Sometime between 2030 and 2040 mandatory spending will exceed revenues.

[dkf]

Social security plus Medicare plus Medicaid plus the interest on debt will pretty much equal revenues with no funds for infrastructure, defense, education, Research and development, etc.

We can't afford to keep entitlements as is or that is all the government will be, aid to our elderly and healthcare for our poor and that is it.

http://en.m.wikipedia.org/wiki/United_States_federal_budget?wasRedirected=true

[Hannah Bell]

1. bullshit

[dkf]

2. 2007 GAO chart.

You got something better?

[Hannah Bell]

4. under what conditions, dkf? this is your usual projections dressed up as certainties.

in service of promoting an austerity agenda.

under what conditions?

what assumptions are the projections based on?

are those assumptions realistic?

are they the only assumptions that can be made?

who's running gao right now?

do you even know?

[dkf]

9. David M. Walker (born 1951) served as United States Comptroller General from 1998 to 2008

Walker served as Comptroller General of the United States and head of the Government Accountability Office (GAO) from 1998 to 2008. Appointed by President Bill Clinton, his tenure as the federal government's chief auditor spanned both Democratic and Republican administrations.

http://en.m.wikipedia.org/wiki/David_M._Walker_(U.S._Comptroller_General)?wasRedirected=true

[Moral_Imagination]

10. Anyone who came up with the title is grinding an axe...

There is no reason to blame the growing red bar on the Green/blue/lt blue bars instead of the white bar. Dont focus on the later years that is the scare tactic... focus on the 2010 and 2020 bars... It show how huge the white bar is and if its cut down the red bar will never grow.

[dkf]

16. Don't focus on the later years? Seriously?

I don't know about you but that is when I will be retiring. Seeing this chart makes me realize that I need a contingency plan, because I highly doubt all those promises are going to be kept.

[Moral_Imagination]

21. If you are worried about your Social Security benefits

Then step one would be stop posting charts that are designed to create political support for cuts to Social Security.

[Hannah Bell]

28. bullshit. btw, david m walker looks a lot like bush's cousin john walker.

i wonder if there's a relation.

[Hannah Bell]

27. well, that tells me a lot. former CEO of the Pete peterson foundation. lol.

Peter G. Peterson Foundation

In 2008, Walker was personally recruited by Peter G. Peterson, co-founder of the Blackstone Group, and former Secretary of Commerce under Richard Nixon, to lead his new foundation. The Foundation distributed the documentary film, I.O.U.S.A.,<4> which follows Walker and Robert Bixby, director of the Concord Coalition, around the nation, as they engage Americans in town-hall style meetings, along with luminaries such as Warren Buffett, Alan Greenspan, Paul Volker and Robert Rubin.

http://www.pgpf.org/Issues/Fiscal-Outlook/2010/09/17/Peter-Peterson-Foundation-to-Support-New-Fiscal-Organization.aspx

yeah, it's bullshit.

[dkf]

36. He actually looks like someone who can call a spade a spade to me.

An accountant by profession -- he worked for Arthur Andersen before being tapped by President Bill Clinton to be the nation's seventh comptroller general and before his Chicago-based accounting giant was destroyed in the Enron scandal -- Walker was one of the lone voices crying inside the Beltway wilderness for fiscal responsibility at the start of the Bush 43 administration.
 
Walker warned Congress and the administration as the federal surplus of the Clinton administration became a giant deficit under George W. Bush. He marvels at the disconnect of how Republicans are viewed as being fiscally responsible -- an attribute he assigns to Bush 41 -- while Democrats are seen as spendthrifts.

Walker also wants a total reform of the Pentagon, which has been astonishingly profligate in developing weapons systems of dubious use, with each branch of the service calling for systems unique to their service. We need to reform the pay scale, mandating higher pay for a combat soldier than his out-of-harm's way supporting colleague. In short, a thorough reform of the defense budget is needed in light of our horrific budget deficits.

http://archives.huntingtonnews.net/columns/100113-kinchen-columnsbookreview.html

[Hannah Bell]

51. arthur anderson? lol. do you have any clues at all?

[Moral_Imagination]

6. The white bar is almost all military/security wasted money...

If you cut the white bar down a lot then red bar will stop growing. Next, move the dashed line up 2% or so and your problem is solved.

[dkf]

13. Education, research, foodstamps, aid to foreign countries...

Do you really think the only purpose of the federal government is to care for the elderly, to provide minimal medical coverage to the poor, and that is it? Is that the entirety of our government?

[Moral_Imagination]

17. So ask the author of the chart

to make a separate bar for the military... the fact that they didn't give the military its own bar is VERY telling... Military spending is way over half of the huge white bar.

