Taxes, Spending, the Fiscal Cliff, and Austerity

[JQPublic1]

I'll take another stab at it, just for the heck of it. Up until the last few few years the SS Trust fund has always taken in more than it pays out.

I don't think that is true! That yarn has been around for more than a few years. What you are echoing is the spin posited by extreme right wingers who have been trying to destroy Social Security since its inception. Fortunately, not all Republicans are extreme right wingers bent on gutting social safety nets. Ronald Reagan exemplified the latter with the speech to which I linked in a previous post. And why do you suppose that speech was necessary? Obviously, Reagan was reacting to the same kind of thinking represented in your quote above.

By law, that surplus goes into the US Treasury's general account for virtually everything else we spend money on.

No, there is no law that provides for an interchange of money between the general fund and the SS trust funds. Any SS surplus would properly be credited to the SS funds. If inter fund transactions occurred, the pubic was never informed about them. Frankly, though, I am not sure if any money was borrowed from the SS funds at all. I have seen some congressmen subscribe to the borrowing thesis while others say it ain't so. Perhaps the CBO is the best authority to address that particular question but evan a visit to their website doesn't clear up the controversy.

Technically, considering the statistical projections showing an enormous increase in future recipients, there never could have been a surplus.

The SS Trust Fund gets an IOU, which essentilly means the Treasury will cover any deficits up to the total amount of IOUs. After that, the SS Trust Fund becomes insolvent.

Again, you are speaking from the heart and not from hard verifiable facts. Your statement here is a non sequitur that really makes little sense. Congress allegedly raided the SS Trust Funds for reasons we can only guess at
In doing so, they incurred another debt that has to be repaid. Any looming insolvency is likely tied to that congressional pilferage rather than the increasing number of recipients who paid into the program all their working lives.

I don't care how you spin it, that is a deficit. It isn't on par with the other big ticket spending programs, but I think it's unwise to wait until all the IOUs are gone before we address the problem.

Sorry, but addressing the problem doesn't mean we should put Social Security on the table. None of the other debtors holding IOUs, including China and other foreign entities, are going to be denied repayment at nominal interest rates so why do you want to deny or reduce the SS benefits of Americans who worked for them by screwing with their safety nets?

Now that you and I suspect that Congress borrowed from the SS fund to finance other government programs, do you really think it is right to put Social Security on the table as a bargaining chip to lower the national deficit? I don't. In fact, the obligation to pay off the national deficit has never been questioned.
Our top priority should be to pay that money back so that all the people who paid into the ss fund for many years can get their due.

Here's the deal: When the Treasury has to make good on those IOUs, we have to borrow money from somebody for the transfer.

The entire National Deficit is an IOU! I don't hear anyone saying we should renege on any of that debt except in the case of the debt owed to the SS Funds. A better strategy would be to decrease spending associated with the general fund, to include defense allocations. Revenue generated by closing tax loophole for the rich and letting the Bush tax cuts expire on the top 2% is another popular solution


Revenue from any source would do if the law allows it. But here is the "deal" as I see it: Social Security recipients should not have to worry about having their benefits cut or messed with because congress raided the SS fund. The money would be there otherwise and there should be no talk of putting SS on the table as a bargaining chip ! We already paid for it once and shouldn't have to pay for it again through reductions or cutting of any SS benefits!

 

[PaulS1950]

Even with the reduction in Social Security payment from employees this is the data from 2011:

$819 billion collected
$725 billion paid out
-------------------------
$ 94 billion reserve for the year of 2011

At no time has less been collected than has been paid out - where is the reserve going?
Every year the reserve that is supposed to be held in trust is spent to cover other costs of big government.
The Feds will make sure that we go broke before they do - but it won't be long after.

 

[Wiseacre]

Even with the reduction in Social Security payment from employees this is the data from 2011:

$819 billion collected
$725 billion paid out
-------------------------
$ 94 billion reserve for the year of 2011

At no time has less been collected than has been paid out - where is the reserve going?
Every year the reserve that is supposed to be held in trust is spent to cover other costs of big government.
The Feds will make sure that we go broke before they do - but it won't be long after.

Where'd you get your numbers?

