Andrew Sullivan reviews "Red Ink"
Andrew Sullivan reviews the book Red Ink.
Here are some shocking facts that I learned from “Red Ink: Inside the High-Stakes Politics of the Federal Budget. Where the Trillions Come From, Where They Go, and Why Inaction Imperils Our Future.”
- An amazing 64 percent of the 4.4 million employees on the federal payroll are either uniformed military personnel or work for Defense, Veterans Affairs and Homeland Security. The U.S. defense budget is “greater than the combined defense budgets of the next 17 largest spenders.”
- In 1981 Medicare and Medicaid accounted for 9.5 percent of all federal outlays. Twenty years later, that number had jumped to 25 percent. By 2021, if current trends continue, it will probably hit 31 percent.
- “Today, Americans pay less of their income in taxes than citizens of nearly every other developed country.”
- “In the early 1950s more than 30 percent of federal revenues came from the corporate income tax — in 2011, 7.9 percent.”
“Red Ink” is an extraordinarily useful book. It is exactly what author David Wessel, economics editor for the Wall Street Journal, claims it to be: “a collection of uncomfortable, indisputable facts showing the unsustainable fiscal course the U.S. government is on.”
Perhaps asking clearer questions might help? How does a person ask clearer questions?
Howsabout some basic maths.
Fed direct revenue in 1950 was about 15% of GDP….amazingly, about the same as 2010 or so.
Social security revenues in 1950 were 1% of GDP. In 2010 6% of GDP.
Or, soc sec revenues were 6.6% or so of federal revenues in 1950. And 40% in 2010.
Now, if one source of revenue rises as a percentage of total revenue then some other of the various sources of revenue has to shrink as a percentage of revenue, right?
As it happens, ignoring the recession itself, corporate income tax as percentage of GDP in 1950 was 3.5% or so. In 2006 2.65% or so.
A change, yes, but the way it’s being presented makes it look a great deal larger than it really was, doesn’t it?
playing games with the base upon which a percent is calculated is standard practice of the Big Liars.
and it’s stupid.
For example.. SS may be a growing percent of federal outlays, but it isn’t even a federal outlay. it’s what people save from their paychecks in order to spend it on food and housing when they get too old to work.
and if they are going to live longer in the future than they do today, they might even need to spend more as a percent of their incomes. (but not much more as it turns out.)
so lets stop with the goddam stupid percentage games and just talk about what we need to spend on what we need, and where is the best place to get the money.
as you know, and any corporation will tell you whenever anyone proposes raising a tax on “business,” it all comes out of the same economy in the end.
6.2% of GDP doesn’t strike me as a huge burden to pay for feeding and housing the elderly, especially as they become about one third of the adult population… that damn living longer, you see… and if the best place to get the money is to have them save it in a government plan… but not government paid… that protects their savings from inflation and market losses, then that’s the best place to get it… whether it is 40% of “government outlays” or even 15% of payroll or, gosh, more than we spend on nuclear submarines.
or we could be like the present politicians of both parties, we could say, hey, i found a way to save on our food bill. let’s only buy 80% as much food as it takes to stay alive.
The “unified budget” is political fiction. Revenues are still accounted for in various accounts and are the source of the expenses of those accounts. Try to stick with all the facts, not just those you find to be convenient in supporting your distortions of certain economic phenomenon.
And would you have us all rely on corporate pensions, IRAs and 401(k) plans, all otherwise known as too little too late and often disappearing fast.
I know that we have had two kids since I bought the Porsche, but damn, our food budget is now almost as much as my car payments. And I know you pay for it out of the money you get from taking in laundry, but still, money is fungible and it all comes out of unified budget. So all this eating has got to stop!
Maybe you could give the kids Kool Aide instead of milk. They’d rather have that anyway.
Worstall in 1950 Social Security Title 1 supported more beneficiaries at a higher total cost than the FICA funded insurance plan set up under Title II. Moreover the Disability (DI) program, Trust Fund and FICA assessment did not get put in place until 1951.
Title 1 had ZERO dedicated revenues and was supported by direct outlays from the General Fund. So expressing SS revenues as a share of GDP does ZIP to get to any kind of comparative burden imposed by Social Security as a whole. In order to get an apples to apples comparison you would have to boost that 6.6% of federal revenues by the amount of general funds actually allocated to Social Security.