[dkf]

25. It's the Government's numbers and estimations.

http://www.gao.gov/financial/citizensguide2008.pdf

[Hannah Bell]

29. it's the estimates of a gao headed by a lackey of pete peterson & the blackstone group.

[dkf]

32. Appointed by Bill Clinton.

[Hannah Bell]

35. ooooh, bill clinton. that famous "liberal" that gave us nafta, welfare reform, & the telecom bill.

plus war in yugoslavia.

the now-best bud of ghw bush, you mean?

[dkf]

37. That balanced the budget and brought us to a surplus...yup that Bill Clinton.

[Hannah Bell]

38. oh, bullshit. the revenue surplus came from the boom, just like the revenue deficit comes from the

bust.

[Moral_Imagination]

45. Yes...

he brought the dotted line up by raising taxes... see how it goes up from 1990-2000? (Bush Sr. raised taxes also in this period)
and by decreasing the white Bar (decresed defense spending as a percentage of GDP).

[dkf]

60. Raised revenues AND cut expenses.

Quite a feat really.

[Hannah Bell]

61. tell me, what expenses did clinton cut? do you know? did the federal budget grow or shrink under

clinton? do you know?


you don't seem to know a whole hell of a lot about the assumptions your chart is based on, or why the 2010 projection varies by 33% from the 2007 projection.

do you know anything about clinton's budgets?

[dkf]

66. Welfare reform, defense cuts, plain old budget agreements... Etc

[Hannah Bell]

67. yes, how much was that welfare cut? and that defense cut? and was his budget each year

bigger or smaller than the one before?

you say he cut defense & ran the war in yugoslavia?

[Hannah Bell]

92. too much work for you? canned charts from peterson peeps = the lazy option v.

actually knowing the assumptions they're based on.

[Moral_Imagination]

30. This does not refute anything i have said.

If you refuse to believe that the white bar is mostly military spending i don't know what to tell you. The fact that the authors of the chart have not shown you what part of the white bar is military spending is very telling.

[Generic Other]

84. And don't foget to factor in starving current retirees

most of the boomers will be out of the rest homes and in the cemeteries.

[Moral_Imagination]

3. Bad title.... it should read

THE RISKS OF LOW TAXATION AND HUGE NEEDLESS MILITARY SPENDING

[dkf]

5. That is with no outlays for the military. None. Look at the chart. See how we exceed revenues?

The other question is how much more can you tax the populace. Since this chart was done in 2007 I assume the revenues past 2010 were calculated at the Clinton rates, without the Bush taxes, extra child tax credits, making work pay, the social security cut, etc.

[Moral_Imagination]

7. I responded above...

the white bar is almost entirly military/security... get that bar down and the red bar stops growing... Also must move the dotted revenue line up by increasing taxes elminating subsidies/loopholes.

[melm00se]

39. evidence that if you stop military spending

(something that is unreasonable as one of the main purposes of government is to provide security for the People) that federal government borrowing will stop?

and pointing to the graph and saying: "just look at it" is not evidence. it is an assumption (and I believe a faulty one at that).

the federal budget has to be looked at holistically. Government spending, as a whole, has already outstripped revenue and past obligations and current as well as future unbridled spending (regardless of sector) will drive that graph to mirror, perhaps not 100% exactly but pretty darn closely. reality.

sticking your head in sand, with your fingers in your ears and chanting ideological dogma will not change things.

the solution must be a top to bottom, side to side revamp of the entire revenue and expenditure system of the federal government.

Certainly some of this will feed your ideological fires but others will surely dampen them (you can't make all the people happy, all the time).

we are rapidly approaching a tipping point, economically, once past that point, the changes needed to solve this problem will grow and compound just like the way the graph in the OP is showing compounding growth of federal obligations.

[Moral_Imagination]

53. So what would you cut oh wise one? n/t

[Moral_Imagination]

12. No military outlays???

Huh? so we spend no money on the military? are yous serious?

[dkf]

18. The military spending is above the revenue line.

Even if we had no military spending just the entitlements alone would eat up the revenues.

[Moral_Imagination]

23. Not True

in the 2010-2020 period... The military expenditures are what pushes the bar above the dotted line. If it is brought down below the dotted line then the red bar never grows (it would actually get smaller) in the later years. And this doesnt even take into account bringing up the dotted line (increased taxation).

[dkf]

31. The white bar falls from 2010 to 2020.

This number includes all other mandatory government spending. I'm not sure what part of military spending is considered mandatory except for veterans benefits.

[Moral_Imagination]

8. Its funny this chart is designed to cause panic

but if you know how to read it its actually not that bad... See the 2020 bar? If the dotted white bar is brought down below the dotted line then the red bar stops growing. The white bar is almost entirely military/security wasted spending.

