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Politics : Foreign Affairs Discussion Group -- Ignore unavailable to you. Want to Upgrade?

To: geode00 who wrote (261946)	4/19/2008 7:48:18 PM
From: TimF	Read Replies (1) \| Respond to of 281500

The monies that go into the fund are clearly marked as such which is different from monies that go into, say, defense. The money's go in to a different fund, but that doesn't make it "special". "A different fund" or "clearly marked as such" are very relevant or important issues. It doesn't make the nature of spending federal money different in any significant way. There is ONE federal government. Create two fund, eight funds or forty two million funds, all with money "clearly marked" for a particular fund or program, and you haven't really changed anything. The government is still spending a dollar, any time it spends a dollar, whatever fund it comes from. their point is that the whole notion of a separate budget for Social Security is a fiction I wouldn't say its a fiction. It is rather a meaningless distinction. There is in a certain sense a separate budget for Social Security. But ever penny spent under that budget is still spending by the federal government. The lesser problem is that if you say that there is no link between the payroll tax and future Social Security benefits - which is what denying the reality of the trust fund amounts to - then Greenspan and company pulled a fast one back in the 1980s: they sold a regressive tax switch, raising taxes on workers while cutting them on the wealthy, on false pretenses. I don't know that I'd say that Greenspan etc. pulled a fast one on anyone. Its not an issue I'd even bother examining in this context because it doesn't matter. If Greenspan pulled a fast one or if he didn't it doesn't change the nature of government spending. And yes under the current formula there is a link between the payroll tax and future benefits. But there is no inherent link. The formula can, and probably will change. There would still likely be a link, but a different link. And that link, could be completely eliminated, if politicians and voters desired the change. Congress could pass a law tomorrow to eliminate it. But lets assumed for a moment that the link won't be severed. After all its a popular program with a strong constituency. So assume the link remains. If you have a "link" it just means that tax X will pay for spending Y. It doesn't mean that spending Y isn't spending, or is somehow less expensive. The link is meaningful in certain contexts, but not in this one. But those who insist that we face a Social Security crisis want to have it both ways. Having invoked the concept of a unified budget to reject the existence of a trust fund, they refuse to accept the implications of that unified budget going forward. Instead, having changed the rules to make the trust fund meaningless, they want to change the rules back around 15 years from now: today, when the payroll tax takes in more revenue than SS benefits, they say that’s meaningless, but when - in 2018 or later - benefits start to exceed the payroll tax, why, that’s a crisis. Huh? Unified or not unified isn't the issue here. Both are just different accounting methods. Each might be better than the other in certain ways. My personal preference would be to calculate both. But however you account for the money, that's just the figure you write down, or announce in a press conference. It doesn't change the underlying reality. The underlying reality I have been talking about is that spending is spending. However you account for it, when the feds spend a dollar, a dollar has been spent by the feds. The underlying reality about circa 2018 is that income tax dollars will have to start paying for part of Social Security's costs. That's not somehow evil or inherently wrong, or fraudulent or a disaster or anything like that. But it can be somewhat problematic. Right now we don't raise enough regular income tax to pay for the non entitlement part of the budget. We are used to getting the extra money from the social security tax to pay for all the other federal programs. The larger problem isn't "is social security tax money paying for regular spending?" or later "is regular income tax money paying for Social Security (and other entitlements)", but that the total amount of spending has increased so greatly, and is projected to increase a lot in the future. The biggest part of this spending today is the entitlements. The biggest part of the future increase is also the entitlements. So to control the spending and get some long term fiscal sanity you have to contain the future growth of entitlement spending. Issues of exactly what form of taxes pay for different types of spending are secondary. If we eliminated the payroll tax, and had everything under the income tax, or vice versa, or had a VAT, or a sales tax or whatever, doesn't cure the problem. What we really have is a looming crisis in the General Fund. Social Security, with its own dedicated tax, has been run responsibly The real issue is total spending, and since entitlements are the biggest part and growing faster than the rest they are the big problem. They get paid for by a "dedicated tax" doesn't obviate the problem. Dedicated or nor the tax revenue needed to keep the entitlement programs at the levels currently projected is going to be too high. That would be true even if spending in the "general fund" consistently grew slower than the growth in the economy from this point on.