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BUDGET: Social Security, Medicare not part of problem

Letter by Eric P. Herde, Tacoma on Aug. 19, 2011 at 11:08 am with 19 Comments »
August 22, 2011 12:23 pm

Re: “10 steps that could get the country out of the financial mess” (Robert J. Samuelson column, 8-16).

Samuelson suggests cuts to Social Security and Medicare in order to balance the budget. Apparently, he is unaware of how these two programs function. Both Social Security and Medicare are funded by separate taxes on income and have their own funds separate from the general fund.

Both of these funds are, in fact, currently running a surplus. Cutting Social Security and Medicare spending to reduce the deficit in the general fund would be as effective as trying to close a budget hole in the City of Seattle by cutting spending by the City of Tacoma.

Cuts to these two programs would actually have a negative impact on the economy. If younger retirees have their Social Security and Medicare benefits taken away, they will try to re-enter the workforce, which will lead to an increase in unemployment and end up actually increasing government spending, as well as hurting those who are already unemployed by making it harder to get a job.

Leave a comment Comments → 19
  1. old_benjamin says:

    Wrong, wrong wrong. Social Security is funded from current receipts. There is no “Trust Fund” and there never has been. The concern is for future payments to aging Boomers–when there most certainly will not be sufficent receipts to cover payments.

    “What happens to the taxes that go into the trust funds? Tax income is deposited on a daily basis and is invested in “special-issue” securities. The cash exchanged for the securities goes into the general fund of the Treasury and is indistinguishable from other cash in the general fund.”

  2. old_benjamin says:

    “As stated above, money flowing into the trust funds is invested in U. S. Government securities. Because the government spends this borrowed cash, some people see the trust fund assets as an accumulation of securities that the government will be unable to make good on in the future. Without legislation to restore long-range solvency of the trust funds, redemption of long-term securities prior to maturity would be necessary.”

  3. old_benjamin says:

    You give me a million bucks. I’ll give you an IOU and call it a “trust fund.” That’s what the guvment does. Any takers?

  4. commoncents says:

    sorry ben, I’ll wager my money on the US Government making good on it’s debts before you.

    However, you’re right on your posts. But one thing to consider – because social security is seperate from your normal FIT taxes there is an assumption that the benefit that you are accruing is somehow tied to the tax being levied. It’s not true of course…but it’s still the perception. Anyhow, a cut in the benefit without a corresponding cut in the tax will create an illusion of a tax increase rather than a spending cut. Doubt the masses would go for that. Additionally, a cut in SS benefits alone will do nothing to alleviate the debt issues (that 13 trillion figure) as it’s not even included. We have to cut our spending on items that make up the debt…allocating only current dollars will have same effect as taxing the millionaires: Little to none.

  5. old_benjamin says:

    Commoncents, yes we must cut spending, or the equivalent in duplication, fraud, abuse, outright thievery, and idiotic programs. Estimates are that waste in Medicare alone approaches $100 billion annually. In ten years that amounts to some real money. We need to elect a CEO that wants to run a lean and mean government instead of a community organizer whose main objective is to tax and spend us into oblivion. George Romney has the business smarts, if he has the will.

  6. old_benjamin says:

    Of course, I meant Mit Romney. George isn’t able to run except in Chicago.

  7. Old ben – I think you mean Mitt Romney. George was the father. Your reply was right on. Both Social Security and Medicare are now paying out more than they are taking in. Many people also think they paid in far more than they will ever get back in Medicare benefits. Most Medicare recipients receive far more in benefits than they ever paid into the system.

  8. old_benjamin- You are not taking into consideration the fact the Republican Party does not want to see any redemption of those special treasury bonds. To have a redemption of the $2.5 trillion of bonds would necessitate raising taxes by $2.5 trillion. You know the Republicans would rather screw the old folks than use those funds for the intended purpose. Yes, there should be changes in social security and medicare, but, that should not prevent the redemption of those bonds. And, why the heck does Obama and Congress want to extend the tax holiday for employees when the trust funds are going to be short? Total BS from your Washington politicians.

  9. theglovesRoff says:

    Yep, the republicans want to kill old people and children. And they think ketchup is a vegetable too….

  10. concernedtacoma7 says:

    A+numbers, you need to help me out. I did not know I wanted screw old folks. What are you talking about? My parents are old and hopefully I will once be old.

    Now, if you meant republicans care about fiscal sanity and understand that even if we taxed millionaires 100% we would still spend more than we take in, ok.

    Wait a second… Your point was what? Oh yeah, the rich are bad (and you are jealous).

  11. As a senior trying to exist on the generous Social Security income that the Government seems to equate that income on a par as Welfare,I am wondering if I could find employment and went back to work,got laid off and was able to collect unemployment,would I be able to collect benefits for the 99 weeks that the current unemployed are now doing?

  12. concernedtacoma7 says:

    Sincere, normal retirement planning means you save and invest 15-20% of your income if you plan on retiring relatively young.

    Since you are already receiving benefits, you obviously paid a rate much less than that. But you expect to RV around the country and pay for the grandikids schooling based on your SS contributions. You are welcome for what you get now.

  13. Yep, the republicans want to kill old people and children. And they think ketchup is a vegetable too….

    No….only specific Republicans do…..

  14. steilacoomtaxpayer says:

    OK, dear readers, let’s review Eric’s main point: Social security + medicare are separate funding streams from the general tax base. Anything to cut, alter or re-define benefits within the programs, has, as Eric points out, the same effect as making budget changes in Tacoma in response to Seattle budget issues. May be a good idea to review the programs, but it isn’t central to the issue on the table–national debt.

  15. concernedtacoma7-

    Yep, the Republican philosophy is to screw the old people- Oh, just the not so rich old people. The rich, old or young, usually do not have to worry about too much UNTIL they are neither old nor rich anymore.

    Actually, none of this debate will effect your parents nor I, since I will be ‘grandfathered’ into any new system. My point is fiscal responsibility, as you call it, requires those special bonds do not see redemption. Whenever the social security taxes are short of being able to pay benefits, monies have to be raised by taxing or borrowing.

    Oh, fiscal responsibility??? Somehow the Republicans want to cut taxes so businessmen can hire minimum wage employees to do what? Nothing is made in American anymore. Check out the boxes and labels on everything.

    Part of the problem with the entitlement programs is workers cannot make enough money to support their families without subsidies such as medicaid, food stamps, section 8 housing, etc. Please, concernedtacoma7, do away ALL entitlement programs and factor in the true cost of providing the goods and services we enjoy. Those entitlement programs are no different than farm subsidies and price supports for businesses.

  16. Typo

    That should be “are neither young nor rich anymore…” Oh, they will not have to worry when they are not old anymore also, since they will end up in the same place as the poor- I think????

  17. old_benjamin says:

    WASHINGTON (AP) — Laid-off workers and aging baby boomers are flooding Social Security’s disability program with benefit claims, pushing the financially strapped system toward the brink of insolvency.


  18. Given that Reagan was President when USDA wanted to classify ketchup.

    Either Reagan was not a Republican, or

    Republicans want to old people and children.

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