[Skip Intro]

11. What are the taxation rates assumed? That aside, if this is indeed accurate, and I don't buy it just

from some random chart posted on a discussion board, but for the sake of argument, if this chart is indeed accurate, what do we do? What do we do?

[Moral_Imagination]

14. The revenue line on the chart

is set at 20% of gdp... All of the bars are shown as percentage of GDP and not just flat amounts spent. What do we do? Chop the white bar by half and the problem goes away... its mostly military spending.

[dkf]

19. It's from the GAO in 2007.

Are they credible? The guy was appointed by Clinton.

[Hannah Bell]

58. no, they're not credible. point 1: their 2010 projections are 33% different.

a projection that varies by 1/3 just 3 years later is completely WORTHLESS.

[dkf]

62. Are they more or less optimistic?

I'm guessing less, which would err on the side of things being worse.

[Hannah Bell]

63. the deficit they project is 33% less, and non-interest spending is only 3%

higher than receipts in 2080.

gee, what a change in just 3 years!!

i guess things aren't as set in stone as you thought, eh?

i'm sure you'll apologize for crying wolf now that the new & ever-so-much better projection is out, right?

http://www.gao.gov/financial/fy2010/10guide.pdf

[dkf]

68. Did you notice there IS NO interest spending?

What is the point of that chart anyway?

You know what? That is actually deceiving and shameful. Wow. Just wow. The fact that they dropped it is kind of scary.

[Hannah Bell]

69. um, go take another look. page iii. no idea what *you're* looking at.

page iii has exactly the same info as in the 2007 chart.

[dkf]

71. I have no idea what you are comparing to the chart on page iii but if the 2010 report comforts you

In any case I am glad you are looking at the numbers.

And please note the paragraph before the conclusion of the 2010 report...

"It is estimated that preventing the debt-to-GDP ratio from rising over the next 75 years would require running primary surpluses over the period that average 0.5 percent of GDP. This compares with an average primary deficit of 1.9 percent of GDP under current policy. The difference, the “75-year fiscal gap,” is 2.4 percent of GDP. Closing the 75-year fiscal gap requires some combination of expenditure reductions and revenue increases that amount to 2.4 percent of GDP on average over the next 75 years. The timing of such changes has important implications for the well-being of future generations. For example, it is estimated that the magnitude of reforms necessary to close the 75-year fiscal gap is 50 percent larger if reforms are concentrated into the last 55 years of the 75-year period than if they are spread over the entire 75 years."

http://www.gao.gov/financial/fy2010/10guide.pdf

[Hannah Bell]

88. the projections are different by 1/3 in just 3 years. the charts are about a 70-year window.

the charts are crap.

[dkf]

79. Actually you can't compare my chart to anything in the 2010 report

Because it doesn't show how much spending is mandatory, i.e. Social security plus Medicare Plus Medicaid plus interest. If you had that number vs revenues you could see how much discretionary income is left.

I'm glad you pulled the 2010 report though. I finally understand what Obama was trying to do, which was to control the growth rate of Medicare. I didn't realize how important that was.

[Hannah Bell]

90. it shows how much spending is projected to be uncovered by revenues & its 3%,

and it shows how much spending is interest v. non-interest, and the difference between the interest spending projected in 2007 v. 2010 is 33%.

a change of 1/3 in just 3 years.

wow, i bet that chart is an accurate prediction of finances in 2080.

not.

[Lasher]

15. How about the risks of extending the Bush tax cuts?

Looks like we're not collecting enough revenue.

[Moral_Imagination]

20. Correct

The dotted line needs to move up a few percentage points.

[dkf]

22. Wouldn't they have assumed the lapse of the cuts in 2010?

That is what scares me...we are already behind schedule.

[Moral_Imagination]

24. No they kept the High end cuts

intact all the way thru 2080 which is rediculous... I repeat this chart is designed to scare you into supporting cuts to SS.

[dkf]

33. How could they have assumed that in 2007? By law the cuts lapsed.

[Moral_Imagination]

42. Why are you asking me?

Its just more evidence that the chart is BS. Ask the author why the dotted line stays at 20%

[Hannah Bell]

46. the answer is: they just assume it will. there is no particular reason except that

it's averaged about 20% since the 70s.

but it's been higher & lower.

the 2010 report makes a significantly different projection. the difference is the change in interest rates & other factors that their 2007 (pre-bust) projections were based on.

which shows you how easily differences in underlying assumptions can change the projections.

http://www.gao.gov/financial/fy2010/10guide.pdf

but it's pretty obvious that the point of the exercise is to scare people into giving up their social benefits.

[dkf]

64. Good grief they've cut out the interest expense.

Isn't that like telling you the cost of your mortgage using just principal payments?

