Free Markets, Free People

Social Security


Why the Right Should Embrace “Fairness” in Entitlement Reform

This is a departure from my previous two posts; it’s not about a particular group that has pulled away from the GOP.  Romney pulled a slightly larger share of older voters than McCain did, even if fewer total turned out than in previous years.  That the Romney-Ryan ticket did this while proposing entitlement reform is a substantial feat, but it did involve watering down the reforms a great deal.  For example, Republicans now make a habit of promising that nobody under age 55 will be affected by their reforms.

Why make this concession when the lion’s share of the fiscal problem is current retirees and the many, many Baby Boomers who will retire soon?  Boomers vote, of course, but what motivates them?  I don’t think most seniors could bring themselves to act on straightforward greed; I think they’re voting based on a particular concept of fairness.

Specifically, they paid into the system over a long career, and they believe they should be able to get back what they paid in.  And even though current Medicare beneficiaries get two to six times as much in benefits as they paid in (if this is right), only about a third of Americans think Medicare beneficiaries get any more than they paid in.  As long as they think that way, they’ll continue to oppose means testing and raising the retirement age by wide margins.

You might be tempted to say that our task is to educate them, but it’s much easier to persuade people based on their current beliefs than to convince them of inconvenient facts first.  Republicans basically conceded that cutting benefits to older voters at all would be unfair, and pushed complicated plans that few people aside from Paul Ryan can competently defend.

But we might be even bolder if we just hugged that core fairness principle tighter.

September’s Reason-Rupe poll (PDF – fixed link) asked Americans if they’d support cuts to their own Medicare benefits “if you were guaranteed to receive benefits at least equal to the amount of money that you and your employer contribute into the system.”  It was a blowout: 68% yes, 25% no.  Three quarters of Tea Partiers said yes.

At a stroke, you could slash Medicare in half with a reform based on that principle.  (Their August 2011 poll suggested similar support for applying the principle to Social Security, but the cuts would be much more modest.)

Centering a reform on that principle achieves steeper cuts and seems easier to defend than what Paul Ryan is trying.  Because if Democrats fought us on it, they’d have to make the wildly unpopular case for entitlements as redistribution programs rather than as “insurance” or “savings.”

The kind of coalition the Right needs for sustainable entitlement reform has to include people who highly value fairness (or, as Jonathan Haidt would call it, proportionality).  If we want the project of liberty to be successful, we have to pluck on other heartstrings.


Circling the drain

The NY Times has an article out saying that extended unemployment benefits are beginning to wind down.  Of course that’s in the face of at least 5 million still unemployed.   And while it obviously has to happen, i.e. the cut-off of extended unemployment benefits,  my guess is that Democrats are less likely to want it to happen than Republicans.

In case you haven’t heard there’s an election soon.

But, that said, it does take us to a number that should concern everyone:

49.1%: Percent of the population that lives in a household where at least one member received some type of government benefit in the first quarter of 2011.

Cutting government spending is no easy task, and it’s made more complicated by recent Census Bureau data showing that nearly half of the people in the U.S. live in a household that receives at least one government benefit, and many likely received more than one.

Yes, that number.  49.1%.  Why should we be concerned about it?  Well if I have to explain, you most likely won’t get it anyway.  Make this comparison:

The 49.1% of the population in a household that gets benefits is up from 30% in the early 1980s and 44.4% as recently as the third quarter of 2008.

That’s a very large increase from 1984.  It speaks, at least to me, of dependence.  Now I know the recession has somewhat skewed the numbers.  Got it.  And, as the unemployment benefits wind down, the number will probably drop.

But in reality it points to a trend in which more and more people depend on less and less working people to help pay their way (CBO says food stamp rolls will continue to grow through 2014).  What this points too is increased government spending (no matter how you slice it – those drawing money from the government is up and that means government is spending more) in an era we can’t afford it.

With increased government spending comes the need to pay for it, and if taxes aren’t going to increase that means deficits. Nearly three-quarters of Americans blame the U.S. budget deficit on spending too much money on federal programs, according to a Gallup poll last year, but when the conversation turns to which programs to cut, the majorities are harder to find. For example, 56% of respondents oppose making significant changes to Social Security or Medicare.

Why do you suppose that is? Why would 56% oppose making significant changes to Social Security or Medicare?

