Bacon's Rebellion

Democracy Thrives in Sunlight

A Glimpse of Boomergeddon in Virginia’s Future

—

by

James A. Bacon
in

Virginia will pay an estimated $594 million in 2012 to service its $9 billion in tax-supported debt. That will make interest payments the sixth largest category of expenditure in the General Fund budget, behind public education, Medicaid, higher education, corrrections and the car tax rebate.

And those numbers do not include debt on transportation projects, or the money “borrowed” from the Virginia Retirement System.

The analysis comes from a 30-page reported prepared by the Senate Finance Committee staff for presentation to the committee during a November 18 retreat in Staunton. Reports Jim Nolan with the Times-Dispatch:

The report paints a picture of a commonwealth that is in deeper debt than it has ever been — to the point where it cannot borrow any more money if it wishes to stay within a self-imposed debt capacity cap of 5 percent of annual tax revenues.

The state has stacked on loads of new debt since 2007, including the three largest debt authorizations in the state’s history: $3.2 billion for transportation (parts of which were deemed unconstitutional), $2.8 billion for a capital improvement program, and $1.4 billion for capital construction projects in eduction.

Virginia cannot afford this nonsense anymore. Federal aid to localities under the “stimulus” bill is coming to an end. Medicaid burdens continue to mount. The economy, especially the housing sector, will continue to lag and tax revenues will remain depressed. Legislators simply must adapt to the new fiscal reality… or they will face the same treatment at the polls next year meted out to federal officials in November.

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44 responses to “A Glimpse of Boomergeddon in Virginia’s Future”

  1. Larry G Avatar
    Larry G

    Very excellent commentary. I cannot recall seeing any other editorial in Va papers that so succinctly outlines the reality of Virginia's financials.

    So – three questions:

    1. – why does the perception that Va must, by law, have a balanced budget clash with what you have proffered here?

    2. – Major cuts in Va at the state level would inevitably mean less money for localities or education and law enforcement so when we say we need to cut – are we not saying that …realistically.. we are spending more than we can AFFORD on education?

    3. – where are the Tea Party folks on Virginia's taxes and spending?

  2. Groveton Avatar
    Groveton

    Remember about 20 years ago when newspaper articles wrote about senior citizens forced to eat dog food? No more.

    Here is an interesting article:

    http://www.usatoday.com/news/nation/2007-05-20-cover-generation-wealth_N.htm

    Here is an interesting quote:

    "Nearly all additional wealth created in the USA since 1989 has gone to people 55 and older, according to Federal Reserve data. Wealth has doubled since 1989 in households headed by older Americans.

    Not so for younger Americans. Households headed by people in their 20s, 30s and 40s have barely kept up with inflation or have fallen behind since 1989. People 35 to 50 actually have lost wealth since 1989 after adjusting for inflation, Fed data show.".

    However, it's terribly unfair that senior citizens have to pay for their prescription drugs. And any reduction in social security benefits is grossly unfair.

    Alan Simpson is right. The American economy will only be fixed when the people in their 60s and 70s renounce their entitlement mentality.

  3. Larry G Avatar
    Larry G

    I have the view that we cannot fix what is wrong if we don't know what is wrong.

    It sounds like a "duh" idea but I'm telling you that most of us do not know the basics about our deficit an our longer term debt in terms of what is causing it ergo how to fix the problem.

    The current 1.3 trillion debt that is adding another 1.3 trillion to the 13 trillion debt has very little to do with entitlements for seniors and it won't be fixed by whatever we do about entitlements – which I agree we have to do something.

    but the 1.3 trillion MORE that we are spending right now that we are taking in – has little to do with the FICA tax revenues (that fund SS/Medicare) and everything to do with the simple stark fact that we are taking in 1.3 trillion LESS in income taxes that we are paying out for discretionary govt and the military.

    Simply stated – until we collectively understand this reality – talking about "generational theft" is just a further example of the wretched budget illiteracy that is rampant these days.

    We can't fix what we don't understand and clearly we are basically ignorant about the basic facts of the matter.

    "generational theft" is so wide off the mark of what is really the reality as to be comical.

