From what I understand, your choice of example is seriously flawed, but your logic is correct.
Spending on defense is a questionable enterprise, unless a state of war exists. Money going into defense is buying means of destroying value, such as bombs, airplanes, submarines, and training. If those weapons are used, the overall value of wealth in the world will decline. If the weapons are not used, then the money is effectively removed from the economy after a single pass.
Ideally, government spending should be on things that increase the amount of wealth in the world. Building roads, bridges, hospitals, schools and housing are ways to achieve that. Paying for research also helps to increase wealth. Providing health care increases wealth by keeping employees able to work. Spending which increases the common weal results in individuals having greater wealth in general.
But then you are relying on disproportionate revenue growth. You acknowledged that in the example, this would require a constant raise above the inflation rate. As applied to the government by way of analogy, that means taxes would have to go up every year by 5% after inflation. If we were talking about income tax, for example, pretend you get taxed 20% this year. Next year you would have to be taxed 25%, and the next year 30%, etc.
Sure it is. Literally every government document providing an overview of the budget presents two scenarios, on-budget and off-budget, to account for the fact that Social Security really is on an autopilot of its own, but to completely exclude Social Security isn’t the full picture of the government’s budget either. To read your post here, one would assume that the term off-budget doesn’t even exist.
No kidding, because the tax cuts over the last two decades that have cost trillions are all primarily impacting the structural on-budget deficit. I would phrase the issue this way: you have two children. One is a good kid, might not be totally perfect, but meets your expectations in a consistent and predictable manner; while the other is a mess and a constant source of over-promising, under-delivering, and general disappointment.
When it comes to making your family run better, don’t treat them the same just because they both live under the same roof.
For one, doctors in the 1950s did not have to deal with government insurance such as Medicare and Medicaid. Most people still got their insurance as a job benefit, but the insurance model as we know it didn’t quite exist yet - doctors would bill the patients, the patients would file insurance claims, and if the insurance denied the claim, the patient was on the hook. Doctors wouldn’t have to inflate prices to cover for “indigents”, unless the patient was actually dying on the doorstep, they could simply be refused service up front. Specifically, HMOs were invented in the 1970s, which really made medical billing complicated as each insurer negotiated their own contract (and fees) with each doctor.
Second, becoming a doctor by the 1950s is significantly different than becoming a doctor today. Until the 1950s, residency was uncommon unless you were going to be a researcher. That shaves about three years off becoming a doctor. Perhaps related, there has been an exponential increase in knowledge of medicine in the past 70 years, which means in theory doctors must learn exponentially more than they used to, which means, in theory, it is exponentially harder to become a doctor. Not only were there less medicines, there were less classified diseases as well: the ICD and DSM were not even published until 1949 and 1952, respectively.
The actual knowledge of medicine has progressed so much… remember that penicillin was discovered in 1928, its first clinical trial took place in 1941, and it was only really used by the military until 1945. Because you brought up depression, keep in mind that the theory of chemical imbalances in the brain was brand new, as it was based on observations of the first “antidepressants” such as Isoniazid, which were in turn developed in the 1950s. Vistaril was not brought to market until 1968 (Atarax in 1956).
Third, and this is probably related to the above point, student debt has gone up. A 1981 article in the New York Times indicates that medical student debt shot up around that time. Compare $50,000 of debt in 1981 dollars, enough to write an article about, with the $190,000 average medical student debt cited in a 2018 article by the same publication. The BLS CPI Inflation Calculator tells me that $50k in 1981 dollars has the same buying power as $142.4k in 2018. So medical student debt has been outpacing inflation. This doesn’t explain why medical care is outpacing inflation, but it does play at a role in why the doctor’s fee for mere consultation is higher.
Fifth, doctor’s fees haven’t gone up all that much. I manage a doctor’s office and we charge something like $125 for a new patient visit today, in doctor’s fees (procedures excluded). Something like a third of that goes into administrative overhead - billing, ancillary staff, compliance, etc. In 1955 dollars that would be around $15, cut out the overhead and you’re down to $8.
