Wednesday, January 8, 2014

USA Recent Spend History

Here is a graphic to ensure we all understand how national spending has increased.

33 comments:

Anonymous said...

Does the government get bigger when someone starts receiving a Social Security check? Does government get bigger when a child's health care expenses are paid for by Medicaid?

--Hiram

jerrye92002 said...

Interesting question. My answer would be yes. It is bigger because more people are dependent on government taking from some to give to another. It is bigger because at some point it will take more bureaucracy to administer the additional check-writing. It is bigger because these programs are operating in the red, making the deficits larger and our collective obligation to pay the debt larger.

Anonymous said...

"It is bigger because more people are dependent on government taking from some to give to another."

Is the Social Security recipient dependent on the government? Or on the person supplying the money? Bearing in mind that before he started receiving the money, he was a supplier of the money?

"It is bigger because these programs are operating in the red, making the deficits larger and our collective obligation to pay the debt larger."

Social Security was in the black for decades. Did it only become part of the government when it started paying out more money than it pays in? And let's note also, now that Social Security is paying out more than it's taking in, the net effect is to reduce rather than increase the deficit.

--Hiram

John said...

Unfortunately when he was the supplier of the money, he supplied too little to cover the expense of the benefits he hopes to receive. As soon as the cost of the benefits exceed the premiums paid + interest, he is now on government "welfare".

Technically the SS bond redemption is probably deficit and debt neutral. I assume the government is simply changing the ownership of the debt, since the debt is not falling. The SS Trust Fund's "assets" / "number of bonds it holds" are falling, and some one else is buying more bonds.

The redemption of those bonds would increase the deficit and reduce the debt if the government had to actually pay them back. (and couldn't sell more)

John said...

And when the SS and Medicare bonds have all been redeemed. Then the problems really begin.

Laurie said...

Non-Defense Discretionary Spending Is Falling to Historically Low Levels, Even Without Sequestration

NDD spending as a share of the economy is on a sharp downward path as a result of the cuts enacted since 2010. Whether the sequestration cuts continue or not, NDD spending will reach its lowest share of the economy on record by 2016 (in data that go back to 1962).

cbpp

So is spending up or down? funny how I find my link/graph more persuasive in regards to fed. gov spending trends than the graph in your post.


jerrye92002 said...

It comes out to 5% per year, every year for 30 years. Did your salary go up by that much? Is the federal government really delivering 4.5 as much "value" as it was 30 years ago? Just like State government (though MN is worse), the proper starting point of every budget should be zero, requiring every program to be justified, every year.

jerrye92002 said...

Laurie, I don't think you are looking in the right place. NDD may be going down as a percent of the total (whether as a fraction of GDP I don't know) but the concern has to be the TOTAL budget. We will never get control of spending without addressing the entitlements, we all know it, but Democrats live in that alternate reality where simply saying how evil Republicans are for wanting a balanced budget results in the reality being what they want it to be.

Here we are worrying about a national debt of $17T, 100% of GDP, when our unfunded liabilities-- what we have promised to pay out in entitlements less what they will take in-- is at least 6 TIMES that much! In other words, if the federal income tax was raised to 100% for 7 years, we wouldn't have to worry about the budget deficit. Some folks would consider that unworkable, but what is the alternative?

John said...

It seems these comments and this link are needed here also.


Pages 14 and 16 of this report have some interesting data.
FAS Discretionary Spending

It does look like those entitlements are going to overwhelm us like a tidal wave... Maybe if we just ignore it, it will disappear...

Let's keep praying that interest rates don't go up, or then it will be servicing the debt that drowns us.

So many opportunities...

The conclusions on page 33 pretty much say it all.

John said...

Conclusion Text:

"The shift toward mandatory spending and away from discretionary spending may raise concerns for two reasons.

First, as the portion of the federal budget controlled on a year-by-year basis shrinks, making adjustments in spending levels may become more difficult. Mandatory spending,which requires changes in authorizing legislation, is not normally considered on an annual basis.

Moreover, existing budget enforcement mechanisms are largely designed to constrain
discretionary spending, while measures that can be used to reduce mandatory spending have been more difficult to apply in recent years.

Second, the rise of mandatory programs’ share of federal spending reflects an aging population. Policymakers may choose to adapt the structure of the federal budget to reflect the needs of a growing segment of retired or elderly Americans.

Such shifts in resource allocation, however,could affect intergenerational equity and the federal government’s ability to respond to the needs of future generations."

John said...

So let's summarize, those at or approaching retirement age did not pay high enough payroll taxes during their working years to adequately fund the "pension fund".

And instead of voluntarily reducing benefits to match their contribution, they will fight to keep their "excessive relative to premiums paid" benefits. Even though it means it will take money from their children and grand children today, and leave them deeper in debt.

