L.A. Times Column: Deficit hawks' 'generational theft' argument is a sham

Los Angeles Times ^ | 02/27/2013 | Michael Hiltzik

[SeekAndFind]

[SNIP]

So here's the truth about the "generational theft" theme: It's wrong on the numbers and wrong on the implications.

Let's start with that 7-to-1 spending ratio on seniors versus children. Among the flaws in the calculation is that the vast majority of government dollars spent on children comes from state and local governments, which pay most of the cost of education. On a per capita basis, state and local spending on kids swamps the federal government's spending 8 to 1.

Moreover, there are twice as many children 18 and under as seniors 65 and over (this 2008 figure also comes from the Urban Institute report). Put the numbers together and you discover that spending by governments at all levels in 2008 came to about $1 trillion on seniors and $936 billion on children. In other words, very close to 1 to 1.

The notion underlying the comparison of spending on seniors and children is that "if you save a dollar on Social Security it would be transferred automatically to children," observes Theodore R. Marmor, an emeritus professor of public policy at Yale and a long-term student of social welfare programs. He traces this notion to deficit hawks and dismisses it as "not naive, but cynical."

That's because most of the spending on seniors is in Social Security and Medicare, and therefore has been largely paid for by those very beneficiaries over the course of their working lives.

Payroll taxes have more than covered what today's average retiree will receive back from Social Security. They won't cover the average payout on Medicare, but that's an artifact of uncontrolled healthcare costs, not of the structure of Medicare itself. Changing the terms of that program, say by raising the eligibility age (currently 65) won't save money and may actually raise costs.

[cdcdawg]

A decent (Great?) society does take care of it’s old and sick. The government is a failure in that capacity for the same reason it fails in so many areas. There is a nearly infinite amount of need, and finite resources to meet those needs. I guess decency and bankruptcy are one in the same. The expenditures will grow until the whole thing comes crashing down. Then we can all congratulate ourselves on how decent it all was.

[sphinx]

You are 100% wrong about how Social Security works.

But what you are describing is how Social Security SHOULD work: your money plus your employer match SHOULD go into your personal account, where it would be saved, invested, earn interest, and eventually pay for your retirement with any residual eventually going to your heirs.

Many of us believe Social Security should be reformed along these lines. For our troubles we are demonized by the Ponzi scheme crowd as reckless “privatizers,” while a plurality of the public believes wrongly that Social Security already is a thrift savings and investment plan. The politics of this are quite insane.

This is the Big Lie on steroids and compounded over 75 years of relentless propaganda. People think they already have something that Social Security in fact is not and has never been. Reformers want to bring this promised vision into reality, and we are pilloried. Insane.

[Lancey Howard]

(( ping ))

[griswold3]

What will it take for the ‘Progressives’ to realize Social Security is a tax, not ‘insurance’. The money’s already been spent. There is no ‘lock box’. It’s been that way since August 14, 1935.

[chimera]

It is important to remember in these discussions that the USSC has already ruled on the question of SSI being a “right”, or “guarantee”. The case of Fleming v. Nestor (1960) basically said the government was encouraging the public’s misunderstanding that SS was an entitlement by calling payments into it “contributions”. In fact, the court ruled, payments into SS are nothing more than taxes (and hello to you, John Roberts), and payments out of it are basically welfare. As such, the government can change, or even suspend payments at any time in the future. I would guess that a majority of the public, if asked, believes that because you “paid into” SS, you are “entitled” to at least what you paid in. The USSC says you are not.

[griswold3]

answers:
‘The Social Security Trust Fund was established in 1939 to receive monies collected for Social Security through payroll taxes. The monies in this fund are managed by the Department of the Treasury; they are not, nor have they ever been, put into the “general operating fund.”

However, the Social Security Act specifies that the monies in the fund may “be invested in securities backed by the full faith and credit of the Federal government,” such as treasury bills, treasury notes, and treasury bonds, as well as special issue bonds. So, essentially, the government can “invest” Social Security funds by lending them to itself, then spending that money on programs not related to Social Security (e.g., defense, foreign aid, education). This has always been the case.

