Meta-Blog

SEARCH QandO

Email:
Jon Henke
Bruce "McQ" McQuain
Dale Franks
Bryan Pick
Billy Hollis
Lance Paddock
MichaelW

BLOGROLL QandO

 
 
Recent Posts
The Ayers Resurrection Tour
Special Friends Get Special Breaks
One Hour
The Hope and Change Express - stalled in the slow lane
Michael Steele New RNC Chairman
Things that make you go "hmmmm"...
Oh yeah, that "rule of law" thing ...
Putting Dollar Signs in Front Of The AGW Hoax
Moving toward a 60 vote majority?
Do As I Say ....
 
 
QandO Newsroom

Newsroom Home Page

US News

US National News
Politics
Business
Science
Technology
Health
Entertainment
Sports
Opinion/Editorial

International News

Top World New
Iraq News
Mideast Conflict

Blogging

Blogpulse Daily Highlights
Daypop Top 40 Links

Regional

Regional News

Publications

News Publications

 
The Social Security Problem
Posted by: Jon Henke on Tuesday, November 13, 2007

A lot of Democrats are peddling the claim that there is no Social Security problem that needs to be fixed - and, insofar as they mean the program isn't going to simply go bankrupt or fail to pay promised benefits, they're generally correct. However, that is misdirection. Megan McArdle cuts through that nonsense.
This article by Paul Starr makes the central error that comes over and over again in liberal analyses of Social Security*: it acts as if the general budget problem arrives at the same time as social security's budget problem.

This is wrong. The budget problem isn't in 2041; the budget problem is now. Sometime after next year, the Social Security surplus will shrink, starting to put pressure on the budget. Democrats trying to implement spending plans will start to find their tax increases eaten, not by national health care, but by seniors. By 2011, the problem will be large. By 2017, money will be flowing from the general fund to social security. By 2025, the hole will be about as big as it's going to get. Around about 2015, social progressive plans will be DOA. Republican tax schemes will be DOA. The only thing we will talk about for the following 15 years is where to find the money to pay for Social Security and Medicare.
Allow me to resurrect points I've made on this topic in the past:

  1. Paul Krugman, who is currently angry at Barack Obama for worrying about Social Security, has pointed out that that "we can't have a Social Security crisis without a general fiscal crisis". Of course, Paul Krugman also said that a "general fiscal crisis [is] a real possibility..."

  2. Right now, we have a yearly payroll tax surplus of approximately $150+ billion that gets tossed into the general fund to create a "unified budget", allowing politicians to pretend the deficit is lower than it really is. But even with that, we're still running big deficits during an economic expansion. Imagine our deficits when that yearly spiff goes away or even becomes a $100 billion dollar yearly debit.

    Higher taxes on a few rich people won't solve that massive swing from payroll surplus to payroll deficit. Unless the Left has a plan to eliminate vast swathes of current discretionary spending to make room for the coming mandatory spending burdens, then....yeah, there is a problem. As Alan Greenspan pointed out, "[t]ax rate increases of sufficient dimension to deal with our looming fiscal problems arguably pose significant risks to economic growth and the revenue base." Closing that mandatory spending gap with tax hikes will be incredibly unpopular and economically dangerous.

Social Security isn't going to go bankrupt, but the Left appears to be pretending that the massive forthcoming swing from surplus to deficit in the Social Security income/outlay isn't a problem. That's absurd, and it's fiscally dangerous.

Of course, when they are forced to acknowledge that forthcoming problem, their solution will involve higher taxes. It's the only solution they ever have.
 
TrackBacks
Return to Main Blog Page
 
 

Previous Comments to this Post 

Comments
Closing that mandatory spending gap with tax cuts will be incredibly unpopular and economically dangerous.

Did you perhaps mean tax increases?

 
Written By: Sigivald
URL: http://
today the pentagon released the actual cost of the iraq war at 1.5 trillion dollars. so much for fiscal responsibility.
 
