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» Hatrack River Forum » Active Forums » Books, Films, Food and Culture » No New Taxes! (The Impossible Budget). (Page 8)

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Author Topic: No New Taxes! (The Impossible Budget).
kmbboots
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Right. The government has those income tax reports already and could easily use them to figure out who doesn't need SS and not send them a check.
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fugu13
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quote:
All I'm saying is that enforcement is expensive, so if we are trying to save money denying SS benefits to the rich (who are relatively few) might cost more then it saves.
That's not really a concern. People already fill out all the information that's needed. Then the gov't can trigger reductions at some level of the quantities people are already calculating. The cost would be trivial in relation to the revenue.
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SenojRetep
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I mentioned earlier, but I'll say again, by optimistic estimates, means testing (i.e. excluding benefits from the wealthy) both SS and Medicare would save about $200B/year under the current benefit structure (depending on how aggressively you did it). While that would help with the deficit, it wouldn't in and of itself, be sufficient. Ditto with raising the cap on FICA. And neither addresses the underlying issue of unsustainable spending growth (bending the curve, in Orzag-ese).
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Stone_Wolf_
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Sure...200B/year sounds worth it, and all things considered, I wouldn't be against denying the wealthy benefits (of course the definition of "wealthy" would have to be reasonable).
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fugu13
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quote:
I mentioned earlier, but I'll say again, by optimistic estimates, means testing (i.e. excluding benefits from the wealthy) both SS and Medicare would save about $200B/year under the current benefit structure (depending on how aggressively you did it). While that would help with the deficit, it wouldn't in and of itself, be sufficient. Ditto with raising the cap on FICA. And neither addresses the underlying issue of unsustainable spending growth (bending the curve, in Orzag-ese).
I only view tweaking social security as fixing the future of social security, a program both politically indestructible and a bad idea as a source of general revenue. The combination of means testing, removing the income cap on social security taxation (while lowering the rate considerably so it brings in only a little new revenue), and slightly raising the retirement age will make social security entirely sustainable (and coincidentally lower the tax burden on the poor and lower middle class).

And be wary of measuring poverty in the elderly. If you use the income cutoff, you will drastically undermeasure, because elderly people have much, much larger medical expenses even with good insurance, much less without.

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Aerin
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On the other hand, as mentioned before, the problem with means testing is that it makes it much, much more clear that social security would be nothing but welfare. Making social security for everyone if they pay is the only thing that makes it politically viable - if you raise social security taxes while also removing benefits from those who pay most of those taxes, then you HAVE turned social security into just welfare, and the political will to keep it going will vanish.

That is an annuity program is a fiction, but it's a fiction that allows it to exist. You remove the ability of that fiction to exist, and that just might be the impetus to get rid of it altogether.

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kmbboots
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I found this an interesting article.

http://voices.washingtonpost.com/ezra-klein/2010/11/column_we_dont_have_a_social_s.html

Especially this part:
quote:
The deficit-reduction plans under consideration will accelerate this trend. Under current law, an average -income worker (that's someone making about $43,000 a year) is projected to get the inflation-adjusted equivalent of about $15,000 a year in Social Security benefits in 2050. Under the Simpson-Bowles plan, that would drop to about $12,700. That's not nothing, but it's not much. In fact, neither amount is very much. Social Security is not a generous program. It's actually among the least-generous of any developed nation, and in making it less so, we raise the question of what, exactly, seniors with insufficient retirement savings are supposed to do.
Bolding mine.
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fugu13
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quote:
On the other hand, as mentioned before, the problem with means testing is that it makes it much, much more clear that social security would be nothing but welfare. Making social security for everyone if they pay is the only thing that makes it politically viable - if you raise social security taxes while also removing benefits from those who pay most of those taxes, then you HAVE turned social security into just welfare, and the political will to keep it going will vanish.

I think the large numbers of elderly voters will somehow manage to keep supporting sending them money. Especially given the majority of them would see a drastic reduction in standard of living, right away, if it were removed. It already is a welfare program, of course, so I'm not really worried about it being turned into one.
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Aerin
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Not if the large numbers of elderly are no longer getting checks - in order to make the means testing make a dent, it can't be for just the millionaires. In other words, to make the means testing worth it, you have to cut off a big enough number to make it politically dicey.

But look especially at the future generations - will future generations support a 15% tax off the top when those who pay the most won't even benefit?

