Pause just a second here. If you are contending that Social Security has grown out of control, there’s only a few options:
Which one do you think is moat likely?
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.
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.
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.
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.
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 “bonuses” that happened over that time. It’s 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.pl?cost1=100&year1=200701&year2=202001
Inflation makes $100 in 2007 cost about $127 in 2020. That’s the same amount benefits have increased.
Now let’s say 50 million Americans recevived 100 Social Security bucks in 2007. That 5 billion bucks.
Now, 64 million Americans get 127 Social Security bucks. That’s 8.1 Social Security bucks. That’s 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. I’ve 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 I’ll show my work using your inflation rate and to be fair, I’ll 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. That’s the starting point specified by the OP.
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. Fiscal Policy
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 there’s still an increase beyond the demographics of an older population, although the actual figure would still be below the calculated expected figure.
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 “Other” 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.
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.
I totally skipped your takebacksies post.
My bad!
Hi UltraVires, I just wanted to point out that we currently operate at a budget deficit. All other things equal after adjusting for inflation (eg: revenues, interest rates), limiting expenditures to current levels adjusted for inflation will still mean there is a budget deficit going forward.
Let’s say you currently make $100,000 every year. You currently spend 130% of that every year, $130,000. Your budget deficit this year is $30,000, or 30% of gross revenue.
130,000 - 100,000 = 30,000
30,000 / 100,000 = 0.3
Next year there will be an across-the-board inflation rate of 5%. You will make 105% of $100,000 or $105,000. Your proposal is to keep spending constant after adjusting to inflation, which would be 136.5% of $100,000 or $136,500 (1.3 * 1.05 = 1.365). If you follow that proposal, your budget deficit next year will be $31,500 which is still 30% of gross revenue.
136,500 - 105,000 = 31,500
31,500 / 105,000 = 0.3
Other parts of your original and subsequent posts indicate that you already understand this, but the proposal as worded in the title and the original post is flawed. You cannot balance an unbalanced budget by limiting spending to growth or inflation, you must limit spending to income.
~Max
Well, it is a simplistic argument, that’s for sure. As Max S points out, what you’re describing is not actually balancing the budget at all. Instead, you’re arguing that all spending should be frozen at 2020 levels, plus an annual inflation adjustment, for all time. Even if US citizens in 2040 collectively want to increase government spending for some new social program, or to buy 12th gen fighter jets, or to invade Mongolia for it’s yak butter, they’re out of luck, hamstrung by some law (or amendment) passed 20 years ago.
Why? Why not let citizens 5, 10, 20, or 100 years from now decide on their own how big the federal budget should be? Why lock them into some arbitrary spending level from the past?
It sounds like what you’re really trying to say is that revenues should match spending, and spending for next year should be based on revenues from this year plus a small increase to account for inflation. Which is fine, and prudent, and probably how things should be done in an average year, but that won’t balance the budget. Only increasing revenues or decreasing spending will do that.
TLDR: “I admit you proved me 90% wrong, which makes me 10% right, ergo I win.”
I’ve not studied the thread nor the arithmetic — is yours a fair summary?
Are the people advocating that Medicare not outpace inflation aware that medical cost rises in general do outpace the CPI? Is part of their plan to rescind the Bush-GOP gifts to Big Pharma? (I think we’ll need Mods to move the thread if ‘Sending Grma to the e ***ps’ is part of the solution.)
Thanks. While I disagree with your percentages, I note that you’re not very good at calculating percentages so I’ll just let that pass. I accept your concession that US Social Security spending is outstripping the combination of inflation and population demographic increases, and that if the US government is serious about trying to control the federal debt, then they need to impose lower cost of living adjustments. The government should also look at the changing demographics, and if the increasing number of Social Security recipients is due to people living longer, which seems likely, then the government should look at allowing raising the age of Social Security eligibility. Each of these changes may require legislation, but legislation is obviously within Congress’s power. The question is whether the US government is willing to be fiscally responsible, or will choose to bow to popular sentiment. Given how high the US deficit and debt currently are, it’s pretty obvious fiscal responsibility isn’t a current government priority. And unfortunately, that looks like that’s unlikely to change for the next five years.