Because they have a vested financial interest in the two programs.  Government has, for decades, taken money out of their pay check, spent it on other things and over promised the benefits.  Or to simplify it for you, they’ve grossly mismanaged the two programs to the point that anyone in the private sector would be in jail.

And yet, the number of Americans getting benefits from government continues to trend upward.

Can you not spot the big red kangaroo here?

Why is it obvious to everyone but our politicians (yeah, that’s a rhetorical question for those wondering)?

~McQ

Twitter: @McQandO


Social Security–Krugman accuses WaPo of spreading disinformation while he spreads disinformation

A pair of very interesting articles.

First come the Washington Post’s article on Sunday which discusses the problems with the Social Security program in very honest and stark terms. 

For most of its 75-year history, the program had paid its own way through a dedicated stream of payroll taxes, even generating huge surpluses for the past two decades. But in 2010, under the strain of a recession that caused tax revenue to plummet, the cost of benefits outstripped tax collections for the first time since the early 1980s.

Now, Social Security is sucking money out of the Treasury. This year, it will add a projected $46 billion to the nation’s budget problems, according to projections by system trustees. Replacing cash lost to a one-year payroll tax holiday will require an additional $105 billion. If the payroll tax break is expanded next year, as President Obama has proposed, Social Security will need an extra $267 billion to pay promised benefits.

Then comes Paul Krugman’s attempt to dismiss it.  For his part, Krugman talks about a myth and presents it as fact:

You see, the WaPo makes a big deal of the fact that Social Security is currently taking in less in payroll taxes than it’s paying out in benefits. Yet this means nothing, except as a favorite point used to create confusion by those who want to kill the program.

I’ve written about this repeatedly in the past, but here it is again: Social Security is a program that is part of the federal budget, but is by law supported by a dedicated source of revenue. This means that there are two ways to look at the program’s finances: in legal terms, or as part of the broader budget picture.

In legal terms, the program is funded not just by today’s payroll taxes, but by accumulated past surpluses — the trust fund. If there’s a year when payroll receipts fall short of benefits, but there are still trillions of dollars in the trust fund, what happens is, precisely, nothing — the program has the funds it needs to operate, without need for any Congressional action.

Alternatively, you can think about Social Security as just part of the federal budget. But in that case, it’s just part of the federal budget; it doesn’t have either surpluses or deficits, no more than the defense budget.

It is the latter that is correct.  There is no “dedicated source of revenue” per se.  Hasn’t been for years.   What exists instead is a pile of Treasury bonds … IOUs the government wrote itself.   Congress, years ago, spent the money supposedly to be set aside for Social Security.

Krugman then tries to wave away the fact that even if the “dedicated source of revenue” doesn’t exist, heck, it’s a legal and untouchable (entitlement – must be paid, at least under the law as it exists now) part of the budget and the government will fund it.

That means that regardless of revenue, the government must pay.  

So tell me again how, given the unfunded future obligations of Social Security, it matters if the money comes from the mythical “lockbox” that has never existed or the general fund?  In either case, unless taxes are drastically increased, the money will have to be borrowed.  In either case, Social Security is in the negative – paying out more than it is taking in.  Nothing changes that.

Krugman’s last sentence is absolute hogwash.  Of course it would have a “deficit” if it was a part of the federal budget.  It has a set requirement to pay a certain amount out in benefits.  It is a mandatory entitlement by law.

The defense budget is discretionary.  There his postulation is correct.  That budget is whatever Congress says it is each year. 

For Social Security, the deficits would come from unmet and underfunded obligations – note the word: obligations- and it would require the federal government to either raise more revenue or borrow to meet those obligations.   That is not true of the defense budget.  Playing word games and false analogies to try and wave the truth away doesn’t change that.

But it does cement forever the fact that Paul Krugman has become much less of an economist and much more of a hack than I thought possible.

~McQ

Twitter: @McQandO


Romney, Perry, front-runners, Social Security and “Ponzi Schemes”

So, Tim Pawlenty endorses Mitt Romney.  But Republican voters think Rick Perry probably has the best chance of defeating Barack Obama.  Byron York gives us the lowdown:

In a new CNN poll that finds Perry at the front of the Republican pack, the Texas governor’s lead among GOP voters age 65 and older is actually bigger than his lead among younger voters. Fifty-two percent of respondents over 65 say Perry is their choice for president, versus just 21 percent who choose Romney.  In the overall numbers, Perry leads Romney 32 percent to 21 percent, with Ron Paul following at 13 percent, Bachmann and Gingrich at seven percent each, Herman Cain at six percent, and Jon Huntsman and Rick Santorum at two percent each.

