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  #51  
Old 02-19-2020, 12:10 PM
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Originally Posted by UltraVires View Post
My proposition, up for debate, is that the government should balance its budget by only increasing spending relative to inflation and the deficit is solved. What unforeseen problems am I missing with this admittedly simplistic argument?
Hi UltraVires, I just wanted to point out that we currently operate at a budget deficit. All other things equal after adjusting for inflation (eg: revenues, interest rates), limiting expenditures to current levels adjusted for inflation will still mean there is a budget deficit going forward.

Let's say you currently make $100,000 every year. You currently spend 130% of that every year, $130,000. Your budget deficit this year is $30,000, or 30% of gross revenue.
130,000 - 100,000 = 30,000
30,000 / 100,000 = 0.3
Next year there will be an across-the-board inflation rate of 5%. You will make 105% of $100,000 or $105,000. Your proposal is to keep spending constant after adjusting to inflation, which would be 136.5% of $100,000 or $136,500 (1.3 * 1.05 = 1.365). If you follow that proposal, your budget deficit next year will be $31,500 which is still 30% of gross revenue.
136,500 - 105,000 = 31,500
31,500 / 105,000 = 0.3
Other parts of your original and subsequent posts indicate that you already understand this, but the proposal as worded in the title and the original post is flawed. You cannot balance an unbalanced budget by limiting spending to growth or inflation, you must limit spending to income.

~Max
  #52  
Old 02-19-2020, 12:40 PM
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Originally Posted by UltraVires View Post
My proposition, up for debate, is that the government should balance its budget by only increasing spending relative to inflation and the deficit is solved. What unforeseen problems am I missing with this admittedly simplistic argument?
Well, it is a simplistic argument, that's for sure. As Max S points out, what you're describing is not actually balancing the budget at all. Instead, you're arguing that all spending should be frozen at 2020 levels, plus an annual inflation adjustment, for all time. Even if US citizens in 2040 collectively want to increase government spending for some new social program, or to buy 12th gen fighter jets, or to invade Mongolia for it's yak butter, they're out of luck, hamstrung by some law (or amendment) passed 20 years ago.

Why? Why not let citizens 5, 10, 20, or 100 years from now decide on their own how big the federal budget should be? Why lock them into some arbitrary spending level from the past?


It sounds like what you're really trying to say is that revenues should match spending, and spending for next year should be based on revenues from this year plus a small increase to account for inflation. Which is fine, and prudent, and probably how things should be done in an average year, but that won't balance the budget. Only increasing revenues or decreasing spending will do that.

Last edited by steronz; 02-19-2020 at 12:41 PM.
  #53  
Old 02-20-2020, 03:03 PM
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Originally Posted by Wrenching Spanners View Post
Actually, I did have a math error. [snip].... So much less than the incorrect amount calculated earlier, but still a significant spending increase beyond inflation and a growing and aging population.
TLDR: ďI admit you proved me 90% wrong, which makes me 10% right, ergo I win.Ē
  #54  
Old 02-21-2020, 02:40 AM
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TLDR: ďI admit you proved me 90% wrong, which makes me 10% right, ergo I win.Ē
I've not studied the thread nor the arithmetic ó is yours a fair summary?

Are the people advocating that Medicare not outpace inflation aware that medical cost rises in general do outpace the CPI? Is part of their plan to rescind the Bush-GOP gifts to Big Pharma? (I think we'll need Mods to move the thread if 'Sending Gr**ma to the *e*** ***ps' is part of the solution.)
  #55  
Old 02-21-2020, 03:55 AM
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TLDR: ďI admit you proved me 90% wrong, which makes me 10% right, ergo I win.Ē
Thanks. While I disagree with your percentages, I note that you're not very good at calculating percentages so I'll just let that pass. I accept your concession that US Social Security spending is outstripping the combination of inflation and population demographic increases, and that if the US government is serious about trying to control the federal debt, then they need to impose lower cost of living adjustments. The government should also look at the changing demographics, and if the increasing number of Social Security recipients is due to people living longer, which seems likely, then the government should look at allowing raising the age of Social Security eligibility. Each of these changes may require legislation, but legislation is obviously within Congress's power. The question is whether the US government is willing to be fiscally responsible, or will choose to bow to popular sentiment. Given how high the US deficit and debt currently are, it's pretty obvious fiscal responsibility isn't a current government priority. And unfortunately, that looks like that's unlikely to change for the next five years.
  #56  
Old 02-21-2020, 05:02 AM
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I've not studied the thread nor the arithmetic ó is yours a fair summary?

Are the people advocating that Medicare not outpace inflation aware that medical cost rises in general do outpace the CPI? Is part of their plan to rescind the Bush-GOP gifts to Big Pharma? (I think we'll need Mods to move the thread if 'Sending Gr**ma to the *e*** ***ps' is part of the solution.)
If like for like medical costs are increasing beyond inflation, then there are market inefficiencies that the government needs to address. Generally, I would not expect the same basket of medical treatments given to a set group of 70 year-olds in 2000 to cost more, in inflation adjusted terms, than in 2020. The cost of an x-ray in 2020 shouldn't, in real terms, be any higher than it was in 2000. For this particular example, due to the widespread advances in consumer digital imaging technology, I'd expect x-ray costs to be lower. A different example would be insulin which apparently is significantly more expensive in the US now than 20 years ago. However, those cost rises aren't due to rising production costs or inflation, but due to mind-boggling market distortions.
https://www.bbc.co.uk/news/world-us-canada-47491964
If high costs are due to market dysfunctionality, then the government should seek to eliminate the disfunctions rather than throw money at the problem.

Of course medical technology has advanced since 2000. Scanners in 2020 are more advanced than they were in 2000, and the new, more advanced scans available may well represent an additional cost that didn't exist in 2000. The same follows for drugs, especially, I believe, cancer treatments. It's great that there is better medical care available, even if it costs more. But when it comes to budgets, the government has to be realistic about what is affordable. If the basket of medical treatments listed above has grown to twice it's previous size, and in real terms costs twice as much, then that's a budgetary issue. It's an additional budgetary issue if the number of 70 year-old receiving the treatments is also rising. If rising tax revenues are sufficient to meet these rising costs, then there's no problem. However, the government can's simply accept medical cost rises as unmanageable inevitabilities that muse be paid for, regardless of other costs, the rest of the budget or the national debt. All of those factors need to be considered, even if it means limiting some medical treatments. That's what a responsible government does. Just spending freely by borrowing from the future based on sentiment and the rhetoric of scaremongers isn't responsible government.
  #57  
Old 02-21-2020, 05:51 AM
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Originally Posted by Max S. View Post
Other parts of your original and subsequent posts indicate that you already understand this, but the proposal as worded in the title and the original post is flawed. You cannot balance an unbalanced budget by limiting spending to growth or inflation, you must limit spending to income.
This might just be me, but the way I read the OP is that you would increase your spending by the inflation amount, but NOT for any other increases in income. So let's say you also get a 5% raise on top of the inflation adjustment:

100,000 income becomes 110,000 (not 105,000).
Spending only goes up by the 5% inflation adjustment, so 136,500 remains correct.
Your deficit is now 26,500, down from 30,000.