[Hannah Bell]

65. they haven't cut it out at all. you don't seem to be able to read the chart.

or even understand it.

in the 2007 version, total 2080 spending = 60% of gdp.

in the 2010 version, total 2080 spending = about 43% of gdp, or 17% of gdp lower -- a major difference.

total non-interest spending is also lower.

in the 2007 version they plugged in 6% interest & projected it 70 years.

in the 2010 version (when interest rates declined because of the recession) they plugged in lower rates.

the projected deficit -- including interest -- declined 33% simply because of that single change.

i repeat -- a "projection" that varies 33% in a matter of 3 years IS COMPLETELY WORTHLESS.

tweak another assumption & you get a different chart.

[dkf]

73. Chart 7 is the equivalent of my chart but they are presenting it without interest.

[Hannah Bell]

91. lol.

[dkf]

74. Oops

[Lasher]

26. Don't be afraid.

Try looking separately at Social Security's solvency, for example, instead of folding it into the general fund. Then we would see a much more rosy picture than the impending doom that your chart portrays.

You might find comfort in knowing that if we eliminated the Bush/Obama tax cuts, and if we eliminated all funding for the Bush/Obama wars, we would change our deficits into surplusses. Such a path to fiscal responsibility is much more palatable than victimizing widows and orphans, don't you think?

BTW, the Bush tax cuts don't seem to be accounted for in any way in your chart.

[Hannah Bell]

43. they didn't even look at revenue. they "assumed" revenues would average 20% of gdp

because they've averaged that since the 70s.

they also assume 6% interest rates for pension liabilities, 3% inflation, & 6-7% inflation in health care costs.

they're making a lot of assumptions.

do you know what assumptions they're making?

do you know if these assumptions are realistic?

it's interesting that in this report (2007) total spending in 2080 is projected to be 60% of gdp & non-interest spending about 30% of gdp --

but in the 2010 report, total 2080 spending is projected to be 43% of gdp & non-interest spending is projected to be about 23% of gdp.

http://www.gao.gov/financial/fy2010/10guide.pdf

DO YOU KNOW WHY THERE'S SUCH A BIG DIFFERENCE IN REPORTS ONLY 3 YEARS APART?

[melm00se]

34. subject to change

the thing about projections is that they are subject to change.

Having said that, if this chart is correct or off by even 50%, this is a truly scary thing.

to those who say "cut military spending", 2 things to consider:

1) the military and security are absolute requirements of a government. a government that is unable to provide security for its citizenry is not really a government.

2) approximately 1/3 of the military budget goes to paying current and retired personnel, housing and civilian works projects (US Army Corps of Engineers mainly).

As to raising taxes: a couple of economic professors from Berkley have stated that:

Our estimates suggest that a tax increase of 1% of GDP reduces output over the next three years by nearly 3%

Source: http://www.econ.berkeley.edu/~cromer/draft1108.pdf p.2

this would, overtime, have serious implications as it relates to not only GDP growth (which must keep pace with the size of the workforce or unemployment rises) but also tax revenues (as they also rely on economic growth to keep pace with entitlement programs: social security, medicare and the like).

the only way that would not happen, in my mind, is a massive increase in the need to export.

Before anyone starts pointing at the post WWII to the JFK tax rates (pre JFK tax cuts), one must look at the worldwide economy at the time. the USA had the only fully functional industrial economy and massive markets in need of manufactured goods (getting your industrial base bombed into oblivion will do that). That kind of needed economic output can (and did) mitigate the staggering tax rates applied on the people.

It was only as the world economy began to get on an even footing that the ramifications of sure high tax rates became apparent. JFK cut tax rates to spur economic growth as did Reagan almost 20 years later. these (as well as other factors) did have a demonstrable impact upon economic growth.

but back on point: while some may see this chart as fear-mongering, if that chart is only partially correct, dfk has a serious point that steps must be taken resolve this revenue/spending issue before we reach a point of no return. To do this, we must address not only revenues but also spending and the burden of any tax increase and/or decrease in spending must be borne by ALL segments of the population.

This is kind of like becoming obese: you didn't get to be 100 pounds overweight overnight and you won't get back to fighting trim overnight. It is going to take some serious time, consideration and significant sacrifice.
.

[Moral_Imagination]

41. So you wanna cut SS and Medicare

and keep the military budget the same?

[melm00se]

81. I will thank you not to put words in my mouth

what I am saying that cuts will have to come from all segments of federal spending and that includes the sacred cows of defense spending (for the right) and social spending (for the left).

what most folks don't understand is that both of these investments are of importance to a healthy country.

we have seen what happens when one or the other is ignored:

Part of the big issue with the Depression was the lack of a social safety net to catch those who were, through really no fault of their own, wiped out. Without these safety nets, lives were lost when they didn't have to be.

