Debt Fight Headed For "Train-Wreck" On August 2nd

FNS via RCP ^ | June 25, 2011 | Krauthammer on FNS

[MontaniSemperLiberi]

Charles Krauthammer: "I think Obama and the Democratic Leadership have made a bet. The only way to get out of the November election next year alive is to run against Republicans as the 'granny-killers' who want to destroy entitlements. Medicare and Social Security. The only way to reduce the debt is to do something on entitlements. The Democrats will refuse and I think this is all headed for a train-wreck on August 2nd."

Chris Wallace, host: "Really?"

Krauthammer: "Yes, really. I wouldn't say it otherwise."

[MontaniSemperLiberi]

Yes, really Chris.

"The only way to reduce the debt is to do something on entitlements."

But reducing entitlements is necessary but not sufficient.

[ngat]

The Republican leadership has made a huge mistake by conflating discretionary spending with social security retirement and medicare and pretending to try to solve both problems at the same time. This is all part of the program to confuse the people and to resist actually downsizing the federal government.

[Jim Scott]

Krauthammer has a point. Entitlements must be cut and the Democrats have lulled many Americans into either receiving them or thinking that they are some sort of constitutional right as an American. Republicans cannot seriously attempt to lower the national debt without cutting entitlements, and the Democrats know it. Of course there are other budget items that can be cut but as Krauthammer stated, entitlements are crucial and this is the Democrats ace in the hole. The next move will be up to the Republicans and I'm not as optimistic as I would like to be regarding the outcome.

[MontaniSemperLiberi]

If we cut ALL spending except for interest payments on the debt, Defense, SS, Medicare and Medicaid we would still have a deficit.

All of the above and then some must be cut if we are serious about saving our country.

[BobP]

The next move will be up to the Republicans and I'm not as optimistic as I would like to be regarding the outcome.

--------------------------

The next six weeks are going to be momentus for our nation. We need an immediate and guaranteed cut of $500 billion or more in FY '12.

Guess what we're going to get from either party's crooks and good ol' boys Senate club?

When Republicans Say Bipartisanship, They Mean Surrender

Senate Minority Leader Mitch McConnell says ''the best advise I can give you John is to ignore any symptoms and also ignore the concerns from taxpayers that will arise after taking your blue pill medicaton. Your friendly, progressive DNC is the medication expert and is there to help you... steer for the cliff!'' /sarc

[ngat]

But the different items you listed are all for different purposes and are funded by different taxes. So take them one at a time. The two most popular are SS retirement benefits and medicare. They are still in the black and have special taxes that do go directly to a trust fund for payout. So for now, don’t mix this up with FICA tax revenue which funds the others. Cut the so-called discretionary spending to match revenue tax (other-than SS and medicare tax revenue) and its problem solved. Any federal government functions that have to be eliminated or downsized can easily be made the responsibilty of the states that want them. The economy will then take off like a rocket. Then, you can make the changes needed to put SS and medicare on an actuarily-sound basis. Voila!

[Tolsti2]

If you go on DU you’ll see that a lot of people think that if you cut defense you’ll stop the deficit. It’s a tiny portion of the spending, but they really believe it. Also, they believe if you increase the rest of the spending the deficit will disappear. There’s a lot of people that think that way.

[ngat]

I don’t go to DU, so tell me, what is the reasoning behind the idea that if you increase spending the deficit will disappear? How would that work?

[Pearls Before Swine]

The two most popular are SS retirement benefits and medicare. They are still in the black and have special taxes that do go directly to a trust fund for payout.

I don't see it that way. The trust fund is a fiction, since its assets are Treasury Bonds. In reality, all incoming funds are fungible; the fact that on paper these funds have assets is not the important one. The important one is that they are cash-flow negative now, and will become increasingly more cash-flow negative in the future.

In other words, whether or not the trust funds have assets that are being drawn down is a book-keeping detail. What matters is that we are running huge deficits, and these programs will be the main causes of those deficits going forward.

[Glenn]

But they are going to work ALL NIGHT to get to an agreement!

Such hard working people, they are.

[Tolsti2]

I think they believe in a Soviet style system where if people had cradle to grave total government control/support (in theory) that people would work harder and be happier.

