The late senator Daniel Patrick Moynihan supported sending people statements of what was in their social security. His idea was that if people never saw what was in there, they'd never miss it when it was gone.
I think this is a logical extension of that idea, and its great. I'd also like to see the flip side of the receipt contain a guess for how the same tax amount would break down the following year based on current budget trends. That way you could see how the coming year is different from the current year. Complaining about NASA funding is one thing -- seeing that they only get 20 bucks while Social Security gets over a thousand? Puts the situation in much sharper contrast.
It's strange that the government works in such an arcane fashion. A simple thing like a receipt for your taxes is probably very hard or impossible to accomplish. It took many years for Moynihan to get his SS statements. I have doubts that this would ever fly.
>His idea was that if people never saw what was in there...
The problem of course is there's no "there" there. Any funds collected today by payroll taxes, and not used for today's benefits, are lent to the general fund and spent. There are no funds being saved for next year's benefits, much less the current tax payers.
Now, it is true that the Social Security system then holds "assets" in exchange for that cash, namely, government bonds. But this is just accounting fiction.
Imagine you are a new parent and wish to save for your child's college tuition. Here are some scenarios:
A) Every pay day you put some money in a jar. When your child goes to college you take the money out of the jar to pay the tuition.
B) Every pay day you spend every dime. When your child is ready to go to college, you scramble to find the funds to pay the tuition.
C) Every pay day you put some money in a jar, then you replace the money in the jar with an IOU, and spend the money. When your child is ready to go to college, you scramble to find the funds to pay the IOUs to pay the tuition.
There is no substantive difference between B and C.
"Putting money in a jar" is a very handwavy way of addressing the problem of saving billions of dollars. You don't just put billions of dollars in a "jar". In practice, amounts that large have to be invested in some way. If you rule out federal treasury bills, what does that leave? State and municipal bonds? Pretty tricky (you could make a case for it though). How about stocks? No, that's de facto nationalization of industry. Commodities? Government interference in the market. Real estate? The government has enough land. How would you actually save the Social Security trust fund?
Inflation/time-value of money is a big part of it, actually--not collecting interest on that scale is an opportunity cost of billions of dollars.
There's a macroeconomic issue, as well--if you just let that money sit in an account for years on end, the money supply gets fucked up. Money just disappearing into a hole is essentially deflationary, and deflation is catastrophic. Then, when the money comes back out again, you have inflation (possibly hyperinflation if the amount is big enough). Better to hold onto that money somehow while still keeping the money supply relatively constant--in other words, invest the money somehow.
For very similar reasons, it's much more difficult for the government to carry reserves of funds from year to year than it is for them to carry a debt.
Well, one way to avoid having to invest so much of the money would be to pay retirees directly out of the receipts for a given year. Then you only have to invest the surplus, which shrinks the investment problem considerably. That surplus could be invested in T-bills.
The above is roughly how the system works now, makes sense right?
Of course, you'll see various peopl with an axe to grind calling it a pyramid scheme for the pass-thru payout. And claim that the government is "raiding" the trust fund by selling it t-bills, or say that the trust fund is backed by quote "worthless IOUs". I didn't know t-bills were so disreputable! But aside from the silly rhetoric, it's a pretty sensible strategy.
It shouldn't be a surprise that the people who administer the program 40 hours a week actually kinda know what they're doing. Unless you come to the conversation pre-equipped with ideology and blinders.
Your scenarios, while technically accurate, leave something out. Here's another version:
D) Your child spends his/her high-school years mowing lawns, doing part-time jobs, etc, in order to save some money to help pay their way through college. You encourage them to do so. The money earned is put in a jar. You take that money, replace it with an IOU, and use it to pay for household expenses along with more frivolous things. Now it's college time and you scramble to find the money to pay the IOUs.
What backs a t-bill is the "Full Faith and Credit of the United States Government". Along with smaller amounts of gold, it's the foundation of most countries' national reserves, yes, "most", notably China. If the US gov't defaults, social security getting paid back will be the least of our worries.
"Chinese assets are very safe," Geithner said in response to a question after a speech at Peking University, where he studied Chinese as a student in the 1980s.
His answer drew loud laughter from his student audience, reflecting skepticism in China about the wisdom of a developing country accumulating a vast stockpile of foreign reserves instead of spending the money to raise living standards at home.
Economically, China is playing Chess, the US is playing Checkers. China is more than willing to sacrifice one or two generations of people to gain global dominance. The people controlling the US economy think in periods of 4 or 10 years.
he's talking about the government lending money to the government, not our massive borrowing.
even more obscene than this fiction is how the Federal Reserve prints money, lends it to the banks, who then lend it to the Treasury and collect 3% for doing so. Its such an obvious subsidy of that whole sector, without which would look much worse.
> he's talking about the government lending money to the government, not our massive borrowing.
The point is US T-bills are considered one of the safest investments in the world but when people start talking about SS for some reason they pretend that they are worthless.
Treasurys are "safe" in the sense that the US will never default, since the government can simply print dollars as needed to cover the debt. So yes, you're guaranteed to get your 1% interest in nominal dollars... the question is, how much are those dollars really worth?
The dollar may not enter a hyperinflationary death spiral as some believe it will, but its days as the default world reserve currency appear to be fading fast.
Quote: The problem of course is there's no "there" there. Any funds collected today by payroll taxes, and not used for today's benefits, are lent to the general fund and spent. There are no funds being saved for next year's benefits, much less the current tax payers.
You used the word "lent". Note that that is different from the word "given with no expectation of repayment". Care to revise your second sentence in light of your first?