The following is from the Social Security Fund Trustees, I think I'll take their word over yours:

Social Security’s expenditures exceeded non-interest income in 2010 and 2011, the first such occurrences since 1983, and the Trustees estimate that these expenditures will remain greater than non-interest income throughout the 75-year projection period. The deficit of non-interest income relative to expenditures was about $49 billion in 2010 and $45 billion in 2011, and the Trustees project that it will average about $66 billion between 2012 and 2018 before rising steeply as the economy slows after the recovery is complete and the number of beneficiaries continues to grow at a substantially faster rate than the number of covered workers. Redemption of trust fund assets from the General Fund of the Treasury will provide the resources needed to offset the annual cash-flow deficits. Since these redemptions will be less than interest earnings through 2020, nominal trust fund balances will continue to grow. The trust fund ratio, which indicates the number of years of program cost that could be financed solely with current trust fund reserves, peaked in 2008, declined through 2011, and is expected to decline further in future years. After 2020, Treasury will redeem trust fund assets in amounts that exceed interest earnings until exhaustion of trust fund reserves in 2033, three years earlier than projected last year. Thereafter, tax income would be sufficient to pay only about three-quarters of scheduled benefits through 2086.

Trustees Report Summary

 

[JQPublic1]

Even with the reduction in Social Security payment from employees this is the data from 2011:

$819 billion collected
$725 billion paid out
-------------------------
$ 94 billion reserve for the year of 2011

At no time has less been collected than has been paid out - where is the reserve going?
Every year the reserve that is supposed to be held in trust is spent to cover other costs of big government.
The Feds will make sure that we go broke before they do - but it won't be long after.

Where'd you get your numbers?

The following is from the Social Security Fund Trustees, I think I'll take their word over yours:

Social Security’s expenditures exceeded non-interest income in 2010 and 2011, the first such occurrences since 1983, and the Trustees estimate that these expenditures will remain greater than non-interest income throughout the 75-year projection period. The deficit of non-interest income relative to expenditures was about $49 billion in 2010 and $45 billion in 2011, and the Trustees project that it will average about $66 billion between 2012 and 2018 before rising steeply as the economy slows after the recovery is complete and the number of beneficiaries continues to grow at a substantially faster rate than the number of covered workers.Redemption of trust fund assets from the General Fund of the Treasury will provide the resources needed to offset the annual cash-flow deficits. Since these redemptions will be less than interest earnings through 2020, nominal trust fund balances will continue to grow . The trust fund ratio, which indicates the number of years of program cost that could be financed solely with current trust fund reserves, peaked in 2008, declined through 2011, and is expected to decline further in future years. After 2020, Treasury will redeem trust fund assets in amounts that exceed interest earnings until exhaustion of trust fund reserves in 2033, three years earlier than projected last year. Thereafter, tax income would be sufficient to pay only about three-quarters of scheduled benefits through 2086.

Trustees Report Summary

After reading both posts it seems to me that both assessments could be correct. The legalese in the Trustees report is intended to mislead but doesn't really contradict Paul's source data. Here is why:

Use of terms like "non-interest income" shows an intentional effort to obfuscate the narrative for the casual reader. Then, to say that Social Security expenditures exceeded "non-interest income" in 2010 and 2011, is particularly deceptive. Obviously, the combination of non-interest and interest income would have resulted in a different assessment, more in line with Paul's data.

Further, the red highlighted text above shows in a round about way that Congress borrowed money from the SS funds and those loans are generating interest! Some SS fund asset are held in the General Fund as a result and that those funds will be redeemed as needed to offset the decline in current SS Fund assets on hand!
All in all, Paul's matrix is a simplification of one aspect of the SS Trustees report and is written plainly so that laymen can understand it!

 

[Rozman]

Can't we just spend more???
Like maybe a Stimulus plan or something?

 

[Old Rocks]

Can't we just spend more???
Like maybe a Stimulus plan or something?

You know, the people presenting their information and viewpoints have been really educational. So why change the tenor of the conversation? How about posting something on the level the the rest of the posters have been doing?

 

[Rozman]

Can't we just spend more???
Like maybe a Stimulus plan or something?

You know, the people presenting their information and viewpoints have been really educational. So why change the tenor of the conversation? How about posting something on the level the the rest of the posters have been doing?

