The Coming Battle Over Spending Cuts And National Debt
http://thedianerehmshow.org/shows/2013-01-03/coming-battle-over-spending-cuts-and-national-debt
The last-minute deal between Congress and the White House prevented the drastic spending cuts and tax increases known as the “fiscal cliff” from taking effect this week. But it also set the stage for even fiercer battles over spending and debt in the months ahead. The automatic spending cuts have been postponed for two months. That’s about the same time as the government's legal authority to borrow money expires. The federal debt ceiling will need to be raised to avoid default. And in March, the budget resolution that funds the government expires. what’s up next for the nation’s finances, and what that could mean for you. Jared Bernstein from the Center on Budget and Policy Priorities, David Wessel of the Wall Street Journal and Chris Edwards from the Cato Unstitute join guest host Susan Page to discuss the nation’s short- and long-term spending and debt challenges.
Guests
Jared Bernstein
senior fellow at the Center on Budget and Policy Priorities, and former chief economist and economic policy adviser for Vice President Joe Biden.
Chris Edwards
economist and editor of DownsizingGovernment.org, Cato Institute.
David Wessel
economics editor for The Wall Street Journal and author of "Red Ink: Inside the High-Stakes Politics of the Federal Budget."
Comments
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Please help me understand why earners no longer need to pay into Social Security once they reach a certain income? It seems like it is only fair that as a person earns more they should pay more. Wouldn't this be a way to bring substantially more income to the Social Security system without raising taxes or reducing benefits.
In addition to the discussion over Medicare and Social Security and how unfair it would be to cut them, it is a fact that the tax system is very unfair to seniors. It used to be the case that people over 65 got two personal exemptions. Now they get just something between $1000 and 1500 added to the single personal exemption. Also, they do not get any earned income credit at all, where people under 65 without children who earn a little income can get a couple hundred on this credit. Seniors who want to make any income on top of their Social Security are at a great disadvantage, even though they are still taxed at the normal 15% for FICA if self-employed, and they may not recooup this amount during the rest of their lives.
francisgleiche wrote:
Steve on Plum Isle wrote:
"Social Security: eliminate the cap on FICA taxes and Social Security is solvent for 75 years or so (my source is Senator Sanders.) And that will not hrt the lower and middle class!"
False. Estimates for SS liability during that time period are between 60T and 100T+ My source is Rep. Ron Paul.
Who's going to pay for that?
Does it matter that raising the cap on FICA & SS will not bring in the $60T or $100T you estimate? It will bring in something so why not do it?
Susan, you are absolutely right. There is no reason. It makes it a highly regressive tax and the cap should be lifted. That would also generate enough revenue to keep the program solvent and we wouldn't need to keep hearing this nonsense about the need to cut the benefits. Funny how this is never part of the discussion when it really counts.
Clifford & Richard: Some hard numbers: DoD budget in 2001 was $291 billion, now $850 bil in FY 2013. SS paid out $407 bil in 2001, $603 billion in 2011 (last yr for which totals avail).
An increase of $559 bil at the Pentagon vs an increase of $196 bil in SS payouts. And all the while, folks have kept paying in to SS...
Want to cut spending? You've got to go where the $ is.
The discussion of the Finance Minister Paul Martin's budget balancing in Canada could benefit from a few more facts than just 'cutting budgets'. Martin cut transfer payments to the provinces. He also increased taxes, especially our consumption (Goods and Services Tax) taxes.
A reduction in the GST by our Conservative Party government is arguably the seed of our current deficit problem.
A further note on the suggestion that we have a 'government run health care system'. The actual fact is that it is a single-payer health care insurance system. The money comes from the federal and provincial government tax revenues. The American Medicare system is modelled on it. It is administered by the provinces (not the feds) and coordinated nationally by an inter-provincial/federal 'committee'.
'Insurance claim' compensation rates are set by the provinces. A lot like what large insurance companies do in the United States. The suggestion that there is a move to privatize it is an outright misdirection and conflates the insurance program with the service providers. It suggests a basic ignorance of the facts.
On military "retirement" medical: The military reserves the right to recall a service member till they are 60. So providing health care is part of the "deal." Mr. McCain stated "No one joins for TRICARE." But they STAY after 8 - 12 years for TRICARE. It's part of the formula for how long to put up with the requirements of serving. It's why one has to serve 20 years to earn it, not an entitlement after a 3 year hitch on active duty.
