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Thread: Obama sending Congress $4T budget replete with new spending, taxes

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    Re: Obama sending Congress $4T budget replete with new spending, taxes

    Quote Originally Posted by Lutherf View Post
    I've also got a problem with "Aggregate Demand" since it counts government spending twice. It's counted directly one time and then it's also counted as a function of Consumption.
    Errr.... no, government spending isn't counted twice in AD or GDP.

    Aggregate Demand (AD) = C + I + G + (X-M)

    C = Consumers' expenditures on goods and services. I = Investment spending by companies on capital goods. G = Government expenditures on publicly provided goods and services. X = Exports of goods and services. M = Imports of goods and services. (Aggregate Demand Definition | Investopedia)


    GDP = C + G + I + NX

    where:

    "C" is equal to all private consumption, or consumer spending, in a nation's economy; "G" is the sum of government spending; "I" is the sum of all the country's businesses spending on capital; "NX" is the nation's total net exports, calculated as total exports minus total imports. (NX = Exports - Imports) (Gross Domestic Product (GDP) Definition | Investopedia)

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    Re: Obama sending Congress $4T budget replete with new spending, taxes

    Quote Originally Posted by Visbek View Post
    Actually, it can. A 100% debt-to-GDP ratio causes no issues whatsoever, as long as the government has sufficient revenues to make interest payments. The claims that a 100% ratio impedes an economy are false.



    Medicaid is funded directly by the federal and state governments. By definition, it cannot be "underfunded."

    SS and Medicare are pay-as-you-go systems, which are funded by payroll taxes. For decades, payroll taxes have brought in more revenues than they spent, and for many years the surplus went into a trust fund. What will happen in a few years, if we don't adjust things, is that payroll taxes won't cover those costs.

    However, this is pretty much just sleight of hand. Taxes are taxes are taxes, and there's nothing magical about payroll taxes, except that we've struck this arrangement to make people pay for these services out of wages rather than all forms of income. It's like a man saying he's dying of thirst, because he wants to drink only from the empty glass in front of him, and he refuses to drink from the full mug next to it.

    That said, yes SS and Medicare will take up larger shares of the budget, and we really ought to do something about it. The real issue in that regard is factors like the rising cost of medical care for the elderly, and demographic bubbles that are beyond our control.
    Except you are just partially correct, the excess from SS and Medicare went into the trust fund only to be replaced by an IOU that the govt. put there as they used the money. More money was spent on issues other than SS and Medicare which has left the so called trust fund with a mountain of IOU's that eventually have to be funded. SS and Medicare were used to show a lower deficit in public debt but total debt continued to rise. That is how Clinton claimed a surplus and the minions who don't understand the two components of debt cheer the so called surplus ignoring that it was SS and Medicare that were running the deficit and that contributed to the 1.4 trillion debt Clinton generated.

    Social Security IOUs stashed away - Washington Times

    Government - Historical Debt Outstanding Annual

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    Re: Obama sending Congress $4T budget replete with new spending, taxes

    Quote Originally Posted by Visbek View Post
    Errr.... no, government spending isn't counted twice in AD or GDP.

    Aggregate Demand (AD) = C + I + G + (X-M)

    C = Consumers' expenditures on goods and services. I = Investment spending by companies on capital goods. G = Government expenditures on publicly provided goods and services. X = Exports of goods and services. M = Imports of goods and services. (Aggregate Demand Definition | Investopedia)


    GDP = C + G + I + NX

    where:

    "C" is equal to all private consumption, or consumer spending, in a nation's economy; "G" is the sum of government spending; "I" is the sum of all the country's businesses spending on capital; "NX" is the nation's total net exports, calculated as total exports minus total imports. (NX = Exports - Imports) (Gross Domestic Product (GDP) Definition | Investopedia)
    So if the government hands out $2T in social security, farm subsidies, military contracts, food stamps, etc. that money doesn't get spent by the recipients? I'd generally disagree with that perspective.

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    Re: Obama sending Congress $4T budget replete with new spending, taxes

    Quote Originally Posted by Conservative View Post
    Except you are just partially correct, the excess from SS and Medicare went into the trust fund only to be replaced by an IOU that the govt. put there as they used the money.
    They're called "government bonds," and the federal government repays the trust fund with interest. It does that instead of borrowing the money from the private sector.

    Borrowing against the surpluses held by the trust fund doesn't change the accounting. It's still excess revenues taken in by payroll taxes. It's still likely, at this time, that SS/Medicare expenditures will be greater than payroll tax revenues around 2032. It's not a screaming crisis, because all it means is we'd have to fund part of SS/Medicare with different tax revenues.

    More importantly for this discussion: Intragovernmental debts are included when calculating the debt-to-GDP ratio.


    More money was spent on issues other than SS and Medicare which has left the so called trust fund with a mountain of IOU's that eventually have to be funded.
    ...yes, that's a result of the slightly ridiculous accounting structure of payroll taxes.