If like for like medical costs are increasing beyond inflation, then there are market inefficiencies that the government needs to address. Generally, I would not expect the same basket of medical treatments given to a set group of 70 year-olds in 2000 to cost more, in inflation adjusted terms, than in 2020. The cost of an x-ray in 2020 shouldn’t, in real terms, be any higher than it was in 2000. For this particular example, due to the widespread advances in consumer digital imaging technology, I’d expect x-ray costs to be lower. A different example would be insulin which apparently is significantly more expensive in the US now than 20 years ago. However, those cost rises aren’t due to rising production costs or inflation, but due to mind-boggling market distortions.
If high costs are due to market dysfunctionality, then the government should seek to eliminate the disfunctions rather than throw money at the problem.
Of course medical technology has advanced since 2000. Scanners in 2020 are more advanced than they were in 2000, and the new, more advanced scans available may well represent an additional cost that didn’t exist in 2000. The same follows for drugs, especially, I believe, cancer treatments. It’s great that there is better medical care available, even if it costs more. But when it comes to budgets, the government has to be realistic about what is affordable. If the basket of medical treatments listed above has grown to twice it’s previous size, and in real terms costs twice as much, then that’s a budgetary issue. It’s an additional budgetary issue if the number of 70 year-old receiving the treatments is also rising. If rising tax revenues are sufficient to meet these rising costs, then there’s no problem. However, the government can’s simply accept medical cost rises as unmanageable inevitabilities that muse be paid for, regardless of other costs, the rest of the budget or the national debt. All of those factors need to be considered, even if it means limiting some medical treatments. That’s what a responsible government does. Just spending freely by borrowing from the future based on sentiment and the rhetoric of scaremongers isn’t responsible government.
This might just be me, but the way I read the OP is that you would increase your spending by the inflation amount, but NOT for any other increases in income. So let’s say you also get a 5% raise on top of the inflation adjustment:
100,000 income becomes 110,000 (not 105,000).
Spending only goes up by the 5% inflation adjustment, so 136,500 remains correct.
Your deficit is now 26,500, down from 30,000.
I suppose that would work given enough time (and enough raises in excess of inflation), but ignores other factors (like the raise coming with naturally increased costs - higher tax bracket, etc).
@ Wrenching Spanners - Medical care for babies has gotten more expensive; Medical care for children has gotten more expensive; Medical care for teen-agers has gotten more expensive; Medical care for young adults has gotten more expensive; and Medical care for ages 35 to 65 has gotten more expensive. But not for those 65+? Was it your plan all along to degrade care for retirees, ‘Sending Grma to the e ***ps’ if you will? Or do you just now realize that’s what your position on budget-balancing here entails?
Where do you stand on universal health care? Single-payer?
But shouldn’t this naturally correct itself? If in 2000, there were “normal” medical costs, but there were also very expensive state of the art treatments that costs “a lot” then shouldn’t the costs shift in 2020?
Stated differently, what was state of the art and very expensive in 2000 should now be normal and we will be paying for the new state of the art treatments today at an increased rate.
For example, if the government had a “Free Television” program in 2000, we would have spent about $219 per 19" tube TV for “normal” and “a lot” for 40" tube TV. Today we would spend $300 for a 40" HDTV and “a lot” for a 105" HDTV. As technology improves, costs come back to the baseline. Or at least they should.
But your point is well-taken. Nobody seems to talk about what we will refuse to pay for. If we have a 102 year old with cancer and this newest, shiniest treatment that costs $750k will cure him and give him however much longer a 102 year old has, do we pay for it?
Good question. Perhaps you should ask the Mods to change thread title to
“Why can’t we balance the budget by simply limiting its growth and denying modern medicine to old-timers on Medicare?”