GAO Chief Warns of Economic Disaster - Long Article

[dazzleman]

Thoughts?
________________________________
GAO Chief Warns Economic Disaster Looms
 
Oct 28, 12:32 PM (ET)

By MATT CRENSON

AUSTIN, Texas (AP) - David M. Walker sure talks like he's running for office. "This is about the future of our country, our kids and grandkids," the comptroller general of the United States warns a packed hall at Austin's historic Driskill Hotel. "We the people have to rise up to make sure things get changed."

But Walker doesn't want, or need, your vote this November. He already has a job as head of the Government Accountability Office, an investigative arm of Congress that audits and evaluates the performance of the federal government.

Basically, that makes Walker the nation's accountant-in-chief. And the accountant-in-chief's professional opinion is that the American public needs to tell Washington it's time to steer the nation off the path to financial ruin.

From the hustings and the airwaves this campaign season, America's political class can be heard debating Capitol Hill sex scandals, the wisdom of the war in Iraq and which party is tougher on terror. Democrats and Republicans talk of cutting taxes to make life easier for the American people.

What they don't talk about is a dirty little secret everyone in Washington knows, or at least should. The vast majority of economists and budget analysts agree: The ship of state is on a disastrous course, and will founder on the reefs of economic disaster if nothing is done to correct it.

There's a good reason politicians don't like to talk about the nation's long-term fiscal prospects. The subject is short on political theatrics and long on complicated economics, scary graphs and very big numbers. It reveals serious problems and offers no easy solutions. Anybody who wanted to deal with it seriously would have to talk about raising taxes and cutting benefits, nasty nostrums that might doom any candidate who prescribed them.

"There's no sexiness to it," laments Leita Hart-Fanta, an accountant who has just heard Walker's pitch. She suggests recruiting a trusted celebrity - maybe Oprah - to sell fiscal responsibility to the American people.

Walker doesn't want to make balancing the federal government's books sexy - he just wants to make it politically palatable. He has committed to touring the nation through the 2008 elections, talking to anybody who will listen about the fiscal black hole Washington has dug itself, the "demographic tsunami" that will come when the baby boom generation begins retiring and the recklessness of borrowing money from foreign lenders to pay for the operation of the U.S. government.

"He can speak forthrightly and independently because his job is not in jeopardy if he tells the truth," said Isabel V. Sawhill, a senior fellow in economic studies at the Brookings Institution.

Walker can talk in public about the nation's impending fiscal crisis because he has one of the most secure jobs in Washington. As comptroller general of the United States - basically, the government's chief accountant - he is serving a 15-year term that runs through 2013.

This year Walker has spoken to the Union League Club of Chicago and the Rotary Club of Atlanta, the Sons of the American Revolution and the World Future Society. But the backbone of his campaign has been the Fiscal Wake-up Tour, a traveling roadshow of economists and budget analysts who share Walker's concern for the nation's budgetary future.

"You can't solve a problem until the majority of the people believe you have a problem that needs to be solved," Walker says.

Polls suggest that Americans have only a vague sense of their government's long-term fiscal prospects. When pollsters ask Americans to name the most important problem facing America today - as a CBS News/New York Times poll of 1,131 Americans did in September - issues such as the war in Iraq, terrorism, jobs and the economy are most frequently mentioned. The deficit doesn't even crack the top 10.

Yet on the rare occasions that pollsters ask directly about the deficit, at least some people appear to recognize it as a problem. In a survey of 807 Americans last year by the Pew Center for the People and the Press, 42 percent of respondents said reducing the deficit should be a top priority; another 38 percent said it was important but a lower priority.

So the majority of the public appears to agree with Walker that the deficit is a serious problem, but only when they're made to think about it. Walker's challenge is to get people not just to think about it, but to pressure politicians to make the hard choices that are needed to keep the situation from spiraling out of control.

To show that the looming fiscal crisis is not a partisan issue, he brings along economists and budget analysts from across the political spectrum. In Austin, he's accompanied by Diane Lim Rogers, a liberal economist from the Brookings Institution, and Alison Acosta Fraser, director of the Roe Institute for Economic Policy Studies at the Heritage Foundation, a conservative think tank.

