How to Reduce The National Debt Of The United States Without Cutting Benefits

[Supermarioman]

I came up with this idea yesterday when looking at a pie-chart.
Currently, 20% of the U.S annual budget is spent on defense. 20% is also spent annually on Social Security.(discounting Medicare and Medicaid, which account for another 20%)
So, here's my plan. Cut the U.S Military budget in half, and give the funding to Social Security instead.
Presuming that Washington does something right for once and fixes Social Security's budget problems, this would leave half of Social Security's Payroll tax unneeded. Then, use that half to pay off roughly half a trillion dollars of the national debt each year.
In twelve years, you'll have half the debt you used to, which leaves you far more stable fiscally.

Source:
http://www.whitehouse.gov/omb/budget...ets/tables.pdf

[Dreadnaught]

I'm sorry, but it's not realistic.

First of all, Medicare and Medicaid can't be discounted, they are enormous benefits that require a separate payroll tax that is currently at 2.9%. It will need to rise to 6% in a decade or two to cover expected expenditures. Actually, that 6% figure was estimated by the Medicare trustees before ObamaCare, so it will undoubtedly be higher.

Similarly, Social Security is expected to grow rapidly as well.

Secondly, our military can't be simply halved. Who will patrol shipping lanes? How will be fulfill our commitments to Taiwan, South Korea, Iraq, Afghanistan, etc?

There is no effective way to reduce expenditure without reducing benefits. They must be cut.

[EyeKhan]

This is a fantastic question, though I don't have time to read anything or comment on it. Sorry. Be back later.

[Supermarioman]

I'm sorry, but it's not realistic.

First of all, Medicare and Medicaid can't be discounted, they are enormous benefits that require a separate payroll tax that is currently at 2.9%. It will need to rise to 6% in a decade or two to cover expected expenditures. Actually, that 6% figure was estimated by the Medicare trustees before ObamaCare, so it will undoubtedly be higher.

Similarly, Social Security is expected to grow rapidly as well.

Secondly, our military can't be simply halved. Who will patrol shipping lanes? How will be fulfill our commitments to Taiwan, South Korea, Iraq, Afghanistan, etc?

There is no effective way to reduce expenditure without reducing benefits. They must be cut.

Then what can you do?
Since Social Security is a pyramid scheme, If you cut it off somebody gets screwed.
Do you think any politician has the backbone to even try to pass a meaningful reduction like saying that nobody born after 1990 gets any benefits?

[Dreadnaught]

No, they don't. Bush tried in 2003 (5?) and it failed. But they will have to.

I think we have two choices on this --

1) Slow, incremental reductions in benefits over time.

2) Some kind of solvency crisis on our social security or Medicare leads to a sudden change in how all of this works.

[RandBlade]

It wouldn't take that much to fix actually.

How about since the main problem is that since people are living longer raising the proportion of retired:earning that we . . . raise the retirement age and the age at which you get benefits. If instead of say 65 you got benefits at 70 that's 5 years less of benefits, five years more earnings getting taxed.

Raising the retirement age isn't even a case of "cutting benefits" just an acknowledgement that we're living longer. The years of benefits will still be more than in the past.

[littlelolligagged]

The sort of people who are actually depending on social security (that should really pay a hell of a lot more than it does currently) aren't generally in the types of jobs that they can continue doing until age 70; and the people with pensions and retirement plans are going to have companies wanting to push them out the door as quickly as possible to avoid escalating their own costs.

[wiggin]

Lolli - while a decent point, you have to realize that the majority of American workers in their 60s don't work in physically demanding jobs. Furthermore, competition for jobs is going to decrease a lot fairly soon as baby boomers all retire and aren't replaced by a similar burst of new job seekers. Lastly, when the 65 year provision was first enacted, I'd bet most 65 year old workers were is worse shape than most 70 year old workers today.

Social Security is not the problem, nor has it ever been - all that's required is some backbone on the part of Congress to raise the retirement age to at least 68 in the near future (obviously in increments). The real issue is Medicare, and I don't see any way to deal with this outside of cutting benefits and raising premiums (and containing growth in healthcare costs through other measures not directly related to the benefit structure). Medicaid, while certainly an expensive program for states, is not a huge portion of the federal budget. While it could use some reform (and anything that reduces healthcare costs for Medicare could be reasonably expected to do the same for Medicaid), the real issue is Medicare.

