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This is a good rant from Dean baker about the possibility of, depending on how you look at chained CPI and the coming debt ceiling negotiations, cuts to Social Security, Leave It Alone; It’s Irrelevant to the Deficit
While the promotion of budget hysteria is one of the largest industries in Washington, the most important and widely ignored fact about the budget situation is that we have large deficits today because the collapse of the housing bubble sank the economy. This is not a debatable point.
The budget deficit was just 1.2 percent of gross domestic product in 2007. Before the collapse of the housing bubble the deficit was projected to remain low for the next decade and the debt-to-G.D.P. ratio was actually falling. This would have been the case even if the Bush tax cuts were allowed to continue.
When the bubble burst and the economy plummeted, tax collections fell. We also spent more on unemployment insurance and other benefits for unemployed workers. And we had further tax cuts and stimulus spending to try to boost the economy. The automatic and deliberate steps taken to counter the downturn fully explain the large deficits we have seen the last five years.
Record low interest rates on government bonds demonstrate that the current deficits are not a real problem. But even if they were, it is difficult to see how cutting Social Security could to be part of the solution. Under the law Social Security is not supposed to be part of the budget. It is an entirely separate program financed on its own.
Let’s put aside the speculations about debt ceiling talks and what is up for cuts for a moment. Baker tackles two common myths – perpetuated by conservatives like the far-Right Heritage Foundation. The first myth is that President Obama has gone on some kind of wild spending spree, thus driven up the debt. As the chart above – I could draw this thing in my sleep at this point – shows, it is a combination of conservative spending from 2000-2008, the unpaid for wars, the housing bubble, the recession that started on Bush’s watch and tax cuts that are driving 60% of the deficit. The second myth and this one will not die today, it is as common as Birtherism among conservatives – that some how Social Security is a driver of the deficit. That is not true. A few facts to know about Social Security
Social Security is a fifth of the U.S. budget …
Social Security: Another 20 percent of the budget, or $731 billion, paid for Social Security, which provided retirement benefits averaging $1,229 per month to 35.6 million retired workers in December 2011. Social Security also provided benefits to 2.9 million spouses and children of retired workers, 6.3 million surviving children and spouses of deceased workers, and 10.6 million disabled workers and their eligible dependents in December 2011.
… but it is not driving the deficit …
Social Security can only spend what it receives in tax revenues and has accumulated in its trust fund from past surpluses and interest earnings. It cannot add to the deficit if the trust fund is exhausted because the law prohibits it from borrowing (if current revenues and savings in the trust fund are not sufficient to pay promised benefits, these have to be cut). Though modest changes will be needed to put Social Security in balance over the 75-year planning period, the projected shortfall is less than 1% of gross domestic product (GDP). …
There is burrowing, but it only goes one way. The government borrows from the trust fund to help finance day to day government operations. Which is part of conservative Social Security myths part II, subsection B, that there is no such thing as the Social Security Trust Fund. let me back up for a moment and look at the first deficit and spending nonsense. It is ironic how wealthy conservatives, and liberals for that matter, can manipulate the tax code down to the penny and yet, those same conservative use some weird martian math to make the case for Obama’s alleged out of control spending. Steve notes some math challenged spin from Politico, Understanding the ‘debt problem’
President Barack Obama won’t be able to enjoy much of a victory lap from his win over congressional Republicans on the fiscal cliff fight.
There are about 16.4 trillion reasons why.
The staggering national debt — up about 60 percent from the $10 trillion Obama inherited when he took office in January 2009 — is the single biggest blemish on Obama’s record, even if the rapid descent into red began under President George W. Bush. (Glenn Thrush and Reid Epstein’s Politico piece on President Obama’s “debt problem”)
[ ]…First, when there’s a global economic crash, and the government needs to invest to rescue the economy, large deficits are good, not bad, especially when borrowing is cheap and easy. Had the president focused on reducing the $1.3 trillion deficit he inherited from Bush/Cheney, instead of job creation and economic growth, the recession would have intensified, and yet, too many reports simply accept it as a given that higher deficits are worthy of condemnation.
Second, under Obama, as the economy started to improve, the deficit started to shrink anyway. Though the political establishment usually ignores these details, the deficit is $300 billion smaller now than when the president took office — marking the fastest deficit reduction since the end of World War II.
Third, Obama keeps pushing massive debt-reduction proposals on the table, as well as all kinds of policies that shrink the deficit (health care reform, cap and trade, Dream Act), but Republicans have opposed all of them.
