America's budget

Why has the public allowed congress to take money out of the social security fund to spend on things other than social security. Congressmen also recieve their full pay for life when they retire. This is an example of stealing from the poor and giving to the rich if I ever saw it. The republicans and democrats are both guilty of this. Congress needs to be held accountable for stealing the country's money. Take away their power to vote in their own compensation and let the people decide what they should be paid and you will see career politicians find other careers. At the same time you will see people who are sincere about serving the public begin to serve.
My opinion, Greg Wurtz

It would seem that Urgsmurgs is into creative accounting when he claims that the military budget exceeds Medicare by "at least" 50%.

US 2010 Budget
Defense: $689B
Medicare and Medicaid: $793

Exactly where did these hidden military costs of $500B come from, Urgsmurgs? Did you have to stand up to find them?

I agree that military spending is a large component of total spending and has to be addressed, but that realization does not require imagination.

Amerlok,
Exactly what IS " budgeted (by law) government subsidies of private insurance health care policies purchased by American companies", and how much does the government spend on this "subsidy"?

Spending by a company on medical insurance is an EXPENSE. Like ALL OTHER EXPENSES it is not classified as profits and is not taxed. Are you suggesting that spending on medical insurance should be part of a company's profits?

I have a suspicion that this is another liberal scam on your part, falling under the general category "everything belongs to the government, and whatever it doesn't take from you is a subsidy".

But perhaps I misunderstand your point.

{But the big items are the entitlement programmes—Social Security, Medicare and Medicaid—that are set to take up an ever larger part of the American budget. The}

And where is the other elephant in the room? The budgeted (by law) government subsidies of private insurance health care policies purchased by American companies?

This bit of Corporate Welfare seems to have escaped scrutiny.

Oh, reading through the other comments, let me add for all those confused about what entitlment means, read the second comment by K Wilson. Hes got it right:

"The word "entitlements" obscures more than it clarifies. It simply means spending based on an eligibility formula that does not have to be voted on with every new budget."

Note, this is great for those who like to keep spending on those things that are entitlements because they dont need another 60& majority in the senate+the presidency + a50% majority in congress to make sure the elderly dont starve, which is why Republicans hate the fact that social security is an entitlment. They would love to starve the elderly. Im sure they would love to make agriculture subsidies, the military budget and wall street bailouts entitlements. Which might happen considering that both party agree that killing foreigners is more important than careing for the poor at home.

This guess about future developments is solely based on the asumption that medical costs will increase far above gdp growth forever. Even asuming for a second this were true, theres no sign whatsoever that the private sector would be any cheaper or fairer, on the contrary. So even in this linear trend world, the best solution would be to increase taxes, not cuts.

Back in the real world where linear trends dont go on forever, the military budget still exceeds medicare spending by at least 50% (the way military spending is hidden in all other budgets is just pathetic, for example nukes are paid for by the energy department, future military pensions are unoaccounted for and the current ones are an extra budget item.... it adds up).

Bottom line:
Cut the military budget by 80% now, no damange for anyone, huge saveings. Beyond that, just increase taxes, because the spending is worth the money.

Social Security is definitely an entitlement, since almost no one pays in as much at they take out. Research I've seen from Federal Reserve Bank analysts indicates that Soc Sec is a problem, though it isn't as big a problem as is Medicare. The figures I've seen on demographics partially debunks the baby boom and bust myth, though. What really has to happen is that medical costs have to come under control. Higher expenditures in medicine have markedly diminishing returns.

Taxing US corporations more does not make sense; they already have a marginal rate 10 percentage points higher than those of their OECD peers. More taxing of any sort won't work; Federal tax revenue stays around 20% of GDP no matter the marginal rate, deductions and credits, ATM, etc. For example, eliminate the mortgage interest deduction; then housing values fall, there is a negative wealth effect.

The Economist states that: "As can be seen, entitlements and interest will absorb all government spending by 2025." I believe you mean revenue, not "spending." Unfortunately, our spending usually exceeds our revenue.

Public and Private Entitlements with careful attention to equality in "Payment In" and Payment Out" is absolutely necessary!

