So what IS the story to tell that most of us live??
Lifted from comments.
Before they cut our paid for stuff, I think we need to “Audit the Government”. Not sure if anyone in Congress, Treasury, or Federal Reserve is up to the task.
As far as the annual budget goes, I always see those pie charts where they make SS, Medicare and Medicaid look like really big slices of pie, and everything tiny by comparison.
I think we should make a new pie without SS since it is fully funded from FICA flows, at least at the moment. Then we would get the rest in proper proportion.
Yes, employment is a problem. Don’t see us getting back to bubble levels anytime soon. That caused the surplus to disappear just recently instead of 2016-2017 as projected.
If I can find an economist anywhere, I would like to know why stimulus programs, federal deficits and ZIRP are good for a recessionary economy, but mom & dad or grandma & grandpa spending money is bad? If the fact that the SS trust fund runs out in 2040 is why something needs to be done today, I think employment would still take precedence. Otherwise the kids, mom and dad, grandma and grandpa will all be living in the same house, and we won’t even know for sure which of the three generations has a job.
“If I can find an economist anywhere, I would like to know why stimulus programs, federal deficits and ZIRP are good for a recessionary economy, but mom & dad or grandma & grandpa spending money is bad?”
I don’t know any economist who says that. But mom and dad and grandpa and grandma are not spending, and that is one reason for a recession. When the private sector is not spending, then it helps for the gov’t to step in.
There may be another thing going on. We have heard a couple of things for years: first, that we have a consumer driven economy, and second, that we do not save enough. It seems that we have had a debt driven economy, that consumers have had to go into debt to be able to spend. That does not sound sustainable, and indeed that state of affairs has ended, or at least moderated. People are saving more, but still less than their parents and grandparents did. That may be a good thing, but it hinders the recovery of the economy. (The paradox of thrift has been known for a long time.)
How do we get people spending again without going into debt? It seems to me that the best thing to do is to create jobs. And the government is failing in that regard. Getting America back to work is at least as important as bailing out the bankers was. We could afford to spend several hundred billion dollars on the bankers but can only afford to spend 15 billion on jobs? Give me a break!
In the first place when the Trust Fund runs out what happens is: we will no longer be taxed through income tax to pay off the bonds — which means we will have to raise the FICA tax to go back to all FICA support of SS retirement: same amount of money out of taxpayer pockets EXACTLY — only question is which tax is fairer (more or less regressive, etc.).
In the second place, as far as I know this 75 year thing stretches out forever — they always want a 75 year Trust Fund. Why? Let’s look at how the 75 year Trust Fund started out — as a practical matter. It meant setting the FICA rate at one level for many decades — releasing politicians from raising the FICA rate to meet growing outgo for many decades while at the same time paying for normal budget items (Army, USDA, etc.) partially with a regressive tax.
No reason for more than say a 5 year Trust Fund as far as I am concerned. The only good purpose is to temporarily and AUTOMATICALLY cover any shortfall in FICA collections versus SS outgo while Congress gets around to hiking the rate — happened a couple of times.
Lastly, I have read — when I was reading such stuff; been out of the loop for a while — that the Trust Fund wont run out (we wont have to stop cashing bonds with income tax — big deal) as long as average income doubles over 40 years as is usual. If average income grows ONLY 2/3 over 40 years then we would have to raise the FICA tax from 12+ to 18+ percent BUT OUT OF 2/3 HIGHER INCOME (I guess that is to avoid switching away from cashing the bonds with income tax — as I remember — I am a bit rusty; I’m sure someone here can clarify).
The important thing to remember with Social Security retirement is that per person economic output grows twice as fast as population (doubling every 40 years for the former but only every 80 years for the latter).
min
i think you missed dans point a bit. gramma spends. she has to to eat. cutting social security will stop granma from eating unless she has gotten lucky on the markets. lf this was 1830 and investment cash was hard to come by, and investments of obvious potential to improve the standard of living, that might make sense. but there is plenty of “money” in the economy to fund useful investments… not the same as wall street casino games.
the public is not spending because they don’t have the money or they are afraid they won’t have the money. that IS a good time for the government to step in. but “not spending” IS “saving.” and there is if anything “too much saving” in the economy. That “not enough saving” is an old lie promulgated by Martin Feldstein as another way of attacking Social Security. It never made sense. But that didn’t keep it from becoming part of the conventional wisdom.
ddrew
you are mostly right. the change from cashing Trust Fund bonds to raising the payroll tax may be “exactly the same” money, but it is not money “out of the economy” because retirees spend it. and it is not taken from exactly the same people. FICA comes from workers as it should. repaying the Trust Fund comes from high earners… as it should. they are the ones who got the tax break from borrowing the Trust Fund.