    It's NOT generational theft to make the necessary demographic/actuarial adjustments to SS and Medicare to keep those programs solvent than it is for the private sector to ALSO adapt their costs to the actuarial and demographic changes.

    It's almost as if we just refuse to deal with the realities and seek comfort from ideological myths.

    because of this – we cannot even agree on what the problems really are much less what we need to do in response.

    Virginia's situation is no different.

    We THINK that we can CUT 3 Billion in spending but it won't affect schools and law enforcement but instead the big bad mythical govt.

    we refuse to accept the reality that a 3 billion cut on Va's budget WILL directly impact local teachers and law enforcement.

  4. Larry G Avatar
    Larry G

    here's two outcomes to Social Security that are not acceptable.

    The first is to do what the right-wing zealots would do and that is to destroy the program because they don't like the concept of it – i.e. the government requiring mandatory deductions from paychecks for a govt-administered program that they think should be done instead as a voluntary private sector 401K-like pension instead.

    The second from the left wing idiots is to not make any changes to SS and to subsidize it from income taxes to keep it afloat.

    What Erskin and Bowles – and Rivlin and Domenici did – was propose two different ways to accomplish the same goal – to preserve the program in it's current conceptual form.

    In other words – keep the basic concept but put it on a fiscally-sustainable basis as opposed to advocating dissolution of the program.

    and yet – they are characterized as espousing a right-wing solution.

    The most important part of both plans though is this:

    Anyone else is free to offer other ways to achieve the same goals

    Both plans are real-live on-the-table proposals that DO WORK.

    but as I said at the top.

    Killing the program altogether because it runs counter to right wing ideology or turning it into a left-wing subsidized entitlement program are both unacceptable – I think – to a vast majority of the country if those two propositions are put to them in an honest and truthful way.

    Not only do the two plans actually produce a sustainable approach , they BOTH offer a chinese-menu RANGE of options to put SS back on track in a number of ways.

    But the problem is this.

    People that hew from both extremes will pick THE option they find most unacceptable and then proceed to use that at their sole basis to be opposed to ANY changes other than subsidized or abolished.

    That pretty much defines our country these days.

    There is no compromise, no middle-ground, zip, nada, zilch.

    We are basically opposed to any changes that affects our interests – even if those changes are efforts to keep the programs sustainable.

    and because of this – we are now in a phase that I call the bomb-throwing phase – both sides – and that is to essentially cut off debate and potential compromises by rolling verbal grenades into the dialog.

    This is the see no evil, hear no evil, speak no evil approach to governance.

  5. Hydra Avatar
    Hydra

    Nearly all additional wealth created in the USA since 1989 has gone to people 55 and older, according to Federal Reserve data. Wealth has doubled since 1989 in households headed by older Americans.

    ================================

    I don't see anything unusual in that. How does it compare to period before 1989? I'd even wager that in 1889 the situation was even worse.

    Young people are nto making as much money, and they are still paying for setting up their households and schooling. naturally older persons accumulate more: they have most of what they need so they have less to spend on, and, they have already inherited.

    I know a couple who were each married and had homes in NOVA. Each had a spouse that died and each collected handsome life insurance. When they met and married they basically consoldated four households. they sold all that stuff and bought a fabululous (but still less expensive) place in the countryside where they retired in relative splendor.

    We don't begrudge them their life insurance, because they paid for it and they are entitled to it. I don;t see why we would begrudge them their other entitlements, which they have paid for.

    Now, it may be that the "company" that sold them insurance is badly run, and squandered the money they paid on other bad investments, but that does not give the comaplny reason to default on promises made.

    Maybe the company needs to scale back its promises, so it does not have this problem in the future.

    And what will be the result of this? The grandchildren of todays young people will inherit less, because they swill spend more taking care of themselves. It's all fine to make a fuss about not sending the bill for our problems to our grandchildren, but in the end, that is exactly what will happen.

    Now all we are arguing about is the line of inhertance, or distribution of the bills and the goodies. the people in their sixties and 70's are not going to renounce their entitlements, they are going to renounce the entitlements of their grandchildren.