"We all agree on what the choices are and what the numbers are," Fraser says.

Their basic message is this: If the United States government conducts business as usual over the next few decades, a national debt that is already $8.5 trillion could reach $46 trillion or more, adjusted for inflation. That's almost as much as the total net worth of every person in America - Bill Gates, Warren Buffett and those Google guys included.

A hole that big could paralyze the U.S. economy; according to some projections, just the interest payments on a debt that big would be as much as all the taxes the government collects today.

And every year that nothing is done about it, Walker says, the problem grows by $2 trillion to $3 trillion.

People who remember Ross Perot's rants in the 1992 presidential election may think of the federal debt as a problem of the past. But it never really went away after Perot made it an issue, it only took a breather. The federal government actually produced a surplus for a few years during the 1990s, thanks to a booming economy and fiscal restraint imposed by laws that were passed early in the decade. And though the federal debt has grown in dollar terms since 2001, it hasn't grown dramatically relative to the size of the economy.

But that's about to change, thanks to the country's three big entitlement programs - Social Security, Medicaid and especially Medicare. Medicaid and Medicare have grown progressively more expensive as the cost of health care has dramatically outpaced inflation over the past 30 years, a trend that is expected to continue for at least another decade or two.

And with the first baby boomers becoming eligible for Social Security in 2008 and for Medicare in 2011, the expenses of those two programs are about to increase dramatically due to demographic pressures. People are also living longer, which makes any program that provides benefits to retirees more expensive.

Medicare already costs four times as much as it did in 1970, measured as a percentage of the nation's gross domestic product. It currently comprises 13 percent of federal spending; by 2030, the Congressional Budget Office projects it will consume nearly a quarter of the budget.

Economists Jagadeesh Gokhale of the American Enterprise Institute and Kent Smetters of the University of Pennsylvania have an even scarier way of looking at Medicare. Their method calculates the program's long-term fiscal shortfall - the annual difference between its dedicated revenues and costs - over time.

By 2030 they calculate Medicare will be about $5 trillion in the hole, measured in 2004 dollars. By 2080, the fiscal imbalance will have risen to $25 trillion. And when you project the gap out to an infinite time horizon, it reaches $60 trillion.

Medicare so dominates the nation's fiscal future that some economists believe health care reform, rather than budget measures, is the best way to attack the problem.

"Obviously health care is a mess," says Dean Baker, a liberal economist at the Center for Economic and Policy Research, a Washington think tank. "No one's been willing to touch it, but that's what I see as front and center."

Social Security is a much less serious problem. The program currently pays for itself with a 12.4 percent payroll tax, and even produces a surplus that the government raids every year to pay other bills. But Social Security will begin to run deficits during the next century, and ultimately would need an infusion of $8 trillion if the government planned to keep its promises to every beneficiary.

Calculations by Boston University economist Lawrence Kotlikoff indicate that closing those gaps - $8 trillion for Social Security, many times that for Medicare - and paying off the existing deficit would require either an immediate doubling of personal and corporate income taxes, a two-thirds cut in Social Security and Medicare benefits, or some combination of the two.

(continued)

[dazzleman]

Why is America so fiscally unprepared for the next century? Like many of its citizens, the United States has spent the last few years racking up debt instead of saving for the future. Foreign lenders - primarily the central banks of China, Japan and other big U.S. trading partners - have been eager to lend the government money at low interest rates, making the current $8.5-trillion deficit about as painful as a big balance on a zero-percent credit card.

In her part of the fiscal wake-up tour presentation, Rogers tries to explain why that's a bad thing. For one thing, even when rates are low a bigger deficit means a greater portion of each tax dollar goes to interest payments rather than useful programs. And because foreigners now hold so much of the federal government's debt, those interest payments increasingly go overseas rather than to U.S. investors.

More serious is the possibility that foreign lenders might lose their enthusiasm for lending money to the United States. Because treasury bills are sold at auction, that would mean paying higher interest rates in the future. And it wouldn't just be the government's problem. All interest rates would rise, making mortgages, car payments and student loans costlier, too.