>The problem of course is there's no "there" there. Any funds collected today by payroll taxes, and not used for today's benefits, are lent to the general fund and spent. There are no funds being saved for next year's benefits, much less the current tax payers.
And in a short 5 years the direction changes because 2015 is when SS outflow is expected to exceed inflow and they have to start using some of the interest income off those bonds. In 2025 the inflows and interest income become insufficient and the SS trust fund has to start selling the bonds and by 2035 the assets are themselves exhausted.
> Now, it is true that the Social Security system then holds "assets" in exchange for that cash, namely, government bonds. But this is just accounting fiction.
No, there's no fiction - legally it must be paid back. That's why Social Security debt is included in the gross national debt.
But there is a substantive difference between B/C and Social Security. There are many retired people today collecting Social Security (not scrambling for IOUs) who paid into the system from their first day of employment.
Perhaps you have not noticed the shape of the national debt, but yes, there is quite a bit of scrambling to pay the IOUs for past workers, both by taxing current workers, and by taking out loans (thereby taxing future workers).
It's definitely a great idea, given that members of both major political parties are absolutely loathe to touch the biggest sources of government expenditure: old person benefits (social security + medicare), and the military. Medical services for the poor (medicaid) are comparatively minor, but you wouldn't know it, given how much emphasis the Republicans place on the question of the "welfare state".
With greater public knowledge, perhaps we'd finally be able to move past the irrational demonization of expenses that don't matter (but win cheap political points), and focus our attention on the actual problems.
Medical services for the poor (medicaid) are comparatively minor, but you wouldn't know it, given how much emphasis the Republicans place on the question of the "welfare state".
I'm not sure I'd describe medicaid as "comparatively minor". Medicare is $390B, medicaid $247B ($290B including the state contributions). I guess the threshold for expenses that don't matter must bet somewhere between $290B and $390B.
"I'm not sure I'd describe medicaid as "comparatively minor". Medicare is $390B, medicaid $247B ($290B including the state contributions). I guess the threshold for expenses that don't matter must bet somewhere between $290B and $390B."
2009 US Federal Spending: 3,518 Billion (100%)
2009 US Defense Spending: 782 Billion (23%)
2009 US Social Security: 678 Billion (20%)
Medicare and Medicaid combined: 676 Billion (19%)
I'm not saying Medicaid is nothing; I'm saying it's not even close to Social Security or defense spending as a source of concern.
Hey jbellis, been doing some Cassandra this past week.
The original contention was just regarding medicaid -- 290 billion compared to a 3 trillion budget, with a > 1 trillion deficit. Entitlements all together add up to about half of the budget. They're big. But the original point was that nobody wants to touch medicare/SS but everyone makes Medicaid the bad guy. Makes you think they're more concerned with demographics and likely voters than budget arithmetic.
EDIT: Watches the downvotes. Chill out guys, it's just numbers. You'll win the house this fall, take it easy on HN.
Medicaid amounts to 65% of the budget deficit and about 60% of medicare. Welfare amounts to another 70%. If we cut the welfare state (i.e., medicare and welfare), we would have a budget surplus.
While I agree that medicaid is a politically easier target than medicare, it's not a small program. It's a completely legitimate target of criticism, and eliminating it would significantly improve the federal budget.
That's keeping the payroll taxes that pay for medicaid intact. So you're saying cut the medicaid program and slush the money that pays for it over to the discretionary budget (funded by income tax) to plug the hole there? Maybe put a different line item for that amount, or rejigger the tax itself into income tax? Or cut the medicaid program and kick it all towards medicare to give it a longer lifeline? Honest questions, would love to hear a clarification.
(for the record, I'm keeping it extremely civil in the numbers but find the thrust of this morally disturbing because I think there's a right to basic medical care and you can't deny it only to the poor)
Wait, 65% of the budget deficit? Your own quote has it at 290 billion dollars, that' s approximately 30% of the discretionary budget deficit. Letting alone the fact that it's part of an entirely separate budget.
Ohhhhh, we're talking about balancing the 2008 budget.. Well that doesn't make any sense, but I'm looking forward to your answers to my questions above on the mechanics of how that would work.
(EDIT in reply: Yeah, that's fine, and I went with it, but talking about percentages of a 380 billion dollar deficit in the context of current events is just plain silly.)
From my previous post: "(Use the dropdown to select year=2008, the last year for which full data is available.)" I don't think I was unclear - jbellis certainly figured it out about 2 hours ago.
You want to burn a $290 billion dollar program to the ground, with consequences like "poor people don't get insulin", and you can't even be bothered to think about which top level line item should be moved around?
This is why Al Gore sighed into his microphone that time. Yeah, it lost him the election, but when are you people going to realize that studied ignorance is not the way to solve problems?
You can define "welfare" however you like, but it doesn't change the reality that no politician -- on either side of the aisle -- is seriously proposing cuts to Social Security or Medicare. Old people comprise the base of both political parties.
And then he walked it back - the way I saw that conversation was Ryan walking his statements back and Krugman trying to pin him to them, or, if you'd prefer, exaggerating them -- that's just more support for "noone will touch SS".
If Ryan came out swinging and saying "YEAH i want to dismantle SS", that'd be different.
Krugman and Ryan never discussed matters of substance. The public fight I was referring to was bickering over whether Ryan specifically asked the right agency for a forecast. Stuff like this:
Krugman: "...Ryan could have gotten JCT to do a 10-year estimate; [...] he chose not to get that 10-year estimate. "
McCardle: "...I contacted Ryan's staff, who were happy to clarify that yes, they asked the JCT to do a forecast, and JCT said no."
