• Doing CBO’s job

    By now you know the story. If not, it’s here. I just want the 2010 CBO projections to be in the same format as the 2008 ones were. This is important because the way the data are displayed either highlights or somewhat conceals what’s driving federal spending. CBO didn’t produce consistent figures, but now I have with their data. See below. This is the right way to view this information.

    Federal spending and revenue projections as a percent of GDP (CBO)

    Alternative Fiscal Scenario

    Baseline Scenario

    Later: I updated the figures with a better color scheme.

    • Austin:

      Nicely done.

      What is your take on the whole “unfunded liabilities of Social Security” concern? Fact or fiction?

      I’ve read just a little bit about this and it seems like a rather complex thing. Based on the nature of your/CBO’s chart, I’d have to say the government doesn’t see it as real.


    • The way you have charted SS and Medicare makes it clear what the problem is: Medicare.

      As the nation has become more “conservative”, it has become more free lunch in that tax cuts have no cost, debt has no cost, and since Reagan, savings needs to be rewarded with even more tax cuts because people need to get free money to promote savings, because Reagan ushered in a new dawn on no sacrifice needed,

      Since at least the mid-50s when I became a teen, Social Security would not be around when anyone got old,, but as far as I can tell, I was the odd man who saved as if that were true, while everyone else was going deeper and deeper in debt as the nation became more conservative.

      What Ryan wants to restore, it seems, is the 20s and 30s for old people: mostly poverty, malnutrition, and hardship. Or if he’s serious about means tested SS benefits, 80% of those over the age of 65 will be poor qualifying for SS, little different than today.

      Oh, wait, he’s going to guarantee you can’t lose money in the stock market even if more old people are selling than workers buying stock – talk about a bailout.

    • Dr. Frakt,

      In the post you referred Dale to you discussed the main driver of the problem and a number of things needed to fix it.

      “The reason for the predicted shortfall is demographics: longer lives and fewer workers relative to retirees. Social Security’s financing problem could be solved in a number of ways: increasing taxes, decreasing benefits, using other financing sources, or a combination thereof. ”

      All of the solutions assume that the ratio of workers to retirees doesn’t change. Have you given any thought to what would happen if we significantly increase immigration?

      I believe the fundamental freedom we enjoy is still a dream for a majority of the worlds population. If we re-open Ellis Island and give them the opportunity we could reduce the average age of the population (more workers per retiree).

      Everything I’ve read limits the solutions to spending and I’m interested in your thoughts. Thank you.

      • @Bernie – Thanks for your interesting thoughts. No doubt someone has thought about the effect of immigration on worker-to-retiree ratios. Some creative Googling might bear fruit. Should I come across something I’ll post it. Right now, I have nothing additional to add.

    • Thank you for responding.

    • I am confused. Are taxes rising as a share of income in the baseline scenario?

    • Austin:

      Yes. thanks, that helps. It suggests that, albeit unpopular to politicians, something could be done but ultimately taxpayers won’t be too excited about it. I agree, it is pathetic that as a country we continue to stick our heads in the sand on this one.

      What the previous post doesn’t address is what causes the shortfall. Responders to this post sequence have identified one of the causes (and I think this is happening around the world with similar entitlement programs) – fewer workers to support increased payees.

      I agree with you that most folks who wag a finger at this “unfunded liability” issue are probably thinking that they can do better – for themselves – by investing their own money for their own future. Its sad to think that these folks might have forgotten that Social Security isn’t an investment program – its a charitable program (in my view) where those fortunate to have jobs are paying into a system so that those who are now retired can enjoy that retirement a bit more. I think what people also forget is that the job you have now is not only about what you have done to improve your condition to get that job for yourself. Those what worked before you have collectively paved the way for the job you have now – this whole world is a well-connected thing. No one becomes (financially) successful on their own. We are all in this together!

      What allows our government (both red-tied and blue-tied ones over the past 40 years) to “spend” accumulated Social Security tax revenues? This certainly has something to do with the lack of funding in the out years, doesn’t it?


    • What does the chart look like when interest on govt debt is included?