Redstate

Senator Graham (R-SC), I believe, has been rumored to be pushing for a boost in the cap. I'd personally push it up to $300k, but, at that level, I'd also reduce the rate to make it less regressive (and also less of a tax hike). I'd also close some loopholes to make non wage compensation from one's employer subject to FICA. You can be sure if the cap is raised, well-paid people will understandably scurry, John Edwards-like, to shift more of their compensation to dividends or other loopholes (I am ONLY talking about compensation from one's employer, clients, etc.; I oppose making investment income in general subject to FICA).

I think any major boost in the cap should be phased in, however, perhaps over five years. Why? Because in large swathes of this country, $100k or $150k doesn't exactly make one rich, especially if one has bought a home recently (at the highly inflated prices) or is, say, paying for kids' tuition or helping elderly parents. It's only fair to give people time to adjust. While we're at it we might want to consider phasing in a 50 cent increase in gasoline taxes (ten cents a year) for further deficit reduction purposes, along with, perhaps, a two-year freeze in discretionary spending.

Getting rid of wage indexation is purportedly on the agenda, and this will make for huge savings, which is why I'm very much in favor of it. I think, though, again, to be fair, folks should be grandfathered in under the old benefits formula based on what they've paid under the old formula (which, after all, didn't give them a PRA option). Also, participation in a PRA (with the accompanying benefits reduction) should be entirely voluntary, I think, at least for workers over, say 30 (or 35, or 40, take your pick). My point is only that we should give folks getting near to retirement the courtesy of allowing them to continue with the process they've been planning for.

We also might want to consider getting our savings from a mixture of benefits reindexation (away from wages) AND further increases in the retirement age, rather than rely solely on the former. There is something to be said for Social Security's purpose as a hedge against longevity; boosting the retirement age doesn't undermine that, whereas reindexation does. I think it might be worth consideration to, say, set the benefits formula using a number half way between wages and prices, and make up the difference with further increases in the retirement age. If the savings to the treasury work out the same, I can't see the problem, and frankly think this is more consistent with reality. After all, lifespans have increased tremendously over the years, but so, too, have living standards (which is what wage indexation is supposed to help retired folks keep up with).

Finally, although I agree with the idea of allowing PRA contributions to be larger, even up to 6.2%, I think realistically we may need to put a cap on that (say, $3-$4k, ideally adjusted upwards for inflation on a regular basis). Earlier reports had it that the White House was considering making the contribution cap a mere $1,000. This is a niggardly pittance, in my opinion, and is very inadequate. But allowing higher paid foks to divert $10k or $15k may be more than the government can afford.

Unlimited wage tax base; raise base to $200,000; phase in to give people time to adjust---TIME TO ADJUST!!!

Puleeze.We don't need our taxes raised. All of us have state and local taxes (income, sales,property,user fees) exploding around us. You want to raise our taxes another 12.4% (don't forget the employee pays BOTH sides of the tax since if there was no tax the employer contribution would be takehome pay).

Let's try that unheard of solution of cutting spending---or even more radical, having a national government that follows the constitution.

Remember, there is no segregation of SS funds--they all go into the big spending pot. Cut spending.Yeah I know, about as much chance as a snowball surviving a Death Valley summer.

I generally agree with your sentiment for spending control.  But that isn't really on the table in my proposal.  Is this compromise (including spending control in the index change) better than the current system.  I don't claim it is ideal, but I do think it is better.  Let's not let the perfect be the enemy of the good.

As one might have gathered from my previous posts I'm not a huge fan of PRA's, but would be able to compromise on this if it were shown in hard estimates (tongue in cheek) that the reductions in benefits would about equal the decrease in revenues that PRA's would engender.  People who think SS works passably well now generally look at PRAs as obstacles to securing SS's finances, but if estimates of revenue under proposals 1 and 2 give some reassurance that we're not underfunding the program, most of the objections vanish.  Of course those objections exist because many feel that it's impossible to work PRA's into the program without such a loss of funds.  Further, I agree that one way to decrease benefits that makes perhaps the most sense is to increase the retirement age.  With that twist, I otherwise think that it's a workable compromise.