Republican voters over 65 also believe Perry has the best chance of defeating President Obama in next year’s general election.  Perry leads Romney 58 percent to 22 percent among older voters on that question.

Of course, Republican votes over 65 are a key demographic which one might believe would be most put off by Perry’s “Ponzi scheme” meme concerning Social Security, right?  But, as York points out, that doesn’t seem to be the case:

Breaking down the age results in different categories, Perry leads Romney by 24 percent to 19 percent among GOP voters under 50.  Among GOP voters 50 and older, Perry leads Romney by 41 percent to 22 percent.

The results seem likely to encourage Perry to stick with his "Ponzi scheme" critique of Social Security.  At the same time, though, Perry might choose to gradually walk away from those incendiary words while leaving his essential assessment of Social Security unchanged.  In a new op-ed in USA Today, for example, Perry writes that "Americans deserve a frank and honest discussion of the dire financial challenges facing" Social Security.  But he doesn’t use the words "Ponzi scheme."  As for the critics, especially Romney, the results could cut two ways.  They might make Romney and others dial back the criticism a bit, on the grounds that it’s not working among the voters most personally interested in Social Security.  Or the results might actually encourage the critics to attack Perry more, on the grounds that voters don’t know enough about the "Ponzi scheme" issue and might change their opinion of Perry if they did.  The poll results published by CNN poll do not cover the Social Security issue specifically.

Good analysis.  And that sets up tonight’s debate in Tampa.  Will Rick Perry walk away from the “Ponzi scheme” meme and transition to a more general “frank and honest” discussion?  Apparently it resonated, which means that voters understand the intent of Perry’s words – that is to highlight the dire trouble Social Security is in.

Obviously what his opponents will do is try to frame that as extremely as possible – Perry wants to do away with Social Security.  Democrats aren’t the only ones who play that sort of game.  And that’s why York holds out the possibility, given the USA Today piece, that Perry is going to walk away from the description but still pursue the point.

The first place we’ll get to see if that’s true or not is in tonight’s debate as it is sure to be a major subject:

The controversy is sure to erupt at tonight’s Republican debate in Tampa.  In Florida over the weekend, the Romney campaign distributed a flier hitting Perry hard on Social Security, saying the Texas governor is "reckless and wrong on Social Security."  The headline of the flier is "Two candidates: Only one will protect what’s important to you," and the last line of the flier is "Rick Perry: How can we trust anyone who wants to kill Social Security?"  After attacks like that, Perry will undoubtedly be in the mood to hit back on the debate stage.

Of course, I’ve always said that if I was ever a Republican candidate facing Mitt Romney, I’d answer every question he ever ask of me with a one word answer.

“Romneycare”.

~McQ

Twitter: @McQandO


Ratcheting up the scare tactics – Obama says no guarantee Social Security checks will go out Aug. 3

So typical of how politicians tend to treat the serious matters of policy when they want to literally scare up support:

President Obama on Tuesday said he cannot guarantee that retirees will receive their Social Security checks August 3 if Democrats and Republicans in Washington do not reach an agreement on reducing the deficit in the coming weeks.

"I cannot guarantee that those checks go out on August 3rd if we haven’t resolved this issue. Because there may simply not be the money in the coffers to do it," Mr. Obama said in an interview with CBS Evening News anchor Scott Pelley, according to excerpts released by CBS News.

The Obama administration and many economists have warned of economic catastrophe if the United States does not raise the amount it is legally allowed to borrow by August 2.

If nothing else this should forever kill the nonsense about the “Social Security lockbox”.

This is akin to what you always hear when you talk budget cuts or the like.  It’s is always about cutting police, fire and education services first – not the bureaucrat in some office doing redundant work.  You can’t scare people onto your side without such tactics, apparently.

But American’s aren’t at all convinced that the debt ceiling should be raised according to Gallup.  That means it’s time to scare the old folks again.

Nice.

MJW ADDS: Just to throw some graphic wood on this fire, James Pethokoukis put together a handy little chart to demonstrate what a huge lie Obama is telling, and the Dems and the media are trying to sell:

August revenue versus expenditures

Note that all interest, Social Security, Medicare and defense payments can easily be made, and we are not in manner, shape or form in danger of default.

