Budget Deficit

[graller]

I don't mean to sound like Cleve here but holy shit does Bush know how to spend the money....

NY Times on the Bush 455 billion deficit (http://www.nytimes.com/2003/07/15/politics/15CND-BUDGET.html?hp)

This is just a huge amount and mind boggling to think that we had surpluses 2 years ago.

[XPav]

What's better, tax and spend Democrats or no-tax and spend Republicans?

[Tyjenks]

What's better, tax and spend Democrats or no-tax and spend Republicans?

Neither.

[Jason McCullough]

"Not quite as big as Reagan's deficits" is funny.

Tax and spend my ass (http://www.j-bradford-delong.net/Politics/wherethedeficitcamefrom.html).

[XPav]

What's better, tax and spend Democrats or no-tax and spend Republicans?

Neither.
Agreed!

That's why I'm voting for Howard Dean, a fiscally conservative Democrat.

http://www.e-thepeople.org/a-national/article/13555/view

[Jim F.]

Greenspan chimes in. Well, Frank chimes in on what Greenspan is planning to say tonight:

http://money.cnn.com/2003/07/15/news/economy/frank_greenspan/index.htm?cnn=yes

Bush responded by proposing more tax cuts and a 20% increase in government spending.

[awdougherty]

I'd go with the tax and spend democrat any day of the week because a lot of that money is probably being spent on bettering the country. You know, all that bleeding heart liberal stuff.

I wonder how much of that deficit would be erased if Bush hadn't started pumping out 300$ checks to everyone. This administration makes me more and more angry the longer they're in power. Now if they had actually been elected I would be able to grin and bear it a little better (since they people had spoken), but...

[Mark Asher]

Greenspan chimes in. Well, Frank chimes in on what Greenspan is planning to say tonight:

http://money.cnn.com/2003/07/15/news/economy/frank_greenspan/index.htm?cnn=yes

Bush responded by proposing more tax cuts and a 20% increase in government spending.

It's so irresponsible. It's amazing that Republicans, who are supposed to be the fiscal conservatives, would support something like this.

[Jason McCullough]

Yeah, the complete GOP flip on the concept of balanced budgets is wierd.

[Ben Sones]

When did the GOP support a balanced budget? I mean, I know they say that they do, but christ, remember the Reagan years?

[antlers]

One good thing, though, is that the inflationary pressure of this spending spree may have helped to counteract the deflation we might otherwise be experiencing.

Of course, such deficits represent a kind of bubble in themselves. The only way we can prevent it from popping disastrously is a return to the robust economic growth we had under Clinton.

[Tyjenks]

I'd go with the tax and spend democrat any day of the week because a lot of that money is probably being spent on bettering the country. You know, all that bleeding heart liberal stuff.

"A lot is probably going for betterment." I used to think that, too. Today, I do not believe a word of it.

How hard would it be to make one more department to oversee all of these bills being passed that lead to increased spending? Lord knows, the government loves to create new committees and depts. as money sinks, but why there is no one overseeing all of the governments existing spending boggles my mind.

I understand why politicians do not want it. Same reason they do not want term limits. It would detract from there money and power (which are synonymous to politicians, IMO). There are programs and studies and projects being started daily and ongoing where billions of dollars are funneled and no one is watching over it.

Our Republican Gov. here in Alabama has just proposed a 1.2 Billion dollar tax increase. Much of it going to a "fund" that will be managed by people in the capital to be dispersed as they see fit for the "betterment" of the state and our shitty education system. Just a few years ago our city school system misplaced a couple million dollars and the county system could not find around 7 million. I never heard what came of that. People are all bent out of shape when they hear about misspent funds, but seem to quickly forget. I guess we should just raise taxes to make up for the prior mismanagement. The new money will be spent wisely. We promise. :twisted:

When I am in a tight spot, I look where my existing spending can be cut not go out looking for money from people on the street. I will never vote for a tax increase again until someone decides to go and examine where our money is going now and why it is going there.

[Ben Sones]

"A lot is probably going for betterment." I used to think that, too. Today, I do not believe a word of it.

Me neither. Most of it is simply wasted (the government is criminally incompetant at managing money) or spent on pork.

[Jason McCullough]

Don't make me pull out that budget document showing that 88% of spending is on obvious non-waste stuff like Social Security.

[Tyjenks]

"A lot is probably going for betterment." I used to think that, too. Today, I do not believe a word of it.

Me neither. Most of it is simply wasted (the government is criminally incompetant at managing money) or spent on pork.