I suppose that would work given enough time (and enough raises in excess of inflation), but ignores other factors (like the raise coming with naturally increased costs - higher tax bracket, etc).
  #58  
Old 02-21-2020, 05:54 AM
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@ Wrenching Spanners - Medical care for babies has gotten more expensive; Medical care for children has gotten more expensive; Medical care for teen-agers has gotten more expensive; Medical care for young adults has gotten more expensive; and Medical care for ages 35 to 65 has gotten more expensive. But not for those 65+? Was it your plan all along to degrade care for retirees, 'Sending Gr**ma to the *e*** ***ps' if you will? Or do you just now realize that's what your position on budget-balancing here entails?

Where do you stand on universal health care? Single-payer?
  #59  
Old 02-21-2020, 06:22 AM
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Originally Posted by Wrenching Spanners View Post
Of course medical technology has advanced since 2000. Scanners in 2020 are more advanced than they were in 2000, and the new, more advanced scans available may well represent an additional cost that didn't exist in 2000. The same follows for drugs, especially, I believe, cancer treatments. It's great that there is better medical care available, even if it costs more.
But shouldn't this naturally correct itself? If in 2000, there were "normal" medical costs, but there were also very expensive state of the art treatments that costs "a lot" then shouldn't the costs shift in 2020?

Stated differently, what was state of the art and very expensive in 2000 should now be normal and we will be paying for the new state of the art treatments today at an increased rate.

For example, if the government had a "Free Television" program in 2000, we would have spent about $219 per 19" tube TV for "normal" and "a lot" for 40" tube TV. Today we would spend $300 for a 40" HDTV and "a lot" for a 105" HDTV. As technology improves, costs come back to the baseline. Or at least they should.

But your point is well-taken. Nobody seems to talk about what we will refuse to pay for. If we have a 102 year old with cancer and this newest, shiniest treatment that costs $750k will cure him and give him however much longer a 102 year old has, do we pay for it?
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Old 02-21-2020, 06:27 AM
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Nobody seems to talk about what we will refuse to pay for. If we have a 102 year old with cancer and this newest, shiniest treatment that costs $750k will cure him and give him however much longer a 102 year old has, do we pay for it?
Good question. Perhaps you should ask the Mods to change thread title to
"Why can't we balance the budget by simply limiting its growth and denying modern medicine to old-timers on Medicare?"
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Old 02-21-2020, 06:33 AM
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Again, UltraVires, inflation is not added value. Inflation is holding the goods steady and looking at changes in prices. This is why it's basically meaningless over a long period of time.

I know you don't LIKE that that is his inflation is calculated, but it is what it is. We've always done it like this.

You often hear a quip that in 1950s, people could live on one income, why do they need two today? The answer is that a family CAN live on one income today, if they live like it's 1950. That includes no advanced medical care, no electronics or cell phone, etc etc. THATS inflation.
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Old 02-21-2020, 09:24 AM
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@ Wrenching Spanners - Medical care for babies has gotten more expensive; Medical care for children has gotten more expensive; Medical care for teen-agers has gotten more expensive; Medical care for young adults has gotten more expensive; and Medical care for ages 35 to 65 has gotten more expensive. But not for those 65+? Was it your plan all along to degrade care for retirees, 'Sending Gr**ma to the *e*** ***ps' if you will? Or do you just now realize that's what your position on budget-balancing here entails?

Where do you stand on universal health care? Single-payer?
Is the medical care getting more expensive because more care is being provided, or because, after costs are adjusted for inflation, the same-old care is more expensive? If it's the latter, then there's a market distortion. Absent scarcity, and presuming demand remains constant, real costs should fall over time. If scarcity is the issue, I suspect it would be more cost effective for the government to try to stimulate the training of health care professionals and examine if any artificial barriers to entry into medical professions can be removed, than to simply throw money at the problem.

If demand for like-for-like health care is increasing even after population demographics are adjusted for, then unfortunately the government will be faced with difficult societal problems. I've read that higher levels of obesity and lower levels of exercise are leading to poorer health across all age ranges, and not just in the US. Likewise I've read that modern societies are seeing mental health issues related to social media that didn't exist a generation ago. Education and preventative programs, which I acknowledge will also cost money, can partially ameliorate a tendency towards poorer health due to worsening lifestyle trends. However, if society as a whole is choosing to have less healthy practices, it should expect its health care costs to rise, and there's not much government can do about it. It's easier to manage supply than demand, and ever-escalating demand will always hit a point where the cost of supply to meet it, even if the supply is increased, is prohibitive.

If neither scarcity nor increased demand are the culprits in increasing medical care costs, then the cause, as noted earlier in my comments regarding insulin costs, is market disfunction. I would much rather the government eliminated market disfunctions than paid for them.

If medical care costs are increasing because the amount of medical treatments available are increasing, then that's a good thing, but just because a treatment is available doesn't mean it should automatically be supplied. Cost effectiveness and overall budgetary considerations need to be considered. That's what fiscally responsible government does. And it applies to all age groups, not just the elderly.

Specific to the US, I don't think a National Health Care service is a viable option. The US medical care infrastructure is too big, and the switchover would cause too much disruption. I think that gradually increasing the number of people covered by Medicare, and letting individuals or companies buy into Medicare as an alternative to private health insurance is probably a good idea. But there would still need to be strict cost management and a gradually increasing pool of beneficiaries, not a steep increase. Essentially, over time, have the government provide basic medical insurance as a public service, have set costs for the treatments supplied under Medicare, incentivise people to pursue health care professions so personnel supply isn't an issue, and let private insurance compete over supplemental heath care. The US would end up with a two-tier insurance system, but at least there'd be a decent baseline. And of course people would still whine about how unfair it was and how much the government could be doing if only they'd spend more, but I think that's a societal constant, at least from a certain portion of society.
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Old 02-21-2020, 10:49 AM
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But shouldn't this naturally correct itself? If in 2000, there were "normal" medical costs, but there were also very expensive state of the art treatments that costs "a lot" then shouldn't the costs shift in 2020?

Stated differently, what was state of the art and very expensive in 2000 should now be normal and we will be paying for the new state of the art treatments today at an increased rate.

For example, if the government had a "Free Television" program in 2000, we would have spent about $219 per 19" tube TV for "normal" and "a lot" for 40" tube TV. Today we would spend $300 for a 40" HDTV and "a lot" for a 105" HDTV. As technology improves, costs come back to the baseline. Or at least they should.

But your point is well-taken. Nobody seems to talk about what we will refuse to pay for. If we have a 102 year old with cancer and this newest, shiniest treatment that costs $750k will cure him and give him however much longer a 102 year old has, do we pay for it?
Iím not sure. I tend to think that the amount of technology available to society, medical or otherwise, is not only constantly increasing but accelerating. So graphically, an upward curve. If you take any point on that curve, and then map its cost over time, the cost of that point of technology should go down. However, if you take a ratio against the technology curve, even a sliding one, then I suspect the cost of the increases in technology would probably surpass the cost efficiencies gained over time.

