The next wave

July 29, 2008

Good God almighty, isn’t there anybody left among the morons in Wahington who can do the simple freakin’ math and connect the !@*!*^&*# dots? On the same day we have this story:

WASHINGTON (AP) — The government’s budget deficit will surge past a half-trillion dollars next year, according to gloomy new estimates, a record flood of red ink that promises to force the winner of the presidential race to dramatically alter his economic agenda.

We also had this one:

The bill extends a government lifeline to Fannie and Freddie, shoring up public confidence in the two biggest providers of funding for U.S. mortgages and their $5.2 trillion of debt. It creates an independent agency to regulate the companies, launches a Federal Housing Administration program to insure as much as $300 billion in mortgages and provides tax credits to first-time buyers in a bid to reduce a backlog of unsold homes.

A government that is all things to all people, cushions every blow, protects us against every bad decision,  spend, spend, spend, and we’re shocked that the deficit might surge? And we’re about to elect a Democratic president and a filibuster-proof Congress. The next conservative backlash is building even as the current conservative crackup is being celebrated.

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4 Responses to “The next wave”


  1. The deficit is well past the half trillion mark. What is being quoted is the unified budget. The unfied budget is combines Social Security, Medicare and the General Budget. What is wrong with this? Both Social Security and Medicare have dedicatd revenues. Per a 1984 statute, both Medicare and Social Security revenues may not be used to pay for general budget items. Conversel, general revenues may not be used to pay for Medicare or Social Security. However, both Medicare and Social Security may loan the US Treasury any surplus funds they happen to have.

    What does comingling funds, budgets and revneues do? It masks the true size of the deficit. We all know that Social Security will be unable to pay full benefits past 2038. We also know that Medicare will be unable to cover the same elder care past 2018 as they do now. Medicare is in negative cash flow now. Social Security is projected to return to negative cash flow in 2017 (1957 to 1965 & 1970 to 1983 were previous spans of negative cash flow). The interest credited to SS and Medicare as well as the small cash surplus from SS reduce the unified budget deficit.

    What one needs to do is add these funds to the reported deficit to obtain the true general budget deficit. I calculate the deficit at just over $700 billion. However, you might want to do your own research on this.

  2. Harl Delos Says:

    The tax on gasoline is dedicated revenues – it pays for highways and bridges, and mass transit. How come I never hear any complaints that *it* is included in the federal budget?

    The United States Postal Service also has dedicated revenues. How come I never hear any complaints that *it* is included in the federal budget?

    The fact is, the USPS is part of the US Government, which has been subsidized in times of need by tax dollars, and which borrows money from the US treasury.

    So is the highway trust fund part of the US Government. It has been subsidized in times of need by tax dollars, and it borrows money as needed from the US treasury.

    So is the Social Security Administration part of the US Government? Yes. Has it been subsidized in times of need by tax dollars? Yes. Has it borrowed money as needed from the US treasury? Yes.

    The fact is, Social Security (and Medicare) pays current benefits from current revenues, and it always has, except when current revenues don’t cover current benefits, when it has used general fund revenues to cover expenses. This is exactly the same thing that the National Park Service does, except that they run a deficit *every* year, and the same thing the Coast Guard does, except that they run a deficit *every* year.

    The difference is that Social Security is a tax on EVERY DOLLAR of wages earned by poor Americans, while higher-income Americans have much of the salaries exempt from Social Security taxes, as well as the profits earned by their businesses, the dividends earned by their stocks, the interest earned on their savings, the royalties earned on their oil wells, etc., being exempt.

    If we don’t shut down the airports because the landing fees aren’t sufficient to pay for air traffic control, and we don’t close the doors to Yellowstone because entrance fees and camping fees for national parks aren’t sufficient to pay the bills, why would anyone think that Social Security and Medicare are going to shut down when the taxes earmarked to pay those benefits aren’t sufficient?


  3. The Federal Trust Funds I found are; Federal Supplementary Medical Insurance, Federal Hospital Insurance, Federal Old Age and Survivors Insurance, Federal Disability Insurance, Highway Consolidated, Airport and Airway, Black Lung Disability, Hazardous Substance Superfund, Sport Fish Restoration and Boating Safety, Leaking Underground Storage Tank,
    Vaccine Injury Compensation, Oil Spill Liability, Lower Brule Sioux Wildlife Restoration,
    Cheyenne River Sioux Wildlife Restoration, Inland Waterways, Harbor Maintenance,
    South Dakota Wildlife Restoration.

