Part of ABC‘s This Week show (8/19/12) was devoted to the idea that, as host Jake Tapper put it, the U.S. economy is at a potentially defining moment:
The great debate: Can we restore the nation’s finances, or is the U.S. headed toward bankruptcy—an issue at the forefront of the presidential debate, especially since Mitt Romney’s selection of Congressman Paul Ryan.
Setting aside the notion of “bankruptcy,” it’s worth pointing out that despite Ryan’s professed interest in taming the debt, his budget plans don’t actually do much of that. The “all-star panel of experts” was going to tackle this weighty issue, but first Tapper set the stage by pointing out that the “fiscal cliff” cuts in spending of $110 billion would be “like wiping out the economy of both the Dakotas and Montana overnight. Goodbye Mount Rushmore.”
He moved on:
Over the next 75 years, Medicare will run a deficit of more than $30 trillion. That’s two times the entire size of the United States economy.
It’s true that Medicare costs are projected to increase; comparing one year of GDP to 75-year Medicare projections seems more than a little pointless. And as economist Dean Baker has pointed out several times, the Affordable Care Act (aka “Obamacare”)
reduced the projected shortfall in Medicare by two-thirds. In 2009, the shortfall was projected at 3.88 percent of covered payroll. That’s down to 1.35 percent of covered payroll in the 2012 report. Of course, that is not yet balanced, but that is more progress in controlling costs than anyone else has done.
This would be a useful thing to point out—though it might complicate the “Is America Going Broke” framing of the special.
Jake Tapper (cc photo: Victoria Pickering)
But the most misleading part came when Tapper said this:
Social Security will run out of money in just 20 years. In short, if nothing is done, our national debt poses a clear and present danger to the United States.
Social Security is not running out of money. He is likely referring to the projected date—2033—when the Social Security system will have exhausted its multi-trillion dollar trust fund. But if no changes are made to the program whatsoever, the program will pay out 75 percent of scheduled benefits until the year 2086.
That is not at all the same thing as “running out of money.” And linking a program that needs modest changes to remain fully funded over a 75-year window to a “clear and present danger” to the country is misleading.
It’s one thing to have a debate built around the question of whether the United States will become the next Greece. (There are plenty of people who would argue the comparison is fundamentally off-base.) But it’s even more difficult to have that kind of discussion when the “facts” used to make that comparison are misleading.
Social Security was designed to be a pay-as-you-go system. Surplus Social Security revenue goes into general revenue and enables other income tax reductions. The Bush tax cuts, extended by Obama, resulted in a lesser government debt increase due to the over TWO TRILLION DOLLAR surplus legislated allegedly to “save” Social Security from its projected shortfalls.
The repayment of this surplus will, according to this system’s economic model, at some time in the future, require a tax to enable repayment. This tax, if collected from those who pay the largest per cent of their income into Social Security—those whose income does not exceed the Social Security cap—will result in DOUBLE TAXATION of lower income wage earners whose income provided the very surplus that facilitated the Bush-Obama tax cuts for the wealthy.
Fairness requires that those—the very wealthy few percent—whose incomes are so large that Social Security deductions result in only a small percent of their income being paid into the Social Security system, pay the taxes that they evaded by the Bush-Obama tax cuts when the time comes to draw down the Social Security surplus. This surplus has allowed the wealthy to retain more of their income through tax cuts made at the expense of poorer working people, who paid a surplus amount of trillions of dollars into the general revenue through Social Security deductions from their income.
The wealthy, whose income tax cuts were enabled, in part, by the Social Security surplus, fear they may be required to repay the some portion of the taxes they avoided while the government’s general revenue was fed by surplus Social Security deductions taken from working people, this being a most regressive tax.
Fairness is precisely that which the 1% objects to most vociferously.
Jake Tapper has a BA in history from Dartmouth.
Magna Cum Laude.
Phi Beta Kappa.
Per Wikipedia, “On July 6, 2009, former MSNBC television personality Dan Abrams launched a website service, Mediaite, reporting on media figures. The site ranks all TV-based journalists in America by influence. Tapper ranks, as of December 2010, at number one.”
Good God…
…From Wikipedia, the free encyclopedia…
Mediaite is an right wing news and opinion blog covering politics and entertainment in the media industry as well as other issues.
Glenn says “Surplus Social Security revenue goes into general revenue and enables other income tax reductions.” Well, not legally. Social Security is funded by FICA. The only reason any of that money ends up in the general budget is because Congress steals it and replaces it with bonds. Not quite the same. Social security has legally absolutely NOTHING to do with the federal budget. Do some research. It’s all out there.
We keep hearing of the 3 trillion in payroll taxes sent to the Treasury rather than the Trust since Reagan’s time. Do those estimates include that 3 trillion? I have some saying yes and others no.
