Problem #1: Why do politicians keep referring to social security as if it is a trust fund in a bank safe deposit box somewhere, which can be raided in emergencies?
Problem #2: Is it fiscally responsible (in anybody’s humble opinion) to refund money back to taxpayers based on projected budget surplusses? I’ve never run a government, but I have run a condo association and I would consider it irresponsible to give money back to residents just because we hadn’t used every cent we’ve collected in condo fees this year. And lucky for me, too, because we’ve built up such a huge reserve account that we were able to afford a new roof in an emergency. If we hadn’t the surplus in the reserve account ($30k for an 8 unit building, BTW), we’d be hiking condo fees up 500% this year or be forced to take out a loan (and have to pay interest on it) to get the new roof. Either of those options are the result of poor fiscal planning (resulting from poor management) in my opinion.
On the small scale (my building) it makes sense to keep that money in savings rather than have everybody get hit with a huge financial burden in an emergency, and then have all of us be in debt for the next five years while we levy huge special assessments to cover the loan. Even if the bylaws allowed for a surplus refund, I probably wouldn’t allow it because sooner or later something is going to happen to the building and we’ll need a big sack of money to cover it.
On the large scale (the gummint) it seems to me that the same strategy is also prudent, and maybe even more so since the country is somewhat larger than an 8-unit conminium. What is the rationale for refunding money back to me, when it will almost certainly need it next year? And if not next year, then just hang on to it (save it & make some interest, or pay off existing debts). And if a surplus indicates that government is collecting too much money from its citizens, why not just hold on to the surplus and reduce next year’s taxes? In my mind, the refund is irresponsible and amounts to little more than a “thanks for electing me” from El Presidente. At least that’s what it feels like to me… it feels like dirty money (a different debate, I know).
Is fiscal responsibility an oxymoron where government is concerned, or is there really a method to the madness? Small businesses have savings; private citizens [should] have savings (and any responsible financial planner will tell you that living without savings {if you can afford to save and choose not to} is living irresponsibly). Why shouldn’t government have money saved?
No. As any semi-intelligent person knows, fiscal responsibility means you get the money before you spend it.
Unfortunately, “President” Bush is demonstrably not the sharpest knife in the drawer, and he really wanted to bribe the voters into forgetting about that mess in Florida last November, so here we are.
In case no one noticed the national debt, spending money we don’t have is not exclusive to GWB, as much as anyone would like to think so for whatever reason.
As far as the borrowing SS money goes, there isn’t a social security savings account to withdraw from so I have no idea what the hell they are actually doing. Hopefully someone knowledgeable in government budget, general deficit spending, and what a surplus means to a nation in debt will come in to explain.
All I can say is, the money isn’t sitting around waiting for some politican to loot it, they seem to be (from my understanding) using predicted tax revenues to budget future spending differently. You can’t take money that isn’t really there.
What’s even more irresponsible than spending money the US may not have a year from now is that these are not actually refunds–they are advances against projected refunds. In essence, this means you will get less of a refund next year or, if you will owe next year, you’ll have to pay more. So really, we have all been made into debtors to the USA. As a matter of public policy, it seems to me that making debtors out of the entire adult population of America as, essentially, a public relations ploy, stinks.
Not defending the tax cut - there are huge problems with it, most particularly at the back end - we are going to be cutting government revenues severely in the decade leading up to the retirement of the baby boomers, which is precisely when we need to start saving money to pay for their Social Security and Medicare benefits.
That being said, it is common and proper that government revenues decline during periods of economic slowdowns and/or recessions. This is a function of less money being earned, therefore less tax revenue.
It is also common and proper for governments to attempt to stimulate the economy during recessions, either by increased spending or decreased taxation. Hoover’s goof at the start of the Great Depression was to enact austere, balanced budgets, rather than running a deficit.
Quite frankly, Bush got lucky. He ran on the tax cut during the boom last year. Had the boom continued, the tax cut would have been wildly inappropriate - during booms, you don’t add additional stimulation to the economy - that’s how inflation goes out of control. During a slowdown or a (likely) recession, tax cuts are much more appropriate.
But tax rates are also being cut, so refunds overall will be larger anyway. These advances are not being made against rates that will be the same as what they were last year.
Blame FDR. He started it.
In any case, the government should never run a surplus, IMO. The entire jutification behind taxation is that they take our money to pay for government services. If there’s money left over after they pay for everything, that means they took too much. It isn’t theirs to do with as they please; it’s ours. Sure, if you want to be generous and say, “Hey, keep whatever extra of mine you took,” good on ya, but don’t make that decision for me, thanks.
Not necessarily that they took too much. A huge portion of government spending for the last few decades has been for infrastructure… once the infrastructure is built, it costs less to maintain (generally). What do we do with the money now? = surplus part 1. I think surplus part two is that projected money necessary to accomplish a task was overestimated… now what do they do with the money?
Not that I don’t think the government takes too much in taxes to begin with, i just think it is an honest surplus (projected :p).
What’s truly amazing is that Bush correctly foresaw the Florida thing happening, and therefore proposed the tax cut well in advance of the election, even making it the centerpiece of his campaign.
Then, he cunningly had Congress propose the one-shot rebates, which were not in the plan he presented.
Wow. Maybe he is the sharpest knife in the drawer.
Or you are factually incorrect in your assessment.
While I wasn’t a supporter of the recently enacted tax cut, it seems to me that if the refund checks feel like “dirty money”, one could send the nasty things back to Washington uncashed.
All in all, there’s more of a degrading feeling about the Clinton tax hike, which was retroactive.
