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Social Security

All articles with the "Social Security" tag.

Published: Thu, 27 Oct 2016 00:00:00 -0400

Last Build Date: Thu, 27 Oct 2016 19:13:21 -0400


Social Security's IOU Trust Fund

Thu, 27 Oct 2016 00:01:00 -0400

Social Security is the largest single program in the federal budget. The retirement and disability program will cost about $950 billion this year, which is about 23 percent of the entire federal budget. Along with Medicare and Medicaid, these "entitlement" programs are already the main drivers of federal spending. Unless reined in, Social Security and its counterparts will eventually explode the federal budget. Unfortunately, few in Congress—and neither of the major-party presidential candidates—have any interest in acknowledging, let alone confronting, the problem with Social Security's insolvency. That it's insolvent isn't debatable. Social Security faces a $10 trillion funding shortfall. Since 2010, Social Security has been running a constant cash flow deficit, meaning that the taxes collected for the program aren't enough to cover the benefits paid to beneficiaries. To fill the gap and keep the checks going out, the program has been drawing from federal trust funds. However, the government's trust funds aren't like trust funds in the real world. Trust funds in the real world contain assets; the government's trust funds basically contain IOUs. What that means in simple terms is that the government already has to go further into debt to pay Social Security's bills—and it's only going to get worse. Even if one believes in the sanctity of the government's combined trust funds in general, Social Security's will be exhausted by 2034, thus triggering a benefit cut of roughly 25 percent. However, since President George W. Bush tried and failed to reform the program in 2005, Congress has abdicated its responsibility by simply avoiding the issue. On the campaign trail, things are arguably worse. The two main candidates, Hillary Clinton and Donald Trump, have promised to leave Social Security untouched. When asked about what they would do about it during the debate, Trump responded: "I'm cutting taxes. We're going to grow the economy. It's going to grow at a record rate." That's all well and good, but we can't grow our way out of this mess. That's largely nonsensical. Clinton doesn't want to cut benefits, either, but she'd actually exacerbate the problem by raising taxes on the rich while increasing benefits for lower-income Americans. Though the tax increase part of her plan might extend the life of the program, it wouldn't fix much. The Committee for a Responsible Federal Budget looked at the issue and found that some increase in revenue would occur in the short term, but a cash deficit would return within 10 years and grow over time. It concluded: "This change would close just over one-third of Social Security's structural gap by 2090. In other words, a substantial portion of the fix defers the problem, but does not fix it." And that's calculated even before she starts to spend more on Social Security. But even that's probably too optimistic, says the American Enterprise Institute's Andrew Biggs in a recent Forbes column, because her "tax increases on the rich would boost revenues by far less than she imagines because of rarely-discussed interactions with other parts of the tax code." Third-party candidates are only marginally better on the issue than Clinton and Trump. Gary Johnson, the Libertarian, has called Social Security a Ponzi scheme and has personally endorsed privatization. But he has also talked about means-testing benefits—curtailing the benefits of wealthy Americans—and raising the retirement age from 67 to 72. As he is on most issues, here Johnson is to the left of the Libertarian Party platform, which would "phase out the current government-sponsored Social Security system and transition to a private voluntary system." Evan McMullin, an independent candidate, has acknowledged the problem of overspending on programs such as Social Security, but his plan is light on details. To the best of my knowledge, his reform ideas boil down to raising the retirement age and means-testing the program. Same as Johnson. Beyond solvency, Social Security suffers from many other problems, so meek tweaks, higher taxes o[...]

Brickbat: Reports of My Death ...

Fri, 30 Sep 2016 04:00:00 -0400

(image) Lee Miller of Port Orange, Florida, logged onto his bank's website to find his savings account had been emptied and most of the money in his checking account was gone, too. Thinking he'd been hacked, he called the bank only to find the federal government had drained his money and given the bank a death notice. They say he died back in 2012. Officials with the Social Security Administration say they'll work with him to correct the matter, but only after he signed an affidavit that he was actually alive.