I tried putting this rather abstract explanation into a model to see if I could explain it better. Unfortunately, without graphs, I think itís even more confusing. But try thinking about it this way. Suppose the real costs of 2000 medical care, costed at a 1:1 ratio, have gone down by 33% in 2020. However, 2020 medical care offers 50% more care at todayís rates. The old care costs 0.67, the new care costs 0.5, and the combined total is 1.17. So 0.33 of the new care, which is 66%, can be supplied with no increased overall spend. However, that is only 85.5% (1/1.17) of the total care available. Even though more is being supplied for the same amount, thereís a perception that less is being supplied because of that 34% that isnít being supplied. And note that there are no inefficiencies in this simple explanation, which is obviously not true of the real world.
  #64  
Old 02-21-2020, 01:53 PM
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But your point is well-taken. Nobody seems to talk about what we will refuse to pay for. If we have a 102 year old with cancer and this newest, shiniest treatment that costs $750k will cure him and give him however much longer a 102 year old has, do we pay for it?
Do you have any data that this actually happens?
This paper says that end of life cancer patients in Australia had 27% more health care costs than end of life patients with no cancer history.
My father-in-law died at almost 101 (and cheaply.) There is no chance in hell he would have approved expensive (and no doubt painful) cancer treatments if he had cancer. I doubt the people he lived with of a similar age would either.
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Old 02-22-2020, 07:18 AM
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Good question. Perhaps you should ask the Mods to change thread title to
"Why can't we balance the budget by simply limiting its growth and denying modern medicine to old-timers on Medicare?"
That is not at all what I am asking. That question would be relevant in 1950, 2000, or 2020.

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Again, UltraVires, inflation is not added value. Inflation is holding the goods steady and looking at changes in prices. This is why it's basically meaningless over a long period of time.

I know you don't LIKE that that is his inflation is calculated, but it is what it is. We've always done it like this.

You often hear a quip that in 1950s, people could live on one income, why do they need two today? The answer is that a family CAN live on one income today, if they live like it's 1950. That includes no advanced medical care, no electronics or cell phone, etc etc. THATS inflation.
That's true for some things, but not others. There's no reason a doctor in 2020 should charge more (adjusted for inflation) than a doctor in 1950 to dispense medical advice. The 2020 doctor has all of the knowledge up to today and had to attend a CLE about the new advances in 2019. The 1950 doctor had to read up about the latest breakthrough in 1949.

Let's say I suffered from depression. The doctor would give me the 1950 advice, and prescribe me Vistoril at a nominal price, or offer me this new drug that they had some success with in Europe at an inflated price. In 1985, the doctor would give me the 1985 advice, prescribe me Vistoril at a nominal price or offer me this new drug "Prozac" at an inflated price. In 2020, the doctor would give me 2020 advice, prescribe me Prozac at a nominal price, or offer me this new drug "Trinillex" at an inflated price.

The "normal" price stays the same while providing me superior medical care, but I can always get the latest and greatest at an inflated price. There's no reason why the doctor should be charging more related to inflation. Technology makes things cheaper. Added value costs money but then that becomes the new normal, and importantly causes a reversion to the old price in real dollars.

A cell phone bill is not anymore, adjusted for inflation, than a landline bill was thirty years ago, and I get free long distance and texting. An internet connection, even with the goofing off you do on it, more than pays for itself by the productivity it creates. I can pay my bills with one click whereas I used to have to sit down for an hour or more writing paper checks and paying for checks and stamps. I don't spend two hours in the grocery store; I fill my cart online and swing by and pick up the order. I don't have to hire a professional for many household tasks, I watch a YouTube video. I can work from home and not pay for the commute.

I can pay $7.99/mo. for Hulu, far less in real dollars than a cable bill was 40 years ago and get more movies and TV shows than I could ever watch in that month. Magazine subscriptions? Who needs them? I can get more information on any topic immediately that I could with 100 magazine subscriptions in 1985. All of this is the tip of the iceberg.

Now, your point is well taken when it comes to luxury items and our growing expectation of what luxury we should have. The 1950 family had one car, but today we need two, even if one family member doesn't work. It's considered child abuse if a 16 year old doesn't get a car for her birthday. When I was a kid, our vacations were to a local lake or if we really splurged, the beach. People who make middle class money want their vacations today to be to the Caribbean or to Europe. We want to eat out all of the time or pay $500 or more for prom dresses.

In short, I don't see by any measure how necessities of life, or even small creature comforts of life, even adjusted for the fact that these necessities are of better quality and better technology, have caused expenses to rise above inflation.

So, disabuse me of this notion that the rise in government spending above inflation and above population growth is just an inevitable fact of existence and not as a result of needing Caribbean vacations?
  #66  
Old 02-22-2020, 08:05 AM
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So, disabuse me of this notion that the rise in government spending above inflation and above population growth is just an inevitable fact of existence and not as a result of needing Caribbean vacations?
It sounds like you're asking why healthcare costs have risen faster than inflation. That is a separate topic for a separate thread.

Unless you're asking that people dependent on government for their healthcare should get healthcare inferior to the general population. Such alleged inferiority is already a talking point of the right-wing Party. Are you hoping to make this right-wing wish come true?


Did you study the statistics in my #10? Discretionary spending is down sharply since 1987 ó since after Reagan had already waved his "Government is the problem" wand.

Despite confusion in the thread, the distinction between "discretionary" and "mandatory" spending is real. Moreover please note that the big mandatory items are more-or-less self-funded by regressive payroll taxes. Discretionary spending is funded by income taxes. Doesn't it seem illogical to call for a cut in payroll tax-funded programs to cope with Trump's cut in income taxes? And, the huge size of payroll tax is masked because (for those on W2s instead of 1099s) half the total tax doesn't appear on statements. UIAM, payroll taxes, as a percent of total USG revenue, are at record high, while income tax revenue declines.
  #67  
Old 02-22-2020, 08:13 AM
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It sounds like you're asking why healthcare costs have risen faster than inflation. That is a separate topic for a separate thread.

Unless you're asking that people dependent on government for their healthcare should get healthcare inferior to the general population. Such alleged inferiority is already a talking point of the right-wing Party. Are you hoping to make this right-wing wish come true?


Did you study the statistics in my #10? Discretionary spending is down sharply since 1987 ó since after Reagan had already waved his "Government is the problem" wand.

Despite confusion in the thread, the distinction between "discretionary" and "mandatory" spending is real. Moreover please note that the big mandatory items are more-or-less self-funded by regressive payroll taxes. Discretionary spending is funded by income taxes. Doesn't it seem illogical to call for a cut in payroll tax-funded programs to cope with Trump's cut in income taxes? And, the huge size of payroll tax is masked because (for those on W2s instead of 1099s) half the total tax doesn't appear on statements. UIAM, payroll taxes, as a percent of total USG revenue, are at record high, while income tax revenue declines.
What part of my post made you think I am talking about healthcare? I only mention health care because it is used as an example of spending which must, to the exclusion of all other spending, continue to increase and spiral out of control.

I am talking about every type of spending. That's why I reject your "discretionary" and "non-discretionary" labels. All those labels do is beg the question and declare that this type of spending must rise as much as we say it will rise, budget be damned, but the other spending we can do whatever with. It is a self-imposed label that reflects a partisan value choice.

You further beg the question because of this "self funded" description of social security. I don't care how it is funded. Why does it have to rise in cost greater than population and inflation? Why does defense have to rise in cost greater than population and inflation? Pick the Republican program you hate and ask why it has to rise in cost greater than population and inflation.

Despite my continuing attempts to not make this a partisan exercise, you insist that we do so.
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Old 02-22-2020, 09:57 AM
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What part of my post made you think I am talking about healthcare? I only mention health care because it is used as an example of spending which must, to the exclusion of all other spending, continue to increase and spiral out of control.
About 40% of your latest post was confined strictly to the topic of healthcare. And healthcare, as a share of mandayory spending, has been rising rapidly. That IS where your debate is regarding "budget balancing." IF you include mandatory spending.