As for defense spending, it'd be awfully hard to cut defense spending at all. I'd be happy with capping post-war defense expenditures to grow slower than inflation, effectively cutting the military budget by 1-2% a year. This could be funded by consolidating some of our overseas holdings, smart reform in procurements (and some careful thinking about what weapons systems we really need), and overhaul of the Tricare system (including finally increasing the premiums), and getting Congress to stop giving outsized pay raises to soldiers every year. To be honest, though, these cuts have a limit - eventually the rest of NATO is going to have to pick up the slack, at least when it comes to providing a credible defense of Europe and nearby sea lanes.

[RandBlade]

Who exactly is Europe supposed to be getting defended from nowadays?

[wiggin]

Who exactly is Europe supposed to be getting defended from nowadays?

Russia?

Not kidding here - obviously we're not in the Cold War anymore, and it's not like we're planning on mining Fulda Gap with tactical nukes any time soon. But Russia has been upping their game lately - probing flights with long-range bombers, pulling out of the conventional forces treaty, thinking about upgrading their air and naval assets, etc. The only militaries with anything like decent procurement programs are the UK and France, with a side of Germany. Even those are in serious budgetary peril, and only the UK has anything like a decent combat-trained force.

Other concerns involve ballistic missile attack on Europe - currently, the US is spending a lot of money developing and deploying a system to protect Europe (yes, and the US), and the political and monetary support has been lackluster. I honestly think this is currently a bigger concern than a conventional attack on Europe.

Furthermore, the 'nearby sea lanes' is more what I was thinking about. Anti-piracy measures are pretty awful right now, not to mention projection of sea power to rapidly deal with developing crises (humanitarian or otherwise). The rapid reaction forces of the EU are pathetic, Europe's projection power has atrophied (**with the exception of modest British and French investments**), and the only realistic Western response to a world crisis is going to have to come from the US.

I don't doubt that US defense spending as a proportion of GDP is always going to be higher than most of Europe's - that's fine, the US reaps influence and power that clearly most of Europe is not interested in achieving. But the current levels of defense spending are simply not enough to provide a credible, trained force able to effectively compete on land, air, and sea (let alone project power).

[EyeKhan]

before ObamaCare, so it will undoubtedly be higher.

Secondly, our military can't be simply halved. Who will patrol shipping lanes? How will be fulfill our commitments to Taiwan, South Korea, Iraq, Afghanistan, etc?

Shipping lanes??? What are you talking about? Yeah, we have some warships off the horn of Africa, but so do a lot of other countries. I can't imagine that expense is all that big compared to the Afghanistan and Iraq non-occupations, the real cost of which are probably near 2 trillion a year.

There is no effective way to reduce expenditure without reducing benefits. They must be cut.

I'm certain there's plenty of fat to cut in the military budget, despite your in depth analysis claiming the contrary. And there's always raising revenue, the rates of which are quite low by world and historical standards.

Then what can you do?
Since Social Security is a pyramid scheme, If you cut it off somebody gets screwed.

Conservative answer: screw them, then. We can go back to pre-social security and medicare when seniors used to die soon after they were too old to work anymore. That'll help. Because we all know there's no possible way the US could ever pay less money per capita for health care.

Do you think any politician has the backbone to even try to pass a meaningful reduction like saying that nobody born after 1990 gets any benefits?

Works for me.

How about since the main problem is that since people are living longer raising the proportion of retired:earning that we . . . raise the retirement age and the age at which you get benefits. If instead of say 65 you got benefits at 70 that's 5 years less of benefits, five years more earnings getting taxed.

There's got to be an affect on employment rates with that for professionals. But I wonder what a 65 year old man does for a living if, say, he spent his life laying bricks or climbing ladders to pull wire through ceilings? Does he quit the labor intensive job when his body can't do it anymore and then... what? Flip burgers at McDonalds for five or ten years or something? Competing for the lowest wage, crappiest benefit jobs against the local high-school senior? Will that help anything?

Raising the retirement age isn't even a case of "cutting benefits" just an acknowledgement that we're living longer. The years of benefits will still be more than in the past.

This is a real problem, no doubt. Probably the whole concept of retirement's going to have to be re-thought. But what a senior does for a living when his body's giving out and his mind's a lot less nimble has to be re-thoguht too.

[wiggin]

Shipping lanes??? What are you talking about? Yeah, we have some warships off the horn of Africa, but so do a lot of other countries. I can't imagine that expense is all that big compared to the Afghanistan and Iraq non-occupations, the real cost of which are probably near 2 trillion a year.

Building and maintaining a blue-water navy is not cheap.

I'm certain there's plenty of fat to cut in the military budget, despite your in depth analysis claiming the contrary.

Do tell me where you'd like to cut the military budget. I agree that there are cost savings to be had, but I don't think you know what they are.

