Quackery in federal budget, Social Security

Published 2:40 pm Friday, May 27, 2011

Last May and June (2010), I wrote two columns about federal budgeting expenditures and revenues.

To quote myself, “It is clear that the political factions making the most noise are not being upfront about the facts and realities.” It’s one year later and the “quacks” are working harder than ever. Looking at the latest budget, here is what it shows (see below).

So, since last year, the deficit has been reduced by $544 billion or half a trillion dollars and expenditures will be $90 billion dollars less than fiscal year 2011.

Sign up for our daily email newsletter

Get the latest news sent to your inbox

Additionally, the deficit is now only 7 percent of Gross Domestic Product (GDP), down 3.9 percent from last year. It went down significantly between 2011 and 2012. Maybe the quacks are talking about Social Security. Let’s see (See below).

Let me summarize.

Total federal government outlays have gone done by $90 billion dollars and the deficit has been reduced by more than half a trillion dollars. Social Security revenues are generating a one-fourth of a trillion dollars in surpluses beyond expenditures. And our economic recovery is just now beginning to get some traction, which will no doubt increase revenues for general and social security taxes as well as reduce the government’s percentage of the overall economy with respect to GDP.

So what alarmist contention is left?

Oh yea, Social Security, Medicare and Medicaid will run out of money sometime in the next couple of decades. The basis for this is that the baby boomers will all retire at once and drain all the money out, including the surpluses currently being generated. Well maybe, maybe not.

I’m a baby boomer and I don’t see retirement coming my way anytime soon. I think the speculating regarding Social Security/Medicare that are creating full-scale panic is not only quackery, it’s moronic. Medicaid needs adjustment, that’s it.

So, should we just relax because there is no real problem? Of course not.

We do have a federal budget that hasn’t been balanced since 2000. Our long-term economic sustainability is dependent upon working diligently towards balancing that budget, but the key is long-term.

Rapid changes are nothing more than social engineering.

One of the things that confuse people in the budget rhetoric is when Social Security/Medicare is mixed into the operating budget of the federal government. Social Security/Medicare is a self-funded and separate social program. Medicaid is another animal all together but the same rationale applies.

However, sometime during the Reagan administration, we started mixing revenues intended to pay for future costs to paying for Federal operating expenses. They also did the same thing with trust funds set aside for highways, airports, ports and other infrastructure programs that were intended as investments in our future.

Now whose brilliant idea was that?

If you’ve read my articles in the past, you’ll know that it is quackery to think that we have enough cost cutting opportunity to balance the federal budget without:

Eliminating everything in the federal budget except Defense and Homeland Security, and

Reducing the Defense/Homeland Security budget by another 15 – 20 percent.

This would require eliminating Federal Law Enforcement, Department of Transportation, Department of Education, Department of Agriculture, Environmental Protection Agency, Science and Space Agencies, Department of Commerce and the Department of Energy. Of course, all the entitlement programs would go before the previously mentioned agencies including such things as welfare, international aid, unemployment supplements and disaster relief. This would reduce expenditures by $0.9 trillion.

We could use tax increases to help close the gap. Tax receipts are now at about 14.8 percent of GDP dropping from 17.5 percent in Bush’s last year in office. The last time they were this low was during Harry Truman’s administration. Since it’s obvious that lower tax rates to corporations and the wealthy don’t generate economic growth, an adjustment is justified.

The pragmatic thing to do is to cut expenses and raise taxes, but it needs to be done intelligently. We need to look at expenditures from the perspective of investment costs and benefits, eliminating or re-directing investments that get us more bang for our bucks.

The change in NASA’s direction and funding sets a good example. And we need to quit coddling the major beneficiaries of our economic system and require them to pay for the privilege.

Offshore trickery to keep corporations from paying United States taxes should immediately be ended. If the revenue is made by operations in the United States, those operations should pay U.S. taxes, period. Tax breaks should be reserved only for new and emerging industries that manufacture in the United States. Anything else is pure quackery.

Latest federal budget

Item                                          2011                         2012                     Difference

Revenue, billion $                 2,174                       2,627                        +453

Expenditures, billions $      3,819                       3,729                         – 90

Deficit, billions $                  1,645                        1,101                        – 544

Deficit, percent of GDP        10.9                          7.0                           – 3.9

Latest Social Security figures

Item                                                       2011                    2012                 Difference

Social security and Medicare

revenues, billion $                         925                    1,016                       +91

Expenditures, billions $                    748                     767                         +19

Surplus, billions $                               177                     249                         +72

Deficit, percent of GDP                     10.9                     7.0                         – 3.9

Rodney Gibson is the former mayor of Saluda.