John said...

Now remember that all of the entitlement debts can disappear with the passage of new laws. The Supreme Court has already ruled apparently that it is not "our money" in that "Trust Fund". It is the government's money.

So the choice to reduce "discretionary" spending in preference of supporting "mandatory" spending is just that. A choice...

I assume you support cutting "discretionary" spending instead of cutting "entitlements".

The reality is that gov't spending is going up to fast. Now what choices do we want to make...

John said...

Personally I want to get rid of SS and Medicare immediately.

Then those who have saved can pay their own way. And those that haven't can live off welfare and medicaid.

John said...

Per your link:
I think you reaffirm my point that the Liberals want to reset the higher "emergency & temporary funding levels" as the new normal.

That's why a lot of their "cuts" comparisons only go back a couple of years.

"Policymakers have cut NDD programs in three waves: in the 2011 appropriations bills, then under the BCA funding caps, and finally through sequestration. If sequestration remains in effect, NDD in 2014 will be 18 percent below its level in 2010, adjusting only for inflation. (We use 2010 because it is the last year before Congress began cutting discretionary funding.)"

Laurie said...

For greater accuracy you should focus your complaints on medicare, as for most retirees lifetime social security taxes are greater than lifetime social security benefits.

Medicare and Social Security: What you paid compared with what you get

Laurie said...

Medicare and Social Security: What you paid compared with what you get

Anonymous said...

Unfortunately when he was the supplier of the money, he supplied too little to cover the expense of the benefits he hopes to receive.

That's not exactly the case. In 1984, a plan was put into place that would ensure the financial stability of Social Security until the 2030's. The plan was specifically intended to address the problem of the baby boom, to even out the bumps in the population. There wasn't anything particularly wrong with the plan. What's changed is our commitment to implementing it. It would never have occurred to Ronald Reagan that America would choose to dishonor it's bonds. That's not something that occurred to me back in 1984 either. But things have changed, It's no longer morning in America. And we have discarded the old ways. Now that the benefits of the deals we have made have been exhausted, we no longer understand why we should pay their price.

==Hiram

Anonymous said...

Now remember that all of the entitlement debts can disappear with the passage of new laws

John is absolutely correct here. We can choose to dishonor our promises if we want to.

--Hiram

Sean said...

Republicans don't really want a balanced budget, either. Heck, most House committees couldn't even pass appropriation bills that met the first year spending targets of the Ryan budget, which takes many years to get to balance.

jerrye92002 said...

Laurie, that's brilliant. You point out what a "lousy deal" Social Security is for everybody, returning 1% on the investment in the "best case" of low lifetime earnings, and a NEGATIVE return for those making more. At the same time you point out that Medicare-- government mandated and controlled health care, is the real budget-buster.

But I'm not ready to do what John suggests, just ending both. It's cruel and absolutely unnecessary. For Social Security, it can be phased out over the next 30 years, in favor of (mandatory, if you want) private (regulated, if you insist) private investment accounts. That would give people a real guaranteed asset with a real return on the investment and, best of all, grow the economy. As for Medicare, that needs to wait a bit. First we have to get rid of Obamacare before the American health care system is destroyed. And quickly. Then Medicaid needs to be turned back to the states with no-strings federal funding on a "premium support" basis only, on a decreasing scale as states rapidly become more efficient. THEN Medicare can be reformed along those same lines, making it NOT mandatory, and without the price escalations and service distortions caused by the federal "fee for service" model.

jerrye92002 said...

The fundamental conceptual error here is the notion of "mandatory" spending-- entitlements-- in the first place. There should be no such thing. It's like the old line from "The Music Man," "You can eat your fill of all the food you bring yourself." Government should not be giving money to anybody except "in exchange for goods and services." Medicare and Medicaid, beyond the dedicated taxes paid in specifically for them, are welfare, and those programs simply set no expectations on their recipients. When I was younger, I calculated that I was actually eligible for food stamps, though I had a good job and a nice (mortgaged) home. All I needed to do was to buy a bigger house that I couldn't afford, a brand new car that I couldn't afford, and then blow all my savings on a deluxe vacation somewhere. Three bad decisions and government hands me a check. Why?

Unemployment insurance (the old kind, paid by employers) required you to actively seek work. Wisconsin's welfare reform was similar. Government welfare doesn't work and cannot work and needs to end before our economy sinks.

jerrye92002 said...

"And when the SS and Medicare bonds have all been redeemed. Then the problems really begin."

There's the fallacy the government wants you to buy. Redeeming those bonds to pay benefits takes money out of the general fund, and when those bonds run out, the money to pay benefits will come out of the general fund. The bonds are a transparent fiction-- a completely meaningless transaction in the middle of the process.