Debt Denialists

Tue, 20 Sep 2016 06:00:00 -0400

It was eight hours before the biggest media opportunity any Libertarian Party candidate had had in decades, and Gary Johnson was in a New York hotel room talking on the phone with Harvard economist Jeffrey Miron about the nuts and bolts of entitlement reform. "When it comes to Social Security," Johnson told his senior economic advisor as they rehearsed for a June 22 CNN town hall that would end up being viewed in more than 900,000 households, "I'm mimicking the lines from four years ago regarding raising the retirement age, fair means-testing, being able to self-direct as many funds as Congress would authorize.…" After wondering aloud whether even these reforms would prevent the Social Security Trust Fund from going "bust," Johnson arrived at his bottom line: The system as currently constituted is fiscally unsustainable. "That's the reality," he said, "and, you know, you can't run for this office and not speak that truth, in my opinion." Johnson, bless his fiscally responsible heart, was confusing can't with shouldn't. Because one of the most ominous and overlooked developments of the head-spinning 2016 presidential election has been that the winning candidates were precisely the ones who steadfastly refused to speak the truth about how rapidly old-age entitlements are scarfing up the pie of federal spending. In fiscal year 2016, $2.47 trillion of the federal government's $3.66 trillion in non-interest expenses came from the "mandatory spending" categories of Social Security, Medicare, and Medicaid. Within a decade, according to the Congressional Budget Office (CBO), those figures are projected to grow to $4.14 trillion out of $5.7 trillion. In its latest Long-Term Budget Outlook, released on July 12, the CBO concluded that even near-term projections show publicly held debt (which is the national debt minus the debt held by government institutions) "growing larger in relation to the economy than ever recorded in U.S. history," from a current debt-to-gross domestic product (GDP) ratio of 75 percent (up from 39 percent as recently as 2008), to 86 percent in 2026 (higher than it has been since World War II), and then 141 percent in 2046 (wheeee!). Debt service alone is on pace to become the third-largest federal spending category during the next president's first term. "Large and growing federal debt over the coming decades would hurt the economy and constrain future budget policy," the CBO warned. "The amount of debt that is projected…would reduce national saving and income in the long term; increase the government's interest costs, putting more pressure on the rest of the budget; limit lawmakers' ability to respond to unforeseen events; and increase the likelihood of a fiscal crisis." That almost sounds like something worth mentioning during a presidential campaign! Yet instead of addressing that reality, Donald Trump has campaigned as the Republican who would protect rather than tweak entitlements. "We're going to save your Social Security without killing it like so many people want to do," he said at a June 18 rally in Phoenix. "And your Medicare." How will the GOP nominee overcome the cruel logic of actuarial tables, which show that the ratio of workers paying into the system to retirees receiving transfers continues to plunge from 16:1 back when Social Security was launched to less than 3:1 now? Through a combination of "dynamic" economic growth and an always-vague promise to root out "waste, fraud, and abuse." As Steve Bell of the Bipartisan Policy Center told The Wall Street Journal in June, "Any notion of waste, fraud and abuse meeting our fiscal needs remains…silliness." Not just silly, but sad! "Trump's comments are just another kick in the stomach to all of us who have worked for more than 30 years for solvency for Social Security." The Democrats, if anything, have been worse. Insurgent runner-up Bernie Sanders promised to expand, not contract, both Social Security and Medicare, and after long negotiations he helped push those planks into the Democrati[...]

Why Obama’s Social Security Proposal Would Screw Over Millennials

Fri, 03 Jun 2016 13:00:00 -0400

With blatant disregard for any type of basic math, President Obama recently called for an increase to Social Security benefits. Millennials, who pay into Social Security without realistic expectations of receiving their promised benefits, should be furious that neither the president nor the presidential candidates will tell the truth about Social Security's broken finances. As President Obama argued in his June 1 speech in Elkhart, Indiana, "We can't afford to weaken Social Security. We should be strengthening Social Security. And not only do we need to strengthen its long-term health, it's time we finally made Social Security more generous, and increased its benefits so that today's retirees and future generations get the dignified retirement that they've earned." There are two main problems with these claims. First, unless Americans are fine with possibly paying a 31 percent payroll tax (up from 15 percent today), entitlement programs cannot afford to maintain their current course—much less be expanded. Second, retirees receive far more than they pay in from the program commonly known as the "third rail" of American politics. President Obama was light on the details of his proposed expansion. But one can assume that he is lining up to support the policy views of Democratic contenders Hillary Clinton and Bernie Sanders. Clinton wants to expand Social Security, while Sanders calls it "the most successful government program in our nation's history." House Republicans, namely House Budget Chairman Tom Price, are making serious efforts to straighten out American's broken entitlement systems. Unfortunately, likely Republican presidential candidate Donald Trump promises he "will not cut" Social Security. Trump has promised to fully fund the program through higher GDP growth. But even if GDP growth magically shot up to 60 percent above the current long-term estimate (2.1 percent), the program will still end up insolvent. Social Security remains popular—especially among seniors—but no level of public support changes the reality that the program is unfair to millennials. If nothing changes, Americans who retire after 2035 (the year the Social Security Old Age Survivors Insurance Trust Fund is projected to be depleted) will only receive about three-quarters of their promised benefits. On the topic of promises, the myth that entitlements are "earned benefits" is one political talking point that simply refuses to die. Typical retirees, especially older ones, are receiving far more in benefits than what they contributed. For example, according to the Urban Institute, a married one-earner couple with average earnings that reached retirement age in 2000 is expected to receive back more than twice what they paid in. A similar couple that turned 65 in 1980 received 4.3 times what they paid in taxes. And those lucky couples in the same earnings situation that retired in 1960 received Social Security benefits that were over nearly 12 times their contribution levels. It is true that Social Security payments provide the majority of cash income for 65 percent of seniors. But this statistic uses the wrong metric and obscures the troubling truth about the program. Of course retirees, who are by definition not working, have low cash incomes. Additionally, Social Security does not just take from the young to give to the old—it steals from the poor to give to the wealthy. In 2011 (the most recent Census data available), the average wealth for a household headed by someone 65 years or older was 26 times the wealth of the average household headed by an adult under the age of 35. In 2009, during the depths of the recession, older households had 50 times the wealth of younger households. Some argue that this disparity in wealth makes sense. After all, older Americans have had the chance to work longer and accumulate more savings. However, back in 1984 this ratio was 10:1. Since many seniors do not plan on moving out of their homes, perhaps it makes sense to excl[...]