[Longbow1969]

Krauthammer has a point. Entitlements must be cut and the Democrats have lulled many Americans into either receiving them or thinking that they are some sort of constitutional right as an American. Republicans cannot seriously attempt to lower the national debt without cutting entitlements, and the Democrats know it. Of course there are other budget items that can be cut but as Krauthammer stated, entitlements are crucial and this is the Democrats ace in the hole. The next move will be up to the Republicans and I'm not as optimistic as I would like to be regarding the outcome.

This is good analysis and I agree with you. Unfortunately, the reason for such little optimism isn't Republican party weakness, it's because what passes for the American public these days is hopelessly wedded to the social welfare state and is still almost completely unwillingly to curtail or even reform entitlements.

When the Republican party, even many otherwise good conservatives, punt on entitlement reform over and over it is simply because for the most part the public does not accept it. There's just no way around it. Even many conservative seasoned citizens recoil at the Ryan plan, heck you even see the "I paid into it and deserve my entitlements" attitude right here from time to time.

What we have are entitlement programs that are headed for complete insolvency and an American public that doesn't want to believe that is true - at least in their lifetimes. Socialism is a drug worse than heroin, and breaking that addiction usually isn't possible till the patient completely crashes. The Democratic party will be happy to lie to the people in order to remain in power till the bitter end. In their minds, when the whole house of cards falls they want to be in power to pick up the pieces. It's all about power for the left and they will do anything to keep it.

[ngat]

No,you are wrong. Try not paying your trust fund taxes and see what happens. Entirely different from your income taxes. The two ARE treated separately. And, they are NOT now cash flow negative. Where do you come up with that stuff?

[Repeal The 17th]

“...SS retirement benefits and medicare..are still in the black and have special taxes that do go directly to a trust fund for payout...”
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Did you just now arrive here from another planet?

[Jonty30]

They think that if you give government jobs to people, they will spend their money on groceries and tv sets, which will provide private sector jobs to people who will then pay taxes and reduce the deficit.

[cc2k]

ngat wrote:

The two most popular are SS retirement benefits and medicare. They are still in the black and have special taxes that do go directly to a trust fund for payout.

There is no "Trust fund" for Social Security or Medicare. Let me try to personalize this for you.

Imagine that your only retirement plan is a cookie jar in your home. Every payday, you put $250 in the cookie jar. And the following Friday night, you take out a piece of paper and write "IOU $250" on it, put it in the cookie jar and take the $250 out and spend it on beer, cigars and other entertainment. You do this every payday for 20 years. At the end of the 20 years, all that you have in the cookie jar is IOU's from yourself.

How much value are the "assets" in your retirement cookie jar at that point?

The "Social Security Trust Fund" contains a bunch of "intragovernmental bonds." These are just IOU's from one government agency to another. The money has all been spent on farm subsidies, food stamps, welfare, cash for clunkers and treadmills for shrimp. The actual money is gone.

And the only way that the government agencies that borrowed from the "Trust fund" can pay it back is by cutting their own spending so they can pay back the "bonds," or by taxing more to pay back the "bonds." Or the Congress could avoid responsibility by "restructuring" the benefits.

Oh, or the Federal Reserve could just print enough money to paper it over. Benefits could be paid at current levels, but with money that is worth much less and won't have the buying power to live on due to the inflation.

[LuvFreeRepublic]

Love your SS for Dummies explanation on comment #16. I just posted it on my FB because I have a few “friends” that just don’t quite get that we are broke. Thanks. Great job.

[Repeal The 17th]

2Corinthians:11:19:
For ye suffer fools gladly, seeing ye, yourselves, are wise.

[Pearls Before Swine]

They are accounted for separately, but from an overall budgetary perspective, they are just another fungible money item. As to the cashflow problems of Social Security, here's one link to an article earlier this year stating that this is now the case: NPR Article--Social Security Goes Negative

A quick search on "Social Security Negative Cashflow" turns up a lot of references.

[hal ogen]

While I may be at some risk, I am willing to let the “deadline” expire to see what happens. These political class morons are so full of it on so many levels. If human history is a guide, if the worse happens their heads will be on pikes anyway.