Starving the Beast: Can it work?

Great Debates
61

That’s assuming that no one else enters the US. However, many demographic forecasters predict that the US population will grow to 350m in about 50 years, mostly as a result from immigration. This will help keep the average age low and the working class large, large enough that the current population percentages will not change much (tried to link to an Economist article I read it from, but it requires subscription).

Europe, on the other hand, is tipped to shrink, so that the predicted EU size in 50 years ends up smaller than the US population now.

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Didn’t I say that up there!

See, I’m ahead of the trend!

63

… then the immigrants retire. My understanding is that immigration merely postpones the day of reckoning. But, hey, there’s an advantage to experiencing a demographic crunch after others do: you can learn from their mistakes.

Jonathan:
---- Again, I see two paths out: devaluation of the currency or the repudiation of the federal debt. Both of which would destroy the existing value of Treasury bills and destroy the currency (and many peoples life savings and retirement funds).

Devaluation of the currency and a little surprise inflation would merely bring us back to something like the late 1970s, only worse. Lots of countries (mostly third world) have experienced financial crises. Life goes on.

Sure, I think existing policies are irresponsible. And I would advise those in-the-know to map out a savings plan that takes into account Big Government’s decision to increase spending, borrow money and cut taxes at the same time. Something will have to give, and it will probably be aid to the elderly (i.e. social security and medicare).

In the voting booth one might ponder that over 50% of the tax cut will go to the richest 1% in 2010. This group had an average income of $938,000 in 2003. Thus are the priorities of the current administration. http://www.ctj.org/

More budget-busting tax cuts are in the works. Stay tuned.

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Those who favor “starving the beast” define the “beast” as the spending they don’t like. Others in the thread have written this and the spending bills that were just passed would sure support that idea.

65

Hehe, whoops. :smack: Can’t believe I didn’t see that.

66

I find no agreement between myself and the Republicans when it comes to fiscal policy, nor can I see how in my lifetime any Republican administration has improved the country’s finances.

67

Please correct me if I’m wrong but my understanding is:

Social Security is NOT in a “lockbox” or “trust fund.” It’s part of the general fund, and is funded each year from that year’s tax intake (in addition to that year’s S.S. intake from current workers). (Personal opinion here:) It seems to be essentially a pyramid scheme that was designed (IMHO) to create revenue for the gubmint during the Depression to fund gubmint projects…

Assuming it is actually part of the general fund, wouldn’t it be more just if Soc. Sec. were actually converted to a true “bank account” for each person that has a Soc. Sec. number? That number would be an ACTUAL account that you were putting money into for the future, not merely a way of reckoning what share is “yours” of someone ELSE’S money in the future…

68

Measure for Measure, government waste or money used for frivolous projects just has no place in a thread that is essentially about how to get out from under the burden of paying some old dying hippy’s board bill. If it were really about saving tax dollars, we could start with the defense department who are unable to account for one trillion dollars that somehow just got away from them.

(Gee, I bet that would have been enough to buy those state-of-the-art levalar vests to protect the other 40% of our soldiers and have a few dollars left over. I hear you can buy these vests cheap on eBay.)

Cut our entitlements? What part of my $16 a month raise for next year should I give back?

The boomer generation has not done as well financially as the G.I. Generation – our parents. I’m not sure why you think that we are particularly a wealthy retirement class. The boomers are also part of the overtaxed working class.

Women have always been part of the workforce. It’s only been in more recent years that work at home has been seen as a valuable contribution to the economic well-being of the family. Men die about seven years younger but during the prime working years, women are likely to work longer hours – either at home or combining a career outside the home with household duties after returning home from a job.

Today’s generation of young men is probably taking on more responsibility for household chores, but there is a long way to go before there is complete task sharing. You are more likely to hear a young man say that he helps his wife around the house than you are to hear a woman say that she helps her husband around the house. It is all too often still considered primarily a woman’s duty.

Rather than raise the retirement age for women, how about making an honest effort to make those salaries and opportunities equal first..

Was it pervert who has such a wild lifestyle that he plans to live to be only seventy? That same lifestyle could disable him in his forties and make it necessary to draw social security. I was 46. You need a better plan, kid!

I wish you all long and happy lives under a just government.

69

Maybe you’re not familiar with the term ‘entitlement’ as applied to government programs? It has nothing to do with your raise. Entitlements are government programs that people are ‘entitled’ to, such as Medicare and Social Security. As opposed to discretionary programs, such as funding the NEA or NASA.

Entitlements are ‘off limits’. They are also the largest area of government spending by far, and within 20 years entitlement spending will eat up almost the entire government budget, all else being equal. So we’re headed for either huge tax increases (not feasible), or cuts in entitlements (not feasible), or massive deficits and a fiscal crisis (the default case) followed by reforms.