I’ve reread the old threads. The synopsis is that there is no fallacy. I’d provide links and an actual argument, but since you can’t be bothered to do so, I’ll just follow your example of lazy unsubstantiated assertions.
But since this is Great Debates, try answering the following two questions, which will require a bit of lead-up:
The SSA Trust Fund reports that in 2007,
Total benefits paid in 2007 were $585 bil¬lion. Income was $785 billion https://www.ssa.gov/OACT/TR/TR08/II_highlights.html#76460
That’s a $200 billion surplus.
In that year, there was a $161 billion federal deficit.
A breakdown of that figure shows a different revenue amount of $870 billion, but roughly the same spend - $581 billion. I’m presuming the $870 billion figure contains taxes targeted towards other programs, or non-tax revenue such as interest. But whether the Social Security surplus was $200 billion, or $289 billion, it’s clearly gone into the budget.
Let’s go with the SSA Trust figure of a $200 billion Social Security surplus. Take that out of the budget and there’s a deficit of $362 billion.
Here’s the first question: Was the US government lying when it said the deficit was $162 billion and not $362 billion?
Second question: If you’re saying that $200 billion belongs to Social Security, and wasn’t budgeted to other programs, then how do you account for the rest of the budget? The total spending figure was $2.73 trillion. If you take Social Security out of the budget, using the SSA figure of then the rest of the budget is $2.145 trillion. But you also have to take away the Social Security revenue. That adjusted figure is $1.783 trillion. There’s that bigger deficit. If the Social Security surplus wasn’t filling the gap between the two numbers, then what was?
Both statements can be 100% accurate, depending on what precise question is being asked.
It’s like how if you ask me what the unemployment rate is, the answer can be 4.0%, 4.2%, 4.8%, or 7.7%. Cite. The fact that 4.0% is the most commonly used metric doesn’t make the others factually wrong, they are measurements of slightly different things.
Wrong, wrong, and wrong. And I’m “lazy”? Let me assure you I’ve shown far more patience than you deserve. And when you conclude that the “synopsis is that there is no fallacy” you’re obviously just going with the more ignorant people in those threads because they agreed with you.
Pro-tip: Tiring yourself with arithmetic is not the way forward. If you want to reduce SocSec benefits or unwind COLA, say so. If you wish that life expectancy hadn’t improved with many in their 80’s still getting SocSec, say so. But just mindlessly comparing numbers adds nothing.
Finance or even simple accounting can be confusing, so I’ll take it slowly for you. Best is to treat SocSec as a separate program. (That’s how it’s set up, and that’s the role it plays.)
Now, the impending Boomer retirement was well-known so SocSec taxes were set to finance that, putting the SocSec in SURPLUS. Dollar bills are piling up in the SocSec bank account!!
What would you suggest that SocSec do with those funds? :
(a) Keep then in a checking account, or put them under the mattress.
(b) Buy stock in General Motors and Coca Cola.
(c) Invest the money in Canadian bonds, French bonds, or high-yielding Zimbabwe bonds.
(d) Invest the money in U.S. Treasury bonds.
(e) Buy gold with the surplus.
(f) SocSec should not have been allowed to run a surplus. SocSec income should have been kept equal to outgo. Answer this question before proceeding.
If you answer (b), that’s an interesting topic but needs a separate thread. I’ll assume you answer (d), and will compose another reply if you answer else-how.
So … SocSec TF was in SURPLUS and chose to buy U.S. Treaury debt rather than keep the surplus funds under its mattress. TrillionS of dollars of surplus in fact. (Start another thread if you think it a big deal that those bonds had different boilerplate than those you could buy.)
Meanwhile, the Rest_of_the_Government is in deficit. Badd!!?? (Hate those tax cuts?) The government, in order to maintain its military, pay interest on the debt, and engage in other non-mandatory spending, BORROWED money. Some of the net borrowings obviously ended up from SSTF. (Should SSTF have bought Canadian bonds instead of USA bonds to avoid this hornswoggle? I think someone in one of those threads you studied opined this.)