As I said, nothing of substance. Just Krugman dishonestly attempting to paint Ryan as a liar (I believe "flim flam man" was the term he used).
On substantive matters, if you look at Table 1 of the CBO's score of Ryan's roadmap, you see that Ryan clearly proposes cutting medicare by just under 40% by 2040 (and even more drastic cuts after that).
I agree with you that the Republicans aren't going to do much of what I want. I don't agree that all politicians are Democrats or Republicans, or that it's pointless to speak about issues where the parties in power aren't making good proposals.
"I don't agree that all politicians are Democrats or Republicans, or that it's pointless to speak about issues where the parties in power aren't making good proposals."
I didn't suggest that it was. I just think that if we're going to have an intellectually honest discussion about the matter, we have to disregard most of the Republican party rhetoric: the poor are not the problem. The elderly are the problem. As far as I'm concerned, nobody is saying that out loud.
The Democrats are just as guilty of pandering to their base (which is also elderly), but at least they don't hang the poor out to dry in a cynical attempt to distract attention from the real problem.
It's not the elderly's fault that bad laws make them expensive. Elderly people aren't a problem, bad laws are.
Obviously poor people aren't the problem either -- personally I want to see far more immigration of poor people who want American jobs (yes I want rich immigrants too ofc) -- but inefficient govt programs like food stamps and unemployment benefits do cost a lot of money.
The problem is the govt and its mistaken idea that redistributing wealth can help people. It doesn't. It destroys wealth. We'd all be way better off if they'd never done it in the first place, including the poor and elderly. (Now we have transition issues. We need to abolish it in a way that doesn't screw people who are relying on it.)
I don't even think the elderly are the problem. I think Congress as a whole is the larger problem. And the structure of national elections, the existance/tactics of the Republican Party, as a close 2nd and 3rd.
Different sorts of problems - the elderly are a financial problem - not because they're bad people for being old, but because their retirement represents a huge financial liability.
The other problems you state are meta-problems - they're the reason we can't solve any actual problems. And possibly more concerning than actual problems.
Nearly all federal politicians with a realistic chance of winning federal office are Democrats or Republicans, with the exception of one Socialist, and a couple Democrats and Republicans running as independents because they lost their primaries.
Those elderly white men have families do they not? Maybe the family should take care of old white men instead?
Or better yet, invest in technology so they rejuvenate old people to the point that they can enter the workforce and earn their living for the rest of their life(presumably several centuries).
Many people agree with you that people should take care of themselves, and that Social Security and Medicare should be, at most, a safety net for people who would otherwise be old folks on the streets without healthcare. Such a policy is usually referred to as "means testing" retirement benefits.
Eliminating government retirement benefits altogether will never happen because no one likes seeing 70 year-olds suffering in poverty, but they don't dislike it enough to ameliorate the problem directly via charity. Humans are weird like that.
Ignore that. I was reading a parent's post and reply to the wrong parent comment.
Many people agree with you that people should take care of themselves, and that Social Security and Medicare should be, at most, a safety net for people who would otherwise be old folks on the streets without healthcare. Such a policy is usually referred to as "means testing" retirement benefits.
No, this is not what I advocated. I advocated that the family should resume the role of caretakers(or what been eroded by government) instead of leaving old folks alone in old people homes. Old people can then serve as babysitters, teachers, etc, to grandchildren. That is assuming, that they do have them.
Eliminating government retirement benefits altogether will never happen because no one likes seeing 70 year-olds suffering in poverty, but they don't dislike it enough to ameliorate the problem directly via charity. Humans are weird like that.
Maybe some. But this is ignoring the option of creating mutual aid societies. Fraternities organizations used to exists in large number and large number of Americans join them, regardless of their race and class. They provide orphanage, hospitals, and even home for elderly. Now the welfare state serve some of these functions, some said, poorly.
I advocated that the family should resume the role of caretakers
What do you think should happen to those who are unable to reproduce, or who choose not to, or whose children die before them, or whose children are just jerks who won't help their parents out?
What do you think should happen to those who are unable to reproduce, or who choose not to, or whose children die before them, or whose children are just jerks who won't help their parents out?
So this is saying that we should need a government to help out all these old people that do not have anybody to help them.
That's nice, but government aid have crowding out effect on mutual aid societies and the like, and that's assuming that government aid are actually better than family based, charity based, mutual aid societies and other voluntary assistance.
Beside, the increasing wealth of society and technological development should eventually help those old folks out. Charity would eventually be able to buy more food and shelter per dollars.
Look, my suggestion isn't perfect and won't cover all the case scenario. But government is a tradeoff. You might be paying it through taxes, increased bureaucracy, less innovations amongst charity, etc.
All things being equal, I think I consider a voluntary effort to support the old people to be more ethical than coercing people to support these people.
Private, voluntary solutions that achieve the same goals as government programs at equal or lower cost are always superior. However, I don't think your proposed solutions would achieve the same goals. There would likely be more impoverished seniors.
To be fair, the statements we get from Social security suffer from the following very serious problems, which actually have the opposite effect of the one you describe:
1) They aren't redeemable for the promised amount if congress lowers benefits, as it has many times already. We all know that benefits will be lowered significantly (or removed) by the time most of us here reach retirement age. Anyone under 40 should consider the money deducted for Social Security flushed permanently.
2) They are not in projected inflation adjusted dollars. The $1500 per month someone read on the piece of paper is actually in 2060 dollars (for example) not 2010 dollars; if shown in 2010 dollars it would be laughably small.
