The reason that raising revenue become important is because Republicans want to cut taxes without cutting spending so they pretend that they can actually increase tax revenue by cutting taxes, thereby reducing the deficit. THAT is why Republicans are so keen to have everyone believe that tax cuts increase the revenue because they can’t cut spending but they reaaaaaaaally want to cut taxes but it would look really irresponsible to cut taxes when you have a deficit. That is why Republicans defend the ridiculous notion that tax cuts at these levels will actually raise the revenue.
I agree that SS is not fully funded (mostly because it is a transfer payment rather than an investment portfolio) but there is in fact a trust fund, it holds treasuries.
Q: So why don’t we start drawing off the trust fund, and live off the proceeds from the Treasury “assets”?
A: Because to live off the proceeds of the “assets” means you have to tax the public to fund the obligations of the Treasuries. It’s taking out of your left pocket to put money into your right pocket. There are no income or wealth-producing assets in the trust fund.
Come on dude. You’re smarter than that.
First, you made an incorrect generalization. There are some Republicans (especially now) that do want to cut spending. I agree that they are a minority, though. If the US delays cutting spending now, it will be forced to do so later in much worse circumstances (see Greece or Spain). Second, why don’t you talk about all the Democrats who don’t want to cut spending and instead just repeat “Republicans”? Third, the idea of tax cuts is to increase economic activity by consumers and private companies (that they do that is not too controversial), which is a big problem right now.
You seem to be confusing what Congress does/did with the surplus, and what SS does. SS collected the surplus and invested it in government bonds - generally considered to be one of the most secure investments in the world. That’s what SS did. It’s Congress that raided the cash from the SS surplus to fund their deficit spending. So if you have a problem with the notion that the government now has to pay interest to itself (interest that SS earned from it’s invesment in bonds) - your problem is with Congress, and NOT with the fundamental structure of SS.
Your welcome to think it’s a lousy deal for the government to have to tax people to pay itself back with interest. And it may be. But again, that is NOT an issue with SS. It’s an issue with how Congress chose to help fund it’s deficit spending.
I’d encourage you to look at history - specifically 1937. There have been several recent threads here, in fact - discussing how the US was beginning to recover from the Great Depression. However, in 1937, conservatives convinced FDR to cut spending, which stopped the recovery and arguably added an extra 6 years to the Depression. I don’t want to sidetrack the discussion, but cutting spending now seriously risks setting back the recovery and making the long-term financial conditions worse, not better. I think almost everyone wants to address the deficit - but many realize that focusing on that now could be a big detriment to the long term recovery. The current approach seems to be, solidify the recovery first, then worry about the deficit from a position of financial strength.
Because there aren’t enough treasury assets. Did you miss the part where I said SS isn’t fully funded… because its a transfer payment system?
Are you seriously saying that treasuries are not income producing assets? It is exactly the power to tax that makes treasuries such high quality investments. You are letting the fact that these are treasuries confuse you. Would you feel better if the fund bought treasuries on the open market?
I was describing why the debate has been over whether or not cutting taxes increases tax revenue and my description of why this point is important is pretty accurate. Whatever the future fiscal consequences of fiscal responsibility may or may not be, the reason for the claim that cutting taxes increases revenue has its origins in the Republican desire to cut taxes without paying for them with spending cuts. It remains a significant part of their philosophy, noone who understand fiscal policy or economics believes it but the rank and file Republicans eat it up.
I don’t talk about Democrats because the specific question was “why am I talking about whether tax cuts or tax increases maximize tax revenue as if maximizing tax revenue was an objective worth achieving” and it is correct to say that I am focusing on whether tax cuts maximize revenues because it is the underpinning of one of the jsutificaitions Republicans present for tax cuts. It wouldn’t be very responsive to that question to talk about Democrats.
But since you bring it up, I would suggest that a tax and spend government is MUCH more accountable than a borrow (tax cuts without spending cuts leads to borrowing) and spend government. You ever hear of the PAYGO rules?
