----- Original Message ----- From: "JDG" <[EMAIL PROTECTED]> To: "Killer Bs Discussion" <[email protected]> Sent: Wednesday, February 16, 2005 10:25 PM Subject: Re: Budget Deficits and Supply-Siders Re: Kotlikoff's PSS plan
> Dan, > I'm not really sure that it is accurate to describe Bill Clinton as wanting > to save Social Security with the surplus, but I can't admit to being > particularly interested in that debate right now either. Now, paying down the > national debt would only really have benefited Social Security to the > extent that the overall ratio of US debt to GDP might become so overly > burdensome in the near future as to prevent the government from borrowing > to cover revenue shortfalls in Social Security. After all, nothing done >in the current year can affect nominal budget *deficits* in future years. The last statement is clearly false. We are fortunate that the interest on the debt is low because interest rates, overall, are low right now. But, given a T-bill rate of only 6% (which is below the 40 year average of 7.5%), every trillion in debt reflects a 60 billion/year deficit. Second, the effect borrowing to cover revenue shortfalls in the future has to depend on previous borrowing. For example, let us assume that, instead of cutting income taxes and raising deficits, Reagan Bush I and Bush II had budgets with deficits that changed the total national debt, (including that held in governmental accounts) as a % of GDP, in the same way they changed under Johnson, Nixon, Ford, Carter, and Clinton. If that happened, we would have the trust fund exceeding the total national debt, (which would be in the low 20% of GDP range.) In this situation, if we funded SS with deficit spending after about 2015 or so through 2050, as intended, the national debt in 2050 would be lower than if we followed the course we did and then agreed to fund general government from the excess of SS taxes vs. outgo and then yearly cut SS benefits to match the tax rate. With the lower national debt, we could pay for many other functions of government via. T-bills and be in the exact same place in 2050 that we would be if SS benefits were cut from 2015 through 2050. Let me try to put it another way. We agree that for algebra, addition commutes, and is associative, right. In other words a + (b+c) + (d+e) = (a+e) + (d+c) + b, right? So all analysis that involve these functions are equivalent. So, by cutting income taxes at the same time the SS tax is raised above that which is needed to fund is equivalent to shifting the tax burden for general government > To which I can only point out, that you can't have it both ways Dan. On > one hand, the Social Security Trust Fund represent savings from which the > government is borrowing. On the other hand, the Social Security Trust > Fund represents taxes. You'll have to pick one or the other, Dan - its > not fair to keep switching to the one or the other as need to bash > Republicans. I thought about this, and I think that there is a vast difference in perspective between us concerning the nature of government. That's the only way that I can see you setting up this dichotomy. The SS Trust Fund is supposed to be saved and accumulated taxes. I was almost 30, with a job and a family at the time the plan was announced, by Greenspan et. al. The agreement was that the balance between general governmental spending and non SS taxes would stay roughly where it had been. Thus, the excess SS taxes would then represent a change in the amount of funding available later. It is true that there is no difference between a total government debt of 7 trillion with a SS trust fund of 3 trillion and a debt of 3 trillion, and just a debt of 4 trillion and no money set aside for SS. But, there is a big difference between a total debt of 4 trillion and a SS trust fund of 3 trillion and a total debt of 4 trillion and no SS trust fund. At the time payroll taxes were raised, it was with the expressed understanding that it would not just be a substitute for income taxes. Clinton followed this, the total national debt as a % of GDP was lower when he left than when he came in. Reagan, Bush I and Bush II did not. Social Security > In keeping with the convention of Bush's critics, I did not consider > payroll taxes to be taxes. I did include all of the tax cuts, and their > likely extensions - or rather Citizens for Tax Justice, which performed the > analysis that I am citing, did all of these things. Then I am confused, one goes to that site and finds, from their analysis, <quote> The figures, computed by the Institute on Taxation and Economic Policy using the ITEP Tax Model, show that combined federal, state and local taxes on the wealthiest one percent of Americans will equal 32.8 percent of income this year. For all other income groups, combined taxes will average 29.4 percent of income. # The tax cuts enacted under President Bush have lowered the overall federal, state and local tax rate on the best-off one percent of taxpayers by 12 percent. # For the poorest 20 percent of taxpayers, the Bush tax cuts have cut overall taxes by only 3 percent. # For all other income groups, Bush's tax cuts have reduced overall federal, state and local taxes by between 7 and 8 percent. <end quote> http://www.ctj.org/ from their 4/13/04 report on the flattening of the tax rates: > Lastly, I'll admit that I screwed up in describing the government's "take" > of the economy in terms of revenues rather than expenditures. The point, > however, was that increased government revenues, particularly surpluses, > will over time generally allow expenditures to increase (this was > particularly evident in the behavior of State Government budgets over the > past decade), whereas Bush has been explicit that one of his goals has been > to lower Federal Government revenues, and then use pressures to balance the > budget to hopefully achieve a concomitant decrease in Federal Spending. That sounds to me, because the total debt is increasing, that he is lowering the ability of the Federal Government to act in order to shrink government. Dan M. _______________________________________________ http://www.mccmedia.com/mailman/listinfo/brin-l