During the Johnson administration, Social Security and other Federal programs that operate through trust funds were counted officially in the budget. This did not mean that it was actually part of the general fund, rather that it was finally recorded as part of the budget.’

THIS is propaganda.

[redgolum]

You have already established that you do not want to cut spending. You have yet to state how you intend to pay for entitlement programs.

Oh, and the article has a little flaw in it. Part of the “stimulus” package that bush signed went to schools. Now a large part of their budget is funded by the federal government. For many schools, the biggest portion of the budget is from the State, then the Federal, and finally the district.

All are going to get cut, or taxes have to go up. Same with SS. The money is not there.

And thank you for the ping (not being sarcastic).

[redgolum]

SS is a tax. It goes into the general fund. It is a tax, and the money you paid in (and I have) was spent shortly after it was taken in.

Now all the current SS payout is coming from the yearly budget. There is no lock box, and hasn't been for decades (more than likely since before you started working).

No one really wants to admit that, but it is the truth.

[Lancey Howard]

Here’s my reply from last night again, since you missed it the first time:

Why would anybody tell those who have dumped money down the government toilet their entire working lives they now won’t be getting their own SS checks?

Before fooling around with Social Security, first cut off the illegal aliens; then the bums, deadbeats, and parasites who comprise the Democrat party base; then tell the government unions to go suck eggs - - no more “public sector” unions “negotiating” with corrupt politicians for their Rolls Royce pensions and perks; then get rid of all the redundant agencies and worthless, ineffective bureaucracies and departments such as the Department of Education. (How many hundreds of billions of dollars are we up to?)

First, clean up the mess and only THEN talk to me about more taxes.
Starve the beast.

Your answer BEGINS with, “Taxes must be raised.” I maintain you belong back on the liberal Democrat site you came from.

[cpdiii]

If this is not generational theft, who is going to pay for all this spending and borrowing? Perhaps it is the tooth fairy.

[sickoflibs]

RE :”What will it take for the ‘Progressives’ to realize Social Security is a tax, not ‘insurance’. The money’s already been spent. There is no ‘lock box’. It’s been that way since August 14, 1935.”

Did ya see the freeper who lectured me above that SS was a retirement savings account?

SS serves some positive ( LESS EVERY DAY) purpose but anyone thinking that the gubment is saving their taxes in an account for them is just foolish or dishonest or both.

The government is not setup to save money, it is setup to take and spend money and usually for votes,
Exhibit A and B =GWB and Obama.

[central_va]

‘Red’ Golum needs to learn about the Laffer Curve.

[redgolum]

And you maintain
“I want my* money first! Cut somewhere else!”
(*the money paid into to SS goes into the general fund. It is gone, there is no lock box).

That is the attitude I find amazing. Everyone has a pet project or entitlement that needs to be defended. That is my point.

Romney was right that 47% or so pay no taxes, and get their livelihood from the government. That includes federal employees, retirees, and SS recipients. They all will say how important it is that their personal job or entitlement gets funded, and go cut somewhere else.

You are a prime example of it. You want to protect your SS benefit, which you perceive to be owed to you (look at the court cases, you are not owed anything). You are willing for every other group that does not affect you to have massive cuts, but not your entitlement. You are not along. I had the same conversation on FR will people working in the Parks department, NASA, FDA, and a lot of government contractors. All want to cut the spending, as long as it isn't the spending going to them. In other words, fiscal liberals.

You are part of the Democrat base. You are trying to defend you part of the government boondoggle money, and don't care about anything else. Never mind that the SS fund will run out of money very soon, you want “your” money. Which comes from me, and everyone else still working.

So you want a tax increase. That is the only way SS will stay solvent without massive benefit cuts.

Now that tax increase can be explicit, or hidden with inflation. Same with the cuts. But looking at this board, I have come to the understanding that no one really wants to balance the budget. No one really wants to stop spending that affects them. So the money has to come from somewhere.

