Deal on the debt

Democratic and Republican leaders came to an agreement on raising the debt limit, looking to forestall the government from going into default on Tuesday.  But first both sides have to sell the agreement to their Congressmen and to their base.   Basically, the Republicans gave in to the Democrats’ desire for a two year provision, while Democrats gave in to the Republican’s desire for spending cuts without tax increases.  Here are some more details from the Associated Press story:

Details apparently included in the agreement provide that the federal debt limit would rise in two stages by at least $2.2 trillion, enough to tide the Treasury over until after the 2012 elections.

Big cuts in government spending would be phased in over a decade. Thousands of programs – the Park Service, Labor Department and housing among them – could be trimmed to levels last seen years ago.

No Social Security or Medicare benefits would be cut, but the programs could be scoured for other savings. Taxes would be unlikely to rise.

Without legislation in place by Tuesday, the Treasury will not be able to pay all its bills, raising the threat of a default that administration officials say could inflict catastrophic damage on the economy.

If approved, though, a compromise would presumably preserve America’s sterling credit rating, reassure investors in financial markets across the globe and possibly reverse the losses that spread across Wall Street in recent days as the threat of a default grew.

Officials familiar with the negotiations said that McConnell had been in frequent contact with Vice President Joe Biden, who has played an influential role across months of negotiations.

In the first stage under the agreement, the nation’s debt limit would rise immediately by nearly $1 trillion and spending would be cut by a slightly larger amount over a decade.

That would be followed by creation of the new congressional committee that would have until the end of November to recommend $1.8 trillion or more in deficit cuts, targeting benefit programs such as Medicare, Medicaid and Social Security, or overhauling the tax code. Those deficit cuts would allow a second increase in the debt limit.

If the committee failed to reach its $1.8 trillion target, or Congress failed to approve its recommendations by the end of 2011, lawmakers would then have to vote on a proposed constitutional balanced-budget amendment.

If that failed to pass, automatic spending cuts totaling $1.2 trillion would automatically take effect, and the debt limit would rise by an identical amount.

Social Security, Medicaid and food stamps would be exempt from the automatic cuts, but payments to doctors, nursing homes and other Medicare providers could be trimmed, as could subsidies to insurance companies that offer an alternative to government-run Medicare.

via News from The Associated Press.

Both tea party Republicans and leftist Democrats are howling, for different reasons.    Do you think this deal should be approved?   Who do you think got the better of the negotiations?

About Gene Veith

Professor of Literature at Patrick Henry College, the Director of the Cranach Institute at Concordia Theological Seminary, a columnist for World Magazine and TableTalk, and the author of 18 books on different facets of Christianity & Culture.

  • WebMonk

    Perfect compromise? Everyone is unhappy?

    Well, sort of except that what I’ve been able to tell (based entirely on news reports of the thing, so take with a grain of salt) is that the compromise doesn’t actually solve anything. The cuts are non-existent and aren’t even vaguely realistic to cut what they are being touted by the various designers.

    The “immediate” cuts are not anywhere near what they’re being touted as being, and the chance of another $1.8 trillion being cut later is nonsense unless it comes to another debt ceiling showdown.

    From what I can tell that’s the general view of commentators from a variety of sources. That sounds suspiciously likely to be what our politicians would come up with.

  • WebMonk

    Perfect compromise? Everyone is unhappy?

    Well, sort of except that what I’ve been able to tell (based entirely on news reports of the thing, so take with a grain of salt) is that the compromise doesn’t actually solve anything. The cuts are non-existent and aren’t even vaguely realistic to cut what they are being touted by the various designers.

    The “immediate” cuts are not anywhere near what they’re being touted as being, and the chance of another $1.8 trillion being cut later is nonsense unless it comes to another debt ceiling showdown.

    From what I can tell that’s the general view of commentators from a variety of sources. That sounds suspiciously likely to be what our politicians would come up with.

  • helen

    As usual, Congress is willing to cut anything it doesn’t see itself needing.

  • helen

    As usual, Congress is willing to cut anything it doesn’t see itself needing.

  • Michael Z.

    “over ten years”
    A magic little phrase that makes people think that the government is actually making significant cuts.
    1 trillion in cuts “over ten years” is at most 100 billion in cuts now, MAX. Probably less if they are factoring in inflation, etc.

  • Michael Z.

    “over ten years”
    A magic little phrase that makes people think that the government is actually making significant cuts.
    1 trillion in cuts “over ten years” is at most 100 billion in cuts now, MAX. Probably less if they are factoring in inflation, etc.

  • George

    I perceive that the cuts will never happen. I believe a similar “cuts over the next ten years” agreement occurred once before, and never came to pass. The reason why “ten years” is a good amount of time is because it gives big spenders ten years to figure out how to get out of the agreement.

  • George

    I perceive that the cuts will never happen. I believe a similar “cuts over the next ten years” agreement occurred once before, and never came to pass. The reason why “ten years” is a good amount of time is because it gives big spenders ten years to figure out how to get out of the agreement.

  • helen

    “Over 10 years means the current President would certainly not be responsible for seeing that it actually happened and, FTM, all of the present Congress could cash in on their overly generous pensions and leave the mess to someone else.

    They can always hope that Jesus will return first!

