In today's Wall Street Journal Nobel Laureate Edmund Phelps takes on the issue of taxation and insuring wealth across generations. Some snippets: The Wall Street Journal:...Your "golden rule" of capital accumulation states that each generation must save a certain amount so that future generations can enjoy the same standard of living. Should we be concerned? Prof. Phelps: When you apply the golden rule, you have to look at the world economy. Certainly the world as a whole has saved enough...I would, however, have to give bad marks to the U.S. government, which has run persistent budget deficits at a time when we have to start climbing up the mountain of pension obligations that will come due with the retirement of the baby boomers. Yup, spending is out of control. WSJ:..you've suggested that the U.S. economy could possibly grow its way out of its demographic difficulties if productivity...keeps booming as it has in recent years. Do you see that as a likely outcome? Prof. Phelps:...I see such a prolonged boom as unlikely...We should study the market for new ideas, where entrepreneurs and financiers come together, and try to see how that could be made to work better. Venture capital still accounts for less than half a percent of all investment. Stupid regs like SARBOX doesn't help. But Phelps' focus on investment, especially early stage risk-capital investment is right on the money. Get rid of the capital gains tax so investors have no disincentive to move from one investment to another. If we need to limit it, then eliminate the tax on investments in companies below a certain size threshold. WSJ: Would [increasing taxes on low wage earners] be economically just, especially at a time when the gap between the rich and the poor has been growing? Prof. Phelps:...[My proposal is] subsidies that would be paid to companies for the ongoing employment of low-wage workers. The resulting increase in the demand for those workers would pull up their employment and ultimately give a big boost to their paychecks. Our Earned Income Tax Credit is a step in the same direction, but it's aimed toward low-wage parents. I remember reading this a few months ago. It seems like a better idea than direct unemployment benefits. Much better incentives all the way around. WSJ: You've been studying ways to permanently lower the unemployment rate. Any advice? Prof. Phelps: I have the eccentric view that there's too much wealth sloshing around the American economy. This wealth has bad incentive effects on the supply of labor, employee performance and maybe even innovation. We have become wealthy thanks in part to unsustainably low tax rates. From that point of view, it would be a good thing for the federal government to raise taxes and run big surpluses until we have retired the public debt. In the short run the higher tax rates might be unpleasant. But in the long run, with the debt reduced or eliminated, incentives to work or to advance in the world would be enhanced, because after-tax pay rates as a proportion of wealth would be higher. That is certainly an eccentric view. "Might be unpleasant?" I'd guess so :) I wish the interviewer would have asked Dr. Phelps about what kind of taxes he'd like to see and what his view on Federal spending is. But his intergenerational approach, his focus on investment being the answer to most economic questions and his reliance on incentives makes him worth the read. I hope you agree.
Ladies and Gentlemen, Edmund Phelps (Again)
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Huh?
(#823)That's not what he said. He said there is a deficit. To me, and to him as he makes clear later, this is because:
We have become wealthy thanks in part to unsustainably low tax rates.
You know, if you read what you want to see and not what's there, you will always get the message you expect to hear rather than that which is being given. From that point on, your cascade of conclusions will be all wrong.
A friendly suggestion: take it from the top and start again.
I am not a pessimist. I am an incompetent optimist.
You can distinguish between italics
(#827)what the article says, and regular print, what I think, right?
I'm trying to make the best out of a bad situation. I don't need to hear crap from a bunch of hippie freaks living in denial! Screw you guys, I'm going home!
And?
(#882)Is "Yup, spending is out of control.", not your line?
Methinks it is. Yet it pretends to affirm a graph where Phelps makes no such statement.
I am not a pessimist. I am an incompetent optimist.
Oh fer crissake it does nothing of the sort
(#894)I thought about putting a smiley face at the end of that line, but I figured, nah these guys are smart enough to see what I'm saying. I overestimated you. Sorry about that.
I'm trying to make the best out of a bad situation. I don't need to hear crap from a bunch of hippie freaks living in denial! Screw you guys, I'm going home!
Apologies...
(#935)...for being an idiot.
So, for the slow crowd, just what exactly were you saying?
I don't seem to have the IQ to parse "spending is out of control" more ways than one.
I am not a pessimist. I am an incompetent optimist.
Yup, I agree deficits are a problem
(#1028)(cue wise a** approach) but the issue is spending.
If this is that unclear, I'd better go back to my normal written approach with no attempts at humor. Or I could add a smiley face :)
I'm trying to make the best out of a bad situation. I don't need to hear crap from a bunch of hippie freaks living in denial! Screw you guys, I'm going home!
But but...
(#1145)...your man Phelps says taxes are unsustainably low. Blaming spending is your idea, not his.
Not that I think spending is well-managed. It's not. But consider the fact that we should be running a surplus to prepare for baby-boomer day. Also consider that while much spending can be cut, the bulk of it can't and some has to be added too.
In other words, taxes are too low. Particularly taxes on the wealthy. Also, enforcement has gone down the tubes, also particularly for the wealthy. This has to end.
Then we can talk about spending.
I am not a pessimist. I am an incompetent optimist.
Phelps isn't my guy, I posted this because
(#1155)he offers a bunch of ideas, most of which I actually disagree with, but I thought I owed to the community in that I had previously championed other ideas of his in another diary.
Blaming spending is your idea, not his
OK, I'm gonna try this one last time. THAT'S WHY IT IS IN BLOCK PRINT AND NOT ITALICS! Sheesh.
Not that I think spending is well-managed. It's not. But consider the fact that we should be running a surplus to prepare for baby-boomer day. Also consider that while much spending can be cut the bulk of it can't and some has to be added too.
Nonsense. Everything should always be on the table. Period.
In other words, taxes are too low. Particularly taxes on the wealthy. Also, enforcement has gone down the tubes, also particularly for the wealthy. This has to end.
Then we can talk about spending.
More nonsense. The top 1% is paying over 35% of all income taxes while earning less than 20% of income, while earning 1/3, the top 5% is paying over 57% while earning 1/3 of income while and the top 10% over 2/3 while earning 44%. The bottom 50%? Just over 3% while earning 13%. How freakin progressive do you need to get?
Tax receipts are up around $500 billion annually since 2003 or over 25% (From 1.782 trillion to an estimated $2.286 billion in 2006). If we can't spend at a slower growth rate than that? Spending is certainly the issue.
I'm trying to make the best out of a bad situation. I don't need to hear crap from a bunch of hippie freaks living in denial! Screw you guys, I'm going home!
In order:
(#1202)top 1% is paying over 35% of all income taxes while earning less than 20% of income,
Sure, but that leaves out payroll taxes, which is a skeezy statistical dodge. If you count all Federal taxes, their payments drop to 20.1% of all income taxes vs. 20.81% of income (2000 figures). If you look at percentage of income paid in here, from the same source, you can see that 21.5% of income goes to the Federal Government, but those in the top 1% are stuck with the insane bill of . . . 29.1% (2000 dollars, again). That's right -- we ask of our wealthiest citizens 7.6% more of their income than we ask of the average citizen. Clearly they are oppressed.
Tax receipts are up around $500 billion annually since 2003 or over 25% (From 1.782 trillion to an estimated $2.286 billion in 2006).
