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

Lutherf said:

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.

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Errr.... no, government spending isn't counted twice in AD or GDP.

Visbek said:

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.

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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

Visbek said:

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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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.

Conservative said:

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.

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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.

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...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.

Lutherf said:

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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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.

Lutherf said:

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.

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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.)

Visbek said:

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.

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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.

Conservative said:

Where is the money going to come from to convert those bonds to cash?

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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.

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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.

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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.

Fenton said:

LOL !!

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

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

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

etc

Visbek said:

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.

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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

SlevinKelevra said:

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

etc

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Have you ever looked at the U.S. Budget and the line items? Suggest you do that and then read the Constitution for the first time in your life.

Conservative said:

Wow, You have to be kidding. This is your argument that all dollars are the same?

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Yes, that's part of my argument. I'm also hypothesizing that you don't understand how Social Security is actually funded.

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?

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Loaned. Since the primary alternative is having the money sit around, do nothing, and lose value to inflation, and since the intergovernment loans are included in the debt-to-GDP ratio, and since we'd just have to borrow the money anyway, I don't have a problem with the intergovernmental loans.

(We could invest some of it in the stock market; that's a common suggestion for increasing revenues.)

There is nothing sacred about FICA taxes. It's merely a legal construction, and a political convenience, that we specified that those taxes be used for SS/MC. If we aren't collecting enough via FICA to provide SS/MC, then our options are limited. We will have to raise taxes and/or cut benefits and/or borrow. No one really likes the first two, which is why we so often end up doing the 3rd.

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.

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...yes, and we're already in the process of paying it back. Trust fund bond terms range from 1 to 15 years. Any funds borrowed before ~1999 are already paid back.

You believe they will come from other revenue or from borrowing on which we have to pay interest?

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You prefer we conjure the funds from thin air?

We're going to have to do something, and it's politically impossible to cut SS enough to make it solvent. We will likely have to raise revenues and cut benefits, as I've already suggested.

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?

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I hate to break it to you, but: It looks like you're the one who doesn't understand it. Again:

• CURRENT payroll tax revenues pay for CURRENT SS expenditures. That's been the case from the start.
• Intergovernmental loans are not reducing the size of the trust fund, and do not jeopardize the funds.
• There is no serious reason to believe the government won't be able to pay back the intergovernmental loans.
• There is no "Ponzi scheme."

I also do understand debt service... in particular that government debt doesn't function the same way an ordinary person with a credit card. As long as the federal government can cover its interest payments, federal debt isn't a big issue.

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.

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Or, if you actually read what I wrote, you'd see how I have REPEATEDLY acknowledged that revenues will be less than expenditures in the near future. The expectation is that the trust fund will be gone by around 2032. Funny thing about that -- as we draw down from the trust fund, there's less to pay back! It's a problem that solves itself.

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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Thank you for proving my hypothesis: You don't understand how SS is funded.

The benefits paid in 1990 were collected in 1990. The surplus of the program in 1990 was loaned to other parts of government, and has been paid back by now. Whatever else happens, it's highly unlikely the US government will default on its debt obligations any time soon. If it does, SS will probably be one of the least of our worries....

Crovax said:

We can cure it just both sides have vested interests in not doing so.

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Which is why we cant cure it. There is no vested interest in reducing the size of govt from anyone but libertarians who make up 1% of the population. 99% want big govt in their lives, whether its liberals who want govt to control everything, or conservatives who want govt to control a little bit less. All we can do is slow it down a little. If you need proof, look at the GOP platform, which talks about saving entitlements, or the House budget which proposes increasing spending.

Visbek said:

Yes, that's part of my argument. I'm also hypothesizing that you don't understand how Social Security is actually funded.



Loaned. Since the primary alternative is having the money sit around, do nothing, and lose value to inflation, and since the intergovernment loans are included in the debt-to-GDP ratio, and since we'd just have to borrow the money anyway, I don't have a problem with the intergovernmental loans.

(We could invest some of it in the stock market; that's a common suggestion for increasing revenues.)

There is nothing sacred about FICA taxes. It's merely a legal construction, and a political convenience, that we specified that those taxes be used for SS/MC. If we aren't collecting enough via FICA to provide SS/MC, then our options are limited. We will have to raise taxes and/or cut benefits and/or borrow. No one really likes the first two, which is why we so often end up doing the 3rd.



...yes, and we're already in the process of paying it back. Trust fund bond terms range from 1 to 15 years. Any funds borrowed before ~1999 are already paid back.



You prefer we conjure the funds from thin air?

We're going to have to do something, and it's politically impossible to cut SS enough to make it solvent. We will likely have to raise revenues and cut benefits, as I've already suggested.



I hate to break it to you, but: It looks like you're the one who doesn't understand it. Again:

• CURRENT payroll tax revenues pay for CURRENT SS expenditures. That's been the case from the start.
• Intergovernmental loans are not reducing the size of the trust fund, and do not jeopardize the funds.
• There is no serious reason to believe the government won't be able to pay back the intergovernmental loans.
• There is no "Ponzi scheme."

I also do understand debt service... in particular that government debt doesn't function the same way an ordinary person with a credit card. As long as the federal government can cover its interest payments, federal debt isn't a big issue.