  • helen

    “Over 10 years means the current President would certainly not be responsible for seeing that it actually happened and, FTM, all of the present Congress could cash in on their overly generous pensions and leave the mess to someone else.

    They can always hope that Jesus will return first!

  • Dennis Peskey

    Maranatha!
    Pax,
    Dennis

  • Dennis Peskey

    Maranatha!
    Pax,
    Dennis

  • Joe

    Cuts over the next ten years are meaningless. The US has a one-year budget cycle. Add that to the basic rule that the current Congress cannot bind a future Congress and it becomes clear just how illusory these cuts are.

  • Joe

    Cuts over the next ten years are meaningless. The US has a one-year budget cycle. Add that to the basic rule that the current Congress cannot bind a future Congress and it becomes clear just how illusory these cuts are.

  • rlewer

    This is only a cut in the rate of increase. The rate of increase is 8% and the cut is 1%. That leaves a net increase of 7%. Typical of what Washington calls a cut. Even this 1% probably will not really happen. Every Congress sets its own budget and is not required to follow anything before.

  • rlewer

    This is only a cut in the rate of increase. The rate of increase is 8% and the cut is 1%. That leaves a net increase of 7%. Typical of what Washington calls a cut. Even this 1% probably will not really happen. Every Congress sets its own budget and is not required to follow anything before.

  • WebMonk

    Not raising the debt ceiling will have some very bad consequences (assuming a fancy workaround of some sort isn’t invoked, of which there are several possibilities) but though those are serious and negative consequences, I have been of the opinion that not cutting the spending increases will eventually have a much worse effect.

    We can actually sustain these sorts of deficits ($500+bn / year) for another 20-50 years without getting to a Greece-like situation. However, the US in a Greece-like situation is WAY worse than Greece being in a Greece-like situation. (if that makes sense)

    I have a sneaking suspicion that if we don’t have real and serious cuts now, we won’t make any until we are in a far worse situation. Making a plan to cut things in the future isn’t cutting anything, and if we don’t cut things now, we probably won’t for another 20+ years, at which point the problems will be much more severe and cutting deficits might not be enough.

    I’m feeling gloomy today. Maybe that’s colouring my perspective.

    Side note: best general story on the issue I’ve seen is in the Guardian.

  • WebMonk

    Not raising the debt ceiling will have some very bad consequences (assuming a fancy workaround of some sort isn’t invoked, of which there are several possibilities) but though those are serious and negative consequences, I have been of the opinion that not cutting the spending increases will eventually have a much worse effect.

    We can actually sustain these sorts of deficits ($500+bn / year) for another 20-50 years without getting to a Greece-like situation. However, the US in a Greece-like situation is WAY worse than Greece being in a Greece-like situation. (if that makes sense)

    I have a sneaking suspicion that if we don’t have real and serious cuts now, we won’t make any until we are in a far worse situation. Making a plan to cut things in the future isn’t cutting anything, and if we don’t cut things now, we probably won’t for another 20+ years, at which point the problems will be much more severe and cutting deficits might not be enough.

    I’m feeling gloomy today. Maybe that’s colouring my perspective.

    Side note: best general story on the issue I’ve seen is in the Guardian.

  • WebMonk

    Oh, and I’m not as confident about the House passing this deal as so many reporters seem to be. The House has very sizable chunks of both Democrats and Republicans to vote for this thing, and the basic projections are coming up 40-50 votes short.

    Those projections don’t take into account the votes that will inevitably come over with various arm-twisting, promises, and threats, and most reporters seem to believe those votes will be brought over.

    But still, 40-50 votes is a LOT of votes to move. Certainly not a done deal.

  • WebMonk

    Oh, and I’m not as confident about the House passing this deal as so many reporters seem to be. The House has very sizable chunks of both Democrats and Republicans to vote for this thing, and the basic projections are coming up 40-50 votes short.

    Those projections don’t take into account the votes that will inevitably come over with various arm-twisting, promises, and threats, and most reporters seem to believe those votes will be brought over.

    But still, 40-50 votes is a LOT of votes to move. Certainly not a done deal.

  • HistoryProfBrad
  • HistoryProfBrad
  • Cincinnatus

    I suspect the credit agencies will be demoting our coveted Aaa anyway, recognizing that this “deal” does little to correct the real problem.

  • Cincinnatus

    I suspect the credit agencies will be demoting our coveted Aaa anyway, recognizing that this “deal” does little to correct the real problem.

  • Lou

    Yes, the deal needs to be approved to keep us going, but those turkeys need to roll up their sleeves and get to the real business right way.

    FY12 (Next Year) is just two months away. The President has already presented a budget plan (which I assume is unacceptable by Congress.) They need to get started onthat right now!

    Also, they need to start getting serious about the places where the majority of our money is going — subsidies, foreign governments, etc… Some entitlements need to be reworked. Medicaid/Medicare – yes. Social Security – not so much.

    And finally, tax revenue has to be looked at. Raising taxes on the wealthy won’t fix anything. They will just find more loopholes, deductions, and other ways to hide their money, just like they already do. I’m not necessarily saying that we need a “flat tax” but something in that arena needs to seriously be considered. At a miniumum the Bush-era tax cuts need to be left to expire next time around.