Publiko,
The Europeans have already tried your approach. They instituted punitive income taxes on the rich and even wealth taxes. It did accomplish the primary goal - it eliminated that class, at least on paper. Wealth was moved elsewhere and taxable income was hidden, until today, according to an EU report, the rich pay a smaller proportion of the taxes than they do in the US.

But the European social programs still had to be paid for after the ideological goals were met. The solution was to have a much more regressive tax system than we do - one based on a very high sales tax.

Publiko does partially understand the nature of our problem - rising costs. But he is blind to the cause. Why do medical costs rise so much faster than the average cost of living? Because we make more money available to spend. Every effort to solve a problem in this sector by injecting more money into it adds to the problem. Obamacare is just the last futile program. Other sectors which suffer from the same malady of government-encouraged bloat are education and defense.

The solution? Stop spending money.

It is curious how Antiviral does not want to admit that the rising cost of health care is bankrupting Medicare and Medicaid. Of course it is. The medical profession is getting hungrier by the day, and some of them simply refuse to take in patients covered by these programs, because it does not give them "enough" income.
Also, you mention the "rising medical costs through wreckless and selfish retiree demands". What demands? You should list them. Otherwise it appears that you simply want these programs to be phased out and the elderly and the poor go and eat cake (remember Marie Antoinette?).
Of course you don't think that raising the contribution limit on the more affluent would be a reasonable thing, right? Poor them, the top 20% in the income scale owns a mere 85% of the national wealth! Don't you think that they could pay a little more? Sorry, that goes against the Bush tax cuts, which would be unfair to the wealthy, as it seems to be the prevailing thought in some quarters.
Why not be a little bit fairer?
This a nation, a community, where everyone should have a stake in the commonwealth, that is, in the common good and well-being of the American people in general. Sorry, I must be dreaming. That is an anathema to some in the well-to-do category.
But coming back, couldn't we have some more rich people like Bill Gates and Warren Buffett, who feel that there is a finite amount of money you can spend in your lifetime? And that giving some back to society, where it came from, is a good thing?

hedgefundguy wrote: A few weeks back the Economist printed a table of countries. Defense spending as a percentage of GDP.
2 countries were over 4%.
One was the US".

Yes, it costs a lot of money to throw a lot of weight around.

How is it that national defense is not "the elephant in the room" when it comes to the US budget!? Aside from the obvious theatres of war in Iraq and Afghanistan there remains the following military numbers in friendly countries: 52,000 in Germany, 35,000 in Japan, the 28,000 in South Korea, 10,000 in Italy, 9,000 in the UK etc...
How paranoid and corrupt is a nation that need to spends what the rest of the world does combined on defense whilst having no serious threats? Imagine what these soldiers and expenditures could do if re-focused towards building renewable energy installations and electrifying transport. America wouldn't need to invade and occupy the oil producing nations or spend all so much of their income on fuel. Seems an obvious answer to many of America's woes.

@hedgie
"How about we set up a "Pay-As-You-Go" (PayGo) plan for Germany, Japan, South Korea, etc for stationing our troops there?"

Sorry, but we already do that to some extent. Also, does US REALLY want to pull out of Japan, and lose its last Navy base in Asia??

Yes, it can be solved by removing the tax cuts amounting to more than 783 billion dollar awarded to 1% super rich Americans last year; confiscating at least 50% accumulated wealth of all billionaires; raising the age of retirement for medicare and social security benefit to 68 years from current 65 year and cutting welfare and food stamps for only kids for foods and staples only.

Sir:

Ohio is well on target.

Part of the problem is that the human mind has an innate ability to deal with large numbers. How big an area would a billion hens' eggs stood on end cover? Two square yards? Twelve Square yards? Twenty square yards? Two hundred square yards?

The answer? 3025 square yards. A US football field, including end zones, is 6396 square yards in area.

As the late Everett Dirksen said, "A billion here, a billion there: it soon runs into money."