    Instead of collecting taxes and putting it into a big pool, we segregate payroll taxes and assign it to SS/Medicare. If payroll tax revenue went into the general funds, and SS/Medicare were paid out of the general funds, the government wouldn't have to loan itself the capital in the trust fund. It's an accounting trick that basically results in us allocating a tiny bit more money to SS/Medicare.

    Ultimately, the screams that "ZOMG SS IS GOING BROKE!" are based on a fiction that payroll taxes ought to be segregated. Since a tax is a tax is a tax is a tax, and there's really no reason to think of this structure as absolute or inviolate, you can spare us the inaccurate scare-mongering.

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    Re: Obama sending Congress $4T budget replete with new spending, taxes

    Quote Originally Posted by Lutherf View Post
    So if the government hands out $2T in social security, farm subsidies, military contracts, food stamps, etc. that money doesn't get spent by the recipients? I'd generally disagree with that perspective.
    Yes, it does. The same goes for private spending as well. When a private employer pays a wage, the employee then spends a percentage of that on goods and services; the wages and subsequent spending are all included in GDP. If a private company builds a new office for itself, the company's spending on materials and wages are calculated in GDP; when the construction worker spends their wages on groceries and rent and health care, that's also included in GDP. When the grocery store that the construction worker collects that revenue, they in turn spend it on their employees, their rent, their electricity, and so on.

    This is known as the multiplier effect, and it's a Keynesian concept.

    Fiscal multiplier - Wikipedia, the free encyclopedia

    Or are you suggesting that the federal government's multiplier for general spending is 5 times greater than the actual spending? You might actually have a case there though I think that's a generous multiplier.

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    Re: Obama sending Congress $4T budget replete with new spending, taxes

    Quote Originally Posted by Lutherf View Post
    I've also got a problem with "Aggregate Demand" since it counts government spending twice. It's counted directly one time and then it's also counted as a function of Consumption.
    Sort of, it comes down to how the math is applied.

    Technically Aggregate Demand (AD) is the sum of consumer spending on goods and services or Consumption (C) + Gross Domestic Fixed Capital Formation or Investment (I) + Government spending on "Final Consumption" (G) + net exports (again, exports minus imports and in our case still negative.)

    The trick is the determination of Final Consumption for Government Spending, which should be just expenditures by the government on goods and services *but* exclude transfer payments (like Social Security, Welfare, Food Programs, etc.) Think public and influenced goods and services (or merit goods and services.)

    To your point if someone were to incorrectly include transfer payments in Government Spending (G) for this equation, then you are right they would effectively apply math to (G) that is supposed to only be included in (C). And by effect double count that math. The sum of consumer spending (C) on goods and services is supposed to be a reflection on disposable income at the consumer level, or after taxes and regardless of source of income.

    As a tie in to the OP, we are not seeing much in change for Government Spending that suggests influencing (G) all that much, such as infrastructure projects and technology. But with this President we have seen an explosion in Government Spending that results in basic Consumption (C.) Or, spending too much going to dependence as it applies to aggregate demand but not spending enough on core investment as it applies to aggregate demand. Aggregate demand still increases but now it is a question of health. Or, pure dependence in exchange for a vote mentality (political objective) vs. healthy economic input through long term impacting projects as economic cycle stabilizers that economists speak of (the whole point of mixed model economics.)
    "Every time something really bad happens, people cry out for safety, and the government answers by taking rights away from good people." - Penn Jillette.

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    Re: Obama sending Congress $4T budget replete with new spending, taxes

    Quote Originally Posted by Visbek View Post
    They're called "government bonds," and the federal government repays the trust fund with interest. It does that instead of borrowing the money from the private sector.

    Borrowing against the surpluses held by the trust fund doesn't change the accounting. It's still excess revenues taken in by payroll taxes. It's still likely, at this time, that SS/Medicare expenditures will be greater than payroll tax revenues around 2032. It's not a screaming crisis, because all it means is we'd have to fund part of SS/Medicare with different tax revenues.

    More importantly for this discussion: Intragovernmental debts are included when calculating the debt-to-GDP ratio.



    ...yes, that's a result of the slightly ridiculous accounting structure of payroll taxes.

    Instead of collecting taxes and putting it into a big pool, we segregate payroll taxes and assign it to SS/Medicare. If payroll tax revenue went into the general funds, and SS/Medicare were paid out of the general funds, the government wouldn't have to loan itself the capital in the trust fund. It's an accounting trick that basically results in us allocating a tiny bit more money to SS/Medicare.

    Ultimately, the screams that "ZOMG SS IS GOING BROKE!" are based on a fiction that payroll taxes ought to be segregated. Since a tax is a tax is a tax is a tax, and there's really no reason to think of this structure as absolute or inviolate, you can spare us the inaccurate scare-mongering.
    Where is the money going to come from to convert those bonds to cash? You are apparently a supported of the unified budget and that is a huge mistake when you have a monster like the Federal Govt. That is why there is paper IOU's(bonds if you prefer) taking the place of cash for SS and Medicare. This is now a Ponzi scheme where my money has been spent and your money is what is funding my SS. Sorry but it is broke because there isn't enough cash or enough workers to fund the retirement of the baby boomers.