10 Things to Hate About Bernie Sanders' Economic Policy: New At Reason

Thu, 31 Mar 2016 08:03:00 -0400

There is much to cheer about the unlikely competitiveness of Bernie Sanders against that joyless, big-government machine politician, Hillary Clinton. Sanders is comparatively decent and authentic, and his policies are worlds better on drugs, surveillance, and war. But as I write in the May issue of Reason, the thing that arguably makes fans feel the Bern most is his economics, and from the minimum wage to universal pre-K to expanding Social Security, Sanders’ policy is not just misguided, but actively terrible.

Donald Trump’s Plan to Preserve Social Security by Eliminating Waste, Fraud, and Abuse Doesn’t Even Come Close to Adding Up

Fri, 11 Mar 2016 13:01:00 -0500

Donald Trump has staked out a position as the GOP primary's most ardent defender of Social Security. He has promised not to change the benefit in any way, and insisted that he will both defend the program, which is on track to insolvency, from any cuts or changes and reduce annual deficits and the national debt at the same time. Trump repeated this pledge at last night's GOP debate, saying that he "will do everything within my power not to touch Social Security, to leave it the way it is; to make this country rich again; to bring back our jobs; to get rid of deficits; to get rid of waste, fraud and abuse, which is rampant in this country, rampant, totally rampant." As is so often the case when Trump talks policy, his response makes clear that he has no idea what he's talking about. Let's start with "waste, fraud, and abuse." Eliminating waste, fraud, and abuse is one of Trump's favorite talking point solutions for covering budget gaps. It's not a bad idea, exactly, but getting rid of all improper payments in the Social Security system—assuming this could even be done, which is exceedingly unlikely if you otherwise leave Social Security in its current form—would only net about $3 billion in savings annually. That might sound like a lot, but relative to the overall size of the program, it's not. As the Committee for a Responsible Federal Budget (CRFB) points out, that only represents about 0.4 percent of the program's $900 billion a year in benefit payments. To put Social Security on the track to solvency, you'd need to come up with savings on the order of $150 billion every year. To her credit, debate moderator Dana Bash followed up with Trump by pointing this out. Trump's response was to claim that he's not just talking about waste, fraud, and abuse in Social Security. And then he changed the subject to suggest—well, it's not clearly exactly what, but something to do with cutting back on foreign military involvement. Because they don't cover most of the subjects. We're the policemen of the world. We take care of the entire world. We're going to have a stronger military, much stronger. Our military is depleted. But we take care of Germany, we take care of Saudi Arabia, we take care of Japan, we take care of South Korea. We take -- every time this maniac from North Korea does anything, we immediately send our ships. We get virtually nothing. We have 28,000 soldiers on the line, on the border between North and South Korea. We have so many places. Saudi Arabia was making a billion dollars a day, and we were getting virtually nothing to protect them. We are going to be in a different world. We're going to negotiate real deals now, and we're going to bring the wealth back to our country. We owe $19 trillion. We're going to bring wealth back to our country. The most generous reading here is that Trump wants to save money by reducing the U.S. global military presence. And you could save money—perhaps a lot—by cutting back on the Defense Department's global footprint through base closures and troop reductions. But it's hard to square this with Trump's repeated declarations on the campaign trail that he would make a big effort to increase America's military strength and power. "I want to build up the military so nobody messes with us," he said last year, a promise he's repeated in some variation many times since. "I would bring it back to where it was at the height because we're in such trouble." That doesn't sound like a plan for savings. It sounds like a plan for a significant increase in military spending. And Trump's idea that he would do this and create savings at the same time by making better "deals"—a word he waves around like an all-purpose magic wand for political solutions—is just nonsense hand-waving. Still, let's assume for a moment that Trump somehow or another finds a way to fund Social Security using military savings. That still leaves the problem of national debt,[...]