----

Modeling Europe while it is in the process of imploding seems like a particularly bad idea. If you want to copy the social programs, you'll have to copy their monstrous debts, doubled tax rates as well, and cliff-jumping economy as well.

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SenojRetep
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quote:
Originally posted by fugu13:
quote:
I mentioned earlier, but I'll say again, by optimistic estimates, means testing (i.e. excluding benefits from the wealthy) both SS and Medicare would save about $200B/year under the current benefit structure (depending on how aggressively you did it). While that would help with the deficit, it wouldn't in and of itself, be sufficient. Ditto with raising the cap on FICA. And neither addresses the underlying issue of unsustainable spending growth (bending the curve, in Orzag-ese).
I only view tweaking social security as fixing the future of social security, a program both politically indestructible and a bad idea as a source of general revenue. The combination of means testing, removing the income cap on social security taxation (while lowering the rate considerably so it brings in only a little new revenue), and slightly raising the retirement age will make social security entirely sustainable (and coincidentally lower the tax burden on the poor and lower middle class).

And be wary of measuring poverty in the elderly. If you use the income cutoff, you will drastically undermeasure, because elderly people have much, much larger medical expenses even with good insurance, much less without.

I question the wisdom of saving SS and letting the rest of the budget burn. SS rates of taxation are currently about 3X those of Medicare, despite the fact that Medicare expenditures are nearing parity with SS. It does us little good if we make SS sustainable without addressing the broader problems.

To Kate's point: if we want to fund seniors at higher levels without impairing our ability to fund all the other things we want to fund (roads, education, defense), we need to tax at much higher levels. Average federal revenues in developed nations are about 40% of GDP, allowing them to pay quite generous stipends to the elderly, the poor, and the sick. How do you propose we get to that point of revenue generation here in the US?

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SenojRetep
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quote:
Originally posted by Aerin:
Modeling Europe while it is in the process of imploding seems like a particularly bad idea. If you want to copy the social programs, you'll have to copy their monstrous debts, doubled tax rates as well, and cliff-jumping economy as well.

Not all of Europe is imploding. Scandinavian countries are in much better fiscal shape than the US, as are the Netherlands, Germany, the UK and maybe a few others.

The problem with the PIIGS was they wanted benefits commensurate with those provided in other European nations, but were unable to unwilling to tax at sufficiently high levels to support such spending.

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Samprimary
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quote:
Originally posted by kmbboots:
http://voices.washingtonpost.com/ezra-klein/2010/11/column_we_dont_have_a_social_s.html

Especially this part:

It's interesting in light of how the euro teeters near total crisis, but it's exceedingly difficult to pin the roots on their social coverage, which are standard about everywhere in the modernized world outside of here. It's actually to the delight of many eurozone left-wingers that the most threateningly unstable systems tended to have been borne of either tax loopholes or the liberalization of internal economic management (Ireland, in particular). As usual, though, they tend to take a blind eye to other prodding factors like Greece's absurd glut of public servants and prosperity nets they doled out with no sense.

I guess you could get a true test out of whether Germany feels tempted to roll back on their own social programs as readily as they get tempted to buck off the euro and its layabout problem.

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Aerin
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Germany IS rolling it back - their retirement age has been raised to 67 and other benefits have been tightened.
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kmbboots
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And their elderly - and everyone - is free from the crushing fear of any health emergency sending you into the poor house.

And they get a lot more vacation. [Wink]

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SenojRetep
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quote:
Originally posted by kmbboots:
And their elderly - and everyone - is free from the crushing fear of any health emergency sending you into the poor house.

For now. Their healthcare costs are rising faster than ours (although ours are still much higher in absolute terms). And they're paying about 2X as much as we are in taxes. So again, how do we get to 40% of GDP in revenues? It's great to say we want these benefits, but we have to pay for them too.

<edit>Actually, I take that back. While some European countries' healthcare costs are rising more rapidly than the US's, Germany is not one of them (at least not in the most recent data I could find, which ends around 2000). See this table which shows that for the 1990s the growth rate in US healthcare costs was actually about average for OECD countries.</edit>

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kmbboots
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We don't have to be exactly like them, but more like them than we are now would be good. We have swung way over to the plutarchical side of the pendulum and we need to find our way to a more balanced policy.
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MattP
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quote:
While some European countries' healthcare costs are rising more rapidly than the US's, Germany is not one of them (at least not in the most recent data I could find, which ends around 2000)
This is one reason I'm very fond of the German system. It seems like an almost ideal blend of free market and regulation which is in many ways similar to how US car insurance works. (And car insurance rates are generally reasonable and not increasing substantially over time.)
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SenojRetep
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quote:
Originally posted by kmbboots:
We don't have to be exactly like them, but more like them than we are now would be good. We have swung way over to the plutarchical side of the pendulum and we need to find our way to a more balanced policy.