In addition to Medicare and Medicaid, "mandatory spending" includes SocSec, SSI and government/military pensions. in you plan, do we tell retired soldiers that their pension is to be cut 6%? Fine, if that's what you want ó I just want you to understand what cutting mandatory spending means.

There's a reason why mandatory spending is called mandatory.

(There are concrete ways forward, e.g. means-testing SocSec. That would be on-topic. But waving your arms and asking for across-the-board cuts without specific plans is a joke.)

One thing I think we can agree on. Taxes on the rich have been cut; you propose to make up the shortfall by cutting programs like SSI. In other words, you want to stop the transfer of income from the rich to the needy. Fine, if that's what you want ó I just want you to understand what you're asking for.

Quote:
I am talking about every type of spending. That's why I reject your "discretionary" and "non-discretionary" labels. All those labels do is beg the question and declare that this type of spending must rise as much as we say it will rise, budget be damned, but the other spending we can do whatever with. It is a self-imposed label that reflects a partisan value choice. [sgs7 added emphasis]
You really should refine your understanding of the words "mandatory" and "discretionary."

Your final sentence is humorous!
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Despite my continuing attempts to not make this a partisan exercise, you insist that we do so.
Your plan is to fund tax cuts for the rich by reducing programs like Medicaid, SocSec and SSI for the needy. That is straight from the partisan GOP talking points.

YOU propose these cuts. I try to get you to understand that. But I am partisan?
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Old 02-22-2020, 10:39 AM
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Again, UltraVires, inflation is not added value. Inflation is holding the goods steady and looking at changes in prices. This is why it's basically meaningless over a long period of time.

I know you don't LIKE that that is his inflation is calculated, but it is what it is. We've always done it like this.
We don't and haven't always done it like this. There are multiple ways of measuring inflation

CPI-U and -W have the basket weights adjusted every two years. C-CPI-U is monthly. And PCE tries to account for substitution. Etc.
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Old 02-22-2020, 05:53 PM
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In addition to Medicare and Medicaid, "mandatory spending" includes SocSec, SSI and government/military pensions.
Are "SocSec" and "SSI" abbreviations for different programs? If so, please explain the distinction between the two.

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There's a reason why mandatory spending is called mandatory.
Claims that the US government is bound by past legislative decisions regarding budgetary spending with no recourse seem spurious. I'm in favour of governments keeping their promises. However, a claim that a past government made an over-generous promise and it binds future legislative sessions seems dubious. Especially if the budget for the promised spending, labelled as "mandatory", doesn't have a specified figure. I don't want to see a Social Security recipient receiving a lower monthly payment, or a year-on-year payment raised by less than the government's budgetary inflation rate. But the idea that unbudgeted promises from the past are "mandatory" stipulations for future legislatures to provide above-inflation individual benefit increases is absurd. Governments should set realistic increases based on the current rate of inflation, population demographics, and specified extraneous factors. Stating that they have a "mandatory" obligation to provide an above-inflation per-capita increase is a falsehood, as their obligation is to provide an optimal budget that looks after both current and future citizens.
  #71  
Old 02-22-2020, 08:39 PM
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Social Security is perhaps the shining example of fiscal conservatism: we figured out what we wanted to do, we devised a simple way to fund it, and for close to a century it has been tinkered with fewer times than Big Ben. I mean, what can be more fiscally prudent than that?

The only reason that people who call themselves fiscal conservatives get annoyed by it is that there is massive confusion ó intentional of course ó over what a fiscal conservative is. The common sense definition is that a fiscal conservative would like to see policies that match revenues to expenditures in a prudent way to maximize predictability and avoid catastrophic failures.

However, the term has been hijacked by people who:

1. want to cut taxes on the wealthy, no matter what the reason, and
2. Have no plan other than number 1.
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Old 02-23-2020, 12:20 AM
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Originally Posted by Wrenching Spanners View Post
Are "SocSec" and "SSI" abbreviations for different programs? If so, please explain the distinction between the two.
If you're serious, Google "SSI." Near the top of results, Google offers a place to click on "What is difference between Social Security and SSI?"

Briefly, SSI is a Marxist program intended to transfer money from rich people able to pay it from East Asian banks who buy U.S.G. bonds to American citizens who need the money.
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Claims that the US government is bound by past legislative decisions regarding budgetary spending with no recourse seem spurious. ... Especially if the budget for the promised spending, labelled as "mandatory", doesn't have a specified figure....
Is it just the word "mandatory" you're objecting to? Many both on the left and the right have proposed cuts to SocSec, so nobody treats the term as a 100% absolute. (Perhaps the difference is that "discretionary" spending requires an Act of Congress, while to suspend or revise "mandatory" spending would require an Act.) In any event, I hope you can see a qualitative distinction for programs that honor decades-old commitments.

BUT a key question I'd like to see you answer is this:
"Znaqngbel" spending is largely funded by regressive payroll taxes. The budget is in deficit because of massive cuts to progressive income taxes. Does it seem appropriate that the regressive payroll taxes be left intact, while the programs they support are cut to compensate for the shortfall from cuts in the progressive income tax?
(I've replaced the word that offends you with its rot13'ed form.)
Note that "Well, I'd cut the payroll taxes too" is a non sequitur in the context of this thread, where SocSec cuts are proposed to balance the budget.
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Old 02-23-2020, 01:06 AM
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Originally Posted by Ravenman View Post
Social Security is perhaps the shining example of fiscal conservatism: we figured out what we wanted to do, we devised a simple way to fund it, and for close to a century it has been tinkered with fewer times than Big Ben. I mean, what can be more fiscally prudent than that?

The only reason that people who call themselves fiscal conservatives get annoyed by it is that there is massive confusion ó intentional of course ó over what a fiscal conservative is. The common sense definition is that a fiscal conservative would like to see policies that match revenues to expenditures in a prudent way to maximize predictability and avoid catastrophic failures.
I disagree. The reason conservatives - fiscal and otherwise - dislike it is that it is a matter of faith to them that government can do no good, so government doing good - especially in a socialistic program like Social Security - makes them angry. And makes them want to fiddle with it to kill it.
Biggest exception was Reagan, perhaps because he wasn't born with a silver spoon in his mouth.
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Old 02-23-2020, 03:19 AM
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If you're serious, Google "SSI." Near the top of results, Google offers a place to click on "What is difference between Social Security and SSI?"
Thanks. Looking at the figures, Supplementary Security Income paid out $56 billion to 8.1 million people in June 2019.
https://www.cbpp.org/research/social...ecurity-income

It looks like the number of recipients in 2007 was 7.36 million.
https://www.ssa.gov/policy/docs/stat...t/2019/7a.html
Interestingly, the number of recipients seems to have been dropping. From the same source, the 2007 SSI spending was $41.20 billion.

The SSA figures are more detailed than the CBPP figures, but only go up to 2018. But we can probably get a better analysis if we stay with a consistent data set. The SSA figures for SSI spending for 2018 are $54.85 billion for 8.13 million people. For inflation, US Inflation Calculator is my top Google hit, and it says it uses US government CPI data. Itís 2007-2018 cumulative rate is 21.1%.
https://www.usinflationcalculator.com/

A review of the figures shows that the calculated expected spend and the actual spend were very close, with the actual amount lower than the calculated amount by 0.5%. So from a costs versus inflation perspective, thatís a fiscally well-managed program.