Seriously, where is the outcry? It seems folks are happy to just put in a little bit more to help out since it is going to those that need it. Has that not been the reason for tax increases since this country was founded. At some point, we need to scream, "Hold the fuck up! I just gave you extra allowance last month. Where the hell is it?"

[Chris Nahr]

Well, aren't there any other parties that you could vote for? Because lack of voters tends to be the only thing that really scares politicians...

[Andrew Mayer]

At some point, we need to scream, "Hold the fuck up! I just gave you extra allowance last month. Where the hell is it?"

What's needed is oversight. Something with teeth.

[Tyjenks]

Well, aren't there any other parties that you could vote for? Because lack of voters tends to be the only thing that really scares politicians...

Sadly, no. Our two-party system is firmly entrenched in DC and the lack of any term limits keeps it just as thouse two parties like it.

Oversight Committee. Force Congressmen to sign their names to agreements which go along with the bills they approve. If the money is misspent, or misplace, or misappropriated, they have to answer for it.

Sorry, I am going over my usual quota of ten posts a day. And just in this thread, but this is an excruciating sore spot with me. I did not vote for the Governor we are lucky enough to have or the incumbent Democrat who did so little that he lost the governership, but as a "less-government more love" Republican, I expected him to keep his hands out of my goddam pocket for fuck's sake!!!

OK, I need a pill.

[XPav]

Well, aren't there any other parties that you could vote for? Because lack of voters tends to be the only thing that really scares politicians...

Sadly, no. Our two-party system is firmly entrenched in DC and the lack of any term limits keeps it just as thouse two parties like it.

If you want to see what term limits does, take a look at the California legislature.

[Tyjenks]

Well, aren't there any other parties that you could vote for? Because lack of voters tends to be the only thing that really scares politicians...

Sadly, no. Our two-party system is firmly entrenched in DC and the lack of any term limits keeps it just as thouse two parties like it.

If you want to see what term limits does, take a look at the California legislature.

Term limits are not a cure all and will never come to pass anyway. Strom Thurmond in office for 120 years is not a good thing, though. I think it works OK with the presidency, but must claim ignorance where the CA legisalture is concerned. I can barely keep up with the crap that goes on with the good 'ol boys we have here in Alabamy

[bee cubed]

i don't think that problem is how much the government spends. realisticly, all money belongs to the government anyway. all money ultimately comes from government spending and loans and eventually goes back to government as successive transactions are taxed. i also hate to be cleve-ish, but the only reason money is worth anything is because the government says that it is.

the problem is where the money comes from. middle and lower class people are forced to pay more in taxes than they can reasonable afford, because the corporations and the rich are the ones with power and influence, so they keep pressuring to have their tax burden reduced.

where the government spends the money is less of a problem, imo. obviously, some programs are more effecient at helping the common good, but any money the government spends is money going into the economy.

[Ben Sones]

i don't think that problem is how much the government spends. realisticly, all money belongs to the government anyway. all money ultimately comes from government spending and loans and eventually goes back to government as successive transactions are taxed.

Partly yes, no, and no. The government creates money in a superficial sense (in that they mint the actual bills and coins that we use as currency). The government does not create wealth, not is it the originator of such.

[Jason McCullough]

Can you name a program that a) is more than .5% of the budget and b) 51% of the public wants to zero out?

[Ben Sones]

Since I don't speak for 51% of the population, or know what 51% of the population wants, no. I can tell you which programs I think are a waste of money, though. You already mentioned the biggest one--Social Security. It's a wasteful and unnecessary program that is spiralling towards bankruptcy, whether 51% of the population likes it or not.

[graller]

I don't want to get Jason started on fiscal policies, the middle class and Capitalism but man am I ever a fan of small government and fiscal responsibility. I know those are buzzwords and what they really mean is debateable. But shit like setting up a Dept of Homeland Security replicating functionality we already have in government is just one example of wastage. 5 billion a month to be Iraqi skeet pidgeons is another. At least Clinton seemed willing to be responsible when the money was flying in....when things get tough is when you tighten the belt not let it all hang out.

[XPav]

Is Social Security on the brink of bankruptcy?

Or is it just that the Republicans want to gut it so much that they keep repeating that?

http://www.janegalt.net/blog/archives/004214.html

[Tyjenks]

Bill O'Reilly who I realize is universally hated by both sides and the mere mention of his name seems to draw groans, talked about some bills that were passed just last week. Studies about whether there were and how many gay Native Americans there are, oriental massage parlor workers who contract AIDS in San Francisco, do men lose their sex drive as they get older and if so why...and on and on. No, none were over one million dollar studies, but they are all worthless, pointless examinations that will not improve the quality of life in our country. Why it is the government's place to do these studies in the first place is beyond me.

