The seeds of this crisis were planted long ago, by previous generations. Our parents and grandparents had noble aims. They saw poverty among the elderly and created Social Security. They saw sickness and created Medicare and Medicaid … If we had chosen to tax ourselves to pay for this spending, our current problems could have been avoided.
Brad correctly notes:
Mankiw is talking about President Reagan, his supporters, and his appointees. Mankiw is talking about President George W. Bush, his supporters, and his appointees. And--as one of George W. Bush's cabinet-level appointees, Chairman of the Presidents Council of Economic Advisers in 2003-2004--he is talking about himself. Is it too much for me to expect, from him, an apology to America? A whispered: "I am sorry"? An admission that the unfunded 2001 tax cuts that he cheerled for were a mistake, and that we as a nation would have been better off had they not been passed? An admission that the unfunded 2003 tax cuts that he cheerled for were a mistake, and that we as a nation would have been better off had they not been passed? An admission that the unfunded 2003 Medicare Part D prescription drug benefit that he cheerled for was a mistake, and that we as a nation would have been better off had it not been passed?
Let me simply add this: we did choose to tax ourselves to pay for Social Security benefits.
19 comments:
" . . . if we had chosen to tax ourselves to pay for this spending . . ." What is he suggesting? Does he suggest that each year's expense should be paid with current tax revenues? He should explain who he thinks should pay the tax. Look at the distribution of income, you'll see that 60% of all income goes to 20% of the households (I'm looking at a Brookings/Urban Institute Tax Policy Center report for 2006 published in State of Working America, page 79), pre-tax. If you "tax ourselves to pay" as suggested, you have to drastically increase the taxation on that top 20%. Who else are you going to tax? I think that proposal would work if you had a more just and even distribution of income -- he is not proposing that idea.
Ben:
75% of each year's expense is paid with general revenues, and 25% is paid by the beneficiaries.
There are 2 perspectives the government uses to analyze the "funding" and "funded status" of Social Security: the trust fund perspective and the budget perspective.
I have several papers with interesting excerpts (and links) which I can provide, from reputable third parties, such as the Treasury.
Part D, from the trust fund perspective, is always fully funded, for it counts on the 75% of revenues from the general fund and the 25% from the beneficiaries to always be potentially available.
The budget perspective says okay, let's assume that is true, what is the impact on the budget? The impact is the 75% of general revenues, which is an immediate budget expense, which increases the deficits every year.
Part D is a good illustration, in my opinion, of demonstrating that the budget perspective is more realistic and objective than the trust fund perspective.
Don Levit
Don:
You seem to echo the lie/error from Mankiw as properly exposed by Brad Delong. The Social Security system is currently using a small portion of the interest due on trust fund holdings to supplement benefit payments. But this does not reflect anything near 75% of those benefit costs. Even with the fiscal train wreck engineered by Mankiw and other rightarded idiots, the SS tax revenues (eg WAGE TAXES ON WORKERS BEGINNING WITH THE FIRST DIME EARNED) are still providing the primary funding for Social Security. NOT THE GENERAL FUND (income, estate, and excise taxes). Social Security is off budget so that Republicans can't lie about the facts of the funding. But it doesn't seem to matter. They still lie with every breath even when they are pretending to be economists.
Trucker:
The 75% of general revenues I am referring to is for Part D. The 25% is paid by the beneficiaries.
There is no trust fund or only a minimal one, for it is money-in, money-out.
There are basically 2 perspectives the government has for funding - the trust fund perspective and the budget perspective.
From the trust fund perspective, Part D is fully funded, for it is assumed general revenues and beneficiary revenues will always be available.
From the budget perspective, the same assumption is made, but it goes into more detail. What effect does this have on the budget?
The 75% of general revenues is a direct, immediate expense for the budget.
Of course, with deficits, part of that is paid with revenue and part with debt.
The 2 perspectives are strikingly different when it comes to Part D.
Many liberals seem to side with the trust fund perspective, thinking that Treasury securities are like cash, even though new cash must be raised, or, more likely, debt held by the public must be increased to tap the Social Security trust fund.
