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Old 02-15-2020, 06:00 PM
UltraVires is offline
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Why can't we balance the budget by simply limiting its growth?


I know that 1995 called and wants its GOP argument back. But it seems very sensible and I hope we can have this debate without too much partisan sniping. So I am looking at these numbers:

https://www.whitehouse.gov/omb/historical-tables/ (Sorry, it is Table 1.1 and requires an Excel download).

If we look at 2007 outlays you get approximately $2.7 trillion dollars. If you adjust that for inflation using this calculator: (https://westegg.com/inflation/) it is approximately $3.6 trillion in 2019 dollars. That is what the government received in 2019.

So, guess what ladies and gents? If the government since 2007 had simply increased its spending relative to inflation and no more, the budget is balanced in 2019 even including Trump tax cuts, Obamacare subsidies, and increased defense spending.

Again, I don't want a partisan argument. Maybe we raise taxes and enact UHC. Maybe we lower taxes and cut defense spending. Maybe we raise taxes and pay down debt. Maybe we lower taxes and cut social spending. All of these are arguments for other threads.

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?
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Old 02-15-2020, 06:02 PM
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Oops. The budget is not balanced if we include increased defense spending and Obamacare. *smack. That represents increased spending, sorry. But my point stands. Spending is only increased by the rate of inflation. Budget solved.

Last edited by UltraVires; 02-15-2020 at 06:04 PM.
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Old 02-15-2020, 07:32 PM
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My opinion based on 20 years of observation:

The more that government spends, the more that becomes "necessary." As a small example, witness the detailed statistics that the government collects on the economy. That collection is only a few decades old. For well over a century, the government and the country got along just fine without knowing all those figures. But if anybody proposed cutting out the spending to collect those statistics, there would be howls of outrage from industry, from economists, from business groups, and probably other quarters as well.

Between various lobbies that will fight to the death to keep government money flowing their way; and the segment of the populace, who, when anything bad happens at all, their first reaction is, "There outta be a law!"; and politicians who hardly ever met a government spending program that they didn't like--the higher that government spending rises, the higher the "acceptable baseline" ratchets up.

Thus, only a sustained, determined effort will make any reduction, no matter how slight--not necessarily in actual spending, but rather in the increase in spending.
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Old 02-15-2020, 07:59 PM
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What unforeseen problems am I missing with this admittedly simplistic argument?
The world changes. Those changes affect what is needed to meet the goals underlying the spending.

We are part way through the baby boomers hitting Medicare and Social Security eligibility. It overlaps the period you used and spending under those programs will continue to increase for about a decade. Do we cut their benefits to avoid paying out more or cut other programs to avoid increasing overall outlays?

During recessions government spending goes up as more people draw on social safety net programs. Cutting other spending to pay for that, or raising taxes in the trough of the business cycle, may worsen the recession or slow recovery. Your proposal would also tie the governments hands to do things like temporarily increase eligibility for unemployment payments. I worry your proposal may make the negative effects of the normal business cycle more extreme.

How to measure and implement it is also an issue. We make budgets based on estimates of cost and tax revenue. Are we good for the year even if the economic environment changes and the estimates change? If we aren't we could be implementing a system that creates great uncertainty about government spending late in the fiscal year. That could create greater inefficiency in government spending as we go through quarterly feast and famine periods. It is also incredibly damaging to long term projects and contracting when we tie things that tightly to current economic performance. "Ooops the Wuhan coronavirus caused a global economic slowdown we didn't guess. That half research project or building project just got canceled." There is a reason that the Congressional Budget Office uses decade long estimates for costs to help average out the short term blips.

Then there are the issues caused by balancing the budget. Issuing debt is part of our overall monetary system. Treasury bills are the legislatively mandated investment for surpluses in Social Security. There actually were some problems related to the couple of years in the Clinton admin where we had a surplus. We need to take a good hard look at all the implications before Treasury is not issuing bonds.

Last edited by DinoR; 02-15-2020 at 08:02 PM.
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Old 02-15-2020, 08:15 PM
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Let's see. Government axes financial regulations and allows un-indicted co-conspirators to nuke the global money system. Follow-up government must spend terabucks to keep the national and global economies from collapsing and provoking widespread calamity. Budget increases tied only to inflation can handle that situation, how?
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Old 02-15-2020, 08:21 PM
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Again, I don't want a partisan argument. Maybe we raise taxes and enact UHC. Maybe we lower taxes and cut defense spending. Maybe we raise taxes and pay down debt. Maybe we lower taxes and cut social spending. All of these are arguments for other threads.

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?
Why do you want a balanced budget? Why do you want a budget at all? There's no "unforeseen problems" with your argument, since you've declared that you don't want to discuss any of the issues that real budget politics are about.
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Old 02-15-2020, 08:38 PM
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We are part way through the baby boomers hitting Medicare and Social Security eligibility. It overlaps the period you used and spending under those programs will continue to increase for about a decade. Do we cut their benefits to avoid paying out more or cut other programs to avoid increasing overall outlays?
To put a finer point on this. Letís say in 2007, there were 10 million Social Security recipients drawing $10,000 a year.

Then, in 2020, letís say there are 20 million people eligible for Social Security. Under the UltraVires plan, shall they only receive $5,000 a year (in constant dollars)?
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Old 02-16-2020, 12:53 AM
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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?
Even if this makes sense, which it doesn't, wouldn't you have to raise the budget both with inflation and with population growth? Not just for Medicare, but for everything.
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Old 02-16-2020, 04:25 AM
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... Spending is only increased by the rate of inflation. Budget solved.
How about increases in population? Do you think a country of 3 million needs to spend more than a country of 2 million? Regardless of the inflation rate?

How about increases in productivity? If this point isn't clear: Does a country with 6-lane asphalt roads need to spend more maintaining them than one with dirt trails? America's GDP today is 50% higher than it was at the end of the Bush-43 years. That's Fifty percent. With an F.