You are right and I apologize...
So in the spirit of the Obama administration I suggest....

We tax the living shit out of anything that moves and then spend like there's no tomorrow.

Because with this administration who knows how many we have left before we just post a sign....

America...Going out of business sale...

 

[Wiseacre]

Even with the reduction in Social Security payment from employees this is the data from 2011:

$819 billion collected
$725 billion paid out
-------------------------
$ 94 billion reserve for the year of 2011

At no time has less been collected than has been paid out - where is the reserve going?
Every year the reserve that is supposed to be held in trust is spent to cover other costs of big government.
The Feds will make sure that we go broke before they do - but it won't be long after.

Where'd you get your numbers?

The following is from the Social Security Fund Trustees, I think I'll take their word over yours:

Social Security’s expenditures exceeded non-interest income in 2010 and 2011, the first such occurrences since 1983, and the Trustees estimate that these expenditures will remain greater than non-interest income throughout the 75-year projection period. The deficit of non-interest income relative to expenditures was about $49 billion in 2010 and $45 billion in 2011, and the Trustees project that it will average about $66 billion between 2012 and 2018 before rising steeply as the economy slows after the recovery is complete and the number of beneficiaries continues to grow at a substantially faster rate than the number of covered workers.Redemption of trust fund assets from the General Fund of the Treasury will provide the resources needed to offset the annual cash-flow deficits. Since these redemptions will be less than interest earnings through 2020, nominal trust fund balances will continue to grow . The trust fund ratio, which indicates the number of years of program cost that could be financed solely with current trust fund reserves, peaked in 2008, declined through 2011, and is expected to decline further in future years. After 2020, Treasury will redeem trust fund assets in amounts that exceed interest earnings until exhaustion of trust fund reserves in 2033, three years earlier than projected last year. Thereafter, tax income would be sufficient to pay only about three-quarters of scheduled benefits through 2086.

Trustees Report Summary

After reading both posts it seems to me that both assessments could be correct. The legalese in the Trustees report is intended to mislead but doesn't really contradict Paul's source data. Here is why:

Use of terms like "non-interest income" shows an intentional effort to obfuscate the narrative for the casual reader. Then, to say that Social Security expenditures exceeded "non-interest income" in 2010 and 2011, is particularly deceptive. Obviously, the combination of non-interest and interest income would have resulted in a different assessment, more in line with Paul's data.

Further, the red highlighted text above shows in a round about way that Congress borrowed money from the SS funds and those loans are generating interest! Some SS fund asset are held in the General Fund as a result and that those funds will be redeemed as needed to offset the decline in current SS Fund assets on hand!
All in all, Paul's matrix is a simplification of one aspect of the SS Trustees report and is written plainly so that laymen can understand it!

You (and Paul) are mistaken. The SS Fund is taking in less than it is paying out, which is contrary to what Paul wrote. Which was a shortfall on $45 billion in 2011, and it will continue to rise. Steeply. That money comes out of the US Treasury, we have to borrow from somebody (Chinese?) to pay that $45 billion. Interest and non-interest don't mean squat, when the SSTF has a shortfall the federal gov't has to make good on it.

 

[WillowTree]

Can't we just spend more???
Like maybe a Stimulus plan or something?

Certainly we can, because they will tell you in a hearbeat that THEY WON!

 

[JQPublic1]

You (and Paul) are mistaken. The SS Fund is taking in less than it is paying out, which is contrary to what Paul wrote. Which was a shortfall on $45 billion in 2011, and it will continue to rise. Steeply. That money comes out of the US Treasury, we have to borrow from somebody (Chinese?) to pay that $45 billion. Interest and non-interest don't mean squat, when the SSTF has a shortfall the federal gov't has to make good on it.

I see the obfuscation found in the Trustees Report and I see the intended effect it has on you, Sarge; and, that is unfortunate. Interest and non interest income does mean "squat." In fact, both types of income have to be included in determining the actual value of assets in the SS Trust Funds. To me, it is plain that the $45 Billion "shortfall" of which you speak is the difference between the money taken in through payroll taxes and expenditures. That 45 Billion "shortfall" does not take into account the interest paid and principal owed to the SSTFs from the loans appropriated by Congress. Understanding that dynamic is crucial to understanding the Trustee Report.