These sorts of numerical tricks would never be tolerated if a private firm was perpetrating them.
Yes I did. There is a precise analogy between Social Security and Madoff's fund, the only difference is that Madoff's rope was a bit shorter because he doesn't have the power to force all working Americans to sign up.
But, just as Madoff eventually ran out of new investors and due to a market dip was unable to continue to pay out the fake proceeds, demographic trends will make the US Government unable to pay out the proceeds promised to all the people who pay payroll tax every paycheck.
Already, the government has cut social security benefits drastically. I'm not talking about harming the rich, these are working class people forced to invest 12.5% of their lifetime earnings into a scheme that has zero guarantees and a history of profligacy.
Note: If you look at income + payroll tax, we don't have nearly as progressive a system as you might imagine. That would perhaps be fine if there were actually a safety net being provided.
If Social Security were a private company it would be considered a pyramid scheme and shut down. Imagine someone published a Fidelity internal memo to Wikileaks stating that all shareholders under age 40 were required to keep investing 12.5% of their salary every month, could not sell, and would receive a negative return upon reaching retirement age. It's so fafetched it's laughable.
I don't have a problem with the government requiring a 12.5% retirement fund outlay from workers. It's paternalistic but probably pragmatic. I do think it should be an investment based program rather than a pyramid scheme, and I do think workers should be guaranteed at least the rate of return of a very conservative market investment (such as a precious metal or a certificate of deposit would yield).
The original genius behind Social Security was that it was not a welfare program, it was sold as an investment program. However the books were cooked from day 1 because it achieved that only due to very skewed demographics (far more young workers than old workers/retirees), just as Madoff's fund was able to pay out returns only on the basis of having far more new investors than investors expecting returns.
So I'm opposed to the regressive nature of the Social Security tax mainly because the program is broken and thus it's only a regressive tax and not an investment program. Obama ran on a campaign promise of turning social security into a welfare program which simply means preventing the program from going bankrupt by deciding that only those who are deemed poor get the funds promised them.
Imagine if Madoff had tried to avoid jail by saying that he'd refund the money of all the poor people who invested with him. That's equally laughable.
Sadly, turning it into a welfare program is probably the most pragmatic approach, but if we're going to do that we should immediately do away with the payroll tax and allow the scheme to end so that those who don't aspire to be poor can start investing their 12.5% into an actual IRA. It would be fine with me if income tax rates had to rise a bit to cover the cost of Soc Sec as welfare.
Well, for the record, SS is a very conservative market investment -- the surplus is invested in government T-bills every year, that's as conservative as you can get. Of course then people turn around and say it's the government writing itself checks or they're worthless IOUs or something.
As far as the finances, as I understand things, simply raising the cap on income would extend things out a bit, FICA doesn't get collected past 105k or something. That's also redistributive and you could say unfair, but the fact is that we have a big population bump retiring and no system to pay for their retirement is going to be fair to us.
EDIT: Also, I suspect any other mandated market investment that the government enforced would have even worse problems than SS. What happens when all of the baby boomers put daily selling pressure on the stock (or gold) market for 30 years? That might wind up being a way worse investment when it comes to the market prices at sell time, no matter how well the economy does.
There's nothing wrong with using T-Bills, the problem is that the T-Bills are not owned by the worker for 12.5% of his lifetime earnings. And, if any money is saved it's just a temporary measure b/c the program is designed as a pay-as-you-go program, where the taxes paid by current workers are sent to current retirees. So it's really not investment that is going on, merely a very temporary surplus.
I don't approve of raising the income cap because that fails to address the regressive nature of the tax. It also fails to address the larger issue, which is the vulnerability of the program to demographic shifts and congress's whims, including the oft-used whim of spending the current surplus on other things to avoid having to raise taxes now for current spending.
I think the best solution would be to give workers below a certain age the option of opting out of the pay-go program and instead choosing an investment based program curated by the government but with an ownership component. The missing revenue should just be paid for via our progressive income tax regime.
> As far as the finances, as I understand things, simply raising the cap on income would extend things out a bit, FICA doesn't get collected past 105k or something.
Since benefits are roughly related to FICA, extending the cap doesn't help much. It helps some, because the benefits system is progressive, in that folks who contribute a lot get less return on their contributions than folks who contribute just a little, but ....
The folks who designed SS thought that the cap was essential. Their argument was that SS wouldn't survive if it paid folks like Ross Perot $500k/year in benefits or if it was a tax with no benefits to folks like Ross Perot. The cap means that Perot doesn't get $500k/year but don't care because he didn't put much in.
The rich at the time might very well have opposed having to pay the 1% social security tax.
The inception of the program was based on a variety of too good to be true premises, the 1% payroll tax being the most notable, so I interpret the cap more as a symptom of this fantasy... and possibly a consideration of the stigma attached to welfare programs in those days.
I understated things a bit - it wasn't just the originators, but SS advocates, at least until recently.
If you want to remove the cap, then either you're willing to pay Ross Perot $500k/year in benefits or you're going to have uncapped taxes and capped benefits, that is, another 15% tax.
Do you really think that rich people today won't object to another 15% tax?
> If Social Security were a private company it would be considered a pyramid scheme and shut down.
No it wouldn't, your concept of pyramid scheme is flawed. By your definition, all insurance is a pyramid scheme. Pyramid schemes promise everyone they'll get out more than they put in and this eventually collapses. Social Security makes no such promise, it's insurance, they fully expect many people to die before getting out what they put in or even starting to get anything out at all. That's how any insurance works. Social Security is not a pyramid scheme.