The D-word

Interesting to see how the word "default" is cropping up more and more frequently these days.
I fail to see how ANY government/country, from Greece right up to the US, ( and even beyodn....) can ever return to balanced budgets when income is dwindling and "entitlements" ( including interest on sovereign debt - yes that one is scary !) are soaring.
Even if income and entitlements remained the same, the annual deficits would be the same, so the debt would increase, and interest payments would increase.(look what's happening to spreads on government debt these days...)
So income needs to increase, and "entitlements" must decrease, for the situation even to stay as it is.
Then we have to think how we're ever gonna get OUT of this debt ..
Budet surpluses would need to be so eye-wateringly high, it's just not conceiveable.
And what politician would stand for election saying he'd tax people to the point of raising a surplus, so he could pay off past debt rather than increase handouts ?????
Come on let's get real - we ARE all broke and there WILL be total default, right across the board.

BUT DOES IT MATTER ?

Somehow I can't help thinking that if we just wiped every slate clean, right across the world, and started again on cash-payment-only basis, that might just be the solution.

Gotta go now now - just convinced myself I should sell my government bonds & buy some gold before you all do the same...

JoeCairo illustrates the confusion over our deficit

He advocates an oil tax. That would raise some revenue, but it does not address the problem of ever increasing expenditures that continue to eat up revenue, no matter what is raised. Even in this response to the deficit here, we see proposals as to how more money should be spent.

He advocates a fat tax to improve health and increase longevity. Don't you get it, Joe?? We already ARE living too long. Every additional year you live to use up social security and Medicare benefits adds to our deficit. Better we advocate smoking combined with a high tax on cigarettes.

My point is not that we should kill off us oldsters, but we need to deal with the REAL root sources of the problems - we are spending too much money for what we get - medical care, defense, education,... Obamacare pretended to address this problem in the case of medical care, but promptly dumped even more money into that bottomless pit. There is only one possible outcome of adding that money to the medical care system - costs will go up further to make use of that money.

This is something that has been well known for a long time but the US is blindly spending China's money and will do so until China is bankrupt along with the US. That is a credible strategy for reining China in don't you think?

Before it’s possible to find a solution, we need to understand the problem.

Social Security’s problems are purely demographic; population is increasing more slowly, people are living longer, and there are fewer workers for each retiree. This will inevitably require either raising taxes or cutting benefits, but the problem is not that severe. Modest changes (raising the ceiling on taxable income, raising the retirement age slightly, changing the inflation-indexing formula, possibly means-testing benifits) will keep it solvent for the foreseeable future.

The problem with Medicare and Medicaid is also partly demographic, since much of Medicaid pays for nursing home care for the elderly once their savings are exhausted. This is similar to the problem with Social Security, and will inevitably require either raising taxes or cutting benefits, but not to a huge degree.

The much larger problem, and the one which causes the alarming slope of the curve, is the cost of medical care in the US, and the rate at which it’s rising. In the US we pay twice as much per capita for medical care as other wealthy countries. The rate of increase has been roughly twice that of the rest of the world since the 1980s. This is the real source of the problem, and it’s not sustainable, no matter who pays the bills. If the US does not manage to get health care costs in line with the rest of the industrialized world, we have a very, very serious problem ahead.

As I see it, America's budget woes are not caused by social security, medicaid, medicare, or defense spending. Sure, these areas could all use some streamlining and rethinking, but they're not the chronic illness.
America's budget deficit is a result of gluttony and piggishness. Food, oil, pharmaceuticals, and politics; but especially food.
That is the chronic disease and dealing with that is the only way out of this mess. Being well read, I presume you will agree that the skyrocketing health care costs are associated with the "ballooning" of obesity and it's myriad problems, combined with the drugs-instead-of-nutrients approach to prescriptions. Obviously, the health care system is a mess and should be majorly overhauled, however, it feeds off of obesity, so let's work at cutting off it's food source first.

This is where I present my solution, which involves two tax changes.
The first is a much needed tax increase on oil. I don't feel I need to elaborate on this point.
The second would be the creation of a Fat Tax. A tax on obesity to be applied at the individual level. In the short term this would help with the deficit, and if obesity drops too low to be profitable in the long term, then we should have started controlling health care costs enough that it won't be a problem.
Other positive effects would be increased productivity, a (numerically) larger workforce, and an increase in disposable income.

I don't think it's hard to see how obesity is the "elephant in the room", but America need's to stop blaming institutions for the problems caused by individuals. Besides, Fat Tax has a nice ring to it, don't you think?