Generational Swindle: How DC is Screwing over Millennials

Wed, 23 Sep 2015 09:20:00 -0400

People "want to frame this as a generational warfare issue, but I think it really isn't," says Jared Meyer of the Manhattan Institute and co-author of Disinherited: How Washington Is Betraying America's Young. "It's Washington versus America's young—not boomers and the Silent Generation."

In Disinherited, Meyer and his co-author Diana Furchtgott-Roth point blame at a wide range of government policies that threaten to leave millennials worse off than Gen Xers and previous generations. When the education system isn't failing kids in K-12, it's charging them exorbitant amounts for college degrees that confer less and less advantage. Fiscal policy, debt, and labor laws are squeezing out opportunities for go-getters and entrepreneurs. And then there's unsustainable old-age entitlements, such as Social Security and Medicare, that take money from the relatively young and poor Americans and give it to older, wealthier people.

"Politicians sold a false bill," Meyer tells Reason's Nick Gillespie. "They said: 'All these programs that you are paying for now, you're going to get the money you paid in later.' But they've made promises where they give benefits now and push the cost off to the future, which means current retirees are getting far more back then what they paid in."

About 6 minutes.

Camera by Todd Krainin and Joshua Swain; edited by Swain.

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Why It's Hard to Trust the Social Security Disability Insurance Trust Fund

Thu, 03 Sep 2015 00:01:00 -0400

Have you ever wondered why your television screen is often filled with advertisements from law firms touting their ability to land money for the disabled? It's because helping people obtain federal Social Security disability benefits has become a lucrative industry in the past decade. But it would be a mistake to only blame the legal profession. After all, lawyers are merely  taking advantage of a program that frequently encourages people with dubious disability claims to seek benefits, especially when the economy is down. According to the Social Security trustees report released at the end of July, the disability insurance trust fund will run out of money by the end of 2016. Without reforms, millions of Americans will receive an automatic 19 percent reduction in their Social Security Disability Insurance benefits. That the program is short on cash is not surprising, considering the tremendous increase in benefits and recipients. According to the Social Security Administration, 2.6 million Americans were collecting SSDI in 1970. In 2014, that number reached 10.9 million. Today the program pays about $142 billion. Adjusted for inflation, that's double what the program cost in 1998. The statistics show large increases in applications for disability benefits when the economy is struggling and unemployment is rising but fewer applications when the situation is reversed. Given that people obviously don't become more or less disabled depending on how the economy is performing, it means that people are using the program as a form of unemployment insurance. How did we get here? When SSDI was implemented in the late 1950s, it was intended to provide benefits to those who were too disabled to work but weren't yet eligible for Social Security benefits. However, eligibility standard changes implemented in 1984 shifted screening rules from a list of specific impairments to a process that put more weight on an applicant's reported pain or discomfort, even in the absence of a clear medical diagnosis. This results in more workers being awarded benefits based on ailments that aren't easily diagnosed and depend on patient self-reporting, such as back pain. Adding to the problem is that if people are initially denied benefits, they can appeal to an administrative law judge, or ALJ. In theory, these judges impartially balance the claims of applicants against the interests of us taxpayers. Unfortunately, many judges don't. In May, my colleague Mark Warshawsky and George Mason University economics student Ross Marchand noted, "In 2008 judges on average approved about 70 percent of claims before them, according to the Social Security Administration." They added, "Nine percent of judges approved more than 90 percent of benefit requests that landed on their desks." As their data show, those judges who are generous with benefits are also consistently generous over time. This shouldn't be the case, of course, because judges are randomly assigned cases. This is problematic for taxpayers. In their upcoming Mercatus Center study, Warshawsky and Marchand estimate that over the past decade, decisions from these overly generous judges will cost taxpayers $72 billion. As the authors note, ALJs have greater incentives to award benefits than to deny them, because approving people involves less paperwork than denying them. Considering the payoffs for applicants (the average SSDI benefit amount is $1,165 per month but can reach $2,663), as well as the lack of incentives to stop appealing when denied and the incentives for lawyers to push their clients through the appeal process, judges—especially the generous ones—are faced with huge caseloads. The system is in dire need of reform. On the ALJ front, Warshawsky and Marchand recommend reducing the judges' workload to 500 cases per year and ending lifetime tenure by reducing it to 15 years because the generous jud[...]