On the defense side of the ledger, we have gone to war at least twice in the last century with military forces definitely behind the curve as compared to other combatants. We entered WWI with a decidedly 19th century military not only in equipment but also in training and tactical mindset. we did the same in WWII - we entered the war 5-10 years behind the times. In both cases, lives were lost when they didn't have to be.

So striking a balance is critical.

You can see that can't you?

[Pholus]

99. As a history buff, I STRONGLY disagree with your statements about the military in WW II.

You are doing a disservice to FDR's foresight by claiming that we were 5-10 years behind the times. And perpetuating an easily demonstrable falsehood.

In WW II we entered having started the most MASSIVE rearmament program in history almost 2 years before.

2 of the Essex class carriers were already laid down BEFORE Pearl Harbor. This design was in U.S. service
until 1991, 50 years later.

North Carolina and Washington were undergoing post-commissioning work. They were BUILT. Either could have sank any battleship deployed against them had the nature of naval war not changed. Do you honestly think that a huge budget in 1930 would build a military capable of fighting WW II, or would we have just had more of these guys?

The Fletcher class destroyer was designed in 1939.

The B-17E was under production in 1941 (the major evolution that made it worthy of air combat).

The peacetime draft started in 1940.

The M4 Sherman tank was designed in 1940 and the first units rolled off the line in 1941.

U.S. army spending was 500 million in 1939, 8 billion in 1940 and 26 billion in 1941 (PRE-war).

Our forward units were dated, but do not make the mistake of claiming the military was behind the times.

-----------------------------------------------------------------------

We essentially decided the war in the Pacific less than six months in. It took additional production and several years to finish the job, but it the victory was gained by our "obsolete" units. Only ten newer torpedo planes (B-26 and TBF) participated in the Battle of Midway -- everything else there was pre-war. Read "Shattered Sword" to realize that actually this victory was hardly the miracle it was claimed to be. We had PLENTY of margin to make a large number of screw-ups and still win. The size of the forces is important ONLY insofar as the objective. We had the better strategic position and logistics.

We were bombing occupied France with strategic bombers only 9 months after the war began. The training and mobilization of these units had started WELL before that. Within six months after that we were sending 1000+ heavy bombers over Germany every 2-3 days as weather allowed, each carrying 2 tons of bombs.

We were able to invade North Africa 11 months after the war began.

We were supplying the U.K. and the U.S.S.R. with SURPLUS materials even before we started shooting.

------------------------------------------------------------------------

Edit -- added some details to the sermon.

[Pholus]

101. Followup. When we outspend our nearest rival by SEVEN to 1, are we in danger of being obsolete? nt

[Moral_Imagination]

48. Everything you posted here

is MIC propaganda/trickle down nonsense/Free trade lies... including the ridiculous "tax cuts pay for themselves" BS.
Its a lot more transparent propaganda than the rest of the thread so its not really worth refuting point by point.

[Hannah Bell]

49. "Our estimates suggest that a tax increase of 1% of GDP reduces output over the next three years"

this is complete crap. it's true only when government taxation & spending "crowds out" productive investment.

but currently we have a near-deflationary economy, we're at about 70% capacity utilization, & about 10% unemployment.

clearly there is no "crowding out" involved in taxing wealth in such an economy, when wealth is already taxed at the lowest rates in nearly 75 years and when the concentration of wealth is at its highest point in the same period.

it's just crap.

money is like shit, & right now the top tiers have impacted bowels.

[melm00se]

83. and your doctorate in economics

was granted from where again?

[Lasher]

103. Why don't you try to refute Hannah's point instead of attacking her?

Hopefully this snide remark isn't the best retort you can conjure.

[Hannah Bell]

112. same place *yours* was granted from, buddy.

yet you apparently consider yourself able to evaluate economic statements & make pronouncements on same.

yet for some reason, unable to refute anything i said except with jr. high snark.

[dkf]

52. What scares me more than this chart is our inability to even acknowledge the possibility of a

problem. Looking at just the Demographics of the baby boom generation, it seems evident that the numbers must be looked at. And realizing how social security works and what the surplus represents only made me more nervous about how feasible our promises are.

Reading up on David Walker, who quit 10 years into his 16 year term so he could educate people about this problem, was interesting. He is trying to be Al Gore running around the country talking about our coming problems, but he doesn't seem to be catching on.

In terms of the data itself the interesting thing is the problem isn't social security so much as Medicare. Social security actually looks pretty contained in comparison. And all those numbers drive the interest on the debt.

[Moral_Imagination]

55. Yes if we wanna run a world empire

and have the strongest military in the world post 2020 we will indeed be broke and buried along side the USSR by 2080. Is that enough of an acknowledgment for you?

[Hannah Bell]

57. because he's full of shit. In 2003 the share of federal revenues coming from income taxes was

at the lowest level since 1941.