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    Re: Obama sending Congress $4T budget replete with new spending, taxes

    Quote Originally Posted by Conservative View Post
    Where is the money going to come from to convert those bonds to cash?
    It comes from other tax revenues, and from borrowing. It's also a low rate of interest, basically on par with inflation. It's included in our debt-to-GDP calculations.

    I.e. it really isn't costing us much, and we won't have any more problems paying it back than any other debtor.


    You are apparently a supported of the unified budget and that is a huge mistake when you have a monster like the Federal Govt.
    lol

    So let me get this straight.
    - When we separate out payroll taxes, and loan the money to other parts of the government instead of letting those tax revenues sit and do nothing, it's a Ponzi scheme. (N.B.: it isn't)
    - If we don't separate out payroll taxes, it's huge mistake.


    That is why there is paper IOU's(bonds if you prefer) taking the place of cash for SS and Medicare. This is now a Ponzi scheme where my money has been spent and your money is what is funding my SS.


    No, dude. Just... no.

    Social Security is not a giant IRA. It's a welfare system.

    If you paid into Social Security in 1990, that money didn't go into a secret hidey-hole with your name on it. By design, it was spent on the people who collected SS in 1990. If you paid in the past, then "your" money was spent a long time ago. If you are paying today, then "your" money is going straight to the people who collect SS.

    This is one reason why proclaiming that "SS is broke!" is absurd. Demanding that Social Security can only be paid via payroll taxes is, ultimately, a legacy of a decision that eventually won't make sense. If nothing changes, and the trust fund is deleted in 2032, the sky will not fall and the program will not cease. It just means we'll have to make up the shortfall with other taxes, and/or cut some of the benefits.

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    Re: Obama sending Congress $4T budget replete with new spending, taxes

    Quote Originally Posted by Fenton View Post
    LOL !!

    How would this budget help '' service " more people ?

    And how does it help the middle class and American consumers ?

    providing defense?
    supporting the petrodollar?
    maintaining IS highways to bring goods to walmart?

    etc

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    Re: Obama sending Congress $4T budget replete with new spending, taxes

    Quote Originally Posted by Visbek View Post
    It comes from other tax revenues, and from borrowing. It's also a low rate of interest, basically on par with inflation. It's included in our debt-to-GDP calculations.

    I.e. it really isn't costing us much, and we won't have any more problems paying it back than any other debtor.



    lol

    So let me get this straight.
    - When we separate out payroll taxes, and loan the money to other parts of the government instead of letting those tax revenues sit and do nothing, it's a Ponzi scheme. (N.B.: it isn't)
    - If we don't separate out payroll taxes, it's huge mistake.





    No, dude. Just... no.

    Social Security is not a giant IRA. It's a welfare system.

    If you paid into Social Security in 1990, that money didn't go into a secret hidey-hole with your name on it. By design, it was spent on the people who collected SS in 1990. If you paid in the past, then "your" money was spent a long time ago. If you are paying today, then "your" money is going straight to the people who collect SS.

    This is one reason why proclaiming that "SS is broke!" is absurd. Demanding that Social Security can only be paid via payroll taxes is, ultimately, a legacy of a decision that eventually won't make sense. If nothing changes, and the trust fund is deleted in 2032, the sky will not fall and the program will not cease. It just means we'll have to make up the shortfall with other taxes, and/or cut some of the benefits.
    Wow, You have to be kidding. This is your argument that all dollars are the same? You have no problem paying FICA(Payroll Taxes) for SS and Medicare only to have that money spent to pay for things not SS or Medicare related? Liberals have to love you

    For decades we had more money coming out than going in and yet that money was spent, replaced with IOU's which someday have to be funded. You believe they will come from other revenue or from borrowing on which we have to pay interest? That is what is wrong with this country, you have no concept of debt service, no problem with the general fund paying for your retirement, no understanding of SS and Medicare, no understanding of budgeting, no understanding of a Ponzi scheme in which someone else will pay for your retirement with their money because your money was spent?

    You obviously didn't read the article about the SS IOU's because if you did you would understand that there isn't enough revenue coming in to pay for SS and Medicare expenses along with the rest of the U.S. Budget. something has to give. Declaring that SS can only be paid by payroll taxes doesn't make sense to any liberal because borrowing and spending is the entire liberal legacy and now apparently yours.

    Sorry but it your logic that doesn't make any sense and that is the way that our govt. wants it. There is a reason that people retiring in 1990 were paid for by someone else's payment. The money was spent and someone else has to pay the expense due. That by definition is a Ponzi scheme. People go to jail for that

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