Is SocSec spending on retirees included in your "spending"? Should a country with 35 million people 65 years or older spend no more for their retirement entitlements than it spent when there were only 25 million old people?

Answer these questions. Then we'll reconsider OP.
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Old 02-16-2020, 04:59 AM
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It seems appropriate to exclude spending like SocSec which Congress has covenanted to pay workers who paid into SocSec. Similarly the ever-mounting interest payments on the Bush and Trump debt bubbles is not discretionary.

So how has discretionary spending varied in recent decades? For a source, I turn to Whitehouse.Gov:

Quote:
Originally Posted by https://www.whitehouse.gov/wp-content/uploads/2020/02/hist_fy21.pdf
Discretionary spending, as a percent of GDP, fell substantially ... from 9.3 percent in 1987 to 6.0 percent in 1999 [of which 2.9% was "discretionary defense"] . Over the following decade, discretionary spending increased ... to 9.1 percent of GDP [of which 4.6% was "discretionary defense"] by 2010. Discretionary outlays ... were 6.3 percent of GDP [of which 3.2% was "discretionary defense"] in 2019.
So, using figures from the current White House, from 1999 to 2019 there has been an additional 0.3% (per GDP) of discretionary spending, all of which was for the military. (Please note that VA benefits to our ever-growing numbers of shell-shocked soldiers is included as NON-defense discretionary spending.)

@ OP - Does this help?
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Old 02-16-2020, 07:01 AM
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As others have noted, you need to look at per-capita effects of spending. Maintaining a constant defence budget while the population of the defended increases probably doesn’t have any per-capita effect. Maintaining retirement or health care spending while the population both increases and becomes older means that you’re reducing per-capita spending while also delivering less benefits to the recipients than their predecessors. (In other words, even if the overall US population was not increasing, but the percentage of elderly was growing, maintaining constant individual retirement and health benefits would mean that total costs would still rise.) Other government spending programs will have mixed per-capita requirements. It takes more resources to manage a population of 330 million than 300 million. You may not need 10% more roads, but if traffic increases by 10%, you probably want to increase your road maintenance budget and the number of buses.

Another factor is that government spending is part of the economy. You can’t assume that economic growth would be the same whether the government spent $3.6 trillion or $4.8 trillion. The cost effect is obvious, but that extra $1.2 trillion in spending provides economic stimulus that does drive the revenue side of the budget. Some of that spending should be considered investment, where the long term benefits exceed the near term costs.

Interest rates also need to included in your model and not just inflation. Right now, debt is cheap because interest rates are so low. Even so, the US government expects to spend $378 billion on interest payments in 2020. https://www.thebalance.com/u-s-feder...akdown-3305789 If interest rates go up, overall spending will go up even if all other spending levels are maintained or reduced. Some economists would actually like interest rates to go up, as the economy has been doing well for a long time and lowering interest rates are one of the easy way of stimulating the economy when it takes a downturn. Right now, the US only has a limited ability to take that action.

A fourth factor is that governments like to spend money to get the economy out of trouble, but also like to spend money, or reduce taxes, when they have a surplus. Over the long term, a steady tax and spend policy would be level across the booms and busts of the economy. However governments aren’t very good about saving for a rainy day, whether it’s in terms of keeping the proceeds from the good times (or more realistically paying down debt), or pursuing more constrained fiscal policies.

Having said that, your basic idea is correct. Over the long term, per capita tax revenues should rise as technological improvements lead to increased productivity which leads to economic growth, so long as tax policy remains consistent. If per capita spending increases at a slower rate than revenues, eventually the US budget deficit, and then more eventually the US national debt, will be eliminated. But it will take a long time and steady, stable fiscal policy. Given the current picture of US federal politics, I think you may have to wait a few years for that.
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Old 02-16-2020, 08:43 AM
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Originally Posted by UltraVires View Post
I know that 1995 called and wants its GOP argument back. But it seems very sensible and I hope we can have this debate without too much partisan sniping. So I am looking at these numbers:

https://www.whitehouse.gov/omb/historical-tables/ (Sorry, it is Table 1.1 and requires an Excel download).

If we look at 2007 outlays you get approximately $2.7 trillion dollars. If you adjust that for inflation using this calculator: (https://westegg.com/inflation/) it is approximately $3.6 trillion in 2019 dollars. That is what the government received in 2019.

So, guess what ladies and gents? If the government since 2007 had simply increased its spending relative to inflation and no more, the budget is balanced in 2019 even including Trump tax cuts, Obamacare subsidies, and increased defense spending.

Again, I don't want a partisan argument. Maybe we raise taxes and enact UHC. Maybe we lower taxes and cut defense spending. Maybe we raise taxes and pay down debt. Maybe we lower taxes and cut social spending. All of these are arguments for other threads.

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?
I think the Demographics of retirement and SS/Medicare make this impossible to actually carry out. The cost of healthcare itself, if we limited that to inflation, would still get swamped by more and more people being qualified for Medicare, etc.

Last edited by survinga; 02-16-2020 at 08:43 AM.
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Old 02-16-2020, 09:21 AM
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[snip] the higher that government spending rises, the higher the "acceptable baseline" ratchets up.
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Originally Posted by septimus View Post
It seems appropriate to exclude spending like SocSec which Congress has covenanted to pay workers who paid into SocSec. Similarly the ever-mounting interest payments on the Bush and Trump debt bubbles is not discretionary.
Thank you for helping to prove my point. You clearly feel that once the government starts spending money on something, that that spending (by and large) is no longer open for debate. It must continue in perpetuity. Thus government spending can only increase, and never decrease.