Revenue was gutted by the Bush tax cuts. Then some of them expired (in particular the corporate giveaways), and revenue suddenly went up. This has nothing to do with spending, though, if you do want to control spending, I highly recommend electing a Democratic President, as per the CBO numbers above.
"In the very long run, we are all dead." -- John Maynard Keynes, 1st Baron Keynes
You can't have it both ways
(#1208)Either SS is "an insurance program" in which case they aren't taxes but premiums and should be excluded, or it is a welfare program in which case you can call it a tax. But not both.
I'm trying to make the best out of a bad situation. I don't need to hear crap from a bunch of hippie freaks living in denial! Screw you guys, I'm going home!
Yes, he can....
(#1289)So long as SS continues to foot a big chunk of the bill from the federal budget, as it has now for some 20 years, he can certainly count it as a contribution to federal income. If the SS Trust Fund were free to pick and choose investment vehicles, then you would have a point.
Further, in conservative circles it is quite popular now to say that the SS Trust Fund doesn't even actually exist, since the "government can't owe itself". Hence, they have built up the intellectual and rethorical framework to swindle SS contributors at some future time when the numbers no longer add up thanks to our current reckless fiscal policy. You can't have it both ways, either.
And, one more thing, as in most countries, the wealthy are by far the largest direct beneficiaries of government spending, through interest earned on government bonds, through profits made from government contracts, through direct subsidies in various industries, through pension fund bailouts for bankrupt companies, through government lobbying abroad to open up markets and protect IP around the world, through regional pork, etc. All you have to do is look at who funds political campaigns, and particularly (but not only), GOP ones.
Not to mention infrastructure and basic research. You build a highway, you save the average Joe a few minutes and some gas. But you create enormous wealth for the landowning class around the highway. You subsidize aircraft development for decades and you get companies such as Boeing. Same with Silicon Valley, space contractors, energy, etc. The private sector simply doesn't do high-capital, high risk. It does low-cap high risk, or high-cap low risk. Not both. Only government is dumb enough to do both, but sometimes this is exactly what is needed, particularly for all-new industries with decades-long payback. Though we all benefit, the wealthy gain multiple times more. I get a nice computer, Bill Gates gets a 50 billion dollar portfolio.
I am not a pessimist. I am an incompetent optimist.
Intellectual and rethorical framework to swindle
(#1291)Exactly right!
The proper balance between defense and welfare are the tectonic plates that lie beneath our political discourse.
Rhetorical nothing
(#1304)Mr. Aurelius,
You can't rhetoricize economic reality away. SS and Medicare are future problems because they will represent a growing chunk of federal spending, and an increasing burden on the economy.
Our current fiscal condition is nearly irrelevant to this problem.
Whether SS and Medicare are properly funded on paper is a pointless argument.
As for the bit of class war you are attempting there, you are wrong. Both Federal and local spending in the US principally goes to direct payments or benefits to individuals such as SS and Medicare. This is true at all levels of government.
Now you can probably counter that we are somehow indirectly subsidizing the likes of landlords and physicians and the rest of the civilian economy, but this makes no sense.
And from the producer side, that part of government spending that is not directly provided to individuals consists of personnel costs of government employees the vast majority of whom are not rich and who mainly work to provide services to the mass.
I think you're missing MA's point:
(#1309)He's not talking about landlords and docs: he's talking about trust fund babies and CEO's. That's not "class warfare", it's an observation. You know as well as anyone that serious money is made in the bond market, and as for CEO's... I'd remind you whose pensions were left intact when the airlines were bailed out. Hint: it wasn't the ground crew's...
"I've been on food stamps and welfare. Anybody help me out? No!" Craig T. Nelson (6/2/2009)
Of course there are benefits
(#1314)Mr. JKC,
But these things represent a minor portion of government spending. They loom large because they are controversial.
Of course there are benefits
(#1315)Mr. JKC,
But these things represent a minor portion of government spending. They loom large because they are controversial.
Perhaps.
(#1320)They are controversial. And at the same time, a billion here, a billion there, pretty soon you're talking about real money.
You're too smart to pretend that the political and the economic can be divorced. After all, like politics, economics is a human creation, not some mysterious force of nature.
"I've been on food stamps and welfare. Anybody help me out? No!" Craig T. Nelson (6/2/2009)
Economics is not a human creation
(#1340)Mr. JKC,
Not a conscious one anyway. And it is not under conscious control either. The economic consequences of a given policy are not dependent on the intentions of the said policy just as the effectiveness of an aircraft design is not dictated by the wishes of its designer.
Economics is a description of collective behavior just like physics is a description of the physical world. Effective economic policy, like an aircraft, needs to take into account the "laws" of the science, or risk failure.
That's an absurd statement.
(#1428)Economic systems most certainly are human creations, even if they do take on a life of their own. Furthermore, economies are very much under conscious control, unless you think the Fed's policy decisions are made via Ouija board while the Board of Governors is napping after a three martini lunch.
You are, of course, correct in saying that policy consequences are not dependant on the policy-maker's intent. If you were wrong about that, socialism would have been an unqualified success.
I do agree with your assessment of economics as the study of collective behavior. (Sort of like Isaac Asimov's psych-history, but I digress.)
Too often, though, conservatives behave like free markets are natural forces, and use that belief to wash their hands of responsibility towards those who have been displaced by economic changes.
"I've been on food stamps and welfare. Anybody help me out? No!" Craig T. Nelson (6/2/2009)
I think we are not understanding each other
(#1473)Mr. JKC,
Going to the "Foundation" argument, Hari Seldon's Psychohistory was not the same as the Galactic empire it modelled. The point of Psychohistory was to predict future behavior of this complex system, the galaxy, that for all the efforts of those running it was not really under conscious control.
Economic systems, similarly, are not in fact under conscious control, they respond to "engineering" changes according to the laws of economics, which are nowhere near fully understood. Which makes "economic engineering" an iffy proposition, and almost certainly counter-productive without reference to what is known about economics.
Markets tend to spontaneously appear, given the right conditions. That is an interesting phenomenon, a fine argument that these are indeed "natural phenomena" in social science.
I can't disagree with your argument here...
(#1488)but I do have a problem with those blind to the consequences of economic dislocations who treat market forces like earthquakes.
"I've been on food stamps and welfare. Anybody help me out? No!" Craig T. Nelson (6/2/2009)
Of markets...
(#1565)Luis, thanks for reminding me of a subject I've been meaning to write about for some time. Namely, about markets.
You are 110% right that markets appear spontaneously. Markets can also appear by design, and there are good reasons to do so. Carbon trading comes to mind, as well as nearly all derivatives. A need is seen, a mechanism is designed, and if the mechanism is good enough to channel the need, it does.
But let's get back to the spontaneous market. This is a fascinating creature which if well-understood would keep more politicians and executives honest. A spontaneous market simply means that people will find a way to satisfy a need. The greater the need, the harder they will work to satisfy it. But here is a thing conservatives fail to note: markets are about products and services, not about money. Any perceived neeed creates a market to those who perceive it.
If you think about this for a second you must understand that there are consequences to markets that market defenders don't want. Namely, if Dickensian Capitalism rules the fate of the working class, there will be a market for the promises of socialism.