A modest rise in interest rates wouldn't necessarily be a bad thing, Rogers said. America's consumers have as much of a borrowing problem as their government does, so higher rates could moderate overconsumption and encourage consumer saving. But a big jump in interest rates could cause economic catastrophe. Some economists even predict the government would resort to printing money to pay off its debt, a risky strategy that could lead to runaway inflation.

Macroeconomic meltdown is probably preventable, says Anjan Thakor, a professor of finance at Washington University in St. Louis. But to keep it at bay, he said, the government is essentially going to have to renegotiate some of the promises it has made to its citizens, probably by some combination of tax increases and benefit cuts.

But there's no way to avoid what Rogers considers the worst result of racking up a big deficit - the outrage of making our children and grandchildren repay the debts of their elders.

"It's an unfair burden for future generations," she says.

You'd think young people would be riled up over this issue, since they're the ones who will foot the bill when they're out in the working world. But students take more interest in issues like the Iraq war and gay marriage than the federal government's finances, says Emma Vernon, a member of the University of Texas Young Democrats.

"It's not something that can fire people up," she says.

The current political climate doesn't help. Washington tends to keep its fiscal house in better order when one party controls Congress and the other is in the White House, says Sawhill.

"It's kind of a paradoxical result. Your commonsense logic would tell you if one party is in control of everything they should be able to take action," Sawhill says.

But the last six years of Republican rule have produced tax cuts, record spending increases and a Medicare prescription drug plan that has been widely criticized as fiscally unsound. When President Clinton faced a Republican Congress during the 1990s, spending limits and other legislative tools helped produce a surplus.

So maybe a solution is at hand.

"We're likely to have at least partially divided government again," Sawhill said, referring to predictions that the Democrats will capture the House, and possibly the Senate, in next month's elections.

But Walker isn't optimistic that the government will be able to tackle its fiscal challenges so soon.

"Realistically what we hope to accomplish through the fiscal wake-up tour is ensure that any serious candidate for the presidency in 2008 will be forced to deal with the issue," he says. "The best we're going to get in the next couple of years is to slow the bleeding."

[I spent the winter writing songs about getting better]

It's good to know Bush has been so responsible in fixing this.

[dazzleman]

This is actually a longer-term problem that has been known since the 1970s.

If you want to be partisan about it, the Democrats have blocked any suggestions to fix it.

[Beet]

This is a long-standing bipartisan issue, and Democrats and Republicans' approaches have been predictable.

Republicans want entitlement cuts without tax cut rollbacks, and the Democrats want the reverse.

Democrats want to bring down the cost of health care through a combination of tort reform and reducing the cost of overhead, Republicans want drastic tort reform without reducing overhead costs. Both parties are operating out of their special interest groups- Democrats, the lawyers, Republicans, drug companies and the medical industry.

The other problem of course is demographic. America needs more young people who work and pay taxes as baby boomers retire.

[dazzleman]

This is a long-standing bipartisan issue, and Democrats and Republicans' approaches have been predictable.

Republicans want entitlement cuts without tax cut rollbacks, and the Democrats want the reverse.

Democrats want to bring down the cost of health care through a combination of tort reform and reducing the cost of overhead, Republicans want drastic tort reform without reducing overhead costs. Both parties are operating out of their special interest groups- Democrats, the lawyers, Republicans, drug companies and the medical industry.

The other problem of course is demographic. America needs more young people who work and pay taxes as baby boomers retire.

We are getting more younger workers through immigration.  We are the only advanced industrialized country with an expanding population.

It's news to me that the Democrats want any type of tort reform.

One thing that was suggested by Pete Peterson was tying social security increases to the inflation rate, not the rate of increase to income.  Since income goes up at a higher rate than inflation for most people due to growth in productivity over their career, this would mean a sizable savings in future social security benefits.

[Beet]

This is a long-standing bipartisan issue, and Democrats and Republicans' approaches have been predictable.

Republicans want entitlement cuts without tax cut rollbacks, and the Democrats want the reverse.

Democrats want to bring down the cost of health care through a combination of tort reform and reducing the cost of overhead, Republicans want drastic tort reform without reducing overhead costs. Both parties are operating out of their special interest groups- Democrats, the lawyers, Republicans, drug companies and the medical industry.