Feel free to check my math:
2007 SSI Recipients 7,359,525
2007 SSI Spending 41,204,645,000
Spend per Recipient 5,599

2018 SSI Recipients 8,128,652
% Increase 10.45%

2007 SSI Spending Adjusted for Increased Recipients 45,510,847,506
2007-2018 Inflation 21.1%
2018 Calculated Expected Spending 55,113,636,329

Actual 2018 SSI Spending 54,847,237,000

Difference -266,399,329
% Difference -0.486%
  #75  
Old 02-23-2020, 04:43 AM
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Originally Posted by Ravenman View Post
Social Security is perhaps the shining example of fiscal conservatism: we figured out what we wanted to do, we devised a simple way to fund it, and for close to a century it has been tinkered with fewer times than Big Ben. I mean, what can be more fiscally prudent than that?
Youíre consistently discussing Social Security as an independent program. I have no issue with that, but itís not how the US federal government presents its budget or calculates its deficit. Looking at 2018, Social Security revenue versus expenditure was roughly break even.
Quote:
The total cost of the program in 2018 was $1,000 billion. Total income was $1,003 billion.
https://www.ssa.gov/OACT/TR/2019/tr2019.pdf (p.10) (PDF)
Take that out of the 2018 budget and you have $3.1 trillion of non-Social Security federal spending and $2.3 trillion of revenue. Thereís also a $18 billion difference between the two data sources, possibly due to actual versus budget, or inclusion of other costs. That still leaves the US federal government with a deficit of $779 billion.
https://www.thebalance.com/fy-2018-t...equest-4158794
So now you have a smaller base from which to reduce costs, and a smaller base for increasing revenues. That makes deficit reduction harder, not easier.

On the other hand, Social Security costs are expected to exceed revenue this year. So even if it is viewed independently, a mix of reducing costs and bumping up revenue will still need to happen to keep the program solvent.
https://www.marketwatch.com/story/so...ows-2019-04-22

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Originally Posted by Ravenman View Post
The only reason that people who call themselves fiscal conservatives get annoyed by it is that there is massive confusion ó intentional of course ó over what a fiscal conservative is. The common sense definition is that a fiscal conservative would like to see policies that match revenues to expenditures in a prudent way to maximize predictability and avoid catastrophic failures.
I have no problem with your definition of a fiscal conservative. However, I'd include an expectation of consistency into the definition. If the Social Security surplus has been used to reduce the amount of the total US federal deficit over the past decades, then the program's costs also need to be examined as aspects of the total budget. Also, I'd expect controlled spending across the entire budget, and not ring-fencing of the highest budgetary item.

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Originally Posted by Ravenman View Post
However, the term has been hijacked by people who:
1. want to cut taxes on the wealthy, no matter what the reason, and
2. Have no plan other than number 1.
Yes, and us real fiscal conservatives are angrily waving our spreadsheets at those impostors.
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Old 02-23-2020, 06:19 AM
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Is it just the word "mandatory" you're objecting to? Many both on the left and the right have proposed cuts to SocSec, so nobody treats the term as a 100% absolute. (Perhaps the difference is that "discretionary" spending requires an Act of Congress, while to suspend or revise "mandatory" spending would require an Act.) In any event, I hope you can see a qualitative distinction for programs that honor decades-old commitments.
My issue with the word "mandatory" in relation to government spending is that it's false, and it's used as a shield to hide behind rather than making tough decisions. The US government needs to restrain itself from spending increases across the board. That can't happen as a nominal freeze. From the very start of this thread, it's been acknowledged that spending will have to increase with inflation. It also can't happen as an inflation adjusted freeze. The first reply to the OP pointed out that population increases also need to be accounted for in spending decisions. Demographic changes within the population also need to be considered, which I believe I was the first person to point out. But if a program's costs are increasing even after all three of those factors are taken into account, then that's a problem and the government needs to reduce or stop those increases. Saying that the government can't because those cost increases are mandatory or non-discretionary is wrong. The government can legislate the budget however it wants. Regarding past promises, maybe the US government would be able to keep those promises if had restrained its spending in the past. But spending wasn't restrained in the past, it's not being restrained now, and the US federal deficit is ballooning. Sooner or later, the US national debt is going to become untenable and that balloon is going to pop. I'd rather spending was controlled now, rather than when it becomes an emergency.

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Originally Posted by septimus View Post
BUT a key question I'd like to see you answer is this:
"Znaqngbel" spending is largely funded by regressive payroll taxes. The budget is in deficit because of massive cuts to progressive income taxes. Does it seem appropriate that the regressive payroll taxes be left intact, while the programs they support are cut to compensate for the shortfall from cuts in the progressive income tax?
(I've replaced the word that offends you with its rot13'ed form.)
Note that "Well, I'd cut the payroll taxes too" is a non sequitur in the context of this thread, where SocSec cuts are proposed to balance the budget.
I'm discussing spending because it's the subject of the thread. But I'm happy to discuss revenue as well. Maybe you should start another thread. My general thought is that US federal revenue, which is mainly taxation, is too low and needs to be increased so there's a better baseline for starting deficit reduction. Raising the caps on payroll taxes seems a good way to start. I'd probably also bump up the Income Tax rates for the tip five brackets, maybe a 1% bump on 22% and 24%, and a 2% bump above that. If the US goverment could increase 2021 taxes above what it currently has planned by 4%, that's a $154 billion drop in the deficit. After that, look at tweaking the revenue each year by practices such as freezing the brackets rather than than increasing them based on inflation. But basically have revenue rise at a higher rate than spending. Keep in mind that economic growth will be the main contributor to revenue increasing. Put in the tax rise and then if real GDP increases by an average of 2% a year, and tax revenue tracks that, while real spending only increases by 1% a year, the federal budget would be balanced with no deficit in 20 years. Keeping above-inflation spending capped at 1% a year probably isn't realistic, so there would need to be constant adjustments on the revenue side. The key would be to ensure that revenue, over the long term, is increasing at a higher rate than spending. But the only way for that to happen is for spending to be under control. Which means taking a hard look at all spending, including Social Security, SSI, Medicare, Medicaid, discretionary spending, and whatever else you want to name and limiting its increase.
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Old 02-23-2020, 07:05 AM
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SS COLAs do outpace actual increases in cost of living, hence repeated proposals to shift them to C-CPI-U. But good luck with your reelection if you vote to effectively decrease future payments to seniors.
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Old 02-23-2020, 09:30 AM
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... So from a costs versus inflation perspective, [SSI] is a fiscally well-managed program.
I don't think you're unaware that spending overruns were contemplated even before this thread was started. SocSec was always a big problem in the near term because of the Boomer demographic. Government-funded healthcare is a huge problem partly due to the demographic but also because medical costs rise much faster than inflation. It's disconcerting that we've gone around in circles for dozens of posts just to get this far.

I don't know why SSI helps fewer today than it did a decade ago, but that's not a big issue in the context of this thread.

What is more intriguing to me would be your definition of "fiscally well-managed program." Is it your claim that SocSec is "badly managed" because of the Baby Boom? Even though SocSec deliberately ran a surplus for decades because the impending demographic shift was anticipated?

In your latest post, you suggest that a tax increase might be helpful in reducing the deficit! Bravo!! That's the sort of advanced state-of-the-art thinking we need more of in threads like this!
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Old 02-23-2020, 12:43 PM
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I don't think you're unaware that spending overruns were contemplated even before this thread was started. SocSec was always a big problem in the near term because of the Boomer demographic. Government-funded healthcare is a huge problem partly due to the demographic but also because medical costs rise much faster than inflation. It's disconcerting that we've gone around in circles for dozens of posts just to get this far.