An option never discussed is to simply put all retirees under the DVA. Then the cost is no longer the DoDs problem and the cost is part of post military service care. That'll stop the Pentagon from whining. And "Retirement" is really "Freedom" from DoD. Unless there is a willingness to impose national service, don't ask those who served to give up their freedom without compensation.
On Social Security: I'm 54 and maxed out on my contribution largely due to inflation. Fixing that is simple and and a justifiable increase in my taxes and a well documented "fix" to Social Security. Even that simple action is impossible for some to consider.
Medicare/Medicaid is "Socialized medicine" not insurance so treat it as such. Make it a fixed % cost share, maybe of GDP, to the States and let them decide how much above that they can afford.
IleanaDU wrote:
"Does it matter that raising the cap on FICA & SS will not bring in the $60T or $100T you estimate? It will bring in something so why not do it?"
Did not comment on that. My point was that, as it stands, SS is not "solvent for 75 years or so".
Actually the biggest problem is that income vs. payouts is about to turn upside down, and because of the recession, faster than anyone thought (because income decreased at a faster rate than anticipated). When that happens, the FG has to start redeeming bonds to pay recipients. That comes out of the General Fund which owes the money to the SS Trust Fund. Where's that money going to come from?
Ron Paul doesn't live in the real world, he lives in that fantasy world of Texas Libertarians where, if only there were no government, every problem would disappear like magic!
Secondly, the DR Show has been heavily censoring the comments because so few con viewpoints appear? Are you from Ron Paul's fantasy land too?
I agree that defence spending should be on the table; it represents 20% of federal spending and even though it has been reduced, defence can and should be reduced further. Entitlement spending (SS Medicare, Medicade, farm subsidies, etc...) represent over 50% of spending. To suggest that because people have paid into them that they should not be addressed is silly.
We can (and should) means test these programs. That will help a lot. Add to that an elimination of the cap on SS taxes (similar to Medicare) and we would take a significant rational step.
But that is not enough. It is irresponsible for people to complain about everyone with incomes higher than theirs. You may have paid into the system; but if spending is higher than inputs every system will fail. I don't think we should make dramtic changes for current retirees (although I think it is rational to change the escalators); people my age (55) and below need to accept less benefits. If we can do this now, the impacts in 20 or 30 years will be much less.
I am not confident this will happen. I have seen a far greatter focus on self in the past decades. It seems people think the other guy needs to shoulder all of the responsibility. I would give someone a lot of credit if in addition to complaining about the other guy; they talked about what sacrifice they would be willing to give. I am willing to do that; why not you?
If we are serious about cutting spending, I say, start by cutting the executive pay and benefits we have allowed Congress to award themselves for doing a poor job. Why should they be entitled to significantly better pay and benefits then the majority of people they were elected to represent.
The president can't spend money that wasn't authorized by Congress.
If Entitlements are the issue, what should we cut?
The average monthly Social Security benefit for a retired worker is about $1,230
Today many Seniors are not picking up prescriptions because they can't afford them, often ending up in trips to the Emergency Room adding to Medicare costs. Is that really cost effective?
MEDIAN ASSET LEVELS FOR IRA/KEOGH PLANS: Among all families with an IRA/Keogh plan, the median value of their plan was $34,000 in 2007, up 3 percent from 2004. EBRI estimates this median value dropped 15 percent (to $28,955) from year-end 2007 to mid-June 2009.
LESS THAN HALF OF ALL FAMILIES HAVE A RETIREMENT PLAN THROUGH A CURRENT JOB: In 2007, 40.6 percent of families included a participant in an employment-based retirement plan (either a defined benefit or defined contribution plan) from a current job. This was up from 38.8 percent in 1992, but virtually unchanged from 40.3 percent in 2004. A significant shift in the plan type occurred from 1992 to 2007, with the percentage of families with a plan having only a defined benefit plan decreasing from 40.0 percent to 17.4 percent.
http://www.ebri.org/publications/ib/?fa=ibDisp&content_id=4326
Most of the people I know, who retired at 62, retired not because they wanted too, but because they were forced too. Subsidized Obama Care may well cost the Treasure more then Medicare, for older Americans.
