This is a follow-up to the previous post. It shows federal taxes and spending separately for three different categories: Medicare, Social Security, and everything else.
The "everything else" category includes ordinary discretionary spending, Medicaid, and other social welfare programs. Social Security includes both retirement and disability. Medicare is Medicare. Here they are:
I chose the years carefully: the charts start at 2003, after increased spending for the war on terror had settled in, and end in 2019, before pandemic spending surged. This provides a good long-term look at things without being fooled by transient spikes.
As you can see, spending in the "everything" category goes up and down with recessions but has basically stayed stable since 2003. It was 11.9% of GDP in 2003 and 11.7% of GDP in 2019. It's currently running a deficit of about 1% of GDP because taxes have fallen since 2015.
Social Security outlays have gradually increased and the program is now running a deficit of about 1% of GDP, which is being made up by cashing in bonds from the the trust fund. In a decade this will stabilize at about 1.5% of GDP.
Medicare has gone up steadily and is now running a deficit of about 2% of GDP. Its growth rate has slowed recently but it's still likely to run bigger deficits over time.
This is everything except interest on the debt, which isn't under anyone's control.¹ Roughly speaking, the deficit is all about Social Security and Medicare, with a little bit due to recent declines in corporate tax receipts. That's it.
¹And anyway, interest expenses will go down mechanically if primary spending and taxes are brought into alignment.
The revenue line on the middle graph should be 'taxes + trust fund drawdown' (thus bigger). And the spending line on the top graph should be 'spending + trust fund repayment' (also thus bigger.)
The trust fund is an ASSET for Social Security and a LIABILITY for the general fund ('other'). It was designed that way and consists of *prepaid taxes* in bucket #2.
Not including it's drawdown is making 'other' look better by making 'social security' look worse with accounting sleight of hand.
Correct!
Which is the correct way to do this depends upon what, exactly, you're trying to show. In this case, Kevin is right, and you are wrong. The question he is trying to answer is, "What is contributing to the deficit right now?" This is not a question for which assets and liabilities are relevant. It's purely an issue of income and expenses.
Social Security is paying out more than it is taking in from the taxes dedicated to it. This shortfall is being made up through taxes from the general fund. That Social Security accumulated assets that are liabilities for the general fund in the past doesn't change this. It's something that would have been accounted for in past income/expense analyses. (I'm avoiding the phrase "income statement," because we are not actually making a full income statement.)
If the question Kevin were asking were, "Is the Social Security system solvent," then you would be correct.
If you're worried about Medicare, here is a simple solution - convert to a single-payer system for everyone, such as Canada's (that is, Medicare for All). That would take something like 8% of GDP out of healthcare and insurance, while expanding coverage and not reducing quality. That 8% could at least partially be used to reduce deficits.
Of course implementing this simple solution would be difficult politically and also economically, although all other advanced nations have somehow managed to do it before now. The point is that it is not reasonable to blame Medicare for what is a largely dysfunctional overall system. The real solution is to fix the system, not cut Medicare funding. When you talk about having to cut Medicare (or Social Security) you are accepting conservatives' position that government solutions are forbidden.
Medicare has a dedicated revenue stream, but that has not kept up with the increases in the costs of medical care. The difference is made up out of general revenue. That actually makes the program funding a little more progressive than Social Security.
Given the long history of employer funding of a large share of employees' health insurance, I believe the system used in Germany would be easier to implement here An important difference is that the insurers in Germany are nonprofits. To fully realize the potential savings, we need a single standard for administrative functions.
Yes it’s about social security and Medicare, but also tax revenues, which you really are glossing over here. We’ve had big cuts for corporate and wealthy interests and a defunded IRS. Reverse those things and then tell us about the deficit.
Not sure if it covers recently enough, but in terms of how much the Federal government is taking-in, dear old FRED has https://fred.stlouisfed.org/series/FYFRGDA188S
thank you
That first part is clearly wrong. Interest rates on debt is dependent on, among other things, the relative rate of the Fed's central rate to that of Treasury's. If the Fed's rate is high, it pulls investment away from bonds, which is adjusted upward to get people to purchase bonds. The second applies if, and only when public debt "crowds" out private debt. Otherwise, the history of the period from mid-90s through Trump reflected the opposite of what you claim.
I am SO sick of DEFICIT COMING TO EET US IN OUR BEDZ AIYEEEE!! Our deficit as a percentage of GDP is entirely manageable, as op-ed after op-ed by respectable economists have reminded us, to the point that I think they've just given up since nobody's paying attention.
And the most annoying thing about it is, the loudest voices are the most bad-faith. ANY time a Republican opens his/her piehole about Teh Deficit, there should be a taxpayer-funded public servant standing by to stuff a couple socks in it.
Wanna reduce the deficit? How about applying Social Security taxes to income over $165K or so? Boom, no more Social Security deficit. How about working on bending the medical-care cost curve, including but by no means limited to allowing Medicare to negotiate pharmaceutical prices? Oh wait, Obamacare is actually doing the first, and the Biden administration is doing the second, both over the vociferous objections of, yes, Republicans. And as to the general fund, maybe stop passing trillion-dollar tax cuts for corporations and the very wealthy, as most recently engineered by ... wait for it ... Republicans!
Talk about an issue tailor-made for the bad faith that is not merely endemic to but business as usual for the Republican Party ...
Argh, Kevin! Interest on the federal debt is ENTIRELY at the discretion of the government, almost specifically one person: Fed Chairman Jerome Hayden Powell.
Historically, the Treasury sold bonds to protect its gold supply. The currency that was used to purchase the bonds was temporarily taken out of circulation and couldn't be presented to the Treasury for conversion to gold. Interest paid on the bonds was incentive and reward for the bond buyers assuming the risk that the Treasury would run out of gold before the bond matured. The interest rate was risk-dependent and market determined.
Under a fiat money regime, there is no conversion risk, and no public purpose in paying interest on government liabilities. It's just giving money to people because they already have money.
Government giving money to the right people:good. Government giving money to the wrong people: bad.