This is a very common attitude, as shown by the ludicrous practice of calling entitlement spending "non-discretionary."
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Old 02-16-2020, 09:37 AM
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Do you feel like the government could just cut social security payments by 10% and that would be okay? People were promised those payments. They paid into the system.
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Old 02-16-2020, 02:20 PM
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Originally Posted by septimus
It seems appropriate to exclude spending like SocSec which Congress has covenanted to pay workers who paid into SocSec. Similarly the ever-mounting interest payments on the Bush and Trump debt bubbles is not discretionary.
Thank you for helping to prove my point. You clearly feel that once the government starts spending money on something, that that spending (by and large) is no longer open for debate. It must continue in perpetuity. Thus government spending can only increase, and never decrease.
The outgo from the SocSec Trust Fund is very close in size to that Fund's income. In you plan, does USG continue to collect payroll taxes? And if not, with the outgo and income balancing, destruction of SocSec becomes a "wash" ó what's the rub?

And you quote mention of interest on the debt. In your plan do you stop paying that?
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Old 02-16-2020, 03:15 PM
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I haven't abandoned the thread. I am considering all of the posts and trying to figure it out...
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Old 02-16-2020, 03:29 PM
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Here's my initial thought about the population argument. We had approximately 250 million people in 1990. We have approximately 330 million today. https://www.worldometers.info/world-...us-population/ . About a 1/3 increase.

Yet our government outlays went from $1.25 trillion in 1990 ($2.48 trillion in 2019 dollars). If we increase spending by the population growth as well, we should be spending $3.72 trillion. We are spending $4.45 trillion. That would leave us with a deficit of around $300 billion.

And as others have said, an increase in population doesn't raise government costs across the board for things like national defense. This also includes things which should be a temporary blip like the Boomers now being in retirement and collecting Social Security and Medicare.

$4.45 trillion
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Old 02-16-2020, 05:11 PM
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Do you feel like the government could just cut social security payments by 10% and that would be okay? People were promised those payments. They paid into the system.
Nobody was promised anything, although many people think that they were. The current payments INTO the system by current workers go straight OUT of the system as payments to current retirees. Your payments do NOT sit around in a pile for 30-40 years until you retire. If that's the type of plan that you want, you need to be investing your money.

And legally speaking, Congress can do whatever they want to the system. It is a well-recognized principle that no session of the legislature can bind a future session of the legislature. The power to pass laws is inherently the power to repeal laws.
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Old 02-16-2020, 05:27 PM
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So, in the interest of reducing the deficit, you advocate we keep payroll taxes but stop payments to current retirees?
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Old 02-16-2020, 09:33 PM
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. This also includes things which should be a temporary blip like the Boomers now being in retirement and collecting Social Security and Medicare.
So just wait about a decade or two and this blip in spending on seniors will take care of itself. No need to cut spending just because you find yourself in the middle of a temporary blip. Just tough it out, and everything will be fine before you know it.
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Old 02-16-2020, 10:22 PM
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... The current payments INTO the system by current workers go straight OUT of the system as payments to current retirees. Your payments do NOT sit around in a pile for 30-40 years until you retire. If that's the type of plan that you want, you need to be investing your money.
Oh my. These fallacies have been addressed at least as often as 1≠0.99999... Let's do it One.More.Time.

When you deposit $100 in your bank account and withdraw it a month later, does the bank give you the same $100 bill you gave it? Do life insurance companies or private pensions keep your payments sitting around in a pile for 30-40 years? Or do they work just as SocSec? One Doper, believe it or don't, wanted the SocSec Trust Fund to keep its money in the form of U.S. banknotes, since that's "real money" unlike Treasury bonds.

And, while you're abolishing SocSec, you could at least answer the simple question posed to you:
In your plan, do workers keep paying their payroll taxes as at present, even though retirees are cut off?
If you answer No; that you will cut off both the checks and the paycheck deductions, then explain how that helps balance the "budget." The one more-or-less equals the other.

Please start another thread if "Which political party took Social Security from the independent trust fund and put it into the general fund so that Congress could spend it?" is your confusion, and Googling that right-wing meme doesn't unconfuse you.
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Old 02-17-2020, 01:22 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.
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Old 02-17-2020, 01:39 AM
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Here's my initial thought about the population argument. We had approximately 250 million people in 1990. We have approximately 330 million today. https://www.worldometers.info/world-...us-population/ . About a 1/3 increase.

Yet our government outlays went from $1.25 trillion in 1990 ($2.48 trillion in 2019 dollars). If we increase spending by the population growth as well, we should be spending $3.72 trillion. We are spending $4.45 trillion. That would leave us with a deficit of around $300 billion.

And as others have said, an increase in population doesn't raise government costs across the board for things like national defense. This also includes things which should be a temporary blip like the Boomers now being in retirement and collecting Social Security and Medicare.

$4.45 trillion
I think you've made a good point about US government spending. It's reasonable for the government to increase spending in line with inflation, to support an increased population, to support an increased number of people receiving social security and Medicare, and to boost the economy during economic downturns. Accounting for all of those, US government spending increases have still blown way past any metric of reasonableness.

I suppose you could consider war spending as a necessary exceptional cost, but even adjusting for that doesn't make the government spending increases look unexcessive. Here's the costs for Afghanistan and Iraq, $975 billion and $1,060 billion (through 2016) respectively:
https://www.forbes.com/sites/niallmc.../#2b6df0321971
https://www.thebalance.com/cost-of-i...impact-3306301

There's no budgetary sign that the US government is worried about the impact of its debt. I'm not sure where/when the debt crisis point will be, but it does seem like the US government is driving towards that point with its foot on the accelerator rather than the brake.
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Old 02-17-2020, 02:30 AM
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... Accounting for all of those, US government spending increases have still blown way past any metric of reasonableness.
Drat! I knew I should have used a larger font in #9 to counter this disinformation. To keep it simple, heed especially the stats I've painted red.
Quote:
Originally Posted by https://www.whitehouse.gov/wp-conten.../hist_fy21.pdf
Discretionary spending, as a percent of GDP, fell substantially ... from 9.3 percent in 1987 to 6.0 percent in 1999 [of which 2.9% was "discretionary defense"] . Over the following decade, discretionary spending increased ... to 9.1 percent of GDP [of which 4.6% was "discretionary defense"] by 2010. Discretionary outlays ... were 6.3 percent of GDP [of which 3.2% was "discretionary defense"] in 2019.
If the font-size still isn't large enough, please use your browser's Zoom function.
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Old 02-17-2020, 06:34 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.
I'm not an economist (obviously) but inflation is a measure of the increase in price of a basket of goods, no? So, if the M4 Carbine, for whatever reason, outpaces the rate of inflation, then other goods should not rise as much as the rate of inflation making it all even out in the end. If it doesn't, then our measure of inflation is wrong.

