additional $118 billion to fund military operations in Iraq and Afghanistan….” The $118B is war spending, and a budget issue. ?Tax holidays? are an interesting term for tax cuts authorized by law, and is a political/historical issue. Change the law to make it a budget issue.
Sarc is okay when it’s deserved, but in this case I don’t think it is. I think its reasonable to look at where other expeditures can be found in “the” budget that are reasonable related to the wars and the defense spending.
To be fair to you, ilsm, or coberly, needs to spell out exactly what he means. me, i don’t know enough so i only put it as a question. i would look at VA hospitals, and interest on the debt which can reasonably be apportioned to war spending. or, as i guess ilsm meant, preparation for wars that are unlikely.
you are being too cute by half. the budget is political. historical and political are what determines the budget.
as to Jack being precise with numbers, given that your side lies with numbers its hard to be precise.
and i guess “tax holiday” is what they called defunding Social Security, so I would consider it an ordinary use of language to refer to tax cuts in the face of increased spending for wars “tax holidays.
MG that’s a very useful cut at budget spending, thanks. The discretionary numbers (national security and all other) for those two years are: $1,416B ($908B and $507B) and $1,346B ($897B and $449B), according to the president’s budget proposal. The revenue streams–mostly personal and corporate income taxes–that are supposed to pay for your categories plus discretionary spending in 2011 will total $1,367B or 46 percent of what’s needed, according to OMB data.
Your raw numbers also can be expressed as a percent of GDP, using OMB’s GDP figures. The total costs of the items you listed will reach about 11.75 percent of GDP 2020, up from 10.14 in 2011, a rise of 1.64 percent of GDP over the 9 years. This is a lot of money, but it looks less like runaway spending growth than what I expected from rising medical costs and interest payments.
How does one get a “property” or “economic right”, and how come some worry too much about the welfare aspects of some one elses’ “property rights” and less of others’?
what’s wrong with welfare is that the rich work hard to cut it. means testing is really ugly… the reason i call it visits to the government proctologist who will examine your hidden assets. and it really isn’t good for people to depend on handouts as a way of life.
this doesn’t mean that government handouts in a time of trouble is a bad thing. it does mean you don’t design your economy around the expectation of handouts as the defining feature of a predictable stage of life.
similarly for socialism… government ownership of the means of production might actually be very efficient at some stages of history. the communists brought russian from the dark ages to the second power in the world in about thirty years. still, the centralization lends itself to abuses and eventual inefficiencies.
there is nothing wrong with capitalism, as long as it is limited by a sense of decency… which ought to come from the people acting through their government. sadly, we have seen how easily the people can be fooled and accept a potemkin democracy ruled by the capitalists. capitalism is fine. rule by capitalists is not.
as for property rights etc. i think they are a good way to provide some order in both the economy and living together generally. i don’t much care for sitting on your pile of gold greed. but i like the idea that i can exchange one thing of value for another and keep what i “bought” against the claims of someone who think he “deserves” it for whatever reasons he can give himself.
but i understand your point… as i think it is… that much of “capitalism” is a kind of theft and a “true” sense of “fair” would redistribute some of the wealth. the problem there is whose true sense of fair.
i think that as long as the “rich” got their’s without breaking any laws they have a right to keep it, subject to other laws including the right of the people to impose taxes for the general welfare… oops, bad word.
but “general welfare” works better against an ethic of property rights than it would against an ethic of take from them who has and give it to me because i am so needy.
coberly – “What MG fails to note here is that Social Security pays for itself.”
It was never my intention to provide the operational history of Social Security, Medicare, Medicaid, or Other Mandatory spending. This is a summary presentation of the net impacts on the General Fund by the Government programs identified in the title based on data provided in the three references cited. This information may be rolled into a more comprehensive General Fund budget presentation later on.
coberly – “It’s [Social Security OASDI] funding has nothing to do with “the budget” however the liars try to confuse the issue. What the liars are saying is that we have pissed away so much money that we are going to have to take away your retirement in order to keep buying enough beer to keep everyone stupid enough to believe this.”
There is most assuredly an accounting relationship between Social Security OASDI cashflow surpluses and shortfalls and the General Fund.
You need to add the Stephen Goss, Chief Actuary of the Social Security Administration, to your list of supposed liars.
Stephen Goss stated last year in Social Security Bulletin, Vol. 70 No. 3, 2010 that “the trust fund assets are generally assumed to be a wash: an asset for the trust funds, but an equal liability for the General Fund of the Treasury.” Stephen Goss stated further that “it is reasonable to assume that the financial markets understand that securities held by the trust funds may be redeemed in the future, requiring the Treasury to collect additional taxes, lower other federal spending, or borrow additionally from the public.”
The Social Security OASDI combined trust funds like many other Government trust funds have an impact on the operation of the General Fund. This is the case whether trust funds provide surplus cashflows for other Government operations and payments, or require reimbursement from the General Fund to the trust funds as may be required based on trust fund cash balances and Government debt holdings including any interest earned on such holdings.
It is readily acknowledged that surpluses of Government trust funds offset some portion of existing on-budget funding deficits should such exist, or reduce needed funding levels of appropriations for other Government programs. Similarly, it is also understood by budget analysts and others that reimbursements to Government trust funds from the General Fund increase the funding obligations or outlays of the General Fund.
If Government trust fund reimbursement outlays require the issuance of new Treasuries on the open market, interest costs for such publicly held issuance are added to the interest costs outlays already identified in the General Fund. As such, trust fund reimbursements by the General Fund can involve a dual line accounting entry, one for trust fund reimbursement costs identified as a Government program outlay and one for related interest costs if such exist.