This is why those who wanted to soften the hard edge of unfettered capitalism, like Keynes or FDR, weren't closet commies but the opposite. They wanted to deny the market to Marxism, and they did so. Which is why I think that demolishing institutions such as Social Security is absolutely the dumbest thing you could do if you like free markets.
I am not a pessimist. I am an incompetent optimist.
I have to agree....
(#1348)....with luisalegria, at least up to a point. Economics and finance are, at base, sociological phenomena. That said, they (at least attempt) to be based on how large numbers of human beings react to specific conditions in the aggregate. Statistical thermo, if you will. You can no more predict the individual response than you can predict a specific path for a specific particle in Brownian motion, of course. The problem is made worse by the fact that some of the stuff the human "particle" bounces into exists only in its own head. But in aggregate you get a good approximation.
"Unfortunately the universe doesn't agree with me. We'll see which one of us is still standing when this is over." -- Eliezer Yudkowsky
SS and Medicare
(#1311)First of all "SS and Medicare" are not one thing, but two, and quite distinct. Medicare is a problem because healthcare spending is out of control. This is a completly separate issue and has to be dealt with interms of comprehensive healthcare reform. It is not a mere fiscal/pension issue.
As for SS, it has accumulated a trust fund to take it to the middle of the century, and simply raising the cap on the SS tax could extend that to 2080 or more. It is only a problem if the right succeeds in defaulting on Trust Fund bonds, which would be fraud, since the money that was used to pay for them was just as real as the money used to pay for regular treasuries issued at the same time.
No class war. But classes exist. I don't believe in a classless society, for many reasons. But from there to pretending that classes do not exist there is some distance indeed. The subsidies I'm talking about are quite direct, by the way. I had neither landlords nor doctors in mind. More like oil company executives and shareholders.
I am not a pessimist. I am an incompetent optimist.
Comments re SS and Medicare
(#1337)Mr. Aurelius,
Both are "trust funds", both depend on dedicated taxes. Their outlays are also trending up for similar reasons, that of an aging population. The fast escalation of unit medical costs is a special problem with Medicare, but even without this, like SS it would escalate faster than general inflation and as a share of the budget.
As for their being "adequately funded" from an accounting point of view. This is not a problem. The real problem is the economic one, of an expanded claim on resources. The government makes money, it can make it appear at will to make the books balance, as long as this is done with regard to the economic consequences.
As to why these trust funds are irrelevant - I have expounded on this at length in the past. Basically the role of the Federal government as a macroeconomic entity, in managing money, make it absurd to treat SS, Medicare, or anything else as anything but just another cash flow. The government has no way to store value. What the government pays out is constrained only by a concern to limit inflation. This requires, literally, "cash accounting".
The government cannot directly create economic investments, other than by purchasing private property (a bad idea I think), all it can do is make promises of benefits, claims on future cash flows, which is something else entirely.
Okay, I'll have to think about that.
(#1497)I think that's an interesting point. On the one hand, yes, SS is definitely a required fee-for-service program. On the other hand, if we exclude SS, are we defining progressivity based on the beneficiary, rather than the taxation? That opens up a huge can of worms; national defense and law enforcement, for example, benefit the wealthy more than the poor, as the former have more assets which are being protected.
I'll have to think about that.
"In the very long run, we are all dead." -- John Maynard Keynes, 1st Baron Keynes
Dumb question
(#1501)Should the progressivity of taxation be based exclusively on income, or should wealth play a role? That is, if you have twice the wealth I have, but we have the same income, is it really true that a tax which strikes both equally is progressive? Certainly, you have a greater ability to pay than I do . . .
"In the very long run, we are all dead." -- John Maynard Keynes, 1st Baron Keynes
Ya know ...
(#838)... even if we don't get into the argument about how high our tax rates actually are, let's say they're around 25% or something, I just can't understand how anyone could regard that as "unsustainably low".
Maybe if they were down around 5% then you could start worrying about that being unsustainable. I just don't understand any theory of government that requires it to be so large that 25% is too little taxation.
It's not a theory of government...
(#847)...it's an empirics of government.
From The Congressional Budget Office (pdf):
As a percentage of GDP:
Year Revenue Outlay
1962 17.6 18.8
1963 17.8 18.6
1964 17.6 18.5
1965 17.0 17.2
1966 17.3 17.8
1967 18.4 19.4
1968 17.6 20.5
1969 19.7 19.4
1970 19.0 19.3
1971 17.3 19.5
1972 17.6 19.6
1973 17.6 18.7
1974 18.3 18.7
1975 17.9 21.3
1976 17.1 21.4
1977 18.0 20.7
1978 18.0 20.7
1979 18.5 20.1
1980 19.0 21.7
1981 19.6 22.2
1982 19.2 23.1
1983 17.4 23.5
1984 17.3 22.1
1985 17.7 22.8
1986 17.5 22.5
1987 18.4 21.6
1988 18.1 21.2
1989 18.3 21.2
1991 17.8 22.3
1992 17.5 22.1
1993 17.5 21.4
1994 18.1 21.0
1995 18.5 20.7
1996 18.9 20.3
1997 19.3 19.6
1998 20.0 19.2
1999 20.0 18.6
2000 20.9 18.4
2001 19.8 18.5
2002 17.9 19.4
2003 16.5 20.0
2004 16.3 19.9
2005 17.5 20.1
Look at the outlays -- we seem to demand a government that uses 20% or so of GDP (granted, more under Republican presidents, but we figure that'll balance out under Democratic Presidents). Unless we collect 20% of GDP in taxes, we have to borrow the rest, and unless the difference is trivial, we have to borrow it from other nations -- either their people (which is an issue, but it's really not that huge a deal if we owe a bunch of middle-class Brits some money) or their central governments (which is an issue, when that central government is China or Saudi Arabia).
Since that level of outlays is likely to rise in the near future (especially if a Republican is elected President but is unable to convince Congress to default on the Social Security Trust Fund or to dismantle Medicare), we really need to be collecting more taxes to lay in surpluses to deal with the upcoming general fund deficits.
Here is some info on who we owe money -- note that the biggest two chunks are to essentially the SS trust fund and other countries.
Those who discuss how we're going to cut spending need to deal with this basic reality:
The military, medicare, and interest on the debt constitute 2/3 of all non-Social Security spending. If anyone is talking about significantly cutting into the Federal deficit by reducing spending, they are talking about cutting into the military, shuttering Medicare or Medicaid, defaulting on the national debt, or defaulting on Social Security obligations. Everything else is puttering around the edges -- useful in a general sense, but not meaningful in a sustainable policy sense.
"In the very long run, we are all dead." -- John Maynard Keynes, 1st Baron Keynes
Thanks for cutting threw the mularkey
(#850)I have always wondered how people think we can cut our way to balance... Even if you cut to the bones you have to hit the big three...Defence, Social security (old people's retirement or their health...Some have money to help... but not most... they either only have SS or have so little that in the end the government is going to have to help...
My father once told me when I asked about SS that old people used to starve when he was a kid and people hated it...