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Drat! I knew I should have used a larger font in #9 to counter this disinformation. To keep it simple, heed especially the stats I've painted red.

If the font-size still isn't large enough, please use your browser's Zoom function.
I agree with the prior poster. It's cheating to put spending into "discretionary" and "non-discretionary" categories. The government can spend whatever it wants or does not want.
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Old 02-17-2020, 06:46 AM
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Oh my. These fallacies have been addressed at least as often as 1≠0.99999... Let's do it One.More.Time.

When you deposit $100 in your bank account and withdraw it a month later, does the bank give you the same $100 bill you gave it? Do life insurance companies or private pensions keep your payments sitting around in a pile for 30-40 years? Or do they work just as SocSec? One Doper, believe it or don't, wanted the SocSec Trust Fund to keep its money in the form of U.S. banknotes, since that's "real money" unlike Treasury bonds.

And, while you're abolishing SocSec, you could at least answer the simple question posed to you:
In your plan, do workers keep paying their payroll taxes as at present, even though retirees are cut off?
If you answer No; that you will cut off both the checks and the paycheck deductions, then explain how that helps balance the "budget." The one more-or-less equals the other.

Please start another thread if "Which political party took Social Security from the independent trust fund and put it into the general fund so that Congress could spend it?" is your confusion, and Googling that right-wing meme doesn't unconfuse you.
But spending is spending and taxes are taxes no matter the legislative label placed on them. This argument only works because a specific tax was assigned to the social spending program called social security.

Why is that important, though? If social security was financed originally through an increased income tax, would that make it less sacrosanct?

How about this. Say some years ago, the neocons introduced a "National Defense Tax" and rationalized that as everyone benefits from a national defense, we will assign everyone who works a 6.2% payroll contribution that is designated for national defense and also require all employers to match that 6.2%. In exchange, people were promised a certain level of military preparedness.

Would it be a good argument against proposed cuts in defense spending that people had already "paid" for it? Would it be a breach of a promise to cut defense spending?

Should we argue that the National Defense Tax and spending program is actually a net positive for the government and that the program is run very well?

Or, as I am arguing, do labels not really matter and overall spending is what is important?
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Old 02-17-2020, 07:08 AM
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What about paying interest on debt? In your mind, is defaulting an option we should always keep on the table?

As far as social security and Medicaid go, I don't think it's politically possible to cut those--not just because you'd get voted out of office immediately, but because the whole economy would be impacted. We are talking about money old people are currently using to survive. Cut those payments, and what do they do? They can't go get a job. So they move in with family? Die? Same with medical care. There may be tweaks we can make, some amount of means-testing, remove the cap on payroll tax, but we can't just cut social security checks, or remove access to medical care.
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Old 02-17-2020, 07:22 AM
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What about paying interest on debt? In your mind, is defaulting an option we should always keep on the table?

As far as social security and Medicaid go, I don't think it's politically possible to cut those--not just because you'd get voted out of office immediately, but because the whole economy would be impacted. We are talking about money old people are currently using to survive. Cut those payments, and what do they do? They can't go get a job. So they move in with family? Die? Same with medical care. There may be tweaks we can make, some amount of means-testing, remove the cap on payroll tax, but we can't just cut social security checks, or remove access to medical care.
I'm not saying that this should be unfailingly strict down the entire line, and some years may rise higher than others and some years lower than others. Further, my overall plan didn't suggest "cuts" at all. Spending increases in line with inflation.

If you got $10,000 this year and got $10,200 next year, if you weren't starving or moving in with family or dying this year, then you won't next, at least not because of the spending increase in line with inflation.

Maybe X costs way more this year but Y costs way less but Z is in line with inflation. X+Y+Z should = inflation, at least in the near term. If not, then we are measuring inflation wrong.
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Old 02-17-2020, 07:54 AM
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But inflation assumes all things being held equal. So that only works if you hold medical care static. The cost of medical care has gone up way in excess of inflation, because it has profoundly changed. The same with the military--the military we have now is not the military we had in 1980, so you can't use inflation to measure what it "should" cost. .

It's not possible to tell people "once you hit 65, you won't have access to any developments in medicine". Medical costs just aren't connected to inflation because the product itself is changing. So if you want to put discretionary and non-discretionary in the same pool, it means that other spending will have to be cut. Because inflation is never going to measure changes in medical costs.

We can have other discussions about ways to cut medical costs. But inflation just isn't relevant.
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Old 02-17-2020, 08:23 AM
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But inflation assumes all things being held equal. So that only works if you hold medical care static. The cost of medical care has gone up way in excess of inflation, because it has profoundly changed. The same with the military--the military we have now is not the military we had in 1980, so you can't use inflation to measure what it "should" cost. .

It's not possible to tell people "once you hit 65, you won't have access to any developments in medicine". Medical costs just aren't connected to inflation because the product itself is changing. So if you want to put discretionary and non-discretionary in the same pool, it means that other spending will have to be cut. Because inflation is never going to measure changes in medical costs.

We can have other discussions about ways to cut medical costs. But inflation just isn't relevant.
But doesn't that apply to a lot of things, though?