Umm…the Bush tax cut was retroactive…a new 10% bracket, back to January 1 (the bill was signed into law June 7, if I recall correctly). And your understanding is not quite correct, Elvis. The checks are for that reduction in the rates, which are set in law forever more–or at least until 2011 or Congress changes the law, whichever comes first.
And, to address the OP, it’s just as fiscally irresponsible to cut taxes based on a projected surplus as it is to spend the projected surplus. I doubt you will find one time in American history when either a federal or state government appropriated less in year T+1 than they did in year T, as long as revenue estimates in T+1 were higher than they were in T. That is, growth in revenue is (nearly) always expected, and that growth is budgeted for. The distinction between a tax cut, higher entitlements, more transportation spending, more prisons or more B-2 bombers is irrelevant.
Here’s a recent explanation about the Social Security surplus and how it works:
"The restrictions on using the surplus are largely political. It is all but impossible for the government to place Social Security or Medicare taxes in a bank, because that would harm financial markets. So in effect, the government borrows the money from the old-age programs and uses it elsewhere.
“Under government accounting, spending Social Security or Medicare taxes does not reduce the amount of Treasury bonds credited to the trust funds of the two programs; it also does not affect benefit payments. When surpluses emerged several years ago, politicians agreed to wall off the money and use it for debt reduction.” – [url=“http://www.washingtonpost.com/wp-dyn/articles/A3037-2001Aug27.html”]Washington Post
And that’s all I care to say about that. For once.
What, you want to take the fun out of my simplifications?
Yes, I know Dubya was pressing for tax cuts during his campaign – but that’s no surprise; just about every politician promises tax cuts, and Republicans doubly so (especially tax cuts for businesses, but that’s another matter).
However, AFAIR (as far as I remember) Dubya didn’t go stumping around the country with “Vote for me and I’ll get the IRS to send y’all a check six months later, with a smarmy letter giving me all the credit for being so generous”. And that is a big reason (though not the only one) why we’re now looking at cracking into Social Security, and why he’s already passing the blame around.
(I especially love the spin where the disappearing surplus is blamed on Bill Clinton for the slumping economy – I’m still puzzling over how Clinton tanked the economy so that George had a surplus to throw away, myself.)
As for having Congress initiate the rebates, that was before Jeffords’ defection, when the Republicans were still in power, right? Gosh.
And I disagree with pldennison’s assertion that the government should never run a surplus. If there’s a surplus, it should be saved for a “rainy day”, and possibly as an aid to keep future taxes lower. The danger comes when government officials decide to splurge and use the excess monies to pay for frivolous or useless things, like a missile defense system that doesn’t work…
Each year’s federal spending is different, as various laws are passed or amended. Tax revenue is uncertain, even without a change in tax rates, because it depends on economic conditions, etc. So, whether there’s a tax refund or not, there’s always the risk that income won’t cover outgo. Fortunately, if the federal budget winds up in deficit, there’s no disaster. The government can borrow the difference and pay it back in future years.
Here’s what I find so odd. Most people build up immunity to things by repeated exposure. Yet you seem to be immune to facts, despite not having any whatsoever.
Fact one: Bush expended no small amount of political capital making sure that this was a personal, not business tax cut. All those corporations to which he is allegedly beholden were lobbying him and the Congress to sneak in this reduction or that reduction. With remarkable success, he told them to go pound sand.
Fact two: “just about every politician” does not promise tax cuts. Specifically, Gore kept talking about how “risky” they were.
Fact three: The reason you don’t remember him promising the rebate is that it wasn’t his idea. Bush’s tax cuts were originally even more back loaded than they are now. The idea to add the front load and the quick shot of the rebate check came mostly from, well, Democrats.
Oh, and just for the heck of it, to address the OP: All taxation schemes in the United States are built on estimates. All the estimates are always wrong by some amount. To use your condo example, imagine if your common charges were based on the income of your residents. Do you think you could reliably estimate your income each year? Of course not. You make the best guess you can and adjust as necessary. Government is no different, and that applies whether tax rates are going up, coming down or not changing.
This, I believe, is indicative of the attitude that the money is the government’s first, and ours second. We agree (:::snort::: I’m having trouble saying that with a straight face) to allow the government to keep x% of our paycheck each week to pay for government-provided services. Once all those services are paid for, if there are leftovers, there is no moral or legal justification for keeping them around. Rationalize it any way you want, but essentially, by letting them keep it, you’re letting them charge you for something they aren’t providing.
When you go to the grocery store, and your bill comes to $75, do you hand them a $100 bill and say, “Keep the change?”
I disagree that there can be no justification to ever build a reserve of cash, or that the belief that it may be a good thing to have indicates that we don’t think it’s our money. To go back to the previous condo example, often a condo assocation does not spend all the money it takes, and usually they build up large reserves. However, when the roof or windows need to be replaced, they are not going to be hitting the condo owners up for several thousand dollars or borrowing money at high interest rates from a bank to pay for it, and in the meantime the association is making interest on the reserve money. The government could be run in a similar way, although I am not saying it should; I have little idea if it makes fiscal sense for goverments to keep money on hand for a “rainy day”. But I think you’re making several leaps about rjung’s attitude and the moral obligations of those we pay for ongoing services that are not warranted by the suggestion that the government build up a reserve fund.
Actually, this idea is well-nigh unthinkable for several reasons. rjung recognized one; it won’t happen. The excess would get spent.
Also, think about where a government surplus would be stored. We’d be talking about perhaps hundreds of billions or trillions of dollars. You don’t just put that amount into a savings account. Presumably the government would be out buying stocks and bonds. But, this would give them direct control over a portion of the private economy, which seems to reduce freedom.
However, I must admit that CALPERS (the retirememt system for Cal state employees) is a big investor and is quite influential. Their participation doesn’t seem to be a problem AFAIK.