[Aimless]

I don't know what they are either, could you please tell me? I've cleaned my room.

[EyeKhan]

Lolli - while a decent point, you have to realize that the majority of American workers in their 60s don't work in physically demanding jobs.

because they can't. Now if you start asking them to do it, there is the issue for people who's only work life-long was physical labor. What do these people do until they're 70?

Lastly, when the 65 year provision was first enacted, I'd bet most 65 year old workers were is worse shape than most 70 year old workers today.

You may have a point here, but consider the ever increasing obesity rate... A life of being fat means ill health and physical ability in your 60's....

As for defense spending, it'd be awfully hard to cut defense spending at all.

There's always the concept of completely re-defining the roll of the US military in the world. Maybe we don't need the ability to project power that we have now . . . . That's a BIG question though.

Building and maintaining a blue-water navy is not cheap.

But the large majority of the fleet is not patrolling shipping lanes against pirates. That's just a nit pick...

I agree that there are cost savings to be had, but I don't think you know what they are.

Ok, so what? I'm sure you have a sense that ITER's facing some significant engineering challenges but I don't think you know what they are. HA!

I don't know what they are either, could you please tell me? I've cleaned my room.

Do we have to know exactly what they are in order to participate in the conversation?

[wiggin]

because they can't. Now if you start asking them to do it, there is the issue for people who's only work life-long was physical labor. What do these people do until they're 70?

What do they do until they are 65 right now? Obviously they have to make provisions for a time when they are too old to work but the government mandated plans haven't taken effect yet. They can take lower payments starting at 62; they can work in their jobs with an eye to 'training up' for a less physically demanding job; they can sock away extra cash to retire early. The physical limitations are not that much greater at 70 today than 65 in 1935.

There's always the concept of completely re-defining the roll of the US military in the world. Maybe we don't need the ability to project power that we have now . . . . That's a BIG question though.

No offense, but I'd prefer the US to be the ones with the ability and not China.

But the large majority of the fleet is not patrolling shipping lanes against pirates. That's just a nit pick...

Even the cost of the ships and deployments off Somalia are pretty significant. Guided missile destroyers don't come cheap - hell, even a littoral ship costs more than $1 billion now.

Ok, so what? I'm sure you have a sense that ITER's facing some significant engineering challenges but I don't think you know what they are. HA!

You're giving Dread crap about not giving an 'in depth analysis' and that you're sure there's money to be had in a budget when you clearly have no clue. (And actually I am rather aware of ITER's problems - my friend's father was heavily involved in the construction of the NIF and educated me about the relevant issues.)

Look, either provide some evidence for your claim or don't complain when Dread makes an unsubstantiated point.

[Nessus]

If I clean my room, will you tell me?

[littlelolligagged]

I think you have to clean his room.


So if you have old people staying in the work force until they are 70, what are the younger people who are looking for work supposed to do? There is already a job creation problem.

[EyeKhan]

What do they do until they are 65 right now? Obviously they have to make provisions for a time when they are too old to work but the government mandated plans haven't taken effect yet. They can take lower payments starting at 62; they can work in their jobs with an eye to 'training up' for a less physically demanding job; they can sock away extra cash to retire early. The physical limitations are not that much greater at 70 today than 65 in 1935.

Good question. I don't know. (that's why I asked it... ). Without looking at data, I'm guessing the vast majority of people were dead by 65-70 in 1935, which is why they set the retirement ages where they did. It was a big shock that when people had money for food and health care after retirement they lived a lot longer....

No offense, but I'd prefer the US to be the ones with the ability and not China.

Me too. Good thing this isn't the only possible outcome of redefining the US military's role and therefore not a good argument for dismissing the idea.

Even the cost of the ships and deployments off Somalia are pretty significant. Guided missile destroyers don't come cheap - hell, even a littoral ship costs more than $1 billion now.

Those ships aren't designed with that mission in mind either. If there are pirates to be dealt with, we ought to redefine a bit of our navy's mission and build lower cost, smaller, speedier boats with appropriate weaponry for interdicting pirates.

You're giving Dread crap about not giving an 'in depth analysis' and that you're sure there's money to be had in a budget when you clearly have no clue.

I wouldn't go so far as to say I have no clue. And I'm giving Dread crap because his analysis was crap and he presented it as though it were something more than that. When I give you an analysis that is crap and I'm claiming its not crap, please call me on it. Otherwise, stick to adding something to the argument instead of making inane arguments defending Dread's inane arguments. He's very capable of defending himself.

(And actually I am rather aware of ITER's problems - my friend's father was heavily involved in the construction of the NIF and educated me about the relevant issues.)

Ironic, that.