Kate, you have strong opinions on this issue; you've shown that several times. Why shy away from making a concrete proposal?

How far should we go? How should we pay for it? I don't need a 10-page plan or anything, but I would find a concrete statement about what level of benefits you'd recommend and a structure for paying for them very enlightening.

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kmbboots
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Pay for which, exactly?

Closing corporate tax loopholes. Disincentives for moving jobs overseas to match. Closing tax loopholes in general and raising rates on the wealthy and, later when the economy can stand it, on the middle class as well. There is no reason that tax rates should be lower now than they have been since the 1950s. Stop bleeding money into useless wars. Raising the cap and need testing for social security and Medicare.

There's a start.

We need to get more money into the hands of people who need it - shrink the gap between the very wealthy and everyone else.

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SenojRetep
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quote:
Originally posted by kmbboots:
Closing corporate tax loopholes. Disincentives for moving jobs overseas to match. Closing tax loopholes in general and raising rates on the wealthy and, later when the economy can stand it, on the middle class as well. There is no reason that tax rates should be lower now than they have been since the 1950s. Stop bleeding money into useless wars. Raising the cap and need testing for social security and Medicare.

While this sounds an awful lot like a litany of zombie talking points, I'll try to do a rough wag on pricing them.

Concrete suggestions: end wars, close "loopholes," needs test, raise the cap, return to historical tax rates for the rich. My scores: $150B, $1T, $200B, $500B, $100B. Total increase in revenues: 14% of GDP, putting our total federal revenues at 29% of GDP, on the very low end of the OECD.

By "close loopholes" I assume you meant eliminate all tax expenditures, including popular ones like mortgage interest deduction, child care deductions, earned income deduction, and charitable donation deductions, significantly increasing the tax burden of the middle class. Sticking just to "corporate" loopholes would, at a guess, decrease that number by about an order of magnitude. I also assumed "lift the cap" meant eliminate the cap, meaning FICA taxes are paid at the current rates on all income. I also think it's fair to mention that (as a rough estimate) about 75% of the increased revenue is due to increased tax burden on those making less than $250,000/year.

Our current expenditures are about 25% of GDP, so with your increased revenues we're able to fund at current levels, with a small surplus left over. However, due to expected cost growth in healthcare and other social welfare programs, that surplus will be gone within the next 5-10 years.

<edit>Also, note that I haven't factored in any strategic behavior on the part of tax payers, like businesses choosing to incorporate in Europe or Asia where corporate rates are lower. This probably wouldn't change the numbers very much directly, but it might lead to other behaviors which would impact them, like increasing unemployment.</edit>

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TomDavidson
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Personally, I would bring back the estate tax, dramatically increase the capital gains tax, institute a 50% marginal tax rate above $450,000 in household income, and cap deductions (but not credits) at 25% of gross tax due.
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kmbboots
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Yes. I figured you would assume that "life the cap" referred to FICA taxes as we have been talking about that for most of the thread.

How much less than $250,000 a year? It would have to be more than $106,800 (ish) a year as people already pay FICA on that much. We might also consider taxing investment income.

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fugu13
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quote:
I question the wisdom of saving SS and letting the rest of the budget burn.
Who said anything about that? I only pointed out that social security should not be viewed as a source of funding or an irreparable money drain, just a moderately effective transfer program that needs some tweaking to be more effective and appropriately funded. Not that I'm a huge fan of social security (I'd prefer to replace it with a transfer program that has nothing to do with age), but I recognize that it is a nigh-indelible part of political reality.
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SenojRetep
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Kate-

My assumption wasn't about if we were talking about FICA, it was about whether you meant "eliminate" when you said "raise", rather than either simply moving it higher, or partially lifting it where income over $100,000 is FICA-ed but at a lower rate.

Most of the increase under $250,000 is from elimination of tax deductions, not lifting the cap. And keep in mind this is "back of the napkin" sort of stuff; I'm not uber-confident in my estimates. But I would say the increase is shared pretty evenly among those making below $100K and those making above that.

Tom:

Capital gains and estate taxes aren't things I've really looked into, so I barely have guesses on what sort of revenue those proposals would generate. Raising marginal rates to 50% (rather than the Clintonian 39%) on incomes over $450,000 wouldn't directly* increase revenues more than a few decimal points. There just aren't enough people in the category to make a very big difference.