The other problem of course is demographic. America needs more young people who work and pay taxes as baby boomers retire.

We are getting more younger workers through immigration.  We are the only advanced industrialized country with an expanding population.

It's news to me that the Democrats want any type of tort reform.

In Maryland the legislature passed a tort reform measure aimed at restraining premium costs and limiting noneconomic damages to $650,000. Ehrlich vetoed it, as it wasn't radical enough for him.

You must be logged in to read this quote.

Which is an entitlement cut. As the article points out, social security isn't the main problem. The main problem is health care costs, combined with demographics. What's needed is a combination of tort reform, lower overhead costs, lower prescription drug costs, including government negotiating power and importation from Canada, and finally more healthy living and "preventative care" by ordinary Americans. I would also like to see more funding for basic research, but that's a separate issue.

[dazzleman]

This is a long-standing bipartisan issue, and Democrats and Republicans' approaches have been predictable.

Republicans want entitlement cuts without tax cut rollbacks, and the Democrats want the reverse.

Democrats want to bring down the cost of health care through a combination of tort reform and reducing the cost of overhead, Republicans want drastic tort reform without reducing overhead costs. Both parties are operating out of their special interest groups- Democrats, the lawyers, Republicans, drug companies and the medical industry.

The other problem of course is demographic. America needs more young people who work and pay taxes as baby boomers retire.

We are getting more younger workers through immigration.  We are the only advanced industrialized country with an expanding population.

It's news to me that the Democrats want any type of tort reform.

In Maryland the legislature passed a tort reform measure aimed at restraining premium costs and limiting noneconomic damages to $650,000. Ehrlich vetoed it, as it wasn't radical enough for him.

You must be logged in to read this quote.

Which is an entitlement cut. As the article points out, social security isn't the main problem. The main problem is health care costs, combined with demographics. What's needed is a combination of tort reform, lower overhead costs, lower prescription drug costs, including government negotiating power and importation from Canada, and finally more healthy living and "preventative care" by ordinary Americans. I would also like to see more funding for basic research, but that's a separate issue.

Do you categorically rule out entitlement cuts?  Perhaps some phased entitlement cut for those in the upper income ranges would work.

Importing drugs from Canada will never work on a large scale.  Few drugs are actually produced in Canada, since the price controls and government control there has greatly reduced the quantity of drugs produced there.  If importing from Canada becomes widespread, demand will simply bring their prices up to the US level.

[Beet]

This is a long-standing bipartisan issue, and Democrats and Republicans' approaches have been predictable.

Republicans want entitlement cuts without tax cut rollbacks, and the Democrats want the reverse.

Democrats want to bring down the cost of health care through a combination of tort reform and reducing the cost of overhead, Republicans want drastic tort reform without reducing overhead costs. Both parties are operating out of their special interest groups- Democrats, the lawyers, Republicans, drug companies and the medical industry.

The other problem of course is demographic. America needs more young people who work and pay taxes as baby boomers retire.

We are getting more younger workers through immigration.  We are the only advanced industrialized country with an expanding population.

It's news to me that the Democrats want any type of tort reform.

In Maryland the legislature passed a tort reform measure aimed at restraining premium costs and limiting noneconomic damages to $650,000. Ehrlich vetoed it, as it wasn't radical enough for him.

You must be logged in to read this quote.

Which is an entitlement cut. As the article points out, social security isn't the main problem. The main problem is health care costs, combined with demographics. What's needed is a combination of tort reform, lower overhead costs, lower prescription drug costs, including government negotiating power and importation from Canada, and finally more healthy living and "preventative care" by ordinary Americans. I would also like to see more funding for basic research, but that's a separate issue.

Do you categorically rule out entitlement cuts?  Perhaps some phased entitlement cut for those in the upper income ranges would work.

Importing drugs from Canada will never work on a large scale.  Few drugs are actually produced in Canada, since the price controls and government control there has greatly reduced the quantity of drugs produced there.  If importing from Canada becomes widespread, demand will simply bring their prices up to the US level.

I would prefer ending the social security tax cap-- which makes the social security tax regressive-- than ending benefits for the upper income ranges.