Well it expired in 2002 and almost immediately upon its expiry, a Republican congress and a Republican President passed the largest unfunded tax cut in history and when they were challenged about the inevitable growth in the deficit, they claimed that the tax cuts would actually increase tax revenue, because of , ermm… uhhh … Laffer curve and Ronald Reagan. It was impossible to get there through math or traditional economics (noone scored these tax cuts as budget positive or even budget neutral, not the CBO, not teh CATO institute) so they relied on the Republican version of economics that said that tax cuts paid for themselves. noone really minded because everyone’s tax bill went down in 2003 (of course it left us with larger deficits and alrger national debt but taht was a concern for later).
Democrats on the other hand paid for their increased spending with tax increases and THIS is why people got upset about things like welfare. They were held accountable for their spending. If they had claimed that welfare paid for itself through the multiplier effect (which would be no sillier than the notion that tax cuts pay for themselves at current tax rates) and gotten away with it, I suspect that they would have insulated themselves from at least some of the consequences of their spending decisions.
Well DEmocrats have learned their lesson and now they are also on teh tax cut bandwagon except they target their tax cuts at a wider spectrum of the population and try to claim that the suboptimal health care reform they passed was actually budget positive (it might have been true if they passed a single payer system but the bastard hybrid system they passed will only achieve the univeersal coverage objective without taking significant steps towards cost savings). Obviously they haven’t gotten the hang of it yet because noone believes them.
This thread misses the point that corporation taxes have been going down for more than a decade. Bush pushed hard for it too. The impact is an accumulation of wealth for those at the top and unemployment and dropping wages and security for the masses. It is not something to actively push. As the powerful continue to escape taxes, the taxes just drop down to those who are less able to pay . In America we certainly do not penalize the rich. They make the laws to benefit themselves.
Well, you and I are such brilliant investors that we can do this with no risk. However Joe Blow down the street might get taken in by a low rent Madoff clone. What do we do when he retires with nothing. Even today, lots of people are delaying retirement because their 401Ks and IRAs have tanked. At least they have a cushion of Social Security, which is still there. Social Security enforces diversification. Claims that everyone is smart enough about investing to do this themselves are not supported by the facts.
Except for the force part, that’s how insurance works as well.
Perhaps you can’t, but that’s not the point I’m making. The point is that insurance isn’t a Ponzi scheme.
As tax rates dropped for corporations, American employment went into the toilet. Corporations shipped their labor and manufacturing to cheaper and cheaper places. They have avoided taxes and environmental regulation. They are simply bad citizens and have to be reigned in.
The idea that large corporations will increase hiring as they make more money has been proven wrong. They will start plants in China. They will empty American plants. Real hiring is done by small companies now. We have praised management that brooms their labor force . We have lauded corporations that ship their operations to third world countries. And then we idiotically fight to have their taxes cut.
There was a time when productivity was shared with employees. those days are long gone. Productivity increased dramatically in the last couple decades while wages dropped. The profits went right to the top. It has made us into a 19th century America with unfettered corporations making the ownership class richer and richer. We are screwed.
That’s not exactly true. Insurance companies are actuarially required to hold enough in reserve that if they didn’t sell another policy, they would be able to pay off all claims as they became due. Social security is a transfer payment system. Your social security dollars are not being put away for your later use, they are (for the most part) being used to pay out current social security claims and when you retire the idea is that the social security taxes of the workers of that generation will be paying your benefits. It may sound a bit precarious but it has been functioning fairly well for several generations and with adjustments along the way, there is no reason it cannot continue to function well for generations to come.
Taxes cannot overcome an 800% difference in labor costs (and don’t fool yourself into thinking that the great American worker is productive because we work so much harder or so much more efficiently than others… well compared to European workers we do work harder and compared to many other nations we are more efficient workers, but compared to the Chinese worker and the Indian worker the difference is capital investment. Once they put American factories in China and India, the difference in productivity shrinks very rapidly.
We have seen this phenomenon before with the Asian tigers but when their standard of living approached our own, they stopped having such an insurmountable advantage. There are 125 million Japanese, 75 million Koreans, 25 million Taiwanese, 5 million in Singapore and about 7 million in Hong Kong. There are a BILLION Chinese, this is not going to be like it was with Japan or Korea, this one’s gonna leave a lot of Americans in the dust if they are not prepared.
The average American earns 37K/year and the average Chinese earns about $3700/year. In Japan its about 28K and about 18K in Korea. China is not going to stop growing any time soon and that growth is going to be at least in part at the expense of its trade partners (which at this point is every developed nation in the world). Anyone that is worried about unskilled illegal aliens taking their jobs is in a lot of trouble regardless of whether we fix the illegal immigration problem or not.