Ask courageous questions. Do not be satisfied with superficial answers. Be open to wonder and at the same time subject all claims to knowledge, without exception, to intense skeptical scrutiny. Be aware of human fallibility. Cherish your species and yo
That's simply nonsense DA
(#895)All you have to do is hold the overall spending growth rate below the economic one and it will catch up. See what tax revenues have done in the last two years? The issue is simply restraining spending, and it is all about entitlements. And you're wrong about the old. They are the wealthiest segment of our scoiety.
Means test or gradually extend retirement ages.
I'm trying to make the best out of a bad situation. I don't need to hear crap from a bunch of hippie freaks living in denial! Screw you guys, I'm going home!
A few things:
(#969)How is this relevant? I agree, tax revenues go up during expansions, no matter what the overall tax rates might be. If you look at the table above, tax revenues as a percentage of GDP are essentially unchanging over 2003-2005.
True, but (1) that wealth is hardly evenly spread, and (2) since they often lack the ability to sell their labor, they'd better be wealthy, or else they'd starve.
"In the very long run, we are all dead." -- John Maynard Keynes, 1st Baron Keynes
No they aren't
(#1014)Mr. Kimmitt,
Tax revenues as a % of GDP have increased substantially in 2005 and also in 2006.
Preliminary CBO figures for 2006 have tax collections at 18.4% of GDP. Thats about the same rate as 1995, at considerably lower tax rates.
As for 2003-2006 - the first four full tax-cut years
2003 16.5
2004 16.3
2005 17.5
2006 18.4 (prelim)
Heh, that's what I get...
(#1072)...for misreading my own table.
What an explosion in corporate income tax receipts starting in 2004; is that exclusively due to the sunset provisions in the 2001 tax cuts? If so, that's a one-time bonus, albeit one of a couple hundred billion dollars.
Looking at the CBO's predictions, I'm struck by how absurd some of their assumptions are. Why on God's green earth would one pretend in Table 1-2 that growth in SS outlays will be about what it was in 2006? The Baby Boomers are retiring. And the assumption that Medicare expenditures will grow more slowly than they have over the past few years is even more absurd. Also, in this day and age, why would one assume below-trend growth in defense spending? Don't even start with me on the assumptions regarding the presupposed massively above-trend growth in income tax receipts -- are they assuming that there will be a significant tax increase?
"In the very long run, we are all dead." -- John Maynard Keynes, 1st Baron Keynes
Comments on the CBO Outlook
(#1108)Mr. Kimmitt,
It looks to me that the assumption of corporate tax rates is pretty much a one-time thing, as per table 1-2. 2007 is negative and onwards has basically no growth there at all. Note that the "one time" effect has persisted through FY2006, so the "sunset" provisions are not the whole story.
Though corporate taxes "exploded", most of the increase in collections in 2005-06 in actual magnitude has been in personal income tax.
The SS payout projections, it seems to me, are the most accurate of all, because they are based on pretty good data. They have heavy-duty models for this. And SS payout is assumed to increase substantially above previous trends, 5.8% average for '07-16 vs 4.5% '94-04.
Ditto for Medicare, the rate of increase is assumed to increase long term. Note the notes regarding the last three years, where Medicare absorbed the one-time increase of the prescription drug benefit. Unless coverage is similarly expanded why do you see a higher rate of increase ?
Defense is the wildest card there is. One argument is that there is an ongoing restructuting in the armed forces whereby the most expensive forces (Navy and Air Force) are being reduced.
As for the individual income tax, it seems to me that there has been a considerable bracket adjustment with the tax reduction/recent inflation. The CBO models for income tax collections have been blown out of the water three years running.
BTW, I won my bet with you in 2005, and (with another person) in 2006 in predicting the deficit.
Medicare increases
(#1197)Unless coverage is similarly expanded why do you see a higher rate of increase ?
Because the Baby Boomers are getting old, as previously mentioned -- and because medical care continues to increase in cost.
"In the very long run, we are all dead." -- John Maynard Keynes, 1st Baron Keynes
I meant higher than projected
(#1293)Mr. Kimmitt,
The CBO is already assuming a faster growth rate for Medicare 2007-16, I think it accounts for higher rates of escalation in unit medical costs and larger numbers of beneficiaries.
This projection based on static assumptions, in that it assumes present policy going forward. The higher recent growth of Medicare was due to a policy change (drug benefit).
Absent a policy change (the likelihood or nature of which cannot be forecasted), why would you dispute the CBO's projection ?
How much of the 2005 percentage was transferred or
(#869)granted to States and local jurisdictions? What was the tax take of those two?
You cannot treat the Federal Budget as an isolated issue; Congress has very shrewdly integrated and intruded State and local expenditures into it.
There is no question that the defense budget can be cut (though not by as much as many would like). Both Meidicare and SS can be cut -- simply by introducing means testing (I have no business drawing SS for instance and I decline Medicare Part B and would decline Part A if I could).
We cannot default on the debt -- which we shouldn't have in the first place -- but we can pay it off and should. Taxes do not need to be raised, we need to cut a lot of fluff and place the social Safety net on a self sustaining and fair -- not a vote buying -- basis.
The K Codes explained HERE.
As written,
(#967)the budget there includes transfers to state and local governments. As you note, the overall process is complicated, but the CBO is the place to go for good numbers on it.
I'm amazed to hear so many conservatives asking for SS to be means-tested. Social Security is an insurance program; when you buy life insurance, the insurance company doesn't check to see if you're rich before sending you the payout. Social Security is the same way -- we've taken these people's premia and owe them their payouts. Putting that aside, cutting SS would do nothing to assist the deficit; a large portion of the deficit is debt owed to the Social Security Trust Fund. Unless you want to transfer SS payroll taxes to the general fund (and perpetuate what amounts to a $1 trillion embezzlement process), cutting SS is irrelevant to the general fund deficit.
Medicare could be cut, it's true, but it is currently not what's driving the deficit. Medicare's essentially self-funding through its payroll taxes (though that will eventually change). So that's irrelevant.
This whole conversation really is extremely frustrating; it bears no resemblance to the current fiscal reality. We have a large general fund deficit, which is driven by military spending and interest on the current debt. There is no way to finance it other than increasing Federal taxes. Any other suggestion is unserious.
"In the very long run, we are all dead." -- John Maynard Keynes, 1st Baron Keynes
SS is a welfare program
(#996)Mr. Kimmitt,
It is not a traditional insurance system at all. Benefits can and have been modified through legislation without reference to fund income. There are no actuaries evaluating risks and setting rates. There is also a disconnect between what has been collected and these benefits.
There is no private insurance system where a low-income client is guaranteed a higher return for his payment than economically justified, or where a high income client is guaranteed a bad return.
Consider my case - my wife and I have had high incomes for many years, each of us individually qualifies for the highest payout that SS offers, but when we get to collect our benefits we will get only a little over half of that because of the household limit. We will not (unless something unfortuante happens in the next decade or so, God forbid) actually require SS in order to retire comfortably. We could have our SS benefits means-tested away in just the way that they are already limited.
Besides which the unique position the SS fund occupies as an entity entirely within the "black box" of the government makes its artificiality clear. It cannot be handled independently in the fiscal cycle.
SS is in reaity a government benefit paid for out of taxation, just like any other. Its facade as an investment or insurance just complicates clear thinking.
On reforming Social Security - the government has made promises concerning payout to people for the last 60 years, and I think these promises should be honored in proportion to what has already been collected from individuals. But going forward different promises can be made, such as means-testing benefits more stringently than is already the case.
