The US Federal Budget Crisis

[iamshack]

Those forms are basically so people can't skip out on paying taxes on large winnings. The IRS wouldn't really have any other way of documenting or knowing that you won $200k at the tables but didn't report it.

Right. I'm not trying to say that people pay taxes for table games winnings often. I probably have won $10k or so last year on football and blackjack. I won't pay a dime for any of that as additional income. So for most of us, in a practical sense, he is correct.

 

But if you are a big time player and you routinely are cashing $10k+ at the cage, you better believe it the IRS is going to come after you.

[Balta1701]

Interesting stuff, but I disagree with the idea that there isn't a crisis. Servicing the debt is a large chunk of the budget and will only get larger, SS/Medicare are huge drains, the economy sucks... this is what I'd call a crisis. Now, it could be a WORSE crisis... but when you are looking at the idea that the federal budget will be less than 10% discretionary outside of debt/SS/Medicare/Defense in the next decade, that's a huge problem in my eyes.

 

Some of what you suggest: ending wars, ending at least some of the Bush tax cuts, I agree with.

 

But what you are obviously trying to lean towards here is that more spending by the government will be what lifts us out of the doldrums. Noted.

 

Your last point, that "all the other changes" are small tweaks used to mask the problem, is a stinking pile of it. You cannot sit there and say you shouldn't touch those things, just because other things (which I also addressed) are bigger.

Social Security has been running a surplus for decades, and it is really giving no problems to the general budget right now. It needs no additional funding for at least 25 years under current law, it will pay out more money in benefits after its trust fund goes bankrupt than it currently does, and its deficit on the infinite horizon is smaller than the Medicare deficit over just a couple of years. In the "Entitlements" part, Social Security is 2% of the problem, Medicare is 98%, and Social Security is actually helping now.

 

Secondly...the cost of servicing the debt in 2006-2007 was larger than the cost of servicing the debt right now, because interest rates have gone through the floor. The debt is 50% bigger, but we're paying less on interest right now.

 

Third...right now a significant chunk of that debt is held by the Federal Reserve Bank, which is the largest holder of U.S. treasuries (along with the Social Security trust fund). The funds that are paid out in interest on Federal Reserve holdings go back to the Federal Reserve, which then returns them to the Treasury Department. Last year, the amount the Fed transferred to the Treasury totaled $80 billion dollars, a sum more than double the previous year's value. The Federal Reserve has done this to try to push the inflation/growth button. Therefore, the amount actually paid out in interest has shrunk even more substantially over the past year, because we're paying the interest to the U.S. government. (Note; this money is actually money paid back in interest; the money the Fed is earning on its investments in the Housing market, it re-investing in housing securities so that its portfolio will not shrink).

 

Your last point, that "all the other changes" are small tweaks used to mask the problem, is a stinking pile of it. You cannot sit there and say you shouldn't touch those things, just because other things (which I also addressed) are bigger.

Now, don't get me wrong here...there are plenty of programs I could list even outside of defense/security that I'd be willing to part with (Farm subsidies). However...there are 2 key issues. First...you can not solve the budget problem using them, they're just too small. Second...even if you solve every single one, you still have a massive budget problem because of Health Care cost growth.

 

If you think something is a waste of money, and you can convince the rest of the small states/Congress that you're right, then you might get a little bit of savings, but it's ignoring the forest for the trees.

[Balta1701]

No, you are misinterpereting me. I am saying that the Postal Service should do these things:

 

--Provide that which private business will not and cannot - basic mail

--Charge for that service the amount of money it actually costs

--Elect to compete in related services if and only if it can compete on at least an even budget

I believe the Postal Service already does the first and 3rd of those. Priority mail doesn't lose the USPS money. And it provides the everyday services.

 

The problem is...it cannot charge what it actually costs, or provide services at the level that it is allowed to charge, because of Congressional rules.

 

If I wanted to build the postal service from scratch as a private enterprise, there would be areas of the country I would go to once a month, or perhaps once a week. Personally, there's no reason why I need mail more than 1-2 times a week, maybe even less. I could easily charge people for delivery more often than that, or for rural delivery, or for Saturday delivery.

 

Here is the question...you have to pick one (or all 3); Which option do you prefer; significant increases in everyday mail costs, significant cutbacks in everyday service, or significant cutbacks in rural service.

 

The Postal service works like a lot of things in this country; it makes its money delivering mail in high-profit areas (cities and suburbs on weekdays) and that goes to subsidize rural delivery and weekend delivery. Either the people in the cities need to pay higher rates to reflect the fact that they're subsidizing the other types of delivery, or they need to be allowed to cut back on rural delivery.

 

None of those options have proven politically palatable.

[Chet Lemon]

Cutting Education by 83% doesn't bother you? And eliminating Housing and Urban Development completely?

 

My view dissents from the two main opposing sides of the educational debate. For the sake of brevity, I will bring up the issue of teacher effectiveness.