Insurance is not a scheme "destined to collapse" when it runs out of new investors. Insurance is perfectly sustainable. In fact, some of the oldest companies in business today are insurance companies.
Social security is currently "designed to collapse" as the trustees report has warned for years. The program will run out of money sometime fairly soon unless the benefits are cut or the taxes raised. In fact, it has already collapsed several times and a new program has been reinvented, also named Social Security. Initially the payroll tax was 1% and the benefits constituted enough to live on.
That link supports me, not you. As I already said, Social Security doesn't promise anyone a profit, as long as benefits are managed properly, it can continue indefinitely. It specifically relies on people dying before they receive back what they put in. Social Security is perfectly sustainable, they simply have to cut benefits to an appropriate level or raise the retirement age. You clearly have some personal bias against Social Security that's making you not see it rationally.
How is it sustainable if it has to be redefined every few years? How is it sustainable if it will need to be turned into a welfare program resulting in all the money many of us have put into it not being returned at all?
Lifespans aren't static, nor can the retirement age be. Continual adjustments have to be expected. The whole point of the program was to provide income for old people the last few years of their lives, not to allow them to live for 30 years after retirement.
On your last point, you're simply making that up. Assuming you live long enough to reach retirement age, you will get benefits. The idea that you won't get benefits is based on absurd projections that wrongly assume the retirement age will never change. That's simply not going to happen, benefits/age will simply be adjusted to compensate and keep the program for those within a few years of the average lifespan, as it was intended.
You've fallen for political scare tactics of those opposed to the very idea of social security because they're opposed to all government assistance and anything even slightly socialist. Benefits simply have to be adjusted so payouts don't exceed payins and we're not using debt to support people. For the boomer generation, that sucks, because they're huge and gen X isn't. For gen X, that's great, because they're small and gen Y is huge.
> Would this be hard and expensive for the federal government to do? It shouldn't be. The mathematical formula to do this is very simple. The Social Security Administration does this every year ... This would be far easier. It could also be done online. An IRS website should be available so people could key in the amount they pay in taxes and a receipt pops up showing several dozen recognizable programs and the amount that went to each of them
Your point, I take it, is about government resistances and inefficiencies, and spot on. But it wouldn't have to be the government to do this. The information is available. Thirdway, or anyone, could do it themselves and make it available to any website. A developer could do an app and sell it for a dollar.
We do get annual statements from the SSA. The benefit amounts listed on mine are not insubstantial. (Whether you believe those numbers of the long term is a different question...)
The IRS seems plenty good at figuring out how much I should have paid in taxes and hounding me about it. Why not do those calculations in February and send me a bill:
"We calculated that you owe $14,278 in taxes this year. Please submit payment along with the stub below. Alternately, you may choose to submit a tax return for our review."
Government gets their money. I save a bit of hassle in April. Sorted.
I mean sure, they'd end up overcharging you by a few percent, but really that amounts to <$1,000. My time is worth a lot more to me than that. Send me a bill telling me what I owe and I'll pay it.
I don't think your idea would ever work. I think the way the tax system gets by everyday with all the corruption and waste associated with it is by the simple premise "Out of sight, out of mind". Taxes are paid by the average Joe a little at a time, I think most Joe's would simply freak out if they received a total sum bill at the end of the year. Actually, your idea would work in a perfect system, but we know how rare those are.
I imagine they'd keep track of your withholding, so the "bill" would be for the difference between what you'd paid already and what you owe. Just like your current tax return.
In the case of a refund, it might even take the form of a check that, if cashed signifies your intention not to file a return.
Not a bad idea. But why does it say "selected items"?
I haven't added the numbers up myself, but one of the comments says that the listed things add up to only sixty-something percent of the total. Where's the other money gone? One might almost think they're trying to make a political point with their careful selection of items (eg. "Combat operations in Iraq and Afghanistan" somehow got to fifth place on the list while "bailouts" and "stimulus" are entirely missing despite this being 2009).
Anyway, I certainly wouldn't trust the government to give me a receipt which said "selected items" -- deceptive information is worse than no information.
Also, since the US federal expenditure is currently about 25% larger than tax receipts, how is this taken into account?
re: "selected items", if you click through to the PDF there is a footnote attached:
>4 Budget calculations are based on budget allocations obtained from the Office of Management and Budget using historical tables from the FY2011 budget submission as well as the Congressional Budget Office website for such items as interest on the debt, Medicare, Medicaid, and Social Security.
My guess is that the real cause of "selected items" is that the number of things paid for by your taxes are obviously much larger than could fit on a short list, and has a long tail.
My guess is that the real cause of "selected items" is that the number of things paid for by your taxes are obviously much larger than could fit on a short list, and has a long tail.
Well, of course that depends how you slice it. Break it down by department and it looks more like this:
The twenty-something listed departments account for 97% of the budget (of course there's other government spending which isn't listed explicitly in the budget, I suppose).
This doesn't, of course, include stuff like "Smithsonian Museum", which are included on this list to make people feel warm and fuzzy about paying their taxes.
If you are ever asked to make a Pie Chart for general distribution please take this as a perfect example of what not to do. This is almost completely unreadable for 6-8% of the male population who suffer from colour-blindness (myself included).
I don't think that anybody can reliably match all 31 of those colors, particularly when the context changes from similar shades to white. Especially for the big slices, the name needs to be in the slice, not at the side of the chart. The smaller slices can have the names printed in the callout labels along with the percentages.
This chart shows that the military, entitlements and interest on the debt account for over 80% of the budget. In other words, the things that are pretty much off limits when politicians discuss the budget.