The share of federal revenues consisting of payroll taxes rose to the highest level in the nation's history.

http://www.cbpp.org/cms/index.cfm?fa=view&id=1324

Tax the rich.

Like David Walker & his fucking boss Pete Peterson.

[melm00se]

86. ding ding ding

we have a "winnnnaaaahhh"

the data, at least to me, points to a very dangerous cliff at which we are approaching at breakneck speed and we have folks here brushing the conclusions aside because it doesn't fit their ideological mindset.

I really hope you take off your blinders before you turn to your fellow passenger and say "gee, what do I get the feeling that we are falling?"

[Hannah Bell]

93. "ideological mindset" = lol.

[muriel_volestrangler]

70. But look how that same paragraph from the Romers ends:

An examination of the two types of exogenous tax changes separately shows that tax increases motivated by a desire to reduce an inherited deficit appear to have much smaller effects on output than tax changes taken for long-run reasons.

There is now an inherited deficit; it was caused by Bush's tax cuts. There's also the deficit caused by the recession, which cut revenues further, and increased spending on bailouts, and on welfare. What that paper says is that now is the time to increase tax revenue to sort out the present inherited deficit. Over the longer term, what the 2010 "Citizen's Guide" linked to above says is:

It is estimated that preventing the debt-to-GDP ratio from rising over the next 75 years would require running primary surpluses over the period that average 0.5 percent of GDP. This compares with an average primary deficit of 1.9 percent of GDP under current policy. The difference, the “75-year fiscal gap,” is 2.4 percent of GDP.

For the long term, the assumption for defense spending in the 2010 GAO guide is 4% of GDP. If that were cut to 3% (more than China today at 2%, a bit more than France at 2.3%, or the UK at 2.5%, less than Russia at 3.5%), then that's a significant part of the gap closed. Decrease it to 2%, and you're almost there.

[sendero]

40. If Treasury borrowing interest rates rise..

... it will be a lot sooner than that.

[Hannah Bell]

44. hardly. they assume 6% interest in this report. they've got some way to go before they hit that.

[melm00se]

47. currently rates are low

but they are projected to rise (and will have to rise as inflation does and our money continues to weaken)

so a 6% average over the time period is not as outlandish as it sounds.

[Hannah Bell]

54. it's completely outlandish & arbitrary. they simply plunked in the rates

preceding the 3 years prior to the report & projected them out to 2080.

completely bogus.

If they're going to make a 70-year projection, the proper assumption would be the average rates of the prior 70 years.

they picked boom rates because it makes a bigger number.

in the 2010 report they had to use different numbers, since rates are now at near-historic lows, & --

wow, the projection is completely different!! how amazing!!

[melm00se]

80. ok, average interest rates

for as far back as I can readily find data (1962) are:

average yield:

10 year: 6.81%
5 year : 6.55%
1 year : 5.89%

median yield:

10 year: 6.44%
5 year : 6.19%
1 year : 5.63%

source: http://www.federalreserve.gov/releases/h15/data.htm

so the interest rate assumption of 6% is not far off and I believe that as we move forward we will see the interest rates rebound to these rates (and potentially higher unless we get our financial house in order and woe betide us if we lose our status as the benchmark currency)

If you really want to see the telling piece of data, look at the delta between the 10 year and 1 year yields. delta ranges from +13% (1979: 1 year higher than the 10 year) and -90% (2010).

so you ask: "so what?"

the delta is an indicator of what the investing community expects to happen to t-bill yields in the short term. in 1979, safe haven investors expected that interest rates were going to drop. Guess what? they did

Now the situation is reversed: the 1 year yield is 90% lower than the 10 year yield (an all time record BTW) which indicates (to me at least) that safe haven investors are unwilling to tie up their money for any extended period of time as they anticipate as they expect interest rates to go up and I am going to go along with them and expect that to happen.

When these interest rates go up, they will drag all the rates upward.

Again you ask: "so what?"

rising interest rates will have the following effects:

- the economy will slow
higher interest rates slow borrowing, slower borrowing equals less durable goods being purchased (both on the personal and business level) which equals less production which equals higher unemployment
- the costs for things that HAVE to be bought will cost more
for the individual consumer car and mortgage loans will spike (and in the case of real estate will depress prices - something we have had quite enough of thank you very much) and on the business side either prices will rise somewhat as lines of credit (something that supports many payrolls in this country from Fortune 500's to Bob's Bar and Grill) become more expensive or businesses will contract until their costs (mainly labor) can be covered by existing cashflow (no LOC needed)
- the above will work out to slow tax collection jeopardizing discretionary spending (and eventually required spending)

all of these can conspire to create the perception that money borrowed will either not be paid back or paid back with currency worth substantially less than it was when the money was lent (inflation aids the debtor but hurts the creditor) which drives the creditors to demand a higher yield on money lent which loops us right back to the top of the list.

and all of this can lead to one of the most scary scenarios in economics: deflation. this can damn near crush an economy to the point that recovery shifts from years to decades. Just ask Japan. Their economy, with the exception of a couple of years has been in the shitter from their zenith during the 80's (when the complaint was that "Japan owns everything") to today. (Something that I personally think is a strong possibility for China...their economy is just not transparent and the leading economic indicator, the yuan, is kept artificially low...if they ever let that free float, you will get to see the "real" Chinese economy and they are going to be in for a world of hurt).

