September 07, 2004

Brother Can You Spare A [Billion] Dollars?

I understand the idea of spending your way out of a recession, but nearly half a trillion dollars? Are the people overseeing the budget not seeing how many commas there are?

Edit: This further cements my belief that anyone who governs must first be able to create a profitable Sim City. Somehow I think a lot of those Washington types wouldn't be able to do it.


Noumena said...

So the government spends about $4.3 trillion per year these days, with a deficit of around $.5 trillion. The social security aspect of this is actually running a surplus, and will be solvent for something like the next thirty years. But if the conservative free marketers have their way and privatize social security, the money that was going from our paycheques to old and unemployed people will go instead to special savings accounts. Let's say not all of it will be diverted, so the government will only have to pay half of current social security benefits out of ordinary revenue (income taxes, capital gains, and so on). This represents 20% of that 4.3 trillion. Or a further half trillion dollars in debt.

Let me say that again, without the math: privatizing social security will double the deficit.

Incidentally, Keynesian, or demand-side, economics means you run a deficit temporarily, to put money into people's pockets as a way of encouraging them to spend, and bring a recessed or depressed economy back up to speed. That's what the New Deal was. Shifting the tax burden onto the middle class, cutting tax revenue generally, and shooting up government spending in the most inefficient way possible (Halliburton), on the other hand, is Milton Friedman's plan for starving the government, forcing it to eventually shrink. Seriously. Conservative economic doctrine for the past 30+ years has been to make the government as insolvent as possible.

Which, I suppose, is why they're all gangbusters about trying to privatize social security and replace a nominally progressive income tax with a regressive flat tax, another revenue-killing move.

MosBen said...

That's what the deal with using the surplus on social security was all about though, right? Using the surplus to pay for all the people currently drawing on the system, so no one on the system is screwed, while moving people paying in to private accounts.

If this were the case, are they any problems with privatizing social security? As long as we make sure the people currently on the system are covered and start moving younger people into a privatized system, are there any really big drawbacks I should know about?