Written By: SLNTAX
URL: http://
today the pentagon released the actual cost of the iraq war at 1.5 trillion dollars. so much for fiscal responsibility.
At leat national defense is a constitutional use of our tax $$$. Same can’t be said for SS and Medicare.
 
Written By: Don
URL: http://
I think the government solution to the fiscal mess of the welfare state will be along the same lines as the solution to the fiscal mess of the sub-prime mortgages.

Print more money.

Monetary inflation is the tax the government doesn’t have to legislate.

Oh, and the $1.5 trillion for the Iraq war does not hold a candle to the $50 trillion of obiligations the welfare state represents.

 
Written By: tkc
URL: http://
today the pentagon released the actual cost of the iraq war at 1.5 trillion dollars. so much for fiscal responsibility.
Wow. Why cant the anti-war idiots ever get their facts straight. Its as if they have to lie to make a point?

Here is the story from AP via usatoady which clearly says the report was not from the pentagon but was "according to a new report by Democrats on Congress’ Joint Economic Committee."

Back to the topic at hand, Social Security. It seems the only valid solution is to privatize Social Security and not just 4% like Bush wanted but the entire 15%. This will shrink the size of government which is always a good thing, and unshackle us from this massive ponzi scheme that is our current system. Here is an interesting page with some examples of the returns that could be achieved using private accounts.
 
Written By: Irony Challenged
URL: http://
At leat national defense is a constitutional use of our tax $$$. Same can’t be said for SS and Medicare.
Or The Department of Energy (which was given $23.53 billion for FY 2006)....or The Department of Education $67.2 Billion /year...

Hell, I just cleared $362 Billion over the past four years by eliminating two useless, worthless and unconstitutional expenditures and I did it all in while having a cup of joe and watching House, MD.

Imagine what I could do in a week.
 
Written By: Joel C.
URL: http://
Or The Department of Energy (which was given $23.53 billion for FY 2006)....or The Department of Education $67.2 Billion /year...
Keep up the good work.

today the pentagon released the actual cost of the iraq war at 1.5 trillion dollars. so much for fiscal responsibility.
You bought $300 golf clubs so I’m going to get a new purse!

WTF? Let me see if I get this straight, since there’s some spending you don’t lilke, all spending you like is in like Flin. Afetr all, if there HAD to be a spending cut it would start with that icky part you don’t like.
 
Written By: Ryan
URL: http://
money will be flowing from the general fund to social security
This is the beginning of the repayment of those T-bills being held in that West Virginia filing cabinet on behalf of the Social Security Trust Fund.

For the past few years, many in the "reality-based community" have been saying that since the federal government has the power to tax, this will be painless.

Unfortunately, this is not the case. In fact, it sets up a double wammie of sorts. First lose the ability to use the Social Security "surplus" to finance the "deficit" in the general budget (this has been going on since LBJ) as it completely disappears, then to be followed by the need to finance the Social Security "deficit" .. err .. "repayment" out of the general budget.

Call this "deficit" .. err .. "repayment" whatever you want, but this "deficit" .. err .. "repayment" will become a line item in the federal general budget before the next President leaves office.
 
Written By: Neo
URL: http://
Forgot to mention that the deficit" .. err .. "repayment" will grow ever year until the "famous" day of in 2046 (or such) when the whole thing in paid out of the federal budget when the Social Security Trust Fund goes dry.

Many politicians have been trying to say that the 2046 date is the "day of reckoning", but it will pass with a whimper compared to the date in the near future when the Social Security deficit" .. err .. "repayment" goes on budget.

Hiliary is trying her best to keep the smoke and mirrors fully functional till after the election, but the choices just keep getting worse as time goes on. If she wins, I expect that her "universal healthcare" will try to raid the Medicare fund to pay the Social Security deficit" .. err .. "repayment". This works, at least on paper, but really, just like Social Security, there is no money, no "lockbox", just IOUs.

I give Obama credit for not applying any more BS than necessary to the whole subject.
 
