Running the government on 8¢

[David88vert]

http://money.cnn.com/2011/01/21/news/economy/spending_taxes_debt/index.htm

Interesting report on CNN concerning the GAO findings.

Today, the United States spends roughly 76 cents of every federal tax dollar on just four things: Medicare, Medicaid, Social Security and interest on the $14 trillion debt. That leaves 24 cents of revenue to pay for everything else the federal government does. By 2020 Washington could be spending 92 cents of every tax dollar on Medicare, Medicaid, Social Security and interest alone. That would leave just 8 cents to pay for everything else.

[Relentless]

Have anyone heard that China is going to be holding the world "dollar" now, its no longer gonna be the U.S

[bu villain]

David, I'm sure for you and for anyone else that follows government spending, this isn't news. What discussion were you hoping to spark with this? Are you looking for programs to cut and scale back? If so, lets talk about them. Are you only interested in discussing medicare/medicade and social security? Are you interested in cutting back defense spending which according to the article would take up that last 24 cents of every dollar?

[David88vert]

Obviously, cutting back needs to be done on all possible programs - and none should be off the table - including defense, and all entitlement programs. Don't you think it excessive that the entitlement programs take up more of our current budget - than all of our defense spending? Yet Medicare and Medicaid cost us MUCH more than defense, and they still want to spend MORE on healthcare?

Please read the article again - by 2020, 8% will be all that is left to pay for everything but Medicare, Medicaid, Social Security, and the interest on the national debt. Right now that is 24% of the budget. That is a massive reduction over the next 9 years.

[BanginJimmy]

If you want to save this.country from financial ruin like they are in Greece the big 4 spending programs need to be scaled back.

SS: Start adding in a plan to phase it out. If you are under 25 you are responsible for your own retirement, not the fed govt. Also, add some type of in one qualification to SS. If you make more than a set number from other sources you do not collect.

Medicaid/Medicare: do something about the billions a year in fraud. Until those programs are reformed on.a.way.that heavily reduces fraud any other discussion is worthless.

Defense: Massive reforms of the contracting system is needed. DoD spends billions every year just to research and write contracts. They also need to penalize contractors that fail to live up to contractural standards.



Sent from my DROIDX using Tapatalk

[bu villain]

Don't you think it excessive that the entitlement programs take up more of our current budget - than all of our defense spending?

Actually I'm not sure if that is reasonable or not. In this day and age, soft power and information are becoming as powerful as tanks and bombs. We simply don't need to spend as much money as we used to to keep our country secure. That being said, I agree the amount we spend on healthcare is astonishing. I would prefer we have regulations that promote a health care environment that works for everyone (including the poor/elderly) so that we wouldn't need specialty programs like Medicare and Medicaid. If that can be provided by the free market, that's fine with me but there are a lot of intrenched interests to deal with.

As far as social security goes, even though I would prefer to save for my own retirement, I understand that at a societal level it is valuable. If the government would just distribute benefits equal to what was taken in, then there would be no debt created by this program.

Other than phasing out SS, I agree with Jimmy's ideas as I think most people would.

[David88vert]

Actually I'm not sure if that is reasonable or not. In this day and age, soft power and information are becoming as powerful as tanks and bombs. We simply don't need to spend as much money as we used to to keep our country secure. That being said, I agree the amount we spend on healthcare is astonishing. I would prefer we have regulations that promote a health care environment that works for everyone (including the poor/elderly) so that we wouldn't need specialty programs like Medicare and Medicaid. If that can be provided by the free market, that's fine with me but there are a lot of intrenched interests to deal with.

As far as social security goes, even though I would prefer to save for my own retirement, I understand that at a societal level it is valuable. If the government would just distribute benefits equal to what was taken in, then there would be no debt created by this program.

Other than phasing out SS, I agree with Jimmy's ideas as I think most people would.

Then we all agree that government spending needs to be reined in. It cannot continue at the current pace - however, Democratic Party leadership believes that it should be increased.
Currently, funding that is contributed to Social Security is no longer kept just for that purpose, but rather, is put into the general fund. That is the problem we now face. This was thanks to the liberals in the Democratic Party.

[BanginJimmy]

Currently, funding that is contributed to Social Security is no longer kept just for that purpose, but rather, is put into the general fund. That is the problem we now face. This was thanks to the liberals in the Democratic Party.

I dont know who was the first to tap into SS as a general slush fund, but it doesnt matter. Both parties are equally responsible for the draining of the trust.

[BanginJimmy]

Actually I'm not sure if that is reasonable or not. In this day and age, soft power and information are becoming as powerful as tanks and bombs. We simply don't need to spend as much money as we used to to keep our country secure.

I dont agree. While the manpower to actually fight a war is not as large as it was during WWII, a large and well trained military is a significant deterrent.



That being said, I agree the amount we spend on healthcare is astonishing. I would prefer we have regulations that promote a health care environment that works for everyone (including the poor/elderly) so that we wouldn't need specialty programs like Medicare and Medicaid. If that can be provided by the free market, that's fine with me but there are a lot of intrenched interests to deal with.