*A slight caveat: there is some small evidence that decreasing income disparity increases GDP. If that holds true, than wealth redistribution from rich to poor may have indirect positive impact on revenues.

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SenojRetep
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quote:
Originally posted by fugu13:
quote:
I question the wisdom of saving SS and letting the rest of the budget burn.
Who said anything about that? I only pointed out that social security should not be viewed as a source of funding or an irreparable money drain, just a moderately effective transfer program that needs some tweaking to be more effective and appropriately funded. Not that I'm a huge fan of social security (I'd prefer to replace it with a transfer program that has nothing to do with age), but I recognize that it is a nigh-indelible part of political reality.
I agree it's realistically difficult to imagine major changes to SS. But I have a hard time looking at it in isolation, because it causes huge structural issues for the rest of the budget. Taxes flowing into SS are unavailable to be used on other national priorities, so I have a somewhat adverse reaction to the idea that SS is "fine" it just needs some tweaking to be solvent. It's true, but I feel it ignores the negative impact SS has on the rest of our federal budget.
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fugu13
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quote:
I agree it's realistically difficult to imagine major changes to SS. But I have a hard time looking at it in isolation, because it causes huge structural issues for the rest of the budget.
What about my proposals create or leave remaining huge structural issues for the rest of the budget?

quote:
Taxes flowing into SS are unavailable to be used on other national priorities
Untrue at the moment. Granted, SS is issued bonds in exchange, but the tax monies definitely are repurposed in times of surplus. I'm fine with that happening now and then, I just don't think it should be at all a goal.

quote:
It's true, but I feel it ignores the negative impact SS has on the rest of our federal budget.
What negative impact, if SS becomes fully sustainable, as would happen with the changes described?
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SenojRetep
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The way I look at it, there's a finite amount of money the US public is willing to give to the US government. Historically, it's about 18% of GDP, but maybe we could change the culture and increase that amount (although I would guess current cultural forces are actually pushing in the opposite direction).

If all we can expect to get is 18% of GDP and 8% of that is going to fund SS, it doesn't leave much over to satisfy other obligations and priorities, like infrastructure, R&D, education, etc., let alone a surplus to pay down debt.

This is what I meant by the structural issue I have with SS; it's not that the program can't be made sustainable at current rates of taxation. It's that I feel those rates of taxation are sufficiently high that they make it impossible to adequately fund our other national priorities out of the remaining tax base.

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fugu13
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I don't think the 18% ceiling is as hard as all that; we're actually in a bit of a trough right now on true total gov't revenue, once state and local get factored in. What's more, there's a fair bit of evidence that people can and will accept higher rates -- that the US is more resistant to such increases than other countries does not mean it is infinitely resistant. Especially for transfer programs, which are both extremely efficient (in terms of "waste" and effectiveness, both) and extremely popular.

quote:
If all we can expect to get is 18% of GDP and 8% of that is going to fund SS, it doesn't leave much over to satisfy other obligations and priorities, like infrastructure, R&D, education, etc., let alone a surplus to pay down debt.
The changes I've outlined might, a few decades hence, cause SS to briefly kiss 8%, but it should decline back down to under 7% after that. There's a demographic "bump" we're still working out, but then the ratio of workers to those supported by social security is expected to increase again by a good bit before reaching a fairly steady state.

And, as I said, above, 18% isn't really a limit.

On a different note, I read a very interesting post recently where someone said that the whole idea of keeping health care costs down doesn't make as much sense as it seems. The US health care industry is a high productivity, high skill area we want to encourage, and a lot of the reasons for growing costs are because people want to consume more healthcare, even if it takes a lot of expenditure to reach a little longer life. Not that there isn't plenty to reform in US healthcare, but that controlling costs is the wrong way to think about it. Make basic healthcare affordable for everyone, yes. Make healthcare produce similar levels of health and health satisfaction as it does in other countries (for the same money), yes. But then let people spend lots of money on healthcare, and leave the system structured so that's possible, because that's a good thing, not a bad one.

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kmbboots
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So...the "greatest country in the world" could take care of its own but we should just accept that we are too selfish (moreso than the rest of the world apparently) so we shouldn't even try.
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SenojRetep
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Yeah, that's what I said.