I don't think drug importation is the only solution, however it should be allowed. It is funny how conservatives are supposed to be for the free market yet when it's the Republican special interests (drug companies) that are threatened the GOP balks. In addition to allowing importation, I think a more large scale solution can be found simply by improving Medicare Part D to give the government more leverage over bargaining for prices, as the Veterans Administration is currently allowed to do, as well as possibly giving seniors covered by it the option to obtain their medications directly from medicare, rather than being forced to choose from a list of private companies.

[dazzleman]

I would prefer ending the social security tax cap-- which makes the social security tax regressive-- than ending benefits for the upper income ranges.

I don't think drug importation is the only solution, however it should be allowed. It is funny how conservatives are supposed to be for the free market yet when it's the Republican special interests (drug companies) that are threatened the GOP balks. In addition to allowing importation, I think a more large scale solution can be found simply by improving Medicare Part D to give the government more leverage over bargaining for prices, as the Veterans Administration is currently allowed to do, as well as possibly giving seniors covered by it the option to obtain their medications directly from medicare, rather than being forced to choose from a list of private companies.

I don't have a problem with allowing importation.  I just don't think it would work, so it's foolish to look to it as a solution.

I don't think the earnings cap on social security should be removed.  There is supposed to be some relationship between money paid in and benefits received.  It's not supposed to be a pure entitlement/income transfer program.  Roosevelt was very clear on that, because he believed that the long-term political viability of the system depended on it.  If people are paying for all sorts of benefits they're not getting, they'll start looking on social security with the same scorn with which they look at welfare.

[David S]

Just for the record the surpluses they mentioned in the article are the result of a little accounting "creativity". Money that was slated for the social security trust fund was stolen (borrowed in politician speak) to balance the budget. But in reality the national debt has increased every single year since the Eisenhower era. Only in Washington can you claim to have balanced the budget while going deeper into debt. In the corporate world that kind of creativity would get you sent to jail.

The reasons for this problem:
1) The government has grown far beyond its constitutional framework and is spending money on a multitude of programs that it should not be
involved in, such as; nation building in Iraq and previously Vietnam, medicare, medicaid, social security, welfare, corporate welfare, foreign aid, bridges to nowhere etc.
2) Our politicians have absolutely no fiscal responsibility whatsoever. They should all be thrown out on their butts.

Possible solutions:

Throw the bums out by voting for third party candidates especially Libertarians,  enact a balanced budget amendment, and begin the process of restoring the government to its constitutional basis.

Keep voting for the same idiots who created the problem in the first place. Although the likelihood of this being successful is zero.

Prepare yourself as well as possible for the situation to come and then sit back and watch as the whole thing collapses.

[Beet]

I would prefer ending the social security tax cap-- which makes the social security tax regressive-- than ending benefits for the upper income ranges.

I don't think drug importation is the only solution, however it should be allowed. It is funny how conservatives are supposed to be for the free market yet when it's the Republican special interests (drug companies) that are threatened the GOP balks. In addition to allowing importation, I think a more large scale solution can be found simply by improving Medicare Part D to give the government more leverage over bargaining for prices, as the Veterans Administration is currently allowed to do, as well as possibly giving seniors covered by it the option to obtain their medications directly from medicare, rather than being forced to choose from a list of private companies.

I don't have a problem with allowing importation.  I just don't think it would work, so it's foolish to look to it as a solution.

I don't think the earnings cap on social security should be removed.  There is supposed to be some relationship between money paid in and benefits received.  It's not supposed to be a pure entitlement/income transfer program.  Roosevelt was very clear on that, because he believed that the long-term political viability of the system depended on it.  If people are paying for all sorts of benefits they're not getting, they'll start looking on social security with the same scorn with which they look at welfare.

I said I preferred that to your plan, where you talked about an entitlement cut for the upper income ranges but not a tax cut. If you want both, that's hardly going to help with the government's fiscal situation, and it can't even be implemented for people who have already paid into the system for years-- which is almost the entire current workforce. If you choose only the entitlement cut, people in those income ranges are still going to be paying social security taxes for an entitlement they won't fully get.