I agree about 5 year Trust Fund, but one year would be better. If a future “baby boom” or something like it protends and extended “generational imbalance” a largre trust fund might be a good idea. but given present experience i would be unwilling to trust it to Congress.
you are about right on the expected increase in FICA if life expectancy really goes up, but I find it is very dangerous to tell that number to people because they can’t help comparing it to their CURRENT income, and CURRENT idea of their retirement costs. in fact the whole problem of explaining SS to people is that ordinary human intuitions about numbers are almost always wrong.
as for the pie chart
i strongly suggest that the point be made as often as possible that it is not legitimate to include Social Security in the chart of “government spending.” SS is money you pay yourself. It is not money that goes to run the government, or pay welfare to someone else, or pay for the general defense. it is simply money you save for your retirement, with the government doing the job of guaranteeing it will be there with its value preserved by “pay as you go with wage indexing.”
it is exactly what a good private insurance plan would do for you, except that a private insurance plan can’t guarantee as well as a government “non voluntary” savings and insurance account.
but it’s not the government’s money. and the fact that it’s more money than the defense budget is about as meaningul as saying you pay more for rent and groceries than you do for submarines. that’s something to be glad about. not run around being panicked about.
Let’s not forget that economists calculate GDP (Aggregate Demand) multipliers for various sorts of fiscal stimulus, and there is much agreement that the highest multipliers are associated with things like unemployment insurance and food stamps.
So if we continue to let grandma have her unemployment check, that’s as good a stimulus program as food stamps! (actually better in my opinion)
(Disclosure: My grandmas don’t eat anymore, but mom and dad do, which accounts for my more liberal than usual views on the matter.)
Whoops, typo.
“So if we continue to let grandma have her unemployment check..”
I meant social security check, of course.
The best stimulus — and best anti-poverty program — for America with its unique dearth of checks and balances labor market would be to begin paying people what they are worth to work, again. The minimum wage (the minimum part of the job) was raised in 2007 by the Dems to all of 75 cents an hour short of what it was in the Eisenhower administration in 1956 — 2 1/2 X the average income later! Labor unions have virtually disappeared from the private employment landscape — and now pressure IS BUILDING on public employee unions to give up deals that the majority (working private) no longer enjoy: the ultimate race to the bottom.
The ultimate and only answer to labor union disappearance is of course the answer that serves all the better paid, less over worked OECD world (other “miserables” exception Japan): sector-wide labor agreements.
Leaving what to do aside for the moment, what will it cost. Answer: a lot of inflation. To move the 15% of income SHARE that has shifted from the bottom 90% of earners to the top 3% (overwhelmingly to the top 1/10% and the top 1/100%) over the last 37+ years (1973 being the dividing line) back where it came from must necessitate much inflation as prices rise and rerise: as much as 30% over a few years being my amateur economic guess.
A time of potential deflation like now with a definitely UNDER heated economy would seem the ideal moment. Myself at the beginning of Nipperdey’s “Germany from Napoleon to Bismark” see that back then there were potential economic upsets from freeing the formerly unpaid serfs. BUT AT SOME POINT YOU JUST HAVE TO FREE THE SERFS — come Hell or high water.
Come to think of it, deflation racked Japan could use exactly the same remedy : in Japan’s case the institution of labor bargaining power in the market place as a completely new experience — that is exactly what Japan needs.
ddrew
just so you know: i agree.
***I think we should make a new pie without SS since it is fully funded from FICA flows, at least at the moment. Then we would get the rest in proper proportion.***
Is this http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389×620399 what you are looking for?
OK, now — having burrowed my way through hundreds of lines of almost certainly unnecessary html and javascript in order to locate the chart, I’ll try to embed it in this post. Given my past attempts,I doubt that will work.
It didn’t “wrong format”. Anyway the link to the chart without the wrapper should be http://nationalpriorities.org/images/stories/chartspage/discr08prop.gif
That’s it !!!! Great find. Note how the “talking points” would change.
Though this chart excludes medicaid and medicare, and I don’t think we can ignore the problems there. But they are of a “cost” nature, not spending nature, IMO.
I agree completely about Medicare/Medicade. And I think the National Defense heading includes some not terribly optional veterans benefits over and above the 4% Veterans Benefits and Services item. Also, one wonders where the secret “black budget” in hidden. (Who is it a secret from other than the taxpayers?) Is it all in National Defense?
One point, just for the sake of clarity. Codger’s chart is ex-Social Security and ex-interest payments on the national debt. There is nothing wrong with that, necessarily. We just need to keep in mind what we are looking at.