The TV I bought in 1999 is about the same price, adjusted for inflation, that I would buy today. But the TV I get today is far superior, not even close really, than the one I bought in 1999.

The laptop I bought in 2016 is far superior and costs less in real dollars than the desktop computer and monitor I bought in 2002.

Maybe medical care is unique. I'm not sure, and I really do come to this board to learn and also debate. My opinion is not fixed. However, it seems to me that medical care, from the dawn of civilization to the present could be grouped in five categories at any moment in time: 1) Piss Poor, 2) Below Average, 3) Average, 4) Above Average, 5) The Best of the Best.

I fail to see why any of these categories should rise above the cost of inflation. Yes, we can have debates and make policy choices on what level of care that a particular citizen, any citizen, or all citizens should have, but the costs shouldn't be out of whack with inflation even as technology advances.
  #31  
Old 02-17-2020, 08:42 AM
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But they aren't the same thing. That's not how they calculate inflation. Take a car, for example. Inflation measures what it would cost you to buy a 1985 Toyota in today's dollars. When they calculate what that would be, they calculate improvements in the car separately from inflation--they don't compare base trim to base trim, they adjust for the fact that the modern car has power locks and windows and a back up camera and air bags and all that. That's not inflation, that's added value.
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Old 02-17-2020, 09:09 AM
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But they aren't the same thing. That's not how they calculate inflation. Take a car, for example. Inflation measures what it would cost you to buy a 1985 Toyota in today's dollars. When they calculate what that would be, they calculate improvements in the car separately from inflation--they don't compare base trim to base trim, they adjust for the fact that the modern car has power locks and windows and a back up camera and air bags and all that. That's not inflation, that's added value.
I don't understand, and I am truly asking. You are saying that when the government measures for inflation and uses a car as one of the items in the basket of goods, it uses the value of a car with no a/c, cassette tape deck, knob radio, carbureted fuel, etc. but then adds for things like bluetooth at current sticker price separate from inflation?

How would that even work? You take the price of a 19 inch tube TV in 1999. It must be worth zero today even if in the box new and we assume it hasn't aged. You can't say that the value of a 1999 TV was zero and therefore TVs have suffered infinity inflation.

IOW, if inflation is measured by some half-assed calculation of what I could buy a car with a tape deck, no a/c, knob radio and a carbureted fuel system in 2020, then the inflation calculation is horrifically wrong and we should correct that. Please fight my ignorance.

Last edited by UltraVires; 02-17-2020 at 09:12 AM.
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Old 02-17-2020, 11:05 AM
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From Khan Academy:

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The other major problem in using a fixed basket of goods as the basis for calculating inflation is how to deal with the arrival of improved versions of older goods or altogether new goods. Consider the problem that arises if a cereal is improved by adding 12 essential vitamins and minerals but costs 5% more per box. It would be misleading to count the entire resulting higher price as inflation because the new price is being charged for a product of higher—or at least different—quality. Ideally, we would like to know how much of the higher price is due to the quality change and how much of it is just a higher price. The Bureau of Labor Statistics, or BLS, which is responsible for the computation of the Consumer Price Index, or CPI—a measure of inflation calculated based on the price level from a fixed basket of goods and services that represents the purchases of the average consumer—must deal with these difficulties in adjusting for quality changes.
Apparently the magic words are hedonic quality adjustment
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Old 02-17-2020, 11:12 AM
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I don't understand, and I am truly asking. You are saying that when the government measures for inflation and uses a car as one of the items in the basket of goods, it uses the value of a car with no a/c, cassette tape deck, knob radio, carbureted fuel, etc. but then adds for things like bluetooth at current sticker price separate from inflation?

How would that even work? You take the price of a 19 inch tube TV in 1999. It must be worth zero today even if in the box new and we assume it hasn't aged. You can't say that the value of a 1999 TV was zero and therefore TVs have suffered infinity inflation.

IOW, if inflation is measured by some half-assed calculation of what I could buy a car with a tape deck, no a/c, knob radio and a carbureted fuel system in 2020, then the inflation calculation is horrifically wrong and we should correct that. Please fight my ignorance.
First note that the U.S. government maintains multiple different inflation measures. The CPI is considered to best reflect actual consumer purchases of services and new goods. (It also includes other spending, e.g. some taxes paid for services like sanitation useful to consumers.) I think the USG makes a sincere effort to make CPI an appropriate measure but it isn't easy.

Two of the other most popular inflation measures are (1) PPI which reflects pricing pressure on industry from commodities and intermediate goods and is a better indicator than CPI for profitability prediction; and (2) "core" inflation used by the Fed to set interest rates. Core inflation ignores food and fuel since price hikes there generally do not result from overheating of the domestic economy.

For CPI they try to match a 2020 product with its 2019 equivalent and so on, making adjustments, though this can get complicated as features and consumer preferences change. Because the quality of smartphones increases so rapidly, some kind of scaling is done (which may give that component a falling-price trend); I'm not sure whether such special scaling is applied to products other than smartphone.

Last edited by septimus; 02-17-2020 at 11:14 AM.
  #35  
Old 02-17-2020, 11:47 AM
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Maybe medical care is unique. I'm not sure, and I really do come to this board to learn and also debate. My opinion is not fixed. However, it seems to me that medical care, from the dawn of civilization to the present could be grouped in five categories at any moment in time: 1) Piss Poor, 2) Below Average, 3) Average, 4) Above Average, 5) The Best of the Best.
200 years ago Best of the Best medical care was probably more dangerous to the patient than Piss Poor medical care. Homeopathy was a pretty good solution back then since giving a patient water was safer for him than bleeding.
The "problem" with medical care now is that there are more options for care, some of them expensive. How to you relate inflation in medical costs with better survival rates? And better outcomes.
That's why the basket changes. A laptop is not really a substitute for a typewriter.
I know someone who worked for CPI, and I'm pretty sure an M4 Carbine was not in the basket, by the way.
  #36  
Old 02-17-2020, 12:05 PM
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Drat! I knew I should have used a larger font in #9 to counter this disinformation. To keep it simple, heed especially the stats I've painted red.