I’m not comparing the boomers to other generations. I’m saying that within our society as a whole, the elderly are the wealthiest class. The reason is simple: They’ve had their whole lives to accumulate wealth. Now obviously there are poor old people. But there are also a lot of people with a house paid off, a nice nest egg, a work-related pension, plus social security. The proportion of millionaires among the retired class is higher than for any other class.

My proposal is not to freeze out all old people. What we need to do is to means-test social security. Why in the hell should Donald Trump or Bill Gates or the guy who sells his Tire store for a couple of million and retires get a government paycheck? It makes no sense.

As for the boomers not doing as well as their parents - I dunno about that, but I can tell you one thing - they are going to make out like bandits on their social security payments, while their kids are going to get absolutely raped on theirs. Boomers will get back everything they put into SS, plus a whole lot more. People who are 20 today will get back far less in SS than they would have gotten had they invested their money privately. This makes it not a ‘retirement program’ but a huge tax on young working families, with the benefits going to wealthier (on average) retirees.

70

Measure for Measure, are you flowbark? Just curious.
Anyway, the big crunch is the boomers, and of the boomers, my cohort: check the demographic figures and you’ll see that the real takeoff in the population over 65 takes place in 2020 and beyond. If we can get over that hump via increased immigration, then the problem should be solveable thereafter.
Dirk Gntly: my understanding is: it depends on who you ask. Social Security is entirely funded by its own separate tax, and there is a separate Social Security Trust Fund. However, all of its surplus is mandated to be invested in US Treasuries. Therefore, the surplus serves to mask the true size of the deficit by minimizing, to the extent possible, which hasn’t been much lately under Bush, the amount that has to be funded through sales of bonds to the general public.
Anyway, my long-term bet has been that we will have a crisis eventually because of this wild fiscal policy that Bush has been following, and that appears to have become SOP for Republicans in power at the Federal level. Given that this is a Republican-dominated age we’re living in, and given the above SOP, it’s a no-brainer, almost, that there will be a fiscal and currency crisis at some point, with the only crucial question being the timing.
Ah, if I could only find out when. That way, I’d know when to put in the order for my yacht…

71

Sam Stone,

It makes sense if D.T. or B.G. has been paying into Social Security all along - it’s their money, not mine, or yours, or anyone else’s. Now, if they are allowed to NOT pay into Social Security in the first place, that’s another story. Unfortunately, they’re not allowed to make this choice, and neither is anyone else. Now, if you want to propose that Big Fed get honest with John Q Public and explain that Social Security is NOT their money (which is how it’s been sold to them for 70-odd years), then I’m all for that. Of course, once John Q figures out that he would do just as well investing into T-bills and etc. for himself, then Soc. Sec. as it stands will be demolished.

  • Dirk
72

pantom,
Thanks for the answer, by the way. It cleared things up a bit.
As far as Bush’s spending policies - well, that’s very very complicated. I mean, sure, we had surpluses in the late 90’s. But these were projected surpluses - they weren’t actually realized. They were based on conjecture that if the economy grew at such-and-such-rate, etc., then we would have more money than we were spending by year X. At least, that’s how I understood it. Our current predicament is similar; if the economy continues at it’s present rate of decrease/increase, then surpluses/deficits will be such-and-such by year Y.
So far, there have been a great many crises since the 30’s, including a lot of tax/spend, and I haven’t seen indication of the dangers of a complete economic collapse, in spite of predictions of another global depression since the 1970’s. I’m not saying I want to stick my head in the sand and pretend one isn’t possible, I just am not sure a single presidency can cause that large of a ripple.

  • Dirk
73

Well, that would be true if Social Security were an actuarially sound investment program. It’s not. Money that goes into the fund is not invested - it’s spent. The people who are retiring now did not pay anywhere NEAR enough money to account for the benefits they will get, while the people who are entering the workforce today will not get anywhere near the money back that they invested.

Politicians like to claim that SS is a retirement savings program, but in reality all it is is a tax, with a promise that sometime in the future the payee will get benefits from revenues taxed from someone else. It’s essentially a big Ponzi scheme, and like all Ponzi schemes it only works for those who are in at the beginning. As the boomers retire and the workforce supporting them shrinks, the whole house of cards is going to come crashing down.

74

I don’t think so. I’m not sure what you are asking.

75

Dirk Gntly: Well, it isn’t just Bush, it’s also Reagan and Bush Senior. Like I said, wild fiscal policy appears to have become the Republican Standard Operating Procedure, also known as “Starving the Beast”. I do agree that this is their tactic, and I also think they’ll succeed, in the sense of bankrupting the government. This will be a classic case of “getting what you wish for”, since the crisis this will cause will discredit the Republicans for at least a generation after it happens, much as the Depression did. My only hope is that the coming crisis won’t cause the hell that the Depression caused, but there will be one, of that I’m as certain as a person can be. Which Republican Admin it happens under is of course unknowable, but we already know from the Clinton experience that all a Democrat can do when confronted with a massive fiscal deficit upon assuming office is fix as much as he can and hope his successor doesn’t screw it up. But this is ultimately futile in the face of the constant mania for tax cutting combined with over the top defense spending, not to mention the Republicans appear to be as good at pork barrel spending as any Democrat.
Little known fact: the debt increased more in percentage terms under Reagan than under FDR from 1933 to 1941:

FDR: Start at 6/30/1933: 22,538,672,560.15
End at 6/30/1941: 48,961,443,535.71

Increase of 117%.