    Time to Get busy, Congress!

  • Lou

    Yes, the deal needs to be approved to keep us going, but those turkeys need to roll up their sleeves and get to the real business right way.

    FY12 (Next Year) is just two months away. The President has already presented a budget plan (which I assume is unacceptable by Congress.) They need to get started onthat right now!

    Also, they need to start getting serious about the places where the majority of our money is going — subsidies, foreign governments, etc… Some entitlements need to be reworked. Medicaid/Medicare – yes. Social Security – not so much.

    And finally, tax revenue has to be looked at. Raising taxes on the wealthy won’t fix anything. They will just find more loopholes, deductions, and other ways to hide their money, just like they already do. I’m not necessarily saying that we need a “flat tax” but something in that arena needs to seriously be considered. At a miniumum the Bush-era tax cuts need to be left to expire next time around.

    Time to Get busy, Congress!

  • http://www.facebook.com/mesamike Mike Westfall

    Where’s Howie when we need him?

    “Deal? or No Deal?”

  • http://www.facebook.com/mesamike Mike Westfall

    Where’s Howie when we need him?

    “Deal? or No Deal?”

  • WebMonk

    Lou, the problem is that if this deal is approved, then they won’t “roll up their sleeves and get to the real business right way”.

    If this episode has shown anything, it shows the extreme reluctance and difficulty in getting any sort of major cuts and/or any tax increases in place. If there’s not a gun pointed at their heads, they won’t do anything. And that will be far worse in the long run than a “default” would be now.

  • WebMonk

    Lou, the problem is that if this deal is approved, then they won’t “roll up their sleeves and get to the real business right way”.

    If this episode has shown anything, it shows the extreme reluctance and difficulty in getting any sort of major cuts and/or any tax increases in place. If there’s not a gun pointed at their heads, they won’t do anything. And that will be far worse in the long run than a “default” would be now.

  • Lou

    WebMonk, that may be true. I know that’s what most of the people I talk to are saying as well. But I’m going to be optimistic and hope that a few leaders will emerge and get down to business.
    Like I said, there are only two months to go before next year’s budget is due, so I don’t think they’re going to be able to drag their feet too long. I hope.

  • Lou

    WebMonk, that may be true. I know that’s what most of the people I talk to are saying as well. But I’m going to be optimistic and hope that a few leaders will emerge and get down to business.
    Like I said, there are only two months to go before next year’s budget is due, so I don’t think they’re going to be able to drag their feet too long. I hope.

  • DonS

    This will pass. There are a core of Republican house members who won’t vote for it because they are principled small government proponents. There are a core of Democratic house members who won’t vote for it because they are principled hard leftists who want to further their objective of big government as a social tool for wealth redistribution. But the vast majority in the middle will ultimately sign off on this, despite the rhetoric.

    As has been said above, ten year budget cuts are meaningless and unenforceable. Also, these aren’t real cuts. The budget will increase next year, and every year thereafter. No cuts. Just small decreases in the rate of increase in spending. Same as always. To analogize to our personal budgets, if I spent $1500 on vacations this year, planned on spending $2500 next year, but only spent $2,000, we would all call that a $500 increase in vacation spending. The government would call it a $500 cut. Stupid and dishonest.

    Since we are now going into an election year, we can expect no more serious talks of further budgetary cuts until 2013. There will be a lot of heat this fall in connection with the consideration of next year’s budget, but nothing in the way of real and needed cuts will pass. Kick the can until it’s a catastrophe — that will be the mode. And our media, with its endless drumbeat of stories of deprivation because people are facing 5% cuts in benefits and other such nonsense just makes the pressure worse to make a bad deal that solves nothing.

    Tax increases of any stripe aren’t going to solve a spending problem. Tax reform — simplification together with a minimization of deductions and credits — which can raise more revenue while reducing compliance costs by an even greater amount — can be part of the solution. But entitlement spending is where the problem is, and it necessarily is where the solution lies.

  • DonS

    This will pass. There are a core of Republican house members who won’t vote for it because they are principled small government proponents. There are a core of Democratic house members who won’t vote for it because they are principled hard leftists who want to further their objective of big government as a social tool for wealth redistribution. But the vast majority in the middle will ultimately sign off on this, despite the rhetoric.

    As has been said above, ten year budget cuts are meaningless and unenforceable. Also, these aren’t real cuts. The budget will increase next year, and every year thereafter. No cuts. Just small decreases in the rate of increase in spending. Same as always. To analogize to our personal budgets, if I spent $1500 on vacations this year, planned on spending $2500 next year, but only spent $2,000, we would all call that a $500 increase in vacation spending. The government would call it a $500 cut. Stupid and dishonest.

    Since we are now going into an election year, we can expect no more serious talks of further budgetary cuts until 2013. There will be a lot of heat this fall in connection with the consideration of next year’s budget, but nothing in the way of real and needed cuts will pass. Kick the can until it’s a catastrophe — that will be the mode. And our media, with its endless drumbeat of stories of deprivation because people are facing 5% cuts in benefits and other such nonsense just makes the pressure worse to make a bad deal that solves nothing.