Look, I'm glad you gave me some details for ways to increase revenue. They're not very popular, but they're a meaningful start on what we would need to do if we want to keep spending the way we're spending. But don't pretend there's all this money floating around out there that you can just pick up and give to people who are suffering. Those revenue increases will hurt people, people who feel they have a right to the money they've earned and who won't be able to afford as big a house or as nice a car or as good a college for their kids as a result. These aren't hedge fund managers, they're grocery store managers.

I think we could spend Denmark into the ground if that's what we wanted to do. But for 60 years (actually, for a lot longer than that, but the OMB on-line records only go back so far) no one's been able to make that pitch successfully. Maybe it'll be different in the future, but I don't see why (and actually I think we're getting more selfish and skeptical of government rather than less, which I think is very unfortunate). Wishing it were different won't solve the problem.

<edit>And, personally, I find your "take care of their own" language asinine. The entire argument is about what that means, and your presumption in setting yourself up as the sole moral authority on the adequate provisioning of the poor and old strikes a very sour chord with me.</edit>

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kmbboots
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Because you don't believe they are our own? Or some other reason?
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SenojRetep
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First, I apologize for my previous post. It wasn't in keeping with the sort of respectful dialogue I think Hatrack ought to stand for.

But I also don't want to play this cute game where you ask me one line questions and I give careful, measured responses and we dance around until one of us can take umbrage, or feel insulted or something. If you want to talk about the federal budget, including the proper role for social welfare in it I'm fine with that. But the moralizing tone of your last two posts isn't something I find particularly worth engaging with.

<edit>But to your question, I was specifically saying that "taking care of" our own is a subjective judgment. I don't imagine there's a person anywhere who doesn't want to "take care of" our own; I just imagine their belief about what counts as "taking care" of someone, and the proper role of the government in doing so, and the relative trade-off between "taking care of our own" and a person's right to the profits of what she produces, differs significantly from mine, or yours.</edit>

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kmbboots
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My answers are going to be short as I am posting from my phone. Or this could wait till Monday if you prefer.

The obscene percentage of wealth concentrated in the hands of a very few while we are contemplating cutting funds for the elderly, depriving them of Medicare, is a moral issue.

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SenojRetep
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Fugu-

I didn't see your earlier response.

The 18% figure I cite has held true for a long time. I agree, there's no reason it should be a hard limit, but for whatever reason we haven't really been able to crack it yet. Until I see practical evidence that the US public will accept much higher rates, I'll continue believing that it's unreasonable to expect significant increases in revenue.

But even if federal revenue went up to, say, 25% of GDP, I still think spending 7-8% on SS reflects a poor prioritization of funds. There are many people (certainly not all, but I would guess at least a sizable minority) who are potentially productive for 5-10 years after SS retirement kicks in. I would favor changing the "one size fits all" system into something that makes much more personalized decisions about an individual's continued ability to hold down a job. This would increase the fairness of the program, as people would get more uniform benefits, rather than poor unhealthy people only collecting for a couple of years and rich, healthy people collecting for much longer. I would set the threshold such that, on average, people collected for about the final five years of their lives, which is in line with the original intent of SS. This would, I believe, reduce annual spending by more than half without decreasing monthly stipends. It would significantly increase retirement age for people not working in labor intensive fields, but I see that as a benefit rather than a cost.

The healthcare thesis is provocative, but my initial reaction is that encouraging more spending on something that produces little good for society isn't a very good idea. Perhaps I'm the one moralizing now, but I don't think the billions of dollars we spend on sustaining our parents, grandparents, and other loved ones for an additional few days at the end of their lives contributes very much to the Gross National Happiness.

Cosmetic plastic surgery on the other hand...

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SenojRetep
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quote:
Originally posted by kmbboots:
The obscene percentage of wealth concentrated in the hands of a very few while we are contemplating cutting funds for the elderly, depriving them of Medicare, is a moral issue.