I’ve explained how to look at these numbers. If you choose to combine SocSec with Rest_of_Government that’s fine – the numbers end up different; but the way I instructed you to think of them is clearer and more valid. We can join together and deprecate the politicians that started quoting the net deficit if you wish. IIRC right-wing politicians use separate accounting when it suits them, and joint accounting when it suits, often in the same paragraph! So I’ll join you in deprecating right-wing lies.
But what’s with “government lying”? Are you suggesting there was some malice or fraud by the Deep State?
I think it would have been much simpler if the social security fund was simply set aside rather than reinvested. So that’s (a) and (f) - the surplus from one year would be used to reduce the tax burden for the next, and there should be a reserve of some sort, enough to fund the program for a number of months until the tax rate can change to correct a deficit. Bonds are an unnecessary step, and makes this more complicated than it should be. Besides, having the government bet on the government to finance its own trust fund doesn’t strike me as above-board…
Just so I’m understanding – you want the FICA tax rate to be variable based on how many recipients there are? So if there are 1x retirees in, say, 1974, then people in 1974 will be taxed at 1x; and in 2020 there are 15x retirees, the tax rates should be 15x?
What do you mean by 1x and 15x? The tax rate would depend not only on the number of retirees, but also the number of people subject to the payroll tax, and also the ratio between average taxable income and average retiree benefit payout.
So if in 1974 there were as many workers as retirees, 1:1, that might be a “1x” tax rate. And if in 2020 there are 1/15 as many workers as retirees, 1:15, that could be a “15x” rate compared to 1974 - assuming that the median-taxable-income to median-retiree-benefit ratio is the same in both 1974 and 2020.
I’m not going to go into a Wrenching Spanners-length post that involves a loose summary of some numbers I googled and make it out like I can show what payroll tax rates would be in various years. I’m just talking about the principle of these two options:
When expenses are low and income is great, put the surplus in a safe place for the future when expenses are higher and revenue is lower (basically the current system)
Or…
Eliminate all annual Social Security surpluses by cutting taxes and then raise taxes when deficits happen so there is never a balance to carry forward.
I’m okay with having enough surplus funds to run the program for a few months. The idea is that the working young pay a tax to support the elderly; if there are more elderly, the tax goes up. It is always possible that tax receipts come in lower than expected, so the “reserve” fund would hold social security over until new, higher tax rates become effective. But effectively, I am in camp 2.
The flipside is, what would it would take to put me in camp 1? Social security would have to be more of a pension fund sort of thing where the government says, ‘I don’t trust you to save for old age so I’m making you a pension account’. I would want individualized and inheritable trusts. I would not want one person’s social security taxes to go into another person’s social security benefits, unless the two were married or something like that. I still don’t see why you would reinvest the trust in Treasury bonds, because that just means you would have to tax people - again - to pay the interest; alternatively, you have a scheme where the government finances interest on the older generation’s pensions with the trust funds of the younger generation, eventually the interest would overtake the actual disbursements and the payroll tax would grow to over 100%.
After seeing how the government has run deficits for virtually the entire postwar era, and the last tax increase was like thirty years ago, the idea that anyone should count on future tax increases as a fiscally prudent measure to address the major demographic shift we are experiencing is just a loser plan. I mean, we are running trillion dollar deficits now and for whatever reason, taxes are being cut! Trusting that tax increases will happen just because of a deficit is just… so unrealistic that it is unadulterated fiscal fantasy to think that such a scheme could even hope to work.
I thought we had dispensed with the current state of affairs in post #3. The GQ answer to UltraVires’s question is that fiscal conservatism is, at present, politically untenable.
I think an automatic tax increase can be written into law, based on SSA administrator’s numbers from the previous year, much like sequestration or the Medicare sustainable growth rate was. An automatic tax won’t stop legislators from passing the equivalent of an annual “doc fix” for social security, but sound fiscal principles would. Do you have any objections on principle or only on practicality?
Error on my part. $125 today would be about $13 in 1955. Cut out a third to account for additional overhead today versus 1955, and you’re down to about $8.67. Now, I wasn’t around in 1955 so I can’t tell you with any certainty how much a doctor might have charged back then. The cost probably varied by region, too (it varies by region today). But I have heard a 50’s doctor would charge somewhere around the $2-10 range.