Reagan: Start at 12/31/1981: 1,028,729,000,000.00
End at 9/29/1989: 2,857,430,960,187.32

Increase of 178%

…this despite the fact that the first eight years of FDR featured, of course, the Great Depression and the earliest stages of spending for gearing up for WWII.
So much for any idea that a conservative administration would ever give you anything remotely resembling fiscal responsibility. God forbid we should have a huge war like WWII or a major economic crisis like the Great Depression during these guys’ watch.
Given that, as I said, we are in a Republican dominated era, I’m not just betting on the current Administration. Over time, a fiscal and currency crisis is in our future, absent a change in the political winds, and I don’t see that happening any time soon.

Source for debt figures:

http://www.publicdebt.treas.gov/opd/opdhisto4.htm
http://www.publicdebt.treas.gov/opd/opdhisto3.htm

76

SS is not and has never been, nor intended to be, a personal account. It’s pay as you go. It’s a tax on present wage-earners to support the retirement of previous wage-earners. You’re paying money now to support someone else, and when you’re retired other wage-earners will support you. The ratio of payers to payees is obviously critical, and the building up of the trust fund was intended to soften the effect on the boomers’ children when that ratio gets low.

Sam, better look up “Ponzi scheme” before you misuse the term any more. The classic pyramid that Ponzi invented fails only because it runs out of new entrants to make one-time payments. SS, and whatever you have up there, does not.

77

pantom,
Though the percentage, overall, increased, wasn’t it actually a lesser percentage of the GDP? I’ve looked all over the gov’t websites you provided, and can only find info on the debt itself, not its relation to any other indicator, which seems disingenuine from an official gov’t source. For me, I want more info than simply how much debt we’ve assumed; I want to know it’s relative percentage to our GDP (income). If it has decreased, then we’re not as bad off as one might be at first led to believe with simple debt figures.
As for the economy itself, I have a hard time blaming or crediting a particular political set - the overall system is cyclical in such long terms, that political analysis of the economy seems practically fruitless. Yes, there was economic growth under Clinton - but his 8 years came after 12 years of Republican presidencies. Not that I’m crediting Republicans, merely that long-term cycles in the economy easily span beyond presidential terms. Also, if we’re being honest, the economic downturn we’ve been experiencing the last 3 years started before Clinton left office. If we attempt to look at short-term cycles, then we have to say that yes, Clinton was responsible for an economic upturn, but he was also responsible for the economic downturn, whereas Bush is responsible for our current economic uptick. I tend to think such micro-analysis is counter-productive and we have to look at greater indicators over longer terms, rather than laying blame/credit at any one administration’s feet.

Elvis,
Personally, if SS works the way you claim (it appears that it does), then it is the most unjust tax scheme ever devised. Personally, I’m all for eliminating the sumbitch completely and letting me manage my own financial affairs - or, barring that, eliminate it as a tax to fund the gov’t and make it a true forced savings plan.

  • Dirk
78

I think this is a semantic argument. Would you consider that an individual who buys a US government bond as having invested?

It appears to me that the Social Security accounting fund is in effect a US government bond backed by the full faith and credit of the United States which is the also the only backing for the bonds.

79

I don’t think Presidents cause upturns or downturns. But they are responsible to a large extent for fiscal policy, obviously, and the evidence over the past quarter century is that Republicans don’t care how much debt is accumulated, as long as they can get in a tax cut for their constituency. As to percent of GDP, I’ll find the site for that when I have the time - I’m sort of composing this one on the run.

80

Just so we’re all clear, a Ponzi Scheme is one where old investors are paid with new investor’s money, not with profits from the investment.

In one sense, social security does not count. Any money which is not given to benificiaries is used to purchase special US government bonds. If you or I were purchasing the bonds we would certainly call it an investment. However, since government bonds, backed up by the governments ability to tax future Americans they essentially amount to promises to pay benifits from future social security taxes (new investors) and general fund taxes. These other taxes may not technically be considered new investors and therefore possibly technically they could be considered profits. But anyone with a little common sense can see that there is little difference between being forced to pay social security and being forced to pay other taxes.

Of course, SS is not illegal, while Ponzi Schemes are. But the thing that makes ponzi schemes illegal is that they constitute fraud where the “Ponzi” promises to invest money and pay the profits back to the investor. This, or a very similar promis is being made about social security. However, every “Ponzi” invests very little and pays older investors with new investors money. Socail Security does the same thing.