There are hundreds of such examples that are trade offs between politicians for support for other things. Quid pro quo support for each other's state projects. I also do not believe for a second that the 88% of "non-waste" budget items do not have fat and waste embedded in them.

[Jason McCullough]

My point was that literally every single program of reasonable size has a 51% constituency behind it. What do you expect a democracy to do? Not operate by majority rule?

You can always find silly programs that would die if anyone ever heard of them, but they're pocket change. The *entire* non-defense discretionary budget - the stuff politicians vote on every year, where you end up with pork, road construction, and silly studies about old guy sex drives - is about 12% of the federal budget. Needless to say, there's a lot of nonwasteful stuff in there.

As far as "waste embedded in popular programs" goes - it's government. What do you expect? And GAO doesn't really agree with you anyway; like where would the "waste" in stuff like Social Security be, anyway? The entire SS program apparently operates with half the overhead of private retirement programs.

[Ben Sones]

Is Social Security on the brink of bankruptcy?

Or is it just that the Republicans want to gut it so much that they keep repeating that?

http://www.janegalt.net/blog/archives/004214.html

Whee. So we might have enough to cover the Social Security deficit. Assuming that's true (I'd like to see the actual paper; that article is pretty vague on the specifics), that's hardly a ringing endorsement of the system.

Social Security, even when working as intended, makes a crappy retirement fund. If you took the same money you put into Social Security and invested in a mutual fund or a private pension, you'd do much better. A person retiring today after making a salary of $20,000 a year after making 40 years' worth of deposits into a private pension, would have a nest egg of nearly $400,000. Then, if this person turned this sum over to an insurance company, he or she could get a monthly annuity of $2,740 for life.

That same person's monthly Social Security benefit would have been $775. Plus, the money invested in Social Security is not an asset. The person can collect their monthly check, and that's about it. Seems like a waste of money to me.


My point was that literally every single program of reasonable size has a 51% constituency behind it. What do you expect a democracy to do? Not operate by majority rule?

Yeah, I expect exactly that, since our government is not a democracy. The founders disliked democracy for exactly this reason--sometimes the majority of the public doesn't know what the hell it's talking about.

[XPav]

Whee. So we might have enough to cover the Social Security deficit. Assuming that's true (I'd like to see the actual paper; that article is pretty vague on the specifics), that's hardly a ringing endorsement of the system.

The paper is linked in the article. ( http://emlab.berkeley.edu/users/burch/e231_sp03/Boskin.pdf ) Only 131 pages. Off you go!

Calpundit's also got something about it.

http://www.calpundit.com/archives/001355.html

Its not really an issue about it being bankrupt -- its about whether or not social security is, like you say, worth it at all.

[Jason McCullough]

I've seen issues discussed on that paper; one is that assumes the retirement benefits will be taxed at 26%, which is probably too high by a factor of 2.

And Social Security is not a retirement fund; it's a risk-pooling operation. No matter how badly your investments turn out, you'll have a reasonable retirement. That the first generation in got wildly silly "rates of return" (because they didn't really pay anything in) doesn't change that.


Yeah, I expect exactly that, since our government is not a democracy. The founders disliked democracy for exactly this reason--sometimes the majority of the public doesn't know what the hell it's talking about.

Yes, that must be why they required two-thirds supermajorities to pass any sort of spending program! Wait.....


A person retiring today after making a salary of $20,000 a year after making 40 years' worth of deposits into a private pension, would have a nest egg of nearly $400,000. Then, if this person turned this sum over to an insurance company, he or she could get a monthly annuity of $2,740 for life.

That same person's monthly Social Security benefit would have been $775

This double-counts contributions. Unless you think we can pay off the last generation's retirement for free.

Edit: Oh yeah, and 40% of Social Security payouts are to the disabled and what not. Where are their benefits going to come from?

[Mark Asher]

Social Security, even when working as intended, makes a crappy retirement fund. If you took the same money you put into Social Security and invested in a mutual fund or a private pension, you'd do much better. A person retiring today after making a salary of $20,000 a year after making 40 years' worth of deposits into a private pension, would have a nest egg of nearly $400,000. Then, if this person turned this sum over to an insurance company, he or she could get a monthly annuity of $2,740 for life.