    Tax increases of any stripe aren’t going to solve a spending problem. Tax reform — simplification together with a minimization of deductions and credits — which can raise more revenue while reducing compliance costs by an even greater amount — can be part of the solution. But entitlement spending is where the problem is, and it necessarily is where the solution lies.

  • Lou

    DonS, good stuff. However, I disagree that entitlement spending is the first stop. Subsidies and handouts are the first stop. It’s total BS the trillions of dollars that are sent overseas and given to big businesses who are running our country into the ground.

    “Entitlements if we’re talking about Social Security should be the last place we go. Medicare and Medicaid needs to be reformed because it is so new, unlike SS, and it hasn’t been properly managed or monitored from its inception.

  • Lou

    DonS, good stuff. However, I disagree that entitlement spending is the first stop. Subsidies and handouts are the first stop. It’s total BS the trillions of dollars that are sent overseas and given to big businesses who are running our country into the ground.

    “Entitlements if we’re talking about Social Security should be the last place we go. Medicare and Medicaid needs to be reformed because it is so new, unlike SS, and it hasn’t been properly managed or monitored from its inception.

  • DonS

    Lou @ 18: I didn’t say that entitlement spending should be the “first stop”. I said that is where the problem is, and you can’t solve the problem of excessive government spending without going there.

    I agree with you, as I said above, that we need to wring the politically poisonous tax credits and deductions out of our system. Government should not be in the business of picking winners and losers — it serves ALL of the people, and should do so neutrally, and in a way that minimizes its own power and maximizes the liberty of the citizens. But, government should also have never gotten into the business of enacting unfunded entitlements, especially ones that commit future Congresses to spending obligations. Social security and Medicare should have been set up so that they were pre-funded, and benefits should have been pegged to available funds. Since that was not done, there is no question whatsoever that these systems are unsustainable as they are structured, particularly with my baby boomer generation entering their retirement years. At the very least, we need immediate action to move the retirement eligibility age substantially upwardly, to take into account our longer and healthier lifespans. We also need to adjust the COLA factors — benefits increases cannot be guaranteed the way they are now for those not yet in the system. Medicare is a huge mess — if we do nothing it will fall of its own weight, by the simple fact that no doctors will any longer participate in it. We need to drastically re-think the delivery of medical services so that patients understand and have a stake in their costs. Insurance should cover catastrophic costs, not everyday costs that people can budget for. We need to move toward comprehensive plans with higher deductibles, and use our subsidy dollars to help the indigent pay those deductibles. There is plenty of money to pay the costs that need to be paid to ensure that people don’t fall through the cracks, but we need to do things a lot less stupidly than we do them today. That’s the bottom line.

  • DonS

    Lou @ 18: I didn’t say that entitlement spending should be the “first stop”. I said that is where the problem is, and you can’t solve the problem of excessive government spending without going there.

    I agree with you, as I said above, that we need to wring the politically poisonous tax credits and deductions out of our system. Government should not be in the business of picking winners and losers — it serves ALL of the people, and should do so neutrally, and in a way that minimizes its own power and maximizes the liberty of the citizens. But, government should also have never gotten into the business of enacting unfunded entitlements, especially ones that commit future Congresses to spending obligations. Social security and Medicare should have been set up so that they were pre-funded, and benefits should have been pegged to available funds. Since that was not done, there is no question whatsoever that these systems are unsustainable as they are structured, particularly with my baby boomer generation entering their retirement years. At the very least, we need immediate action to move the retirement eligibility age substantially upwardly, to take into account our longer and healthier lifespans. We also need to adjust the COLA factors — benefits increases cannot be guaranteed the way they are now for those not yet in the system. Medicare is a huge mess — if we do nothing it will fall of its own weight, by the simple fact that no doctors will any longer participate in it. We need to drastically re-think the delivery of medical services so that patients understand and have a stake in their costs. Insurance should cover catastrophic costs, not everyday costs that people can budget for. We need to move toward comprehensive plans with higher deductibles, and use our subsidy dollars to help the indigent pay those deductibles. There is plenty of money to pay the costs that need to be paid to ensure that people don’t fall through the cracks, but we need to do things a lot less stupidly than we do them today. That’s the bottom line.

  • http://www.facebook.com/mesamike Mike Westfall

    Social Security is a behemoth among entitlements. At some point it must be reformed. No, we can’t just cut off benefits. People have been paying into the system for years and years in exchange for a promise of benefits in retirement.

    Instead, privatize (or even eliminate) the system for new workers. For the workers who have paid into the system, offer to buy them out for a lump sum (assuming the treasury has enough money to do that, which it probably doesn’t) according to how much they’ve paid into the system. Barring that, start putting the money collected from Social Security withholdings into an interest bearing bank account instead of into the general fund where dirty paws reach and grab what they can out of it for all sorts of various and nefarious purposes.

    Our long term goal should be to eliminate all federal departments and programs that contain the word “social” in their name or description.

  • http://www.facebook.com/mesamike Mike Westfall

    Social Security is a behemoth among entitlements. At some point it must be reformed. No, we can’t just cut off benefits. People have been paying into the system for years and years in exchange for a promise of benefits in retirement.

