Replies

Entitlement spending is a transfer, and is received as well as spent. If entitlement spending were zero tomorrow, it would make no net difference in the net worth of the American people. What the treasury and indirectly the taxpayers gain by not paying it out, the people receiving it lose by not receiving it. Similarly, if it remains unchanged, yes it would pass too much of the income stream through Washington, but no it would not make that stream zero. It is received, and spent, and earned by those providing goods and services to those receipients, etc.

Here is my modest proposal to fix the public fiscal mess and the unreality it has bred. It requires new legislation and will be anathema to the left, and I don't seriously expect it in the short run. But it is a program that would work and that populists might agree on and push for.

The idea is to use the portion of measured GDP the budget is in deficit or surplus, as an automatic adjusting factor in many federal payments. Basically, automatic marginal cuts when the budget is in deficit, and rises capped by the portion of GDP in surplus at other times.

To start with, no federal worker can receive a pay adjustment in any given year for the same job or grade, greater than the above percentage, plus 2% to reflect average targeted inflation. If the deficit is 10% of GDP, that means an automatic 8% pay cut. If the budget is balanced, that means a maximum 2% raise. For federal workers to get real annual raises, the budget would have to be continually in surplus by several percent of GDP.

Second, for COLAs for federal pensions and also for social security, the rule is more forgiving but still tight. No increases at all if the budget is in deficit. Second, when COLAs are given for either, the indexing series shall be the CPI, not wages.

Third, gradually raise the normal retirement age to 70, by 3 months each year. Adjust the early and later retirement options for social security away from actuarial equality, to instead deliberately encourage working longer, in real terms, by at least 2% per year away from the new retirement age standard. (So someone retiring at 65 should expect only 90% of the total benefit of someone retiring at 70, and spread over more expected years of life, with less interest, in addition).

Next for so-called "discretionary" spending, it is important to encourage smaller government, not just fiscal balance (by e.g. higher taxes). So a different automatic budgeting rule there. The maximum rate of change in federal discretionary spending is 20% minus federal spending as a share of GDP. Meaning, if spending is taking 25% of GDP, discretionary spending must fall 5% per year. If you want discretionary spending to grow 5% per year, then spending must already be under 15% of GDP.

Now, naturally congress cannot fully bind its successors. These rules should be in place as an automatic budgeting matter, but congress retains the right to vote new spending for wars or national emergencies etc. But the above system would effectively require continual new majority (or in the senate, sometimes supermajority) votes to deviate from this fiscal discipline.

Money is just one more good among others.

Insert rueful chuckle here. You couldn't possibly be more wrong. Just because a thing can be treated as if it were another thing doesn't make it that other thing.

Now, naturally congress cannot fully bind its successors.

Congress can not bind any of its successor Congresses at all. What one Congress giveth, another can take away.

Jason, not bad ideas,but do you really want a 69 yro nurse to be trying to lift you, or position you, or transfer you to a commode with her arthritic knees and hips?

or draw up medication with her #350 reading glasses and hope that the dose is correct?

SS at 70 is fine for people that sit at desks or don't do physical work....the only recourse would be for many people to just go on dissability...which would be more expensive...

as far as dissability on Ss.....why age 40?....anyone up to age 62 should be able to work unless totally dissabled..even if just part time....