Pete started this and Andrew added smartly to the discussion. Here are a few thoughts from someone who has served on a budget-related commission and watched while many others crashed and burned.
1. It's extremely rare that federal commissions ever solve problems. They are usually a way to delay taking action on some issue.
2. The only exception to #1 I can think of is the commissions that have dealt with military base closures. But this is also the exception that proves the rule. The base closure commissions were successful because they were created when a consensus had developed that their recommendations more or less would be followed.
3. There is no such consensus on entitlements.
4. In fact, there is no consensus of any kind on entitlements.
5. There has been at least one entitlement commission in the relatively recent past. It's recommendations went absolutely nowhere, and that was when the deficit was considered to be more of an issue than it is today.
6. There absolutely is no way to take the politics out of an inherently political decision -- reducing entitlement spending. That what "a commission" purports to do and it virtually has to fail when the politics of the decision are intractable.
7. The politics of entitlements are indeed intractable.
8. A commission cannot make the decisions the U.S. Constitution gives to Congress. A commission may make recommendations to Congress, but the actual decisions to cut spending or or increase revenues have to be made by Congress itself.
9. If Congress could make these decisions we wouldn't need a commission in the first place.
Once again
By calling social services "entitlements" you have already slanted the discussion towards those who want to cut them back or eliminate them. The idea of a commission is also part of this effort.
The public has stated time and again that they support government-administered social services and want to see them expanded. So all ideas of "studies" are simply a way to thwart this desire.
None of the points in my prior comment were addressed.
1. Where is the willingness to stop using euphemisms?
2. Where is the discussion of excessive militarism?
3. Where is the acknowledgment that Social Security is not a problem?
4. Where is the acknowledgment that current problems with health care are a result of excessive privatization, not of "entitlements"?
5. There isn't even any discussion (just an axiom) that lowering the deficit or balancing the budget is a "good thing".
As for the chart that I cited, it's not mine, so if you have an arguments with the data, take it up with the authors, however you can do the math yourself, it's all on the CBO web site.
If prior militarism is now creating a continuing expense for the government (debt, veteran's care and benefits) then all the more reason to alter policies so that these "long-term entitlements" don't continue to grow.
If you are young and healthy you may think that you won't need these "long-term entitlements", but you may change your mind someday. It would be pretty ironic if your commission had eliminated them just when you need them most. Or perhaps you are sufficiently rich that you may never need to worry about living in retirement or paying for some catastrophic illness out of your own pocket.
Libertarians (or whatever they call themselves these days) are either foolish or heartless, take your pick.
Moral argument won't cover your tax bill.
"The public has stated time and again that they support government-administered social services and want to see them expanded."
Of course they want services that they think they won't have to pay for. Who doesn't want things for free? I sure do. All I can get!
Here's simple question: How many of these people that you talk of know that these services are going to cost them a 50% across-the-board income tax increase. (Including, if they will be retired, on their very own fixed income from pensions, IRA, and Social Security benefits!) by 2030?
That's a bigger tax increase in GDP terms than was imposed after Pearl Harbor to fight WWII -- and that is only the start of them.
Not many, eh?
If you can admit that simple fact, then you must admit that people are very ill-informed indeed when deciding what they want here.
"I'm making a moral argument."
Well, as a matter of morals, it is immoral to sell somebody something without revealing the true cost.
In the case of most real-world people like used car salesmen, it is also highly illegal and they can go to jail for it.
But politicians have personally benefited en masse by getting themselves elected by promising all these services to be provided in the future without revealing their accruing cost of $2 trillion annually, that is piling up and will have to be paid through by far the hugest tax increases in history at the same time as they are collecting the benefits, to pay for them.
How "moral" is that?
Even Paul Krugman told the Asian Times that "We should be getting 28% of GDP in revenue" in taxes today, to prepare to pay for Medicare and Social Security -- that's a 90% across-the-board income tax increase from today. And he says the gov't should be imposing that right now.
But while Krugman says that out loud in Asia, why won't he say it in his own NY Times column right here?
Maybe because it would be bad politics for his side, because if people learned the real cost that's coming at them of all these services they've been promised, they wouldn't like it?
I mean, if people would like it, and would think, "Sure, we'll pay a 90% tax increase right now, that's worth it!", then Paul would have no trouble telling them about it -- and we'd all happily have the tax increase we'd need to pay for these programs!
Right?
robert, What do you mean
robert,
What do you mean "Social Security is not a problem"?