I'm not sure that you read your own post when you seem to ignore words like "redemption" or "non interest" income. Those words are huge keys to navigating through the calculated morass seen in the Trustees Report.
I respectfully solicit your response to the following snippets from your Trustee Report:

Redemption of trust fund assets from the General Fund of the Treasury will provide the resources needed to offset the annual cash-flow deficits

.

What do you think the phrase "redemption of Trust Fund assets from the General Fund" means here? It is a reference to the principal loan amount owed to the SSTF. You can only redeem something that has been taken away or borrowed. The annual cash flow deficits mentioned in the report( represented by the 45 Billion figure in 2011) is the difference between non interest income and expenditures;i.e. payroll taxes vs money paid to recipients. The word "deficit" here does not take into account interest payments or the principal on loans owed to the SSTFs by the General Fund.

Since these redemptions will be less than interest earnings through 2020, nominal trust fund balances will continue to grow

.

Can you explain why the SSTF balances will continue to grow through 2020? In plain language, the principal of the loan is what interest is based on. According to the above statement ,redemptions ( money paid on the principal of loans appropriated from the SSTF) will be less than interest earnings ( interest paid on the loans appropriated from the SSTF).

I rest my case. The evidence is right there in your own posts but you still don't see it. My fear is that other well meaning citizens will be as taken is as you were by the Trustees report which could only be the work of Republican operatives working from within. They had to print the truth, but nothing prevented them from trying their best to hide it behind useless rhetoric designed to confuse the voting public and make it seem that the SSTFs are receiving welfare from the General fund. Nothing could be farther from the truth. If you have reached that conclusion, read the trustees Report again. This time open your mind and try to absorb what you are reading.

 

[The Rabbi]

Even with the reduction in Social Security payment from employees this is the data from 2011:

$819 billion collected
$725 billion paid out
-------------------------
$ 94 billion reserve for the year of 2011

At no time has less been collected than has been paid out - where is the reserve going?
Every year the reserve that is supposed to be held in trust is spent to cover other costs of big government.
The Feds will make sure that we go broke before they do - but it won't be long after.

There is no "reserve." The excess money purchases Treasury notes, which the Feds spend, leaving a pile of IOUs.

But that is ancillary to the issue. Europe is not a great example because their legal structure is fairly different from ours. The difficulty in starting and growing businesses there is far harder than here, even in places like CA. So the regulatory environment itself limits economic growth, even without burdensome taxation.
Returning to the US: we have two issues. The first is the growing regulatory millstone around companies' necks. Obamacare is a big part of it, but only a part. Most businesses over 50 employees are spending from now to the end of the year trying to figure out how to game the system so they can survive. That isn't a productive use of time or money. The EPA and other agencies like the new Consumer Protection agency are spinning out regs like no tomorrow, adding to regulations and compliance costs. These are effectively taxes as real money has to be spent to comply with them.
The second is the relatively high level of corporate taxation and the gov'ts claim on overseas earnings. We now have about the least competitive tax rates for companies and every incentive to keep money overseas.
Added to this is a level of uncertainty as to what will come next. Companies must be able to plan so they can make educated guesses about costs. The Obama Administration has made this impossible with their constant streams of regs, tax proposals, and mandates.
The best approach is simply starve the beast. With less money to spend agencies will have to cut back on their activities, benefiiting private enterprise.

 

[Wiseacre]

You (and Paul) are mistaken. The SS Fund is taking in less than it is paying out, which is contrary to what Paul wrote. Which was a shortfall on $45 billion in 2011, and it will continue to rise. Steeply. That money comes out of the US Treasury, we have to borrow from somebody (Chinese?) to pay that $45 billion. Interest and non-interest don't mean squat, when the SSTF has a shortfall the federal gov't has to make good on it.

I see the obfuscation found in the Trustees Report and I see the intended effect it has on you, Sarge; and, that is unfortunate. Interest and non interest income does mean "squat." In fact, both types of income have to be included in determining the actual value of assets in the SS Trust Funds. To me, it is plain that the $45 Billion "shortfall" of which you speak is the difference between the money taken in through payroll taxes and expenditures. That 45 Billion "shortfall" does not take into account the interest paid and principal owed to the SSTFs from the loans appropriated by Congress. Understanding that dynamic is crucial to understanding the Trustee Report.

