http://baselinescenario.com/2010/01/20/one-more-thing/#

It will be important to you if you actually are a progressive.

Progressives have an answer to it: change our health care system to be like the other couple dozen wealthy nations for whom these charts and their citizens lives are far less scary (though the charts are still a bit scary).

Conservatives also have an answer to it as well: change our health care system to be more like the many dozen poorer nations for whom these charts are far less scary and their citizens lives far more scary (though they see themselves as part of some group who will remain safe).

Sure it ought to keep us up at night. The reason is that the current health care reform, while it will cover more people better, does not seem likely to do much about overall costs (thanks in large part to conservative objections). We need to follow it up with further reforms that will.

“Some progressives may object to the idea of progressive cost-sharing because it shifts costs and risk onto individuals. But they are going to incur the costs one way or another, whether through higher taxes or greater out-of-pocket spending.”

Notice how risk is present in the first sentence, but absent from the second. Risk is important to individuals. Often more important than cost. You can tell because insurance exists and its purpose is to decrease risk and it has a cost.

Then a look at the table titled “KEY DATES FOR THE TRUST FUNDS” shows that, e.g., Social Security starts drawing on general revenues in 2016. It doesn’t actually say this, but that’s what the title of the first line (“First year outgo exceeds income excluding interest”) means, since that pot of gold is actually filled with IOUs that can be redeemed only by drawing on general revenues. This inevitable trajectory was pointed out explicitly in the 1950 Brookings Institution monograph _The Cost and Financing Of Social Security_ by Meriam and Schlotterbeck, but it’s too soon for the Boo-urns of the world to have caught on to this. (It’ll probably **always** be too soon for that.)

1. the spending line doesn’t even start to increase until 2020-10 years from now.
2. That line actually decreases over the next 5 years
3. It gives absolutely no information about GDP assumptions, rolled out for 70 years! So, yeah, if spending skyrockets and GDP stays roughly the same, in about 70 yrs. we might possibly, maybe be f-d.

No offense, but I don’t think I’ll worry too much about this one.

You can always take an unusually high growth rate, like in health care costs, and then say if this kept up for some great period like 70 years we’d be bankrupted. I suspect that’s the main thing driving your line.

It’s like saying in 2005 that I project only the richest 1% will not be homeless in 2080, because home prices will be so high projecting out recent price increases for 75 years.

Health care costs can’t, and won’t, increase as they have been recently for decades to come. They can’t, just as housing prices couldn’t, and the Obama program will be a big step forward.

Another key is high return government spending, like on education, alternative energy, basic scientific research, etc. This will make GDP growth far higher, and thus lower government spending as a percentage of GDP.

Deciding to raise taxes to accomodate the extra 4% in deficit spending would mean that the total revenue that the Federal government would have produce would be a 25% increase in taxes. That’s how out of whack the recent passed legislation is.

http://www.cbpp.org/cms/index.cfm?fa=view&id=1258

Defense spending = 21%, Social Security = 21%, Medicare/CHIP = 20%, interest on debt = 8%

Social Security explicitly does not require any injection of taxpayer dollars, because it is funded by the FICA tax. In fact, Social Security has a rather sizeable surplus right now of about $2.2T. http://www.ssa.gov/OACT/STATS/table4a1.html

So when you claim that SS and Medicare contributed to larger debts, which led to higher interest payments, you are wrong. Higher debt is the result of reduced taxes + higher spending. The largest growth in non-SS spending since 1980 has been in defense spending. On the other hand, the largest decrease in federal revenues has been due to tax cuts passed under Reagan and Bush Jr. These tax cuts were supposed to increase overall federal tax revenues by improving GDP. In fact, GDP growth under Reagan and Bush were both less than under any Democratic President since WWII, except Jimmy Carter (for Reagan only; Bush enjoyed worse GDP growth than Carter). The federal debt exploded under Reagan and Bush Jr.

Please try looking up facts before you make factual assertions. Thanks.