Without the forced retirement savings that Social Security represents, you'd get a lot of people who would be unable to work due to old age and yet would have no income. You can say that's their problem, but I don't think that's a realistic view. It's a problem that would affect the society we live in.

[antlers]

Bill O'Reilly who I realize is universally hated by both sides and the mere mention of his name seems to draw groans, talked about some bills that were passed just last week. Studies about whether there were and how many gay Native Americans there are, oriental massage parlor workers who contract AIDS in San Francisco, do men lose their sex drive as they get older and if so why...and on and on. No, none were over one million dollar studies, but they are all worthless, pointless examinations that will not improve the quality of life in our country. Why it is the government's place to do these studies in the first place is beyond me.

There are hundreds of such examples that are trade offs between politicians for support for other things. Quid pro quo support for each other's state projects. I also do not believe for a second that the 88% of "non-waste" budget items do not have fat and waste embedded in them.

In every human endeavor there is going to be some waste. At a certain point it becomes more expensive to try and prevent than you would save by eliminating it. Asking the government not to lose track of a million dollars over the course of the year is somewhat akin to asking the average family not to lose track of a nickel. You've got to give the kids money for the ice-cream truck now and then.

Which isn't to say that there isn't a lot of pork that in the best of all possible worlds would be eliminated. However, it's stupid to cite anecdotal examples of tiny and seemingly wasteful programs and somehow extrapolate from that that there is any substantial savings, percentage-wise, to be found by eliminating such things from the federal budget. Citing such examples is perfect for O'Reilly, since it appeals to innumeracy and encourages the fuzzy-headed anti-government sentiment on which he trades. It's like all the people who think that a substantial portion of their tax dollar is going to foreign aid, when in fact our foreign aid is fairly tiny, and most of it goes to a few favored nations as bribes for making foreign policy decisions that we like.

[antlers]

Also, people underestimate the "return" that money put into the Social Security system gets. It grows as fast as the economy as a whole. And, guess what, any retirement system that covers everone can't grow any faster than that.

The only way a "privatized" Social Security could grow faster would be if the change in investment patterns actually allowed the economy to grow more swiftly. This is a more complex argument to make than "well, if you just put that money in a mutual fund it would grow faster" so usually the advocates of privatization just skip making it.

[MikeJ]

This is a more complex argument to make than "well, if you just put that money in a mutual fund it would grow faster" so usually the advocates of privatization just skip making it.

The other thing I like about mutual funds is how they always say: "The market has averaged 10% annual growth over the last X years.", where X = Current Year - 1931.

[Rywill]

Yes, that must be why they required two-thirds supermajorities to pass any sort of spending program! Wait.....

Two-thirds of our elected representatives, you mean? Almost nothing in the federal government is done through direct democracy, except the electing of our representatives themselves. In fact, I can't think of a single thing.

[Jason McCullough]

Rywill, that's a non-sequitir. I said you'd kind of expect in a democracy (representative, whatever) for programs with 51% to stick around. Sure, its through the indirect nature of voting for candidates, but what difference does that make? What's your objection here?

I mean, I think the Star Wars missile defense program is an asinine waste of money, but I'm kind of outvoted. Tough shit for me.

[Tyjenks]

So the defense is, "Yeah there's waste and misspent money, but its a big government, so what can ya' do?"

I should not have brought up my concerns of government spending. I must have had a bad day at work. They are doing the best as can be expected. Its such a cumbersome budget and the few mistakes they make can be overlooked because they are really trying to do what's right for the greater good. The ends justify the means.

[Jason McCullough]

Tyjenks, it's not that anyone defends waste, its that some level of waste is inherent in anything - check to see how much money your employer blatantly wastes, lately?

[Tyjenks]

Tyjenks, it's not that anyone defends waste, its that some level of waste is inherent in anything - check to see how much money your employer blatantly wastes, lately?

I understand that. Cost of doing business and all, but to claim that dishonest politicians, backroom deals, "I scratch your back" bill voting does not go on and that the waste is not out of control is hard for me to swallow.

[Rywill]

Rywill, that's a non-sequitir.
Not if you understand how American government is supposed to work or what Ben's point is. The founders wisely went for a republican system of representative democracy. That means that if 80% of people think Star Wars is a good idea, but 51% of professional legislators who are better informed realize that it's not a good idea, the legislators should vote it down. I realize they risk being voted out of office if they do something really unpopular, but their guaranteed terms (particularly for senators, who are the most powerful representatives) are supposed to allow them to ride out that sort of controversy. Same deal with the presidency, obviously--a president may have to take a stand on something that 51% of the populace isn't in favor of. We elect these people to be leaders, not proxies. The idea is that they have the time (because it's their job) to be better informed about the nuances of this stuff than we are.