Look, either provide some evidence for your claim or don't complain when Dread makes an unsubstantiated point.

See above vis a vis Dread's inane argument. And why do you need evidence when you've already agreed that yeah there's a lot of fat that can come out? Is this a pissing contest of trivia for you or can we get on with the discussion topic at hand agreeing that yeah, there's a lot of money that can come out of the defense budget? Or would you rather argue what weapons programs can be cancelled or mothballed, how many ships of what class can be mothballed, how many strategic bombers can be mothballed, etc etc ad nauseum? Frankly, I'm not interested in doing the research, but feel free to make a thread about it.

So if you have old people staying in the work force until they are 70, what are the younger people who are looking for work supposed to do? There is already a job creation problem.

Join the military and not occupy Afghanistan and Iraq.

[Flixy]

Correct me if I'm wrong, but isn't taxation in the USA at the lowest level ever, but still no one dares to increase it, afraid to lose votes? I mean, I can understand being against high taxes, but if you want a functioning government, and your entitlements, you're going to have to pay for it somehow.

That said, I'm not against (gradually) increasing pension age. Life expectancy and life quality, and the nature of employment have all changed a lot, it doesn't hurt to acknowledge that (and hell, even the labour unions here agree with that).

[EyeKhan]

Correct me if I'm wrong, but isn't taxation in the USA at the lowest level ever, but still no one dares to increase it, afraid to lose votes? I mean, I can understand being against high taxes, but if you want a functioning government, and your entitlements, you're going to have to pay for it somehow.

Probably not the lowest ever, but the lowest in a long time, and certainly the lowest in the developed world. And those taxes are about to go up a bit, at least for folks making 250k or more per year, unless Obama extends the GW tax cuts.

That said, I'm not against (gradually) increasing pension age. Life expectancy and life quality, and the nature of employment have all changed a lot, it doesn't hurt to acknowledge that (and hell, even the labour unions here agree with that).

My grandfather's been retired and living off his pension and social security for 35 years +/-. That's not what social security was meant for.

[Loki]

Correct me if I'm wrong, but isn't taxation in the USA at the lowest level ever, but still no one dares to increase it, afraid to lose votes? I mean, I can understand being against high taxes, but if you want a functioning government, and your entitlements, you're going to have to pay for it somehow.

That said, I'm not against (gradually) increasing pension age. Life expectancy and life quality, and the nature of employment have all changed a lot, it doesn't hurt to acknowledge that (and hell, even the labour unions here agree with that).

It's nowhere near the lowest ever; it was less than 1% of GDP before the Civil War. And the reason it's lower than usual now is because the recession hit revenues hard; the rate of taxation has actually increases.

[LittleFuzzy]

I wouldn't go so far as to say I have no clue. And I'm giving Dread crap because his analysis was crap and he presented it as though it were something more than that. When I give you an analysis that is crap and I'm claiming its not crap, please call me on it. Otherwise, stick to adding something to the argument instead of making inane arguments defending Dread's inane arguments. He's very capable of defending himself.

Wasn't the suggestion a 50% cut in funding? I'm pretty sure Dread's response was more than adequate for the proposal.

[Flixy]

It's nowhere near the lowest ever; it was less than 1% of GDP before the Civil War. And the reason it's lower than usual now is because the recession hit revenues hard; the rate of taxation has actually increases.

Oops, seems I was wrong! I did mean modern days, not before the Civil War of course But looking it up it seems that the tax burden has been pretty much steady for the past 60 years or so. And apparently you had a top bracket tax rate of more than 90% in the 50s It does seem curious that you have a relatively low tax burden (as % of GDP), but a very high corporate tax rate, by the way.

[Aimless]

Hey, on the list of problems that must be dealt with, how high is the issue of your national debt?

[Loki]

Oops, seems I was wrong! I did mean modern days, not before the Civil War of course But looking it up it seems that the tax burden has been pretty much steady for the past 60 years or so. And apparently you had a top bracket tax rate of more than 90% in the 50s It does seem curious that you have a relatively low tax burden (as % of GDP), but a very high corporate tax rate, by the way.

Probably because we don't have a VAT.

[EyeKhan]

It does seem curious that you have a relatively low tax burden (as % of GDP), but a very high corporate tax rate, by the way.

The effective corporate tax rate probably isn't very high once you take into account 40k pages of loopholes every two bit lobbiest has been able to worm into the tax code.

Hey, on the list of problems that must be dealt with, how high is the issue of your national debt?

