President Obama, the Republicans, and the Proposed Unnecessary Cuts to Social Security, and the lies and myths about Social Security

The Social Security Trust Fund has grown every year since 1983, thanks to President Ronald Reagan and the adjustments to funding that he initiated. It even grew last year and the year before despite the cut in payroll taxes from 6 to 4 percent.

However, the corporate press will only let you know about about the Social Security Trust Fund deficit between the taxes it takes in and the money it pays out even though the system is sitting on a $2.7 trillion surplus that collects about $120 billion in interest per year. When you count the interest, there has always been a surplus, at least since 1983.

Take a look at part of the report from the trustees of the Social Security Trust Fund from 2012. Italics and bold are mine.

“Social Security’s expenditures exceeded non-interest income in 2010 and 2011, the first such occurrences since 1983, and the Trustees estimate that these expenditures will remain greater than non-interest income throughout the 75-year projection period. The deficit of non-interest income relative to expenditures was about $49 billion in 2010 and $45 billion in 2011, and the Trustees project that it will average about $66 billion between 2012 and 2018 before rising steeply as the economy slows after the recovery is complete and the number of beneficiaries continues to grow at a substantially faster rate than the number of covered workers. Redemption of trust fund assets from the General Fund of the Treasury will provide the resources needed to offset the annual cash-flow deficits. Since these redemption’s will be less than interest earnings through 2020, nominal trust fund balances will continue to grow. The trust fund ratio, which indicates the number of years of program cost that could be financed solely with current trust fund reserves, peaked in 2008, declined through 2011, and is expected to decline further in future years. After 2020, Treasury will redeem trust fund assets in amounts that exceed interest earnings until exhaustion of trust fund reserves in 2033, three years earlier than projected last year. Thereafter, tax income would be sufficient to pay only about three-quarters of scheduled benefits through 2086.

A temporary reduction in the Social Security payroll tax rate reduced payroll tax revenues by $103 billion in 2011 and by a projected $112 billion in 2012. The legislation establishing the payroll tax reduction also provided for transfers of revenues from the general fund to the trust funds in order to “replicate to the extent possible” payments that would have occurred if the payroll tax reduction had not been enacted. Those general fund reimbursements comprise about 15 percent of the program’s non-interest income in 2011 and 2012.”

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US 2012 Fiscal Budget Deficit Falls Sharply

The US budget deficit fell sharply in just-ended fiscal 2012 to $1.1 trillion, but remained at an uncomfortably high ratio to the size of the economy, the Treasury reported Friday.

The fiscal shortfall topped $1 trillion for the fourth straight year, but dropped from $1.3 trillion in 2011, as the Obama administration answered deep pressure to narrow the shortfall.

Government receipts for the year through September 30 were up 6.4 percent to $2.45 trillion, the largest gains made from higher payroll deduction returns and a better corporate tax take.

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Obama Vs. Romney: Is it Mostly a Battle Over the Speed of Income Redistribution from the 99 to the 1 Percent? Or is it a battle over Taxation and Spending?

The differences between Barack Obama and Mitt Romney on all aspects of economic policy are considerable, and they will have significant consequences for the US and the global economy. Tax and spending is at the heart of the matter. The link below illustrates the significant differences between the two on such issues as taxing, spending, entitlements, trade and several other issues. Remarkably, the battle between Romney and Obama is one between two Wall Street factions.

On the other hand, this is really a battle over who will be chosen as the leader in income redistribution from the 99 to the 1 percent. This process has been going on since 1981. The winner will continue to wage war against the middle class on behalf of the 1 percent, and the big difference between the two is who will do it at faster rates than the other. Obama is likely going to do it slower, Romney more rapidly. This the article below does not cover. The 1 percent feels almost to a person that it is entitled to these redistribution programs, such as free trade treaties, privatization and deregulation scams. See the link below in the Related Stories section on how these redistribute income from the 99 to the 1 percent.