I assume you are saying (1) that official projections are overly pessimistic and that Social Security should be currently projected to be fully (or near fully) "solvent" forever without any changes, and (2) that if Social Security were projected to be fully solvent forever, that would mean that Social Security spending is unrelated to our overall fiscal imbalance, does not contribute to it, and should not be considered as one type of spending to include as we consider spending cuts to reduce our overall fiscal imbalance because reducing projected Social Security spending would not help reduce the overall fiscal imbalance.
Is that what you're saying?
If so, it's nonsensical. Even if SS were projected to be fully "solvent" forever under current SS FICA tax rates and applicable income, reducing SS spending could still be part of our means of reducing our overall fiscal imbalance. We would just have to combine cuts on projected SS spending with cuts in SS FICA taxation and offset that revenue loss with increases in other taxes, resulting in lower projected overall spending, unchanged projected overall revenues, and therefore lower projected deficits.
Not my fight
Brooks:
The details of Social Security have been discussed so often that there is little point in doing so again. If you really want to pick a fight (or get better informed) go visit the web site of Bruce Webb who make a specialty of this area:
http://bruceweb.blogspot.com/
I'm making a moral argument.
1. Using euphemisms to disguise one's intentions is dishonorable or dishonest or deliberately misleading.
2. Equating spending on destruction with that intended to promote human welfare is morally corrupt and repugnant and should be shown for what it is when it appears.
Now you can explain why the EU is not having these problems with their funding of health and retirement services or even projecting that such problems will be insurmountable in the future. If anything the demographic trends are less favorable for them, population is falling and aging, while in the US it is doing neither, or at a rate that is not a concern.
I claim it's because they aren't wasting half their budget on militarism. If you have a better argument let's hear it. How come the libertarians don't have any traction in Europe? If their arguments were so compelling one would think they would be discussed everywhere. Why aren't they?
Get your facts straight first, *then* twist them as you want.
I always recommend that advice of Mark Twain....
"Now you can explain why the EU is not having these problems with their funding of health and retirement services or even projecting that such problems will be insurmountable in the future?"
Hello? If you think they're not, you just aren't paying attention.
The credit ratings of France, Germany and the UK are on course to fall to "junk" by by 2023, 2029, and 2034, respectively, according to S&P. Japan's credit rating is already falling.
Their politicians have done the same as ours. Gotten elected by making massive promises for the future, the payment on which isn't due yet.
But as long as payment isn't due yet, there's no problem with such promises. Right?
BTW, both Moodys and S&P project that the US's credit rating will start falling in 2017, on current law.
"I claim it's because they aren't wasting half their budget on militarism. If you have a better argument let's hear it."
Oh, please. The war in Iraq is costing about $150 billion annually. The entire Defense Budget in 2007 was $550 billion.
Medicare and Social Security just by themselves are accuring liabilties at the rate of $2 trillion a year. The Medicare drug benefit all by its lone self is costing over $450 billion per year that's going to have to get paid by someone -- two to three times the cost of the Iraq war.
Here's former CBO head Douglas Holtz-Eakin recalling his days in that job:
"The thing that I found most amazing is everybody thought the war in Iraq was a much bigger expenditure than the Medicare drug benefit. How could you possibly believe that?"
Well, how do you think that?
Euphemisms
Robert, 'Social Security' is itself a euphemism.
And it certainly isn't a 'service'. It's a transfer of money by government from a larger, poorer group of people to a smaller, wealthier group.
You lost me
Pat:
You will have to explain your comment in more detail, you lost me (twice).
Here's FDR explaining what SS was set up to do:
http://www.youtube.com/watch?v=aVZijG4WSOw
Notice that it is supposed to provide "security" in one's old age.
As for the transfer, which are the poorer and wealthier groups that you are referring to? SS is designed to provide, on average, a higher rate of return, compared to contributions for those at the bottom than those at the top. You can look it up. Furthermore since the payroll tax is capped, the rich end up paying at a lower effective rate than the poor.
I'm afraid you've got things backwards. If you think otherwise you need to supply some documentation.
Alas, it hasn't been FDR's Social Security for a long time.
"Here's FDR explaining what SS was set up to do:"
Well, here's the problem with that: FDR's Social Security program has been repealed -- twice over.
FDR was *insistent* that his SS be "actuarially sound and out of the Treasury forever" -- and that there would be no cost pushed out onto future generations. That meant that participants as a whole basically were to get the 3% return from T-bonds earned in the Trust Fund from their contributions. Each retiring annual cohort was to get that much (the high earners somewhat less, the low earners somewhat more) on a 6% payroll tax. This would have produced a program that could have run on its own indefinitely. In the 1980s it would have had a major Trust Fund balance built up.