[Rywill]

Nevermind, Bush has the whole thing figured out (http://money.cnn.com/2003/07/15/news/economy/bush_deficits.reut/index.htm?cnn=yes) anyway.

[Jason McCullough]

"I understand that. Cost of doing business and all, but to claim that dishonest politicians, backroom deals, "I scratch your back" bill voting does not go on and that the waste is not out of control is hard for me to swallow."

Unless I'm misinterpreting, your definition of "out of control" appears to be "increases my tax bill by .5%".

Rywill, and these better informed legislators are supposed to resist the expressed majority will of their constituents, how? Near as I can tell, you and Ben both want politicians to just suck it up and eliminate or privatize Social Security - that's leadership, because its right regardless of what the public thinks, and so on. Never mind that they'd immediately be thrown out and replaced by politicians who support Social Security, because a broad, long-term majority *likes* Social Security as is; I'm having trouble figuring out your objection. Unless we're talking "I'm obviously right and I'm angry no one agrees with me."

And the "insulation from the whims of the popular majority" thing is supposed to be on short term, passionate issues. This is the complete opposite of what Social Security is.

[Rywill]

Way to conflate numerous posts by different people. All I'm talking about here is your comment that majority should rule; Ben's comment that no, this is a republic; and your non sequitur that we're not a republic because our representatives have to pass votes by majorities. You're wrong.

But to answer your assertion--wait, I already answered it in the post you were replying to. Start with the sentence that goes "I realize they risk being voted out of office" and read from there. Edit: I see you edited in a token sop at this while I was posting. Although politicians are better able to ride out shorter term passions, they have the time to make a case for longer term ones as well. Presidents make unpopular decisions with some regularity--especially the good ones. So do senators, although not as often.

[Jason McCullough]

Since I don't speak for 51% of the population, or know what 51% of the population wants, no. I can tell you which programs I think are a waste of money, though. You already mentioned the biggest one--Social Security. It's a wasteful and unnecessary program that is spiralling towards bankruptcy, whether 51% of the population likes it or not.




My point was that literally every single program of reasonable size has a 51% constituency behind it. What do you expect a democracy to do? Not operate by majority rule?

Yeah, I expect exactly that, since our government is not a democracy. The founders disliked democracy for exactly this reason--sometimes the majority of the public doesn't know what the hell it's talking about.

In other words: I think some programs, like Social Security, are a waste of money. I don't care whether a majority supports them; they should be done away with. Why? Because the majority is wrong. Mind you, I can't find the bit in the constitution where it says I get to determine they're clearly wrong, and never mind that half or more of these elected officials disagree with me that they're "clearly wrong", and that the program is perfectly constitutional and has enjoyed 60%+ support for generations, but I'm right and my opinion should count more than anyone else's, apparently.

Replacing Social Security is *not* taking a short run unpopular stand; at this point, it's the "political" equivalent of passing a constitutional amendment - extremely long lasting and important.

You know, I think the public is "obviously wrong" about opposing single payer health care and supporting NMD, but I think that's because they're misinformed, and if I can't convince them, too bad. That's the way our government is set up.

[Rywill]

Excellent point. I didn't realize that Ben was saying he thought it was unjust that he can't rule by fiat. Actually, I'm still having trouble finding that part of his post. Could you point it out to me?

Perhaps you're having difficulty because Ben was simply arguing from logic and his values that abolishing SS is the right thing to do and he wishes some politicians would have the foresight and fortitude to do it. To which your counter-argument is that if 60% of the people like it, it must be a good idea.

I find myself unable to counter this unassailable logic. No gay marriage, and slavery for the southern blacks! Gosh, all this time and it turns out Cleve was right after all. Thanks for showing me the light, Jason.

I'm out of this thread. Have the last word.

[bmulligan]

I think some programs, like Social Security, are a waste of money.

Are you kidding? The're a terriffic way for congress to redistriburte wealth and use as a campaign tool. Thank goodness we have a lock box in government to protect all of our money.

[Ben Sones]

In other words: I think some programs, like Social Security, are a waste of money. I don't care whether a majority supports them; they should be done away with. Why? Because the majority is wrong. Mind you, I can't find the bit in the constitution where it says I get to determine they're clearly wrong, and never mind that half or more of these elected officials disagree with me that they're "clearly wrong", and that the program is perfectly constitutional and has enjoyed 60%+ support for generations, but I'm right and my opinion should count more than anyone else's, apparently.