Or, if you actually read what I wrote, you'd see how I have REPEATEDLY acknowledged that revenues will be less than expenditures in the near future. The expectation is that the trust fund will be gone by around 2032. Funny thing about that -- as we draw down from the trust fund, there's less to pay back! It's a problem that solves itself.



Thank you for proving my hypothesis: You don't understand how SS is funded.

The benefits paid in 1990 were collected in 1990. The surplus of the program in 1990 was loaned to other parts of government, and has been paid back by now. Whatever else happens, it's highly unlikely the US government will default on its debt obligations any time soon. If it does, SS will probably be one of the least of our worries....

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No, it is you that doesn't understand how SS was to be funded, by FICA which is payroll taxes and what has happened is more money came in than went out, LBJ created the unified budget to pay for the Vietnam War and Congresses after that used the unified budget to show a lower deficit than actual. So yes, Intergovt. holdings were used to show a lower deficit, replaced with IOU's that one day have to be funded. So please tell me how running a deficit and having to borrow money to fund the deficit is a good thing? We are paying OUT debt service, not in. Using your funds to pay my SS is nothing more than a Ponzi scheme and something you don't understand. As the article I posted says trillions in unfunded liabilities exist and those IOU's have to be funded. There aren't enough workers to do that so it has to be printed or borrowed. Low interest rates today hide the true costs.

LagerHead said:

Entitlements are not THE problem. They are A problem, among many.



I would at least cut every single one of those, and eliminate several.

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I had the same reaction as I went down that list. Some got a "CUT THIS!", and some got a "WTH IS THIS? - ELIMINATE IT!" from me.

$4 trillion. It scares me that we as a nation don't faint when we see that kind of a number.

tres borrachos said:

I had the same reaction as I went down that list. Some got a "CUT THIS!", and some got a "WTH IS THIS? - ELIMINATE IT!" from me.

$4 trillion. It scares me that we as a nation don't faint when we see that kind of a number.

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12,500 per person. It scares me when people can't scale/normalize simple data. Shall we next discuss how that compares to the rest of the "first world", and why?

SlevinKelevra said:

12,500 per person. It scares me when people can't scale/normalize simple data. Shall we next discuss how that compares to the rest of the "first world", and why?

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As a wannbe socialist you have no idea what the free enterprise, capitalistic economy has generated for you and this country. One of these days you may get your wish and there is no turning back. What scares me is the belief that with an 18.2 trillion dollar debt costing the taxpayers 250 billion a year that people like you still don't believe we have enough govt. Greece would be proud of you

Let me see if I have this right, we have no wars, no recession, a self proclaimed liberals booming economy and Obama proposes a record budget? That apparently only makes sense to a liberal who never believes the govt. spends enough on social programs that create nothing but dependence. Do I have that right, Obama supporters?

Conservative said:

Let me see if I have this right, we have no wars, no recession, a self proclaimed liberals booming economy and Obama proposes a record budget? That apparently only makes sense to a liberal who never believes the govt. spends enough on social programs that create nothing but dependence. Do I have that right, Obama supporters?

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You seem to be forgeting the existance of theongoing war on terror.

Conservative said:

As a wannbe socialist you have no idea what the free enterprise, capitalistic economy has generated for you and this country. One of these days you may get your wish and there is no turning back. What scares me is the belief that with an 18.2 trillion dollar debt costing the taxpayers 250 billion a year that people like you still don't believe we have enough govt. Greece would be proud of you

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As a rabid internet anti-"socialism" warrior, I find it odd that you don't rail against the single largest socialist enterprise in the entire world-- wait for it--- the US Military.

Unitedwestand13 said:

You seem to be forgeting the existance of theongoing war on terror.

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Really? so we need a 4 trillion dollar budget to fund the ongoing war on terror when we never had that big of a budget or expenditures with boots on the ground? Is that liberal logic again? How much of that 4 trillion dollars is actually war on terror related? Bet you don't know. Why don't you give Obama a call and ask him?

SlevinKelevra said:

As a rabid internet anti-"socialism" warrior, I find it odd that you don't rail against the single largest socialist enterprise in the entire world-- wait for it--- the US Military.

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I would but then again I understand the Constitution which says PROVIDE for the Common defense. To me that justifies the military which by the way is 600 billion of the 4.0 trillion dollar request from Obama. Apparently that is too much for someone who enjoys their freedom because of that military

Conservative said:

I would but then again I understand the Constitution which says PROVIDE for the Common defense. To me that justifies the military which by the way is 600 billion of the 4.0 trillion dollar request from Obama. Apparently that is too much for someone who enjoys their freedom because of that military

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LOLOL. I knew it, you love your socialism after all.

The first step is admitting you have a problem.

SlevinKelevra said:

LOLOL. I knew it, you love your socialism after all.

The first step is admitting you have a problem.

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Do you have any idea what Provide for the Common defense means? You call that socialism? Wow, do you live in California or some other blue state?

Conservative said:

Really? so we need a 4 trillion dollar budget to fund the ongoing war on terror when we never had that big of a budget or expenditures with boots on the ground? Is that liberal logic again? How much of that 4 trillion dollars is actually war on terror related? Bet you don't know. Why don't you give Obama a call and ask him?

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You know as well as i do that the majority of spending in the federal budget is on domestic issues. What you do not seem to understand is that the federal government cannot cut funding for social programs without expierencing a hostile backlash from the people enrolled in those programs.