I don't know why SSI helps fewer today than it did a decade ago, but that's not a big issue in the context of this thread.

What is more intriguing to me would be your definition of "fiscally well-managed program." Is it your claim that SocSec is "badly managed" because of the Baby Boom? Even though SocSec deliberately ran a surplus for decades because the impending demographic shift was anticipated?

In your latest post, you suggest that a tax increase might be helpful in reducing the deficit! Bravo!! That's the sort of advanced state-of-the-art thinking we need more of in threads like this!
My claim is that when I look at Social Security spending, it's rise in costs is outstripping both inflation and the increase in the number of participants.

Here's what I posted before, examining Social Security spending from 2007-2019:
Quote:
Start with a baseline of 49,864,978 Social Security recipients receiving a total benefit of $581 billion in 2007. That’s the starting point specified by the OP.
https://www.ssa.gov/OACT/STATS/OASDIbenies.html
https://www.thebalance.com/fy-2007-u...ending-3306310
That an average of $11,651.46 per recipient.

Adjust first for the increase of recipients to 64,064,496 (same SSA source). Paying them the same average nominal benefit results in a population adjusted budget of $746.5 billion.

Now multiply the population adjusted budget by your inflation rate of 1.27. You get a total adjusted budget of $948 billion. The 2019 Social Security spending was $1,041 billion. https://www.thebalance.com/fy-2019-f...ending-4589082
So the revised difference using higher inflation and the year before is $93 billion. So 9.8% over the calculated expected increase.
So $93 billion in overspend, and that's using an cumulative inflation rate of 27% when the CPI based inflation rate for 2007-2019 is 23.3%.

The counter-argument seems to be that that Social Security overspend is okay because it was funded by payroll taxes which provided a surplus in the past and are somewhere around slightly below break-even today. The problem with that argument is that those past surpluses were spent. They were used to fund other programs. If Social Security spending was adequately funded, then non-Social Security spending was even more inadequately funded than the current deficit and debt figures indicate. That spending isn't recoverable. The best the US government can do is try to control spending going forward. Which, guess what, means restraining spending on Social Security and medical benefits.

Do you actually think the current US government spending trends are sustainable? I don't. I think the US government should use 2020 spending as a baseline, and try to control spending going forward. I think the US government should try to avoid a future debt crisis by controlling spending and increasing tax revenues. Thanks for labelling my revenue ideas as "state of the art", but I'd prefer the labels "realistic" and "common sense". But what are your counter-proposals? US spending since 1999 has been increasing at a rate of 4.8%. GDP growth in that period has averaged 4.1%. Revenue growth has been at a rate of 3.44%. Do you want to maintain the spending rate, but bring revenue growth up to somewhere above 4.8%? If so, what's your plan for doing so? Do you understand that substantial tax increases will have a negative impact on GDP growth? Do you also understand that tax revenue increases cannot perpetually exceed GDP growth?

The US federal government has a major problem with its deficit. It needs to control spending and raise tax revenues. Both sides need to be part of the solution. The idea that you can have a revenue-side solution, while continuously increasing spending at a rate above GDP is infeasible.

Last edited by Wrenching Spanners; 02-23-2020 at 12:47 PM.
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Old 02-23-2020, 01:05 PM
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... funded by payroll taxes which provided a surplus in the past .... The problem with that argument is that those past surpluses were spent. They were used to fund other programs....
Oh no. We've been around and around on that fallacy as often as 1≠0.99999...
If you can't get Google to help you understand this fallacy, please re-read one of the old threads.
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Old 02-24-2020, 04:28 AM
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Let's keep it simple.

Let's say the United States wants to buy weapons for the Army. How exactly is the United States government supposed to enforce a policy that the price of an M4 Carbine is not subject to inflation? Do they tell Colt Firearms that they must sell the rifles at the same price they cost in 2007? If Colt says they now cost more to manufacture, do you force them to sell the rifles at a loss? If Colt goes bankrupt, do you force other companies to manufacture the rifles at the price you've set?

Or do you just buy less rifles? Do you tell some soldiers they won't be assigned a rifle? Or do you discharge the soldiers you now can't afford rifles for? Do you expect the remaining soldiers to be capable of the same amount of military strength even though there are now fewer of them?

Figure out some good answers to these questions. Now do the same for everything else the government pays for.
From what I understand, your choice of example is seriously flawed, but your logic is correct.

Spending on defense is a questionable enterprise, unless a state of war exists. Money going into defense is buying means of destroying value, such as bombs, airplanes, submarines, and training. If those weapons are used, the overall value of wealth in the world will decline. If the weapons are not used, then the money is effectively removed from the economy after a single pass.

Ideally, government spending should be on things that increase the amount of wealth in the world. Building roads, bridges, hospitals, schools and housing are ways to achieve that. Paying for research also helps to increase wealth. Providing health care increases wealth by keeping employees able to work. Spending which increases the common weal results in individuals having greater wealth in general.
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Old 02-24-2020, 07:57 AM
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So let's say you also get a 5% raise on top of the inflation adjustment
But then you are relying on disproportionate revenue growth. You acknowledged that in the example, this would require a constant raise above the inflation rate. As applied to the government by way of analogy, that means taxes would have to go up every year by 5% after inflation. If we were talking about income tax, for example, pretend you get taxed 20% this year. Next year you would have to be taxed 25%, and the next year 30%, etc.

~Max
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Old 02-24-2020, 09:23 AM
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But then you are relying on disproportionate revenue growth. You acknowledged that in the example, this would require a constant raise above the inflation rate. As applied to the government by way of analogy, that means taxes would have to go up every year by 5% after inflation. If we were talking about income tax, for example, pretend you get taxed 20% this year. Next year you would have to be taxed 25%, and the next year 30%, etc.
(Real) tax receipts would have to go up, which happens normally.
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Old 02-24-2020, 12:10 PM
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Originally Posted by Wrenching Spanners View Post
Youíre consistently discussing Social Security as an independent program. I have no issue with that, but itís not how the US federal government presents its budget or calculates its deficit.
Sure it is. Literally every government document providing an overview of the budget presents two scenarios, on-budget and off-budget, to account for the fact that Social Security really is on an autopilot of its own, but to completely exclude Social Security isn't the full picture of the government's budget either. To read your post here, one would assume that the term off-budget doesn't even exist.

Quote:
So now you have a smaller base from which to reduce costs, and a smaller base for increasing revenues. That makes deficit reduction harder, not easier.
No kidding, because the tax cuts over the last two decades that have cost trillions are all primarily impacting the structural on-budget deficit. I would phrase the issue this way: you have two children. One is a good kid, might not be totally perfect, but meets your expectations in a consistent and predictable manner; while the other is a mess and a constant source of over-promising, under-delivering, and general disappointment.

When it comes to making your family run better, don't treat them the same just because they both live under the same roof.
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Old 02-24-2020, 07:43 PM
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There's no reason a doctor in 2020 should charge more (adjusted for inflation) than a doctor in 1950 to dispense medical advice. The 2020 doctor has all of the knowledge up to today and had to attend a CLE about the new advances in 2019. The 1950 doctor had to read up about the latest breakthrough in 1949.
For one, doctors in the 1950s did not have to deal with government insurance such as Medicare and Medicaid. Most people still got their insurance as a job benefit, but the insurance model as we know it didn't quite exist yet - doctors would bill the patients, the patients would file insurance claims, and if the insurance denied the claim, the patient was on the hook. Doctors wouldn't have to inflate prices to cover for "indigents", unless the patient was actually dying on the doorstep, they could simply be refused service up front. Specifically, HMOs were invented in the 1970s, which really made medical billing complicated as each insurer negotiated their own contract (and fees) with each doctor.