Of course none of this will matter as this will be dismissed as right wing propaganda/spin.

:shrug:

But that won't make it any less true when it happens.

[Hannah Bell]

94. federal funds rate, 1955-present:

1955, 1.79
1956, 2.73
1957, 3.11
1958, 1.57
1959, 3.31
1960, 3.21
1961, 1.95
1962, 2.71
1963, 3.18
1964, 3.50
1965, 4.07
1966, 5.11
1967, 4.22
1968, 5.66
1969, 8.21
1970, 7.17
1971, 4.67
1972, 4.44
1973, 8.74
1974, 10.51
1975, 5.82
1976, 5.05
1977, 5.54
1978, 7.94
1979, 11.20
1980, 13.35
1981, 16.39
1982, 12.24
1983, 9.09
1984, 10.23
1985, 8.10
1986, 6.80
1987, 6.66
1988, 7.57
1989, 9.21
1990, 8.10
1991, 5.69
1992, 3.52
1993, 3.02
1994, 4.21
1995, 5.83
1996, 5.30
1997, 5.46
1998, 5.35
1999, 4.97
2000, 6.24
2001, 3.88
2002, 1.67
2003, 1.13
2004, 1.35
2005, 3.22
2006, 4.97
2007, 5.02
2008, 1.92
2009, 0.16
2010, 0.18

[sendero]

110. You assume...

..... the report is accurate and accounts for all actual treasury liabilities.

You'd be wrong about that. When you BORROW TRILLIONS OF DOLLARS, the interest rate you have to pay when you roll over the debt (cauze there is NO WAY to pay it back) matter a lot.

You'll see, it's not that far down the road.

[BzaDem]

50. This really masks what's going on. While SS has a problem in a few decades, it is fixable by raising

the cap.

As for Medicare, nothing will work except actually controlling healthcare costs for the entire healthcare system to keep cost growth at inflation. This will have to be accomplished by some sort of price controls (either direct price controls, or something like single payer).

We will need to lower discretionary spending significantly/raise taxes (partly in order to pay back the SS trust fund), but entitlements should be OK (assuming we eventually can switch to a more rational healthcare system).

[Pholus]

56. BADLY misleading graphic. Along with a POOR interpretation on the part of the OP.

A. No information about tax rates. I'm VERY surprised that revenue has
been that flat considering the major changes in the system between
1970 and now. Interesting and raises some flags.

B. Lumping Social Security in to Medicare as a problem is inappropriate.
The "Green Bar" stays constant like the white bar you want to protect.

C. Doesn't this indicate that the big "health care compromise" didn't get at the core
issue which is cost control -- the prime reason Medicare/Medicaid is exploding in this
graph? Sounds like a policy failure to me because SOMEONE was afraid of taking on
the insurance industry.

D. Seems like the big tax cut compromise was a budget buster. That bump in the dashed
line in 2000 actually would move the problem 20 years down the road had it continued.
Another policy failure due to short sighted "realism" politics?

E. Note how the interest on the debt shrunk between 1990 and 2000. Small corrections
NOW have huge benefits downstream.

FINALLY. it's the RED bar that is supposed to cause the panic here. The red bar
explodes because of the light blue bar and the light blue bar only. We passed on
fixing the core issue of this problem 18 months ago.

But the graph as presented has purposes OTHER than illumination.

[Hannah Bell]

59. They lumped all government revenues together to disguise the fact

that income tax collections have declined & been replaced by SS collections.

A consequence mainly of the declining taxation of wealth.

The decline in income tax receipts also led to a shift in the composition of federal revenues.

The share of federal revenues consisting of income taxes was at the lowest level since 1941.
The share of federal revenues consisting of payroll taxes rose to the highest level in the nation&'s history.

The decline in income tax revenues as a share of the economy to its lowest level in more than six decades reflects a drop in both individual and corporate tax receipts.

In 2003:

Federal individual income taxes equaled 7.4 percent of GDP. This is the lowest level since 1966.
Corporate income taxes were just 1.2 percent of GDP. With the exception of the deep recession year of 1983, this is the lowest level since 1937. (A recent Center on Budget and Policy Priorities analysis discusses the fall in corporate income taxes in more detail.)<2>


http://www.cbpp.org/cms/index.cfm?fa=view&id=1324

This chart is bogus on so many levels.

