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!
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.
“...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?
There is no "Trust fund" for Social Security or Medicare. Let me try to personalize this for you.
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.
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.
SS is running a deficit right now and has been for the past few years. If the SS trust fund had been filled with gold or foreign bonds, then we could have traded them for the goods that the elderly want now. Instead we filled them with US government bonds. The dollars required to cash in those US bonds will either be financed by more deficits or taxes.
Medicare is running a deficit right now and has been since 2007.
Defense spending has increased 44% since 2006.
If this economy ever recovers or inflation kids in, interest payments on the debt will explode.