  6. Hydra Avatar
    Hydra

    Its OK if it affects local law enforcement. We will all have guns.

  7. Hydra Avatar
    Hydra

    The next generation will ave little to complain about. We will have made the world much safer for them by fighting all their wars.

  8. Hydra Avatar
    Hydra

    http://www.priceofweed.com/

    From Carpe Diem.

    This is either hysterically funny or a disaster, depending on your viewpoint.

  9. Gooze Views Avatar
    Gooze Views

    Mr. Bacon,
    Here are two ideas to help fix this problem. RAISE TAXES:

    (1) Va. has among the lowest gasoline tax in the country. All neighboring states have higher gas taxes. Hike them to alleviate transportation-related debt.

    (2) Va. has among the lowest cigarette taxes in the country although tobacco kills 400,000 Amerians a year and will likely kill ONE BILLION worldwide this century, according to the World Health Organization. We could raise the tax per pack.

    Peter Galuszka

  10. Hydra Avatar
    Hydra

    The Federal Highway Administration reported recently that travel on all roads and streets in the U.S. increased by +1.5% in September compared to the same month last year. Total travel for the month of September was estimated at 247.8 billion vehicle miles, the highest travel volume ever for the month of September. The September increase in traffic was the fourth consecutive monthly increase compared to the same month last year, and the sixth increase in the last seven months.

    Also reposted from Carpe Diem

  11. Hydra Avatar
    Hydra

    Galuszka is right. When I was in Arizona I didn't see very many people smoking at something like $7 a pack.

    Seems to me this would be a good place to run a test on the Laffer curve theory. How high can you raise cigarette taxes before revenue drops?

    There might be a complicating factor in Virgina. If you raise cigarette taxes the companies might move, and that would negatively affect state revenues.

  12. Hydra Avatar
    Hydra

    Although raising the gas tax is considered politically dead here, several other states have raised gas taxes in the past few years. I imagine that most of them have, since the last time Virginia did.

  13. Groveton Avatar
    Groveton

    Peter is right on both counts. Both the gas tax and the cig tax should be raised.

    The gas tax hasn't been raised (in cents per gallon) in 23 years. Meanwhile, the cost of building and maintaining roads has inflated.

    Seeing the members of the General Assembly acting surprised about funding issues while the funding for transportation has been frozen for two decades is almost comical.

    Almost.

  14. Groveton Avatar
    Groveton

    America is an increasingly uncompetitive economy on the global stage.

    Increasing taxes on the productive (i.e. working) members of society to make wealth transfer payments to non-productive members of society makes the economy even less competitive.

    As an economy becomes less competitive it must either raise taxes, reign in government spending or run a deficit.

    At the outset of the Social Security program, the federal government published an informational pamphlet that stated the following with regard to Social Security taxes:

    "And finally, beginning in 1949, 12 years from now, you and your employer will each pay 3 cents on each dollar you earn, up to $3,000 a year. That is the most you will ever pay.".

    After adjusting for inflation, the result of this calculation equates to a maximum tax collection of $1,630 per person. In 2007, the maximum tax collection per person was $12,090, or more than seven times this amount.

    http://www.justfacts.com/socialsecurity.asp

    The only way that Social Security can be put on a sustainable path is to reduce the money it pays out in benefits.

    Given that people of retirement age control more of the national wealth than they did 20 years ago – I'd suggest that we reduce those benefits immediately.

    Then, we can start forgiving some of the debt owed by the federal government to social security.

  15. Larry G Avatar
    Larry G

    re: " Given that people of retirement age control more of the national wealth than they did 20 years ago – I'd suggest that we reduce those benefits immediately.

    Then, we can start forgiving some of the debt owed by the federal government to social security."

    The only problem is that this does not hardly touch the 1.3 trillion annual deficit now slow the adding of 1.3 trillion to year to the 13 trillion debt.

    Social Security is a slow motion problem compared to the fact that we spend a trillion more in discretionary government than we take in – income taxes.

    And yet we continue to blather on about social security as if it is the priority concern.