This information is understood by many individuals familiar with government fiscal accounting procedures.
coberly – “What is “crowding out” spending is tax cuts.”
Reductions in Federal revenues to the General Fund obviously play such a role, but growth in General Fund outlays does as well. It’s a double edged sword. Both situations impact the operations of the General Fund, increase the potential need for more publicly held debt financing, and, ultimately, may require reductions in […]
coberly – “The Second thing to note is that “OASDI reimbursements” doesn’t mean anything.”
The second paragraph states: “A sizeable percentage of future tax increases, by necessity, will be devoted to supporting the financial requirements of net interest payments and mandatory programs funding, whether involving reimbursements to Medicare and Social Security trust funds or direct funding to Medicare, Medicaid, and Other Mandatory programs.”
Reimbursements to the Medicare and Social Security trust funds (as stated) refer to funding reimbursements in support of earned interest and principal on special issue Treasuries redeemed to the U.S. Treasury for cash necessary to improve trust fund cashflow balances as required to support ongoing program obligations.
coberly – “will be crowded out regardless of whether taxes are raised…” seems to me that depends on how much taxes are raised. since a lot of this is interest on stuff we already bought but didn’t pay for, it strikes me that maybe we ought to raise the taxes to pay for it. note that none of that stuff that was bought and not paid for was Social Security.
The post is a snapshot of existing law and a significant group of funding requirements placed on the General Fund. What the Congress will or will not do to improve the fiscal budget situation remains to be seen. The Congress may not agree on meaningful changes in revenues and/or outlays until the situation develops into a full blown crisis later this decade or next decade should interest rates ramp up significantly. That alone should serve as a call for action.
coberly – “mandatory programs.” as we have seen nothing is mandatory. congress can change the law any time it wants. i am not recommending this, but i think we ought to take some of the air out of words like “mandatory programs.”
A mandatory program’s funding does not require Congressional negotiation over annual appropriations. Discretionary programs require both authorization and fiscal year appropriations approval. Congress has no discretion over a mandatory program’s funding outlays unless the existing law governing the mandatory program is amended. Mandatory programs are on auto pilot funding unless changed by law.
coberly – “Projected Net Mandatory and Net Interest Outlays of the General Fund” some big numbers here all right. hard to tell if they reflect inflation or exactly what they mean.
The numbers were extracted from data provided in the references identified in the post. None of the financial amounts are adjusted for inflation.
coberly – “I don’tknow what “other mandatory programs are”. we ought to find out.”
There are shorter lists, but you have to go through each U.S. Government department and agency budget submission to capture the entire list. Visit OMB and study the Federal Budget if you want to determine the entire list. It doesn’t take that long to work through the departments and agencies. Once you have pulled together a list, many questions will remain.
coberly – “we already knew that medical costs were going up, and that if we don’t find a way to control them we are going to spend a lot on Medicare and Medicaid… or just tell people to do without medical care. Me, i’d ask them if they are going to want the medical care, then tell them they are going to have to pay for it. It won’t break them. but it will be a choice between medical care and trips to Las Vegas.”
Your approach would be to ask or require individuals and families to pay for all of their Medicare expenses? When? When they’re retired or while they are still working? Individuals on Medicare have already paid into the trust funds and continue to pay premiums after enrolling in the program. Individuals paying for the projected balance of Medicare costs would involve higher payroll taxation and/or substantial increases in premiums once enrolled in the Medicare program. The costs to retires would be rather shocking for many recipients. Saying that they can afford it doesn’t make it so.
Presently, Federal revenues from the General Fund provide approximately 43.3% of Medicare costs and that funding is projected to decrease to 42.9% in 2020, but rise thereafter to 47.5% in 2030 and 50.0% in 2060.
coberly – “I’d agree those interest payments look quite alarming. but they keep going up if you don’t pay for them, you know. Since Social Security had nothing to do with those interest payments, it hardly seems fair or honest to keep talking about cutting social security to pay down the deficit.”
Social Security OASDI surpluses and shortfalls have a direct relationship with Federal interest payments incurred by the General Fund. That is a simple fact that addressed upthread.
I happen to agree, though, that it does appear to be unfair to saddle two of the three Social Security programs (OASI and DI) with any responsibility for fiscal year deficits in light of the fact that Social Security OASDI surpluses offset previous on-budget deficit shortfalls in the General Fund. But the level of support required to support reimbursements to the Social Security combined trust funds will be substantial during the next decade. Therefore other Government programs will probably be eliminated or reduced in the General Fund.
The eligibility age and inflation measurement for Social Security OASI beneficiaries have been under consideration for a long time. Neither issue is new to the scene. It’s more important to maintain the distinction between near, medium, and long term proposed changes to either Social Security program (OASI and DI) than fall into the trap of lumping them together.
Correcting the OASDI long term shortfall issue is a matter that will be addressed at some point and if that […]
coberly – “The real fault of this “Budget Reality Check” is that it is so abstract that we really don’t know what we are talking about, and it subtly invites us to “blame” the Budget problems on SS and “entitlements.” That is more the fault of the Congressliars and Petersons than MG here… but we really need to try much harder to think clearly about exactly what we are talking about and what we need to do, and not just be stapeeded by a vague sense of Big Numbers gonna Eat US Alive!”
My goal was to lay out the Net Mandatory and Net Interest costs in summary form for others to examine. No one has presented this information in this manner on this blog previously to the best of my knowledge.