Interesting that this pie chart shows Social Security's budget as about five percent more than DoD's while the components of military spending listed on the sample receipt total less than half of the Social Security spending.
Well, they probably could have done the same job by grouping. If they combined combat operations with military personnel, for example, that would bump it up to third-largest.
Leaving out specific items is an obvious way to work an agenda into it, but manipulating the groupings could do the same thing, and more subtly at that. With a little gerrymandering, the receipt could say pretty much anything.
The break-down is certainly important. They could choose to lump all military expenses together, or to break down social security into tiny bits. The results would look very different.
This is, after all, NPR...no surprise the war was prominent as they have a decidedly progressive news team. I won't call NPR liberal, but certainly left of center, and very critical (as they should be) of the wars.
I think the bias in the table actually goes the other way. By breaking down, and omitting parts of, military spending, they make it look relatively minor compared to SS, Medicare, and Medicaid. They have also chosen to display SS intakes, not outflows, which is a $400B difference.
If you look at the pdf from the think tank which came up with it, you'll see that one of their arguments for doing it this way is that "An educated taxpayer is a progressive's best customer", leaving no doubt what their political agenda is.
Somewhat disingenuous from a think tank called the "Third Way", which was originally intended to imply centrism. Still, it's a general law of NPR reporting that a left-wing think tank is called a "think tank" and a right-wing think tank is called a "right-wing think tank".
Still, it's a general law of NPR reporting that a left-wing think tank is called a "think tank" and a right-wing think tank is called a "right-wing think tank".
I don't really have a dog in this fight, but a quick search suggests you may be mistaken. [site:npr.org "right-wing think tank"] os 8 results; [site:npr.org "think tank"] has about 2380. Nothing funny in robots.txt.
But you never know, maybe there aren't that many transcripts on there or something...
Or perhaps they rarely quote right-wing think tanks?
Still, a bit more googling:
7 hits for "right-wing think tank" vs 4 hits for "left-wing think tank", so apparently they don't use either term very often.
1200 hits for "liberal think tank" vs 285 for "conservative think tank" vs 447 for "libertarian think tank" (all of which seem to be Cato) vs 6 for "moderate think tank".
3 for "Republican think tank", 345 for "Democratic think tank" and 57 for "non-partisan think tank"
I take your point, though. What you'd really need to do in order to analyze bias would be to check out "think tank" is used without an adjective and figure out what kind of think tanks those are.
I thought the same thing. It looked as though they completely left out weapons procurement outside the scope of the wars, which seems almost dishonest. But it feels like I'm nitpicking; overall it's definitely a worthwhile effort.
The empirical evidence shows that, for example, NPR is more likely to interview a conservative economist about a story than a liberal. I think they go out of their way to defer to right-of-center politicians because they are so afraid of the perception that they're liberal.
Well, actually it's Thirdway.org, who've been plugging this idea for a few years now, but since it's somewhat progressive too, your point may stand. My sense was that Thirdway was deliberately trying to avoid being overly inflammatory: they don't, for instance, specify the amount of military aid to Colombia to fight the drug war, or the amount to Pakistan to fight terrorists, or to Israel to fight whoever Israel ends up fighting next.
Everyone should be critical of wars. I think there's a knee jerk reaction to label war critics as partisan, but questioning war really should be apolitical. I'm a veteran (go 10th Mountain!) and a Republican, and I'm critical of wars. I don't feel that we have a clear, achievable goal in Afghanistan, and I'm appalled at the complete apathy by the media and America public to the fact that we are at war, both taking and losing lives.
I'm actually not one of those antiwar protesters that crawls in ditches. I didn't say "they should be against" the wars. I just said they should be critical of it; as a publication-of-record it's their job to critique major national issues.
Your rock, nicely done. One suggestion: Maybe base the calculator off of Gross Income? That number is arguably better known by people than taxes paid. Just a thought.
Nice idea, so I put something up at: http://www.yourtaxreceipt.com
Haven't added the calculator yet, trying to garner from the feedback about how to be more accurate in reporting (given the feelings about the npr depiction).
There's a lot of naive love here for a deeply flawed idea.
First, what is suggested in this article is not a receipt, but a breakdown. A sales receipt for a car, for example, doesn't start out, "5 tires (4 on vehicle, 1 spare), 2 axles..." It just doesn't work that way. You buy "government" with your taxes.
Even if you did get an itemized receipt for a car, that would be far easier than what's proposed here. You can always just point to the car and account for the parts. The part is either there or not, and meets specifications or not. The reason that government and spending are these intractable issues is that the parts can be arguably there or not, and arguably working or not.
As long as you can't opt out of all or a portion of your taxes, in other words, as long as tax policy is sane, the only "receipt" you should get should specify that you paid the amount you calculated. Any other discussion or education about costs and allotment should happen in a forum that at least has a chance of shedding some real light.
Finally, if the receipt ever became the focus of public attention, politicians will just monkey with the categories until you're happy again. It will cease to be an information tool and become an influence tool. It will merely add another layer of intractability to an already byzantine bureaucratic system.
This is a brilliant idea, and in the spirit of a democratic republic, I'd say. I'm paying taxes; it'd be nice to know what exactly I'm paying for.
I'm also for listing all the expenses; down to the ones that end up costing you a millicent.
Perhaps yet more feasible would be setting up a real tax website, with real information, and accessible tax records for all. On this website you could also find your receipt. If only…
But it's not the entire story. Just because X dollars was spent on the military for example, how much of that X was actually put to good use? As a former employee of a military contractor, I can attest there are entire companies built around taking advantage of how inefficiently the government spends its money.