I'm not sure that you read your own post when you seem to ignore words like "redemption" or "non interest" income. Those words are huge keys to navigating through the calculated morass seen in the Trustees Report.
I respectfully solicit your response to the following snippets from your Trustee Report:

Redemption of trust fund assets from the General Fund of the Treasury will provide the resources needed to offset the annual cash-flow deficits

.

What do you think the phrase "redemption of Trust Fund assets from the General Fund" means here? It is a reference to the principal loan amount owed to the SSTF. You can only redeem something that has been taken away or borrowed. The annual cash flow deficits mentioned in the report( represented by the 45 Billion figure in 2011) is the difference between non interest income and expenditures;i.e. payroll taxes vs money paid to recipients. The word "deficit" here does not take into account interest payments or the principal on loans owed to the SSTFs by the General Fund.

Since these redemptions will be less than interest earnings through 2020, nominal trust fund balances will continue to grow

.

Can you explain why the SSTF balances will continue to grow through 2020? In plain language, the principal of the loan is what interest is based on. According to the above statement ,redemptions ( money paid on the principal of loans appropriated from the SSTF) will be less than interest earnings ( interest paid on the loans appropriated from the SSTF).

I rest my case. The evidence is right there in your own posts but you still don't see it. My fear is that other well meaning citizens will be as taken is as you were by the Trustees report which could only be the work of Republican operatives working from within. They had to print the truth, but nothing prevented them from trying their best to hide it behind useless rhetoric designed to confuse the voting public and make it seem that the SSTFs are receiving welfare from the General fund. Nothing could be farther from the truth. If you have reached that conclusion, read the trustees Report again. This time open your mind and try to absorb what you are reading.

Alright, one more try at this, then I'm giving up. If the SSTF takes in less money than it pays out, that is a deficit that must be met by the US Treasury General Fund. Period. Let's try an example: say the SSA takes in $800 billion in 2011 from people paying in, but they paid out $845 billion to beneficiaries. So the SSTF has a $45 billion deficit for 2011, as it says in the summary.

Let's say further that the SSTF has 2 trillion dollars in treasury bonds, for which it is paid 3% interest. So, the SSTF now has 2 trillion plus 60 billion in interest in treasury bonds earned in 2011, okay? But they have a deficit of $45 billion in 2011, which means they have to cash in $45 billion in TBills. Where does the Treasury get that $45 billion? Only one way - they borrow it, and our debt just went up $45 billion dollars. Whether the interest from the TBills exceeds the SSTF shortfall or not does not really matter; in the end we the taxpayers will have to cover the SSTF shortfall.

And at some point the SSTF will use up the last of it's TBills and will be broke; in about 20-25 years I think. You think we should wait for that to happen or do somerthing about it now? From the summary:

" The trust fund ratio, which indicates the number of years of program cost that could be financed solely with current trust fund reserves, peaked in 2008, declined through 2011, and is expected to decline further in future years. After 2020, Treasury will redeem trust fund assets in amounts that exceed interest earnings until exhaustion of trust fund reserves in 2033, three years earlier than projected last year. Thereafter, tax income would be sufficient to pay only about three-quarters of scheduled benefits through 2086. "

The trust fund reserves talked about here are TBills that US taxpayers have to redeem. It's important we all understand this: when the SSTF has a shortfall, the money that is used to make up the difference comes from INCREASING THE DEBT.

 

[Sallow]

Clinton raised taxes on the rich in '92. And the economy cratered, right? Not quite. Longest sustained economic boom in our naton's history.

Then Bushie Baby cut taxes, while engaged in two wars. And the economy did great, right? LOL. 16 trillion in homeowners value and 401Ks lost in two years, from 2007 to 2009.

So, what are we to believe? Recent history or rightwing ideology?

It is not just recent history.

Early America used to military to clear cut forests and build stuff.

FDR put into place massive spending programs. As did Eisenhower.

Seems that during those times, the American economy grew..and America expanded.