An excellent breakdown of exactly what budgetary issues we are facing can be found here [HT: Insty].

~McQ

Twitter: @McQandO


Obama not serious about debt ceiling or deficit

There’s a story out in the Washington Post about Obama’s supposed willingness to make cuts to entitlements, specifically Social Security.   Also out today is a story in The Hill concerning proposals to make much deeper cuts to defense spending than previously proposed.  All of this has to do with the debt ceiling debate.

The question I ask is what is really behind the Obama willingness to cut (or claim to be open to cutting) Social Security.  Is it real or is it just politics?

Combine that with increased cuts in defense and one has to question what the administration is or isn’t really willing to do?  My conclusion?  The Social Security cut proposal is smoke and mirrors.  The defense cuts are real, i.e. that’s where Obama and the Democrats are willing to go and go deep.  Why have I concluded that?  Well, two paragraphs, one in each story, give the game away.

First Social Security:

Privately, some congressional Democrats were alarmed by the president’s proposal, which could include adjusting the measure of inflation used to determine Social Security payouts. But others described it as primarily a bargaining strategy intended to demonstrate Obama’s willingness to compromise and highlight the Republican refusal to raise taxes.

A president running for re-election is not going to condone cuts in Social Security in an election year.   Politics 101.  Not. Going. To. Happen. 

But … he comes from a base constituency which would be fine with deep cuts to defense (disclaimer: there are cuts to defense that can be made – that’s understood – but not at the level they’re proposing).  Here’s the paragraph from The Hill story that tells you how serious Obama is about cutting spending – he gave it away at his “Twitter Townhall” yesterday:

During his first-ever Twitter town hall meeting Wednesday, Obama said the Defense budget is so large that even modest cuts to it would free up dollars for other federal programs.

Of course the budget is “large”, thanks to him we’re involved in our third war.  But that’s not the key takeaway from this paragraph.  Notice what he’s talking about for the dollars freed up by cuts.  Debt reduction?   Nope – further spending.

But it is more than clear that Obama is willing to gut defense and attempt to claim radical spending reductions on the back of the national security apparatus as a means of satisfying voters concerned about debt.  The $400 billion in DoD cuts has already been declared dangerous.  $700 billion would most likely be crippling.  With the first, you would trim mostly fat, but have a good chance of cutting critical muscle (i.e. critical programs such as the F-35).  With $700 billion in cuts, to continue the analogy, you’re cutting through muscle straight to the bone.

Defense spending is not sacrosanct and as I mention above, there are certainly cuts to be made.  But the problem with spending isn’t to be found there.  It is and always has been in entitlements.  President Obama has no intention of cutting Social Security – bet on it.   Unless such cuts for both Medicare and Social Security are made and restructuring of both programs seriously undertaken, what is happening (other than defense cuts) can’t be taken seriously and represents the politics at its worst.

Not that anyone should be surprised, considering the political class we’ve elected to represent us.

~McQ

Twitter: @McQandO


ObamaCare will allow middle class retirees to go on Medicaid

Good thing we passed this ObamaCare monstrosity so we could finally find out what is in it.  More and more surprises, as the Daily Caller points out:

President Barack Obama’s health care law would let several million middle-class people get nearly free insurance meant for the poor, a twist government number crunchers say they discovered only after the complex bill was signed.

The change would affect early retirees: A married couple could have an annual income of about $64,000 and still get Medicaid, said officials who make long-range cost estimates for the Health and Human Services department.

Brilliant.  The states, which pay over 40% of Medicare costs, are, of course, not thrilled by this revelation.

Governors have been clamoring for relief from Medicaid costs, complaining that federal rules drive up spending and limit state options. The program is now one of the top issues in budget negotiations between the White House and Congress. Republicans want to roll back federal requirements that block states from limiting eligibility.

Medicaid is a safety net program that serves more than 50 million vulnerable Americans, from low-income children and pregnant women to Alzheimer’s patients in nursing homes. It’s designed as a federal-state partnership, with Washington paying close to 60 percent of the total cost.

Early retirees would be a new group for Medicaid. While retirees can now start collecting Social Security at age 62, they must wait another three years to get Medicare, unless they’re disabled.

Some early retirees who worked all their lives may not want to join a program for the poor, but others might see it as a relatively painless way to satisfy the new law’s requirement that most Americans carry health insurance starting in 2014. It would help tide them over until they qualify for Medicare.