That's basically a "funded" non-paygo program. (When FDR found some of his aides had slipped paygo elements into a SS legislative proposal without telling him, he had a famous tantrum, pulled the proposal, and made them re-write it). That was FDR's own Social Security Act of 1935.
Unfortunately, that was repealed starting with the Amendments of 1939 -- over FDR's veto. The politicians then (Democrats, of course!) decided to -- guess what! -- increase spending and cut taxes using SS's money. The Trust Fund was wiped out, nothing from contributions saved, benefits were greatly increased, the planned tax increase to 6% was stopped.
"Actuarially sound" was dead and gone. Participants now got far more back than they put in -- politicians love arranging that! This was the era when famous Nobel economist Paul Samuelson wrote in a Newsweek article called Social Security,A Ponzi Scheme That Works.":
"The beauty of social insurance is that it is actuarially unsound. Everyone who reaches retirement age is given benefit privileges that far exceed anything he has paid in -- exceed his payments by more than ten times...!
...a growing nation is the greatest Ponzi game ever contrived."
Participants in that version of SS got back from it $14 trillion more than the bond rate would have paid -- and more than FDR intended.
But that version of SS went broke in 1983 (as Ponzi schemes do) and was replaced with a third version. This one saved the high benefits of the then-old at the cost of the then-young -- increasing taxes on the young while slashing benefits paid to them.
This makes up for the $14 trillion gain given to the old by making the young take a $14 trillion loss on SS as a group -- Hey, that's a $28 trillion swing between generations!
Now, you seem to believe that today's Social Security somehow, someway, still is FDR's -- instead of being twice removed from it.
But if FDR knew that today's young were going to take a $14 trillion loss on "his" actuarially sound Social Security, he'd be burning rubber popping wheelies in that chair of his, in sincere disagreement.
That transfer again.
"As for the transfer, which are the poorer and wealthier groups that you are referring to? SS is designed to provide, on average, a higher rate of return, compared to contributions for those at the bottom than those at the top. You can look it up. "
The older, as a demographic class, are richer than the young.
The old as a group have a lot in the way of pensions, paid off homes, investment assets, free medical coverage (Medicare), etc -- far more asset wealth than the young, and considering the smaller sizes of their households, very often more income per capita as well, often tax favored.
The young have zip asset wealth, kids to raise, mortgages to pay, medical costs to pay out of pocket and low wages (the younger the lower) -- plus 12.4% payroll tax to pay from the first dollar of the lowest minimum-wage level of earnings to fund SS payments to the old. (Warren Buffett's Dairy Queen employees paying for his SS benefits, if you will.)
The old receiving SS benefits are as a class richer than the young who pay SS tax to fund them. As you say, you can look it up.
Now, this wouldn't be an issue if today's young were in turn going to receive like payment when old from the young of the future -- but they aren't. Nothing like it.
Not only does demographics prevent this, but the law was re-written when SS went broke in 1983 to protect the high net benefits of the then-old by slashing the benefits of the then-young while also increasing the taxes imposed on the then-young. That *obviously* cratered the net value of SS to the then-young to protect its high net value to the then-old. Such is how politics works.
The result today is that in real time the younger (and poorer) make transers to the older (and richer), in such a way as they are going to take a $14 trillion net loss.
The younger are never getting that money back. And this isn't some "75 year" thing, this is the young paying tax today who are taking this loss. As the Treasury states (.pdf)...
"The Trustees Report indicates that Social Security’s unfunded obligation for only past and current workers equals $14.4 trillion, which is actually slightly greater than the infinite-horizon shortfall."
When you are "unfunded" $14 trillion you are out $14 trillion. If you close that gap by collecting $14 trillion of tax increases on the young, they are out $14 trillion of taxes. If you close it with $14 trillion of benefit cuts for the young, they are out $14 trillion of benefits. Any combination of the two leaves them out $14 trillion.
The Iron Law of Arithmetic that applies to a paygo benefit program like SS is that benefits = taxes, so that if one group (the older) receive benefits $14 trillion > taxes, another group (the younger) must receive benefits $14 trillion < taxes. That's it, no way around it.
Thus, the bottom line is that today's young are making SS benefit payments to the older, who are richer than them as a class, and are going to be out $14 trillion for doing so.
That's the "transfer".
To get back to the subject of Stan's post...
It should be noted that the SAFE commission introduced by Cooper and Wolf was debated on as an amendment to the Financial Services Appropriations bill yesterday. It fell only 31-32. That's not a strict party line vote. In fact, among those abstaining were two cosponsors of the commission.
The objections raised by the Chairman were on process - would appropriators be included in the commission membership - not on substance.
Perhaps there is more political will around than Stan would presume.
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