This is based on a false premise that has been refuted in at least two separate threads. There isn't enough wealth concentrated in the very few for even stratospheric tax rates on them to fund the sort of spending you advocate. If you want to do more for the poor, the sick and the old that's great; but don't delude yourself that it won't cost the middle class anything to do so. If you exclude the middle class (up to $250,000) tax increases from your proposed tax reforms, federal revenues would only increase by about 3% of GDP, which isn't even enough to fund our current programs, let alone the sort of growth in social spending you advocate. So stop pretending.
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Blayne Bradley
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But you could adjust it to that less of the wealth was concentrated in their hands and instead put into the hands of consumers which would drive growth, create jobs, make stuff more affordable, increase GDP , improve infrastructure, lighten transportation costs and increase availiability and allow us to better take care of our own.
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TomDavidson
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quote:
There isn't enough wealth concentrated in the very few for even stratospheric tax rates on them to fund the sort of spending you advocate.
Actually, I think this is untrue. There isn't enough income, but there is absolutely enough wealth.
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fugu13
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quote:
Actually, I think this is untrue. There isn't enough income, but there is absolutely enough wealth.
I can't come up with any calculation where that isn't a ridiculous statement. What do you base that on?
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Stone_Wolf_
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quote:
...I don't think the billions of dollars we spend on sustaining our parents, grandparents, and other loved ones for an additional few days at the end of their lives contributes very much to the Gross National Happiness.
Sounds like Logan's Run...sorry old folk, time to die!
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Black Fox
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1. In response to a post above, Germany scaled back most of their social programs in the 1990's and has also instituted serious tax increases in the last 5 years or so. I know they bumped their VAT from 15% to almost 20% about 4 years ago. Surprise, they handled their fiscal issues by both cutting spending across almost all government programs and raising taxes.

2. As noted above SS spending will smooth out once we're done with our demographic issues. Also, I'm a firm believer that eventually medical costs will come down, but for now we're at this odd point where more medical technology is actually radically increasing the cost of treatment rather than decreasing it. Mainly, if you have a non-curable disease and then find a cure you are stuck with the unfortunate fiscal situation of spending a lot of money to cure them, but then you also have that nice added benefit of not having people die.

3. SS spending and medical spending on the elderly makes life much easier for the middle class. Instead of having Grandma and Grandpa live with their kids, they get to live on their own and not "tax" the spending of their children. This is a win for everyone. It also cuts down on social issues that can cost a lot of money and time.

4. To just say SS is expensive and maybe does not give us the best bang for the buck so lets get rid of it is an unimaginative solution to the problem. There are so many ways to combat the costs. The government could set back retirement age, promote later retirement by creating meaningful payout increases for those that retire later on in life and contribute more to the program, and legally separate SS taxes and spending from the general budget.

5. Old people don't add to the bottom line, so let's put the money into an investment that gives us a real return. Let's be honest, that pretty much sums up your argument. The problem with that is government's purpose is not to make the best investments in terms of financial return, but the best investments for the general welfare. Now, it certainly might be in the interest of the general welfare to at times make the best financial investment, but certainly not all the time.

I like to think about it like this: there are police officers protecting me right now that were trained with revenue generated long before I was even born or was paying taxes. There are F-15's and F-16's flying air superiority missions built from monies and government funded research from long before I was born or paying taxes. I drive on roads built before I was born. I live in a city laid out by urban planners long before I was born. I stand on the investment of hundreds of generations of peoples. I don't think it is a terrible thing to spend some money on the latest generation on its way out.

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SenojRetep
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BF-

Were you talking to me, or Aerin? I think she's the only one who's advocated abolishing SS. I think we should scale it back dramatically, but I pretty specifically said that SS should continue to exist.

1. Good for Germany. We should do the same; raise taxes and decrease outlays. Not this year, or the next, but soon and for a long time.

2. I don't believe it will "smooth" out as much as you anticipate. Japan has an inverted demographic pyramid, so do many European countries, and all signs indicate the US is continuing in that direction. IMO, there will continue to be a smaller tax base than can be reasonably expected to support the retirement base at the levels currently envisioned, especially as life expectancies continue to increase.

3. It certainly spreads the burden over society, but it's less efficient. Providing G&G with the means to live on their own artificially inflates all sorts of costs from housing to food to transportation.

4. I agree. That's why I'm not suggesting we abolish SS, but rationalize it so that it better reflects what I believe our national fiscal priorities are.

5. I agree again. There's a time for compassion and support. But I also think that if our compassion for the elderly hamstrings our ability to educate our children, its a bad fiscal policy.

Your arguments for police and F-15s and other investments don't answer. SS isn't an investment; it's a nice thing we've done to protect a class of individuals who historically in our country have suffered privations as a result of their inability to engage in work. It's a good thing; it speaks to our better nature. We should keep doing it. But we shouldn't let it get in the way of doing other good things as well. And I believe that the current and projected future funding levels impede progress on other important priorities, and will continue to inhibit our ability to grow and progress as a country into the future.