These financial numbers are the intermediate numbers, not the big numbers. The big numbers pop around 2035 to 2050 when the obligations of pubicly held debt may swamp what remains of the General Fund. The tables and narrative that I provided illustrate the projected growth in the mandatory obligations associated with reimbursements to the Medicare and Social Security trust funds and the direct financing of Medicare, Medicaid, and Net Interest payments on publicly held debt.
There is no question that discretionary spending will be crowded out during this decade, next decade, and thereafter unless the Congress addresses the unsustainable budget situation. Increasing revenues alone will not cover the funding gap, and there are studies available that explain that. The taxation load would be too great for the economy as the “needed” levels would impair economic growth. The actions necessary to put the fiscal operations of the U.S. Government will require reductions in outlays as well as increases in revenues. That’s where are.
I will address other matters regarding the Federal Budget and operations of the U.S. Government in the future.
way too long for me to answer. just in shorty… i know about Goss and I agree with him. i don’t think you understand him.
as for the people paying for their own Medicare and health care in general. Yes, they need to pay for them while they are young and healthy… that’s the only way it works. When they get sick or retired they don’t have the money any more and the premiums would be too hight.
Those people who are too poor to pay their own full “expected” costs, would get a supplement that would act like an additional insurance policy… “we” would pay an insurance that was equal to our expected medical care costs…over a lifetime… plus our expected “inablity to pay.” roughly: if over a lifetime you would be expected to be below the income where a you could “afford” the insurance say 10% of the time… the cost of the insurance would be raised 10% to cover those times… obviously paid for by those who have enough to pay the premium. not time here to explain it exactly… but you should get the idea.
otherwise i don’t have much disagreemetn with you here… other than the usual… you are piling a huge pile of words on top of something that is reasonably simple with no other effect..or purpose?.. than to keep people from thinking clearly about it.
coberly – “just in shorty… i know about Goss and I agree with him. i don’t think you understand him.”
I didn’t offer an opinion about the following statements by Stephen Goss, so how can you make the wild assumption that I supposedly “don’t understand him”? What he said in plain English is straightforward.
Stephen Goss stated last year in Social Security Bulletin, Vol. 70 No. 3, 2010 that “the trust fund assets are generally assumed to be a wash: an asset for the trust funds, but an equal liability for the General Fund of the Treasury.” Stephen Goss stated further that “it is reasonable to assume that the financial markets understand that securities held by the trust funds may be redeemed in the future, requiring the Treasury to collect additional taxes, lower other federal spending, or borrow additionally from the public.” The reality of the accounting situation is very simple as I have explained upthread. I will now explain it another way that is equally simple. Gross Federal Debt as of March 10, 2011 is $14.16 trillion, of which $9.55 trillion is Debt Held by the Public and $4.61 trillion in Intragovernmental Holdings. Social Security OASDI trust funds assets – the special interest Treasuries and earned interest – are reflected in the Gross Federal Debt as part of the Intragovernmental Holdings identified above. When any of the debt is transferred to the General Fund, it is then recorded as a liability or outlay of Treasury’s General Fund. If such require any public financing with new marketable Treasuries, then that portion of the debt transfer becomes new Debt Held by the Public. Otherwise, the Treasury’s General Fund absorbs the transfer liability cost as an outlay in the General Fund accounting. If new publicly held debt is required for redemption or reimbursement, that new debt is recorded and carried in the Geneal Fund. The interest costs of the new debt are recorded in the General Fund budget as Interest payments and is simply added to the existing level of other Interest payments that are outlays of the General Fund. Special issue Treasuries or the earned interest on such which are redeemed by the Treasury are recorded as liabilities in the Treasury’s General Fund for the fiscal year in which they are transferred from the SSA to the Treasury for redemption. This is basic accounting. No amount of spin and intentional misdirection by anyone will change these facts.
FEDERAL BUDGET REALITY CHECK 2.0
Mandatory Spending, Net Interest Payments, and the General Fund
Absent major changes in law, the financial impacts on the General Fund budget from Medicare and Social Security OASDI reimbursements as well as general financing for Medicare, Medicaid, and “Other Mandatory” programs together with Net Interest payments on publicly held debt should be viewed quite seriously considering the related reduction of discretionary spending.
A growing portion of Federal discretionary spending will be crowded out, regardless of whether taxes are raised or not. A sizeable percentage of future tax increases, by necessity, will be devoted to supporting the financial requirements of net interest payments and mandatory programs funding, whether involving reimbursements to Medicare and Social Security trust funds or direct funding to Medicare, Medicaid, and Other Mandatory programs. The growth of these General Fund outlay requirements will become apparent in the latter part of this decade and throughout the next decade. As a point of reference, note the Net Mandatory and Net Interest funding obligations growth in the following comparison between FY2011 and FY2020.
Net Mandatory and Net Interest demands on General Fund direct financing and reimbursements (Medicare and SS) are as follows:
Projected Net Mandatory and Net Interest Outlays of the General Fund
Fiscal Year 2011
$50 billion – Social Security OASDI
$301 billion – Medicare
$276 billion – Medicaid
$713 billion – Other Mandatory Programs
$205 billion – Net interest
$1,545 billion – Total Net Mandatory and Net Interest outlays
Fiscal Year 2020
$101 billion – Social Security OASDI
$417 billion – Medicare
$563 billion – Medicaid
$741 billion – Other Mandatory Programs
$863 billion – Net Interest
$2,685 billion – Total Net Mandatory and Net Interest outlays
FY2020 Net Mandatory and Net Interest outlays represent a 73.8% increase (+$1.14 trillion) over FY2011 outlays.