Medicare/Medicaid are so expensive because fraud and unnecessary procedures are so common. How many times a day do we see commercials for the scooter store and liberty medical where they say they can get you products for free and everything will be billed to medicare? Both of those companies are nothing more than a scheme to bill medicare for far more than market value.

There was a story online I saw while doing research for a class. Basicly medicare was paying $200 a month for a wheelchair that only cost $300 to purchase brand new. That falls under the massive waste issue in medicare.

You will have to explain what you mean by "regulations that promote a health care environment that works for everyone". Not sure where you are going here.



As far as social security goes, even though I would prefer to save for my own retirement, I understand that at a societal level it is valuable.

We will be saving for our own retirement anyways because SS will be no more by the time we retire. Congress has drained that program to the point that it is absolutely unsustainable. There is no amount of reforms that can be made to the current program to make it sustainable. Income limits and other reforms will extend it a little, but in the end, it is walking dead in its current form. SS was in the red in 2010 and unless we start seeing some jobs here very quickly, it will not return to the black and the fund as a whole is expected to hit the red around 2037. Without massive improvement in the economy and jobs market in the next couple years that date will creep closer and closer to today with each passing month.



Other than phasing out SS, I agree with Jimmy's ideas as I think most people would.

Even if we dont completely phase it out, I would like to see a program similar to what Paul Ryan proposed. Where you can choose to move 2% of the 6.2% that we currently pay in to SS into your own private account. That money would only be accessable under the same rules as SS is and you would not be eligible for benefits from the general SS fund.

[bu villain]

I dont agree. While the manpower to actually fight a war is not as large as it was during WWII, a large and well trained military is a significant deterrent.

I'm definitely not advocating dismantling the military. Just that I don't think the current size is larger than necessary. Look how scared we are of a country like Iran or North Korea getting even a small number of nukes. A small fraction of our Nuke arsenal is quite a deterrent already.


You will have to explain what you mean by "regulations that promote a health care environment that works for everyone". Not sure where you are going here.

Well without getting into a whole debate about American healthcare, I'm saying the reason Medicare/Medicade exists in the first place is because the system wasn't working for a large number of poor and elderly people. I'm proposing one possibility would be to add rules/regulations that make it more effective to insure those people through private companies. For example we could give tax breaks to insurance companies based on the benefits they have for the elderly/poor.


We will be saving for our own retirement anyways because SS will be no more by the time we retire.

I agree we will definitely see reduced benefits but SS will never "run out" because it will always take in more money every year. If you take in 1 trillion in SS taxes in 2030, there is no reason you can't pay out that 1 trillion in benefits in 2030 regardless of what was in your bank account in 2039. People who payed into the system (a vast majority of the society) their whole life will not accept dismantling the program. That's political suicide to anyone who even brings it up.

[ek forever]

Bu Villain, we just got done doing Social Security in my public finance class, and you need to research how the Social Security system works.

The "2040 problem" is coming whether you like it or not. In the baby boom generation we had 8 workers supporting each retiree. That number has already dwindled to 2 or 3. Birth rates are at historic lows.

The SS system is a pay as you go, and we'll be eating into the "trust fund" in about 10 or so years at the rate of return.

The money collected now is paid out now, it's not put away in some account somewhere. With the reduction in employee contribution to FICA this year the trust funds will start being drained this year as revenues are already less than is being paid out.

Telling everyone under 45, "too bad" and phasing out the social security system over 20-30 years is going to be the best solution. The maximim rate of return a public collective workers-support retirees system can make is about 3% on the optimistic side once you calculate GW + GL + (GWxGL) = R* for the current system.

MPK for private capitol investment is easily 6% guaranteed if you have a narrow investment focus in steady returns. Any remotely financially knowledgeable person can tell you that you need to spend 12-20% of your earnings in investing in your retirement to maintain your standard of living in retirement. High risk assets, stocks, volatile commodities while you're young, once you hit 40-45 start moving those into steadier commodities, government bonds, foreign currencies, and real estate.

Make every individual responsible for their own retirement. Stupid people think that SS is a retirement program set up for you by the government, so they don't save. So in turn you ruin that retiring generation as they were disincentivised to save for their own retirement. At the same time you harm the private market as businesses, banks, etc are deprived of capital for investment and the multiplicative results from investing is dissipating.

[bu villain]

ek, I'm not sure how your description of SS funding is any different from mine. Every year money comes in and money goes out. If you simply split the money coming in for a given year between the recipients, the program will always be there and never go bankrupt. No need for any long term "fund". I agree that the payout will be substantial less in the future than now but there will still be a payment.

SS was never intended to be the sole retirement income for anyone. That is why we have pensions, 401ks, IRAs or other such vehicles. There will always be a portion of the population who will fail to save either because of ignorance, unfortunate circumstances or a multitude of other reasons. SS is just a way to ensure everyone has something saved regardless of those other factors.

[ek forever]

You're exactly right. The problem is that people treat SS as a retirement account. They don't treat it like a supplement. How do we fix that?

I for one think the first step is eliminating the capital gains tax.