    If you actually take the time to go read the deficit commission draft – you would see that about a half dozen options exist to keep social security solvent for a hundred years.

    All of the options will require some level of a haircut for both existing and future beneficiaries but we are talking about relatively minimal things on an individual basis.

    But again… it's not the Social Security problem that is destroying our global competitiveness – it is our deficit and debt.

    I can't figure this out.

    Why is the focus NOT on the REAL problems?

  16. Larry G Avatar
    Larry G

    Social Security is a gnat on a dogs butt compared to the threat we face from the 1.3 trillion dollar annual deficit in terms of our global competitiveness.

    We need to fix SS but the fixes available are relatively straight forward compared to the challenges we face on the general government deficit.

    Here we have not one but two separate balanced budget plans that are a prime opportunity for anyone who believes we should balance our budget but he's the weird thing.

    Even those who characterize themselves as fiscal conservatives avoid both like the plague and instead natter about SS.

    SS is not going to kill the country.

    If push comes to shove – the beneficiaries will take a haircut by getting only about 78% of the scheduled benefits.

    but the 1.3 trillion annual structural deficit threatens to strangle us….

    at some point the dollar will get devalued and the immediate result will likely be $5-6 gasoline on the 1/2 of our imports that are oil.

    here we have two balanced budget proposals and those who claim fiscal conservative credentials are headed for the exits.

    no wonder the country is in trouble.

  17. Groveton Avatar
    Groveton

    I guess one of the co-chairs of the deficit commission hasn't had the chance to read LarryG's comments.

    http://www.rawstory.com/rs/2010/11/deficit-commission-chair-seniors-greediest-generation/

    It's not the first time Simpson's comments about Social Security have raised eyebrows. In an August email, he described the program as a "milk cow with 310 million tits!"

    Please note that I used the link to a very liberal site. Even that site doesn't claim Social Security is irrelevent – only that the payments into the program were part of "an employment contract".

    Of course, one could also see their income taxes as an "employment contract" against sloth, incompetence and stupidity in Congress.

    I am going to pay higher taxes and Larry is going to see his benefits cut. We both need to get used to it.

  18. Larry G Avatar
    Larry G

    I'm totally 100% in favor of putting social security on a sustainable basis and I'm 100% of the haircuts necessary to accomplish that.

    But doing this will not change the real threat to our economy which is the 1.3 trillion annual deficit an our 13 trillion and growing debt.

    I wish there was as much ardor in dealing with the deficit as there is with social security – ESPECIALLY from those who proclaim themselves as fiscal conservatives.

    I expect the Dems, the loony-left, and the folks currently slurping up Social Security and Medicare benefits to whine and cry about the "good" reasons why we need to run a deficit to subsidize entitlements.

    I have contempt for that.

    But I have MORE contempt for those who promote themselves as fiscal conservatives who run away from the structural deficit problem because they CLAIM that they are NOT LIKE the loony left and are, in fact, "responsible".

    Well.. that kind of "responsibility" has put this country in a deficit ditch that is going to be damned difficult to get out of.

    The two deficit commissions not only generated proposals for Medicare and SS but for the structural deficit but listening to many of these folks the only thing the deficit commission people proposed was cutting entitlements.

    When do we stop playing these silly little pretend games an get on to the real issues?

    I've been declared many times previously as a "misguided" liberal and yet here I'm advocating that we take responsibility for the deficit while those who dubbed me as a "liberal" – run away from the deficits and balanced budget proposals.

    wow!

  19. Hydra Avatar
    Hydra

    The non-productive (retired) members of society have already spent their time in the trenches making America as great as it is.

    The problem with grovetons analysis is shown in the growth in S's taxes. You would have to believe the productive class could turn a meagre increase in income into a cornucopia of new production. As if lack of capital was the only problem.

  20. Groveton Avatar
    Groveton

    The federal government owes money to two groups – Americans through Social Security and Americans / Non-Americans through bonds. Neither are going to get paid in full.

    All areas of Social Security pay out about $1.2T per year in benefits right now. Let's make that $800B. Everybody gets 75% of what they thought they were supposed to get. Take the present value of those savings and excuse that part of the loan that the government owes Social Secutity (in all categories).