Projected Net Mandatory outlays of the General Fund for 2012-2021 include $3.393 trillion for Medicare, $4.387 trillion for Medicaid, and $6.555 trillion for Other Mandatory programs. Medicare and Medicaid financing requirements are projected to continue to increase during the next decade.
Social Security OASDI funding reimbursements from the General Fund take on far greater significance from FY2021-2030 as such financing requirements increase to roughly $3 trillion. This represents a $2.7 trillion increase over the FY2010-2020 General Fund reimbursements of roughly $300 billion.
Net Interest payments will more than double during the next decade as such funding obligations are projected to exceed $1 trillion per fiscal year no later than FY2022. The increases are independent of a spike or significant run up in interest rates prior to FY2022. Net Interest payments during the period FY2021-2030 may exceed $14 trillion.
Obligations classified as Other Mandatory funding are noteworthy due to the current level of funding requirements placed on the General Fund. OMB projections do not indicate much growth in the funding requirements of such programs based on the FY2012 Federal Budget proposal. Whether those projections hold in the future is another matter. It may be the case that crowding out of discretionary funding is anticipated to also flow over to Other Mandatory funding, which excludes any reimbursements for Medicare and Social Security OASDI, and direct funding […]
What MG fails to note here is that Social Security pays for itself. It’s funding has nothing to do with “the budget” however the liars try to confuse the issue.
What the liars are saying is that we have pissed away so much money that we are going to have to take away your retirement in order to keep buying enough beer to keep everyone stupid enough to believe this.
What is “crowding out” spending is tax cuts.
I don’t care if they cut taxes, or stop spending so much on the stuff they like. But Social Security has nothing to do with any of that.
A frequent claim/question is US Total National Security Spending Is in excess of $1.2T. The latest numberts could find were for FY2008. Then it totaled $799,611. For a look at what is included in that number see here: http://www.wallstats.com/blog/total-military-and-national-security-spending-in-the-us-federal-budget/
CoRev
just between you and me, what exactly is the difference between 1.2T and 800B?
just to take a round number, what is your share of $1T ?
btw if you answer 400B you have missed the point of the question. I am asking if you were told the Spending was $800B without the other figure ever having been mentioned, would you feel any different about it? would you feel any different if it was 100B or 2T? I think the answer is no, because you…and I… have NO idea what numbers like that mean. or what they should be.
What exactly are you getting for your 800B?
Could you get it for less?
What other expenses go along with this much “national security spending” that isn’t being counted in THIS budget?
would you consider welfare payments to keep the next generation of soldiers alive when their parents can’t find a job “national security spending?”
welcome to the real world indeed:
first paragraph:
“Absent major changes in law, the financial impacts on the General Fund budget from Medicare and Social Security OASDI reimbursements as well as general financing for Medicare, Medicaid, and “Other Mandatory” programs together with Net Interest payments on publicly held debt should be viewed quite seriously considering the related reduction of discretionary spending.”
The first thing to note is that this paragraph doesn’t actually say anything. “should be viewed quite seriously.” okay, i’m viewing quite seriously. now what?
The Second thing to note is that “OASDI reimbursements” doesn’t mean anything. is he talking about paying back the money borrowed from the trust fund? or paying the benefits that people paid their taxes for? or is he talking about the”pay as you go” part of SS disbursements by which the SS system uses the dedicated SS tax as it comes in to pay (repay?) the benefits earned by the people who paid taxes in their turn? is he suggesting subtly that we “consider” the effect of paying our bills, keeping our promises, on the “discretionary” spending?
and are we to do this wihout “considering” raising the taxes to cover the expenses… a huge part of which is interest on the money we borrowed so we could cut taxes, knowing it would have to be repaid… or maybe hoping it wouldn’t.
but hey, i’m viewing this quite seriously.
still viewing seriously
second paragraph
“A growing portion of Federal discretionary spending will be crowded out, regardless of whether taxes are raised or not. A sizeable percentage of future tax increases, by necessity, will be devoted to supporting the financial requirements of net interest payments and mandatory programs funding, whether involving reimbursements to Medicare and Social Security trust funds or direct funding to Medicare, Medicaid, and Other Mandatory programs. The growth of these General Fund outlay requirements will become apparent in the latter part of this decade and throughout the next decade. As a point of reference, note the Net Mandatory and Net Interest funding obligations growth in the following comparison between FY2011 and FY2020. “
“will be crowded out regardless of whether taxes are raised…” seems to me that depends on how much taxes are raised. since a lot of this is interest on stuff we already bought but didn’t pay for, it strikes me that maybe we ought to raise the taxes to pay for it. note that none of that stuff that was bought and not paid for was Social Security.
“mandatory programs.” as we have seen nothing is mandatory. congress can change the law any time it wants. i am not recommending this, but i think we ought to take some of the air out of words like “mandatory programs.” Maybe if we just said what they were. We might, for example, note that Social Security has its own funding stream. And Medicare should have. but hell, that would mean we’d have to actually know what we are talking about and make specific plans to deal with it according to our needs and priorities.
second paragraph cont.
but here at least we see that “reimbursements” may mean “paying back the money we borrowed from Social Security and Medicare. As long as we understand that, so far at least, we are talking about paying BACK money we borrowed FROM them… hopefully we can keep clear about that as we press ahead.
still viewing seriously
“Projected Net Mandatory and Net Interest Outlays of the General Fund”
some big numbers here all right. hard to tell if they reflect inflation or exactly what they mean.
but let me take some guesses.
we already knew that we owed some money to OASDI we were going to have to pay back over this time.
we already knew that medical costs were going up, and that if we don’t find a way to control them we are going to spend a lot on Medicare and Medicaid… or just tell people to do without medical care. Me, i’d ask them if they are going to want the medical care, then tell them they are going to have to pay for it. It won’t break them. but it will be a choice between medical care and trips to Las Vegas.