We Know Who You Are

Thu, 27 Aug 2015 06:00:00 -0400

(image) Illinois officials are blaming human error for releasing the Social Security numbers and other personal information of more than 1,000 Department of Corrections employees to the friend of an inmate. They say the information was accidentally included when the department responded to an open records request by the friend.

Obama Administration Thinks People on Social Security Who Have Others Handling Their Finances Shouldn't Have Guns

Tue, 21 Jul 2015 04:15:00 -0400

As part of the Obama administration's post-Newtown school mass gun murder attempts to toughen background check laws and make sure the "wrong people" don't have guns (although a move that has less than zero to do with any possibility of anyone becoming a mass public murderer a la Newtown), the government wants to link the Social Security administration to the National Instant Criminal Background Check System (NICS). The administration hopes to prevent anyone receiving Social Security who has others handling their finances or affairs from legally owning a gun. Details and opposition reported in the Los Angeles Times: A potentially large group within Social Security are people who, in the language of federal gun laws, are unable to manage their own affairs due to "marked subnormal intelligence, or mental illness, incompetency, condition, or disease." There is no simple way to identify that group, but a strategy used by the Department of Veterans Affairs since the creation of the background check system is reporting anyone who has been declared incompetent to manage pension or disability payments and assigned a fiduciary. If Social Security, which has never participated in the background check system, uses the same standard as the VA, millions of its beneficiaries would be affected. About 4.2 million adults receive monthly benefits that are managed by "representative payees." Can we have a moment of sanity on this? "Someone can be incapable of managing their funds but not be dangerous, violent or unsafe," said Dr. Marc Rosen, a Yale psychiatrist who has studied how veterans with mental health problems manage their money. "They are very different determinations." The story goes on to detail with anecdote and data how the Veterans Administration has already been pulled into enforcing NICS. The VA reports names under a category in gun control regulations known as "adjudicated as a mental defective," terminology that derives from decades-old laws. Its only criterion is whether somebody has been appointed a fiduciary....the category...includes anybody found by a "court, board, commission or other lawful authority" to be lacking "the mental capacity to contract or manage his own affairs" for a wide variety of reasons... Rosen, the Yale psychiatrist, said some veterans may avoid seeking help for mental health problems out of fear that they would be required to give up their guns..... About 2.7 million people are now receiving disability payments from Social Security for mental health problems, a potentially higher risk category for gun ownership. An addition 1.5 million have their finances handled by others for a variety of reasons. The agency has been drafting its policy outside of public view. Of course it has been. All hope for continued ability to keep their possessions would not be lost for Social Security recipients caught in this new web. But, well, most hope would be: Since 2008, VA beneficiaries have been able to get off the list by filing an appeal and demonstrating that they pose no danger to themselves or others. But as of April, just nine of 298 appeals have been granted, according to data provided by the VA. Thirteen others were pending, and 44 were withdrawn after the VA overturned its determination of financial incompetence. And opponents of gun registration are often written off as paranoid loons for thinking that once the government knows you have a gun, they might try to come up with a reason to take it away. Hat tip: Ken Costantino In other gun law news out of California, a judge declined to place a preliminary injunction in an ongoing federal suit, Tracy Rifle and Pistol v. Harris, against a California law that bars sellers of handguns from, as the law states: No handgun or imitation handgun, or placard advertising the sale or other transfer thereof, sha[...]

