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Wednesday, October 17, 2007
There's Deficits, and Then There's Deficits
From the good folks over at Angry Bear and Econospeak, a little common sense about the deficit: it's not really going down.
The general fund deficit, that is. You see, Social Security revenues are in surplus, and a whole lot of money is being taken out of the flush Social Security trust fund to pay for current government services. This surplus has tremendously contributed to the declining unified deficit, the figure that gets most media attention. See this graph for a good representation.
But Social Security revenues are for, well, Social Security, and under current law they must be paid back to beneficiaries when Social Security is no longer in surplus. So in a way, the government has been borrowing all these new revenues from future Social Security beneficiaries- hence adding to the general fund deficit.
Another way to think about it is that we're adding to future responsibilities to pay for expenditures now. When the bill comes due, the government will probably have to borrow money, raise taxes, or squeeze money out of programs (including perhaps Social Security).
So what are we now buying with the Social Security trust fund? Well, about $200 billion for tax cuts for the rich, and about $170 billion for the wars in Iraq and Afghanistan. Without these expenses, the unified deficit would be in surplus, and the general fund deficit would be near 2001 levels.
Under the Bush fiscal policy, the rich have unquestionably gotten richer, and that has had opportunity costs for everyone else. But now we're seeing the first step towards a massive redistribution of wealth the old fashioned way- taking from the workers subject to the payroll tax and giving to rich people and the beneficiaries of the wars.
Posted by Matt Lewis
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