“Why? Let’s look at how the 75 year Trust Fund started out — as a practical matter. It meant setting the FICA rate at one level for many decades — releasing politicians from raising the FICA rate to meet growing outgo for many decades while at the same time paying for normal budget items (Army, USDA, etc.) partially with a regressive tax.”
Couple of misconceptions here. There is no such thing as a “75 Year Trust Fund”, and no one in 1935 or any year since thought that the FICA Rate would stay “at one level for decades”. And they certainly didn’t.
http://www.ssa.gov/OACT/ProgData/taxRates.html
The Trustees actually target a 1 year Trust Fund either at the end of a ten year projection (Short Term Actuarial Balance) or seventy-five year projection (Long Term Actuarial Balance) and everyone concerned understands or should that this is just a probabilistic measure, it is a planning tool and nothing more.
Although on the larger point I agree that an automatic set of adjustments would be a better mechanism, where I don’t necessarily agree is that the current benefit schedule is set at the perfect rate, to some degree we have let an arbitrary decision drive proposed policy, there is nothing magic about either the wage or inflation indexing formulae in use today.
VtCodger,
The “black budget” is embedded in the DoD budget – it hiding in plain site. (There might be other parts hiding in DARPA or the Energy Dept. but the bulk of what your getting at is in the DoD budget). Its an accounting game. One such example: Every year every aircraft program in the Air Force gets a stream of funds for preventive maintenance, engineering analysis for long-term fixes, and miscellaneous other items. Not oil, gas and new tire money, more like money to find stuff that will go wrong with aging systems. Anyway its not that much and saves lots of money over the long-term. And every year each aircraft program gets these funds wacked by 30-60% depending on the aircraft. These funds, not much from each program, add up into real money which is then dumped into classified programs. Congress is briefed on these programs every year in closed door sessions, so there is oversight.
So that is where the “Secret budget” is hiding.
And don’t forget a large chunk of the DoD budget is for personel and vets.
Islam will change
nothing magic, but you need a balance between what it takes a retiree to live on in modest comfort, and what a working person needs to raise a family.
the inflation index seems to miss the actual expenses of a retired person, but the wage index looks pretty inescapable to me. not that benefits are exactly set by wage indexing.. there is a bit of a formula between the wage-indexed calculation and the “initial benefit” that set that benefit to somelthing like 40% of average lifetime wage for average earners (on a month to month basis), the projected replacement rate will fall to about 33% so it’s already getting a bit dubious, if you think that future retirees might want to live roughly according to the standards of their times… let us remember that when SS was first set (baseline for “cost of living”) most people didn’t have cars or refrigerators. So Mike Boskin and people who should know better need to stop and think when they want to peg benefits to some arbitrary cost of living base year.
and the other thing people seem to have a hard time keeping in mind while fooling themselves about hanging on to “their” money by cutting benefits for “future retirees” is that THEY will be those future retirees. And I can tell you from my own experience that young people are too stupid to understand that it’s easier to take a five percent pay cut today than it will be to take a twenty percent paycut when they are retired.
whenever you start reaching your greedy little hand into grammas purse, you are playing the game of those who want to kill Social Security. death by a thousand cuts doesn’t offend them at all.
well, i don’t think
the issue is, or ought to be about “necessary spending” but simply that Social Security is “off budget” for a reason. So look at what’s ON budget and evaluate that. Medicaid is welfare, Medicare is not… or shouldn’t be. Veterans benefits probably ought to come from the Defense Budget (so put more money INTO the defense budget… this is not about robbing peter to pay paul, just about trying to get a transparent, honest, accounting of where the money comes from and where it goes and why.
This thread sounds like a deja vu experience as I have been having a similar conversation with MG, but on two slightly earlier threads. This is the gist of the conversation.
Sorry to be repetitious, but it says all I have to add. There was a lot more preceding this point.
MG:
“I do not represent any organization or group at this time that has any funding needs or Federal program support desires before the Congress or Administration. Is that clear enough for you?”
Jack:
That was not my assumption, that you did. It seemed more likely to be some academic interest, or maybe even as an employee of some government office.
MG:
“The Congress will likely score many of its key decisions to significantly modify certain provisions of the Federal budget, eliminate/reduce discretionary programs, or make any changes to mandatory programs. Not necessarily all, but the big ones are likely to be scored by JCT and CBO. Standard practice these days.”