First of all, this chart is retarded. It uses short term spending, which was rung up in response to the worst financial crisis of our lifetimes and the worst macroeconomic downturn of our lifetimes, to project long term spending GROWTH. Dumb dumb dumb. Actually, disingenuous on the part of the chart’s creator, dumb on the part of this post’s author to accept this drivel.

Second, Adam, SS isn’t going bankrupt. We’re talking about a massive SS surplus (on paper at least) that is still growing because of the payroll tax, that according to worst case projections may not be sufficient to pay off all obligations in 2042. To repeat, the “bankruptcy” bogeyman is that the surplus (that thing that Gore wanted to lockbox) may evaporate by 2042 (or thereabouts). Whether or not SS, AS CURRENTLY FUNDED, goes net negative in 2042 or around then is a matter of debate. However, what is fairly obvious is that SS right now is more than self-funding. What we’re talking about to fix the long-term solvency of SS (which again is a matter of considerable controversy, given that it’s based on long run estimates of GDP growth, retirement rates, mortality rates, etc.) is maybe some minor tweaks at most. So put that conservative myth to rest.

Medicare is in trouble, but so is healthcare in general in the US. If you look at the long run cost growths of health care, you’ll see that Medicare costs have actually grown less than private sector health care costs (basically because as a block provider, Medicare has the institutional expertise to say “frak off” to rapacious HMOs and Big Pharma in a way that you and I and our employers typically don’t. Not sure whether this program can be cut.

Also, I take issue with the author’s contention that spending cuts are more salable than tax increases. Perhaps that’s true generically, but that’s because it’s based on decades of conservative propaganda that there are trillions of dollars of “wasteful” social spending out there. If you ask the average American where to cut spending to balance the budget, s/he will typically tell you to cut waste and maybe welfare type programs (depending on their ideology, either “wasteful” welfare or all welfare). Obviously, that won’t go anywhere towards balancing the budget.

What’s clear is that when it comes to making specific spending cuts, there is no appetite out there for it. The three main pillars of US federal spending (SS, Medicare, defense) all have vehement and broad-based support. Of those 3, clearly defense has the most “fat” to cut, but in a post 9/11 era, it seems unlikely that anyone will have the temerity to propose such cuts, even for the nonsensical Cold War era technology we’re spending hundreds of billions of dollars on (Star Wars anyone?).

So it seems clear that tax increases are the only answer to balancing the budget. What kind of tax increases? Again, this author seems to have a pretty strong conservative agenda here, or is a patsy, in arguing that the US is as progressive as Europe. He makes the argument that we’re “progressive” by focusing on income tax, which is of course progressive. Of course, he completely ignores the fact that for most Americans, their tax burden is largely borne outside of income tax. For LMI and middle class households, who pay FICA tax on their entire income and who tend to consume most of their paychecks, they typically pay something like 12-15% of their gross income for social security withholding and on sales/consumption taxes. Add that to the 15-25% federal income tax (+ any state income tax + any property tax) and we’re typically talking 40%+ tax rates. Yes, top tier income households pay 35% federal income tax + any state income tax, but their effective tax rate is typically much lower than that. First, any rich household that has an investment advisor will be making the vast bulk of actual income through capital gains rather than employment income in any given year, so we’re talking about a 15% tax rate. Second, because rich households typically don’t come close to spending their annual gross income in any given year (particularly in a high sales-tax US state), the effective sales tax they pay as a percentage of their gross income is close to 0. Third, because real estate is typically a fairly small percentage of their total wealth (the top 1% is typically invested in diverse securities, or else Goldman and Morgan aren’t doing a very good job of pitching their services), their effective property tax burden as a percentage of wealth is close to 0. There are a myriad of other reasons why the effective tax burden of the rich is much less than the effective tax burden of everyone else in the US, but it all goes to prove the point that Buffett made, when he noted that he paid far less in taxes than his secretary. To use income tax alone as an argument for claiming that the US tax code is progressive is either disingenuous to an extreme, or betrays a fundamental ignorance of tax policy (try even looking at your W-2 next time). The term “progressive expert” is fundamentally misleading here. At least strip off one of those two descriptors, because you’re either a conservative trying to mislead people, or you’re ignorant, but as it stands now, I would assume both.