Payroll taxes are contributed to the Soc Sec Trust Fund and Medicare Trust Fund. The funds are invested in specially marked T-Bonds to be cashed only when the contingency occurs. That is, when a beneficiary reaches retirement age, or is disabled, or single mother with dependent children and the cash is not available, a bond will be cashed. Medicare works the same way. What has changed is that in the last few decades, those taxes have been counted in total government revenues to help “balance” the overal Federal budget. This is an accounting gimmick that made the deficit look smaller than it actually was. No money was removed from the trust funds. These programs have had nothing to do with the deficit. The money is there, as much as there is any money in a country’s currency. Look at the dollar in your pocket. Would you listen to someone who told you its a worthless piece of paper? So, the wealthy know that we will be coming after them for more tax revenue. After all, they are the one’s that have it, and have made out so pehnomenally in the last years. A good offense is the besta defense, so, attack Medicare and Sociall Security and if the riff-raff finds a way to keep it, they’ll think they won. In the meantime, the rich avoided more taxes. This is an outrag, but most people don’t know the truth. No real Democrat should ever be talking about making deals on the best programs in America. the T-bonds are backed by the promise of the US Gov’t just like the dollar in your pocket. When it was created, FDR was asked why give it to the rich? He said if we don’t include everybody in it, they’ll kill it. It is not a Ponzi scheme which is only able to pay becuz’ it is bringing in current moneoy, there is a huge surplus, the biggest in the world. Why do you think the investment community wants it out of T-bonds and into the stock market so bad? As for Medicare, GW got Congress to agree to set up Medicare Advantage, a program funded by Medicare to pay private insurers to offer insurance equivalent to Medicare. They can’t do it, so they are subsidized monthly by the Treasury to compete with original Medicare. A further drain to set up “competition.”
So, ABC’s Jake Tapper is wrong when he says “Social Security will run out of money in just 20 years.” But FAIR’s “correction”▬that “the Social Security system will have exhausted its multi-trillion dollar trust fund” by 2033▬is also misleading.
SSA’s Trustees Report makes projections under “alternative sets of economic and demographic assumptions.” The 2033 projection is based on worst case and “intermediate” case scenarios. But, under a best case scenario the trust funds will not be depleted for 75 years. FAIR, like the corporate media, neglects to mention this important fact.
The 2033 date is only under gloomy forecasts. Under a sunnier set of economic and demographic conditions, the trust funds are not depleted till 2097.
http://www.ssa.gov/oact/progdata/fundFAQ.html#n8
Wow, geoffrey n lachner:
Medicare Avantage was set up by GW so that private insurers could offer a service that was already covered by Medicare, but sucks money out of Medicare to offer the “same” care , but at a higher private insurer price?
They duplicate service but for more money? That sounds insane. Then they should probably call it Private Insurer Advantage, because that sounds like what it is. That sounds like a good thing to cut.
I also don’t believe this country is going bankrupt, except morally bankrupt seems to fit.
Well Obamas own people have stated Medicare is broke in 12 years.Obama care will not change that at all.Social security or as I call it” the bank of the American government-” has been robbed left and right.One huge debatable ponzi scheme.As has Medicare(700 million funneled into the Obama care tax plan.)When Medicare goes….. it will pull everything with it .So really arguing if SS is solvent is a waste of breath.Obama formed a fiscal panel that has crunched the numbers and essentially agreed with what his harshest critics have stated.He has no real plan.And without a plan it is all going down hill,with an actual cliff on the short term horizon.
Gloriana…..Im going to say this to you,and I want you to listen love.We need to think the unthinkable before we can steel ourselves to the proper measure…..to SAVE ourselves.If we keep going on like this.Printing money.Borrowing money.Spending money,while attacking every engine that actually makes money….We will be flat broke,busted,bankrupt,in a few short years.All social programs dissolved.Total or near total collapse of our economy.Except for a few anarchists, who wants that?
When the economy crashed, and everyone lost 401ks ,and all the rest, a lot of us saw it coming.Glen Beck screamed from the rooftops that your government is lying.Buy gold he yelled just two weeks before.His arguments were compelling, and hard to refute if you had half a brain.So thank God I did……liquifying earnings into precious metals just weeks before the dump.My friends did the same.We did it while so many tried to pacify you with soft words that all would be well.We were those horrible people who benefited when the collapse came because we believed the information that was out there for all to see.Well Gloriana here comes another shoe to fall, and Obama has not a clue or a plan.Just vague notions that seem to be enough for you to live on.Ryan?????At least he is taking the ultimate collapse in a serious manner and wants to deal with it.Will it be enough?The first step is acknowledging it.And Obama can’t.Because his followers see that as ultimately pulling the purse strings tight.And in the end that is all he has.Control of his nanny society through an open pocketbook to the winners and loosers as he would choose them(his voters).This is the most important vote in the history of this Republic i believe.Only a few question need be asked.Not does Obama care(he does).Not is he a good man(he is).The question is ///Will he stop borrowing.Stop spending?Stop printing money?Stop blocking the exploitation of our natural resources?And allow for the recreation of wealth, making this the most business friendly,free market country in the world?In two words conservative capitalism.Based on free market principles, and constitutional values of individual freedom over the collective.He has tried it his way and failed.We could argue everything else all day.He has failed.His dreams of Hope and change have not worked.We now move to trancend his failed policies.Not accepting a new status quo of a smaller and less America.But moving toward a bigger and better America.