I like this lefty presentation better: Pie Chart Flyers - Where Your Income Tax Money Really Goes | War Resisters League
They also show the conventional pie chart, which puts military at 19% of the budget.
Caveat emptor, but it’s interesting to rework the numbers to re-allocate Veteran’s benefits and a portion of interest on the debt into the military-related bin. After all, fewer wars would probably imply lower debts.
How come? It seems like a big heap of money in a swimming pool would serve all the same purposes, and be no less secure in the bargain. Except from thieves, I guess, but you know what I mean. In some ways it would be better: there’d be no way to unexpectedly come up short of real money when the government tried to draw on the fund. I get that surpluses in securities can be used right away, instead of sitting idle, but that’s only as desirable as the current government’s fiscal policy is trustworthy.
Does “tight fiscal policy” just mean “good fiscal policy” in this context, or does it have a more exact meaning? Either way, on re-reading I think you’re right: no one’s claiming the Social Security trust fund as an asset without also claiming it as a debt. It sounded dishonest to me because from a layman’s perspective, the existance of a Social Security trust fund implied the existance of a Social Security budget, but in this context there is no such implication. I’m not convinced that the present setup is a good idea (see above), but there’s no trickery in it once you know what the terms mean.
Regardless, thanks for your reply.
I don’t want to say “good” fiscal policy, because higher budget deficits can help pull an economy out of recession.
“Tight” fiscal policy means some combination of higher taxes and lower spending. “Loose” fiscal policy is the opposite.
Well, in a sense I don’t know what you mean. The SS admin is taxing more than they are spending. They have to do something with the funds (until the baby boomers retire, at which point outlays will exceed inflows). I suppose they could buy cash from the Bureau of Mint, but that would involve some storage costs.
Treasury notes are just a convenient (and safe) security.
The real underlying problem is that the Feds are not adding to national savings currently in anticipation of the baby boomer’s retirement. That would encourage higher investment now (and lower investment later). Clinton had exactly this sort of scenario in mind. W Bush chose a different path.
Incidentally, another huge owner of US Debt is the Federal Reserve, who run our monetary policy. They like Treasuries because of their high safety and liquidity. If necessary, they could work with other bond instruments (or even used cars), though it would be less convenient.
My alternative? I’ll bet you could see this coming - privatization.
Of course T-bills are an asset - but an asset only to the holder - your portfolio manager would readily agree with that. You’d be best firing him if he tells you otherwise. But your portfolio manager (and apparently everyone else in this thread) would also agree that T-bills are a liability to the seller - the U.S. Gov’t. And that’s where we began this little side-trip - intragovernmental debt. Don’t be so obstinate; you knew exactly what I meant.
[qyote]The magic came back around 1995. To lay give Clinton full credit for this is a little silly, BUT it can be said that his anti-deficit policies were pro-growth: expanded national savings assisted the investment boom associated with the return of fast productivity growth.
[/quote]
So you’re telling us the opposite of what I claimed (that the short-term prosperity of the era was fueled by the stock bubble), right? You seem to be implying that the stock bubble was fed by the relative prosperity. Have I got that right?
If so, it seems a little far-fetched to me. Mainly because I can’t seem to point to anything that Clinton advocated which could be termed “anti-deficit.” Rather, it seems to me, that the Clinton budgets benefited by larger than expected increases in revenue more than through any “anti-deficit” policies of his. I do, however fully agree that the Clinton budgets were less reckless than the Reagan and Bush II budgets, but I don’t see a coherent “anti-deficit” theme. After all, Clinton spending increases at least kept pace with inflation, and in most years exceeded it.
So when the Democrats are in control of all three branches of the government, and attempt to increase the deficit, then it is not their fault. But when Republicans control two branches, and balance the budget (dragging the remaining Democrat along kicking and screaming), then it is “on their watch”.
This is, of course, nothing more than the usual spin where anything bad that happens is the fault of Republicans, and anything good is to the credit of Democrats. Clinton inherits a growing economy, tries to screw it up and is stopped by Republicans, and the subsequent balancing of the budget brought about by Republicans and against his will redounds to Clinton’s credit. Reagan cuts taxes and (to the extent that a President can affect the economy) triggers an economic boom, Democrats hugely increase non-military spending, and the deficit is Reagan’s fault.
During the time that the two previous attacks on the World Trade Center were made, and 9/11 was planned, prepared and set up? Bill Clinton.
:shrugs:
Same old same old.
Regards,
Shodan
So you believe in Ricardian equivalence (or the modern Barro version), UncleBeer? If bonds are not net wealth, why do you care about deficits?
I get it. Clinton should get blamed for an attempt to take down the WTC even though it wasn’t successful, but not get the credit for initiating deficit reduction even though it wasn’t completely done under Democrat control of government :wally
I think that would be difficult to track, RT (I fear calling you by your name now! 
) because I think there’s a realization on the part of Presidents for what can and can’t get through congress depending upon the make up of the chambers. A President who knows his party has both houses is going to be less cautious about what he submits whereas a President who knows his budget will be fine-tooth combed and critiqued is going to look for some form of compromise (and discussions with opposition leaders) in his budgetary submission.
How do you square this supposition with the evidence from the charts you presented that an all-Democratic government reduces the deficit as often as a split government does?
Not to worry, ladies and gentlemen. Bill Frist has it all figured out: it’s all the Democrats’ fault:
Yessir, that Republican war had nothing to do with that debt. Or the tax breaks to the wealthy.