I don’tknow what “other mandatory programs are”. we ought to find out.
But I do note that Net Interest is the elephant in the room. And that interest comes from paying for the Bush Wars, The Arms Buildup That Won the Cold War, and the Stimulus that saved us from the Banks… or didn’t.
I’d agree those interest payments look quite alarming. but they keep going up if you don’t pay for them, you know. Since Social Security had nothing to do with those interest payments, it hardly seems fair or honest to keep talking about cutting social security to pay down the deficit.
MG is not doing that here. But there are about a hundred pundits and congressliars saying that every day as they smell blood in the water.
Dale aks: “Could you get it for less?”
Ofcourse. Look at the details in my referencd and make your own determination of redundancy.
Dale asks: “Could you get it for less?”
Ofcourse. Look at the details in my reference and make your own determination of redundancy.
End of viewing seriously.
MG was not bad here. The real fault of this “Budget Reality Check” is that it is so abstract that we really don’t know what we are talking about, and it subtly invites us to “blame” the Budget problems on SS and “entitlements.” That is more the fault of the Congressliars and Petersons than MG here…
but we really need to try much harder to think clearly about exactly what we are talking about and what we need to do, and not just be stapeeded by a vague sense of Big Numbers gonna Eat US Alive!
“Net Interest payments during the period FY2021-2030 may exceed $14 trillion.”
GDP during the period 2021 -2030 will be about $316 trillion.
Other scary numbers should be viewed seriously in their relevant context.
CoRev
thanks. I am not a national security expert, so I really wouldn’t know what was “redundant.” I tend to ilsm’s view of things military.
i am just opposed to throwing around meaningless numbers. and i am deeply suspicious of what’s “on” somebody’s budget and what just got left off, or put on someone else’s budget. y’know.
or is off it sometimes and on it other times whenever it suits the propaganda needs of the moment.
cob,
The $50B sent from the “general fund” for SS is half the interest accrued to the trustr fund.
The issue is it is cash for the interest!
CoRev,
You can go to Tom’s Dispatch to get to the $1,2T for the wars, including the fictional ones. Makes sense to me you can refute that guy there.
MG’s number are insightful.
Get concerned about a couple other big trust funds, around 1.2T in “federal debt”: OPM retirement and military retirement/Medicare accruals for the soldiers (no cash sent to Medicare from DoD appn).
The OPM retirement fund needed $97B from the general fund in 2010.
The OPM retirement trust fund balance was $748.2B actual end of 2009, $777.2B est. 2010 and 806.1B est. 2011 year end. How does this trust fund grow? A very small employee contribution $3,6B, a bit of interest and almost $50B of agency contributions and transfers from general fund. For outlays at $101.%B.
http://www.gpoaccess.gov/usbudget/fy11/pdf/appendix/opm.pdf
Then there is the military retirement outlays which get no cash from future beneficiaries……………
$1.2T in trusts mostly filled by obligation authority, no cash. All outlays from then year borrowing or taxes.
MG, CoRev and other reactionary war mongers,
Why doesn’t your analysis of the deficit include war spending? Why deesn’t your analysis include the tax holiday, over a decade long now, for the wealthiest Americans? Why doesn’t your analysis inlcude the special priveledge given to estate income taxation? Why does your analysis only include the spending that supports the middle and working classes?
The war budget and the tax holiday account for well over a trillion dollars each year. Wouldn’t that go a long way to resolving the deficit that you are all so concerned about? Or, is your only concern the any effort made to support people in need?
Thanks Jack
I had entirely forgotten the wars. I had also forgotten the Great Recession which cuts tax revenues.. and may have something to do with the lack of bank regulation, or a firm belief in outsourcing to China.
No doubt when we get those pesky public employee unions under control we can reduce taxes. Of course the public employees won’t be buying much at Walmart, unless of course they learn how to take bribes like they do in other countries ruled by plutocrats.
/Sarc On/ Whoop, whoop, whoop, the BS alarm went off. first ILSM you claimed, “… $1,2T for the wars, including the fictional ones.” Actually the more accurate description would be “military, defense, and security spending for current, past and future actions.” But, even this is a wrong total for that category.
They completely forgot the SS payments for those who were part of or supported the past wars. Today that amounts to ~ 10% of the population, but for WWII that was closer to 50%. And, they are nearly all receiving today’s SS benefits. So to be fair ~ 25% of the overall SS payouts are for those folks, totalling ~ $185B. Then we can take the investment for infrastructure improvements, in particlular those related to the interstate highways which were directly related to defense spending to allow for quick movement of troops and materiel.
We can add much of the energy budget, Interior budget, even the Agriculture budget, which are there to protect (another word for secure/security) our valuable resources. Oops, I almost forgot the medicare and medicaid spending for that same demographic who fought, supported the WWII effort. Add to those the borrowing done to make those apyments. Finally, we can take the administrative agencies, OMB, Treasury, personnel, and add significant portions of their budgets which support current and past federal and military employees pensions, and care programs.
Yup! If we’re careful we can probably make a case that 75% or more of the budget is related to military/defense/security spending. You see it is the first order function of the Federal Government.