    You people want to imagine that Social Security is separate and distinct from the rest of the US government. It isn't.

    We don't need to get Social Security back on a sustainable path. We need to get the United States back on a sustainable path.

    As for Hydra's comment:

    "The non-productive (retired) members of society have already spent their time in the trenches making America as great as it is.".

    America is an economic and foreign affairs disaster. Claiming success for what we have now is like the retired management of General Motors wanting to be rewarded for their excellence of execution.

    We are bailing your generation out. This inter-generational bail-out will continue until my kids are as old as I am now.

    The greediest generation indeed. AARPs membership rolls ought to be a laundry list for charges of treason.

  21. Groveton Avatar
    Groveton

    Here's a formula for making restitution to the future of the United States.

    1. Subtract 30 from your current age. If you get zero or a negative number, you are not accountable for the present sorry state of affairs. Example: a 51 year old would subtract 30 to get 21.

    2. Multiply the result of step 1 by 2. Example, the 51 year old would now have a 42.

    3. Subtract the result of Step 2 from 100. The 51 year old would get a 58.

    That's the percentage of all government benefits you are going to get. The 51 year old would get 58% of the benefits he or she expected.

    It's time for the hippie generation, the me generation and all the other middle aged and elderly dimwits in the country to start making restitution to the future.

    If you aren't under 31 or old enough to have fought in WWII you are part of the problem.

    Time to do the right thing and start making plans to pay back what has been stolen.

    For the record, I am presently 51 years old.

    If anybody has a recipe for catfood souffle – please post it.

  22. Hydra Avatar
    Hydra

    Grovetons argument is that since older people have the most wealth it is ok to reduce the retirement benefits they were promised. This amounts to a tax increase on them.

    But he also argues that increased taxes on the most productive wealthiest citizens reduces growth.

    So if you are making enough to replace what we take, that's bad, but if you are wealthy and have no income, then it is ok.

    Not to mention that while most wealthy people are older, not all old people are wealthy. Reducing as payments is not a very targeted way to go after the wealthy, which is somehow not what I think groveton is suggesting.

  23. Hydra Avatar
    Hydra

    Lets see. 71 minus 30 equals 41 times two equals 81. Subtracted from 100 leaves 9%.

    Hey, emr. How do you like them apples?

    If you make it to eighty, you get zero, and you are on your own, or your children. You know, the ones we are supposed to be protecting.

    Wouldn't this formula apply a lot better to Medicaid? No death committee required, just use a formula.

    I like my formula better.

  24. Hydra Avatar
    Hydra

    Sorry, should be 19% not 9%

  25. Larry G Avatar
    Larry G

    " We don't need to get Social Security back on a sustainable path. We need to get the United States back on a sustainable path."

    and you will not achieve this by fixing SS.

    Social Security is not what has endangered the country.

    In terms of people getting what they were supposed to get – keep in mind that first of all Social Security is INSURANCE – NOT a pension fund.

    If it were a pension fund, when you died -your heirs would get the fund and they do not.

    Keep in mind also that many folks get MORE than they paid into it BECAUSE others who also paid into it – died before they could collect.

    This is WHY IT IS INSURANCE and it works like any other kind of insurance INCLUDING adjusting the premiums as actuarials require it.

    It is this lack of awareness and to be honest, just plain ordinary ignorance why so many of us do not "get" this.

    But I'll say one more time.

    Even though Social Security can be fixed with relatively minor changes that don't have to be made this very minute – the same is not true of the part of government that is not funded by FICA but by Income Taxes.

    That part of the government is ALREADY 13 trillion in the hole and each year adding another 1.4 trillion to it.

    We spend a trillion dollars more every year than we take in and this is the threat that we must deal with NOW.

    All of this crap about social security is just that – CRAP.

    It's willful ignorance of the real threats that we face.

    It's like some sort of weird self flagellation for the WRONG SIN.

    This is why the country is in such a mess.

    The right wing ideologues with the help of media like FAUX News has struck the populace STUPID about the simple fact that we spend more than we take in – and it's social security's fault.