The budget perspective is more objective and realistic.
Don Levit
Don:
Don't claim a 75% funding from general revenue and then follow it with a discussion about about Social Security. That is a form of lying that is employed by all rightarded filth and their ditto head toadies. I will add that anyone who throws around "unified budget" numbers when discussing fiscal deficits and general revenue is a lying sack of Republican pig manure.
Discussions concerning Social Insurance systems should be clearly delineated. Medicare part 'D' should have been passed with an increase in PROGRESSIVE Medicare taxation to fund the expense. This was not done because Republicans seek to kill Medicare. They know if it has its own budget, just like Social Security, then it will not be subject to the lying pig shit necessary to kill it.
Your crap about 2 perspectives is exactly that: _CRAP_. The SS trust fund is an accounting of the money stolen from the producer class so as to grant tax relief to the rich. Now the rich and their toadies (that would be you, Don). Are trying to get out of paying the piper.
"
Trucker
Very well said.
Don
Take to heart what Trucker has said in reply to your rambling commentary. You can't talk Part D, a reference to Medicare, and then bring Social Security or the SS Trust Fund into the same conversation. They are two different issues and are legislatively distinct form one another. Is it really too difficult to understand the distinction between Social Security and Medicare. They do share a common beneficiary class, but they are otherwise unrelated.
Jack and Trucker:
i didn't intend to bring up Social Securuty, for, indeed, the post is about Medicare.
When Trucker stated that Social Security was paying nowhere near the 75% of benefit costs, he was confusing Social Security with Medicare.
My response to him about Social Security was from his response.
There are, indeed 2 fundung perspectives, and I can suypply the supportable government excerpts and links.
The same with the unified budget. Trucker seems to suggest that doesn't exist.
That's absurd, and it's your word against the Treasury's , CBO GAO, etc.
Your arrogance is a form of weakness, not strength.
Don Levit
Don
Have you gone postal on us? That one or more agency sees fit to use a euphamism, unified budget, does not lend legitimacy to the term as a legal construct. The Trust Funds are not in a combined general budget,ie the unified budget, because of congressional legislation signed into law by a sitting US President. Here's the link: http://www.ssa.gov/history/BudgetTreatment.html Now scroll down to the section entitled "Off-Budget" Again-" and you will be able to read the Social Security Administration's clear discussion of the issue. Sub paragraphs 1) and 3) are the most relevent to this issue.
Also, you state that you had not intended to bring up Social Security as this thread is about Medicare. How then do you explain the first sentences of your first comment, above?
"Ben:
75% of each year's expense is paid with general revenues, and 25% is paid by the beneficiaries.
There are 2 perspectives the government uses to analyze the "funding" and "funded status" of Social Security: the trust fund perspective and the budget perspective."
Jack:
If Social Security is off budget, then why have their surpluses reduced our deficits?
Have you ever heard of a unified budget?
Don Levit
Don
Read the replys to your uninformed comments. Unified budget euphamism has already been asked and answered. The Treasury borrows funds from the Trust Fund and in so doing covers the true extent of the deficit with those borrowed funds. Total Treasury debt in the name of the SS Trust Fund is said to be in the neighborhood of $2.5T. Interest due on that amount is the only actual connection to the general budget. Did you not bother to read my previous reply to your unified budget reference? It's a device used by those hoping to make their positions look other than what they are. The legislation is clear cut. The Trust Fund is seperate and apart from the general budget. There is no further discussion warranted on this point. Take it up else where with those that make up the deception.
Jack:
If the trust fund is separate and apart from the general budget, how did we have surpluses in 3 of the Clinton years?
Expenses exceeded revenues.
Answer: the trust fund surpluses were counted as a positive part of the budget.
Don Levit
Don
That only means that the so called surplus was illusory, not real, a slight of hand. What something is called is not necesarilly waht it is. Possibly they decided that money borrowed can be considered as income and thereby eliminate deficits in the budget. If so they have only decreased the deficit while at the same time increasing the government level of debt. I'm not an accountant, but that does seem like a bit of tricky account balancing. The Treasury Dept issued notes for every dollar taken from the FICA income stream. That in itself classifies the FICA portion of the income as debt.