Originally Posted by https://www.whitehouse.gov/wp-conten.../hist_fy21.pdf
Discretionary spending, as a percent of GDP, fell substantially ... from 9.3 percent in 1987 to 6.0 percent in 1999 [of which 2.9% was "discretionary defense"] . Over the following decade, discretionary spending increased ... to 9.1 percent of GDP [of which 4.6% was "discretionary defense"] by 2010. Discretionary outlays ... were 6.3 percent of GDP [of which 3.2% was "discretionary defense"] in 2019.

If the font-size still isn't large enough, please use your browser's Zoom function.
Non-discretionary spending makes up 70% of the US budget. In a discussion of controlling US government spending, why would I ignore a category 2 1/3 times the size of its counterpart?
https://www.thebalance.com/fy-2006-u...ending-3306309
(Calculation is 1 Ė 1.438/4.79, percentage applied)

Is your point that US government discretionary spending isnít out of control? Youíre right, it isnít. Itís fluctuated a lot, so the analysis depends on which numbers you use, but for the 2007-2020 timeframe of the OP, discretionary spending is in a range of 28%-33% higher now than in 2007. Thatís slightly higher than the cumulative inflation rate over that period of 24.5%, but as noted earlier, costs also would have expanded to serve an increasing population, and per-capita real costs of discretionary spending would be down.
Discretionary spending: https://www.whitehouse.gov/omb/historical-tables/ Table 5.4
Inflation: https://www.usinflationcalculator.co...flation-rates/

Now that weíve covered discretionary spending, letís look at the actual two biggest US government costs, Social Security and health benefits (Medicare and Medicaid), plus additional non-discretionary spending. From 2007 to 2019, the number of Social Security recipients increased from nearly 50 million to a bit over 64 million, an average increase of 2.11% a year and timespan increase of 28.5%. https://www.ssa.gov/OACT/STATS/OASDIbenies.html Adjusting for inflation, Social Security costs should have increased by 35.5%.
2007 Social Security spending: $581 billion https://www.thebalance.com/fy-2007-u...ending-3306310
Expected 2020 Social Security spending: $1,092 billion https://www.thebalance.com/fy-2006-u...ending-3306309
Thatís an 88% increase. 52% higher than the calculated expected percentage increase. Thatís $305 billion above the expected amount increase.

Medicare recipients 2007: 44 million https://www.cms.gov/Research-Statist...Statistics.pdf
Medicare recipients 2018: 60 million - https://www.cms.gov/files/document/2...nroll-ab-1.pdf
16 million increase or 36.4%
2007 Medicare spending: $371 billion https://www.thebalance.com/fy-2007-u...ending-3306310
2018 Medicare spending: $582 billion - $211 billion increase or 57% https://www.thebalance.com/fy-2018-t...equest-4158794
So a higher percentage increase in Medicare recipients than the percentage increase in Social Security recipients. Adjusted for inflation, calculated expected increase would be 45%. So costs are $44 billion above expectation.

2007 Medicaid spending: $197 billion
2018 Medicaid spending: $389 billion
(Same sources) $192 billion increase, or 97.5%. Using Medicare baseline, $103 billion above calculated expectation.

Other mandatory spending 2007: $302 billion
Other mandatory spending 2018: $569 billion
(Same sources) $267 billion increase, or 88.4%. Using Medicare baseline, $131 billion above calculated expectation. Given ďOtherĒ is the second biggest increasing subcategory behind Social Security, Iím wondering how much of this subcategory should really be in the discretionary category.

So based on some quick Internet research, current non-discretionary spending is roughly $583 billion higher than the calculated expectation based on the increased number of beneficiaries and inflation. Calculating that against the 2020 US government budget figure, the budget is 14% higher than the calculated expectation based on demographics and inflation.

TLDR; US government spending increases have still blown way past any metric of reasonableness.

By the way, the earlier post you should have cited was #10. Maybe you should investigate your browserís zoom function.
  #37  
Old 02-17-2020, 12:52 PM
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But inflation assumes all things being held equal. So that only works if you hold medical care static. The cost of medical care has gone up way in excess of inflation, because it has profoundly changed. The same with the military--the military we have now is not the military we had in 1980, so you can't use inflation to measure what it "should" cost. .

It's not possible to tell people "once you hit 65, you won't have access to any developments in medicine". Medical costs just aren't connected to inflation because the product itself is changing. So if you want to put discretionary and non-discretionary in the same pool, it means that other spending will have to be cut. Because inflation is never going to measure changes in medical costs.

We can have other discussions about ways to cut medical costs. But inflation just isn't relevant.
Improvements in medical care are like anything else; a responsible party, whether the government or otherwise, needs to decide if the new product is cost effective, whether they want to pay for the new product or not, and if they are willing to incur the cost, how theyíre going to pay for it. If the government decides that a 5% above inflation increase in the health budget will be beneficial to overall national health by providing new medical treatments, thatís great. But that increase needs to be funded. Either take that amount away from other programs, or raise taxes. But if the US is looking to control the national debt, which it will have to do sooner or later, then it has to have the government be responsible when it comes to spending in all categories. Hard decisions suck, and they especially suck when it comes to something like limiting medical treatment. But ultimately whatever the government is spending on now, even if itís through borrowing, will have to be paid for. Deciding that medical costs are out-of-bounds for fiscal restraint just creates problems for the budget in other areas. And itís not like the health budget is the only category people care deeply about. People want the government to supply more of almost everything. Thatís the problem.