    I can't believe we are this stupid but apparently we are.

  26. Anonymous Avatar
    Anonymous

    We would have a lot less spending and borrowing if Congress required a 55% or 60% super-majority to pass spending bills. Liberals could and would check conservatives' pet projects and conservatives could and would check liberals' pet projects.

    TMT

  27. Larry G Avatar
    Larry G

    TMT – I don't see a commitment from the folks who bill themselves as fiscal conservatives to balance the budget.

    Let me be even more succinct – there is NO PLAN from the GOP to balance the budget.

    They have NOTHING on the table for the Dems to even disagree with.

    What you are proposing, in effect, is a requirement for a 2/3 majority to agree on what to cut.

    Well.. right now..the Republicans cannot even get a plan on the table to cut.

    I fully expect the liberals to whine and complain about cuts to the middle class and all that rot but where is the plan from those who have run on a successful campaign that we are spending too much, have enormous debt and need to make cuts?

    It's not like there are not already at least 2 plans to balance the budget.

    All the Republicans have to do is say they support one or the other OR to say their plan that achieves the same thing is – and then provide their path.

    I'm flummoxed by all the folks who vote in these guys who now… as they did before under Bush – stand mute on the issue once again.

    Not one sour word from the folks who voted in these guys who have yet to offer any kind of a balanced budget plan nor support the ones that are already on the table.

  28. Accurate Avatar
    Accurate

    This is sort of on topic – I just came across this (although some of you may have already been aware of it). There is a website http://budgetreform.org/stabilizethedebt/?=DMN
    which allows you to mess with the federal budget to see what they are up against. I found the excercise interesting and thought I would pass it on.

  29. Larry G Avatar
    Larry G

    Thanks accurate. Here's another:

    http://www.nytimes.com/interactive/2010/11/13/weekinreview/deficits-graphic.html

    anyone who would take the time to go through the tool that Accurate provided or the one from the NYT or the Deficit Commission Draft or the Domenici / Rivlin plan will notice 3 things:

    1. – it IS possible to balance the budget

    2. – virtually everyone of us will have to take a haircut

    3. – Not a single Republican other than Paul Ryan and Ron Paul has shown any leadership on the issue despite the fact that they ran for election on balancing the budget and reducing the debt.

    and so far.. not a word of complaint from those who elected them expecting to see some proposals.

  30. Groveton Avatar
    Groveton

    It's not about fixing Social Security and LarryG knows it. It's about diverting payments which would have gone out in benefits in order to pay down the national debt.

    Everybody wants their sacrosanct political program protected. For senior citizens … that's Social Security. So, they play dumb and pretend that the government writing checks to them doesn't count as government spending. They pretend that the benefits payments couldn't be used on different priorities or to pay down the national debt.

    Hydra makes a decent point about taxes. I believe that we need to cut entitlement benefits and raise taxes on those who work. We also need to cut non-entitlement spending. A three pronged approach. Everybody helps to pay the price. Especially those of us who voted in the morons who have nearly ruined the country.

    Once again, it's not about fixing Social Security. It's about reducing the payments to use on other priorities. Consider it a tax on the generation which bears the most responsibility for today's sorry state of affairs.

    I could also see a system where the poorest quartile gets 100% of expected benefits, the middle two quartiles each get 75% and the wealthiest quartile gets 50%.

    However, I see no system where the very people who caused the majority of this problem walk away without making any sacrifices because, "we've done our part". You/we did our part alright. You/we did our part to turn the greatest country in the world into a non-competitive, debt ridden, poorly educated economic cesspool.

  31. Anonymous Avatar
    Anonymous

    More of the same. A slight cut in the rate of growth in federal spending, which is quickly canceled. Then tax increases that stick until the GOP controls two branches of government. Then, slowly but surely, some of those cuts are whittled away, while more loopholes are created.

    End the tax-exempt status for foundations. Bar any paid lobbying for spending. No employee or owner of a business can lobby for funding and cannot use a third-party agent. No nonprofit can use a paid employee or agent to lobby for spending. If it takes a constitutional amendment, so be it.