The coming "debt wall" is the only viable solution to out of control social welfare spending. There will be no meaningful spending cuts with this administration on anything. By this time it should be obvious to all that Obama does not care about the U.S. economy. His goals are entirely based on restructuring the country to a wealth redistribution European model. An American economic collapse is not a concern.
Main Street should have saved more, many Republicans claim.
Real wages and benefits have been falling for most Americans. Sadly most Americans are saving less then their parents did for retirement. The Fed has been creating money; clearly it hasn't found its way to Main Street, where did it go?
Lower-wage positions (paying $7.69 to $13.83 an hour) accounted for just 21 percent of the job losses during the recession but are 58 percent of the new jobs created. At the same time, mid-wage positions (paying $13.84 to $21.13 an hour) were 60 percent of the recession losses but only 22 percent of those during the recovery, according to the National Employment Law Project.
Dan D: Please stick to facts. Making wild pontifications like 'Obama does not care about the U.S. economy' just makes you look ridiculous, uneducated, and uninformed. Most see comments like that and just write you off as whack and don't read any further.
I could understand not realizing or understanding the real agenda for four years, but eight? For some living in blissful ignorance is a lifestyle.
SteMar wrote:
"Ron Paul doesn't live in the real world, he lives in that fantasy world of Texas Libertarians where, if only there were no government, every problem would disappear like magic!"
That is what is known as the "strawman" argument. You create a distorted version of your opponent's argument and then rail against it. It's an automatic "lose" in debate. Libertarians don't want "no government". They just want much smaller government that aligns with the provisions of the Constitution. And, yes, if that were the case, many of our problems would "disappear like magic!". For one thing, we would not be arguing ad nauseum over taxes and budgets. Oh ... and the American people would be much more self-reliant instead of having so many living off the government teat.
"Secondly, the DR Show has been heavily censoring the comments because so few [conservative] viewpoints appear? Are you from Ron Paul's fantasy land too?"
No, I'm from the real world of NPR, where my comments have been censored - which is why, by the way, this reply appears under a different ID.
Steve,
You nailed it! Kudos! (oops.....I used a dreaded Greek word...)
Ernest....
Judging by your comment that the elderly "think that what they have paid into Medicare is equivalent to what the average elderly American receives in return during the last years of medical care is erroneous." here are a couple of facts you should be aware.
Seniors, 65 and older, continue to pay Medicare premiums (currently $104.90 monthly). Most of us also have private insurance Supplental plans to pay for what Medicare does not cover (my current premiums $200 monthly). Also, we carry private insurance to cover prescription drugs (my current premiums $30.30 monthly). Those premiums rise every year.
Add it up:
$104.90+ $200 + $30.30 = $335.20 x 12 months = $4022.40 per year
Before I was eligible for Medicare, I went uninsured for 3 years after United Health Care kicked out those who held individual policies. I could not purchase health insurance at any cost because I had been treated for breast cancer 4 years prior. I breathed a huge sigh of relief when I turned 65 and received my Medicare Card.
I personally trust the government more than greedy, for-profit insurance companies. And I wholeheartedly stand up for the Affordable Healthcare Act (ObamaCares).
What Medicare needs is to be set up more like Britain's system, which uses evidence to determine what tests/treatments are effective. They are also willing to have discussions about what sort of care is appropriate. Americans want everything done, all the time, and when families don't, hospitals often step in to do it anyway.
Eggie,
You and your conspiracy theories! Diane's staff is too small to arbitrarily edit out "conservative" comments. Back to John Bolton country for you.
DrEric,
Of course your suggestion is way too reasonable to be adopted by Congress. Ironically, those so called "death panels" in ACA are exactly what you describe.......and, IN FACT, the private insurers have been researching and applying that for many years. When you get an EOB from the insurance company after treatment, and you see that many tests and treatments are not paid for due to various "errors and exceptions", those are the very kinds of outliers the private insurers have determined as waste and abuse. Private insurers hire banks of nurses that review claims and do "pre-certification" before allowing an admission........ANYthing that falls outside the insurer's list of DRGs get kicked out........and placed on the patient's back.
What is needed is some spine in Congress to block providers from billing patients for stuff disallowed by insurers.