Second, becoming a doctor by the 1950s is significantly different than becoming a doctor today. Until the 1950s, residency was uncommon unless you were going to be a researcher. That shaves about three years off becoming a doctor. Perhaps related, there has been an exponential increase in knowledge of medicine in the past 70 years, which means in theory doctors must learn exponentially more than they used to, which means, in theory, it is exponentially harder to become a doctor. Not only were there less medicines, there were less classified diseases as well: the ICD and DSM were not even published until 1949 and 1952, respectively.

The actual knowledge of medicine has progressed so much... remember that penicillin was discovered in 1928, its first clinical trial took place in 1941, and it was only really used by the military until 1945. Because you brought up depression, keep in mind that the theory of chemical imbalances in the brain was brand new, as it was based on observations of the first "antidepressants" such as Isoniazid, which were in turn developed in the 1950s. Vistaril was not brought to market until 1968 (Atarax in 1956).

Third, and this is probably related to the above point, student debt has gone up. A 1981 article in the New York Times indicates that medical student debt shot up around that time. Compare $50,000 of debt in 1981 dollars, enough to write an article about, with the $190,000 average medical student debt cited in a 2018 article by the same publication. The BLS CPI Inflation Calculator tells me that $50k in 1981 dollars has the same buying power as $142.4k in 2018. So medical student debt has been outpacing inflation. This doesn't explain why medical care is outpacing inflation, but it does play at a role in why the doctor's fee for mere consultation is higher.

Fifth, doctor's fees haven't gone up all that much. I manage a doctor's office and we charge something like $125 for a new patient visit today, in doctor's fees (procedures excluded). Something like a third of that goes into administrative overhead - billing, ancillary staff, compliance, etc. In 1955 dollars that would be around $15, cut out the overhead and you're down to $8.

~Max
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Old 02-25-2020, 01:38 AM
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Oh no. We've been around and around on that fallacy as often as 1≠0.99999...
If you can't get Google to help you understand this fallacy, please re-read one of the old threads.
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Originally Posted by septimus View Post
Oh no. We've been around and around on that fallacy as often as 1≠0.99999...
If you can't get Google to help you understand this fallacy, please re-read one of the old threads.
I've reread the old threads. The synopsis is that there is no fallacy. I'd provide links and an actual argument, but since you can't be bothered to do so, I'll just follow your example of lazy unsubstantiated assertions.

But since this is Great Debates, try answering the following two questions, which will require a bit of lead-up:
The SSA Trust Fund reports that in 2007,
Total benefits paid in 2007 were $585 bil¨lion. Income was $785 billion
https://www.ssa.gov/OACT/TR/TR08/II_...hts.html#76460
Thatís a $200 billion surplus.
In that year, there was a $161 billion federal deficit.
https://www.cnbc.com/id/21179989
A breakdown of that figure shows a different revenue amount of $870 billion, but roughly the same spend - $581 billion. Iím presuming the $870 billion figure contains taxes targeted towards other programs, or non-tax revenue such as interest. But whether the Social Security surplus was $200 billion, or $289 billion, itís clearly gone into the budget.
Quote:
The $2.568 trillion in revenue received did not cover the $2.730 trillion in spending, creating a $162 billion deficit.
Quote:
Income taxes contributed most of the revenue, at $1.163 trillion. Social Security taxes made up $869.6 billion, and corporate taxes added $370 billion. The rest came from other taxes, such as excise ($65 billion), estate ($26 billion) and other miscellaneous taxes.
https://www.thebalance.com/fy-2007-u...ending-3306310
Letís go with the SSA Trust figure of a $200 billion Social Security surplus. Take that out of the budget and thereís a deficit of $362 billion.

Hereís the first question: Was the US government lying when it said the deficit was $162 billion and not $362 billion?

Second question: If youíre saying that $200 billion belongs to Social Security, and wasnít budgeted to other programs, then how do you account for the rest of the budget? The total spending figure was $2.73 trillion. If you take Social Security out of the budget, using the SSA figure of then the rest of the budget is $2.145 trillion. But you also have to take away the Social Security revenue. That adjusted figure is $1.783 trillion. Thereís that bigger deficit. If the Social Security surplus wasnít filling the gap between the two numbers, then what was?
  #87  
Old 02-25-2020, 08:00 AM
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Originally Posted by Wrenching Spanners View Post
Hereís the first question: Was the US government lying when it said the deficit was $162 billion and not $362 billion?
Both statements can be 100% accurate, depending on what precise question is being asked.

It's like how if you ask me what the unemployment rate is, the answer can be 4.0%, 4.2%, 4.8%, or 7.7%. Cite. The fact that 4.0% is the most commonly used metric doesn't make the others factually wrong, they are measurements of slightly different things.

This is exactly the same as your $162/$362 issue.
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Old 02-25-2020, 09:41 AM
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I've reread the old threads. The synopsis is that there is no fallacy. I'd provide links and an actual argument, but since you can't be bothered to do so, I'll just follow your example of lazy unsubstantiated assertions.
Wrong, wrong, and wrong. And I'm "lazy"? Let me assure you I've shown far more patience than you deserve. And when you conclude that the "synopsis is that there is no fallacy" you're obviously just going with the more ignorant people in those threads because they agreed with you.

Pro-tip: Tiring yourself with arithmetic is not the way forward. If you want to reduce SocSec benefits or unwind COLA, say so. If you wish that life expectancy hadn't improved with many in their 80's still getting SocSec, say so. But just mindlessly comparing numbers adds nothing.

Finance or even simple accounting can be confusing, so I'll take it slowly for you. Best is to treat SocSec as a separate program. (That's how it's set up, and that's the role it plays.)

Now, the impending Boomer retirement was well-known so SocSec taxes were set to finance that, putting the SocSec in SURPLUS. Dollar bills are piling up in the SocSec bank account!!

What would you suggest that SocSec do with those funds? :
(a) Keep then in a checking account, or put them under the mattress.
(b) Buy stock in General Motors and Coca Cola.
(c) Invest the money in Canadian bonds, French bonds, or high-yielding Zimbabwe bonds.
(d) Invest the money in U.S. Treasury bonds.
(e) Buy gold with the surplus.
(f) SocSec should not have been allowed to run a surplus. SocSec income should have been kept equal to outgo.
Answer this question before proceeding.

If you answer (b), that's an interesting topic but needs a separate thread. I'll assume you answer (d), and will compose another reply if you answer else-how.

So ... SocSec TF was in SURPLUS and chose to buy U.S. Treaury debt rather than keep the surplus funds under its mattress. TrillionS of dollars of surplus in fact. (Start another thread if you think it a big deal that those bonds had different boilerplate than those you could buy.)

Meanwhile, the Rest_of_the_Government is in deficit. Badd!!?? (Hate those tax cuts?) The government, in order to maintain its military, pay interest on the debt, and engage in other non-mandatory spending, BORROWED money. Some of the net borrowings obviously ended up from SSTF. (Should SSTF have bought Canadian bonds instead of USA bonds to avoid this hornswoggle? I think someone in one of those threads you studied opined this.)