So--and let me see if I have this right--your argument goes like this: if something the government does enjoys popular support, it would be wrong to oppose it. Can I use this argument on you?

[graller]

Do any of you expect to collect Social Security? I sure as hell don't. I expect the program to be bankrupt or me to still be working at 70 because I could not save enough to retire...and then I will keel over at the fry fryer in my local McDonalds of a heart attack and the government gets to keep my whole "investment"

[Tyjenks]

Do any of you expect to collect Social Security?

Nope.

I wonder if I could find a better place to invest that money. Hmmmmm....no, the government knows what its doing.

[Jim F.]

To stray back on topic a bit... From Rywill's linked article:



The White House said on Tuesday the federal budget deficit would balloon to a record $455 billion this fiscal year after absorbing heavy costs from the war in Iraq, and then climb $20 billion higher in 2004, a presidential election year.

But the White House said the deficit would improve, pledging for the first time to cut it in half by 2006, though officials did not spell out how they would do so.


Whew, they're planning on having it cut in half in a few years, thank goodness. This is brilliant strategy, actually. Skyrocket the deficit to record amounts (previous record is $290 billion), and then promise to cut it in half. It's like the logic of an alcoholic: "Ok, I'm drinking 14 beers a day today. Last week I was drinking 6 a day... if I cut back to 7 a day, that means I'm recovering!"

Sad thing is, Bush can easily defend this by playing on the fears of the majority. When a Democrat points out how bad the deficit is, expect the response to be "Are you saying we should compromise national security and let the terrorists kill thousands of American citizens just to save a few dollars?"


As for social security... if the government wasn't allowed to spend the current social security surplus, and if the government lent out that surplus in Treasury-like bonds, social security could go on almost indefinitely. This year, the SS surplus is around $150 billion. However, the government is spending that $150 billion instead of keeping it in the system. Doesn't take a financial genius to realize how easily that kind of annual surplus could offset the future forcast SS deficit. But in common government logic, "if we have extra, we damn well have to spend it. Save for a rainy day? Screw that"

[Ben Sones]

And that's why Social Security is such a tough program to do away with. Theoretically, people that have paid into SS should be able collect any payments due to them even if the program were ended today, but the federal government just spends the money immediately rather than investing it, so you have this system where you are robbing Peter (people paying into the system right now) to pay Paul (people collecting SS), and if you cancel the program, everyone gets screwed. Alternately, the program could bankrupt itself, and everyone would be screwed anyway. If this is supposed to be a safety net for retirees, I'm unimpressed. Can you imagine if a private bank conducted business like this?

Investor: "I've come to collect the money I put into that CD."

Bank: "Er... we sort of spent it all."

But when government does it, it's just business as usual.

[Tyjenks]

But when government does it, it's just business as usual.

That's my big beef. (hehe)

The government is given a lotta slack that any other business would not get for a second. "Its the best we have and the best in the world" is an excuse I hear. That is true, but is there any reason we cannot improve on it.

ANd back to the There is waste in any business issue . I am not buying that either after further thought. This should not be an unwieldly business. Its our governemnt and my money which is operating it. Sure, the company I work for wastes money and I know because I do the books. I am in no place to make changes to rectify any waste by the owners and what they let employees get by with. If it was my business, you can be sure I would keep a closer eye on waste and make changes to eliminate it.

[Chris Nahr]

When was the social security system introduced? Was that during the Great Depression? The government might not have had enough money on hand to pay the recipients without using the income from the system.

[XPav]

And that's why Social Security is such a tough program to do away with. Theoretically, people that have paid into SS should be able collect any payments due to them even if the program were ended today, but the federal government just spends the money immediately rather than investing it, so you have this system where you are robbing Peter (people paying into the system right now) to pay Paul (people collecting SS), and if you cancel the program, everyone gets screwed. Alternately, the program could bankrupt itself, and everyone would be screwed anyway. If this is supposed to be a safety net for retirees, I'm unimpressed. Can you imagine if a private bank conducted business like this?

Investor: "I've come to collect the money I put into that CD."

Bank: "Er... we sort of spent it all."

But when government does it, it's just business as usual.
Keep in mind that when they started Social Security -- they had to do it that way, because of course, no one had paid anything in. With the program startingin 37 and payouts starting in 40, the 3 year gap sufficing to build up the funds enough so they could start paying out.

There's a nice history at http://www.ssa.gov/history/briefhistory3.html for those wanting to read me.

