The Coming Social Security Crash

Gary Polland posted this article today on his Texas Conservative Review newsletter. Social Security is a pyramid scheme that will come crashing down in the near future. The Democrats solution, according to sound bites from Hillary and Obama, is to raise the capital gains tax and to tax all IRA and mutual funds investments and apply that tax to "shore up Social Security." The coming Social Security collapse is one of the biggest problem facing my generation of Americans. In essence, Americans collecting Social Security are going to bankrupt the taxpayers in the same way that retired labor union workers have bankrupted the big three American automakers.

For years (decades?) conservatives have been saying there is no Social
Security trust fund: that in essence it is a government Ponzi scheme, and now
unfortunately we are being proven right.

Allan Sloan, in the March 31, 2008 edition of Fortune says the real trouble will begin in 2016-17. You may recall the conservative complaints: that essentially money comes in and is paid out immediately for current retirees benefits and the "surplus" is borrowed by the government to spend on other bills. The government in return issues treasury securities. Sloan described the catch; "say that Social Security calls the treasury ... on 2017 ... to cash in $20 billion of securities to cover benefit
checks." The treasury can get the money three ways, spend $20 billion less,
raise taxes by $20 billion or borrow $20 billion. The choice is essentially no
different than if there wasn't a trust program.

So the train wreck is coming as more and more of the U.S. budget is
going for retirement benefits. One way to slow judgment day will be to divert
the surplus from Treasuries to the "equivalent of a sovereign wealth fund", but
that will affect the present "borrowing" of the Social Security surplus. Other
unpleasant options: raise taxes, means testing, reducing benefits, and raising
the retirement age. Maybe the idea of partial individually owned and controlled
Social Security accounts makes some sense, given the alternatives.

The Shrinking Deficit

Unless you subscribe to the Texas Insider (or the Wall Street Journal), you might never know.
Where is the Austin American-Statesman on this?
========================
The Shrinking Deficit
Published: 10-09-07 by Texas Insider
See: http://www.texasinsider.org/modules.php?name=News&file=article&sid=1454

The Congressional Budget Office (CBO) has released its preliminary estimates for Fiscal Year 2007 that ended September 30, and the federal budget deficit fell again, this time by 35 percent to $161 billion, says the Wall Street Journal.:

• Since 2004, deficit spending has tumbled by $251 billion, which is one of the most rapid three-year declines in U.S. history.
• The deficit as a share of the economy is down to 1.2 percent or about half the average of the last 50 years.
• This improvement is especially remarkable given the $150 to $200 billion a year of post-9/11 expenses for homeland security and the wars in Iraq and Afghanistan.

Moreover:
• Americans coughed up a record $2.568 trillion in taxes to the IRS in 2007, or 6.7 percent more than in 2006.
• This means federal receipts have climbed by $785 billion since the 2003 investment tax cuts, the largest four-year revenue increase in U.S. history.
• Income, dividend and capital gains tax rates were all cut in 2003, but individual income tax receipts have soared by 46.3 percent in four years, with payments by the wealthy accounting for most of the windfall. • Last year's increase in individual income payments was 11.3 percent, or more than double the rate of growth in nominal GDP.
The overriding lesson here is that the best antidote for deficits is faster growth, not tax increases. The budget deficit has declined more rapidly this decade in the wake of the Bush tax cuts than it did in the 1990s in the wake of the Clinton tax increases. CBO is still forecasting a balanced budget in 2010, but if Congress gets its way on spending and taxes, all of this progress will be short-lived, says the Journal.

Source: Editorial, "The Shrinking Deficit," Wall Street Journal, October 9, 2007.

Austin City and AISD budgets

Slicing up the Austin taxpayer pie...

The Austin city budget pie chart is shown below. This does not include the $300 million plus spent by Cap Metro; nor does it include the AISD budget of over $700 million; nor does it include the ACC budget of $157 million; nor does it include the Travis county budget of $400 million; nor does it include the Healthcare Tax district budget of over $50 million; nor does it include the Austin Energy slush fund. So what's left? Police, firemen, parks, and ... well, what exactly does transfer/others mean? Graft, corruption and waste?!? (the Chronicle says: "This nebulous category accounts for project funding and support staff in offices like sanitation or the law department. The budget proposes an increase for funding these offices, including council offices.")

Chart courtesy of Austin Chronicle. More on the budget here.

AISD: The AISD budget message shows the art of OBFUSCATION: What bureaucrats trying to hide the huge spending increases they are engaging in. The message says everything about the budget except the one essential thing - how big it is. Reading the full budget we find: The budget funding totals $748 million, an increase of 13% over the previous year; appropriations come in at $727 million, an increase of nearly 7%. Notably, state funding is doubling from $47 million to over $100 million, but local funding is not going down. AISD did the max tax increase they could without going to the voters, 4 points (from 1.34 to 1.37% valuation) and along with property value increases, that is keeping the local property taxpayers soaked. The cost per pupil is $9,700, but there is a chapter 41 recapture amount of $126 million for net cost per pupil of $8,000. The bottom line: A K-12 education for each single student in AISD costs over $100,000. PDF of full AISD budget.