    Run this regimen for three years and then let's talk revenues.

    TMT

  32. Accurate Avatar
    Accurate

    Ohhhh Larry, I liked the NYT scenario program better than the Pew one that I linked to. I solved the deficit easily and without undoing the Bush tax cuts or imposing any of the mortgage credit tax (cut), or a national sales tax, or the stupid cap-and-tax, or the bank tax. It would be nice if it would have included things like getting rid of the 'education department' and a boatload of money spent on that. I would also have liked to be able to take an axe to all the arts programs/commissions, etc.

    These exercises are informative but you still get get the whole picture.

  33. Hydra Avatar
    Hydra

    "They pretend that the benefits payments couldn't be used on different priorities or to pay down the national debt."

    ================================

    That isn't paying down the national debt, it is shifting one debt for another.

    What we have here is the classic argument of

    "It's not eneough to make any difference, so we shouldn't do it"

    vs

    "Every Little Bit Counts"

    By Grovetons analysis we could save 300 billion a year through draconian immediate cuts in Social security. And Groveton is correct Social security payments are federal spending.

    But, Larry is also correct: of all the government spending out there Social security has at least most of its costs covered by payments which are supposed to be dedicated to Social Security. Either the payments are insufficient or the benefits are too large, but either fix or part of both is not a huge problem.

    The problem is that money that was supposed to be dedicated to social security was spent on other (unfunded) chores. Technically, a huge part of the national debt is money that other programs owe TO social security.

    It is not social security that is the problem, because it is (mostly) funded with dedicated fees. Unfortunately, Social security then loaned that money to the US government, which is notoriously untrustworthy.

    We would have been better off investing it overseas where the rest of the government couldn't get its hands on the money, or maybe even in private eneterprise.

    Like Greece, or Enron.

    A cycnical person would say the Republicans have deliberately run up the debt with off budget financing (a trick learned from Enron) just so they would have an excuse to gut social security which they have hated from day one.

    So the total nation debt per taxpayer is around $125,000, less than most people owe on their homes.

    If A social security payment is $1200 a month then each person could pay off his share of the debt by pushing back retirement payments for one year.

    It would take about 80 years for everyone alive today to cycle through and "make their payment". If we push back retirement two years, we could pay off the debt in forty years. Children who are under ten years old today, could then look forward to the retirement payments we were promised.

    If we immediately push it back to 65 for ten years then even Groveton would be able to retire on schedule, with full payments, because we would be debt free in ten years.

    Looked at that way, Groveton's plan seems perfectly reasonable, especially since we live longer on average.

    Except for one little problem. In order for this to work all of those other unfunded programs would have to stop entirely and immediately, otherwise they keep contributing to the debt that social security is paying off for them.

  34. Hydra Avatar
    Hydra

    I'm not so sure I'm willing to sign up as being somehow "responsible" for problems and debt incurre more than 20 or thirty years ago.

  35. Larry G Avatar
    Larry G

    did I hear we should kill social security and Medicare and use the FICA taxes to pay down the debt?

  36. Anonymous Avatar
    Anonymous

    "AP-CNBC Poll: Cut services to balance the budget"

    http://apnews.myway.com/article/20101130/D9JQCLT80.html

    "To ease surging budget deficits, Americans prefer cutting federal services to raising taxes by nearly 2-1 in a new poll. Yet there is little consensus on specific, meaningful steps – and a wariness about touching two gargantuan programs, Social Security and Medicare."

    TMT

  37. Larry G Avatar
    Larry G

    so if the Republicans would come right out and say they want to kill Social Security and Medicare and use FICA to pay off the debt they'd incur the wrath of the same clueless middle that just elected them to address the debt?

    I like it.

  38. Hydra Avatar
    Hydra

    We don't want politicians, we want magicians.

    And that is just what the politicians keep promising us.

    If will Rogers was alive today he would say "America is going to be the first country to be driven to the poorhouse in a foreign made automobile."

  39. Groveton Avatar
    Groveton

    There is no difference between Social Security and the rest of the federal government. Social Security is just and another program run by an agency established by a law.