So where will the money come from to fund your SS? Santa Claus? We don't have the money coming in to fund it, even if it was the only thing on the budget.

[redgolum]

I know it very well. However you are missing my point.

The Laffer curve assumes that spending stays a relative constant (or at least doesn't increase exponentially). Either we cut everything, and I mean everything from Social Security and Defense to the study of Brazilian banana slugs, or we find a way to fund the stupid games. No one really wants to cut anything. Look at the moaning on THIS BOARD over the “Massive cuts” to the DOD. Look at the moans over the small increase to SS payments. No one really wants to cut anything, they want their money!

Now, if we could do some major cuts, along the order of 10 to 20% across the board, then we can start talking about controlling spending. But we can't even cut anything. These “massive” cuts coming are just reductions in the budget increase.

And yes, I am playing a bit of the cats paw here. I don't want tax increases, but I have yet to see any real support for spending cuts on FR. So either we cut spending, and that means SS and defense also, or massively increase taxes, which will crater the economy.

We can't have both spending increases and tax cuts. Yet everyone wants “Their” money, but not have pay for someone else’s “money”.

[NELSON111]

There is a very simple reason why lefties don’t care about the deficit: They want to crash the system....EVERY system...so they can rebuild one system in the form of a New World Government with one currency.

[Lancey Howard]

Look at the moaning on THIS BOARD over the “Massive cuts” to the DOD. Look at the moans over the small increase to SS payments. No one really wants to cut anything, they want their money!

You are knocking down the straw men you yourself erected.

I am on this site enough to know that there are very few freepers who "moan" about cuts to the DoD. A small handful, but that's it - - and I haven't seen a single complaint about "the small increase to SS payments". Most freepers (including me) are saying, "Bring on the sequestration cuts."

And by the way, the false dichotomy stuff doesn't work around here. It sounds as if you may have fallen for the horse manure propagated by the Democrat "mainstream" newsrooms and their pundits who would have you believe that Americans are confused schizophrenics who want lots of government "services" but "don't want to pay for them". It's a con job. A scam.

The people who demand lots of "services" and "free stuff" from government are generally not hard-working, traditional American families, and the hard-working, traditional American families who pay the taxes are generally not the same people who have their grubby paws out looking for "free" stuff. We are talking about two separate and distinct groups of people here.

One group is the Republican "base" and the other is the Democrat "base".

[redgolum]

Do you, or do you not, support cuts to Social Security?

[central_va]

You are foolishly or purposely misusing/confusing the term "tax increase" with the idea of increasing government revenues. The 2 things are diametrically opposed to each other. Raising marginal rates DECREASE revenue. Noe I've been over this with you 3 times now. So you are either stupid or a troll.

Every time MARGINAL rates are LOWERED revenue increases, and has NOTHING to do with spending. Look at Kennedy and Reagan for guidance here.

[Lancey Howard]

Do you, or do you not, support cuts to Social Security?

I support complete elimination of the program, or at least an "opt out" provision for people under a certain age, say, 30. Meanwhile, everybody who dumped their "payroll tax" money down the government toilet their whole working lives based on the promise that they would recoup a little of it in the form of an old age pension should continue to receive their checks since they are obviously not moochers and freeloaders like the Democrat party base. Far from it. Better yet, calculate the sum total of what I've paid into the system for SS, add compounded interest based on historical averages, and hand me a check. I will gladly take it and run.

Does that answer your question?

So what's your game? You must have your snout in the public trough, what with your obsession with raising taxes.

[redgolum]

I would love to opt out of SS. However, how would we pay for the current recipients? If I stop paying in to SS, and say “I can take care of it myself”, how will the current program be funded? Where will the money come from?

And no, I don't work for any state, local, or federal government or receive any incentives other than mortgage deduction, charitable, etc.

Again, I don't want taxes to go up. But my point is you have to either cut a lot of stuff (including those who are getting SS currently who were lied to), or confiscate a lot of money from somewhere. You can't keep increasing entitlement spending, or any spending, and not increase the money coming in.