Revisiting Murray Rothbard's Thoughts on Libertarian Strategy

Sun, 19 Jul 2015 08:00:00 -0400

In thinking about libertarian strategy, I find it useful to revisit the framework set out by Murray Rothbard in For a New Liberty (FNL). What counts here is not that Rothbard, a builder of the modern libertarian movement, was the author, but that it is an eloquent statement of a reasonable position on how libertarians should grapple with political reality as they strive for a totally free society. In part three of FNL Rothbard offers a "Strategy for Liberty,"which is more a guideline than a recipe for a successful movement. (He attempted such a recipe in controversial unpublished papers.) In FNL he was concerned with how the movement could navigate between the Scylla of "left-wing sectarianism" and the Charybdis of "right-wing opportunism." (He notes that the Marxists confronted the same issue.) In this one respect, perhaps, Rothbard could be said to be a  middle-of-the-roader. He starts with right-wing opportunism: The major problem with the opportunists is that by confining themselves strictly to gradual and "practical" programs, programs that stand a good chance of immediate adoption, they are in grave danger of completely losing sight of the ultimate objective, the libertarian goal. He who confines himself to calling for a two percent reduction in taxes helps to bury the ultimate goal of abolition of taxation altogether. By concentrating on the immediate means, he helps liquidate the ultimate goal, and therefore the point of being a libertarian in the first place. If libertarians refuse to hold aloft the banner of the pure principle, of the ultimate goal, who will? The answer is no one.... Rothbard advises libertarians to "cleave to principle," and that "means something more than holding high and not contradicting the ultimate libertarian ideal. It also means striving to achieve that ultimate goal as rapidly as is physically possible. In short, the libertarian must never advocate or prefer a gradual, as opposed to an immediate and rapid, approach to his goal. For by doing so, he undercuts the overriding importance of his own goals and principles. And if he himself values his own goals so lightly, how highly will others value them?" In support of his case, he turns to F. A. Hayek's important essay "The Intellectuals and Socialism." In that essay Hayek famously called for "a truly liberal radicalism..., which is not too severely practical and which does not confine itself to what appears today as politically possible." Hayek continued: We need intellectual leaders who are prepared to resist the blandishments of power and influence and who are willing to work for an ideal, however small may be the prospects of its early realization. They must be men who are willing to stick to principles and to fight for their full realization, however remote. In Hayek's view a truly liberal radicalism—presenting a "liberal Utopia"—is necessary to "make the building of a free society once more an intellectual adventure, a deed of courage." Rothbard doesn't like the word "Utopia," but he agrees that only a radical vision will attract people to the movement. "Who, in contrast," Rothbard asked, "will go to the barricades for a two percent tax reduction?" Another dividend from liberal, or libertarian, radicalism is that it may shift the "middle" in the public debate toward the libertarian position. "It is precisely the strategic role of the 'extremist' to keep pushing the matrix of day-to-day action further and further in his direction," he wrote. If we stopped the Rothbardian analysis here, we would have a misleading picture of his full position, for while he condemned right-wing opportunism, he was equally hard on "left-wing sectarianism." He wrote: If, then, the libertarian must advocate the[...]

America's Coming Transfer of Wealth

Thu, 25 Jun 2015 00:01:00 -0400

Does it seem as if some lawmakers have the attention span of a toddler? Several years ago, concerns about the debt and overspending were all the rage. These worries have dissipated almost entirely as deficit levels have gone down from their sky-high summit in 2009. And just like that, lawmakers have gone back to overlooking our long-term fiscal situation and the unsustainable path the nation is on.

Case in point: the latest projections from the Congressional Budget Office. According to the CBO's annual Long-Term Budget Outlook, if current laws were to remain unchanged, government spending as a share of gross domestic product would reach 22.2 percent in fiscal 2025, up from 20.5 percent today. By then, even under a very rosy GDP growth scenario, the debt would amount to 78 percent of the economy. To put this number in perspective, the debt-to-GDP ratio was 35 percent in 2007. In 2040, the debt could reach a whopping 103 percent of GDP. Spending on interest alone would consume 4.3 percent of GDP, a dramatic increase above the current 1.3 percent. Putting that in dollar terms, interest on the debt would jump from $235 billion to over $2.2 trillion. That's a lot of money.

The deterioration comes fully from the explosion of major health care programs, Social Security and escalating interest on debt costs. More precisely, Medicare, Medicaid, Affordable Care Act subsidies, and Social Security are the drivers of our future debt. Spending on these programs alone could reach 11.8 percent of GDP in fiscal 2025 and 14.2 percent of GDP in 2040, up from 10.1 percent today.

Because spending on entitlements will continue to outpace all other spending for years to come, they will consume a large and increasing share of the budget. In layman's terms, it means that the future of our government will be mostly to spend money on older Americans for their retirement and health care. Despite federal revenues slightly increasing during the coming decade, the government could still run cumulative deficits of $7.4 trillion over that 10-year period, according to CBO forecasts.