That's one interpretation
(#900)I look at that data and say what we want is a federal tax burden of between 17.5-19% (higher under late-Bubba). Seems to me we should be building our budget around that and not the other way around. Me? means test/extend retirment ages on entitlements and we'll be home.
Thanks for the work.
I'm trying to make the best out of a bad situation. I don't need to hear crap from a bunch of hippie freaks living in denial! Screw you guys, I'm going home!
Play the game and post your cuts ....
(#851)http://www.budgetsim.org/nbs/howtoplay.shtml
Ask courageous questions. Do not be satisfied with superficial answers. Be open to wonder and at the same time subject all claims to knowledge, without exception, to intense skeptical scrutiny. Be aware of human fallibility. Cherish your species and yo
Long version .... so we all understand in what area's you with
(#852)show the pain....http://www.budgetsim.org/cgi-bin/NBS/report.budget06.pl
This was my first try....
Ask courageous questions. Do not be satisfied with superficial answers. Be open to wonder and at the same time subject all claims to knowledge, without exception, to intense skeptical scrutiny. Be aware of human fallibility. Cherish your species and yo
link not working....
(#854)Budget Totals
Old budget was $3747.36 billion
($2672.527 billion in spending, $1074.833 billion in tax expenditures and cuts).
New budget is $3205.95 billion
($2392 billion in spending, $813.95 billion in tax expenditures and cuts).
You have cut the deficit by $541.41 billion.
Your new deficit is $-140.4 billion.
Oops!
You've cut so much that the federal budget now contains a substantial surplus. Many economists warn that this budget may help induce or prolong a recession, and ordinary citizens demand a refund. You might want to cut taxes or raise spending.
--------------------------------------------------------------------------------
Spending
Military Spending
Iraq War and Afghanistan Operations
Veterans & Retired Military Pensions and Services
International Affairs
Science, Space and Technology
Natural Resources and Environment
Agriculture
Transportation
Community and Regional Development
Education
Training, Labor and Unemployment Programs
Non-Medicare Health Spending
Medicare
Civilian Retirement (Social Security excluded)
Aid to Low-Income Families
General Family Support
Commerce and Housing Loan Programs
Social Security
Administration of Justice
General Government Administration
Net Interest
Tax Expenditures and Tax Cuts
Corporate Tax Breaks
Personal Business and Investment Benefits
Pension and Retirement Tax Benefits
Health Insurance Tax Benefits
Housing Tax Benefits
--------------------------------------------------------------------------------
Spending ($2392 billion: cut $280.52 billion)
$223.05 billion .... Military Spending
Cut $223.05 bil. from base of $446.105 bil.(-50%)
$111.85 billion .... Iraq War and Afghanistan Operations (No Change)
$138.58 billion .... Veterans & Retired Military Pensions and Services
Increased $23.1 bil. from base of $115.482 bil.( 20%)
$25.27 billion ..... International Affairs
Cut $6.31 bil. from base of $31.590 bil.(-20%)
$23.97 billion ..... General Science, Space, and Technology (No Change)
$2.12 billion ...... Non-Defense Energy Spending (No Change)
$31.16 billion ..... Natural Resources and Environment (No Change)
$26.02 billion ..... Agriculture (No Change)
$70.67 billion ..... Transportation (No Change)
$19.1 billion ...... Community and Regional Development (No Change)
$64.07 billion ..... Education (No Change)
$47.81 billion ..... Training, Labor and Unemployment Programs (No Change)
$253.32 billion .... Non-Medicare Health Spending (No Change)
$276.6 billion ..... Medicare
Cut $69.14 bil. from base of $345.746 bil.(-20%)
$71.94 billion ..... Civilian Retirement (Social Security excluded) (No Change)
$206.77 billion .... Aid to Low-Income Families (No Change)
$20.5 billion ...... General Family Support
Cut $5.11 bil. from base of $25.619 bil.(-20%)
$6.82 billion ...... Commerce and Housing Loan Programs (No Change)
$544.82 billion .... Social Security (No Change)
$43.1 billion ...... Administration of Justice (No Change)
$17.75 billion ..... General Government Administration (No Change)
$211.08 billion .... Net Interest (No Change)
$-44.37 billion .... Undistributed Offsetting Receipts and Allowance (No Change)
--------------------------------------------------------------------------------
Tax Expenditures ($813.95 billion: cut $260.87 billion)
$0 billion ......... 2001 and 2003 Tax Cuts
Cut $294.59 bil. from base of $294.6 bil.(-100%)
$78.47 billion ..... Corporate Tax Breaks
Increased $18.11 bil. from base of $60.360 bil.( 30%)
$112.72 billion .... Personal Business and Investment Benefits
Increased $26.01 bil. from base of $86.710 bil.( 30%)
$219.01 billion .... Pension and Retirement Tax Benefits
Increased $50.54 bil. from base of $168.470 bil.( 30%)
$112.79 billion .... Health Insurance Tax Benefits
Cut $28.19 bil. from base of $140.990 bil.(-20%)
$130.97 billion .... Housing Tax Benefits
Cut $32.73 bil. from base of $163.710 bil.(-20%)
$159.99 billion .... Other Individual Deductions and Expenditures (No Change)
Ask courageous questions. Do not be satisfied with superficial answers. Be open to wonder and at the same time subject all claims to knowledge, without exception, to intense skeptical scrutiny. Be aware of human fallibility. Cherish your species and yo
Unfortunately DA that site, while a nice try
(#910)just doesn't provide the choices I want. But it is a good starting point. I cut the deficit in half while jacking up defense spending.
I'm trying to make the best out of a bad situation. I don't need to hear crap from a bunch of hippie freaks living in denial! Screw you guys, I'm going home!
Yeah, baby!
(#1870)Budget Totals
Old budget was $3748.1268 billion
($2673 billion in spending, $1075.1268 billion in tax expenditures and cuts).
New budget is $2904.78 billion
($1851.99 billion in spending, $1052.79 billion in tax expenditures and cuts).
You have cut the deficit by $843.35 billion.
Your new deficit is $-442.34 billion.
"Unfortunately the universe doesn't agree with me. We'll see which one of us is still standing when this is over." -- Eliezer Yudkowsky
but what did you cut?
(#2018)nt
Enough to start a freakin'....
(#2463)....civil war. :^) I'll post it later.
"Unfortunately the universe doesn't agree with me. We'll see which one of us is still standing when this is over." -- Eliezer Yudkowsky
It's not a "theory" of government
(#906)It's actual government. There is still a little fat here and there, but we have spent the last quarter-century wacking and hacking at it and the fat that is left is not so much and not so apparent. Mostly we have government that does the things we think government should do.
As the world gets more and more populated, more and more complex, and as the possibilities for individual action and interaction become ever more numerous, the job of optimally regulating and harmonizing all that activity just becomes a bigger job. At the same time, however, technology gives us the ability to create what at least up to this point has been ever-increasing amounts of wealth, allowing us both to pay for the increased government and still live increasingly prosperous lifestyles.