[Jason McCullough]

In other words: I think some programs, like Social Security, are a waste of money. I don't care whether a majority supports them; they should be done away with. Why? Because the majority is wrong. Mind you, I can't find the bit in the constitution where it says I get to determine they're clearly wrong, and never mind that half or more of these elected officials disagree with me that they're "clearly wrong", and that the program is perfectly constitutional and has enjoyed 60%+ support for generations, but I'm right and my opinion should count more than anyone else's, apparently.

So--and let me see if I have this right--your argument goes like this: if something the government does enjoys popular support, it would be wrong to oppose it. Can I use this argument on you?

You didn't say it was "wrong." You said it was *obviously* wrong and started grumbling about how the system was broken because no one agreed with you.

And how can the government itself go bankrupt? And you do know that banks "spend" those CDs you give them by loaning them out, right?

[antlers]

The Social Security surplus is not "spent", it is invested in government bonds--traditionally a conservative investment, safe but with a relatively low yield.

The government spends the money it gets by selling these bonds to Social Security, just as it spends the money it gets by selling bonds to other investors.

People who say that Social Security is going to go "bankrupt" are essentially saying that the government is going to repudiate those bonds held by Social Security. They don't explain why the government would or should do this.

[Ben Sones]

You didn't say it was "wrong." You said it was *obviously* wrong

Huh? What the hell is the difference? It's obvious to me; I am well aware that it's not obvious to everyone, or the program would already be gone.


and started grumbling about how the system was broken because no one agreed with you.

Again, huh? I don't think the system is broken, and I never said that it is. And there are a number of posters in this thread that have agreed with me on one point or another (and others that haven't).


And how can the government itself go bankrupt? And you do know that banks "spend" those CDs you give them by loaning them out, right?

That's an investment, which is a little different than raiding the social security surplus to pay for other government programs. The proper analogy would be if the bank took my CD money and used it build an employee tennis court, then told me "tough luck" when I came to withdraw my money.

But the bigger problem, as I said before, lies with the overall structure of the system, which relies on current taxpayers supporting current retirees. That works fine, in theory, as long as the government uses the money that comes into the system as intended, and as long as the ratio of taxpayers to retirees stays even (or tipped towards the taxpayer side, as it has been for the last few decades). But the former has almost never been true--the government regularyly uses the Social Security surplus as its personal piggy bank--and as the Baby Boomers start retiring, the latter will no longer be true, either. I'm no economist, but that seems like a disaster waiting to happen. When I say that the program will go "bankrupt," what I mean is that the money coming into the system will no longer be sufficient to cover the payments going out, and the government will have to find some other way to cover the deficit--probably through a massive hike in Social Security taxes (which means an even smaller return on investment for people paying into the system right now, i.e. you and me).

Social Security is, as you point out, already the single largest line item in the federal budget. And as I said before, it's an extraordinarily inefficient way to ensure financial security for seniors. Is it really worth paying that much money to keep it going? This debate started when you wondered what fat we could trim from the federal budget. I'd start with Social Security.

[Jason McCullough]

Ok then, Ben, but maybe you can understand why I thought you were saying that:


It's a wasteful and unnecessary program that is spiralling towards bankruptcy, whether 51% of the population likes it or not.



My point was that literally every single program of reasonable size has a 51% constituency behind it. What do you expect a democracy to do? Not operate by majority rule?
Yeah, I expect exactly that, since our government is not a democracy. The founders disliked democracy for exactly this reason--sometimes the majority of the public doesn't know what the hell it's talking about.

How is Social security inefficient? And technically, SS money used "for other purposes" tends to result in lower income taxes to offset - spending the SS surplus is actually how Bush managed to get the first tax cut through. The SS program could have been topped up through 2070 or whatever by Bush forgoing his tax cut, but nooooo.

And if "SS income doesn't cover SS outlays" = bankruptcy, then the income tax system has been "bankrupt" since the 1930s. We ran an income tax surplus in exactly one year (1998, I think); the rest of the
"surplus" years were because we took excess SS taxes and rolled them over into making up for income tax deficits.

The reason we have a SS surplus, of course, is the Greenspan commission back in the 1980s recommended increasing SS taxes and using the money to pay down the deficit, so it'd be easier to transfer cash from income taxes to shore up the system. What actually happened is Bush cut income taxes by about the same amount, so we're going to have to raise income taxes (for a while; you just have to deal with the Boomer demographic "bubble") just as much as before.