Of course, all of the policy uncertainty in Washington, not to mention the CBO's required current law projections, will not yield perfectly accurate forecasts. If lawmakers were to make changes to current law—say, repeal the sequester cuts or scheduled tax increases or fail to implement some of the "savings" in the president's health care law—then deficits and debt would be significantly higher than the amounts reported under the current base line.

For example, under the alternative scenario, the CBO projects that debt would reach 86 percent of GDP in fiscal 2025, and spending would be 22.9 percent of GDP. In 2040, debt as a share of GDP would be an unimaginable 156 percent. And of course, the more debt you have the more interest you pay. Interest on the debt would equal 6.3 percent of GDP, or $3.2 trillion.

Now, if you are not freaked out enough, the CBO also looks at the negative impact on the economy of accumulating such levels of debt. In that scenario, higher debt means lower growth, and that increases our debt to 175 percent of GDP.

And who do you think is going to shoulder this lower growth and higher debt? The younger generations will. Without any changes to our enormous entitlement programs, we are about to witness the most massive transfer of wealth from the relatively poor and young to the relatively rich and old in society. It is time for members of Congress to stop acting like toddlers and refocus on changing the path we are on.


Conservatarians Rising?

Sat, 20 Jun 2015 08:00:00 -0400

Charles C.W. Cooke is a writer at National Review and author of The Conservatarian Manifesto (Crown Forum), a book about a "certain coterie on the right" that combines elements of the conservative and libertarian philosophies. Reason TV's Nick Gillespie sat down with Cooke in March to talk about how the two groups can learn to get along. To see more, go here, or view the interview below. Q: What is a conservatarian? A: These are the people who say when they're around libertarians, they feel conservative; when they're around conservatives, they feel libertarian. The fault lines are that they disagree with libertarians on immigration, foreign policy, and sometimes abortion. They disagree with traditional conservatives on federalism, gay marriage, and drugs. And they tend to be disappointed with the Bush years. Sometimes not because of Iraq, but because of No Child Left Behind, Medicare expansion, the spending, and a general feeling that Republicans don't live up to their rhetoric. Q: Let's talk about immigration. Somehow the government that conservatives are constantly harping on as being inefficient and stupid is going to be able to both secure the borders in a way that doesn't infringe on people's civil liberties and adjust the demographic population of 300 million-plus people to meet all of our needs—in terms of ethnic diversity as well as what jobs people can do. How can anyone think government would be good at that? A: I'm not sure I would say government is going to be good at it. What I would say is that we already have a government that is so deeply woven into the economy and into our lives that to just allow people to come in—and if you look at the polling, tens if not hundreds of millions of people would want to—would be to put some pressure on our existing welfare system. People say, "Let's go back to how we were 100 years ago, sink or swim." I don't have so much of a problem with that. But I don't think the modern American public is willing to watch people sink or swim once they're here. Q: If you knew for a fact that criminals were kept from getting welfare benefits, would that allay your concerns? A: It would allay some of my concerns. I do think the existing polity gets to set the criteria by which new arrivals are permitted to enter the country. Q: In order to be the strongest nation in the world, do we have to increase defense spending from where it is now? A: I think conservatives damage themselves here. It does not need to increase every year. The waste is astonishing. If it were any other department, it would be on the front cover of conservative magazines, week in and week out. They can't even audit themselves—they don't even know where the money is going. That being said, in 1945 the British empire began to collapse. The baton was handed to the United States. It finds itself in the position of power, and it cannot relinquish that without permitting another nation to come in and take that role, and I do not want to see that. Q: How do conservatarians line up on entitlement spending? A: We are seeing an intergenerational wealth transfer that was not what was intended by Medicare or Social Security. More important, we know that it's unsustainable and we're choosing it anyway. That's the unforgivable part. Q: Is there a glue between conservatives and libertarians, other than a rejection of progressivism? A: I think philosophically they start from the same point. Libertarians and conservatives mistrust the centralizer who tells you he knows everything. They don't believe that human nature changes. src="" frameborder="0" height="315" width="560">[...]