[dazzleman]

Just for the record the surpluses they mentioned in the article are the result of a little accounting "creativity". Money that was slated for the social security trust fund was stolen (borrowed in politician speak) to balance the budget. But in reality the national debt has increased every single year since the Eisenhower era. Only in Washington can you claim to have balanced the budget while going deeper into debt. In the corporate world that kind of creativity would get you sent to jail.

The reasons for this problem:
1) The government has grown far beyond its constitutional framework and is spending money on a multitude of programs that it should not be
involved in, such as; nation building in Iraq and previously Vietnam, medicare, medicaid, social security, welfare, corporate welfare, foreign aid, bridges to nowhere etc.
2) Our politicians have absolutely no fiscal responsibility whatsoever. They should all be thrown out on their butts.

Possible solutions:

Throw the bums out by voting for third party candidates especially Libertarians,  enact a balanced budget amendment, and begin the process of restoring the government to its constitutional basis.

Keep voting for the same idiots who created the problem in the first place. Although the likelihood of this being successful is zero.

Prepare yourself as well as possible for the situation to come and then sit back and watch as the whole thing collapses.

The problem is really with the people who elect these politicians.

Most Americans don't do any better in managing their personal finances than the government does.  As a society, we're addicted to the "consume today, pay tomorrow" mentality, and we always vote for politicians who promise us something for nothing.  Each party does it, just in a different way.

It will take a deep change in the attitude of the American people to solve this problem.  Will it happen in time?

[dazzleman]

I would prefer ending the social security tax cap-- which makes the social security tax regressive-- than ending benefits for the upper income ranges.

I don't think drug importation is the only solution, however it should be allowed. It is funny how conservatives are supposed to be for the free market yet when it's the Republican special interests (drug companies) that are threatened the GOP balks. In addition to allowing importation, I think a more large scale solution can be found simply by improving Medicare Part D to give the government more leverage over bargaining for prices, as the Veterans Administration is currently allowed to do, as well as possibly giving seniors covered by it the option to obtain their medications directly from medicare, rather than being forced to choose from a list of private companies.

I don't have a problem with allowing importation.  I just don't think it would work, so it's foolish to look to it as a solution.

I don't think the earnings cap on social security should be removed.  There is supposed to be some relationship between money paid in and benefits received.  It's not supposed to be a pure entitlement/income transfer program.  Roosevelt was very clear on that, because he believed that the long-term political viability of the system depended on it.  If people are paying for all sorts of benefits they're not getting, they'll start looking on social security with the same scorn with which they look at welfare.

I said I preferred that to your plan, where you talked about an entitlement cut for the upper income ranges but not a tax cut. If you want both, that's hardly going to help with the government's fiscal situation, and it can't even be implemented for people who have already paid into the system for years-- which is almost the entire current workforce. If you choose only the entitlement cut, people in those income ranges are still going to be paying social security taxes for an entitlement they won't fully get.

Eliminating the tax cap seemed a lot more drastic than a gradual and marginal decrease in benefits.

There's the British system, which doesn't tax the first x dollars of income for social security, but has a higher cap.  This effectively makes the tax less regressive.

I think partial privatization is a partial answer, but it would have to be implemented carefully.

David S is right in pointing out that the government never actually ran a surplus.  The surplus was the result of overtaxing in social security that is supposed to be in a 'trust fund' for the day when the social security payout obligation exceeds taxes coming in.  This 'trust fund' consists of government bonds that will require higher taxes to redeem.  Take that out, and there was never a surplus, though the fiscal picture was better than today.

[Beet]

Just for the record the surpluses they mentioned in the article are the result of a little accounting "creativity". Money that was slated for the social security trust fund was stolen (borrowed in politician speak) to balance the budget. But in reality the national debt has increased every single year since the Eisenhower era. Only in Washington can you claim to have balanced the budget while going deeper into debt. In the corporate world that kind of creativity would get you sent to jail.

"Just for the record," the government has a fiscal tool that no private entity has-- the ability to legislate. The social security 'trust fund' is not a liability in the true private accounting, corporate sense because the government- as dazzleman has pointed out in this thread- has the ability to legally revoke its promises at any time. It would not necessarily be popular if it did that, but it could. The only legal liabilities the government cannot escape are contractual ones- payments for services, treasury bonds, etc. which get counted on the liabilites side of the government's budget register. (Although the government could default on its bonds, that would be technically illegal. Passing new legislation would not be.) Bottom line: the government took in more than it spent or promised contractually in the late 90s. The whole idea that a surplus didn't exist in then is a conservative talking point.