Obama Vs. Romney: Is it Mostly a Battle Over Taxation and Spending?–Guardian UK

Related Story

Eight Key Charts About the Growing Income Inequality in the USA Perpetrated By Democrats and Republicans

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Why is the federal budget deficit is so large?

During an economic downturn, the government spends money it doesn’t have by borrowing. As people lose their jobs, the government spending increases, thereby taking up the slack in demand caused by the layoffs.

Technically, we’ve been out of recession for a few years, but his year the deficit should be over a trillion dollars. That’s because the demand for goods and services is remarkably low due to the redistribution of income and wealth from the 99 to the 1 percent over the last three decades.

Thirty years ago, the 1 percent received about 8 percent of all income generated in the USA. That figure had held steady, more or less, from 1940 or so until the ascendency of Ronald Reagan as president.

Think about this; the four decades from 1940 to 1980 created the greatest number of jobs in US history, had budget surpluses now and then, and saw the standard of living for most Americans rise. That was in an economy half the size of today’s economy. That’s because the demand for goods and services was strong because the 99 percent had more money to spend.

Nowadays, the 1 percent has legislatively stolen about 27 percent of all US income, and during the last two years, those people have legislatively robbed the rest of us of 93 percent of total income growth.

Look at the numbers closely. From 1940 to 1980, 100 percent of national income minus the 8 percent for the 1 percent left 92 percent of national income for the rest of us to spend on stuff, which created jobs through effective demand. Nowadays, 100 percent of national income minus 27 percent for the rich gives the rest of us 73 percent to spend.

That has left the demand for goods and services extremely weak, which is why the economy is so sluggish. The economy, however, is most likely in a state of slow motion collapse. The only things stopping the economy from a rapid collapse are the New Deal (Social Security, unemployment insurance, etc…), the Great Society Programs of President Lyndon Johnson (food stamps, etc…) and the federal deficit. Those programs create demand.

To stop the economy from imploding because of a lack of demand, the government has been forced to borrow money and find ways to spend it to take up the slack caused by the redistribution of income from the 99 to the 1 percent. That includes borrowing to sustain unemployment insurance and food stamps.

That’s the reason for the size of the federal deficit in a very large nutshell.

One other point should be made. Politicians from Wall Street Obama to Wall Street Mitt from John Boehner to Nancy Pelosi know this, and so does the media, but nobody’s going to say a word to the 99 percent.

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Deficit Hawks are Wrong Again, and Again and Again and Again…

Interest rates remain at historic lows despite massive government borrowing. For years Republican deficit hawks (and a few dumb Democrats) have tried time and time again to instill panic among the mass of financially ordinary US citizens by insisting that continued government borrowing would raise interest rates, thereby bringing on a terrible recession and destroying everybody’s livelihoods. Like that hadn’t already occurred during the Bush regime when then Vice President Dick Cheney famously said, “Ronald Reagan showed up that (federal) deficits don’t matter.” Cheney understood the lesson, President Obama didn’t.

The purpose of this public relations stunt was to influence the Obama administration into cutting government spending, thereby slicing jobs and gross domestic product, and in the process letting the president cut his own throat when it came to being reelected to a second term. The result has been spectacular since President Obama was stupid enough to take the bait.

US deficit spending has been reduced, although still growing strong. The official unemployment rate remains mired between 8 and 9 percent; the real unemployment rate is closer to 15 percent if the rate was measured in the same way it was during the Great Depression.

Click the link below for more interesting points of view on deficit spending by Nobel Prize winning economist Paul Krugman.

New York Times–Money for Nothing

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Republican Senator Mitch McConnell Wants to Reform the Teaching of Math in the US?

Daily Kos: Back in 2005, McConnell’s net worth was…between $1,645,032 and $4,278,999…the 38th richest Senator…McConnell now has a net worth between $7,102,036 and $32,756,000…the 12th wealthiest Senator. Pretty good, for a guy who has evidently NEVER had a private sector job…the wide range of…estimated wealth is due to the way the disclosure forms allow a pretty wide range on reports of assets. Click on the link below.