    The statute that specifies that Medicare and SS dedicated taxes may not be used for General Expenses are:

    United States Code Title 42, Chapter7, Subchapter VII, Sec. 910 (a)
    United States Code Title 42, Chapter7, Subchapter VII, Sec. 911 (a)

    There is a difference between a user fee (national parks) and a dedicated revenue stream. The national parks do not have dedicated revenue stream that pays solely for its operation. The General Fund is used to pay for our national parks. In addition the national parks impose user fees. The postal services raises fees by stamps sold. However, its funding is not limited to the sale of postage, but is funded by general revenues. The gasoline tax goes to the DOT for highway maintenance. I do not know if it is restricted to being funded solely from this tax. The SS and Medicare programs however are restricted by statute. If you happen to know the statute that may limit other agencies to a dedicated tax, I would be very much interested in knowing more about this.

    As for your comment “Do I think the government will not use general revenues to pay SS and Medicare,” I truly believe that general revenues will not be used. The reason is very simple. We are already seeing the affect of 49 years of deficit spending (lower dollar among all major currencies). We are seeing record high oil prices, yet in terms of Euro, it has not risen as high in relation to the dollar. The size of the shortfall in these two programs far exceeds the entire general revenue projected. This means in order to maintain these two programs, all other government agencies will have to spend zero.

    Can we borrow money? We may be able to borrow money to pay for these programs, but eventually they will want to be paid back. At what point will countries stop investing in US treasuries? If you lived in Europe, would you convert your Euro’s today to treasuries (Dollars) when there is a high probability that the dollar will fall in value further? I believe SS and Medicare will implode under their own massive liabilities. If you think the young workers will continue to pay ever-higher taxes, you are mistaken. They out number boomers and seniors combined. How much is too much? They could easily vote out every politician and support those who want to repeal or greatly reduce the scope of SS and Medicare so that they can live. Are we at that point now? How much more tax can you handle? If none, then what makes you think others will shoulder what you would not?

    The shear size of SS and Medicare dwarf all others combined. When dealing with a problem tackle the largest one first.

  4. Harl Delos Says:

    The statute that specifies that Medicare and SS dedicated taxes may not be used for General Expenses

    Not exactly.

    http://www.law.cornell.edu/uscode/html/uscode42/usc_sec_42_00000910—-000-.html
    910(a) says that the Board of Trustees should make recommendations to Congress if the trust funds are running low. It doesn’t say that Congress can’t replenish the trust fund out of general revenues, and it doesn’t say that Congress can’t use the trust fund money for other purposes.

    http://www.law.cornell.edu/uscode/html/uscode42/usc_sec_42_00000911—-000-.html
    911(a) says that the receipts and disbursements should not be included in the budget, and aren’t subject to general budget limitations.

    When Al Gore was runing for President, he talked about creating a “lockbox”, saying it should be the way you say it already is. They didn’t do it.

    In 2007, S 302 was introduced, the “The Social Security Lock-Box Act of 2007”, that would have taken some steps along the lines you propose. On January 16, 2007, the bill had been read twice, and it was referred to the Committee on Finance, where it died.

    The shear size of SS and Medicare dwarf all others combined. When dealing with a problem tackle the largest one first.

    When dealing with a problem, the first thing to do is to gather the facts. You haven’t done that yet.

    You can, as an individual, save for the future by giving your money to someone who wants to borrow today and pay it back tomorrow. As an entire economy, you can’t do that, because there is nobody available to loan it to who can pay it back.

    Social security always has, and always will, be a matter of providing for the support of those who are retired and/or disabled by those who are working. The only way to make it safe is to increase the number of productive workers in the future. Americans have grown too lazy to procreate, something that was not a problem when I was a young man. Consequently, we need to import people who are hard working (to take care of the immediate problem), and willing to screw (to take care of the future problem.)

    That’s why we need to fix the immigration system. In many parts of the US, it takes 8 months to get a 6-month renewal for a visa or for a green card. Obviously that doesn’t work. And it’s not fair to impose different standards today than we have imposed in the past. We really need to say to people that are already here, that if they have gone through the same immigration and naturalization procedures that the founding fathers went through, they are citizens, and if they haven’t, then they need to go back where they came from and comply with those same procedures.

    As far as I can tell, settlers at Plymouth Rock and at Jamestown just showed up and moved in, without asking leave of anybody. Isn’t that true?


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