As always we cannot have an honest discussion about how much deficits matter and when they matter because conservatives really do not care about deficit spending. We had deficit spending under Saint Ronnie, Bush 41 and Bush 43. If a conservative becomes president in 2016, we’ll have deficit spending. They run up deficits for the very purpose of creating this fake crisis where, gee sorry – the David Brooks line – but we just have to let seniors, vets, the disabled and low-income earners live in a ditch or die or whatever because look at the deficits…uh..conservatives ran up, we cannot afford a safety net anymore . That is not political science, it is a social pathology hiding behind the carnival tent of Conservatism. case in point. The fiscal cliff deal included a revenue giveaway to corporations totaling $9.4 billion dollars. That would pay for a third of the$27 billion emergency spending bill for Superstorm Sandy House Republicans might pass ( the Senate had approved a $60 billion relief package. The remainder may be approved eventually. Republicans in the House are still wrangling over the Sandy bill – When House Speaker John Boehner, R-Ohio, pulled his support of a massive Sandy aid bill, Republicans reacted: New Jersey Gov. Chris Christie called the move “disgraceful”).
Other than that few days where we heard the President might consider linking future Social Security cost of living increases to chained CPI I have not heard anything else, but some people are already concerned, The Democrats’ Coming Civil War
Just as Republicans were so divided over taxes – from failing to pass their own “Plan B” bill last week, to their leaders splitting votes on last night’s legislative package – Democrats are about to endure an emotional debate about one of their own bedrock principles: the protection of programs like Social Security, Medicare, and Medicaid.
With the accord reached last night failing to address these programs, Republicans have said they’ll threaten to deny a debt ceiling increase in February — which would prevent the government from paying its bills, exacting a government shutdown and global economic consequences in the process — as leverage to advance their policy interests. In addition, with sequestration cuts set to hit in two months, there’s an additional, built-in point of negotiation between the parties.
The biggest reform Republicans have vowed to push for in these upcoming standoffs is so-called “entitlement reform,” a.k.a. “deficit reduction,” a.k.a., cutting social insurance and benefits for those in need.
That writer means well, but again let’s get this straight. Republicans are linking the debt ceiling to safety net programs, but Social Security is not fiscally linked. Only a very small part of Medicare, under 3% of Medicare financing comes out of general funds. It is not the biggest driver of the debt. Even when we reach the point where there are more Medicare recipients than workers contributing to Medicare ( a known demographic trend), the total cost will still reach a maximum of GDP of 6.2% by 2080 ( currently it is 3.6%). The coming battle will be framed by Republicans as one big all encompassing deficit that includes separate issues. Though he is probably correct in being concerned about what the White House will give away. This statement by Obama is technically correct. It is more overall health care costs rather than just Medicare that are to blame,
But we are continuing to chip away at this problem, step by step. Last year I signed into law $1.7 trillion in deficit reduction. Tonight’s agreement further reduces the deficit by raising $620 billion in revenue from the wealthiest households in America. And there will be more deficit reduction as Congress decides what to do about the automatic spending cuts that we have now delayed for two months.
I want to make this point: As I’ve demonstrated throughout the past several weeks, I am very open to compromise. I agree with Democrats and Republicans that the aging population and the rising cost of health care makes Medicare the biggest contributor to our deficit. I believe we’ve got to find ways to reform that program without hurting seniors who count on it to survive. And I believe that there’s further unnecessary spending in government that we can eliminate.
But we can’t simply cut our way to prosperity. Cutting spending has to go hand-in-hand with further reforms to our tax code so that the wealthiest corporations and individuals can’t take advantage of loopholes and deductions that aren’t available to most Americans. And we can’t keep cutting things like basic research and new technology and still expect to succeed in a 21st century economy. So we’re going to have to continue to move forward in deficit reduction, but we have to do it in a balanced way, making sure that we are growing even as we get a handle on our spending.
Now, one last point I want to make — while I will negotiate over many things, I will not have another debate with this Congress over whether or not they should pay the bills that they’ve already racked up through the laws that they passed. Let me repeat: We can’t not pay bills that we’ve already incurred. If Congress refuses to give the United States government the ability to pay these bills on time, the consequences for the entire global economy would be catastrophic — far worse than the impact of a fiscal cliff.
Probably a matter of perspective. BuzzFeed sees the civil war and I just see the possibility. No one pundit or blogger did it, but it was probably the collective voices of all of us that pushed the White House away from using Medicare and Social Security in the fiscal cliff deal. So ringing alarms now is not a bad thing. Some more in that vain in this editorial at the NYT, For Obama, a Victory That Also Holds Risks.
For President Obama and his Democratic allies in Congress, the fiscal deal reached this week is full of small victories that further their largest policy aims. Above all, it takes another step toward Mr. Obama’s goal of orienting federal policy more toward the middle class and the poor, at the expense of the rich.
Yet the deal, which the Senate and the House have passed and Mr. Obama is expected to sign soon, also represents a substantial risk for the president.
This is a rare day. I agree with that yellow rag The Washington Times, David Gregory walks free while Iraq vet was jailed. The strange aspect of this David Gregory controversy is that the far Right thinks liberals care about what happens to Gregory one way or the other. That is not the case. Gregory is just another Beltway villager entrenched in the right of center conventional wisdom. After the Newtown murders he got a little caught up in the outrage, most people did.