Remember, they have a mandated requirement to carry insurance.  They’re not eligible for Medicare and they’re retired.  COBRA is very expensive.  But the new rules in ObamaCare make those who are drawing up to $64,000 a year in retirement eligible for a program that is supposed to serve only the very poorest among us:

The Medicare actuary’s office roughed out some examples to illustrate how the provision would work. A married couple retiring at 62 in 2014 and receiving the maximum Social Security benefit of $23,500 apiece could get $17,000 from other sources and still qualify for Medicaid with a total income of $64,000.

That $64,000 would put them at about four times the federal poverty level, which for a two-person household is $14,710 this year. The Medicaid expansion in the health care law was supposed to benefit childless adults with incomes up to 133 percent of the poverty level. A fudge factor built into the law bumps that up to 138 percent.

The actuary’s office acknowledged its $64,000 example would represent an unusual case, but nonetheless the hypothetical couple would still qualify for Medicaid.

Now you’re saying, “wait a minute, they’re at 4 times the poverty level with their income and it clearly states that only those who are at 138% can get Medicaid – that’s exactly what $17,000 represents.

Oh, didn’t I tell you?  ObamaCare’s new law doesn’t count Social Security as income.  So in essence, our mythical couple only claims $17,000 a year income and qualifies.

So, they look at the options – let’s say COBRA would run $1,000 a month for the two of them for sake of argument (it could be much higher) and simple math.  They’re looking at an outlay of $12,000 a year.  Medicaid, however, is probably less than a $100 a month and copays.  A thousand a month or a hundred a month – you make the call.

Here’s the bottom line truth:

Former Utah governor Mike Leavitt said bringing early retirees in will “just add fuel to the fire,” bolstering the argument from Republican governors that some of Washington’s rules don’t make sense.

“The fact that this is being discovered now tells you, what else is baked into this law?” said Leavitt, who served as Health and Human Services secretary under President George H.W. Bush. “It clearly begins to reveal that the nature of the law was to put more and more people under eligibility for government insurance.”

It is hard not to interpret it that way, isn’t it?  Everyone claims they didn’t know this was “in there”.  Really?  And it literally has been discovered recently.  Not only does it make you wonder what else is “baked into this law”, but it makes you realize how really “half baked” this law is.

This is a law that has to be repealed in full.  It is terrible law.  It continues to see little surprises like this pop to the surface.  And, as governor Leavitt points out, these sorts of revelations do indeed point to the real nature of the law – that is to make more and more people dependent on government.

Any presidential candidate who is wishy-washy on this issue doesn’t deserve the time of day, much less your vote.

~McQ

Twitter: @McQandO


Ryan budget proposal: you can pay me now or you can really pay me a heck of a lot later (updated)

Problem:  As a nation we’re in dangerous debt territory.  If we don’t do something quickly and dramatically, we’re headed for some very rough and painful times.

But while it seems the American public senses this on the whole, polls seem to indicate that all the “free” stuff handed out by government is popular with a large percentage of the population.  Or said another way, they understand that we have a debt problem, they understand the implications of that problem and they don’t mind spending cuts – just so the spending cuts don’t effect programs they like.

The problem is further compounded by an irresponsible administration which gives the debt problem lip service but submits budgets that exponentially increase the problem:

The president’s recent budget proposal would accelerate America’s descent into a debt crisis. It doubles debt held by the public by the end of his first term and triples it by 2021. It imposes $1.5 trillion in new taxes, with spending that never falls below 23% of the economy. His budget permanently enlarges the size of government. It offers no reforms to save government health and retirement programs, and no leadership.

Both of these facts make it hard for those who would actually like to address the problem of debt before it overwhelms us.  That’s because they’ll really get no support politically from the administration, no call to arms and leadership, and the American people are proving to be fickle about the whole process sending very mixed signals.

Solution?

Well the obvious solution is to find some means of cutting spending to at least the level of revenue and to begin working to pay the debt down in an earnest and timely manner.  What isn’t a solution is business as usual but on steroids as proposed by the President.  So today, Rep. Paul Ryan (R-WI) introduced the GOP plan to address the problem.  Or at least part of the problem.  That of out-of-control spending and addressing the debt.  How it will play with the American people remains to be seen, but it is both an earnest and timely proposal.  It also makes some pretty dramatic cuts which is where you can expect to see the pushback.