    Instead, privatize (or even eliminate) the system for new workers. For the workers who have paid into the system, offer to buy them out for a lump sum (assuming the treasury has enough money to do that, which it probably doesn’t) according to how much they’ve paid into the system. Barring that, start putting the money collected from Social Security withholdings into an interest bearing bank account instead of into the general fund where dirty paws reach and grab what they can out of it for all sorts of various and nefarious purposes.

    Our long term goal should be to eliminate all federal departments and programs that contain the word “social” in their name or description.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    “The President has already presented a budget plan (which I assume is unacceptable by Congress.) They need to get started onthat right now!”

    Why, they haven’t passed a budget in years and it is not like the folks are rioting. When folks (tea party) protest irresponsible spending, they are derided. However, if the government checks stop going out, we can be sure folks will be rioting. We have created a monster. Some elements of the American public could get out of hand pretty fast if the checks stop going out. They aren’t like the tea party folks who are pretty calm and quiet.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    “The President has already presented a budget plan (which I assume is unacceptable by Congress.) They need to get started onthat right now!”

    Why, they haven’t passed a budget in years and it is not like the folks are rioting. When folks (tea party) protest irresponsible spending, they are derided. However, if the government checks stop going out, we can be sure folks will be rioting. We have created a monster. Some elements of the American public could get out of hand pretty fast if the checks stop going out. They aren’t like the tea party folks who are pretty calm and quiet.

  • helen

    If I remember correctly, Social Security was “a separate account bearing interest” until somebody decided to add it to the general fund to mask military spending.

    [Was it "guns & butter" in the Viet Nam era, or some other time?]

    Bush’s guns & ‘profits and caviar’ (for the few) needs to be scrapped, whether by rescinding the tax cut, or closing loopholes for the super rich & corporations, or both.
    Speaking for myself, that “tax cut” has been more than taken back by the subsquent near zero interest rates. [Those don't affect the people with real money either, except positively.]

  • helen

    If I remember correctly, Social Security was “a separate account bearing interest” until somebody decided to add it to the general fund to mask military spending.

    [Was it "guns & butter" in the Viet Nam era, or some other time?]

    Bush’s guns & ‘profits and caviar’ (for the few) needs to be scrapped, whether by rescinding the tax cut, or closing loopholes for the super rich & corporations, or both.
    Speaking for myself, that “tax cut” has been more than taken back by the subsquent near zero interest rates. [Those don't affect the people with real money either, except positively.]

  • P.C.

    helen,

    Yes, you are correct. President Johnson “tapped” into the Social Security Trust Fund, starting in 1968, to help pay for the Viet Nam War . This action made the budget deficit appear to be smaller than what it truly was.

  • P.C.

    helen,

    Yes, you are correct. President Johnson “tapped” into the Social Security Trust Fund, starting in 1968, to help pay for the Viet Nam War . This action made the budget deficit appear to be smaller than what it truly was.

  • Cincinnatus

    For that matter, there was never actually a surplus under Clinton.

  • Cincinnatus

    For that matter, there was never actually a surplus under Clinton.

  • DonS

    Helen @ 22 and P.C. @ 23: Here is a history of the so-called “Social Security Trust Fund”: http://www.ssa.gov/history/BudgetTreatment.html

    To clarify, there has NEVER been a pot of actual money labeled “Social Security Trust Fund”, segregated for paying benefits and earning interest. That is a myth. It has always been the case that Social Security is a “pay as you go” system, where current payroll taxes are used to pay current benefits, and any excess is lent to the government in exchange for government bonds. Yes, those bonds theoretically pay interest, but we the taxpayers have to pay it!!! So, it’s worthless.

    What Johnson did in 1968 was not to “tap into” Social Security trust funds to pay for the Viet Nam War. Excess Social Security tax revenues had already been being tapped into — they were all spent on any one of thousands of government initiatives. Instead, he moved Social Security “on-budget” so that the overall federal deficit would look smaller and people wouldn’t get so mad about Viet Nam spending. This is why, for the first time in years, the federal government appeared to run a small surplus in 1969 — its last seeming surplus until the late 1990′s when a combination of post Cold War defense spending cuts and the Welfare Reform Act 0f 1996 combined to give us a few more years of seeming surpluses (again illusory, as Cincinnatus points out, because it was only accomplished by combining operating deficits with Social Security tax surpluses). Bottom line — it was NEVER anything other than creative bookkeeping, and we have NEVER had any actual money in the Social Security “Trust Fund”. All we have are a bunch of government bonds that we, the taxpayers, have to pay. Worthless.

    Moreover, even if we had segregated all of those excess payroll taxes, the system still wouldn’t have been self-funding. The government makes private pension plans fund prospectively — in other words, a company has to put enough money into their pension funds THIS YEAR to ensure that there is enough money in the future for all present and future beneficiaries on the books. This is why most private companies no longer have these types of plans — they’re unaffordable. State and local governments have to do this as well, though they are typically severely underfunded because governments are terrible at following the rules they impose on private businesses. Social Security was NEVER set up this way, and so was always doomed to failure. That’s just fact.

  • DonS

    Helen @ 22 and P.C. @ 23: Here is a history of the so-called “Social Security Trust Fund”: http://www.ssa.gov/history/BudgetTreatment.html

    To clarify, there has NEVER been a pot of actual money labeled “Social Security Trust Fund”, segregated for paying benefits and earning interest. That is a myth. It has always been the case that Social Security is a “pay as you go” system, where current payroll taxes are used to pay current benefits, and any excess is lent to the government in exchange for government bonds. Yes, those bonds theoretically pay interest, but we the taxpayers have to pay it!!! So, it’s worthless.