[dazzleman]

Just for the record the surpluses they mentioned in the article are the result of a little accounting "creativity". Money that was slated for the social security trust fund was stolen (borrowed in politician speak) to balance the budget. But in reality the national debt has increased every single year since the Eisenhower era. Only in Washington can you claim to have balanced the budget while going deeper into debt. In the corporate world that kind of creativity would get you sent to jail.

"Just for the record," the government has a fiscal tool that no private entity has-- the ability to legislate. The social security 'trust fund' is not a liability in the true private accounting, corporate sense because the government- as dazzleman has pointed out in this thread- has the ability to legally revoke its promises at any time. It would not necessarily be popular if it did that, but it could. The only legal liabilities the government cannot escape are contractual ones- payments for services, treasury bonds, etc. which get counted on the liabilites side of the government's budget register. (Although the government could default on its bonds, that would be technically illegal. Passing new legislation would not be.) Bottom line: the government took in more than it spent or promised contractually in the late 90s. The whole idea that a surplus didn't exist in then is a conservative talking point.

It may have the legal ability to revoke its promises, but does it have the political will?  Should it place itself in a position that it has to revoke its promises, or raise taxes to an unconscionable level to meet them?

There was not a surplus in the 90s in the general fund.  When social security was combined with the general fund, there was a surplus.  As I said, that's a better situation than we have today.  But it's not as good as the American people were misled to believe.

[Beet]

I would prefer ending the social security tax cap-- which makes the social security tax regressive-- than ending benefits for the upper income ranges.

I don't think drug importation is the only solution, however it should be allowed. It is funny how conservatives are supposed to be for the free market yet when it's the Republican special interests (drug companies) that are threatened the GOP balks. In addition to allowing importation, I think a more large scale solution can be found simply by improving Medicare Part D to give the government more leverage over bargaining for prices, as the Veterans Administration is currently allowed to do, as well as possibly giving seniors covered by it the option to obtain their medications directly from medicare, rather than being forced to choose from a list of private companies.

I don't have a problem with allowing importation.  I just don't think it would work, so it's foolish to look to it as a solution.

I don't think the earnings cap on social security should be removed.  There is supposed to be some relationship between money paid in and benefits received.  It's not supposed to be a pure entitlement/income transfer program.  Roosevelt was very clear on that, because he believed that the long-term political viability of the system depended on it.  If people are paying for all sorts of benefits they're not getting, they'll start looking on social security with the same scorn with which they look at welfare.

I said I preferred that to your plan, where you talked about an entitlement cut for the upper income ranges but not a tax cut. If you want both, that's hardly going to help with the government's fiscal situation, and it can't even be implemented for people who have already paid into the system for years-- which is almost the entire current workforce. If you choose only the entitlement cut, people in those income ranges are still going to be paying social security taxes for an entitlement they won't fully get.

Eliminating the tax cap seemed a lot more drastic than a gradual and marginal decrease in benefits.

There's the British system, which doesn't tax the first x dollars of income for social security, but has a higher cap.  This effectively makes the tax less regressive.

Perhaps ending the earnings cap altogether would be problematic. The British system you mention sounds interesting and I would prefer that. Still, I see health care costs as being a much bigger problem than social security due to the vast majority of projected cost increases coming from there.

I would not cry over partial social security privatization, but the way the current Republicans have legislated on recent large bills, even were they to do it, it would be structured in favor of special interests in the financial sector to the detriment of the government's future budget soundness or the soundness of the social security system as a whole. But I don't think the GOP will ever do it-- the party has been completely taken over by the southern, populist wing which is more interested in issues like flag burning, illegal immigration, gay marriage, etc. etc. and other cultural issues that get their base riled up.