They are income producing assets for me, if I choose to purchase them and assume the inflation and default risk associated with them. I would hold them as assets on my personal balance sheet. I just loaned the gubmint 100 dollars, and if they pay me back 105 dollars over time, then I come out ahead (assuming adjustments for inflation).
They are not income producing assets for the government, because the government is just loaning money to itself.
For the government to receive the income from the Treasuries, it must put money in on the other end to pay the income to itself. Where do you think the money to make the coupon payment comes from?
When the government takes in 150 dollars in SS taxes, and needs to pay 100 dollars out in benefits, it uses the excess 50 dollars to buy Treasuries and hold them as “assets”. But where does that 50 dollars go, once they buy the Treasuries?
Well, it goes to the seller. Which is the government itself. The government just wrote an IOU to itself. The “seller” takes the 50 dollars that it just received from the sale of the Treasuries, and spends it on general purposes. Bridges to Nowhere. Helium reserves. Paying unionized GM employees not to work.
So the excess of SS taxes minus payouts just passed through the government’s hands, only with a little stop in the middle that supposedly created an “asset” on the government’s books. But that’s ridiculous. No such asset exists.
If the government wanted to live off the proceeds of that asset, what would it do? It would reverse the stream above, and wait for income from the coupon.
That’s cash from the government. But where does the government get that money to pay the coupon? From taxing the public, or borrowing some more via selling Treasuries. The government taxes the public, or sells more Treasuries, to pay itself on an Treasury asset it supposedly owns.
Get it? That’s a Ponzi scheme. I notice you called it a transfer payment scheme in another thread. A ‘transfer payment scheme’ is a Ponzi scheme, dude. The linguistic gymnastics on this Board - from intelligent people - amaze me.
Transfer payment schemes. Inter-generational pensions. Whatever. They are all Ponzi schemes.
Last time…for a while…I know you will all be relieved.
There are no assets purchased to store value, nor generate income via wealth-creating activities, with the SS contributions.
That is a Ponzi scheme.
Really? If everyone holding a life insurance policy died tomorrow there’d be enough money to pay off all the claims? I don’t believe it for a minute.
Sorry you are just wrong. SS is buying bonds. If they bought them from China instead, and China paid interest, would you say that the money is not invested? The deficit is a result of the govt spending more than receives in revenue (as a result of conservatives lowering taxes and starting two wars). SS has nothing to do with the deficit. It is self funding and ran a surplus for years. I know you conservatives think you can just make shit up, but facts are facts.
Cite?
No, thats why I said actuarially.
Like I said, if an insurance company stopped selling policies today, they will still have enough to pay all claims without relying on new money from new insured.
The fact that the social security fund is holding government securities is really confusing the sh1t out of you. The question isn’t whether or not the social security fund is holding assets that it can collect from unrelated parties, the question is whether or not these treasuries represent a real claim on future cash flows, in other words, does the federal government HAVE to pay them off? Of course. That makes them assets.
You are confusing yourself because (A) the federal government is not a for-profit entity so it doesn’t pay interest from earnings and profits so the repayment will be from taxes, and (B) the federal government’s obligation to pay social security benefits are being secured (in part) by an obligation of the federal government.
I don’t particularly think the social security trust fund is the most important aspect of SS but I understand the instinct of critics to try and pretend the trust fund is illusory.
Once again you have a VERY liberal definition of Ponzi Scheme, so liberal that it is in fact incorrect.
The term transfer payment has a definition distinct and different from Ponzi scheme. I understand the instinct to try and use the most damning possible descriptor to describe something you don’t like but you lose credibility when you insist (against all evidence) that transfer payments are something that they are not.
Once again , I think you are just manufacturing a defintion for Ponzi scheme and applying it to things you don’t like. Why not just call Social Security tax extortion or robbery because you are forced to pay it and call the benefits bribes because it keeps some people happy, you would only have to redefine those words a little more than you have redefined Ponzi scheme to get there.
Your complaint would apply to all treasuries, you have already said that treasuries have value in your hands, does that cease to be the case because the government is not a for-profit entity?
No its not, just saying so doesn’t make it so.