 

Generically, most Democrats in the U.S. Congress believe the good teachers should be paid more, which sounds great, but how does the Fed know that a state or district has good teachers? Most and those in the administration would answer: student assessment. How does the Fed assess students? Test scores and other standardized testing measures. Many Republicans in Congress applaud this too, and the administration leans towards linking teacher pay with test scores ostensibly to weed out bad teachers/reward good teachers and because they don't want to look like they are owned by teacher unions.

 

The other view held by many self-described "conservatives" in the U.S. Congress and some urban lawmakers is that when a school is failing (e.g. test scores are falling, high absenteeism, etc.), families should be given government vouchers so that they can pull their kids out of the failing schools and place them into others of their choosing, where teachers are presumably more effective.

 

Neither side will admit that "bad" schools' clientele are as much a part of the problem as administrators, state-level bureaucrats and teachers. It's good PR to blame the latter two and cite the latest test scores to prove how bad or good teachers are doing. Measuring by test scores is comparable to measuring baseball players solely by batting averages. It would be like saying some guy is a terrible baseball player because you only can see his career .123 line, never mind that he is Roy Halladay.

 

[NorthSideSox72]

Social Security has been running a surplus for decades, and it is really giving no problems to the general budget right now. It needs no additional funding for at least 25 years under current law, it will pay out more money in benefits after its trust fund goes bankrupt than it currently does, and its deficit on the infinite horizon is smaller than the Medicare deficit over just a couple of years. In the "Entitlements" part, Social Security is 2% of the problem, Medicare is 98%, and Social Security is actually helping now.

 

Secondly...the cost of servicing the debt in 2006-2007 was larger than the cost of servicing the debt right now, because interest rates have gone through the floor. The debt is 50% bigger, but we're paying less on interest right now.

 

Third...right now a significant chunk of that debt is held by the Federal Reserve Bank, which is the largest holder of U.S. treasuries (along with the Social Security trust fund). The funds that are paid out in interest on Federal Reserve holdings go back to the Federal Reserve, which then returns them to the Treasury Department. Last year, the amount the Fed transferred to the Treasury totaled $80 billion dollars, a sum more than double the previous year's value. The Federal Reserve has done this to try to push the inflation/growth button. Therefore, the amount actually paid out in interest has shrunk even more substantially over the past year, because we're paying the interest to the U.S. government. (Note; this money is actually money paid back in interest; the money the Fed is earning on its investments in the Housing market, it re-investing in housing securities so that its portfolio will not shrink).

 

Now, don't get me wrong here...there are plenty of programs I could list even outside of defense/security that I'd be willing to part with (Farm subsidies). However...there are 2 key issues. First...you can not solve the budget problem using them, they're just too small. Second...even if you solve every single one, you still have a massive budget problem because of Health Care cost growth.

 

If you think something is a waste of money, and you can convince the rest of the small states/Congress that you're right, then you might get a little bit of savings, but it's ignoring the forest for the trees.

I'll use the Balta method here.

 

So, what you are saying is...

 

1. Social Security is OK now but will break later, so who cares of we are borrowing from it and not fixing it.

2. Because interest rates are low now, that means the doubling of debt is no problem.

3. Small stuff isn't worth doing, and the big stuff is impossible.

 

Did I get that right?

 

I believe the Postal Service already does the first and 3rd of those. Priority mail doesn't lose the USPS money. And it provides the everyday services.

 

The problem is...it cannot charge what it actually costs, or provide services at the level that it is allowed to charge, because of Congressional rules.

 

If I wanted to build the postal service from scratch as a private enterprise, there would be areas of the country I would go to once a month, or perhaps once a week. Personally, there's no reason why I need mail more than 1-2 times a week, maybe even less. I could easily charge people for delivery more often than that, or for rural delivery, or for Saturday delivery.

 

Here is the question...you have to pick one (or all 3); Which option do you prefer; significant increases in everyday mail costs, significant cutbacks in everyday service, or significant cutbacks in rural service.

 

The Postal service works like a lot of things in this country; it makes its money delivering mail in high-profit areas (cities and suburbs on weekdays) and that goes to subsidize rural delivery and weekend delivery. Either the people in the cities need to pay higher rates to reflect the fact that they're subsidizing the other types of delivery, or they need to be allowed to cut back on rural delivery.

 

None of those options have proven politically palatable.

Point of the thread: what would you do?

 

I told you what I'd do, and you are telling me its not that way right now. Well, that's kind of my point. I'm saying what I'd want to change.

 

And where are your actual suggestions? So far, I've seen you rip apart other ideas, but other than leaving Iraq and Afghanistan (which is happening anyway), I haven't seen you suggest any action.

 

 

[Balta1701]

I'll use the Balta method here.

 

So, what you are saying is...

 

1. Social Security is OK now but will break later, so who cares of we are borrowing from it and not fixing it.

2. Because interest rates are low now, that means the doubling of debt is no problem.

3. Small stuff isn't worth doing, and the big stuff is impossible.

 

Did I get that right?