I am afraid ‘basic maths’ don’t help much if deployed in a total lack of actual program finance context. The Social Security Amendments of 1950 changed the whole nature of the game in multiple ways with the largest factors being the introduction of annual benefit increases for Title 2 along with a totally new Disability Insurance program.
As such only two types of people cite SS numbers from 1950 or before in ostensibly comparative fashion to numbers from say 1970 and after (by which time Title 1 was phased out): liars and those taken in by liars.
I respect you enough to hope you fall into the latter category.
Similar games are played by using worker retiree ratios calculated before actual Title 2 monthly benefits started. The red flag date for that (gleefully flown by the Heritage/Cato folk) is 1940. Meaning that anyone reading a SS policy post that deploys either 1940 or 1950 has to be parsed pretty carefully. Because those two particular dates suffer very heavily from the GIGO factor, the programs looking significantly different by the time of the 1942 and 1952 Reports (that showed full year 1941 and 1951, the first years after full implementation of the 1939 and 1950 Amendments)
by 1950 only about one third of those paying into the system had retired.
So while Worstall can mouth “basic math” the fact is that math is not a question of diddling yourself with arithmetic until you get a number that excites you.
You really need to know something about what you are counting, and how that relates … in the real world… to what you are comparing it do.
Err, folks? And especially you Bruce.
Look at the original claim again:
““In the early 1950s more than 30 percent of federal revenues came from the corporate income tax — in 2011, 7.9 percent.””
The original claim is that as a portion of federal revenue the corporate income tax has fallen over the decades.
We do agree that this is what the claim is, do we? I mean, it does say that, loud and clear?
Good, so I mention that some other source of federal revenue has risen as a portion over those same decades.
Note that I do not say that SS is a good idea or a bad one (social insurance is a good one), nor do I talk about where the early SS payments were being funded out of (that’s you Bruce).
What I actually say is that if one source of federal funding rises as a portion of total federal funding then one or more other sources of federal funding must decline as a portion.
We do actually agree on that basic maths certainty, do we?
Good, we do agree because it’s obvious. So what in hell is the rest of this wibble that you are all pushing?
actually I had just looked again at the claims. what all this wibble is about is the use of misleading or meaningless numbers.
SS is not a source of federal funding.
and i certainly don’t agree with you about basic math.
i think there may have been some confusion here because what you said sounded very similar to some of the standard big lies. in fact, that is not exactly what you said, but what you said is still meaningless, and it’s not math.
math, pace Lord Russell, requires that you know what you are talking about.
What is unsustainable in the US in private debt. That is what is holding us back. That is what is holding us down.
I don’t know this for sure, but I think that the original reason for “Jubilee” was exactly that “private debt” eventually destroys economies.
It is because poor people, either from need or from stupidity, fall into debt slavery. And neither the borrowers nor the lenders know how to get out of the trap. So the king has to declare a debt holiday.
Fact is, I think, no one gets hurt. Because the people who lent the money never “had” it in the first place, and certainly weren’t going to “get” it.
Free labor is always better than slave labor, but the owners and managers and lenders can never figure out how to arrange for that. And neither can the borrowers.
“SS is not a source of federal funding.”
SS premiums flow to the federal government.
They are a source of federal funding.
SS and Medicare/Medicaid are certainly federal spending……and the premiums to SS are what are supposed to pay for them.
Sure, they’re not part of the discretionary budget, but they are of the total one.
“Social security revenues in 1950 were 1% of GDP. In 2010 6% of GDP.
Or, soc sec revenues were 6.6% or so of federal revenues in 1950. And 40% in 2010.”
Worstall if you WEREN’T making some implicit claims about Social Security being unsustainable you have a funny way of going about things.
First you point out that “federal direct revenues” were 15% of GDP in both 1950 and 2010. Then point out that under that steady state SS grew by 600% (1% to 6%) over that period. You then restate the same number in a different manner (6.6% to 40%).