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SenojRetep
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BTW, one thing I was thinking about after the back and forth with Kate last night is the problem with using $250,000 as a tax rate increase threshold. Specifically, I think $250,000 household income is ridiculously high. 75% of households have income below $75,000. But $250,000 has become a cognitive anchor in all our discussions of taxes.

I believe that lots of households with adjusted incomes between $75-250K could afford to pay more (increases even over Clintonian levels), but no one from either party has made a serious suggestion about raising taxes on anyone but those making over $250K, because of what I believe was an ill-conceived campaign promise. Such increases would perhaps make us feel good, because it's promoting economic equality, but it won't have anything like the necessary effect on federal revenues.

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kmbboots
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Sorry for another short post.

What does proceeding into the future mean if not better lives for the citizens of the country? All of the citizens, including the old and sick ones. If they don't proceed, we don't proceed as a country.

I think that $250K could be lower but it is a start.

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SenojRetep
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Kate, did you see my earlier suggestion of personalizing SS retirement age? In what way is that leaving the old and sick behind to die? I think you have a binary view of the issue, that any decrease in SS outlays is tantamount to throwing G&G into the street, and it just isn't so.

And no politician is treating $250K as a start. It might make you feel good to think of it in those terms, but the reality is Obama's pledge has made the path to fiscal solvency much more difficult for the country, both directly and indirectly.

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kmbboots
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You might note that I have suggested need based SS several times. That is a change right there.

We haven't even gotten congress to agree to $250K yet.

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SenojRetep
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That's true; you have, my mistake. I don't understand the point of your question then; in what way has anything I've suggested amounted to leaving the old and sick behind?
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fugu13
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First, the 18% number. While that's held moderately constant for federal gov't revenue, total gov't revenue in the US has trended strongly upwards over the same period. See here: http://www.usgovernmentrevenue.com/revenue_history . That's strong evidence that federal gov't revenue has at least the potential to increase as a percent of GDP. What's more, we're currently well below the peak after a drop in 2008. It also completely undermines the crowding out needed expenditure story, as most of the expenditures you identify should stay fairly constant as a percent of GDP -- and we managed to provide them when total gov't revenue was a much lower percentage from peak of GDP.

quote:
2. I don't believe it will "smooth" out as much as you anticipate. Japan has an inverted demographic pyramid, so do many European countries, and all signs indicate the US is continuing in that direction. IMO, there will continue to be a smaller tax base than can be reasonably expected to support the retirement base at the levels currently envisioned, especially as life expectancies continue to increase.

Luckily, this is fairly easy to predict several decades in advance, because the people who will be working in a given time are already born, and most of the rates of change are extremely predictable. Current projections ( http://www.census.gov/population/www/projections/natchart.html for snapshots) have the US problem peaking in the vicinity of 2025, then settling down a good bit by 2050, into a configuration not quite as good as in 2000, but about the same as now. And to preempt, we saw the population pyramid changes coming in places like Japan, too. Also, our population pyramid (and economy) will be greatly improved if we substantially liberalize immigration policy.

I agree completely that tax increases must extend well below $250k (they'll likely need to hit at least as low as $100k) to have their needed impacts.

quote:
Your arguments for police and F-15s and other investments don't answer. SS isn't an investment; it's a nice thing we've done to protect a class of individuals who historically in our country have suffered privations as a result of their inability to engage in work. It's a good thing; it speaks to our better nature. We should keep doing it. But we shouldn't let it get in the way of doing other good things as well.
Agree completely. That's why my proposed approaches take care of that [Wink] . Again, with the tweaks specified, social security would peak at maybe 8%, and then decline, I guesstimate to a tad under 7%, not much larger than currently (due to substantially fewer people receiving the benefit while maintaining it for those who need it, in a population pyramid that's close to the current one).

quote:
I would favor changing the "one size fits all" system into something that makes much more personalized decisions about an individual's continued ability to hold down a job. This would increase the fairness of the program, as people would get more uniform benefits, rather than poor unhealthy people only collecting for a couple of years and rich, healthy people collecting for much longer. I would set the threshold such that, on average, people collected for about the final five years of their lives, which is in line with the original intent of SS. This would, I believe, reduce annual spending by more than half without decreasing monthly stipends. It would significantly increase retirement age for people not working in labor intensive fields, but I see that as a benefit rather than a cost.
The ideas behind the approach aren't too bad (my personal preferred approach is just to have a guaranteed minimum income for everyone that declines gradually with income earned). The specifics don't work, though. People are unproductive and need support much longer than five years at the ends of their lives; targeting five years means leaving huge numbers of people unable to earn much, if any, income without assistance.

quote:

The healthcare thesis is provocative, but my initial reaction is that encouraging more spending on something that produces little good for society isn't a very good idea. Perhaps I'm the one moralizing now, but I don't think the billions of dollars we spend on sustaining our parents, grandparents, and other loved ones for an additional few days at the end of their lives contributes very much to the Gross National Happiness.