There's something bogus about those war numbers, it's far too low.
The US has a $700 Billion ANNUAL military budget (more than every other country combined).
Something is being hidden in other numbers because of all the cost to support military and their families (taxpayer paid "free" housing?) and thousands of military are coming back with traumatic injuries that previously would have been a one-time funeral cost but now are surviving with extremely expensive, continuous medical support and therapy costs (and disability pay for them/family).
Where is the "homeland security" portion in that receipt? Are we to believe the billions in security theater at airports is free and not funded by taxes? What about the billions doled out to local governments under the guise of "homeland security" so law enforcement can buy new toys to abuse?
Where are the secret military projects budget in that receipt (like their own space shuttle, military satellites and other stuff we aren't supposed to know about so their budgets are hidden?)
"At best, motivated taxpayers can locate a pie chart on a government website that gives percentage allocations about how large categories of spending are distributed.
But these are difficult to find and difficult to understand."
This is disingenuous puffery. It's in every copy of the 1040 instructions and is simple to understand.
They're actually suggesting a far more complex and entirely non-visual spending report. That's useful, but the existing report is neither hard to find nor understand.
I do like the idea, but a cursory look at their 'receipt' and where the numbers come from showed a pretty large flaw: half of social security and medicare is paid for by employers. Unless you consider your salary to be an extra 8.65% than it really is, you're not accounting for all the taxes the government receives based on your paycheck. Although this is really a "hidden tax" on your paycheck, most people don't think of it as part of their salary (which is why they do it this way).
There's also other types of taxes paid by non-individuals, like corporate taxes, estate taxes, and the like.
In any case, it means the numbers in their receipt for SS and Medicare are off by a factor of 2, so you should evaluate this only based on the idea, not on their actual numbers. (Not to mention there are likely an abundance of other problems with this method, like spending that is not part of the budget, or when the government is over-budget and issues bonds to pay for it.)
This is amazing. I find it incredible that only .100 billion is going towards "Financial Crimes and Enforcement" given the huge amount of fraud and outright criminal activity that has occurred in our banking sector. This is actually down 10% from last year.
Regardless of your political views, left or right, this shows you what the priorities of our government are.
After the S&L crisis in the 80s, over 1000 banksters and fraudsters were convicted and imprisoned. Why is it that none have been convicted and imprisoned now?
While I'd love to see all the home borrowers who lied on their loan applications jailed, it just isn't going to happen. They are "victims" who need a bailout.
Besides, it's probably also not that useful to do. From now on, you can expect banks to do a little more verification, so creating disincentives for mortgage application fraud is not that pressing an issue.
It seems like a nice idea on the face of it, but apart from the inevitable chaos which comes from having budgets of government departments fluctuate wildly from year to year, I think it would lead to a world where government departments spend about half their time and money begging taxpayers for money.
Every television ad for the first four months of the year would probably be some variation on:
"Remember, the FBI does good work! Be sure to remember to contribute to the FBI on your next tax return!"
Honestly, the receipts for MOST businesses are fairly predictable (within 10-20%, at least), so why would we think that the government would be any different?
Also, I'm not sure why making government departments beg for money and have to live in the free market is on the face of it a bad thing. Would it be any different than the current system, where politicians beg us for money while promising to allocate our taxes a particular way, but then usually fail to follow through completely on? Having the departments beg for money directly seems more efficient somehow.
Of course, I think what would really suffer is bold new infrastructure programs. People would be willing to allocate money to roads once a couple high profile bridges collapse, but would we ever see a space elevator?
Would be nice, but what happens when you contribute to a government program? Nothing. Your money is far too small to have any effect and you will likely receive a particular service whether you personally contribute or not. With a business, you get what you pay for. Fast.
Seems like a happy medium would be that I get to choose where 10 or 5 percent of my taxes go. The politicians can expect a certain cut, with the rest we're empowered to fund what we believe in.
I also don't realistically believe this will ever happen.
À la carte governance might be a good idea (though it sounds likely to produce the largest expansion of the IRS anyone has ever seen), but is there any empirical information on the use of such a system in governance? It is not too much to ask that the idea be tested and proven on smaller levels.
I wonder if these numbers are made up or have any basis in reality.
One item that caught my eye was spending on the DEA of only $3.14: Wikipedia puts yearly spending on law enforcement related to the War On Drugs at about $44 billion [1] and gross federal tax revenue for 2009 at about $2.1 trillion [2]. This works out to roughly 2% of tax revenue spent on the War On Drugs. For the $5,400 of federal income tax in the linked example that would work out to more like $100 rather than $3, no?
Of course, the Wikipedia article doesn't state how much of the $44 billion goes to the DEA and how much goes to other law enforcement agencies.
According to http://www.justice.gov/dea/agency/staffing.htm, we spent $2.602 billion on the DEA in 2009. That would make the naive figure $6.69. However the USA ran a $1.4 trillion dollar deficit. That means that fully 40% of federal spending was paid for by future debt, not taxpayer revenue. That reduces the figure spent on the DEA down to $4.015. As for the remaining difference, I suspect that the numbers don't count social security as a tax (officially it is not a tax, and officially money transferred from social security to the general revenue via purchases of treasury bonds is debt owed back to social security at some future point) which reduces the amount that comes out of your actual federal income taxes.
Furthermore the USA has some other forms of revenue. Such as tarriffs and fines. Put that together and I can believe that the figure given is reasonable.
DEA's budget is much smaller than total spending on the "War On Drugs" (not sure how that number is calculated; spending against illegal drug manufacturing, distribution and consumption happens at many levels of law enforcement).