Now true enough you seque to some argument about corporate income taxes, and that in the context of the SS numbers the fact that corporate numbers ‘only’ went from 3.5% to 2.65% shows that it is basically a wash. Or something. Your overall argument is a little hard to follow here. But what isn’t hard to follow is that you framed the whole argument in terms of out of control growth in Social Security.
For you to turn around and claim: “Note that I do not say that SS is a good idea or a bad one” is, and I am trying to be kind here, is disingenuous. I mean you didn’t exactly lead off with your corporate tax numbers now did you?
For that matter the original claim about such numbers was only bullet point four. And AFTER a bullet point pointing out an alarming growth in Medicare. Which makes the following a little disingenuous as well “We do agree that this is what the claim is, do we?” Because I don’t agree that that is the “claim” that any casual reader would take away from either Sullivan or from your original comment. Particularly since this isn’t Heritage’s first trip to the rodeo. After all this book is just a repurposing of Peterson-Pew Commission’s “Red Ink Rising: a Call to Action” http://www.pewtrusts.org/uploadedFiles/wwwpewtrustsorg/Reports/Economic_Mobility/40543%20FR_R1.pdf which in turn just rehashed the Brookings-Heritage Fiscal Seminar’s “Taking Back Our Fiscal Future” http://www.brookings.edu/~/media/research/files/papers/2008/4/fiscal%20future/04_fiscal_future
Anyone who has read any or all of these would take the claim that any of the authors are actually centrally concerned about a drop in the take from the corporate income tax is ludicrous. Indeed most are on record for eliminating it altogether. In light of that your wounded feelings seem a little exagerrated. Because the central focus on all of these Peterson influenced and funded efforts is clearly and narrowly on the “necessity” for immediate “entitlements reform”.
“SS premiums flow to the federal government.
They are a source of federal funding.”
Federally Insured Banks pay FDIC premiums to the federal government, but we don’t normally think of that as a source of federal funding. Because the payouts don’t come in the form of appropriated spending. Farmers and homeowners pay crop and flood insurance premiums directly or indirectly to the federal government and I doubt that many people think of THOSE as “a source of federal funding”. In large part perhaps because those premiums do not in fact cover the entire cost to the feds for crop price supports or flood rebuilding. I suppose if you insist every fee or premium that touches a federal employee’s hands and is accounted for on federal books is a “source of federal funding”, even where those dollars are retained and returned in the form of direct services to those who pay them. But where do you stop taking this logic? I mean some tiny fraction of each net dollar deposited into a member bank of the Federal Reserve is “paid” to the Fed in the form of mandatory reserves and indeed mostly held in the form of Treasuries. And so have the secondary effect of guaranteeing a part of the market for such Treasuries and so to that degree reduce borrowing costs. And we could really extend this argument to include every foreign corporate or sovereign entity which maintains their reserves in ‘dollars’ which actually translates to ‘Treasuries’.
Now the relation of the Social Security Administration and its Trustees and Trust Funds are obviously a little closer than those of say the National Bank of Singapore and its Directors, there is a reason why some spending is considered ‘on budget’ and some other ‘off budget’ and direct and indirect investments in Treasuries not having any relation to the budget per se. But none of this reduces so simply to: “premiums flow” therefore “federal funding” as to justify your silent “Well DUH!!” attitude. Because even special pleading and logic chopping tend to have some internal consistency. You just have to accept the buried premises and assumptions. As you seem to expect us to do here.
“Sure, they’re not part of the discretionary budget, but they are of the total one.” T.W.
Nice try Tim, but you know we’re way past that simple minded canard. You know very well that SS “tax” is earmakred by law for the purpose of funding SS costs. The money is collected in the name of every working person with prcise records of lifetime income and contributions. To further emphsize the seperate and distinct structure of SS from the discretionary general budget one need only to recognize that the SS Trust Fund is a major lender/investor in the government through the issuance of T-Bills to account for the value of the SS Trust Fund assets.
The working people need some safe haven for retirement funds and a solid ground floor through which those funds will not suddenly shrink in value. Only the current structure of the program has been able to accomplish that important worker’s goal.
Most other government expenditures are discretionary in that those who represent government to the people are often at odds regarding the best uses of the country’s, and therefore the governemnt’s, assets. Pick and choose from within that discretionary field of dreams, but keep the damn SS funding stream where the law puts it.