 

[saveliberty]

The economy goes through cycles regardless of who's in office. Congress and the President can make that cycle go faster or slower and fall more easily or harder.

 

[The Rabbi]

Clinton raised taxes on the rich in '92. And the economy cratered, right? Not quite. Longest sustained economic boom in our naton's history.

Then Bushie Baby cut taxes, while engaged in two wars. And the economy did great, right? LOL. 16 trillion in homeowners value and 401Ks lost in two years, from 2007 to 2009.

So, what are we to believe? Recent history or rightwing ideology?

It is not just recent history.

Early America used to military to clear cut forests and build stuff.

FDR put into place massive spending programs. As did Eisenhower.

Seems that during those times, the American economy grew..and America expanded.

So what happened this time? Obama has spent more than every other president combined. Where is the expansion??

 

[JQPublic1]

Alright, one more try at this, then I'm giving up.

I am with you here! We have both presented our arguments with zeal and civility. I say let those with the inclination sift through the bewildering array of posts and arrive at their own conclusions. Great debate! Thanks!

 

[jaymiewilson]

So you ask, what does this have to do with our fiscal cliff? Well, the president is asking for tax hikes and the republicans are asking for spending cuts. Hard to say what we'll end up with, but I'm pretty sure it'll be weighted more to the tax hike side than the spending cut side. In a recent article appearing the USAToday by Matthew Melchiorre of the Competitive Enterprise Institute, the current fiscal cliff as it is now calls for 4 times the amount of tax increases than spending cuts.

snippet:

Beginning next year, $136 billion of spending cuts are scheduled to take place according to the Congressional Budget Office (CBO). These include the mandatory sequestration of defense and discretionary spending resulting from the failure of last year's bipartisan "supercomittee" to agree on a 10-year plan to cut the federal budget by $1.5 trillion. They also include the end of unemployment benefit extensions and reductions in Medicare reimbursement rates. Keep in mind these aren't real cuts in overall government spending, but merely reductions in its rate of growth.

They are also trivial compared to the $532 billion of scheduled tax increases that CBO also reports. Most of this comes from income tax rates reverting back to pre-2001 levels and the alternative minimum tax expanding deeply into middle-class households. That's roughly four dollars of tax increases for every one dollar of so-called spending cuts.


It is true that significant spending cuts will hurt short term. But it needs to be done, the big deficit drivers are defense, medicare and medicaid, and social security. These programs must be reined in to be sustainable not just for the seniors who need them now but also for younger generations who will need them later. Combine that with tax reform that increases revenue and a cap on gov't spending and we're in business. I think this is Obama's big chance to make his mark in American history; if he can lead us to reasonable and workable solutions that will succeed long term, he could go down as one of our best presidents. If he doesn't, he'll take his place next to Jimmy Carter.

Somehow, it's true.

 

[PaulS1950]

look here for the graph on spending:
Image Detail for - 2011 Federal Spending

and here for the graph on income:
Image Detail for - 2011 Federal Income

Now you look at the graph and tell me that the SS income was less than was spent!

 

[Wiseacre]

look here for the graph on spending:
Image Detail for - 2011 Federal Spending

and here for the graph on income:
Image Detail for - 2011 Federal Income

Now you look at the graph and tell me that the SS income was less than was spent!

Your graphs weren't very clear on SSTF income and expenditures. I'd rather go with what the SSTF trustees said in their report:

" Social Security’s expenditures exceeded non-interest income in 2010 and 2011, the first such occurrences since 1983, and the Trustees estimate that these expenditures will remain greater than non-interest income throughout the 75-year projection period. The deficit of non-interest income relative to expenditures was about $49 billion in 2010 and $45 billion in 2011, and the Trustees project that it will average about $66 billion between 2012 and 2018 before rising steeply as the economy slows after the recovery is complete and the number of beneficiaries continues to grow at a substantially faster rate than the number of covered workers. "

 

[PaulS1950]

The graph shows that 819 billion dollars were collected in SS taxes - with the employee cut in effect and that the amount paid out was 725 billion. I don't know how much clearer you can get than that.
Believe what you want to, I try to keep from arguing matters of faith with logic as belief trumps the facts every time.