The US Math Gap is in Republican Party Hands?

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A reality check on the US economy

This economic recovery is the weakest on record. Yes, the jobs sector is growing but at a much slower pace than when Jimmy Carter was president. From June 1980 through June 1981, the US economy added over three million jobs and average real employee compensation grew. That’s nearly three hundred thousand jobs a month that were added to an economy less than two thirds the size of the current one, and with a much smaller population. So what’s so different between then and now?

In 1980, the one percent received about 7 percent of the total income produced in the nation and nowadays they steal about 25 percent. That means the rest of us have less money to demand goods and services, which is what creates jobs. The worse aspect of the current recovery is that the rich are still getting richer at the expense of the rest of us.

There’s a massive redistribution of income from us to the one percent going on through the financial markets and other mechanisms, and that’s why the financial markets have risen so sharply over the last year. It’s a legislatively rigged game. That’s all you need to understand. The government is a weapon of the one percent. Its used to steal ever more income and wealth from the rest of us and redistribute it to the rich.

That means the current recovery will be weaker than the last one and it won’t last as long.

Click here for a more comprehensive report

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U.S. set for fourth year in a row of $1 trillion-plus deficit According to the Congressional Budget Office

The United States isn’t heading for a economic disaster, not yet anyway since were still in one, but it is heading toward another trillion dollar deficit. You’d think the folks in Washington would figure out that redistributing income and wealth from productive working people to the unproductive parasites of the affluent class reduces the demand for goods and services in roughly the proportion as the redistribution. Unfortunately, the rich folks hijacked our government long ago, so don’t expect jobs to increase at a serious enough pace to enhance federal tax receipts enough to significantly reduce the deficit.

Click here for more on the deficit

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Economist warn of United States Credit Downgrade if Super Committee Fails to Reduce Deficit

Economists are warning of dire consequences if US politicians fail to make progress this weekend in tense talks aimed at reducing America’s massive deficit ahead of a Wednesday deadline. Of course, the politicians won’t deal with the real issues that caused the deficit: two unfunded wars, tax cuts for the rich, and our current slow motion Great Depression. Our economic depression has been caused by government policies designed to redistribute income from working people to the rich. These policies include deregulation, free trade, tax cuts for the rich and under estimating inflation, among others.

For more on this issue, click the links below.

US Faces Credit Downgrade if the Super Committee Fails to Cut the Budget

One way that tax cuts for the rich have destroyed jobs, created poverty and redistributed income from working people to the rich

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High US Debt is Caused by the Recession and Low Tax Rates for the Rich

FACT CHECK: Recession Is Culprit in High US Debt
By THE ASSOCIATED PRESS
Published: August 20, 2011 at 3:33 AM ET

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WASHINGTON (AP) — It’s the loud and clear consensus of Republicans in Congress and on the presidential campaign trail: Runaway government spending is the problem, not taxes.

But the math isn’t so simple.

The number at the heart of the battle cry of the Republicans and their tea party allies — that federal spending has risen to an alarming 25 percent of the economy — is skewed by recession dynamics.

In recessions, federal spending always goes up and tax revenues go down. And the economy contracts in recessions, shrinking the gross domestic product, which is the total output of goods and services and the broadest measure of the economy’s health.

Republicans are calling for sweeping spending cuts and want to hold the line on taxes, even as the U.S. struggles through one of its slowest recoveries since the Great Depression. The jobless rate has been stuck for months at more than 9 percent. With the economy slowing again, the odds of a new recession seem to be increasing.

While spending’s share of the GDP might be at a post-World War II high, tax revenues have fallen to 14.4 percent of the index, the lowest since 1950.

This disparity between what comes in and what goes out plays into the Republican argument about runaway spending.

But it also reflects the mathematical reality that during recessions, tax revenues go down sharply because people and companies make less money and so pay less in taxes. Federal spending goes up, even before stimulus programs, with an increasing demand for government help from food stamps and unemployment compensation and other safety-net programs.