For starters, it cuts $6.2 trillion in spending from the president’s budget over the next 10 years, reduces the debt as a percentage of the economy, and puts the nation on a path to actually pay off our national debt. Our proposal brings federal spending to below 20% of gross domestic product (GDP), consistent with the postwar average, and reduces deficits by $4.4 trillion.

But there’s pain in them thar words.  And it means things are going to have to be quite different in some areas than they are now.  Government is going to have to be rolled back.  That is unless we’re partial to a complete collapse of our economy and our currency, hyper inflation and all the good times those developments would bring.

So to specifics in Ryan’s proposal.  Addressing welfare in general, he says:

This budget will build upon the historic welfare reforms of the late 1990s by converting the federal share of Medicaid spending into a block grant that lets states create a range of options and gives Medicaid patients access to better care. It proposes similar reforms to the food-stamp program, ending the flawed incentive structure that rewards states for adding to the rolls. Finally, this budget recognizes that the best welfare program is one that ends with a job—it consolidates dozens of duplicative job-training programs into more accessible, accountable career scholarships that will better serve people looking for work.

As we strengthen and improve welfare programs for those who need them, we eliminate welfare for those who don’t. Our budget targets corporate welfare, starting by ending the conservatorship of Fannie Mae and Freddie Mac that is costing taxpayers hundreds of billions of dollars. It gets rid of the permanent Wall Street bailout authority that Congress created last year. And it rolls back expensive handouts for uncompetitive sources of energy, calling instead for a free and open marketplace for energy development, innovation and exploration.

I am quite pleased to see the second paragraph.  It is indeed time to eliminate “corporate welfare” and subsidies for favored industries.  It also takes on what we would call traditional welfare.  And make no mistake about it Medicaid and food stamps are welfare.    As for the “perverse incentives” Ryan points too, here’s what they’ve yielded recently:

Snap 1

I’m sure some of that comes with the economic downturn, but it also indicates the effect of the incentives to sign people up for the welfare program.

We can’t afford the level of welfare we’re paying out now – and that included corporate welfare and subsidies.  We are a compassionate people, but I end up shaking my head when I hear government officials claiming that people at “4 times the poverty level” need help?  Really?  So what’s the purpose of the poverty level as a measure and why are we now convinced we have to “help” people well above that level?

Then there are the twin third rails of politics, but areas where dramatic reforms are absolutely necessary to get us on the right fiscal track as a country.  And those are Medicare and Social Security.  The Ryan plan:

Health and retirement security: This budget’s reforms will protect health and retirement security. This starts with saving Medicare. The open-ended, blank-check nature of the Medicare subsidy threatens the solvency of this critical program and creates inexcusable levels of waste. This budget takes action where others have ducked. But because government should not force people to reorganize their lives, its reforms will not affect those in or near retirement in any way.

Starting in 2022, new Medicare beneficiaries will be enrolled in the same kind of health-care program that members of Congress enjoy. Future Medicare recipients will be able to choose a plan that works best for them from a list of guaranteed coverage options. This is not a voucher program but rather a premium-support model. A Medicare premium-support payment would be paid, by Medicare, to the plan chosen by the beneficiary, subsidizing its cost.

In addition, Medicare will provide increased assistance for lower- income beneficiaries and those with greater health risks. Reform that empowers individuals—with more help for the poor and the sick—will guarantee that Medicare can fulfill the promise of health security for America’s seniors.

I’ve already seen some on the left characterizing this as "privatizing" Medicare. And, of course, as we all know, that’s dangerous as government always does it better – look at the budgets for example. Look at the debt.

In fact, what Ryan is talking about is giving seniors a choice vs. automatically enrolling them in a government insurance program that averages about $60 billion a year in waste, fraud and abuse.  There will be a subsidy – probably means tested.  Is the the ideal libertarian answer?  No.  But as I’ve said before, freedom is choice and any legislation that expands that is at least a step in the right direction. 

We must also reform Social Security to prevent severe cuts to future benefits. This budget forces policy makers to work together to enact common-sense reforms. The goal of this proposal is to save Social Security for current retirees and strengthen it for future generations by building upon ideas offered by the president’s bipartisan fiscal commission.

