Wisconsin is just a primer- the Medicare & SS battle(s) await

[Trajan]

I think Jenkins does a good job laying out some of the broader points. I will add that there is a huuuuge battle coming in that, even to get to the point where politicians can float ides like adding years to the retirement age, means testing benefits etc. there will be a gnashing of teeth driven by standard bearers from both sides that will rev this up barley a moment after the first sentence is complete as to suggestions for deailing with either entitlment issue.

Wisconsin is just a tune up.




Let's Begin Obama's 'Conversation' on Entitlements
A couple retiring last year paid $109,000 into Medicare but can expect $343,000 back from the system.
FEBRUARY 26, 2011

some salient points from the article-


Don't doubt that Mr. Obama's real impulse, like that of most Democrats, is to let things ride and then simply, amid a crisis, start slashing benefits for the "rich" while also raising taxes on "the rich." Unspoken has been a Democratic assumption that an aging electorate, in a crisis, would be willing to tax itself to the hilt to prop up an unreformed or barely reformed Social Security and Medicare.

snip-

Let's lay down a couple of markers for "the conversation" Mr. Obama pretends he wants to have. The transition to a new system, in which workers save for their own retirement consumption, will have to be financed—that is, we'll have to borrow to settle the claims of those who are retired or nearing retirement and can't be left in the lurch.

Medicare is the real killer. According to Eugene Steuerle of the Urban Institute, an average couple retiring last year can look forward to consuming Medicare benefits with a present value of $343,000, having paid Medicare taxes with a present value of $109,000.

And don't let that figure get your hopes up, because even that $109,000 is not available today. That money was spent long ago. The government's trust funds are a fraud. Indeed, by some large amount, society missed out over many decades on domestic savings and investment that would have taken place had workers not been relying on unfunded government promises to support them in retirement.

snip-


The flip side of this depressing consideration, though, is a happier one. Moving toward a system of real savings, in which payroll taxes would flow into some version of personal accounts controlled by the worker, would bring a big improvement to incentives. We could expect a sizeable growth dividend to help finance the transition.

By "finance the transition," of course, we mean today's workers having to reach into their own pockets twice, paying for their own retirement while also making up for the saving their parents and grandparents didn't do. When people talk about generational injustice, this is what they mean. But the pain can be lightened and spread more evenly with borrowing. Here's where we should not be afraid of debt. The bond market can be trusted to distinguish between good debt and bad debt—between borrowing to fix the system and borrowing to prop it up.

read more at-
Jenkins: Let's Begin Obama's 'Conversation' on Entitlements - WSJ.com

 

[boedicca]

Indeed. IBD has a good piece today on what the Social Security Trust Fund's value actually is: Less Than Zero.

Every dollar’s worth of special-issue Treasury bonds held by Social Security — and there are currently about $2.6 trillion worth — is a dollar that Treasury must come up with by issuing new debt, raising taxes or taking away from the rest of government, which is in far worse fiscal shape.

But an analysis done by the Congressional Budget Office last year on the effect of high government debt levels suggests that unless the government gets its fiscal act together, the value of the trust fund is less than zero.

Under the Alternative Fiscal Scenario, which approximates current policy, CBO finds that elevated debt levels would crowd out private investment and restrain economic growth to a significant degree. Specifically, GDP would be 15% smaller in 2035 under the current policy trajectory than it would be if debt stabilizes around current levels, as it would under the baseline scenario.

While CBO assumes the current-law trajectory for Social Security under both the alternative and baseline scenarios, what matters for its crowding-out analysis is suffocating debt levels, not what contributes to the debt.

Debt would be 185% of GDP in 2035 under current policy — vs. 79% under the baseline scenario. By that point, using assumptions from Social Security’s 2010 annual report, redemptions of trust fund bonds would have raised debt levels by about 18.5% of GDP, or $4.5 trillion in 2010 dollars.

In other words, debt incurred by paying unfunded Social Security benefits would account for nearly 1/6th of the crowding-out effect, curbing GDP by about 2.6%.

So, under the current budget trajectory, here is roughly the bottom-line value of the Trust Fund in 2035.

The trust fund would cover $317 billion in unfunded benefits (in today’s dollars), but the government would owe $236 billion in interest on the $4-trillion-plus in extra debt, and taxable wages would be about $235 billion lower (assuming a tight link between wages and GDP).

The Social Security Trust Fund May Be Worth Less Than Zero


Social Security should be viewed as insolvent now, and restructured to prevent the debt tsunami which will crater economic growth.

 

[kyzr]

I will be the most surprised guy on the planet if the GOP & DEMS ACTUALLY AGREE on ANY reduction of entitlements. Its necessary, but the pols just don't have the guts to fix entitlements. IMHO they should raise the taxes on the rich to the Clinton era rates as their contribution. We know that those tax rates work well as proven in the 1990s.

 

[boedicca]

They won't....yet.

The GOP majority in the House will propose entitlement reform, and likely get something passed as part of the budget bill Ryan is leading. The Senate, however, will not pass it. We'll have to wait until 2012, which is why it is critical to defeat Obama and turnover the Senate.

 

[Trajan]

I am re-reading;

The Rise and Fall of the Great Powers ;
Economic Change and Military conflict, 1500-2000
by Paul Kennedy.


It is apt, to the max. The long and short of it is-

The ability of nations to sustain themselves in war and peace at a 'high' level is to a huge extent dependent on their ability to.....manage their fisc over the long term. No empire or city state, not Athens or Alexander, not Rome or Great Britain, any advanced state has ever survived poor mismanagement of their ability to structure and re-structure their long term debt.