    What Johnson did in 1968 was not to “tap into” Social Security trust funds to pay for the Viet Nam War. Excess Social Security tax revenues had already been being tapped into — they were all spent on any one of thousands of government initiatives. Instead, he moved Social Security “on-budget” so that the overall federal deficit would look smaller and people wouldn’t get so mad about Viet Nam spending. This is why, for the first time in years, the federal government appeared to run a small surplus in 1969 — its last seeming surplus until the late 1990′s when a combination of post Cold War defense spending cuts and the Welfare Reform Act 0f 1996 combined to give us a few more years of seeming surpluses (again illusory, as Cincinnatus points out, because it was only accomplished by combining operating deficits with Social Security tax surpluses). Bottom line — it was NEVER anything other than creative bookkeeping, and we have NEVER had any actual money in the Social Security “Trust Fund”. All we have are a bunch of government bonds that we, the taxpayers, have to pay. Worthless.

    Moreover, even if we had segregated all of those excess payroll taxes, the system still wouldn’t have been self-funding. The government makes private pension plans fund prospectively — in other words, a company has to put enough money into their pension funds THIS YEAR to ensure that there is enough money in the future for all present and future beneficiaries on the books. This is why most private companies no longer have these types of plans — they’re unaffordable. State and local governments have to do this as well, though they are typically severely underfunded because governments are terrible at following the rules they impose on private businesses. Social Security was NEVER set up this way, and so was always doomed to failure. That’s just fact.

  • Lou

    Let the Bush Era Tax Cuts expire, where’s why:
    http://en.wikipedia.org/wiki/File:U.S.-Tax-Revenues-As-GDP-Percentage-(75-05).JPG

    Subsidies have gone thru the ceiling since 2000 (more than 2100 in 30 sectors).
    Take a look at State and Local subsidies alone:
    http://www.downsizinggovernment.org/the-state-state-subsidies
    We now pay approximately 2 trillion dollars per year in subsidies to oil, health care, education, alt energy, financial companies, etc…
    Before we stop writing checks to the poor, the elderly and the sick. We need to put an end to these.

    Also, addressing Medicare and Medicaid is more important than Social Security right now (Social Security expenditures remain constant on track with regular GDP. If we get Medicaid and Medicare fixed, SS will stay solvent much, much longer.):
    http://upload.wikimedia.org/wikipedia/commons/6/64/GAO_Slide.png

  • Lou

    Let the Bush Era Tax Cuts expire, where’s why:
    http://en.wikipedia.org/wiki/File:U.S.-Tax-Revenues-As-GDP-Percentage-(75-05).JPG

    Subsidies have gone thru the ceiling since 2000 (more than 2100 in 30 sectors).
    Take a look at State and Local subsidies alone:
    http://www.downsizinggovernment.org/the-state-state-subsidies
    We now pay approximately 2 trillion dollars per year in subsidies to oil, health care, education, alt energy, financial companies, etc…
    Before we stop writing checks to the poor, the elderly and the sick. We need to put an end to these.

    Also, addressing Medicare and Medicaid is more important than Social Security right now (Social Security expenditures remain constant on track with regular GDP. If we get Medicaid and Medicare fixed, SS will stay solvent much, much longer.):
    http://upload.wikimedia.org/wikipedia/commons/6/64/GAO_Slide.png

  • Lou

    Moderation, eh… Sorry. Not sure what I did to warrant that.

  • Lou

    Moderation, eh… Sorry. Not sure what I did to warrant that.

  • WebMonk

    Too many links in one post.

  • WebMonk

    Too many links in one post.

  • DonS

    Lou @ 26, 27: The reason for moderation was probably an excess number of links. It used to be that more than one link sent you to comment purgatory, but now I believe the threshold is more than two links in a single comment.

    The Bush era tax cuts are not the problem. We need a complete tax system overhaul to simplify the system and wring most, if not all of the preferential credits and deductions out of the system. Exchanging a flatter tax for fewer deductions and credits, and allowing taxpayers to reap the benefits of much lower tax compliance costs is the way to go. Increasing marginal tax rates and retaining the existing complexities isn’t going to help the economy and certainly isn’t going to raise revenue substantially enough to address our current and particularly future imbalances.

    As for Social Security, we need to look at this as a unitary problem. This comment: “If we get Medicaid and Medicare fixed, SS will stay solvent much, much longer” is only true if you believe in the fiction of a Social Security Trust Fund. Absent that mythical fund, Social Security is already running negative and this will worsen quickly in the years to come. If we don’t make the relatively small adjustments to it now to keep it truly solvent, we will be forced to sharply cut benefits all at once in a few scant years, a far worse option.

    Kicking the can down the road still further is not an acceptable option.

  • DonS

    Lou @ 26, 27: The reason for moderation was probably an excess number of links. It used to be that more than one link sent you to comment purgatory, but now I believe the threshold is more than two links in a single comment.