Makes sense, but assuming that the $44bn figure in the Wikipedia article is correct I'm still wondering where the remaining ~$97 dollars are hidden. In "Military Personnel" and "Health Care Research"? I guess it goes to show that even with a fairly detailed list of expense positions, you still don't really know where your tax dollars go.
I am open to correction, but as I understand it the $44 billion figure is a calculated estimate of the money being spent in total by any and all government institutions in the US, including that spent by local and state police departments and prison services to investigate, catch and incarcerate narcotics suppliers and users.
Considering the nature of the War on Drugs I'd expect most of the expenditure to be at the local and state level, but the biggest chunks at the federal level aside from the DEA's budget would probably be the proportion of Coast Guard and CBP time and resources dedicated to counter-drug operations and the military and policing aid given to countries like Mexico and Colombia. This is a bit hard to quantify though, as the Coast Guard and CBP usually conduct counter-drug operations as part of their usual duties and not all the aid being sent to Colombia and Mexico is motivated solely by the desire to contain drug production and shipment.
So you would not necessarily find the remaining funding hidden within the federal budget.
I would dearly love the UK government to send me a statement every year explaining what it has done with my taxes and detailing my share of the liabilities it has been running up on my behalf.
In fact, I want it online and I want to be able to drill down as far as I want into the data.
Of course, my desire for such a thing is balanced by the fact that such a project if carried out in the same way as most public sector IT projects would probably cost a hundred billion and not actually work.
My unrealistic idea for changing how taxes work is allowing me to designate which programs my cash goes towards. Make it kinda like the old Wheel of Fortune ... where you've got $x to spend on stuff that's priced 5 times what it's supposed to cost. If I want to buy 0.003% of that winter's salt supply for the road, or 0.00001% of a Predator drone ... at least I'd know where my taxes supposedly went.
I've always liked the idea of a receipt to be given to Canadians at the end of every year telling them what healthcare benefits they got and how much they cost.
It seemed like it would make people grateful that they had that service, but it also might make the people who pay disproportionately more than they use angry (and the nature of insurance is that most people put in more than they get)
If you are under 60, chances are you are paying disproportionately more in healthcare than you are getting. But this is how it goes. A large percentage of your lifetime's healthcare spending occurs in the last 6-12 months of your life.
Given the choice, I would much rather pay more for healthcare than I am using. It means I am healthy. My health is more valuable than money.
I always thought it would be a good idea to let people decide how part of their tax dollars were going to be spent. Set aside maybe 20-30% and let them choose which programs to give extra funding to. I imagine most of it would end up in education and social programs.
And this is what I was about to post, but instead of 20-30%, make it 51%. Allow taxpayers to decide where (the broad categories the receipt listed are a perfect starting point) their tax dollars are going. The remaining 49% can be discretionary, let the government decide where that goes: fill in the gaps for items needed, but that no one wants to pay for.
Such a policy would give people a sense of power over the money they're paying. I, for one, would begrudge less the paying of taxes if the monies went to programs important to me.
1. That's pretty much already the case (lobbyists are paid by someone, and that someone isn't the poor).
2. You make that sound like a bad thing, when it's not.
Given the categories listed on the receipt, which one of those would you really be upset if a rich person decided to put 51% of his taxes to? Medicaid? Pell Grants? How about the National Parks?
"If the wars are important to you, use your money to pay for it, stop using mine," is pretty much my philosophy. Having no control over where my taxes go makes me significantly less pleased with paying them.
Well, that's already the case, but I agree in that this would make it considerably worse. If you look at the government as legal force, then this scheme would amount to paying for influence over a group with legal force.
Taxpayers should be able to choose where their taxes go. Like when you file your tax return, check some boxes. If you like paying for renewable energy, great. If you like funding the war, your choice.
The denominator should be tax receipts, not federal spending. Foreign countries and our Federal Reserve actually made large contributions this past year (both do every year we have a budget deficit and every year the money supply increase- this is most every year for the past few decades). This is not to suggest that Americans won't eventually pay for all of this year's expenditures, we eventually will. In the case of the Fed, consider their new money printing and subsequent spending to be a tax of everyone that holds dollars at the time of the printing/spending.
in austria everyone pays ~7% into the public health fund. by law the insurrance is bound to send you a letter listing the benefits you recieved (per quarter i think).
sometimes mind boggeling number - e.g., several thousand euro for a short hospital stay - sometimes zero.
The way some of the line items are written/described is very misleading.
Setting aside money for "Low Income K-12 students" or Foreign Aid or Amtrak (with prices as high as flying and quadruple the travel time) does not necessarily mean that investment is getting results.
I'd only trust a receipt like this if it were annotated with hard numbers on how my dollars turn into meaningful progress.
Why does this surprise you? Since deficit spending is generally disallowed for state and local governments, nearly all sizable projects are funded through bonds. Bonds are basically loans with a promise to pay back in the future, generally with tax revenues. So you are paying off that 99 year bond to build a TB sanatorium built in the 1930s.
We are doing the same thing today. My grandchildren will be paying for the school repair and high-speed rail bonds that passed a couple of years ago here in California. Their grandchildren will be paying off the anti-global-warming school air conditioning and hyper mag-lev rail bonds that will be put forth 25 years from now.
Return policy - don't like how much the government spent on Amtrak, get a refund (no questions asked).
Customer loyalty program - earn points towards postage stamps or a national park pass.
Discounts from partner programs - i.e., paying, loyal customers of the US government get discounts with China, GM, Goldman Sachs and other US 'partners'.