Jack:
There’s that affectation with numbers again. Of course all parties to the to the act have their roles to play. It will all be very antiseptically clean, very quasi-scientific. That way the public will be assured that only the necessary cuts will be made to the most unncessary budget items. That way the politicians and the lobbyists will keep political considerations out of such significant decisions. No politics are ever involved when it comes to budget policy. I repeat, that’s why the country and the budget are in such sorry shape. Because only the most objective considerations have b een brought to bear on what is almost always a politically charged issue.
MG:
“There has been no attempt whatsoever to discuss and analyze the President’s budget on this blog. Zip. You’re busy making excuses and trying to defend something that simply never occurred to this date.”
Jack:
You must be reading some alternative blog because amost every comment that I havwe made, and so too many others, has had to do with the one key item related to the budget which so many “experts” seem all too willing slash to death after all the scientific analysis is completed. That being the Social Security program. There have been additional comments made regarding the military expenses of the past two decades, and so too there has been a great deal of attention paid to the issue of revenue loss through the Bush administration’s significant tax cuts for the wealthiest Americans. I guess such discussions are not related to the budget, the President’s proposal or any other, if they are not couched in the terms that you designate as appropriate. There are no long lists of numbers. We all are well aware of where the money is being squandered and from where the sacrifices are intended to come.
Play with your numbers and focus your attention on all of those serious studies, analysis and committee proposals. They will have little effect on the outcome which is more likely to be determined by key politicians and their key financial supporters and the lobbyists that connect the two. But no, the budget process as it occurs in the Congress is not encumbered by political considerations. I’m almost sure that your right on that score, but I can’t find the numbers to do the math.
jack
i wonder how you can expect irony… you were being ironic i assume… to be even detected by someone whose logic system is so completely different from yours. i can rarely follow MG’s logic.. sometimes i think he doesn’t have any, intends none. He presents a lot of data… I think he has actually read the stuff… but either draws no conclusions at all, or draws conclusions that seem to me at least to be very different from those I would draw… some of which conclusions i regard as “direct”… that is, no caculating involved.. just “is.”
what then? arguing with him not only gets nowhere, it gets worse.
and there is this: there is probably not a person on this blog, or in the entire universe, even those I agree with in my heart, whose “logic” can be made to agree with mine when what looks like pure chance and random association has made it disagree. at least not by any method i recognize as “logical.”
Coberly,
That is almost exactly what I have been trying to dirve home, the concept that is. There is far too much reference to Social Security as an entitlement as though it were something the government owes to the people out of a sense of charity rather than as a result of the legislative process. It’s the law!!!! It is off budget when the general budget is the issue. It relates to the general budget in no different way than the Treasury bonds held by Daddy Warbucks and virtually the entire far east realte to that budget. They are both debt and that debt has carrying costs and principal due to the holders of the bonds. Social Security benefits are not a cost item in the general budget. No matter how many lists of numbers, no matter how many scholarly forums, no matter the average life expectancy of workers and retirees, social security benefits are expensed only from FICA receipts and Trust Fund dividend income and priciple balance.
There is no secret to the imbalances of the general budget. The big three, which I’ll repeat again and at nauseum if need be, gorillas sitting on that budget are;
1) the extraordinary Bush tax cuts benefiting the wealthiest Americans,
2) the Iraqi debacle, trillions and still accumulating,
3) the Afghanistan and the search for Osama.
Is it really acceptable to gut education funds, health care funds, highway repair…..(fill in the rest from any catagory of useful spending that you care to) all in favor of waging war and coddling our wealthiest citizens?
Given that a direct argument with presentation of facts that are summarized to their simplest form is met by MG with a barage of data streams and a description of the hypothetical process that will be presented to the public as a four square and even handed approach to budgetary discipline, I can only fall back on irony and sarcasm in response. As I have tried to make clear to our professorial friend, I fully expect that a grand theatrical production will precede any final determination of how the budget will be adjudicated. Every effort will be made to appear to have reached conclusions that may require sacrafice, but are in the long term best interests of the country. The problem is in who will be making the sacrafice and who’s best interests will be served. MG seems to believe that there is no political aspect to this decision making process in spite of the fact that the decisions are wholely in the hands of our designated political representatives. It beats me how one can come to such an illogical conclusion.
Jack
i couldn’t agree more. but i think you muddle your point (all right, MY point) when you conclude by talking about “useful spending.” I agree about all that, but the real point is that Social Security is OFF budget. The people can decide what spending they think is “useful.” But they already paid for their social security, and the money they lent to the Congress is a DEBT that Congress needs to pay back.
Meanwhile Social Security pays for itself… as long as the people don’t let themselves be fooled into thinking it’s “not useful.” Of course that issue never comes up. The liars say “not sustainable.” And tell them it’s the cause of the deficit.
yep.
i wasn’t disagreeing with you. just commiserating.