Puleeze.We don't need our taxes raised. All of us have state and local taxes (income, sales,property,user fees) exploding around us. You want to raise our taxes another 12.4% (don't forget the employee pays BOTH sides of the tax since if there was no tax the employer contribution would be takehome pay)...Let's try that unheard of solution of cutting spending...

Couldn't agree more. You draft a petition to the Republican Congress and the White House, and I'll sign it, okay?

Just to step away from the SS debate, this seems to invite economic disaster.  I'm sure the Sierra Club and LCV crowd would love to depress the demand for gasoline this way, but think of the increased price on consumer goods, travel, etc.  I may be open to the idea of adjusting the gas tax for inflation, but the suggestions of raising taxes on this thread scare me.  Save for a national emergency or a time of war, we should always be looking to cut taxes, not to raise them.  Likewise, it's time to bring spending under control by applying innovative ideas to public policy problems.  Let's leave the tax-and-spend philosophy to Nancy Pelosi, Harry Reid, and their ilk.

to the extent that we allow folks to divert FICA points into PRAs, one could argue it's effectively a cut in the FICA tax. So, depending on numbers, increasing consumption taxes of any kind (including energy) is arguably not a net tax increase (again, it depends on the numbers) but rather a change in the composition of taxation. I know plenty of conservatives, for instance, who might support relying more on consumption, and less on income taxation, to fund the government's needs.

As a Blue Stater, I am extremely concerned about budget deficits and the short and long term ramifications thereof.  Any talk of PRA's without replacing the funding is a nonstarter for me until we have the rest of the budget under control.  Our deficit is an extremely serious problem, so proposing to make it much worse is absolutely nuts to me.  I would like PRA advocates to commit to bringing the general fund into balance (that is, without using the Social Security surplus), even if that means cancelling all of Bush's tax cuts, seriously cutting the military, and in general facing the consequences of Bush's fiscal policies.

the individual doesn't have complete freedom over the FICA-earmarked funds, whether they go into a PRA or remain in the traditional social security Ponzi scheme.  They have to go somewhere.  Besides, I believe this money belongs to the individual, not the state.

I think SS reform needs to break away from the pyramid nature of SS and pair individuals with their own unique accounts.  Any shortfall should be made up through general tax revenues.  A more libertarian approach (to an extent), would be to legalize marijuana and let government revenues on sales go to fund the SS gap.

I'm one of the conservatives who is adamantly opposed to taxing consumption.  The constitutional issues of this proposition aside, I think a nat'l sales tax or any other consumption based tax is so easily disguised that citizens won't fully realize how much the state is taking from them.

Or, we can just try to reduce spending and find the funds there.  I think raising taxes is almost never the answer.  Let's get creative and make some tough decisions as a nation.

Would you support closing the deficit if it meant cutting the Depts of Education, Energy and Commerce out of existence instead of cutting Defense and tax cuts?  On in other words, are you interested in cutting the deficit primarily or cutting the conservative agenda items (Defense, tax cuts)?

Pejman notes that the administration is cutting or holding still non-defense discretionary spending in their new budget outlays.  That's a long overdue start in my book.

And, if the gap between what the government takes in and what it pays out is not met, I'd add means testing to the mix.*

In that regard, we need to dispense with two myths forwith:

1.  The social security deficit and the general fund deficit may be separated as a practical matter.  They can't and shouldn't be.  Any SS proposal that resolves the SS deficit by increasing the general funds deficit merely trades a long term problem for a short term problem; it's the equivalent of paying off a mortgage with a car loan.
   
2.  We need to start viewing social security for what it is:  a welfare program.  It's not a retirement program -- and we should act as if it were.  (Bush's private accounts, by contrast, are a retirement program, which is why I support them.)

von

*FWIW, both means testing and raising the SS cap would negatively affect me (the latter to a fairly significant extent).          

Education? Appears to be a dead waste of money. DoEd sends money that gets spent filling out forms. Useless. College loans and grants can be managed by a (slimmed down) HEW.

Energy? Boondoggle. A few minor functions should be folded back into Interior. The rest can go.

Commerce? Some functions may need to go back to State, Interior or independent agency. The rest should go.

Agriculture? Food stamps can go to HEW, and continue to be administered by the states. Most of the rest can go. It never did manage to stop the consolidation of farms.

Special: Get rid of BIA. It's our most embarrassing agency. Hand all functions over to individual tribes or to an agency that is run by the tribes.

I'm sure I can find more, both supported by liberals and conservatives.

I would change the indexing formula as soon as possible. This will keep SS solvent for the foreseeable future. I would not make it exactly price indexed, particularly since drugs have been a huge problem for seniors and their prices have increased faster than price indices. I would roughly split the difference between price and wage.

I would not have means testing. That may end up encouraging a small but significant number of people to dispose of their assets, much as those facing nursing home care do today.

I'd rather fund through consumption taxes than through payroll taxes, but I have no problem uncapping if necessary.

Another useless department.

First, we do not need a massive tax increase (which you are advocating by lifting the FICA cap). That is exactly the wrong thing to do.

Second, why PRA's at all? If the problem is the looming insolvency of Social Security, lets address that head on (and honestly) by making reasonable increases in the retirement age. PRA's are nothing more than a smoke and mirrors scheme to try to conceal Social Security benefits cuts.

I agree with your perspective that SS is now a welfare program.  In fact, it penalizes those with shorter life expectency.  Here are a couple groups that came out below the national average and are thus disadvantaged:

CDC statistics for those born in 2002

National Average: 77.3

African-Americans: 72.3

Men: 74.5

African-American Male: 68.8

I tried to find the difference based on income but I don't have the time right now.

The only way I could stand raising the cap would be if you could put every dollar beyond the cap into your PRA.  Every damned time someone wants to "save" SS, they do it by raising the taxes on productive people.  

I'm getting tired of paying all this money when I know that I won't see a dime of it back, yet it is claimed it's all for My benefit.  You want to make it a welfare program by raising taxes and means-testing the payments?  Fine.  Come right out and say so.  Drop the lies about "security" and "retirement" and tell us it is to pay for people who spent all their income and didn't save.  Try to sell it honestly as what it really is, for once.

Like all transfer programs, SS is turning people against each other.  Whenever I read about the AARP's solution (raise taxes on working people so benefits can continue to climb unrestrictly), I feel like going to Senior World and shooting one person in ten.

I would prefer not to raise taxes as well.  The question posed however is a pragmatic one.  Would you prefer the above compromise to the current status quo?  The PRAs are the sweetener for the bitter pill of higher taxes and lower benefits.  As a young worker, I would accept that compromise as both beneficial to myself and to creating a solvent SS system.

Should productive people making less than $87,000 pay more by percentage than others?  If not, because  Social Security is an insurance program, then should people making more than $87,000 have their benfits cut proportionally because they don't need the insurance?  Is salary a true measure of productivity?  

Doverspa - nice post, it has generated good discussion.

#1 Should NOT be done.  As noted above it is the wrong direction to take.  All it would do is increase the future liability to those with salaries over 87K.  Unless you are proposed these additional taxes are not offset by increased benefits - good luck with that approach.  That would make the SS return for these people even more crappy than it is now.

#2 and #3 should definitely be done.

The real issue as someone above said is that SS was designed to be a welfare system (provide for poor elderly) and it has become a forced retirement system (with crappy returns) with a huge bureaucracy.  Scale the program back so that it is back to where it should be - a program to provide for elderly below a certain income/wealth level funding by regular income taxes.  

I have my priorities on deficit reduction which in part do not match those of RedStaters.  What I'm looking for is a sign that Republicans are at least willing to pay for their own fiscal priorities.  I opposed the Iraq war, but what really infuriated me about it was that Bush saw no need to actually pay for it.  I believe in responsibility and facing the consequences of one's actions, including paying for spending.  The easy political thing for him to do was to pretend there was no cost, which I have a real problem with.  We should always make choices with the cost (both treasure and blood) in mind - otherwise we have no moral basis for our decisions.

I see alot of criticism over here of Bush's spending, which I'm glad to see, but cutting things Republicans don't like won't get us close to bring our general fund into balance.  I would love to see Iraq war supporters saying they would cancel part of Bush's tax cuts or specify what $200 billion they would cut out of the general fund to cover the cost.  I would like to see NMD supporters say the technology isn't here, so why not scale back and do more research rather than spend billions deploying what we know won't work.  (I'd dump the thing altogether.)  Either pay for prescription drug coverage or dump it (and face the political consequences either way).

We can fight over the details of spending, PRA's, and everything else.  I'm just looking for a sign of common ground, where we can agree in the principle that we should pay for our toys ourselves instead of sticking our children with the bill.

I look at this problem from the other end, since I suspect differences in quality of medical care is part of the problem.  If the poor and minorities are dying young, the problem is the dying, not that they can't receive as much Social Security money before they do.

Cutting taxes would be a defensible position if the US was anywhere near able to pay for it's obligations given our current tax revenue.  Unfortunately, we're massively in deficit and even cutting all non-discretionary spending will, to my understanding, only barely bring the credit sheet into balance.  So we can't think about cutting taxes unless we're seriously thinking about cutting all non-military, non-entitlement spending.  

I bet we're not ready for that, so I think raising taxes has to be on the board to bring the revenue sheet even again.

Here is info about the budget.  $570 billion would need to be cut from 2004 to balance the budget without tax increases.  It will only get worse with the phase-in of prescription drug coverage and more tax cuts.  Then there's the wars, which get left out of the spending but still use the same color of money.  Even repealing all of Bush's tax cuts, I don't think we would be close to a general fund balance thanks to a soft economy and massive spending.  The numbers are just grim to begin with, so the thought of making it worse (and giving China and Japan control over our economy to boot) makes my head spin.

I could not have said any of this better myself.

Cheers -

does not excuse making the future one worse.

Raising the cap would attempt to fix current 'unfairness' by making the whole thing equally burdensome. The perceived onus on those who make < 87KUSDpa cannot be used as a justification for further burdening those who make more. Benefits are already set by the amount paid in, so one's past fiscal burden is proportional to the potential future fiscal pay-off. Increasing the burden without increasing the reward only makes the system more unfair (by making the tax non-regressive while leaving its benefits so), while increasing both would only stave off the current problem a few more years.

As regards productivity, salary is as good a rule of thumb measure for productivity as one is likely to find, especially once adjusted for regional cost-of-living differences and so forth. Granted, it is not a hard and fast rule, but a general guideline. Likewise, laws are made for the general populace and hypothetically average man, not edge cases and specific individuals. There are undoubtedly better measures of productivity, but salary is good enough.

Finally, the key points to the Social Security discussion are that, whatever SSI was at its institution, it is widely perceived as a retirement program, not as an insurance program (whether it is operated as such is largely immaterial here) and it's still going to come up busted. As a retirement program, it produces a frighteningly poor return on investment and has had equally poor management. As an insurance program, it has still been badly mismanaged and abused. It's still going to leave us seriously in the hole money-wise if nothing is done. Raising the cap is either spectacularly unfair as a matter of principle or is a non-starter as regards fixing the program (rather than band-aiding it for another five or ten years).

was at least partially due to the same concerns you have now.  It saddens me and many other conservatives that spending has not been scaled back or spending caps implemented.  And the failure of Democratic rule for 40 years to balance the books is what opened the door for Republicans in the first place.  Seeing Republicans lose the mantle of fiscal responsibility would be a sad day for me (and if the deficit isn't cut in half in 4 years they will lose the mantle).

That being said, there are exceptions to the rule.  Times when I believe running a deficit is okay or necessary:

1. During a recession, the standard operating procedure is to run a deficit to jumpstart the economy.  This is why I didn't mind the deficit in 2001-4.
   
2. During a war that mobilizes large parts of the economy.  More or less, we take out a loan to fight the war and pay it off over the next generation.  I don't think this applies to open-ended wars like the War on Terror; however, an argument can be made for specific wars such as Iraq.  It best applies to WWII.
   
3. For investment in infrastructure.  There is a strong argument that taking a loan (deficit) to create roads or the internet or other positive return investments can pay itself off in the long run.  The Eisenhower highway system is an obvious example.

The main problem in my eyes is that right now most of our money goes into one time spending.  This includes the Department of Defense and all entitlement programs.  I understand the need for a powerful military and the desire to redistribute wealth.  However, I wish we could return the entitlements to the states to decide how high taxes should be and how much redistribution to do.  The military must be national.

So as I posted above, we could cut 3-5 entire agencies to close the gap and let states decide what level of social service is needed in their communities.

Don't know if this site has a bias, but it is concise.

http://www.marktaw.com/culture_and_media/TheNationalDebt.html

A few counterpoints, Doverspa -

I agree "priming the pump" is a good way to reinvigorate an economy out of recession.  So I can handle some deficit spending.  I disagree with the way the tax cuts were distributed, but not with the quasi-Keynsian basics.

But as to spending on was, I disagree wholeheartedly.  I seem to remember we raised taxes to confiscatory levels during WW II.  As you say, Iraq is no WW II, but the idea of tax cuts to lift us out of recession while bumping spending to fight a war makes my head hurt.  Particularly when increasing consumer spending could have been accomplished with a narrowly tailored tax cut as opposed to a mass giveaway.

Beyond some Homeland Security activities, have we invested in infrastructure?  I guess some Bushies might say the NMD counts, but I sure don't.

While I realize we don't always pay off all of the costs of the war during the war, I don't recall any war before Iraq where we didn't keep or raise taxes during the duration.

Would you support closing the deficit if it meant cutting the Depts of Education, Energy and Commerce out of existence instead of cutting Defense and tax cuts?

I disagree with the priorities, but that is beside the point.  Cutting those departments' budgets completely, even though some functions would just be transferred to other departments, would have saved about $90 billion in 2004.  That leaves about $480 billion to cut to the general fund to bring it into balance.

What if you couldn't get all your priorities cut?  Would you support balancing the budget anyway?  I don't support the Iraq war or NMD, but that doesn't mean I want a hole in the budget equal to the size of budget line items I don't like.  I'd rather have my taxes pay for spending I don't want than have our children's taxes pay for it instead.

Gengisdom, your points are valid.  I want to make one thing explict: These 3 cases are not meant to apply to this administration or our current deficit necessarily.  They are general cases when deficit spending should be allowed and accepted.  This is why a balanced budget amendment would not be the right way to reign in deficits in my mind; we need the flexibility.

As noted above, right now we spend a huge percentage of government spending on entitlements and military.  I'm for sending the former back to the states and before 9/11 I was for cutting the later as well if it is done competently.

Personally, my big economic panacea is a TABOR (Taxpayer Bill or Rights which exists in Colorado at present) for the country.  Limit government spending to today's level plus inflation plus population growth.  That creates a ceiling that can only be broken in times of Congressionally declared War or 3/4 vote of both houses.  Then each time a program is added (military, entitlement, or discretionary), one must end an older program.  It creates the right incentive of cost-benefit analysis.  Right now each President adds their own program (Peace Corps, AmeriCorps, Homeland Security, etc) without making the hard decision of what must go to pay for it.  A TABOR would fix that problem.

Your link didn't work for me.  Could you try re-posting it.

I am aware that discretionary spending is a small part of our spending.  Medicare, social security, and the military are the largest three.  They need to be dealt with.  As stated elsewhere, I prefer to give entitlements back to states to make their own decisions about.  Rich, blue states can have their European-style social states and poor, red states can stick to individual responsibility and risk taking.

I recognize we aren't going to transfer those programs entirely, but shrinking the liabilities of SS would be a start.  PRAs are one way to shrink the liabilities in the long run (as is changing the wage index to an inflation index).  Hence my attempt at a compromise that lowers the liabilities in the long run.

In the short term, economic growth of 4% would be the best remedy (as it was in the 1990s) and I think we will get that.  Freezing spending across all agencies for 4 years would probably take care of the rest but I would still toss an agency or two for the sake of good governance and to stop the sprially bureaucracy.  Finally, I hope Senator Coburn gets in the face of Republican leadership about pork politics when the transportation bill hits the fan.  The party and the country could use a sobering sucker punch on pork spending.  Now that both parties have proved capable of using it to their benefit, true anti-porkers like myself don't know who to trust.

is good enough for me.  Want tax cuts?  Have the political muscle to cut domestic spending.  Don't want to suffer the political consequences of such an act?  Raise taxes.  Can't stomach those consequences either?  I hear UPS is hiring these days.  Bush I and the Democrats in Congress managed to do it - but (ironically) it played a part in diminishing his base in 1992.  Clinton and the 1994 era Republicans continued the trend.  Yes, there was a peaced dividend, economic times were fat, blah blah blah, but they did it when they could have just as easily found all sorts of new programs to fund or taxes to cut.  Clinton actually used vetoes, imagine that.

I do like the line item veto, but I understand the Constitutional problems with a statute.  Rather than a balanced budget amendment, why not a line item amendment?

I would support that.  Although a TABOR spending cap would be the best solution since it makes Congressman do the same cost-benefit analysis I have to do when choosing to buy a car, save my money, or spend it elsewhere.  I can't take all three and figure it out later.  If I want one, I have to forego the other two.  It's called a budget and it would be nice to see elected officials being required to stay within a Constitutional limit.

I understand that most conservatives want #2 and 3 without #1.  However, if it is an all or nothing option, how would you vote.  Is this setup better than the status quo?

Try this.  If that doesn't work, try their homepage and then find the "interface to details" link under White Papers.  The source is just what I found from Google, but it seems to have enough detail for quick analysis.

So as I presumed, the big three for 2003 (2004 est.) are:

HHS (Medicare): 500 Billion  (548 Billion)

Social Security: 500 Billion (530 Billion)

Military: 389 Billion        (436 Billion)

Notable agencies that cutting would have an impact.

Agriculture: 72 Billion      (78 Billion)

Labor: 69 Billion            (60 Billion)

Treasury: 367 Billion        (369 Billion)

Education: 57 Billion        (62 Billion)

Transportation: 51 Billion   (58 Billion)

HUD: 37 Billion              (46 Billion)

Veterans Affairs: 57 Billion (60 Billion)

Note that almost all of Treasury is interest on the debt and tax credit payment.  Wiping out all of the rest to zero (and there are obvious reasons why you couldn't do that as well) would net $364 billion, leaving you just over $200 billion short of balancing the general fund budget.  I understand your wishes to cut Medicare and Social Security, but since they aren't part of the general fund, a balanced general fund budget would require taking about $200 billion out of the military after eliminating the Agriculture, Labor, Education, Transportation, HUD, and Veterans Affairs departments.  That doesn't count Iraq and Afghanistan either.  The current level of general fund taxation is just plain unsustainable.

Do you have a site that follows revenues as closely.  My guess is that revenue increases by $100 billion or more a year (outside of recessions).  If spending is held tight, that would balance a budget in 4-6 years.  Obviously these numbers are flimsy as I don't have revenue data.

We agree on the ends (balancing the budget in non-recession, peaceful times), but we have different paths to get there.  The hard part about this (and the 2000 election) is that neither candidate seemed serious about persuing cuts in federal spending.  That was a major reason I supported Senator Coburn (in spite of his more offensive views); his record on pork and spending is impecable.

Leaving aside the issues of Iraq and Afghanistan (which I agree are absurd not to consider them as part of the budget), cutting the $364 billion you cite would indeed balance the budget. All sources of income would equal all spending programs. The budget situation may be bad, with our deficit running at better than 3% of GDP, but it's not unprecedented, and there's no need to portray it as worse than it actually is.

You may wish to consider entitlements sacrosanct, but they're not -- they just have the (dubious, from an economics perspective) distinction of being supported by earmarked taxation. When those taxes exceed the spending needs of the specific programs, the government quite logically spends the remainder.

There's no justification, from the perspective of economics, for earmarked taxes, outside of a few, narrow areas such as highway tolls; we should get rid of them and fold FICA and the Medicare tax into general taxation. Barring that, at the very least we should lower the FICA tax to the level needed to fund the program, but no higher.

Here is a neat little program which might either not work or might crash an older browser.  It works OK for me in Internet Explorer.  Its numbers are apparently based on FY 2005.  Note that it credits the S.S. surplus with the rest, so getting the general fund balanced requires getting a $160 billion surplus without touching Social Security and Medicare.

So getting rid of Education, Commerce, Energy, and Labor cuts the deficit to 213.6 Billion.

Our GDP was $11.8 trillion per annum based on the 3rd quarter of 2004.  This would lead to roughly a $12.5 trillion estimation for 2005.

Our deficit would be 213/12500 = 1.7% of GDP.  Compared to today's 4-5%, that is substantial improvement and would beat all expectations.

My underlying point is that it is not a requirement that we raise taxes to cut the deficit.  It is one option, but it is an option that has been roundly defeated electorally around the country.  It's time for spending cuts instead of 60% increases in the Dept. of Education spending.

But it is also a bum deal for male minorities who pay in their whole life to fund long living upper middle class white women.  We can work on both problems.

On a side note, health care is a sleeper issue that by 2008 will be a major plus for Democrats.  There are no new ideas coming from either side that can deal with the enormity of the problem.  If Republicans can get SS pushed through and a tax reform, they will have the plus of being "reformers."  But if they have no plan for medical costs, it may not matter.  If I worked at a liberal think tank, a health care solution that couldn't be called "Socializing" would be a top priority for me.

You may wish to consider entitlements sacrosanct, but they're not -- they just have the (dubious, from an economics perspective) distinction of being supported by earmarked taxation. When those taxes exceed the spending needs of the specific programs, the government quite logically spends the remainder.

If the government chooses to spend the remainder (which they certainly don't have to do), they are on the hook for replacing the funds when Social Security's payments exceed receipts.  The government promised working people who pay the payroll tax that the money taken out of their checks would be used for Social Security.  To pull the rug out and say the payroll taxes will instead be taken away to subsidize low income and capital gains taxes and not replaced, that is a breach of faith which would be a horrible precedent.  It would also be an income redistribution from the working class to the wealthy.

The general fund deficit would still be about $373 billion, and revenue would drop some if you don't give people unemployment insurance.  If you want Social Security to subsidize the general fund now, you should have no problem with subsidizing Social Security for an equal amount plus interest later.  That means we have no problems until about 2053 when Social Security's bonds (currently subsidizing the general fund) run out.

Ca Pol Junkie: You're certainly entitled to your opinions about the desirability (or undesirability) of this or that proposal. What you're not entitled to is your own set of facts. It wouldn't take "an extra $200 billion" to balance the budget. $400 billion in cuts would get the job done (not sure if that accounts for Iraq/Afghanistan, but you get my point).

The current level of general fund taxation is just plain unsustainable.

No it's not. Because "general fund taxation" isn't forced to carry the entire the load of "general" government spending. That burden is shared by payroll taxes. I could just as easily make the case that the "unsustainably" low level of payroll taxation isn't providing a sufficiently large cash stream to the government. Indeed, in the case of Medicare, that's true in the strictest sense already.

Social Security surpluses are being used to subsidize the general fund right now.  If you have no problem with that, then you should also have no problem with the general fund subsidizing Social Security by the same amount, with interest, in the future.  Thus, Social Security is fine until 2053 with no problems.  If you don't think the general fund should repay to Social Security what it has borrowed, then I guess the whole Reagan era payroll tax hike was just a sneaky trick to take money away from working Americans and give it to the wealthy.

You're right that from a macroeconomic perspective, the net budget deficit is the concern.  The problem is that the budget deficit is already a big concern even after a $160 billion subsidy from Social Security.  That deficit will only get worse when the bill comes due on Social Security.  We have already ceded control over our economy to China and Japan - imagine if we had a $573 billion general fund deficit and an additional $160 billion Social Security deficit.

Our basic disagreement seems to hinge on whether the Social Security surplus is just money or whether it is a promise made by the United States government.  By law it is the latter.  The law could be changed, of course, but that would be a betrayal of working Americans.  I think the right, and indeed moral, thing to do is live up to our obligations to working Americans and not spend our children's money.  The way to do that is to balance the general fund budget.

... but courts have already decided that by law individuals have no "right" to social security - making it, in effect, the worst scam possibly in the history of American Government.

It doesn't matter what we've all been led to believe over the years.  The fact of the matter is that SS has been a PayGo program since 1939, and there's no point in believing in the fantasy that 100's of billions of $$ will be sitting around Washington DC unspent by our current crop of whores, I mean politicians - in spite of the fact that it's supposed to be there for Granny's retirement.

Forgive my cynicism, but I don't see any future Congress (regardless of which party controls it) raising income taxes to cover the first 18-billion shortfall in 2018, never mind when the deficits start to get really big.  I could be wrong, but I just don't see it.  It will become the Mother or All Political Footballs, kicked around by everyone, and talked about more than anything else - but in the end the program will merely "Wither on the vine", to quote a future Presidential candidate about another scam program (Medicare).

Anyone my age (38) or younger who thinks they're going to see dime-one from Social Security is delusional.

1. Bush will get his way on social security.
   
   
2. The social security program will be royally bollocksed up. Can you say "bollocksed" on RS?
   
   
3. In ten to fifteen years, we'll be ponying up  through the nose to clean up the mess, and conservatives will be complaining that problems were caused by not taking the social security reforms far enough.

Call me Nostradamus.

Cheers -

"Beyond some Homeland Security activities, have we invested in infrastructure?"

The answer is "No".

Cheers -

For the whole post-WWII era, we have focused the vast majority of money on redistribution efforts, entitlements, and the military.  Besides the Eisenhower highway system, I can't think of many infrastructure investments the government has made.  Some spin-offs have become useful (like, um... the internet), but those weren't the purpose of those agencies.

"There's no justification, from the perspective of economics, for earmarked taxes"

I have no training in economics, as anyone who has read my somewhat naive posts on this thread will know.  So, you will have to explain this one to me.

Why is earmarking taxes for certain uses not justifiable?  It's certainly justifiable in the micro sense, i.e., around the house.  My wife and I do it all the time.  And, if we borrow from an "earmarked" fund we pay it back.  Otherwise, my wife gets really mad.

So -- why??

Thanks -

I think what the poster was implying is that from a macro level there is no difference.  Financial markets react the same, our share of GDP that goes to the government is the same, and our "deficit" is the same.  Having a bunch of IOUs in a box somewhere means nothing.  Additionally, since the courts have ruled that no one has a legal claim on the social security funds, government could wipe away all those IOUs with nary a legal problem.

If only the government had a wife to get really mad about it's poor accounting.  Sadly, it doesn't.  So the IOUs pile up and it starts to look like Enron accounting.

Where do you see 5 Democrat Senators jumping ship and reaching the magic "60" needed to overrule an obstructionist minority?

I couldn't name one right now, and 5 would be needed if and only if there weren't any GOP Senate defectors - hardly a given.

The argument goes that "nothing could be worse than what we have."  Personally, I've found that, no matter what 'it' is, 'it' can almost always be worse.  However, given the fraud that Social Security has become in this day and age, I would conclude that - short of terminating the program tomorrow (a social disaster) - just about any change to the system could only help in the long and short run.

Cheers.

"Where do you see 5 Democrat Senators jumping ship and reaching the magic '60' needed to overrule an obstructionist minority?"

It's early in the game.  Give Bush a little time to lather rinse and repeat the "crisis" mantra.

Cheers-

The entire non-Republican sphere of influence is uniformly opposed to anything that resembles the Bush "plan" (yet to be seen in public).

I still cannot think of a single Dem Senator - now that Zell Miller (DINO-GA) has retired - that would sign on when even the so-called "centrist" Democrat organizations (DLC, 3rd Way) are opposed.

Can you?

As for the scare quotes around "crisis", let's just say that you and I fundamentally disagree regarding the fiscal "health" of Social Security.  If it were a private pension system, the Feds would have shut it down for good during the Carter years.

Peace.

I love coming to this site and reading you intellectuals whom write so well. I am not but a common sense American that knows Social Security is wrong period. Why do we only talk of reform? Why not elimination? I am 50 and would love it to end tomorrow. They can have the money paid in so long as I get my 15% the rest of my working life. Most important I'd like to be sure my children (8 &2) have nothing to do with this Ponzi scheme. We need to work toward the elimination of Social Security. I want to get a bumper sticker of the above title and start a Blog. I'd need some help with writing some facts about how this program is useless if you are interested please email me:

tonydebaker@earthlink.net