 

 

Point of the thread: what would you do?

 

I told you what I'd do, and you are telling me its not that way right now. Well, that's kind of my point. I'm saying what I'd want to change.

 

And where are your actual suggestions? So far, I've seen you rip apart other ideas, but other than leaving Iraq and Afghanistan (which is happening anyway), I haven't seen you suggest any action.

Social Security is not broken, and its entirely possible it won't break later.

 

Interest rates are low now, so yes, the doubling of debt is no problem. The higher it goes right now, the more rapidly we're going to pull the economy out of the hole.

 

Small stuff is only worth doing if you can justify why the program is bad. Cutting for the sake of cutting is silly policy. Don't make inapt comparisons as a reason to justify cuts; be honest and tell me why rural areas should have their services cut or why we don't have enough lead in our toys.

 

Oh, and we're not pulling out of Afghanistan. Nice try.

 

Solutions:

 

Step 1: some version of an infrastructure bank to get people actively back to work while simultaneously improving infrastructure. This has been needed for years anyway.

Step 2: in about 2 years, allow the Bush Tax cuts to expire.

Step 3: Either pull out of Afghanistan or raise taxes by $100 billion a year to pay for it. Take your pick.

Step 4: You need a complete health care system overhaul. The ACA was a start, but it didn't do everything. Some of the things Y2HH talks about would be nice; much more government imposition on the rates Medicare pays for prescription drugs, much more active management of the program's expenses from an outside panel.

 

That said, even that won't do it forever, it's just another couple year patch, just like the ACA was. So, either we're going to have to accept much higher tax rates in about 20 years to pay for Health Care costs that go up by 10% a year, or we're going to finally give up and create the Public system that works everywhere else.

Step 5: in About 10 years, re-assess where OASDI actually sits. If a small tweak is needed then, a small tweak can still be done.

Step 6: yeah, make the small cuts you can. $75 billion from defense spending, clear up regulations, etc., but don't pretend that you're going to get more than a handful of cash from it, not only because of the politics protecting certain expenditures, but also because a lot of them actually do good things for the economy.

[Balta1701]

This graph is a few years old so it doesn't show the financial crisis on it, but I think it ought to sum up why I think that Health Care costs are the #1, #2, and #3 priorities if you're serious about the deficit.

 

 

(Vertical axis is %age of GDP. The non-Medicare budget has been shrinking as a fraction of GDP. The small expansion around 2005 was Bush's war. There's a 2009 spike on any updated version of this graph, because GDP contracted sharply. The rest-of-the budget line is flat because the CBO bases its numbers on the assumption that current policy will continue. Growing the defense budget at a rate greater than GDP growth, which has also happened, hurts that line, but only slightly.)

[Balta1701]

One more graph...this one just to shoot down any suggestion that Medicare is somehow in trouble because the population is getting older. Paying for that requires small policy changes. The real long-term trouble comes almost entirely from the fact that health care costs are growing at 10% a year above the rate of GDP growth.

[southsider2k5]

I'll use the Balta method here.

 

So, what you are saying is...

 

1. Social Security is OK now but will break later, so who cares of we are borrowing from it and not fixing it.

2. Because interest rates are low now, that means the doubling of debt is no problem.

3. Small stuff isn't worth doing, and the big stuff is impossible.

 

Did I get that right?

 

Thank you. That was making my head hurt.

[Texsox]

First, accept that there is very little spending from the federal government that us totally without merit or a justification. Certainly not 1.5T worth. So if cuts are made, good programs, and worthy people will be hurt.

 

Second, accept that it is better to be loaning people money than borrowing money.

 

Third, accept that America does not function based on what the lowest earners can afford. It functions on what collectively we can afford, which means those with greater resources will shoulder a higher percentage of the budget.

 

Begin cutting from programs that have a likely opportunity to be picked up by private donors or enterprise. "Non essentials". Sorry items like arts will be cut back for a few years. Keep programs that benefit the widest range of citizens.

 

Be careful in grouping agencies. Sometimes there are reasons for dual agencies seemingly in related fields. Encouraging and regulating off shore drilling are opposite relationships and should not be combined in the interest of budget savings.

 

Allow agencies to have a surplus one year without cutting their next year's budget.

 

If you want a new program, pay for it. If you want to cut taxes, cut the budget an equal amount.

[Balta1701]

This year, the U.S. government will collect the lowest share of GDP as taxes since the year 1950.

[NorthSideSox72]

This year, the U.S. government will collect the lowest share of GDP as taxes since the year 1950.

This is one area I agree with you on... the narrative being pushed by the right about the supposed overspending and overtaxing liberals is not only false, its actually something that is accurate about themselves. Taxation levels as part of GDP lowest in 60 years, discretionary spending lowest in relative dollars basically forever, and most of the deficits and debt are the result of GOP Congressional and Presidential actions.

 

But nevermind reality.