    The Bush era tax cuts are not the problem. We need a complete tax system overhaul to simplify the system and wring most, if not all of the preferential credits and deductions out of the system. Exchanging a flatter tax for fewer deductions and credits, and allowing taxpayers to reap the benefits of much lower tax compliance costs is the way to go. Increasing marginal tax rates and retaining the existing complexities isn’t going to help the economy and certainly isn’t going to raise revenue substantially enough to address our current and particularly future imbalances.

    As for Social Security, we need to look at this as a unitary problem. This comment: “If we get Medicaid and Medicare fixed, SS will stay solvent much, much longer” is only true if you believe in the fiction of a Social Security Trust Fund. Absent that mythical fund, Social Security is already running negative and this will worsen quickly in the years to come. If we don’t make the relatively small adjustments to it now to keep it truly solvent, we will be forced to sharply cut benefits all at once in a few scant years, a far worse option.

    Kicking the can down the road still further is not an acceptable option.

  • Jon

    This deal, assuming it goes through, signals the end of the Tea Party. Yes, the TP movement may last, rhetorically, but it’s finished as a movement designed to bring about structural and lasting changes to the nation’s spending and deficit realities. It failed, and there’s nothing left to do but quibble over whether to support (or meekly oppose) a deal that is being praised by TP opponents Obama, Boehner, and Reid. The TP is symbolism now.

  • Jon

    This deal, assuming it goes through, signals the end of the Tea Party. Yes, the TP movement may last, rhetorically, but it’s finished as a movement designed to bring about structural and lasting changes to the nation’s spending and deficit realities. It failed, and there’s nothing left to do but quibble over whether to support (or meekly oppose) a deal that is being praised by TP opponents Obama, Boehner, and Reid. The TP is symbolism now.

  • Cincinnatus

    Jon: Why? Tea Party “ideals,” such as they are, are still being widely enacted at the state level (see: Wisconsin). Moreover, this “deal” at best postpones the question until after the next election–certainly no longer. And the debt certainly won’t get smaller by then.

    Also, Michele Bachmann et al. For better or worse, I don’t see her popularity simply disappearing because of this deal on the debt ceiling. I think you’re making too much out of something that was a manufactured crisis in the first place.

  • Cincinnatus

    Jon: Why? Tea Party “ideals,” such as they are, are still being widely enacted at the state level (see: Wisconsin). Moreover, this “deal” at best postpones the question until after the next election–certainly no longer. And the debt certainly won’t get smaller by then.

    Also, Michele Bachmann et al. For better or worse, I don’t see her popularity simply disappearing because of this deal on the debt ceiling. I think you’re making too much out of something that was a manufactured crisis in the first place.

  • Lou

    DonS: “Kicking the can down the road still further is not an acceptable option” – Very, very true.
    So, whatcha gonna do? Sounds like you’d make a better candidate than most of the ones we’ve got running out there right now.

    Although, I saw that guy, Thadeaus McCotter on a CSPAN interview. I know he’s probably not electable, but it seems like he’s got a lot of good things to say right now. At least if he gets some airtime in the debates, maybe it will help keep the primaries interesting. Otherwise, I might have to write you in “DonS”.

  • Lou

    DonS: “Kicking the can down the road still further is not an acceptable option” – Very, very true.
    So, whatcha gonna do? Sounds like you’d make a better candidate than most of the ones we’ve got running out there right now.

    Although, I saw that guy, Thadeaus McCotter on a CSPAN interview. I know he’s probably not electable, but it seems like he’s got a lot of good things to say right now. At least if he gets some airtime in the debates, maybe it will help keep the primaries interesting. Otherwise, I might have to write you in “DonS”.

  • Jon

    @31 Yes, the crisis was manufactured, but the TP took advantage to stake out a no-compromise position. It promised too much and (assumning the deal goes through) lost. Bachmann and others will remain popular in the movement, but (again, assuming the deal passes) they will never achieve more than parochial status. Bachmann sees this and will not support the deal. But it’s too late; the deal with pass because the public (panicked chiefly by TP opponents) overwhelmingly demands that something be done about the debt ceiling. This was simply the wrong time for the TP to draw its line in the sand.

  • Jon

    @31 Yes, the crisis was manufactured, but the TP took advantage to stake out a no-compromise position. It promised too much and (assumning the deal goes through) lost. Bachmann and others will remain popular in the movement, but (again, assuming the deal passes) they will never achieve more than parochial status. Bachmann sees this and will not support the deal. But it’s too late; the deal with pass because the public (panicked chiefly by TP opponents) overwhelmingly demands that something be done about the debt ceiling. This was simply the wrong time for the TP to draw its line in the sand.

  • Jon

    Sorry, but 4th line from bottom should read “too late; the deal will pass…”

  • Jon

    Sorry, but 4th line from bottom should read “too late; the deal will pass…”

  • DonS

    Lou @ 32: Thanks for the kind words, but I suspect there are many folks on this blog who would strongly oppose my nomination ;-)

    Jon @ 33: You seem very anxious to pronounce the tea party movement as dead. So far there has been one election cycle since this movement became a force, and the result was to change the majority party in the House, and to make substantial inroads in the Senate. More could not be done in the Senate because only 33 seats were up for election, but it is widely expected that the Republicans will take it in 2012. The presidency is also up for grabs in 2012, for the first time since the tp movement became a force. As long as those politicians elected on tp principles remain true to their principles, I don’t see how you can declare the tp movement dead. I rather think they will be back with renewed vigor next year, and it remains to be seen what will happen when they have adequate political power to enact their proposed reforms.