Each time someone compares the US economy to the situation in Greece they should immediately be called out for having no understanding of the issues. Since they cannot control the Euro, Greece has no control over its own economy. There is no way that the US would find itself in the same situation.
avintageyear,
Well stated re: what you have paid (and continue to pay) into SS.
Conservatives need to read Webster's dictionary instead of Frank Luntz one-liners......."entitlement" means something one has earned or has been deemed worthy of receiving. e.g. oil companies have not earned subsidies but they get them anyway.
As several have pointed out, cutting SS and Medicare just means cost shifting in the long run......from Fed to state, from elderly people who can no longer be gainfully employed to either welfare or financially strapped Medicaid, from elderly disabled parents and grandparents to their working kids.
Best suggestion was the caller who said there needed to be personal penalties for Congress for missing appropriation deadlines.....2% PER DAY for each deadline missed. That's how it works in the vaunted "free" market.....so it should be in government. Any person who has been given a deadline in business KNOWS there is hell to pay for delays........fines, penalties, loss of income, dismissal, loss of face, loss of reputation. (Does Congress or individual Reps ever care about their reputation?)
HonestAbe wrote:
"Eggie,
You and your conspiracy theories! Diane's staff is too small to arbitrarily edit out "conservative" comments. Back to John Bolton country for you."
They don't have to. They can block by user-id and/or IP address. You will see the message, "Your comment has been queued for moderation by site administrators and will be published after approval", which, of course, never happens. Just because it hasn't happened to you, doesn't mean it doesn't happen.
I really resent your guest's comment about senior citizens "screwing" young people. This guest, from the Cato Institute, apparently knows nothing about the financial or healthcare needs of the elderly. He should have been slapped on the spot, but I heard no response to his offensive remark. I am, by the way, not yet elderly, but I found his attitude revolting.
One of your guest's mentioned that social security was more for a welfare program. I am wondering if he is aware that retired military are able to contribute to social security throughout their career and claim this as part of their pension when they retire. (Double dipping). While all others (state employees who are in a pension program) regardless of whether they contributed at some point are unable to collect at retirement. Also, military retirees do not have to pay income tax on their retirement.
I am wondering if all of congress are the same?
As a retired Marine Officer (20 years active duty), I applaud anyone that speaks to revamping our military as a means of reducing our deficit. Our current military was formed in 1947 (National Security Act)! Do you think things have changed much since then? It's unbelievable how much money we spend to ensure the continuation of this military-industrial complex that does nothing but drive us further into debt. Here are some examples:
1. Does the Air Force, Navy, Army and Marine Corps really need airplanes...couldn't one air component provide support for all branches of the military?
2. Do we really need all three military academies....over the last 50 years, less than 50% of officers appointed to the post of Chairman of the Joint Chiefs of Staff have been US military academy grads.
3. Does the Marine Corps really need to be capable of making amphibious landings...the last amphibious landing was conducted during the Korean War.
The list is endless and until someone steps up and has the courage to talk about revamping our military, we will continue to grow our debt and laying this problem at the feet of future generations. We must move towards one "armed force" with naval, air and ground capabilities instead of our current structure. Once we do, all the other talk about spending cuts, tax increases and entitlements will become moot.
Australia has a much higher minimum wage, national health care, high taxes and a small military. To say that the size of their government is the reason for their economic growth is cherry picking to say the least. Proof that the small government camp doesn't have much proof that their ideas will work.
Lisa, as a military retiree, I just wanted to help set the record straight:
1. I did pay into Social Security for 20 years and I do expect to collect when that time comes.
2. I look at retirement pay and social security as two different things. Retirement pay is something I earned and was part of the "contract" that I entered into when I joined. Under current rules, when someone retires from the military @ 20 years he/she earns 40% of their base pay as retirement pay. Social Security is a program I have paid into for over 35 years...20 in the military and 17 in my second career...and something for which I believe I am entitled.
3. Military retirement pay is taxed...it is only non-taxable when the retiree has some sort of service related disability. For example, if I had a 50% service related disability, 1/2 of my retirement pay would be non-taxable but the remainder of my retirement pay would be taxable.
4. I firmly agree with you about double dipping but our definitions are different. For me, a double dipper is someone that retires from the military and transitions immediately into a US military civil service job thereby collecting two checks from the government.
Hope this helps.