Edit: All that was pointed out in the late 90s was that there was a budget surplus, meaning the government was taking in more money in those years than it was spending, which was true-- the American people were never 'misled' into believing any ultra-specific formulation of the budget whereby conservatives now claim that based on legislated promises decades into the future which might very well be revised, there was no surplus. By all the accounting measures that had long been agreed upon by both parties for decades, it was a sizeable surplus.

[dazzleman]

Perhaps ending the earnings cap altogether would be problematic. The British system you mention sounds interesting and I would prefer that. Still, I see health care costs as being a much bigger problem than social security due to the vast majority of projected cost increases coming from there.

I would not cry over partial social security privatization, but the way the current Republicans have legislated on recent large bills, even were they to do it, it would be structured in favor of special interests in the financial sector to the detriment of the government's future budget soundness or the soundness of the social security system as a whole. But I don't think the GOP will ever do it-- the party has been completely taken over by the southern, populist wing which is more interested in issues like flag burning, illegal immigration, gay marriage, etc. etc. and other cultural issues that get their base riled up.

Well, if the party loses control of congress in the upcoming elections, they may have to do some soul-searching, and try to put together a platform of substantive ideas that go beyond just the cultural issues (though I don't deny that they're valid issues to an extent).

Neither party is addressing these critical long term issues.  I have long believed that is the major achilles heal of democracies -- myopia.  The masses of people are generally very short-sighted, and those who try to get them to face up to looming problems before they become a crisis are often voted out of office for telling people something they don't want to hear.

[Beet]

Neither party is addressing these critical long term issues.  I have long believed that is the major achilles heal of democracies -- myopia.  The masses of people are generally very short-sighted, and those who try to get them to face up to looming problems before they become a crisis are often voted out of office for telling people something they don't want to hear.

Well, we can agree on that. Perhaps we should get Janet Jackson, Michael Jackson, and O.J. Simpson to talk to Americans about fiscal foresightedness-- breasts will be exposed, children molested, and pretty girls go missing if we don't do something!

[David S]

Just for the record the surpluses they mentioned in the article are the result of a little accounting "creativity". Money that was slated for the social security trust fund was stolen (borrowed in politician speak) to balance the budget. But in reality the national debt has increased every single year since the Eisenhower era. Only in Washington can you claim to have balanced the budget while going deeper into debt. In the corporate world that kind of creativity would get you sent to jail.

"Just for the record," the government has a fiscal tool that no private entity has-- the ability to legislate. The social security 'trust fund' is not a liability in the true private accounting, corporate sense because the government- as dazzleman has pointed out in this thread- has the ability to legally revoke its promises at any time. It would not necessarily be popular if it did that, but it could. The only legal liabilities the government cannot escape are contractual ones- payments for services, treasury bonds, etc. which get counted on the liabilites side of the government's budget register. (Although the government could default on its bonds, that would be technically illegal. Passing new legislation would not be.) Bottom line: the government took in more than it spent or promised contractually in the late 90s. The whole idea that a surplus didn't exist in then is a conservative talking point.

How does one explain the the fact that the national debt grew every single year since 1960? It would have been more fiscally responsible to put the SS surplus into a pickle jar and bury it in the back yard of the Whitehouse. At least then when the money is needed in a few years it would be there.

[dazzleman]

Neither party is addressing these critical long term issues.  I have long believed that is the major achilles heal of democracies -- myopia.  The masses of people are generally very short-sighted, and those who try to get them to face up to looming problems before they become a crisis are often voted out of office for telling people something they don't want to hear.

Well, we can agree on that. Perhaps we should get Janet Jackson, Michael Jackson, and O.J. Simpson to talk to Americans about fiscal foresightedness-- breasts will be exposed, children molested, and pretty girls go missing if we don't do something!

O.J. Simpson is completely innocent.  How dare you suggest otherwise, you filthy racist pig?

[Undisguised Sockpuppet]

Abolish all benefits for those born before 1980. Voila no social security crisis.

[Bono]

Abolish all benefits for those born after 1980. Voila no social security crisis.

[opebo]

These 'crises' are merely caused by inadequate taxation.. americans need to simply wake up and reduce the privilege of their owners.

[dazzleman]

Abolish all benefits for those born before 1980. Voila no social security crisis.

Great idea.  Do they still have to pay the taxes?  If the answer is yes, that could be a problem.