    By your reckoning, I guess the civil rights movement would have been dead in the 1870′s? Political change takes time, and a lot of failure as the entrenched politicians and bureaucrats in power, as well as those who support them because of their own government benefits, fight with all their might to retain that power. We’ve allowed the entitlement monster to gain steam in our government for 80 years. It will likewise take years, decades, or generations to slay it.

  • DonS

    Lou @ 32: Thanks for the kind words, but I suspect there are many folks on this blog who would strongly oppose my nomination ;-)

    Jon @ 33: You seem very anxious to pronounce the tea party movement as dead. So far there has been one election cycle since this movement became a force, and the result was to change the majority party in the House, and to make substantial inroads in the Senate. More could not be done in the Senate because only 33 seats were up for election, but it is widely expected that the Republicans will take it in 2012. The presidency is also up for grabs in 2012, for the first time since the tp movement became a force. As long as those politicians elected on tp principles remain true to their principles, I don’t see how you can declare the tp movement dead. I rather think they will be back with renewed vigor next year, and it remains to be seen what will happen when they have adequate political power to enact their proposed reforms.

    By your reckoning, I guess the civil rights movement would have been dead in the 1870′s? Political change takes time, and a lot of failure as the entrenched politicians and bureaucrats in power, as well as those who support them because of their own government benefits, fight with all their might to retain that power. We’ve allowed the entitlement monster to gain steam in our government for 80 years. It will likewise take years, decades, or generations to slay it.

  • Joe

    Jon – there is one victory for the TP in this, but it happened weeks ago. Tax increases were originally part of the President’s plan and probably would have been a part of any deal. The TP’s refusal to give in on that kept GOP leadership in line and took tax increases off the table.

  • Joe

    Jon – there is one victory for the TP in this, but it happened weeks ago. Tax increases were originally part of the President’s plan and probably would have been a part of any deal. The TP’s refusal to give in on that kept GOP leadership in line and took tax increases off the table.

  • Jon

    @36, There’s something to what you say, but the TP promised much more than no tax increase, which was already the official GOP line.

  • Jon

    @36, There’s something to what you say, but the TP promised much more than no tax increase, which was already the official GOP line.

  • Joe

    Jon – I don’t mean to suggest that the TP should be jumping for joy. This deal is not very good. I was just trying to point out that this was not a complete failure. Many (including me) view the TP’s role as reforming the GOP from the inside. Without the TP this current deal would include tax increase. GOP leadership would have sold the tax increases and would have had a small minority of GOpers vote no. With the TPers, there is no way the GOP can give in. TPers have not completely captured the GOP yet. There are still big gov’t GOPers in Congress. So I see small steps, but no giant leaps forward.

  • Joe

    Jon – I don’t mean to suggest that the TP should be jumping for joy. This deal is not very good. I was just trying to point out that this was not a complete failure. Many (including me) view the TP’s role as reforming the GOP from the inside. Without the TP this current deal would include tax increase. GOP leadership would have sold the tax increases and would have had a small minority of GOpers vote no. With the TPers, there is no way the GOP can give in. TPers have not completely captured the GOP yet. There are still big gov’t GOPers in Congress. So I see small steps, but no giant leaps forward.

  • steve

    “Social Security, Medicaid and food stamps would be exempt from the automatic cuts, but payments to doctors, nursing homes and other Medicare providers could be trimmed, as could subsidies to insurance companies that offer an alternative to government-run Medicare.

    Curious. What possible motivation could they have to cut subsidies to companies that provide alternatives to Medicare without cutting Medicare itself? Will those companies stop offering said alternatives? If so, where will people getting those alternatives go, if not to Medicare?

  • steve

    “Social Security, Medicaid and food stamps would be exempt from the automatic cuts, but payments to doctors, nursing homes and other Medicare providers could be trimmed, as could subsidies to insurance companies that offer an alternative to government-run Medicare.

    Curious. What possible motivation could they have to cut subsidies to companies that provide alternatives to Medicare without cutting Medicare itself? Will those companies stop offering said alternatives? If so, where will people getting those alternatives go, if not to Medicare?

  • steve

    Lou, #32, McCotter is to blunt to be Presidential, I think. Although he is Roman Catholic so at least we know where he stands on the whole Pope is the antichrist thing.

  • steve

    Lou, #32, McCotter is to blunt to be Presidential, I think. Although he is Roman Catholic so at least we know where he stands on the whole Pope is the antichrist thing.

  • WebMonk

    Don, I’d vote for you. All you need is to get about 63 million more votes and you have a real chance!

  • WebMonk

    Don, I’d vote for you. All you need is to get about 63 million more votes and you have a real chance!

  • DonS

    I’m honored, Webmonk ;-) Let me talk to my wife and family — I don’t think we’re doing anything the next 15 months or so.

  • DonS

    I’m honored, Webmonk ;-) Let me talk to my wife and family — I don’t think we’re doing anything the next 15 months or so.


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