I suspect you'll feel differently when you're experiencing those days [Wink] . Also, most of what we're talking about isn't a few days, but a few years. And I'm not sure why people working in health care earning money contributes less to the GNH than other jobs [Smile] .

I'm not saying use gov't force to redirect huge sums of money to those ends, I'm saying let people redirect the money they have to those ends. I want a reasonable minimum healthcare made available for all for moral reasons, but I also want people to have the freedom to pay (and pay substantially, if they want) for more healthcare. The trick is figuring out the dividing line between reasonable minimum and payment supported.

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SenojRetep
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Fugu-

Thanks for the detailed response. I'm afraid mine will likely be less well thought out.

I appreciate the additional information on state and local revenue increases over time. I would dispute, though, it's value in predicting capacity for increased federal revenues, beyond the natural increase as employment picks up and the effects of the downturn dissipate. But, honestly, I'd be glad if we could demonstrate significantly increased federal revenues. I think most federal programs are based on good ideas, so if we can increase revenues to cover them that would be fine. I remain skeptical, but would not be disappointed. However I do think planning as if it's a foregone conclusion that we could raise federal revenues of 29% of GDP would be foolhardy.

On demographics, I'll bow to superior research.

Not remembering precisely what your recommended tweaks were. Means testing and raising the retirement age? I just don't remember. I think you're underestimating most people's ability to remain employable, even in a diminished capacity. But I would be comfortable with a system that used thresholds of employable capability rather than a fixed distance from end of life. I'm most concerned with making benefits more uniform across society, while recognizing that some people's health and professions allow them to work much longer than others.

Finally, I have experienced old age death among my grandparents, more recently with my wife's grandparents, and imagine I'll face it soon with my own parents. Which is to say I'm not wholly inexperienced with the difficult decisions that have to be made when death approaches.

I wouldn't dispute the right of an individual to spend money on expensive treatments that will have minor impact in extending their loved ones' lives. But encouraging such a system perpetuates the idea, I believe, that we are obligated to "do all we can" before we're able to admit "defeat" in the face of death. I don't think that's a healthy attitude to have about death, so I don't think we should encourage (and perhaps that we should actively discourage) such behaviors. But I haven't given it a lot of thought, and as I write it my own opinion sounds fairly monstrous to me, a good indication that I'm probably strongly overstating my views on the matter.

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Destineer
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quote:
On a different note, I read a very interesting post recently where someone said that the whole idea of keeping health care costs down doesn't make as much sense as it seems.
Do you have a link for this? I'd love to read it.

quote:
But encouraging such a system perpetuates the idea, I believe, that we are obligated to "do all we can" before we're able to admit "defeat" in the face of death. I don't think that's a healthy attitude to have about death, so I don't think we should encourage (and perhaps that we should actively discourage) such behaviors
Ah, see, I think that's exactly the correct attitude to have toward death. I'd feel very differently if I believed in an afterlife, though.
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fugu13
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quote:
Thanks for the detailed response. I'm afraid mine will likely be less well thought out.

I don't have time for a lengthy reply, but no worries, I'm enjoying the conversation [Smile] .

quote:
However I do think planning as if it's a foregone conclusion that we could raise federal revenues of 29% of GDP would be foolhardy.
Definitely. I only foresee a slight rise, to perhaps 20 or 21%, being possible/necessary without a drastic public rethinking. And after a drastic public rethinking, I hope it will still only be a slight rise overall.

quote:
I'm most concerned with making benefits more uniform across society, while recognizing that some people's health and professions allow them to work much longer than others.
It's a very difficult question. I can definitely understand the desire for that sort of approach. I'm not sure there's any feasible way to approach it, though, much less avoid the likely problems with gaming the system. One reason I like guaranteed minimum income is that it is extremely simple to implement, and since earned income would only partially crowd out the subsidy, there's (somewhat) less incentive to game the system.

quote:
Do you have a link for this? I'd love to read it.

It took me a little while to find, but here we go: http://www.bloomberg.com/news/2011-07-21/business-class-longer-lives-and-lower-health-costs.html
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