Anonymous said...

"The fundamental conceptual error here is the notion of "mandatory" spending-- entitlements-- in the first place."

I have no problem at all in jettisoning the concepts that these benefits are "mandatory" or that we are "entitled" to them. But that doesn't address the issue that we have decided to create for ourselves, whether we should keep the promises we have made.

Maybe government shouldn't be giving money, but it did. That's what happened back in 1984. That's an executed policy decision that can't be reversed 30 years later. What we can do is break the promise today that we made back then. And there is a certain logic to that. We had 30 years of benefit from that policy, but now the bill is coming due. Why not just dump the bill in the recycling bin? How could we possibly benefit from paying it, when the alternative is as easy as just passing, or even not passing a bill?

--Hiram

Anonymous said...

"Redeeming those bonds to pay benefits takes money out of the general fund, and when those bonds run out, the money to pay benefits will come out of the general fund."

That's kind of in the nature of paying debts. When I get my Target bill with all those Christmas expenses, instead of paying it, I might send them a little note explaining how payment of debts takes money out of the economy going forward, and in particular takes money out of my general funds which could otherwise be used for current expenditures.

How do you think Target would react to that?

--Hiram

jerrye92002 said...

"What we can do is break the promise today that we made back then."

I don't think we should break our promises (on Social Security) at all. That's why the plan I support (not my own invention, btw) phases it out in favor of private accounts, so that those who are already or near to retirement get everything that was promised to them, and those who are further from retirement will find that the promise of Social Security for them, which they KNOW will not be kept, can be fulfilled from their secure and vested private accounts.

Sean said...

Jerry, private accounts have one giant flaw (and many smaller ones) -- there's no plan to pay the transition costs. It's horrible for current workers because not only would they be mandated to pay the retirement of those currently collecting SS, but then also be forced to contribute to their own retirement -- one without any of the guarantees that SS provides them today.

John said...

Laurie,
Excellent link.

Personally I think it is you who are complaining... "They keep reducing the discretionary spending... boohoo"

The reality is that the government over promised, so do we correct that problem or keep struggling to pay for it at the expense of our children?

John said...

By the way, I am fine just eliminating just Medicare and moving the needy over to Medicaid.

Then people with money could buy insurance that meets their needs.

That would eliminate most of the looming entitlement cost problem.

Though we would probably have to eliminate the "disability" portion of SS also. Since that is the one that will be going insolvent first, and it seems that should fit well into the concept of welfare / social services.

jerrye92002 said...

"Jerry, private accounts have one giant flaw (and many smaller ones)"

You are correct that transition costs would be a problem if we stopped "cold turkey," but that is not what is being proposed. First of all, we are already incurring the "transition costs" because SS is paying out more than it is taking in; that will only get worse, and the difference is coming out of the general fund anyway. Second, nobody is talking about eliminating the Social Security tax on employers, so more than half of the current Social Security revenue would continue to fund existing benefits. Finally, we are only reducing individual employee Social Security revenue completely for those under 25 years of age or so, with lesser amounts applying up to older workers, while those aged 57 and up would continue to pay in the full amount. And as younger workers retire, they will receive lower benefits, supplemented by the private account, while the corresponding eldest cohort of beneficiaries stops drawing benefits altogether.

As for the "guarantee" of Social Security, it is a myth, pure and simple. Calling it a Ponzi scheme is not unreasonable and in fact fairly accurate, because it WILL come apart at the seams at some point. Try dying at age 65 and see what kind of a "guarantee" you have, compared with your personal investment portfolio. For that matter, I don't think an investment that promises to return my money with less than a 1% return, minus inflation, is worth doing. I would be better off putting my money under the mattress!


Anonymous said...

As for the "guarantee" of Social Security, it is a myth, pure and simple.

I don't know of any guarantee that can withstand a guarantor's decision not to honor it. In that sense, all guarantees are myths. But it's also true that myths can be very important in our lives.

--Hiram

jerrye92002 said...

Hiram, you're just muddying the water. There is nothing wrong with myth; they are often comforting or educational, even though we know they aren't true. But when we predicate incredibly costly and crucial public and personal financial decisions on a myth, it becomes a dangerous and intolerable lie. If Social Security is to be "saved," it cannot continue as it is, and privatization (over time) is the best way to do it.

John said...

As Laurie noted, Social Security retirement and survivor benefits aren't the problem. It is Medicaid and SS disability that have premiums that are WAY TOO small for the benefits paid.

Thoughts on these?

jerrye92002 said...

SS is not a problem RELATIVE TO these other things, but it's still a problem because it is the same sort of Ponzi scheme. The solution to these other things isn't to raise the premiums, it's to get government out of these massively expensive and ineffective programs.