So, I’m going to trump your $1.2T with $2.78T, over twice your estimate. Of which probably 20-25% is redundant. So let’s start cutting. When we can’t cut anymore then let’s talk about taxes. We have 3/4 of the 2012 budget on the table for you who want to cut military/defense/security spending.
I feel better don’t you? /Sarc Off/
Jack, the auick answer is because we are talking budget issues and not political/historical.
BTW, jack you are less than precise with numbers. ILSM’s reference says: “For 2012, the White House has requested $558 billion for the Pentagon’s annual “base” budget, plus an additional $118 billion to fund military operations in Iraq and Afghanistan….” That’s a budget issue. ?Tax holidays? are an interesting term for tax cuts authorized by law, and is a political/historical issue. Change the law to make it a budget issue.
Jack, the quick answer is because we are talking budget issues and not political/historical.
BTW, Jack you are less than precise with numbers. ILSM’s reference says: “For 2012, the White House has requested $558 billion for the Pentagon’s annual “base” budget, plus an additional $118 billion to fund military operations in Iraq and Afghanistan….” The $118B is war spending, and a budget issue. ?Tax holidays? are an interesting term for tax cuts authorized by law, and is a political/historical issue. Change the law to make it a budget issue.
CoRev
Sarc is okay when it’s deserved, but in this case I don’t think it is. I think its reasonable to look at where other expeditures can be found in “the” budget that are reasonable related to the wars and the defense spending.
To be fair to you, ilsm, or coberly, needs to spell out exactly what he means. me, i don’t know enough so i only put it as a question. i would look at VA hospitals, and interest on the debt which can reasonably be apportioned to war spending. or, as i guess ilsm meant, preparation for wars that are unlikely.
CoRev
you are being too cute by half. the budget is political. historical and political are what determines the budget.
as to Jack being precise with numbers, given that your side lies with numbers its hard to be precise.
and i guess “tax holiday” is what they called defunding Social Security, so I would consider it an ordinary use of language to refer to tax cuts in the face of increased spending for wars “tax holidays.
CoRev,
I run a no sarc zone.
Relate why the US steams the 11 super carriers. What need is there? The Battle of Midway? Against whom? 100,000 tons and steam catapaults.
What are 19 B-2’s flying for, fictions?
Or 6 USN/MC Amphib Ready Groups 3 LXX ships, 25000 tons plus each. For a John Wayne movie?
The list goes on.
Fictions for $15B dollars ships.
No sarcasm here.
The Navy corridor of the pentagon has a bunch of sarcasm on the taxpayer each time the Navy builds a budget.
MG that’s a very useful cut at budget spending, thanks. The discretionary numbers (national security and all other) for those two years are: $1,416B ($908B and $507B) and $1,346B ($897B and $449B), according to the president’s budget proposal. The revenue streams–mostly personal and corporate income taxes–that are supposed to pay for your categories plus discretionary spending in 2011 will total $1,367B or 46 percent of what’s needed, according to OMB data.
Your raw numbers also can be expressed as a percent of GDP, using OMB’s GDP figures. The total costs of the items you listed will reach about 11.75 percent of GDP 2020, up from 10.14 in 2011, a rise of 1.64 percent of GDP over the 9 years. This is a lot of money, but it looks less like runaway spending growth than what I expected from rising medical costs and interest payments.
What’s wrong with welfare?
Look here, everything we are not happy with is socialism.
Talking about “property rights” and “economic rights”. Different terms for the idea of a right to some benefit from the government.
I had a star of a comment which was getting far too long so I stopped.
But for a respite I found this off Mark Thoma’s Economists’s View.
http://www.interfluidity.com/v2/1272.html
Enjoy.
How does one get a “property” or “economic right”, and how come some worry too much about the welfare aspects of some one elses’ “property rights” and less of others’?
ilsm
what’s wrong with welfare is that the rich work hard to cut it. means testing is really ugly… the reason i call it visits to the government proctologist who will examine your hidden assets. and it really isn’t good for people to depend on handouts as a way of life.
this doesn’t mean that government handouts in a time of trouble is a bad thing. it does mean you don’t design your economy around the expectation of handouts as the defining feature of a predictable stage of life.
similarly for socialism… government ownership of the means of production might actually be very efficient at some stages of history. the communists brought russian from the dark ages to the second power in the world in about thirty years. still, the centralization lends itself to abuses and eventual inefficiencies.
there is nothing wrong with capitalism, as long as it is limited by a sense of decency… which ought to come from the people acting through their government. sadly, we have seen how easily the people can be fooled and accept a potemkin democracy ruled by the capitalists. capitalism is fine. rule by capitalists is not.
as for property rights etc. i think they are a good way to provide some order in both the economy and living together generally. i don’t much care for sitting on your pile of gold greed. but i like the idea that i can exchange one thing of value for another and keep what i “bought” against the claims of someone who think he “deserves” it for whatever reasons he can give himself.
but i understand your point… as i think it is… that much of “capitalism” is a kind of theft and a “true” sense of “fair” would redistribute some of the wealth. the problem there is whose true sense of fair.
i think that as long as the “rich” got their’s without breaking any laws they have a right to keep it, subject to other laws including the right of the people to impose taxes for the general welfare… oops, bad word.
but “general welfare” works better against an ethic of property rights than it would against an ethic of take from them who has and give it to me because i am so needy.
coberly – “What MG fails to note here is that Social Security pays for itself.”
It was never my intention to provide the operational history of Social Security, Medicare, Medicaid, or Other Mandatory spending. This is a summary presentation of the net impacts on the General Fund by the Government programs identified in the title based on data provided in the three references cited. This information may be rolled into a more comprehensive General Fund budget presentation later on.
coberly – “It’s [Social Security OASDI] funding has nothing to do with “the budget” however the liars try to confuse the issue. What the liars are saying is that we have pissed away so much money that we are going to have to take away your retirement in order to keep buying enough beer to keep everyone stupid enough to believe this.”