If the amount of wealth available continues to increased, one day the next step for bigger government will come. What I mean by that is that one day we are actually going to have the capability to eliminate poverty and hunger, with the side product of eliminating a lot of disease and probably the lion's share of the crime. At another indeterminate future point in time we're going to be confronted with the reality that machines can do most of the jobs we busy ourselves with now better than we can, and a whole new raft of social management problems will present themselves, best to be solved if at all through organized social action, i.e., government.
So ...
(#1094)... does that mean that society is inevitably going to become increasingly more and more dominated by the activities of the government, until the point where all economic differences are erased?
Sounds an awful lot like Marxism to me.
What's more, if we act on this theory, and choose to believe that there's an natural (historically inevitable) trend towards greater government dominance of economic and social life, then we're going to be encouraging the further growth of government expenditures, creating a self-fulfilling prophecy.
But is the true destination really this utopia in which poverty and hunger are eliminated and all remaining social problems are dealt with through government action, or economic collapse, which is what happened the last time someone tried out a strikingly similar idea?
As a lefty I have little trouble with either view in the short
(#828)I think that if your are subsidising labor rather than investment you will have the same effect that welfare to work was or is suppose to accomplish.. Elimination of the debt is one I am for as long as it takes into effect long term commitments and enhances savings rates... It should have an incentive to save or be taxed....
As to if you or MA read the piece I am not a WJ person and the firewall keeps me from the original source....
Still it does sound interesting and outside the typical left right divide... Sorta of a radical middle kind of guy..... (Still much speculation on my part I might be out in left field or tin foil hat land other wise known as Right Field.... :)
Ask courageous questions. Do not be satisfied with superficial answers. Be open to wonder and at the same time subject all claims to knowledge, without exception, to intense skeptical scrutiny. Be aware of human fallibility. Cherish your species and yo
Yup, that's why I posted it. Phelps is sure
(#897)tought to categorize. He really makes one think.
I'm trying to make the best out of a bad situation. I don't need to hear crap from a bunch of hippie freaks living in denial! Screw you guys, I'm going home!
Capital gains tax
(#860)Unless tax cuts can be offset through spending cuts I don't see what their benefit is. If those spending cuts don't occur the gov't has to finance the tax cuts by borrowing the money. How is that a good thing? I can't read the article b/c it is behind a firewall but from the excerpts you provide and the other comments in this thread it seems like that is Phelp's basic point; the gov't must pay for its spending with tax revenue instead of credit.
"And now you run in search of the Jedi. They are all dead, save one. And one broken Jedi cannot stop the darkness that is to come." -Darth Sion
Try it this way
(#896)Tax cuts free up capital for investment or consumption, both of which have multiplier effects on the economy. That in turn creates more economic activity which will create tax revenue.
The economy isn't measure by the Federal Deficit.
I'm trying to make the best out of a bad situation. I don't need to hear crap from a bunch of hippie freaks living in denial! Screw you guys, I'm going home!
But
(#899)tax cuts don't occur in a vacuum. If the only effect of a tax cut was to increase economic growth who would be against them?
The problem with tax cuts is that they reduce revenue and we need the revenue to pay for the spending we incur. Clearly Americans as a whole don't want lower spending so tax cuts make no fiscal sense. And since the tax cuts are financed by borrowing it means, as Friedman has said (IIRC), we have no tax cuts only tax deferrals.
This place is my vacation.
Look at Kimmitts data
(#901)The truly tight cluster is the revenue side. People want to be taxed at the 17.5-19% level. We should start there.
I'm trying to make the best out of a bad situation. I don't need to hear crap from a bunch of hippie freaks living in denial! Screw you guys, I'm going home!
People want to be taxed
(#915)at zero, if possible. Problem is they want spending of close to 20% of GDP and much higher in the future.
This place is my vacation.
Sure.
(#960)But in the real world, we aren't going to default on our Social Security obligations (nor should we), so this conversation is the functional equivalent of categorizing subspecies of unicorn.
"In the very long run, we are all dead." -- John Maynard Keynes, 1st Baron Keynes
I love this line of argument
(#1029)Lets take my pets off the table, then we'll negotiate. Ha!
I'm trying to make the best out of a bad situation. I don't need to hear crap from a bunch of hippie freaks living in denial! Screw you guys, I'm going home!
Heh, my pet's nickname...
(#1064)...is Leilani, not "the third rail." SS isn't my pet, it's inviolate. Even Bush at the height of his power couldn't dismantle it.
"In the very long run, we are all dead." -- John Maynard Keynes, 1st Baron Keynes
Of course its violate, W just couldn't get it done
(#1082)we're gonna have to deal with it at some point.
I'm trying to make the best out of a bad situation. I don't need to hear crap from a bunch of hippie freaks living in denial! Screw you guys, I'm going home!
I think this is an important disconnect.
(#1203)We aren't going to have to "deal with" Social Security. We are going to have to deal with the general fund deficit which payroll taxes have been subsidizing for the past 20 years. Social Security needs to push the retirement age about a year up, at which point it'll be fine, if the rest of the government lives up to its promises of repaying its Federal bonds.
Further, the Baby Boomers are retiring. If you thought SS was a third rail before, wait until the 20% of the population which is most likely to vote all collects it. SS will be untouchable, and Medicare will move from entitlement to sacrament.
"In the very long run, we are all dead." -- John Maynard Keynes, 1st Baron Keynes
Sigh. Big "/if/." Plus, for the last thoughts, you're
(#1316)sadly correct...
The K Codes explained HERE.
No need for default
(#1040)Mr. Kimmitt,
Just change the contract going forward, on the basis of monies still to be collected.
Its been done before, with less attention to contractual nicety, when payments were inflation-indexed, and rules changed for payouts and eligibility.
What Gabriel said
(#914)Thanks for the reponse. Gabriel pretty much summed up my thoughts on tax cuts w/o corresponding spending cuts. If there are no spending cuts then there will be no economic growth from the tax cut if it isn't greater than the debt service on the money needed to create for the tax cuts in the first place. Otherwise there is a net reduction to the GDP. A healthy growing economy and wicked low interest rates hide a lot of fiscal sins, but at some point we will have a recession and we will actually need to borrow to stimulate the economy. When that recession does come it would be nice if we didn't have a ton of debt on the books already.
"And now you run in search of the Jedi. They are all dead, save one. And one broken Jedi cannot stop the darkness that is to come." -Darth Sion
Blue, that's just wrong
(#916)Economic growth and the growth of interest payments just can't be compared like that with regard to GDP. The debt level has NOTHING to do with GDP.
I'm trying to make the best out of a bad situation. I don't need to hear crap from a bunch of hippie freaks living in denial! Screw you guys, I'm going home!
GDP
(#925)Maybe I am using the term incorrectly but my point is that tax cuts have to pay for themselves or there is no benefit to them. Every dollar borrowed costs more than a dollar to pay back. If the economic growth from tax cuts do not cover the cost of paying back the debt then there is no benefit to them.
"And now you run in search of the Jedi. They are all dead, save one. And one broken Jedi cannot stop the darkness that is to come." -Darth Sion
That I agree with, it is clear to me they do
(#928)look how much tax revenue is up in the last two years for starters.
I'm trying to make the best out of a bad situation. I don't need to hear crap from a bunch of hippie freaks living in denial! Screw you guys, I'm going home!