The poster ignores any critique & just keeps babbling about clinton.

as though clinton was some kind of culture hero.

[TBF]

72. Unrec for right-wing bs, again, from this poster. nt

[Earth_First]

75. Can we please stop calling Social Security, Medicare, Pensions, et al. "entitlements"?

Sure, in black and white they may be exactly that; however the GOP uses 'entitlements' as a derogatory term to represent the supposed "free money" that is being given to "the lazies" by the government...

[SammyWinstonJack]

78. Thank You!

:thumbsup:

[leftstreet]

98. +1

Democrats should NOT be using rw terms

[blindpig]

76. This assumes the status quo

with the wealthy and corporations grossly under-taxed and the imperial war machine just humming along.

Half the Pentagon(for a start), tax capital gains like other income, tax wealth as necessary. Or we could just dispose of the capitalists model and let the economy work for society instead of having society in thrall to the economic system as we have now.

[bighart]

105. While I agree with you initial statement I have very little reason

to believe the status quo is going to change. I wish I could point to something tangible that would make me believe that something other than
reductions in benefits are looming on the horizon. I see no indication there is any willingness by the legislature or the executive branch to raise corporate tax rates, end un-need subsides, tax capitol gains or inheritance or means test social spending.

[blindpig]

106. Over the short term you're probably right.

But these deprivations provide the opportunity to begin the organization required to reverse the abuses of the ruling class. It has been said that people aren't engaged because 'things aren't bad enough'. Given the unemployment, the trashing of the safety net, the perilous state of people's health care, eternal war and all sorts of environmental crisis, all the while the rich farting loudly thru silk, that time is approaching like a speeding train.

[bighart]

108. I fear that by the time "the masses" realize how dire the situation is

the only option will be massive cuts in government programs at least in the short term.

[blindpig]

109. It ain't gonna be pretty

but the actual reduction in people's ability to subsist will be the catalyst.

[totodeinhere]

77. Just take a look at this thread and you will see the state of denial that many people are in.

The GAO is non partisan. They have no political axe to grind. We have to do something about runaway government spending, and yes we need deep cuts in the defense budget. But that combined with higher taxes for the rich still won't be enough. There are too many people who don't care about all this as long as they continue to get theirs, and the fate of out children and grandchildren be damned.

This is not a partisan issue. Leaders on both sides of the political isle including President Obama agree that something needs to be done.

[Hannah Bell]

96. the gao may be, but the people in charge -- aren't.

no, it's not a partisan issue, it's a bi-partisan attack on the working class by the same ruling class that leads the gao.

a 70-year projection that shows a 1/3 difference in just 3 years isn't worth the paper it's printed on.

[Odin2005]

82. Long term linear projections ALWAYS turn out to be bullshit.

The real world doesn't move in straight lines. They complete ignore things like new technological and organizational innovations that reduce cost.

[jtown1123]

97. Thank you.

[WinkyDink]

85. Somewhere between 2030 and 2040 I'll probably croak.

[KillCapitalism]

87. It doesn't matter anyway.

By 2030, 65% of the population will probably be unemployed and living on less than $2 a day like a lot of Africa.

[EstimatedProphet]

89. So we need to raise taxes on the top 2%. We already know this.

[leftstreet]

95. TAX THE RICH !

How hard is that to understand?

[inna]

102. +1,000,000

Sickening to see OPs like the one above.

[SalviaBlue]

100. Roll back the Reagan Tax Cuts - TAX THE RICH!!

[bighart]

104. I read yesterday the GAO is saying that there is currently $.24 of

every dollar left after mandatory spending and that in 10 years with the increase in outgoing dollars for debt interest and social programs that number will be down to $.08 of every dollar.

[Hannah Bell]

113. i read yesterday that gao said something entirely different in 2007 than in 2010,

so i take whatever gao says with buckets of salt.

you should too.

[xchrom]

107. unrec for dragging a pete peterson proganda piece in here

and trying to sell it as something real.

cut the military and tax the rich.

[Forkboy]

111. I saw this graph not long ago. In a RW email.

[Hannah Bell]

114. a favorite source for some du-ers.

[JHB]

115. Have you tried locating the equivalent projections from circa 1980?

Comparing past projections to real results is a useful exercise when you're evaluating current projections.
The same sort of "trend continuing indefinitely" projections gave us Clinton's "five trillion dollar surplus" number. That was based on the Tech Boom expansion continuing indefinitely, even when it was starting to falter.

Tell me about the methodology used to create those projections. What assumptions are they making, and why?

[neverforget]

116. another cat food post

:eyes: