Comments on: The NYT’s attempt to fix the budget A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 By: Etta Trendell Thu, 16 Oct 2014 22:20:34 +0000 I don’t even know how I ended up here, but I thought this post was good. I do not know who you are but certainly you are going to a famous blogger if you aren’t already Cheers!

By: Alvarez Tue, 16 Nov 2010 23:22:56 +0000 @TFF – Absolutely, and I would certainly support doing something along those lines myself. I don’t see any evidence, though, that Felix is proposing those types of trade-offs in order to, say, raise 20% of GDP in what he believes is the best possible manner. Instead, it almost feels like he is trying to maximize government revenue, an effort that I wouldn’t support.

By: TFF Tue, 16 Nov 2010 21:28:58 +0000 Alvarez, new taxes don’t need to be used to increase revenue. They can be used to offset old taxes, simply restructuring the incentives.

By: Alvarez Tue, 16 Nov 2010 20:25:01 +0000 Reading Felix’s tax wish list, I shudder to think what the final government share of GDP would be if we made him emperor for a day.

By: y2kurtus Tue, 16 Nov 2010 16:25:29 +0000 “I expect real wages to fall significantly over the next decade (likely flat wages and escalating inflation?)”

“Marginal tax rates are already high, distorting behavior.”

Two of the most accurate sentences I’ve read this week.

On our wages being uncompetitive… I could not agree more I’m shocked whenever I read about a local manufacturing business opening, expanding, or even highering.

How do you operate in a globally competitive marketplace paying twice the average wage of South Korea, for a 40 hour week compared to their 50 hour week… and their average highschool graduate has the same math skills as our average college graduate?

Best hopes for our entitelment culture to moderate their expectations

By: TFF Tue, 16 Nov 2010 13:47:09 +0000 Some-Guy, our wages are already uncompetitive on the global market. I expect real wages to fall significantly over the next decade (likely flat wages and escalating inflation?).

Thus I don’t think increased payroll taxes are an answer. Marginal tax rates are already high, distorting behavior. We need to broaden the tax base, not raise the rates further.

By: Some-Guy Tue, 16 Nov 2010 05:54:18 +0000 An increase in payroll taxes could work well if we could 1) maintain consistent wage growth, especially for those in the bottom quintile and 2) phase in FICA tax increases so that they would take a tiny bite out of that wage growth.

For some reason, debates about SS begin with the premise that people shouldn’t pay more to get a higher benefit. Since initial benefits are indexed to average wage growth and people live longer, the value of what they get from SS will be higher. There’s nothing unreasonable about paying more now to get more later.

Social Security’s shortfalls have been exacerbated by bad fundamentals of the US economy over the last 20-30 years. With real wage growth mainly concentrated to the rich (and with SS indexed to /average/ wage growth), the tax base for FICA taxes have not grown as quickly as initial benefits for new retirees.

By: Jimbo316 Tue, 16 Nov 2010 03:18:00 +0000 All of these fixes assume the need for revenue raising when the driving force of the Republicans and their corporate sponsors is to continue to drive the Federal Govt. into near oblivion. And they are winning big time and with Democrat wimp acquiescence. The big agribusinesses, manufacturers and banking/insurance industries are all multinationals which have no inherent interest in what happens to the US economy still less regarding “fairness” to the American people. The agenda is to drive gradually towards a state where there is no regulation and companies are free to do anything (or nothing in the case of infrastructure and public services). Think of a more sophisticated version of a banana republic but nevertheless one that has all the quality of life of about 1880. Oh and they are counting on the American public to remain anesthetized on 21st century bread and circuses and to just surrender to their impoverished fate. Will we let this be America’s future?

By: TFF Tue, 16 Nov 2010 01:43:12 +0000 Curmudgeon, if I recall correctly the *deficit* is generally quoted honestly while the *debt* is generally cited as “debt held by the public”. Perhaps a fine point? Of course most people who read are aware of both figures, but I agree that the lower debt total gets more press.

I would agree with you on separating the general account deficit from Social Security (the latter ought to be actuarially self-funding), however the problems with Social Security have been evident for a decade and nobody has mustered the political will to act on them. Making it a piece of a larger tax reform could make it easier to get something done? I’m happy with any fix, as long as I have time to plan ahead BEFORE I retire in the not-so-distant future. Right now I can’t count on anything.

By: TFF Tue, 16 Nov 2010 01:38:07 +0000 Trying to figure out the answer to that question… According to documents here: ist.html

For 2010 there is $264B of “Social Insurance and Retirement Receipts” that are “on-budget” and $740B that are “off budget”. The former, apparently, is primarily Medicare and Unemployment. The latter is Social Security and Disability. (I believe they were placed off-budget as part of the 1986 reform?)

In any case, the Social Security surpluses were relatively small from 1985 through 1996, totaling just $523B compared to a cumulative deficit of $2.9T over those 12 years. The surpluses did reduce the amount borrowed by 18%, but it is a stretch to suggest that they created the deficit spending. The politicians would have been perfectly willing to borrow more money if they had needed to do so.

After that, the surplus picked up rapidly. It more than doubled from $67B in 1996 to $150B in 2000. Moreover, the federal coffers were flush from the profits with the “on-budget” numbers showing just a $77B deficit from 1997 through 2001.

Perhaps that played a role in the Bush tax cuts? The large Social Security surpluses were projected to continue for many years (the recession changed that), so President Bush may have seen this as a way to return the funds to the economy (instead of doing something “stupid” like restraining the growth of the national debt?). But prior to Bush, either the surplus was comparatively insignificant or the budget was already roughly balanced.

Ironically, the page I’m looking at (from the 2009 budget report) shows the deficit declining to just $200B by 2012 (where it would once again be balanced by a Social Security surplus). Keep that in mind any time you hear a CBO projection… I wouldn’t be at all shocked if the actual combined deficit were still over $1T in 2012.