Why You Shouldn't Take Mike Huckabee's Presidential Campaign Seriously

Mon, 11 May 2015 17:06:00 -0400

As former Arkansas Gov. Mike Huckabee meanders into the Republican party’s presidential primary race, you may see occasional calls to take him seriously as a candidate. Here’s a better idea: Let’s not. Huckabee is affable and likeable, and it’s at least conceivable that he could make a strong showing in an early contest or two next year. But given the strength and breadth of the GOP field this round, he has essentially no real chance at winning the GOP nomination. More than that, he’s proving himself unwilling to grapple with some of the most fundamental federal policy issues. In particular, Huckabee has taken to arguing that Medicare and Social Security, the nation’s two biggest entitlements and two biggest drivers of the long-term debt, don’t need to be reformed. Last month he attacked fellow GOP no-hoper, New Jersey Gov. Chris Christie, for his recent proposal to means test entitlements and raise the retirement age, and said that he wouldn’t support GOP Rep. Paul Ryan’s Medicare reform plan. Part of what’s telling here is that neither of these proposals are intended to blow up the big entitlements; instead, they’re plans to slowly transition them into systems that are fiscally sustainable, or at least closer than they are now. Yet for Huckabee, even that’s too much. His reasoning for opposing the changes, meanwhile, is pretty much pure pandering. At a stop in South Carolina over the weekend, he reiterated his opposition to reforming entitlements, arguing that doing so would amount to a betrayal of taxpayers, reports Dave Weigel of Bloomberg Politics:  As a candidate, Huckabee is attempting to bring the conversation around to economic populism. At every stop of his tour, he made the standard Republican attack on Washington, but added a twist. Other Republicans would cut away at "entitlements." He would not. "I remember the first time I got a paycheck, at age 14," said Huckabee in Urbandale. "I had a job at the radio station. I got paid -- a buck-twenty-five an hour, minimum wage. I was worth every bit of it, too. A buck-twenty-five an hour, however many hours I worked, so I added it up -- and then I got the check, and there was something called FIC taken out." Huckabee's crowd, a mixture of young parents and head-nodding retirees, laughed as he re-enacted the conversation with his boss over FICA, the Federal Insurance Contributions Act, a.k.a. the Social Security tax. "I said, 'Oh my gosh, I'm 14 years old, you really think I need that?' He said, 'Well, someday, someday it will be there for you.' Folks, I'm a whole lot closer to that someday than I was! It is a foolish thing for the government to involuntarily confiscate money from your pockets and paychecks for 50 years, and then suddenly tell you, oh, we were just kidding." It was a sidelong reference to some of his Republican rivals, who are calling for major cuts in the Social Security program. Huckabee has made this argument elsewhere, in various forms, but it doesn’t hold up. For one thing, it’s not as if any of Huckabee’s fellow Republicans have suggested cutting off Social Security or Medicare. The changes that have been proposed are gradual, taking years to kick in, and while they would alter how those programs and their benefits are structured, they wouldn’t simply take benefits away For another, the combined Social Security and Medicare benefits that an average person will get far exceed what they pay into the system. So the idea that they are owed the benefits the system currently offers by virtue of having paid in doesn’t really work either. Nor is it as if Social Security is some absolute that will simply continue to pay out if not changed. At some point in the next [...]

Mike Huckabee Attacks Chris Christie Over Social Security and Medicare

Fri, 17 Apr 2015 12:49:00 -0400

Former Arkansas Gov. Mike Huckabee is more willing than the average Republican to unapologetically embrace domestic spending. He proved that again today, sniping at another potential presidential candidate—New Jersey Gov. Chris Christie—over entitlements. The Daily Caller reports:

(image) In a speech this week, Christie proposed eventually raising the eligibility age for Social Security and Medicare and getting rid of payments to wealthy seniors through means testing....

Huckabee then said of the proposed changes: "I would say it's not just no. It's you-know-what no. That we're going to rip this rug out from under people who have dutifully paid in their entire lives to a system."

"I'm not being just specifically critical of Christie," Huckabee added. "But that's not a reform. That's not some kind of proposal that Republicans need to embrace. Because what we're really embracing at that point, you're embracing a government that lied to its people. That took money from its people under one pretense, and then took it away from them at the time they started wanting to actually get what they paid for all these years."

In its broad strokes, this fits Huckabee's attempt to distinguish himself as the blue-collar candidate for the Republican nomination, though when you get to the specifics that gets more muddled. Raising the eligibility age would make the system more regressive, since wealthier people tend to live longer than poorer people. But means-testing would have the opposite effect, and that might have some appeal for the populist constituency the candidate is seeking. It's interesting that Huckabee challenged Christie's proposal in full, rather than splitting the issue.

Meanwhile, yet another potential candidate, former Florida Gov. Jeb Bush, just joined Christie in supporting a hike in the Social Security eligibility age. So if this is how Huckabee plans to make himself stand out from the other contenders, he'll probably have plenty of chances to keep at it.

Addendum: John McCormack contrasts Huckabee's current comments with what he was saying about Medicare three years ago.