Perhaps raise the caps (I gave a certain percentage to my 401k regardless of how much I earned, so doing the same with Social Security doesn’t really bother me.  And it will provide increased revenue for the fund.  Again, ideal?  No, but then I don’t consider either Medicare or Social Security to be “welfare” since most participants have paid into those systems for their entire working life.   But there are changes which will have to be made.  I don’t favor means testing if the cap is raised.  But I do think that a hard look at the retirement age is necessary.  My ideal outcome, obviously, would be getting government out of the retirement income business, but that’s not going to happen.  So Social Security has to be made self-supporting and not a drain on the budget – as does Medicare.

Budget enforcement: This budget recognizes that it is not enough to change how much government spends. We must also change how government spends. It proposes budget-process reforms—including real, enforceable caps on spending—to make sure government spends and taxes only as much as it needs to fulfill its constitutionally prescribed roles.

If we don’t get some restrictions on government spending, nothing is going to change.  Nothing.  We’ve watched Congress talk the talk for decades, ala Nancy PAYGO Pelosi.  But they ignore their own legislation and policy at will.   As Ryan says, there have to be “real, enforceable caps on spending”.  I interpret that as “you cannot and will not spend more than you take in”.  We’ll see how the Congress interprets that.

Tax reform: This budget would focus on growth by reforming the nation’s outdated tax code, consolidating brackets, lowering tax rates, and assuming top individual and corporate rates of 25%. It maintains a revenue-neutral approach by clearing out a burdensome tangle of deductions and loopholes that distort economic activity and leave some corporations paying no income taxes at all.

Here is something that is going to be as hard to do as entitlement reform.  Why?  Because the tax system provides Congress with another way to wield its power.  But the way it has wielded this power has done precisely what Rep. Ryan points too here – it has “distort[ed] economic activity.”  Make the system simple, remove the loopholes, broaden the base (get some more “skin” in the game from those who now don’t pay taxes) and my guess is you’ll not only see an increase in revenue, but a far greater increase in economic activity.

Bottom line:  We are in a “you can pay me now or you can pay me later” moment.  And if we wait, we’re going to be paying a price we’re just not willing to pay, all because we chose to avoid the pain now.   I’m sure the opponents of this proposal are going to call it “extreme” and something that will “hurt the children”.  Trust me, if you want to see extreme, put it off until this house of cards collapses.  And if you want to avoid “hurting the children”, man up and face the pain now to avoid it later when it really will “hurt the children”.

UPDATE: Chris Edwards at CATO gives his take on the Ryan budget.  I’m pretty much agreed with everything Edwards says:

  • Ryan doesn’t provide specific Social Security cuts, instead proposing a budget mechanism to force Congress to take action on the program. It is disappointing that his plan doesn’t include common sense reforms such raising the retirement age.
  • Ryan finds modest Medicare savings in the short term, but the big savings occur beyond 10 years when his “premium support” reform is fully implemented. I would rather see Ryan’s Medicare reforms kick in sooner, which after all are designed to improve quality and efficiency in the health care system.
  • Ryan adopts Obama’s proposed defense (security) savings, but larger cuts are called for. After all, defense spending has doubled over the last decade, even excluding the costs of wars in Iraq and Afghanistan.
  • Ryan includes modest cuts to nonsecurity discretionary spending. Larger cuts are needed, including termination of entire agencies. See DownsizingGovernment.org.
  • Ryan makes substantial cuts to other entitlements, such as farm subsidies. Bravo!
  • Ryan would turn Medicaid and food stamps into block grants. That is an excellent direction for reform, and it would allow Congress to steadily reduce spending and ultimately devolve these programs to the states.
  • Ryan would repeal the costly 2010 health care law. Bravo!

Here’s a chart Edwards includes in his post:

201104_blog_edwards52

 

I’m a huge supporter of military spending in order to maintain our national security and technological edge, but I find it hard to believe that there aren’t many places where savings could be accrued in “Security”.  And I’d also note under the broad “Security” umbrella fall many other programs that could be cut – like the entire TSA.  But, in any event, it is an area that should also be looked at with an eye for cutting spending.  It would get us to our goal of paying down the debt even sooner and it can be done without jeopardizing our security (cut costs not capability).

UPDATE II:  Geoff over at Ace of Spades gives a little context to the Ryan proposal:

PublicDebtRyanvsCommissionSmall

 

Now, where I come from, the “extremes” are on either side of a situation, right?

~McQ


The anticipated move to the center by Obama

Apparently that’s what everyone expects to hear in the SOTU address.  And most see it as a reflection of political reality.  Independents deserted the Democrats fairly quickly after the Obama administration took office, apparently not liking what they saw developing at all.  So here comes the inevitable shift – at least the perception of one – to the center in order to win them  back.