I didn't ask what we should remove; I asked what possibly is unpopular enough to get rid of. No one's suggested anything.

[quatoria]

Spending the money was a double winner for Bush. He wants Social Security ailing or bankrupt to push through a privatization with sweetheart deals for major contributors, and wanted the tax cut for the obvious reasons.

[Jim F.]

Spending the money was a double winner for Bush. He wants Social Security ailing or bankrupt to push through a privatization with sweetheart deals for major contributors, and wanted the tax cut for the obvious reasons.

The current return on investments from many mutual funds will make selling privatization much harder than it was during the late 90's boom. Today, my 401K, in conservative investments, is worth less than it was 3 years ago, and that's counting my continuing contributions into it.

Can you imagine what would have happened if a large chunk of privatized social security funds were tied up in Enron, Worldcom, and Tyco? Many mutual funds were heavily vested in these stocks and lost a large chunk of their value. Now imagine if you are 65 years old and you just watched a large part of your retirement account go up in smoke.

Economists and Democrats would have a field day if this was used as a compaign point.

[bmulligan]

they've already used this point to debunk theories of SS privatization.
I'm sure you'll hear it agin in the coming 17 months.

We should be allowed to keep our money in the first place and not be forced to hand it over to congress. Social security is just an income tax with a different name to give the masses some comfort.

[Jason McCullough]

Yes, switching to a system that results in people starving when their investments go bad is a great idea.

It's just a risk-sharing program. Everyone pays in and that guarentees they'll have a respectable retirement, no matter what else happens.

[bmulligan]

first of all there's no guarantee. Second, it's not a respectable amount. Third, it's forced coersion, not risk sharing. Why didn't they make social security a bond program? That would make me feel safer than some arbitrary payout. If I got a note for my money with some numbers on it that said "backed by the full faith and credit uf the US government". Then the Politicians couldn't use it as campaign fodder.

[Ben Sones]

How is Social security inefficient?

Because most of the people on Social Security would be better off if they could just keep that money and invest it themselves.


And technically, SS money used "for other purposes" tends to result in lower income taxes to offset - spending the SS surplus is actually how Bush managed to get the first tax cut through.

So you approve of this manner of voodoo accounting? Because I sure as hell don't.


And if "SS income doesn't cover SS outlays" = bankruptcy, then the income tax system has been "bankrupt" since the 1930s. We ran an income tax surplus in exactly one year (1998, I think); the rest of the
"surplus" years were because we took excess SS taxes and rolled them over into making up for income tax deficits.

Yeah. So won't it be great when SS can't even cover its own costs? Where will the money come from then?


I didn't ask what we should remove; I asked what possibly is unpopular enough to get rid of. No one's suggested anything.

And I said that cutting budgetary items does not require the popular support of the general public, which is apparently where you drew the conclusion that I think our system of government is broken. Politicians do unpopular things all the time. If those things turn out to be good in the long run (or at least not bad), then they generally don't have much trouble getting re-elected. In fact, many politicians have no trouble getting re-elected even if their choices turn out badly. So I'm not sure why popular support is a necessary prerequisite for budgetary changes.


Yes, switching to a system that results in people starving when their investments go bad is a great idea.

Their investments would have to do exceedlingly poorly to match the returns that they'd get out of Social Security.

[Jason McCullough]

So I'm not sure why popular support is a necessary prerequisite for budgetary changes.

It's not necessary, but politicians *like* to stay in office, so its highly unlikely they'll up and cut a program with broad support. It's not like all the Democrats and Republicans in Washington secretly know the program is "broken" and just won't cut it because they're cowards, as you imply.

Anyway, this is the chief privitization fallacy:


Because most of the people on Social Security would be better off if they could just keep that money and invest it themselves.

Right now, that money pays for the retirement of your parents. If you keep that money, who's going to pay for your parent's retirement? The only way you get a better "rate of return" on privitized social security is by ignoring the roughly 3 trillion dollar outstanding generational debt.

If you want to shell out the 3 trillion to switch to a fully funded system, great. But you're not going to get a better rate of return unless you pretend that transition cost doesn't exist.

Krugman covers this in more depth here (http://www.wws.princeton.edu/~pkrugman/socsec.html). It's not an obvious point, and the privitization wags at Cato and the like have thrown up a ton of disinformation related to this.

Mulligan, I'm not sure what you mean by no guarentee. What, the government is going to vaporize? As long as there's political support for the program, its not going anywhere.

And no, the program isn't going to make you rich, but you won't be on the street, regardless of how your investments turn out.