Pat Toomey on Social Security

via NRO.

Social Security is going broke, and our fine friends in DC aren't doing anything about it. By 2017, the system will start paying out more than it takes in. What about the Trust Fund, you ask? Worth less than the paper it's written on, nothing but an accounting gimmic, stating my right hand owes my left hand several trillion dollars.

We have four options - three of which I don't like, being raise taxes, lower benefits, or increase government borrowing. The other?

"Let’s take a hypothetical 25-year-old male earning $32,000 a year with average wage growth. Under the current system, he will receive $2,780 per month when he retires, or a measly -0.72 percent return on his contributions (according to the handy calculations of the Heritage Foundation). Now imagine that our hypothetical worker invests the retirement portion of his payroll taxes in a bundle of stocks and bonds, earning a modest 4.9 percent return. When he retires at the ripe age of 67, he will have an account with his name on it worth $1.1 million, or $9,546 per month, ready to be spent on that cabin in the mountains he always wanted.So the debate over Social Security comes down to one simple question: Would you rather have $2,780 a month in your retirement or $9,546 a month?"

So instead of the government taking my money and giving me basically nothing in return, I could be investing it myself and getting three times the benefits. I just wish our lords in DC would let me sign up for this new plan. They sure don't participate in the old one like the rest of us all do today, I note.

Federal Debt Trends

The Skeptical Optimist has a new chart out showing the Federal tax receipt trends versus the Federal spending trends over the last 12 months. The 12 month deficit is $203.7 billion, which sounds like a big number, unless you take into account that it is only 1.4% of GDP.

Over the same period, Federal Tax Receipts are up 10.6%, and federal spending is up 4.4%, so if the trends continue, the Federal budget would move into balance in August of 2008, just in time for the election. Steve thinks it unlikely, however, due to a dampening of corporate tax receipts (around 15% of tax receipts right now) in particular. He thinks it more likely that the budget balance will be achieved in early 2009.

I'll note for the record he thinks deficits are a good thing, if kept within a certain range as a percentage of GDP; I would agree with him if I thought the deficit funds were or would be spent on worthwhile pursuits (particularly security related stuff), which I do not believe happens in most cases. I do agree the deficit spending is not the bogeyman most people make it out to be.

I'm a firm believer that the less money the government takes from me, the better off we all are as a nation and accomplishing excellent things like growing the economy make everyone better off - and on that score (a growing economy is a good thing) Steve and I are in perfect agreement.

Unfunded Liabilities

Over TCS, John Tamny exmaines the US government's scary "unfunded liabilites" - that is Social Security, Medicare, etc. entitlement spending -the number is pretty scary, $53 trillion. However, he sounds a lot like Steve over at the Skeptical Optimist. they both think as long as the economy continues to grow substantially, we'll probably be OK.

"If markets felt the U.S. were truly "bankrupt," and incapable of meeting its debt requirements, yields, particularly on the long end of the Treasury curve, would be very high as a reflection of uncertainty over our future ability to pay back what we owe. And 30-year U.S. Treasury bonds are a particularly good market measure of our debt-paying capacity considering how many Americans are expected to retire within that timeframe. Presently, the yield on 30-year Treasuries is 4.75 percent, a number lower than the short-term rate set by the Fed, along with U.S. Treasury yields on the shorter end of the yield curve. That the yield is so low suggests great confidence on the part of markets that debt fears are overdone."

He also points out that the US Treasury rate was 15.2% in 1982, which IS truly a frightening number, but one we managed to live through thanks to Reagan and his Fed chief Paul Volcker wringing inflation out of the US economy and growing the economy through tax cuts. In effect, tha market indicators today are telling us that the US economy's ability to create and generate wealth and economic growth are likely to do so to the extent that these government budget issues are quite probably going to be dealt with with some degree of success in the future. So we've got that going for us, at least.

Economy - Debt Clock

The Skeptical Optimist has upgraded the Debt Clock.

It now features both the previously displayed Total Government Debt and its ratio to GDP, and now includes the Total Public Debt (the debt held by US citizens, as well as foreign citizens and geovernments) without the intergovernmental debt, (otherwise know as the theoretical Social Security Trust Fund), and its ratio to GDP as well.

As the man himself puts it:

"Why add the extra numbers? Simply to help clarify the debate. Most politicians and journalists like to trumpet the total debt ($8.6 trillion) in their headlines and speeches. Many economists, on the other hand, argue that the important number is not total debt (including intragovernmental), but publicly-held debt—partly because that’s the number on which the government pays out “net interest.” "

He also notes, for the record, that the debt ratio for the second number, the publicly-held debt ratio, is actually running backwards as the expanding economy and increasing government tax receipts makes it easier to pay the interest burden. The first number is increasing, but quite slowly. His calculations show the budget balancing (on a 12 month rolling basis) in summer 2008, others are calculating it in Q1 2009.