Quote:
... Letís go with the SSA Trust figure of a $200 billion Social Security surplus. Take that out of the budget and thereís a deficit of $362 billion.

Hereís the first question: Was the US government lying when it said the deficit was $162 billion and not $362 billion?...
I've explained how to look at these numbers. If you choose to combine SocSec with Rest_of_Government that's fine -- the numbers end up different; but the way I instructed you to think of them is clearer and more valid. We can join together and deprecate the politicians that started quoting the net deficit if you wish. IIRC right-wing politicians use separate accounting when it suits them, and joint accounting when it suits, often in the same paragraph! So I'll join you in deprecating right-wing lies.

But what's with "government lying"? Are you suggesting there was some malice or fraud by the Deep State?
  #89  
Old 02-25-2020, 01:03 PM
Max S. is offline
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What would you suggest that SocSec do with those funds? :
(a) Keep then in a checking account, or put them under the mattress.
(b) Buy stock in General Motors and Coca Cola.
(c) Invest the money in Canadian bonds, French bonds, or high-yielding Zimbabwe bonds.
(d) Invest the money in U.S. Treasury bonds.
(e) Buy gold with the surplus.
(f) SocSec should not have been allowed to run a surplus. SocSec income should have been kept equal to outgo.
Answer this question before proceeding.

If you answer (b), that's an interesting topic but needs a separate thread. I'll assume you answer (d), and will compose another reply if you answer else-how.

So ... SocSec TF was in SURPLUS and chose to buy U.S. Treaury debt rather than keep the surplus funds under its mattress. TrillionS of dollars of surplus in fact. (Start another thread if you think it a big deal that those bonds had different boilerplate than those you could buy.)
I think it would have been much simpler if the social security fund was simply set aside rather than reinvested. So that's (a) and (f) - the surplus from one year would be used to reduce the tax burden for the next, and there should be a reserve of some sort, enough to fund the program for a number of months until the tax rate can change to correct a deficit. Bonds are an unnecessary step, and makes this more complicated than it should be. Besides, having the government bet on the government to finance its own trust fund doesn't strike me as above-board...

~Max
  #90  
Old 02-25-2020, 01:51 PM
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I think it would have been much simpler if the social security fund was simply set aside rather than reinvested. So that's (a) and (f) - the surplus from one year would be used to reduce the tax burden for the next, and there should be a reserve of some sort, enough to fund the program for a number of months until the tax rate can change to correct a deficit.
Just so I'm understanding -- you want the FICA tax rate to be variable based on how many recipients there are? So if there are 1x retirees in, say, 1974, then people in 1974 will be taxed at 1x; and in 2020 there are 15x retirees, the tax rates should be 15x?

That's a terrible idea.
  #91  
Old 02-25-2020, 04:21 PM
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Just so I'm understanding -- you want the FICA tax rate to be variable based on how many recipients there are? So if there are 1x retirees in, say, 1974, then people in 1974 will be taxed at 1x; and in 2020 there are 15x retirees, the tax rates should be 15x?

That's a terrible idea.
What do you mean by 1x and 15x? The tax rate would depend not only on the number of retirees, but also the number of people subject to the payroll tax, and also the ratio between average taxable income and average retiree benefit payout.

So if in 1974 there were as many workers as retirees, 1:1, that might be a "1x" tax rate. And if in 2020 there are 1/15 as many workers as retirees, 1:15, that could be a "15x" rate compared to 1974 - assuming that the median-taxable-income to median-retiree-benefit ratio is the same in both 1974 and 2020.

~Max
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Old 02-25-2020, 05:43 PM
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Iím not going to go into a Wrenching Spanners-length post that involves a loose summary of some numbers I googled and make it out like I can show what payroll tax rates would be in various years. Iím just talking about the principle of these two options:

1. When expenses are low and income is great, put the surplus in a safe place for the future when expenses are higher and revenue is lower (basically the current system)

Or...

2. Eliminate all annual Social Security surpluses by cutting taxes and then raise taxes when deficits happen so there is never a balance to carry forward.

Youíre in camp number 2, right?
  #93  
Old 02-25-2020, 06:01 PM
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Iím not going to go into a Wrenching Spanners-length post that involves a loose summary of some numbers I googled and make it out like I can show what payroll tax rates would be in various years. Iím just talking about the principle of these two options:

1. When expenses are low and income is great, put the surplus in a safe place for the future when expenses are higher and revenue is lower (basically the current system)

Or...

2. Eliminate all annual Social Security surpluses by cutting taxes and then raise taxes when deficits happen so there is never a balance to carry forward.

Youíre in camp number 2, right?
I'm okay with having enough surplus funds to run the program for a few months. The idea is that the working young pay a tax to support the elderly; if there are more elderly, the tax goes up. It is always possible that tax receipts come in lower than expected, so the "reserve" fund would hold social security over until new, higher tax rates become effective. But effectively, I am in camp 2.

The flipside is, what would it would take to put me in camp 1? Social security would have to be more of a pension fund sort of thing where the government says, 'I don't trust you to save for old age so I'm making you a pension account'. I would want individualized and inheritable trusts. I would not want one person's social security taxes to go into another person's social security benefits, unless the two were married or something like that. I still don't see why you would reinvest the trust in Treasury bonds, because that just means you would have to tax people - again - to pay the interest; alternatively, you have a scheme where the government finances interest on the older generation's pensions with the trust funds of the younger generation, eventually the interest would overtake the actual disbursements and the payroll tax would grow to over 100%.

~Max
  #94  
Old 02-25-2020, 06:59 PM
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After seeing how the government has run deficits for virtually the entire postwar era, and the last tax increase was like thirty years ago, the idea that anyone should count on future tax increases as a fiscally prudent measure to address the major demographic shift we are experiencing is just a loser plan. I mean, we are running trillion dollar deficits now and for whatever reason, taxes are being cut! Trusting that tax increases will happen just because of a deficit is just... so unrealistic that it is unadulterated fiscal fantasy to think that such a scheme could even hope to work.
  #95  
Old 02-26-2020, 12:18 PM
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After seeing how the government has run deficits for virtually the entire postwar era, and the last tax increase was like thirty years ago, the idea that anyone should count on future tax increases as a fiscally prudent measure to address the major demographic shift we are experiencing is just a loser plan.
I thought we had dispensed with the current state of affairs in post #3. The GQ answer to UltraVires's question is that fiscal conservatism is, at present, politically untenable.

I think an automatic tax increase can be written into law, based on SSA administrator's numbers from the previous year, much like sequestration or the Medicare sustainable growth rate was. An automatic tax won't stop legislators from passing the equivalent of an annual "doc fix" for social security, but sound fiscal principles would. Do you have any objections on principle or only on practicality?

~Max
  #96  
Old 03-02-2020, 12:01 PM
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Fifth, doctor's fees haven't gone up all that much. I manage a doctor's office and we charge something like $125 for a new patient visit today, in doctor's fees (procedures excluded). Something like a third of that goes into administrative overhead - billing, ancillary staff, compliance, etc. In 1955 dollars that would be around $15, cut out the overhead and you're down to $8.

~Max
Error on my part. $125 today would be about $13 in 1955. Cut out a third to account for additional overhead today versus 1955, and you're down to about $8.67. Now, I wasn't around in 1955 so I can't tell you with any certainty how much a doctor might have charged back then. The cost probably varied by region, too (it varies by region today). But I have heard a 50's doctor would charge somewhere around the $2-10 range.

~Max
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Old 03-04-2020, 02:23 PM
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