There is most assuredly an accounting relationship between Social Security OASDI cashflow surpluses and shortfalls and the General Fund.
You need to add the Stephen Goss, Chief Actuary of the Social Security Administration, to your list of supposed liars.
Stephen Goss stated last year in Social Security Bulletin, Vol. 70 No. 3, 2010 that “the trust fund assets are generally assumed to be a wash: an asset for the trust funds, but an equal liability for the General Fund of the Treasury.”
Stephen Goss stated further that “it is reasonable to assume that the financial markets understand that securities held by the trust funds may be redeemed in the future, requiring the Treasury to collect additional taxes, lower other federal spending, or borrow additionally from the public.”
The Social Security OASDI combined trust funds like many other Government trust funds have an impact on the operation of the General Fund. This is the case whether trust funds provide surplus cashflows for other Government operations and payments, or require reimbursement from the General Fund to the trust funds as may be required based on trust fund cash balances and Government debt holdings including any interest earned on such holdings.
It is readily acknowledged that surpluses of Government trust funds offset some portion of existing on-budget funding deficits should such exist, or reduce needed funding levels of appropriations for other Government programs. Similarly, it is also understood by budget analysts and others that reimbursements to Government trust funds from the General Fund increase the funding obligations or outlays of the General Fund.
If Government trust fund reimbursement outlays require the issuance of new Treasuries on the open market, interest costs for such publicly held issuance are added to the interest costs outlays already identified in the General Fund. As such, trust fund reimbursements by the General Fund can involve a dual line accounting entry, one for trust fund reimbursement costs identified as a Government program outlay and one for related interest costs if such exist.
This information is understood by many individuals familiar with government fiscal accounting procedures.
coberly – “What is “crowding out” spending is tax cuts.”
Reductions in Federal revenues to the General Fund obviously play such a role, but growth in General Fund outlays does as well. It’s a double edged sword. Both situations impact the operations of the General Fund, increase the potential need for more publicly held debt financing, and, ultimately, may require reductions in […]
coberly – “The Second thing to note is that “OASDI reimbursements” doesn’t mean anything.”
The second paragraph states: “A sizeable percentage of future tax increases, by necessity, will be devoted to supporting the financial requirements of net interest payments and mandatory programs funding, whether involving reimbursements to Medicare and Social Security trust funds or direct funding to Medicare, Medicaid, and Other Mandatory programs.”
Reimbursements to the Medicare and Social Security trust funds (as stated) refer to funding reimbursements in support of earned interest and principal on special issue Treasuries redeemed to the U.S. Treasury for cash necessary to improve trust fund cashflow balances as required to support ongoing program obligations.
coberly – “will be crowded out regardless of whether taxes are raised…” seems to me that depends on how much taxes are raised. since a lot of this is interest on stuff we already bought but didn’t pay for, it strikes me that maybe we ought to raise the taxes to pay for it. note that none of that stuff that was bought and not paid for was Social Security.
The post is a snapshot of existing law and a significant group of funding requirements placed on the General Fund. What the Congress will or will not do to improve the fiscal budget situation remains to be seen. The Congress may not agree on meaningful changes in revenues and/or outlays until the situation develops into a full blown crisis later this decade or next decade should interest rates ramp up significantly. That alone should serve as a call for action.
coberly – “mandatory programs.” as we have seen nothing is mandatory. congress can change the law any time it wants. i am not recommending this, but i think we ought to take some of the air out of words like “mandatory programs.”
A mandatory program’s funding does not require Congressional negotiation over annual appropriations. Discretionary programs require both authorization and fiscal year appropriations approval. Congress has no discretion over a mandatory program’s funding outlays unless the existing law governing the mandatory program is amended. Mandatory programs are on auto pilot funding unless changed by law.
coberly – “Projected Net Mandatory and Net Interest Outlays of the General Fund” some big numbers here all right. hard to tell if they reflect inflation or exactly what they mean.
The numbers were extracted from data provided in the references identified in the post. None of the financial amounts are adjusted for inflation.
coberly – “I don’tknow what “other mandatory programs are”. we ought to find out.”
There are shorter lists, but you have to go through each U.S. Government department and agency budget submission to capture the entire list. Visit OMB and study the Federal Budget if you want to determine the entire list. It doesn’t take that long to work through the departments and agencies. Once you have pulled together a list, many questions will remain.
coberly – “we already knew that medical costs were going up, and that if we don’t find a way to control them we are going to spend a lot on Medicare and Medicaid… or just tell people to do without medical care. Me, i’d ask them if they are going to want the medical care, then tell them they are going to have to pay for it. It won’t break them. but it will be a choice between medical care and trips to Las Vegas.”
Your approach would be to ask or require individuals and families to pay for all of their Medicare expenses? When? When they’re retired or while they are still working? Individuals on Medicare have already paid into the trust funds and continue to pay premiums after enrolling in the program. Individuals paying for the projected balance of Medicare costs would involve higher payroll taxation and/or substantial increases in premiums once enrolled in the Medicare program. The costs to retires would be rather shocking for many recipients. Saying that they can afford it doesn’t make it so.