As an aside, I’d like to know what that Democrat party is that Republicans like to refer to. I support the Democratic Party. Does he represent the Republic Party?
It’s the party of Jim Davison! Fear him!
Yes, the democrats lacked the majority needed to pass a paygo deficit control program by party line vote.
If only they had been able to convince a few republicans to exercise fiscal restraint, but they didn’t, because they’re weak.
Oh, shut up.
Eyes do not exist big enough to roll proportinate to the ridiculousness of these statements.
I’ve found these useful, while still less than his comments demand.
Ricardian equivalence, in its simplest form, says that money government spends must come from one of two sources: the current revenue stream (your taxes today), or it is financed by borrowing (or issuing promissory notes/bonds) which must be paid back later thru higher taxes. The assumptions underlying Ricardian equivalence are what dooms it:
Assumption 1): Individuals must be able to borrow at the same interest rate as the government. This is false; interest rates offered to individuals are higher than government rates.
Assumption 2): Enough of the populace must give a shit about the future tax burden to be driven to save enough now that will offset the future tax liabilities caused by financing debt. This too, is demonstrably false; the personal saving rate over the population of the U.S. is effectively < 0%.
Assumption 3): The interest on any individual savings accounts must be equal to the interest paid on the government financed debt. False once more; interest on savings is almost always* lower than interest on debt; there is a net cost invovled even if individuals would save a principal equal to government financed debt.
*Where savings interest is equivalent to debt interest, is when government debt is financed thru promissory notes (bonds). The interest a bond holder earns is identical to the interest the government must pay.
An excellent question. Bonds are not net wealth because the assets backing them (the cash you’ve used to buy them) is subject to diminishing value over any given period. There are two forces causing this shrinkage. Inefficiencies in the market place - particularly where government is doing the buying. And, since the government is taking on more future debt to finance payment of current debt, the result is inflationary interest rates.
Deficits are important for a couple reasons, too:
Because we’re financing current debt with future debt creating a spiral that cannot be sustained indefinitely. Unless, of course, economic expansion is perfectly elastic. But it ain’t because of friction in the capital market (the overhead- type costs associated with borrowing and the non-instaneous feedback inherent in any market). Also important here, is that not all government debt is financed by issuing bonds; much of it is borrowed on the open international capital market creating additional inflationary pressures there as government competes against individuals and other governments for a finite quantity of dollars.
Individuals simply do not have access to enough capital that would enable them to offset all government spending by saving more; individual income is finite in any given period - another inelasticity. For Ricadardian equivalency to hold, government debt must also be finite in any given period. There doesn’t seem to be such a constraint in place though.
I think. There are some holes in there, I’m sure. Probably some pretty large ones. You’ll probably come in here and tell me that I can’t both reject Ricardian equivalency and believe that government debt matters for some very logical reason. To be honest, I knew nothing about the theory Ricardian equivalence before I read the term in your post. Not surprising since I don’t know much of anything about economics (and it probably shows). Pretty much everything I know, I’ve learned thru this board. So, please, if there are holes in my logic, poke some sticks thru 'em. I’m willing to be instructed.
Ok, thanks.
This put it together for me. The surplus that SS taxes are collecting is being spent on non-SS things*. This would not be a problem, except that our government isn’t trying to build its savings in anticipation of having to give the money back. Fair (and non-combative) summary?
*The one part I don’t understand is why it’s necessary for the SS admin to do anything with its surplus. I mean, I have a savings account. If I have money that I don’t want to spend right away, I put it in my savings account and leave it there until I need it. Isn’t there some way for the SS admin to do the same thing with the surplus it’s collecting? Treasury bills don’t do what I want because the money they represent has to be acquired from some other part of the budget when they’re redeemed, as if I represented a withdrawl of $100 from my savings account by spending $400 on cocaine that week instead of $500 (having spent $600 the week I “invested” the money). This is what I was trying to get at with the swimming pool thing: what does the US government do with money that it has but doesn’t want to spend right away?
For my own interest: does anyone in this thread, from Shodan to elucidator, agree with Frist’s analysis of the source of our deficit woes?
I wanna go back to this question posed to me yesterday if I may. I replied previously that privitization seemed a prudent alternative. But if we reject that out of hand, or accept as proven that it isn’t a viable alternative, I’ve got another idea - one that simply reduces the future outlays. Raise the minimum age to qualify for SSA disbursements to, say 70. With people living significantly longer than they did when this plan was conceived, it seems an idea worth considering. In actual fact, though, it wasn’t so long ago (during the Reagan years, I believe) that the minimum age at which you could start drawing funds was lowered from 65 to 62. Is there a good argument against (and by “good” I mean one that ignores that supporting such would likely be political suicide) bumping that up to some higher number.
Simply because that’s the way the code governing SSA receipts is written. The real question though, is, “Why is the code written that way?” The answer to that is that sticking all that cash (and it’s a really, really, really huge amount - the SSA claims almost $1.7 trillion were in the trust fund at the end of 2004. in comparison the total value of every share of every domestic stock traded on the NYSE was $13.9 trillion on 1/31/06) would distort & disrupt the capital market too greatly. This is also one of the arguments against privatizing the whole shebang.
Why put it in the capital market, though? I can see as how suddenly growing NASDAQ by 10% would have unpredictable side effects, but if SS didn’t do anything with the money, and just sat on it, then no one would be disrupted, would they? Or would taking 1.7 trillion out of the economy have its own ugly consequences?