Er
(#932)Are you saying that tax cuts pay for themselves?
This place is my vacation.
Gotcha gets old Gabriel
(#1068)What I am saying is that the economic growth well devised tax cuts can catalyze can create a larger economy and can add to our national asset growth more than the added interest which leads to capitalized interest leading to additional debt will add to our liabilities therefore leading to enhanced national net worth.
Of course, as taxes approach zero, at some point that equation stops working.
I'm trying to make the best out of a bad situation. I don't need to hear crap from a bunch of hippie freaks living in denial! Screw you guys, I'm going home!
it wasn't meant as gotcha
(#1071)It read as if you think that tax cuts paid for themselves, that's why I asked.
This place is my vacation.
I don't think they "pay for themselves" within a year say
(#1079)but the economic growth they can catalyze and the resulting increase in tax revenue over time seems likely to me.
I'm trying to make the best out of a bad situation. I don't need to hear crap from a bunch of hippie freaks living in denial! Screw you guys, I'm going home!
And what I am saying...
(#1073)What I am saying is that the economic growth well devised tax cuts
...is that there is no consensus in the Economics profession as to what "well devised tax cuts" are, in this context.
"In the very long run, we are all dead." -- John Maynard Keynes, 1st Baron Keynes
Does anyone serious dispute that capital gains cuts
(#1078)can be a particularly powerful tool to spur investment and hence economic groeth?
I'm trying to make the best out of a bad situation. I don't need to hear crap from a bunch of hippie freaks living in denial! Screw you guys, I'm going home!
"Can be?" Sure --- "Are?" Depends
(#1084)nt
The proper balance between defense and welfare are the tectonic plates that lie beneath our political discourse.
On what? The more expensive something is, the less
(#1086)people will do it or purchase of it, right?
Higher capital gains taxes makes it more expensive to sell successful investments since the rate of return on the new investment must be high enough to not only be better than the future return of the existing investment, but it must make up for the higher capital gains tax which will be extracted when the current investment is sold to provide the capital for the new investment. Lower cap gains tax, less friction preventing the sale of the old for investment in the new.
I'm trying to make the best out of a bad situation. I don't need to hear crap from a bunch of hippie freaks living in denial! Screw you guys, I'm going home!
Short answer:
(#1196)Yes, it is generally believed that there is some optimal level of capital gains taxes -- that is, that there is some point at which cutting capital gains taxes no longer significantly affects incentives to save.
People's saving behavior has very little to do with the interest rate and a lot more to do with their culture and disposable income. Firms do invest more when the interest rate is lower, but someone has to consume all this stuff which firms are tooling up to make -- Say's Law has been shown to be thoroughly untrue. At some point, as we discovered during the Depression, if we keep stimulating the supply side, we're just pushing on a string.
In the context of a Federal Government running a deficit, keep in mind that no matter what the marginal incentive to save is, it is definitely less than 100%, so borrowing money to give to people isn't a net positive in the market for loanable funds.
"In the very long run, we are all dead." -- John Maynard Keynes, 1st Baron Keynes
That is a tricky number to bin down
(#938)Deficit spending can stimulate the economy just as much as a tax cut can, especially if you are borrowing a lot of the money from a foreign nation such as China.
"And now you run in search of the Jedi. They are all dead, save one. And one broken Jedi cannot stop the darkness that is to come." -Darth Sion
Okay, we're mixing metaphors here
(#966)Tax cuts free up money, not capital. That money can be used for investment or consumption.
The multiplier effects of tax cuts are a matter for debate; many people believe deeply in them. Many people believe they are bunk. The current economic consensus which does exist, however, is that balanced budgets are more important than marginal tax rates, as the former creates a stable financial and economic system, while the latter has controversial effects. No economist advocates running a significant structural deficit, and even the most libertarian of economists advocate paying for whatever government you currently have and then reducing both taxes and spending.
"In the very long run, we are all dead." -- John Maynard Keynes, 1st Baron Keynes
Sounds like a call...
(#863)...for that Nixonian concept of the negative income tax.
As for deficits, it would be refreshing if either party could start an adult discussion: we can have a bare-bones, minimal government with low taxes and few, if any services, or more services with taxes to pay for them.
Pretending services are "free" because tax dollars pay for them is silly.
"I've been on food stamps and welfare. Anybody help me out? No!" Craig T. Nelson (6/2/2009)
It sounded that way to me too
(#898)I'm hearing more and more whispers of that in economics discussions. No idea what that means. But your choices are too stark. We could just as easily means test/extend retirment ages on entitlements, leave everything else alone [shudder] and we'd be fine.
I'm trying to make the best out of a bad situation. I don't need to hear crap from a bunch of hippie freaks living in denial! Screw you guys, I'm going home!
means testing benefits
(#902)I'm all for that and it would help with SS and medicare... but if you're suggesting doing that and then funding general government off of the regressive payroll tax, that strikes me as a little reverse robin hood. Means test, cut the payroll tax way down, heck maybe a negative income tax too and then deal with the discretionary budget on its own terms as a combination of mostly spending cuts and some modest increases on the top income bracket? I think we had this whole discussion 6 months or a year ago already (this is booth).
No, I'm making the system more progressive
(#908)Poor guy A pays payroll tax, gets SS. Rich guy B pays payroll tax, gets no bennies, his money is used to support Poor guy A.
I'm trying to make the best out of a bad situation. I don't need to hear crap from a bunch of hippie freaks living in denial! Screw you guys, I'm going home!
I agree
(#931)But that stays within SS and doesn't affect the discretionary budget. I think we should keep a clear firewall between SS and discretionary as much as possible. Discretionary borrowing being funded by SS bonds, as things work now, is ok because they are still acting as separate entities (picking the best interest rate to borrow at, safest borrower to lend to respectively) although you can sound-bite it otherwise. But yeah I definitely like means testing for its progressiveness. The deficit that's currently driving up interest rates though can't (or shouldn't IMO might be a better phrase) be fixed via means testing... and to clarify my proposal, I was actually suggesting we implement your means testing and then cut the payroll tax across the board with the resulting SS surplus. It's more progressive and it's a tax cut, why can't we get both sides behind this? Maybe it makes too much sense.
Theres no difference
(#990)Mr. Dionysius,
I don't see why there is any economic justification for an SS "firewall". These distinctions are purely artificial within the government "black box", and are meaningless economically.
It would not be meaningless of course if the government were investing SS funds in the private sector (at that point these would be leaving the "black box"), but the government can't do that, and I don't think it is a very good idea for many other reasons.
To keep up the value of the currency, roughly speaking total money output by the government must be balanced by input.
The deficit that has an economic effect is the total fiscal deficit, including SS payments. SS payments and taxes are part of the total cycle that has to balance.
It's an accounting
(#991)not an economic justification.
This place is my vacation.
Yes its accounting
(#997)Mr. Gabriel,
The nice thing about accounting is that it is a tool, it is there to serve a purpose, and it can be modified to suit requirements.
exactly
(#999)Since ample majorities support keeping SS the accounting serves the purpose of keeping that money ringfenced so that the government is forced to reduce the deficit in other parts of the budget.
This place is my vacation.
Accounting doesn't trump economics
(#1008)Mr. Gabriel,
Accounting is to economics what an airplane is to Newtonian physics. When an airplane gets into a dispute with physics there is no question about the winner.