Jack:
You are exactly correct.
If I added anything, I would be subtracting from the truth.
Don Levit
The Clinton surpluses (there were two) are pictured HERE: We see that the ON BUDGET numbers were indeed in surplus in 1999 and in 2000. Yet, when we look at the national debt we see that the debt increased in both 1999 and 2000. That is because the government was, in fact, in surplus but the FICA tax revenues were converted to T-Bonds and placed in the SS trust fund anyway according to law. Hence, all of the excess money paid by working people was INVESTED in T-bonds even though government did not need the money. And that INVESTMENT/SAVINGS was added to the National debt. For Jamie Galbraith, Warren Mosler, and other MMT people this is a victory in clear cut terms. Don, need not apply. And it seems that there are others that are suffering the same hallucinations regarding modern fiat money. The sum of the deficits (and surpluses) do not necessarily project the national debt. The Fed will have reduced the National Debt by $600B with QE2.
Jack:
SS and Medicare do not share a beneficiary class. SS is for wage earners only. Medicare is available to all persons over age 65 who have been legal residents of the USA for 5 years. If you have qualified for SS then government will subsidize your medical insurance payments. But ALL people over 65 can opt for Medicare insurance by paying for it out of pocket. It is a VERY GOOD insurance policy for the money paid even without the subsidy. Medicare Buy In.
I used the term beneficiary class only in reference to age. Both serve people from the same age group.
Trucker wrote:
The FICA revenues were converted to T-Bonds and placed in the SS Trust Fund.
You left out one step.
Before the bonds were issued, the Treasury borrowed the FICA revenues to pay for other government expenses, thus lowering the deficits.
I don't think Roosevelt envisioned this to happen, for the program was to be self-supporting, without using general revenues.
Do you realize the federal retirees' trust fund works similarly to SS.
It has a liability of $5 trillion, and is listed on the balance sheet.
That is because when federal retirees and the federal government pay in money, the FASAB (the accounting advisor for the federal government) considers it an exchange transaction.
That means when service is given, a liabulity is created to pay back for the employees'retirement due to the services offered.
SS taxes are non exchange transactions, That means you pay in, but the government is not obligated to pay you back, other than for the next year.
I see you are a MMT fan.
Does that mean you believe Medicare Part D to be fully funded?
Don Levit
No, Don.
I didn't "leave out one step" or two or three or any. In 2000, the ON BUDGET affairs of government were cash positive and there was no need to "borrow". The excess general revenue from taxes (other than FICA taxes) was used to actually retire some of the "debt held by the public" as illustrated here. The surplus wasn't large as it turns out and as you can see in the picture I provide
And we aren't discussing the federal workers fund of green cheese on the moon, Don. We are discussion the SS trust fund and you are sadly misinformed or you are a liar. As to what happened to the actual reserve balances: they were reduced by the excess FICA tax proceeds and replaced by T-Bonds in the SS trust fund. QE2 is doing the reverse of that.
I am not simply an MMT "fan". I see reality as it is. Going back to the graph of the national debt we see the divergence of the gross debt and the public debt as the Republicans rip off the working class in order to hide the result of tax cuts for the rich. That starts in the mid 80's when Allen GreenJeans and his Libertarian wackadooldle pals dream up this "savings scam". FICA taxes should have been greatly reduced in the 90's and the early 2000's as opposed to granting tax relief to the rich as economic stimulus. The economic results would have been much more positive. But that is water under the bridge. The rich people now owe the worker bees and that is the way it is. Income taxes on the thieves must be increased to repay the stolen output.
Trucker:
You are correct about the surplus and the budget.
The trust fund reserve balances were reduced because they were loaned to the Treasury to pay for current expenses and lowered the deficit as well.
When it comes time to tap the trust fund, it will be honored as the Treasury pays all expenses, whether there is a trust fund or not - with general revenues and debt.
Do you want a reputable government citation?
I have plenty of them.
It's not your word against mine. It's your word against the GAO, CBO, Treasury, and even the Social Security Administration itself!
Don Levit
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