Presently, Federal revenues from the General Fund provide approximately 43.3% of Medicare costs and that funding is projected to decrease to 42.9% in 2020, but rise thereafter to 47.5% in 2030 and 50.0% in 2060.
coberly – “I’d agree those interest payments look quite alarming. but they keep going up if you don’t pay for them, you know. Since Social Security had nothing to do with those interest payments, it hardly seems fair or honest to keep talking about cutting social security to pay down the deficit.”
Social Security OASDI surpluses and shortfalls have a direct relationship with Federal interest payments incurred by the General Fund. That is a simple fact that addressed upthread.
I happen to agree, though, that it does appear to be unfair to saddle two of the three Social Security programs (OASI and DI) with any responsibility for fiscal year deficits in light of the fact that Social Security OASDI surpluses offset previous on-budget deficit shortfalls in the General Fund. But the level of support required to support reimbursements to the Social Security combined trust funds will be substantial during the next decade. Therefore other Government programs will probably be eliminated or reduced in the General Fund.
The eligibility age and inflation measurement for Social Security OASI beneficiaries have been under consideration for a long time. Neither issue is new to the scene. It’s more important to maintain the distinction between near, medium, and long term proposed changes to either Social Security program (OASI and DI) than fall into the trap of lumping them together.
Correcting the OASDI long term shortfall issue is a matter that will be addressed at some point and if that […]
coberly – “The real fault of this “Budget Reality Check” is that it is so abstract that we really don’t know what we are talking about, and it subtly invites us to “blame” the Budget problems on SS and “entitlements.” That is more the fault of the Congressliars and Petersons than MG here… but we really need to try much harder to think clearly about exactly what we are talking about and what we need to do, and not just be stapeeded by a vague sense of Big Numbers gonna Eat US Alive!”
My goal was to lay out the Net Mandatory and Net Interest costs in summary form for others to examine. No one has presented this information in this manner on this blog previously to the best of my knowledge.
These financial numbers are the intermediate numbers, not the big numbers. The big numbers pop around 2035 to 2050 when the obligations of pubicly held debt may swamp what remains of the General Fund. The tables and narrative that I provided illustrate the projected growth in the mandatory obligations associated with reimbursements to the Medicare and Social Security trust funds and the direct financing of Medicare, Medicaid, and Net Interest payments on publicly held debt.
There is no question that discretionary spending will be crowded out during this decade, next decade, and thereafter unless the Congress addresses the unsustainable budget situation. Increasing revenues alone will not cover the funding gap, and there are studies available that explain that. The taxation load would be too great for the economy as the “needed” levels would impair economic growth. The actions necessary to put the fiscal operations of the U.S. Government will require reductions in outlays as well as increases in revenues. That’s where are.
I will address other matters regarding the Federal Budget and operations of the U.S. Government in the future.
MG
way too long for me to answer. just in shorty… i know about Goss and I agree with him. i don’t think you understand him.
as for the people paying for their own Medicare and health care in general. Yes, they need to pay for them while they are young and healthy… that’s the only way it works. When they get sick or retired they don’t have the money any more and the premiums would be too hight.
Those people who are too poor to pay their own full “expected” costs, would get a supplement that would act like an additional insurance policy… “we” would pay an insurance that was equal to our expected medical care costs…over a lifetime… plus our expected “inablity to pay.” roughly: if over a lifetime you would be expected to be below the income where a you could “afford” the insurance say 10% of the time… the cost of the insurance would be raised 10% to cover those times… obviously paid for by those who have enough to pay the premium. not time here to explain it exactly… but you should get the idea.
otherwise i don’t have much disagreemetn with you here… other than the usual… you are piling a huge pile of words on top of something that is reasonably simple with no other effect..or purpose?.. than to keep people from thinking clearly about it.
coberly – “just in shorty… i know about Goss and I agree with him. i don’t think you understand him.”
I didn’t offer an opinion about the following statements by Stephen Goss, so how can you make the wild assumption that I supposedly “don’t understand him”? What he said in plain English is straightforward.
Stephen Goss stated last year in Social Security Bulletin, Vol. 70 No. 3, 2010 that “the trust fund assets are generally assumed to be a wash: an asset for the trust funds, but an equal liability for the General Fund of the Treasury.”
Stephen Goss stated further that “it is reasonable to assume that the financial markets understand that securities held by the trust funds may be redeemed in the future, requiring the Treasury to collect additional taxes, lower other federal spending, or borrow additionally from the public.”
The reality of the accounting situation is very simple as I have explained upthread. I will now explain it another way that is equally simple.
Gross Federal Debt as of March 10, 2011 is $14.16 trillion, of which $9.55 trillion is Debt Held by the Public and $4.61 trillion in Intragovernmental Holdings.
Social Security OASDI trust funds assets – the special interest Treasuries and earned interest – are reflected in the Gross Federal Debt as part of the Intragovernmental Holdings identified above. When any of the debt is transferred to the General Fund, it is then recorded as a liability or outlay of Treasury’s General Fund. If such require any public financing with new marketable Treasuries, then that portion of the debt transfer becomes new Debt Held by the Public. Otherwise, the Treasury’s General Fund absorbs the transfer liability cost as an outlay in the General Fund accounting. If new publicly held debt is required for redemption or reimbursement, that new debt is recorded and carried in the Geneal Fund. The interest costs of the new debt are recorded in the General Fund budget as Interest payments and is simply added to the existing level of other Interest payments that are outlays of the General Fund.
Special issue Treasuries or the earned interest on such which are redeemed by the Treasury are recorded as liabilities in the Treasury’s General Fund for the fiscal year in which they are transferred from the SSA to the Treasury for redemption.
This is basic accounting.
No amount of spin and intentional misdirection by anyone will change these facts.