Iíll also note that the government needs to ensure that the costs of existing medical products arenít increasing at a rate that exceeds inflation. Iíve not done any extensive reading on the subject, but from reading scattered news reports, I get the impression that just keeping costs of existing medical treatments under control is a big part of the problem.
  #38  
Old 02-17-2020, 05:36 PM
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I for one agree that we should slash defense spending and raise taxes on the wealthy (for real this time). Which is to say that we shouldn't blindly balance the budget, but of course the budget can be balanced. It's happened before, and if we get democrats into office if can probably happen again.
  #39  
Old 02-17-2020, 10:17 PM
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200 years ago Best of the Best medical care was probably more dangerous to the patient than Piss Poor medical care. Homeopathy was a pretty good solution back then since giving a patient water was safer for him than bleeding.
The "problem" with medical care now is that there are more options for care, some of them expensive. How to you relate inflation in medical costs with better survival rates? And better outcomes.
That's why the basket changes. A laptop is not really a substitute for a typewriter.
I know someone who worked for CPI, and I'm pretty sure an M4 Carbine was not in the basket, by the way.
In many ways a laptop is not a substitute for a typewriter, but in many ways it is. In 1985 if I wanted to send a resume to a business, for example, I would have to buy a typewriter, typing paper, envelopes and stamps.

Today, I would have to buy a laptop, purchase Microsoft Word, and purchase internet services so I could email the resume to the business.

Further, if we assume that this place only accepts online applications, buying a typewriter like in the good old days, simply is not an option for me. In that context, the laptop is a substitute for the typewriter.

Of course, the laptop does thousands of other things that the typewriter could not do and should be compared to those other functions as well. However, how do compare those functions that did not exist in 1985? Do you analogize researching a topic online with a trip to the library?

I think if you totaled everything together, "inflation" in this context is minimal and probably deflationary. I can do all of the tasks that I had to do in 1985 much easier and with less cost today, which is really the figure one is after.

Using the example of a cereal which increases in price 5% but also added more vitamins and minerals, any measure of inflation must account for the unavailability of the prior product. If the USG decides that 2% of that increase was inflation and 3% was me getting a better cereal, then that 2% number seems meaningless except as an accounting gimmick.

Nobody can buy the old cereal without the additional vitamins. Every person has just seen their cereal costs increase by 5%, not 2%. 2% is not a number that anyone is affected by and seems meaningless.
  #40  
Old 02-18-2020, 12:30 PM
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Using the example of a cereal which increases in price 5% but also added more vitamins and minerals, any measure of inflation must account for the unavailability of the prior product. If the USG decides that 2% of that increase was inflation and 3% was me getting a better cereal, then that 2% number seems meaningless except as an accounting gimmick.

Nobody can buy the old cereal without the additional vitamins. Every person has just seen their cereal costs increase by 5%, not 2%. 2% is not a number that anyone is affected by and seems meaningless.
But it also has to account for the fact that now that cereal costs 5% more, I might just make pancakes instead. I don'r have to buy the new product. Inflation is really hard to measure, and they make a lot of estimates and adjustments. But added value is not and has never been considered inflation.
  #41  
Old 02-18-2020, 07:55 PM
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From 2007 to 2019, the number of Social Security recipients increased from nearly 50 million to a bit over 64 million, an average increase of 2.11% a year and timespan increase of 28.5%. https://www.ssa.gov/OACT/STATS/OASDIbenies.html Adjusting for inflation, Social Security costs should have increased by 35.5%.
2007 Social Security spending: $581 billion https://www.thebalance.com/fy-2007-u...ending-3306310
Expected 2020 Social Security spending: $1,092 billion https://www.thebalance.com/fy-2006-u...ending-3306309
Thatís an 88% increase. 52% higher than the calculated expected percentage increase. Thatís $305 billion above the expected amount increase..
Pause just a second here. If you are contending that Social Security has grown out of control, thereís only a few options:

1. You think that somehow the benefit payments have been larded up beyond inflation during the time period you mentioned.
2. Your understanding of the Social Security program is incomplete.
3. Your math/expectations are shot.

Which one do you think is moat likely?
  #42  
Old 02-18-2020, 08:33 PM
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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.
When I screw up, I try to admit it.

I was on the road for ten hours yesterday and I was posting at two in the morning. I read the OP but I misunderstood what it was that was being proposed.

So ignore what I posted above. I was wrong.
  #43  
Old 02-19-2020, 02:00 AM
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Pause just a second here. If you are contending that Social Security has grown out of control, thereís only a few options:

1. You think that somehow the benefit payments have been larded up beyond inflation during the time period you mentioned.
2. Your understanding of the Social Security program is incomplete.
3. Your math/expectations are shot.

Which one do you think is moat likely?
I think that #1 is most likely. Noting that 2020 is a budgeted figure, US Social Security costs are expected to rise by 88% from 2007 to 2020. Inflation hasn't been high over the past 13 years. You might be able to find a better figure than the 24.5% I looked up, but I don't think it would be phenomenally higher. I'm going to stand by the number of beneficiaries I cited, since it came directly from the Social Security administration's website. 28.5% more beneficiaries are receiving an 88% increase in spending over the specified time period, which was set by the OP. You can twiddle with the numbers, but there's no way you're not going to find that Social Security spending hasn't outstripped inflation.

I am aware that US Social Security funding works differently than other programs. However, the US government chooses to place Social Security in it's overall budget. If it excluded it, the deficit would have been much higher in past years, and the current US debt figure would be even worse.
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Old 02-19-2020, 04:02 AM
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I am aware that US Social Security funding works differently than other programs. However, the US government chooses to place Social Security in it's overall budget. If it excluded it, the deficit would have been much higher in past years, and the current US debt figure would be even worse.
Let's not start down that road, though for the reasons I said earlier. You are correct that we should look at overall spending and (for purposes outside this thread) overall taxes.

If we don't do that, then we allow the government to create "special" spending which has to be outside of any debate about a budget deficit because it is "self funding."