    There is no separation.

    There is no lockbox.

    There is no trust fund in any meaningful sense of the term.

    There is only a promise. A promise that the federal government will provide the money for benefits once outgo exceeds intake.

    Like the promise that all American children will get a quality education.

    Or the promise of winning the war on poverty … or drugs.

    Or the promise that all rights not granted to the federal government of reserved for the people will be granted to the states.

    Or the promise that Congress will pass no law infringing the people's right to bear arms.

    Or that tolls on the Dulles Toll road will be eliminated once the bond for that road has been paid.

    Or that bad driving points will only be used to keep unsafe drivers off the road.

    Politicians rarely keep their promises. Political institutions never keep their promises.

    Social security is a promise from a political institution.

    It is a promise that cannot and will not be kept.

    Kill Social Security? Very unlikely.

    Cut back the benefits? Very likely.

    You need to think of the federal government like a candy store. $X comes in and $Y goes out. If more goes out than comes in … $Z must be borrowed to finance the shortfall.

    Part of the $Y which goes out is payments for entitlement programs like Social Security. If $Y goes down and $X stays the same then the deficit is reduced.

    There is no real loan from Social Security to the rest of the federal government because there are no real terms for collecting the loan. Let's meander down Looney Lane. What will the Social Secutrity Administration do if the rest of the federal government can't or won't repay what it owes the SSA? Foreclose on the federal government? Ask a bankruptcy court to force a bankruptcy? Get an administrator to start selling off Army bases and use the proceeds to pay back the SSA loan?

    No.

    The federal government will get desperate, keep the FICA taxes, lower the benefits and excuse some of the pseudo-debt "owed" to the SSA by the rest of the federal government.

    Everybody will piss and moan. Then, everybody will get over it.

    Just like in France, Greece, etc.

  40. Larry G Avatar
    Larry G

    Given the fact that FICA barely covers the payouts right now I'm not sure how it will play to lower benefits and with the savings divert FICA to pay for the deficit.

    All of the balanced budget proposals so far consider FICA to be firewalled from the discretionary budget although the Rivlin/Domenici plan proposes a one year FICA holiday for both employer and employee. (that will add another trillion to the deficit an debt.)

    I'll concede that the money that supposedly is in the lock box is gone, gone, gone but I think it will be interesting to see the FICA diversion.

    Of course .. it could be "spun" as the seniors trans-generational gift to their kids,,,heh heh heh…

    but I'm betting that the first politician who comes right out and advocates this is going to have to disconnect his/her phone and get a new email server..as well as a bodyguard.

  41. Hydra Avatar
    Hydra

    Groveton and I agree government is In trustworthy. We disagree what to do about it.

  42. Larry G Avatar
    Larry G

    well I agree about the trustworthiness to a degree.

    First – as far as I know – they have not diverted the FICA taxes and people who receive social security and Medicare get their money.

    second – the numbers… they all come from CBO….

    the same CBO that the right wing says fudges the numbers for Obama_Care – the same folks believe the CBO numbers for the deficit, the debt and the solvency of social security, the "lockbox" and FICA taxes.

    I love it.

    They keep saying that Obama has ballooned the deficit to 13 trillion but they don't believe that Bush moved it from 5 to 10 trillion.

    and they say that CBO LIES about Obama_Care – at the same time they cite the 13 trillion debt number than CBO generates.

    Up is down. down is up. The world is whatever these guys want to believe it is.

    If they like CBO numbers – they're good as gold.

    If they don't like CBO numbers, CBO is a lying SOB..

  43. Hydra Avatar
    Hydra

    I figure we will muddle through,pointing fingers all the way. Too bad. We could do better.

  44. Hydra Avatar
    Hydra

    From the New York Post:

    "The underground tobacco market is spreading like a fast-growing cancer in the wake of tax hikes that make New York cigarettes the most expensive in the nation — and it's costing the state tens of millions a month in lost tax revenue.

    Illegal cigarettes are pouring into neighborhood bodegas by the truckload from neighboring Indian reservations, lower-tax states in the South and even as far away as China.

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