That money can't be "ringfenced", no matter what accounting rules are adopted. The balance of the net current SS income-payout will have to be made somewhere. Thats economics, not accounting.
??
(#1015)of course the money can be ringfenced. In fact it already is.
If what you are trying to say is that ringfencing the money does not change the economic impact of it, I agree. But that's not my point. My point is that by ringfencing you limit government's ability to tamper with it. It means that any improvements to the budgwet will have to come from the non SS parts of it.
This place is my vacation.
The economic impact is the important thing
(#1018)Mr. Gabriel,
The "ringfencing" is artificial and pointless because it does not address the economic reality.
If we collect an SS surplus, it means that the government can run paper deficits in the rest of the budget up to the amount of that surplus (and a little over) without incurring a negative economic consequence. So is that "deficit" real ? No. Its an illusion created by that "ringfence".
Luis
(#1031)you are talking about something else. I agree the overall economic impact is the important thing.
This place is my vacation.
Exactly
(#1037)Mr. Gabriel,
And thats why "ringfencing" SS is pointless.
Sigh
(#1066)No, it's not pointless. I've already told you what it's used for.
This place is my vacation.
The accounting still serves a valuable purpose though
(#1039)Sure, it's all money moving around in the end, after all the only thing separating my bank account from yours is accounting.
But if it weren't for this accounting, then things like raising the payroll tax in the 80s and now proposing balancing the budget by reducing social security benefits would be much harder to reveal as the fiscal shell game that they are. Everyone who makes under 90k gets soaked under that plan, and as long as SS is raised on a separate tax I think it should be accounted for in a separate system.
If you're talking about doing away with the payroll tax and funding SS out of the progressive income tax I could be convinced to merge them, but still I think keeping "income redistribution cash flow" separate from "tax money in exchange for gov't services cash flow" in the books has benefits.
PS arguing with you
(#1047)Has me considering changing my nick back to my real last name. Guess I'd better get used to it. I got the biggest kick out of "Mr. No15e"
My point is that they are merged
(#1053)Mr. Dionysius,
Whether you want it to be or not, and no matter what the law says. Economics trumps all our petty rules.
Yes indeed the excessive complication of the distinction makes understanding the whole fiscal system harder. It would simplify a lot if the general taxation system were adjusted to collect SS funds and if SS payments were budgeted like any other.
uh...
(#1042)airplanes don't violate any laws of physics at all.
Just sayin'...
"I've been on food stamps and welfare. Anybody help me out? No!" Craig T. Nelson (6/2/2009)
A pilot may sometimes attempt to... n/t
(#1054)..
But that's a spending choice:
(#951)By changing the criteria for Social Security, you spend less (or more) on it.
To address those two specific proposals you made:
1) I like extending the retirement age. I would think some sort of allowance would have to be made for disability retirement, or for those in physically demanding fields. A firefighter or construction worker may not be able to work as long as, say, an investment banker or a physician assistant. How do we account for that? Private disability insurance would work for accident or illness, but what about that construction worker?
2) I don't like means testing: it sounds good on paper, and the overall idea is sound. Why should a rich granny get exactly the same benefits as a poor one if she doesn't need them? The problem though, is that then Social Security (or Medicare) becomes a "poor person's program" and a much easier target politically. Premiums on a sliding scale (aka a progressive payroll tax) make more sense to me.
"I've been on food stamps and welfare. Anybody help me out? No!" Craig T. Nelson (6/2/2009)
I am coming to prefer #1 as well for incentive reasons
(#1030)and while I think you overstate the issue (there are only a handful of investment bankers in their 50's who still are investment bankers, the job will literally kill you) of construction workers etc. (they can take other jobs, as can bankers as they age) I could live with a true disability approach of some kind.
I'm trying to make the best out of a bad situation. I don't need to hear crap from a bunch of hippie freaks living in denial! Screw you guys, I'm going home!
Guess I know even less than I thought...
(#1038)about investment banking.
I'm not as sure as you seem to be about career changes. I say that as someone who's changed careers at least three times. I was a very lucky PA student, in that I had a lot of support from my then-fiancee (and now wife) as well as my family. I'm not sure everyone can retrain into other careers. It would certainly take some sort of support for re-training of displaced workers.
"I've been on food stamps and welfare. Anybody help me out? No!" Craig T. Nelson (6/2/2009)
I like Phelps idea of subsidizing
(#1058)through employers new workers.
Just so you know an average Investment Banking week for a senior guy when he is in the office is 8-7 or so. Most will also put in a half day on Saturday. What is the killer is three days a week on the road. That often means up at 4:30 to catch a 6-7 am flight to say Dallas or Denver, have four to five meetings and catch a 4-5 pm flight back to NYC arriving at say 9-10 pm, home by 11 or so.
Now add those hours up and see why folks don't last.
I'm trying to make the best out of a bad situation. I don't need to hear crap from a bunch of hippie freaks living in denial! Screw you guys, I'm going home!
Oh yeah, for junior and mid-level guys
(#1059)figure 8 or 9 am to an average of 10pm plus one full day on a weekend. What gets you is the once every two weeks or so all nighter so you end up spending 30-40 consecutive hours in the office. My personal record was just over 60, I was useless for the level of work we were doing by hour 60. You never get those sleep hours back.
I'm trying to make the best out of a bad situation. I don't need to hear crap from a bunch of hippie freaks living in denial! Screw you guys, I'm going home!
By not means testing, you give the rich Granny and
(#1128)the poor one essentially the same amount. The rich Granny doesn't need it, it is not enough for the poor one to live on -- you do both Grannies a disservice.
Not to mention affordability -- can we afford to provide funds to everyone? I suspect not.
The answer to your very real problem of political targeting is to word the law so that Congress and the government are removed form the issue and cannot tinker with it.
The problem with your sliding scale payroll tax is that you're still requiring today's workers to take care of yesterdays and that is patently unfair -- plus an invitation to political tinkering.
The K Codes explained HERE.
Don't get me wrong, Ken:
(#1170)I'm not dead set against means testing. It may be the only way to swallow the elephant that is the retiring baby boom generation.
I'd like to see Social Security as a safety net: a way for the elderly to keep a roof over their heads and food on the table. (The social insurance aspect is another matter. We could have a great discussion on disability, survivor benefits, etc.) I don't mind seeing the poor granny get more while the rich one gets less. But pretty much everybody's paid into the system with the understanding that they're going to get something out of it.
"I've been on food stamps and welfare. Anybody help me out? No!" Craig T. Nelson (6/2/2009)
The pay in can be easily covered; there are numerous
(#1173)alternatives. The option is for the nation to go broke paying for "entitlements" (I use quotes because I strongly disagree those are entitlements; they're a vote buying dependency building program IMO - bit that's a discussion for another day).
A social safety net is needed, I don't think hardly anyone disagrees with that. It needs to be partly (at least) governmentally operated to keep everyone reasonably honest, few differ too much with that. However, what we're doing doesn't keep a roof over the poor Grannies head while it gives the rich Grannie money to buy her Grandkids things thay don't need at exorbitant prices. That's not fair at all...
All that's lacking is political will...
The K Codes explained HERE.