The left?  Where are they going to go?  Who else would they vote for?  They’re not going anywhere despite all their grumbling and mumbling about Obama’s attempt to move right (and yes, a move by Obama to the center means a distinct move to the right).  Here’s the reality:

A labor official, who asked not to be identified in order to speak more candidly about the president’s political situation, noted that “the midterm elections freed” Obama to work independently and without regard to his party’s left.

“The left understands that the choice in 2012 will be Obama or somebody far worse,” the official said. “They will have no choice, no matter what Obama says in the State of the Union address. No matter how much we complain, he knows that at the end of the day, we will be supporting him in 2012 — and that affects what he can do now. The choice for us will be an administration that disappointed us or a Republican administration that will be out to destroy us.”

Colorful language, but you get the drift.  The far left is stuck with him and Obama knows it.  It is the center where elections are won, and right now they don’t belong to him. 

So how does he win them back?

Well the Democrats hope that it will be through leadership.  Rep Anthony Weiner lays it out:

“He’s the president of the United States, and he’s got to go in there and lean into the idea that he still has an agenda he wants to accomplish,” Weiner said. “He has to make sure he’s leading the debate and Paul Ryan is responding, not the other way around.

“He has to make it clear that he’s not going to be held hostage over issues like the debt-limit increase,” Weiner said.

But, as usual and instead, the President plans to vote “present”:

But the president’s decision not to lay out his own vision for reducing the national debt has infuriated balanced-budget advocates, who fear that a bipartisan consensus for action fostered last month by Obama’s commission could wither without presidential leadership.

"There is no way you get momentum without the president. If you don’t lead now, when is it going to come?" said Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget. "He has to go first and he has to be specific. He has to pivot to something hard."

And pander, of course:

The direction of Obama’s speech became apparent over the weekend, when the White House informed Democratic lawmakers and advocates for the elderly that he would not endorse the commission’s recommendation to raise the retirement age and make other cuts to Social Security – the single largest federal program.

The sound you hear, my friends, is that of the can being swiftly kicked down the road again – something candidate Obama said wasn’t going to happen on his watch.

The administration claims that it’s goals will be more specifically addressed in the budget request the White House submits in mid February.  Per Robert Gibbs, the SOTU is just not the proper venue for specifics.   Well, except when you want to take a shot at the Supreme Court, who, by the way, will only have partial attendance this year, with a group of conservative justices clearly deciding to show their disapproval of the partisan sniping they were victim too in last year’s SOTU.

Yup, all in all politics rules the day with the political advice being as predictable as sunrise.  Obama, being the ultimate political animal, will indeed heed it, but the left shouldn’t look for any leadership to suddenly emerge where none has been evident in the past and the center should be wary of the now well-known smoke and mirrors show the administration puts on regularly – saying one thing and doing something else altogether.

Life in the Obama White House I’m afraid.

~McQ


Quote of the day–Social Security edition

It comes from Charles Blahous, one of the two private trustees for Social Security and Medicare explaining what has to be done for SS to “save” it in light of the release of the recommendations from the co-chairs:

Bottom line: You’re either for changes to the benefit formula, or you’re for big tax increases on the next generation. If you oppose benefit formula changes on the grounds that they are “cuts,” then you are for big tax increases. Period.

There it is.  While all this “outrage” and declarations of the panel’s recommendation being “unacceptable” circulate and build, the “bottom line” doesn’t change.  Blahous provides all the facts necessary to understand his statement.

Also keep in mind, as you see this discussed, that when the word “cuts” is used, it refers to not spending as much as projected, not necessarily actually cutting current spending.

While it is obvious that spending in defense and other discretionary spending is necessary, it is also just as obvious that the the major area of cuts has to come on the non-discretionary side.  The reluctance of politicians to address that notwithstanding, there isn’t a more perfect time than now (and one that may not come again in a generation) to actually do something. 

There is no “middle ground” concerning Social Security.  Either benefits are changed to accommodate revenue or incoming revenue has to be drastically increased.  That decision isn’t one which can’t be ignored.  At some point one of those two things must happen.  Why we won’t face that point head on and do what is necessary remains the most asked question.

The answer, of course, is political will.  And the bottom line there is our politicians have none when it comes to making hard and unpopular decisions.

~McQ

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