Friday, July 8, 2011

Why We Need An Economic Version Of The X-Files.

I've blogged that facts don't speak for themselves here and here.

At South Dakota Politics, Dr. Blanchard posts "The Fiscal Mess We're In" with a follow-up. Blanchard calls uses New York Times, Wall Street Journal, and Weekly Standard articles to call for cuts to entitlements including Social Security. 

To his credit, Blanchard, unlike many conservatives admits that tax increases might be necessary.  I'm unsure if  Blanchard would would agree with the facts, tone, or reasoning that Robert Ferguson and Thomas Johnson present in Salon.
Between 2002 and 2007, for example, the richest 1 percent of Americans garnered 62 percent of all income gains, while the bottom 90 percent of the population saw their incomes grow by 4 percent. At the same time, thanks to the Bush tax cuts, the rich were also paying proportionately fewer taxes. Considering that ordinary Americans fronted most of the money for the bank bailouts and have endured most of the recession’s “collateral damage,” it seems only simple justice that if the program needs fixing, the best way to do it would be to raise the ceilings on earnings subject to the Social Security tax, which is currently only $106,800. That would put the burden on people who cannot plausibly claim to be suffering.
Further, Ferguson and Johnson conclude the following about entitlements:

But even now there is no near-term threat to Social Security’s solvency. In 1983, Congress enacted into law recommendations of the Greenspan Commission to raise Social Security taxes to cover the retirement bulge coming from baby boomers. Since then, the program has piled up enormous surpluses. These have been invested in government bonds, thus helping to finance the rest of the government.

The 2011 Report of the Trustees of the Social Security Trust Fund projects that the Trust Fund and interest earnings from it will suffice to cover all benefit payments until 2036. Even then, the fund would not be empty -- the report projects that tax revenues will still cover approximately 75 percent of promised benefits until 2085. Talk of the bankruptcy of Social Security is hot air.
Meanwhile, Blanchard contends,
The Democrats in Congress have agreed to promises of future spending cuts, but only in non-entitlement spending. That just begins the process whereby entitlement spending and interest on the federal debt squeezes out all other spending. Until and unless entitlement reform is really on the table, agreeing to revenue increases just compounds the problem.
Where's the economic version of Mulder and ScullyThe truth has to be out there.

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