That's a good question. I don't honestly know how big an issue it is. It seems the TEA (Taxed Enough Already?) Party movement, because of its energy, has moved taxation to the forefront, as though current taxes are unusually high, but in fact current taxes are unusually low. But they point to the big deficits and the corresponding growing debt and say that has big future taxes written all over it. And because the Tea Partiers are largely conservative, the Republicans have worked to coopt that energy and so now their propaganda machine is all over too much deficit, too much debt. Not sure what happened to "Reagan proved deficits don't matter...."

Loki - you seem to know a lot about this stuff. How bad is the current deficit/debt? Emergency proportions or OK for the time being while we deal with the economic downturn? Or something else?

Wasn't the suggestion a 50% cut in funding? I'm pretty sure Dread's response was more than adequate for the proposal.

Well, I will concede in the context of what he was responding to, it wasn't that sloppy a statement. But he could have made a better response without much work (He's a pretty smart guy, afterall). Patrolling shipping lanes, indeed....

[Loki]

US Corporate taxes as percentage of GDP (excluding recession years) - 2.0-2.5% (http://www.gpoaccess.gov/usbudget/fy10/hist.html table 3)
Canadian corporate taxes as percentage of GDP (excluding recession years) - 1.7% (http://www.budget.gc.ca/2010/pdf/bud...etaire-eng.pdf p.176)

Anti-corporate propaganda FTW.

Loki - you seem to know a lot about this stuff. How bad is the current deficit/debt? Emergency proportions or OK for the time being while we deal with the economic downturn? Or something else?

The current debt isn't particularly bad (compared to similar countries), but still at the highest level since WWII. The current deficit is ridiculously high; the only times we've had a higher deficit was during WWI, WWII and the Civil War. Furthermore, the deficit is not projected to go down below $700 billion for the foreseeable future, even when the economy is at its peak. Those kind of numbers are unheard of.

[EyeKhan]

US Corporate taxes as percentage of GDP (excluding recession years) - 2.0-2.5% (http://www.gpoaccess.gov/usbudget/fy10/hist.html table 3)
Canadian corporate taxes as percentage of GDP (excluding recession years) - 1.7% (http://www.budget.gc.ca/2010/pdf/bud...etaire-eng.pdf p.176)

Anti-corporate propaganda FTW.

Comparing amount of taxes paid as a % of GDP when the GDPs are vastly different and the profits being taxed are likely vastly different isn't particularly useful. In fact, it could be downright mis-leading in a conversation about who has the higher tax rates. Also, haven't you been criticized recently for, ahem, this sort of light posting style relying heavily on links?

Do you have the effective corporate tax rates between Canada and the US? How about a distribution of effective corporate tax rates for all industrialized countries?

This is interesting.....

http://www.taxfoundation.org/blog/show/1471.html

And this....

http://en.wikipedia.org/wiki/File:In...By_Country.svg

But still, these are rates. I'm wondering how widespread the loophole system we have is. I can't believe most major companies are paying these tax rates . . . .

EDIT:

Here's a Washington Post article about tax havens. It's focussing more on big companies that got bailed out with tax dollars and also hide their profits in offshore tax havens. But its estimating the 83 of the 100 largest public US companies that have offshore tax havens are dodging 100 billion in US taxes.... Something to think about if you apply this kind of thing to the nominal tax rate and calculate an effective tax rate.... Hard to get to the real numbers, I'm sure.

http://www.washingtonpost.com/wp-dyn...l%2Fcomponents

[Loki]

Comparing amount of taxes paid as a % of GDP when the GDPs are vastly different and the profits being taxed are likely vastly different isn't particularly useful. In fact, it could be downright mis-leading in a conversation about who has the higher tax rates. Also, haven't you been criticized recently for, ahem, this sort of light posting style relying heavily on links?

Erm, you were referring to the effective tax rate. What's a better way to measure that than to see what portion of GDP corporate taxes are equal to? Your point about Canada and America having different GDPs is ridiculous. How would America being richer somehow alter the results?

Haven't you been criticized for dismissing facts you disagree with, saying things out of your behind, and refusing to provide evidence to back up your assertions?

Do you have the effective corporate tax rates between Canada and the US? How about a distribution of effective corporate tax rates for all industrialized countries?

Do you have Google? Use it.

[EyeKhan]

Haven't you been criticized for dismissing facts you disagree with, saying things out of your behind, and refusing to provide evidence to back up your assertions?

Loki, this is an unwarranted personal attack the type of which we are all, as a community, trying to avoid. Please don't do it anymore or I will have to report you.

That said, if you look at my edits, I've posted links that A. are what I already said would be a more straight forward response, and B. support, more or less, your own assertions. I'll take your retraction/apology with a smile, please.