Written By: Neo
URL: http://
WTF? Let me see if I get this straight, since there’s some spending you don’t lilke, all spending you like is in like Flin. Afetr all, if there HAD to be a spending cut it would start with that icky part you don’t like.
It would start with the part that’s unconstitutional.
 
Written By: Jordan
URL: http://
Did you perhaps mean tax increases?
Yes, thanks. Fixed it.
 
Written By: Jon Henke
URL: http://www.QandO.net
I hope you’ll allow me a little analogy here and I’d appreciate any thoughts. I know comparing government budgets to household budgets isn’t perfect but I’m going to do it anyway. As I see it, for the past several decades the Social Security designated payroll taxes have, by exceeding SS expenditures, acted as a kind of credit card for the general budget spending. They have allowed administrations and congresses of both parties to spend more than the revenue would support less painfully than would otherwise have been the case. Now the card’s credit limit is approaching. The answer then, is not to increase the credit limit, by raising payroll taxes. Nor is it to transfer the balance to a lower interst card, by reducing benefits paid by SS. Rather the answer is to spend @#$@#$! less than you make. Thus SS is not the problem per se, but the spending habit that SS has supported.
 
Written By: Retief
URL: http://
There are several underlying assumptions in this argument that are not necessarily true. First, the assumption that deficits are bad. If that’s correct, we’ve been bad for a long time because the average Federal budget deficit for the past 40 years is 2.4% of GDP. The current deficit for FY 2007 was 1.2% of GDP. That’s actually much better than average. The government is not a household and it can operate at a deficit indefinitely. That does not mean a deficit of 1-2% of GDP is optimum, just that it is manageable.

Another assumption is that you can cut back a bureaucracy and cut spending to free up dollars for entitlements. Anyone who has watched the past few years as Rs and Ds fought shamelessly for their earmarks should know that spending is pretty much all legislators do. Without a strong political consensus, politicians and bureaucrats can outfight or outlast any single reform-minded political leader. GWB tried to do something reasonable about Social Security, but he was in a party of one.

Social Security would be relatively easy to fix compared to Medicare. The problem is not the details of a solution, but simply a lack of political will to engage in a solution that will, unfortunately, be more about spreading pain than gain.
 
Written By: Kurt Brouwer
URL: http://www,fundmasteryblog.com
Hey Jon, I’m so glad you’ve started blogging again. Where so many conservatives and liberals talk past each other, when I read you I learn things that are true even if the things that liberals say are also true. Such as how Social Security can not be "going bankrupt," but still cause a problem. Or how Republicans may be "attacking dissent," but Democrats are doing it just as openly.

(Also, LOL about Ron Paul being asked to donate $500 to the neo-Nazis.)
 
Written By: Noumenon
URL: http://
Do any of you reading this understand that the current Social Security "cash surplus" is just as phony as the "special bonds?"

For example. The actual surplus of Social Security payroll taxes over benefit payments and program expenses was about $48.8 billion in Fy 2007. Of this amount, about $38.3 billion was returned to low-income workers via the EITC program. That left a cash surplus of about $10.5 billion for politicians to spend.

If you really want to understand all of this, the figures are right in front of you. You just have to know where to look. Try looking at my book, "Fool’s Gold." It is all right there.

If you do not understand the question, you cannot possibly come up with the answer.

Roy V. Dent
 
Written By: Roy Dent
URL: http://

 
Add Your Comment
  NOTICE: While we don't wish to censor your thoughts, we do blacklist certain terms of profanity or obscenity. This is not to muzzle you, but to ensure that the blog remains work-safe for our readers. If you wish to use profanity, simply insert asterisks (*) where the vowels usually go. Your meaning will still be clear, but our readers will be able to view the blog without worrying that content monitoring will get them in trouble when reading it.
Comments for this entry are closed.
Name:
Email:
URL:
HTML Tools:
Bold Italic Blockquote Hyperlink
Comment:
   
 
Vicious Capitalism

Divider

Buy Dale's Book!
Slackernomics by Dale Franks

Divider

Divider