At the same time, the negative economic growth associated with recessions lowers the GDP number on the bottom of the equation, further boosting the ratio of spending to GDP.

Since 1970, federal spending has averaged just over 21 percent of GDP while tax revenues have averaged over 19 percent.

The last time since World War II that federal spending exceeded 23 percent of GDP was in 1982 and 1983, when it rose to 23.1 percent and 23.5 percent, respectively, during what was then called the worst recession since the Great Depression. A Republican, Ronald Reagan, was president, and he was hardly anyone’s idea of a tax-and-spend liberal.

Federal spending is even higher now as a percentage of GDP, but not by much — just between 1 and 2 percentage points. That reflects the fact that the most recent recession was far deeper than the 1981-82 downturn, which lasted 16 months.

Much of the present large gap between tax revenues and federal spending comes not from political decisions but from what happens to a nation’s finances during any deep recession, economists suggest.

But you wouldn’t know it from some of the recent campaign rhetoric. The Republican candidates all want to shrink government’s role by slashing spending and taxes, and repealing or suspending regulations.

—Former Massachusetts Gov. Mitt Romney asserted that, because of the rise of the ratio of government spending to GDP on President Barack Obama’s watch, “We’re inches away from no longer having a free economy.”

—Former Pennsylvania Sen. Rick Santorum: “We’re now at almost 25 percent (of GDP) … the problem is spending, not taxes.”

—Reps. Ron Paul of Texas and Michele Bachmann of Minnesota insisted they would never vote to raise the U.S. debt limit and they decried the rise in federal spending. The recent bipartisan debt deal, which includes a big spending-cut component, won the support of many tea party-aligned lawmakers, however.

—Texas Gov. Rick Perry said that Federal Reserve Chairman Ben Bernanke would commit a “treasonous” act if he “prints more money” before next November’s elections. “We would treat him pretty ugly down in Texas,” Perry told an Iowa audience. Economists generally credit Bernanke with helping save the nation’s financial system by stimulating it with a flood of new money.

Economist Bruce Bartlett, who worked in the administrations of both Reagan and President George H.W. Bush, said some of the statements by Republicans make him cringe. “And what sometimes makes me cringe more is the silence from their competitors.”

Bartlett includes the solid opposition to any tax increases from the entire GOP field, citing the recent debate when not a single Republican participant would agree to accept even a mix of $1 in new taxes for every $10 in spending cuts.

“It’s the cowardice of people who know they’re wrong when they say these things that disturbs me more than the fact that some people say crazy things,” Bartlett said. He said the Republicans were clearly playing to the party’s conservative base for the primary elections “but when you repeat these things, they tend to get solidified.”

He added, “The same is true in both parties. It’s just that there’s no primary race on the Democratic side.”

The intense focus by Republicans and some conservative Democrats on cutting spending to reduce the national debt, now at nearly $14.5 trillion, helped put deficit reduction high on the priority list for both parties.

But polls continue to show that people are more concerned about the lack of jobs than they are the deficit. Nearly 15 million are jobless in the U.S.

Obama, now on vacation, plans a major speech on the economy after Congress returns in September, trying to emphasize jobs and help the poor and middle class, aides said. The plan is expected to contain a mix of tax cuts, construction projects and steps to help the long-term unemployed.

Even though the pace of recovery is painfully slow, any improvements in the jobs situation will help spur stronger economic growth, leading to more tax revenues and lower federal spending.

“If the economy starts to get better, then everything gets better,” said Democratic strategist Mark Mellman.

But it will be a slog.

As the recession that began in December 2007 intensified, federal spending increased from 20.7 percent of GDP in 2008 to 25.0 percent in 2009, according to figures compiled by the White House budget office. And while the recession was officially declared over in early summer 2009, overall federal spending was 23.8 percent of GDP last year and is projected to come in at 25.3 percent for 2011 amid fears of a new, or “double dip,” recession.

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