Its very readable and well worth a look.

[ame=http://www.amazon.com/Rise-Fall-Great-Powers/dp/0679720197/ref=sr_1_1?ie=UTF8&qid=1298772551&sr=8-1]Amazon.com: The Rise and Fall of the Great Powers (9780679720195): Paul Kennedy: Books[/ame]

Yale historian Kennedy surveys the ebb and flow of power among the major states of Europe from the 16th century when Europe's preeminence first took shape through and beyond the present era when great power status is devolving again upon the extra-European states. Stressing the interrelationships among economic wealth, technological innovation, and the ability of states efficiently to tap their resources for prolonged military preparedness and warmaking, he notes that those states with the relatively greater ability to maintain a balance of military and economic strength assumed the lead. Kennedy never reduces the analysis to crude materialism or empty tautology. Stimulating, erudite, carefully crafted, and readable; for public and academic libraries. James B. Street, Santa Cruz P.L., Cal.

 

[Old Rocks]

Ah, so now we have it. As soon as the union issue is taken care of, i.e., no unions, then we steal all the SS funds. And we have the ideal Conservative America, in which all but the very wealthy and their enforcers work until they drop dead for just enough to have energy for the next days work. What a beuatiful concept! How the Kock Brothers must be loving you idiots.

 

[Trajan]

Ah, so now we have it. As soon as the union issue is taken care of, i.e., no unions, then we steal all the SS funds. And we have the ideal Conservative America, in which all but the very wealthy and their enforcers work until they drop dead for just enough to have energy for the next days work. What a beuatiful concept! How the Kock Brothers must be loving you idiots.

humm, lost your meds again


what in the hell are you talking about?

 

[American I Am]

I'm a taxpayer, and since were getting our money back from the unions and public sector employees, why stop there. The Hell with SS, Welfare, Wic, Hud Housing, Medicaid, Medicare and all that other B.S. that gets into my wallet.

I WANT THE PIECES OF MY PIE BACK, let Me invest my own money as I see fit !!!!

 

[skeptic]

Since Social security has been paid for in full in advance by 90% of it's recipients, and Medicare hasn't been.....I hope that SS be preserved and that medicare either be fazed out or that co payments be installed to make it balance inputs to outputs.

As per the missing $2.6 trillion in the SS trust fund.....either refund those who paid in that amount, or finance the benefits. You can't tax people $2.6 trillion and then renig on your resultant obligations.

 

[Polk]

I don't see the urgency. The argument is that we need to pass massive benefit cuts to avoid the future horror of having to pass massive benefit cuts. It's a bit circular.

 

[skeptic]

I don't see the urgency. The argument is that we need to pass massive benefit cuts to avoid the future horror of having to pass massive benefit cuts. It's a bit circular.

Not really. Medicare is projected to be some $75 trillion, or $37 trillion over budget by 2050. Depending on whose figures you adhere to. The sooner we install some remedy the less we bleed.

Social Security is already paid for for another 5 years or so, but since the funds were stolen by republicans who wanted to bolster defense and give hand outs to defense and "security" contractors the money is all spent. Even tho it's beneficiaries paid in full in advance.

Beyond 2015 SS goes into the red. Upping the age when benefits apply and raising the upper limit on taxable income stabilize that system indefinitely. We should do it.

Medicare/caid should either be phased out or restructured.

 

[Polk]

I don't see the urgency. The argument is that we need to pass massive benefit cuts to avoid the future horror of having to pass massive benefit cuts. It's a bit circular.

Not really. Medicare is projected to be some $75 trillion, or $37 trillion over budget by 2050. Depending on whose figures you adhere to. The sooner we install some remedy the less we bleed.

Social Security is already paid for for another 5 years or so, but since the funds were stolen by republicans who wanted to bolster defense and give hand outs to defense and "security" contractors the money is all spent. Even tho it's beneficiaries paid in full in advance.

Beyond 2015 SS goes into the red. Upping the age when benefits apply and raising the upper limit on taxable income stabilize that system indefinitely. We should do it.

Medicare/caid should either be phased out or restructured.

I think lumping Social Security and Medicare is misleading. Social Security is fine. Medicare is the giant hole.

 

[Trajan]

I don't see the urgency. The argument is that we need to pass massive benefit cuts to avoid the future horror of having to pass massive benefit cuts. It's a bit circular.

Not really. Medicare is projected to be some $75 trillion, or $37 trillion over budget by 2050. Depending on whose figures you adhere to. The sooner we install some remedy the less we bleed.

Social Security is already paid for for another 5 years or so, but since the funds were stolen by republicans who wanted to bolster defense and give hand outs to defense and "security" contractors the money is all spent. Even tho it's beneficiaries paid in full in advance.

Beyond 2015 SS goes into the red. Upping the age when benefits apply and raising the upper limit on taxable income stabilize that system indefinitely. We should do it.

Medicare/caid should either be phased out or restructured.

Social Security is already paid for for another 5 years or so, but since the funds were stolen by republicans who wanted to bolster defense and give hand outs to defense and "security" contractors the money is all spent. Even tho it's beneficiaries paid in full in advance.

can you run that by me again, slow ...as in how exactly?

 

[Agit8r]

Medicare is the giant hole.

isn't that what healthcare reform is supposed to solve?

 

[Polk]

Medicare is the giant hole.

isn't that what healthcare reform is supposed to solve?

It will improve the situation, but it won't be enough alone. Frankly, we need to be in the mode of constant evaluation and reevaluation. Lots of seed projects. See what works and what doesn't. Expand of the good, eliminate the bad.