It would be like me arbitrarily telling my wife that the last hour of every day that I work goes to my booze budget. I keep careful calculations of the money in and the money out. Maybe I start drinking more so to "save" the booze account I decide that the last two hours per day now go into the fund. I also structure it so that the "booze trust fund" (the excess of which is carefully invested) contains more money than I would drink away.

Then if my wife complains that my drinking is costing too much money, I simply get out the spreadsheets and show her that my drinking is actually a net financial positive for the family as there is a surplus in the booze fund, unlike her hair and nail spending which is costing the family every month as it has no "dedicated funding source." She would rightfully complain that there was only money in my booze fund and no money allocated for her hair and nails because I simply decreed it to be so.

That's exactly what we have done with social security. We have enacted a tax and the government gets money, but the money could be used for any purpose. Only because it has arbitrarily declared that such is a "Social Security" tax makes the program "solvent." It's a shell game.
  #45  
Old 02-19-2020, 05:39 AM
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Before any other issue can be discussed, we need to establish why you want to balance the budget on a year by year basis and then balance that reason against reasons for not doing that.

Unless we have established that, it makes no sense to talk about methods to do that.
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  #46  
Old 02-19-2020, 06:29 AM
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I think that #1 is most likely.
Well, it is a combination of 2 and 3. COLAs for Social Security are locked in by a formula in law, and there are no ďbonusesĒ that happened over that time. Itís a fundamental misunderstanding of Social Security to think otherwise. In fact in a few of those years, proposals were considered to reduce the formula to cut benefits.

https://data.bls.gov/cgi-bin/cpicalc...1&year2=202001

Inflation makes $100 in 2007 cost about $127 in 2020. Thatís the same amount benefits have increased.

Now letís say 50 million Americans recevived 100 Social Security bucks in 2007. That 5 billion bucks.

Now, 64 million Americans get 127 Social Security bucks. Thatís 8.1 Social Security bucks. Thatís roughly an 80% increase.

Why you think that 28% more beneficiaries getting 27% more in inflation-adjusted dollars should equal only a 24% growth in nominal dollars is beyond me.
  #47  
Old 02-19-2020, 08:28 AM
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Well, it is a combination of 2 and 3. COLAs for Social Security are locked in by a formula in law, and there are no ďbonusesĒ that happened over that time. Itís a fundamental misunderstanding of Social Security to think otherwise. In fact in a few of those years, proposals were considered to reduce the formula to cut benefits.

https://data.bls.gov/cgi-bin/cpicalc...1&year2=202001

Inflation makes $100 in 2007 cost about $127 in 2020. Thatís the same amount benefits have increased.

Now letís say 50 million Americans recevived 100 Social Security bucks in 2007. That 5 billion bucks.

Now, 64 million Americans get 127 Social Security bucks. Thatís 8.1 Social Security bucks. Thatís roughly an 80% increase.

Why you think that 28% more beneficiaries getting 27% more in inflation-adjusted dollars should equal only a 24% growth in nominal dollars is beyond me.
Actually, I did have a math error. I multiplied the 28.5% population increase by 1.245 (using the earlier cited inflation figure). I should have multiplied 1.285*1.245. That means that the calculated expected increase should have been a 60% increase rather than a 35.5% increase. Iíve rechecked my calculation and, based on the numbers I was using, I should have predicted the over-budget figure for Social Security to be $163 billion. But Iíll show my work using your inflation rate and to be fair, Iíll compare the calculated figure against the 2019 Social Security spending, rather than the 2020 budgeted figure.

Start with a baseline of 49,864,978 Social Security recipients receiving a total benefit of $581 billion in 2007. Thatís 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 $1,041billion. 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. Not as out of control as I thought, but still a significant difference.

Revised figure for the Medicare increase is an expected 73% budget increase (36.4% recipient increase, 27% inflation), so expected budget going from $371 billion in 2007 to $642 billion in 2018; actual figure was $582 billion so actually $60 billion lower than expected. However, note that the 36.4% increase in Medicare beneficiaries is still much higher than the 28.5% increase in Social Security beneficiaries. So thereís still an increase beyond the demographics of an older population, although the actual figure would still be below the calculated expected figure.
https://www.thebalance.com/fy-2018-t...equest-4158794

Revised calculated figure for Medicaid using the 73% Medicare figure and $197 billion 2007 amount is $341 billion. Actual spending was $389 billion, $48 billion higher than calculated.

Revised calculated figure for ďOtherĒ using the 73% Medicare figure and $302 billion 2007 amount is $522 billion. Actual spending was $569 billion, $47 billion higher than calculated.

Revised non-discretionary spending overspend of actual versus calculated expected is $128 billion. So much less than the incorrect amount calculated earlier, but still a significant spending increase beyond inflation and a growing and aging population.
  #48  
Old 02-19-2020, 09:36 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.

Huh? I mean, I know it was hard to follow since he said inflation adjusted but how does what you wrote make sense to you at all?

Of course it is subject to inflation, which is why his budget was also raised by inflation.
  #49  
Old 02-19-2020, 10:14 AM
Little Nemo is offline
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Quote:
Originally Posted by Kearsen1 View Post
Huh? I mean, I know it was hard to follow since he said inflation adjusted but how does what you wrote make sense to you at all?

Of course it is subject to inflation, which is why his budget was also raised by inflation.
I thought he was saying the government should set their spending at an arbitrary amount set in 2007 and refuse to spend anything more than that. In other words, to ignore any prices that have risen in the last thirteen years.

Why did I make this mistake? Sleep deprivation.
  #50  
Old 02-19-2020, 11:59 AM
Kearsen1 is online now
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Quote:
Originally Posted by Little Nemo View Post
I thought he was saying the government should set their spending at an arbitrary amount set in 2007 and refuse to spend anything more than that. In other words, to ignore any prices that have risen in the last thirteen years.

Why did I make this mistake? Sleep deprivation.
I totally skipped your takebacksies post.

My bad!
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