The Federal government builds ZERO schools so i'm not entirely sure what you're talking about. And the only roads that they have ever built and inter-state highways. So both of your examples are weak, and it is a rather high price to pay in the trillions for a few interstate highways. No, most of the government spending goes towards giving the rich a lot of money/contracts. It is a redistrubtion policy of taking from the middle/upper middle class and giving some crumbs to the poor while taking care of their elite friends (military industrial complex, banks, et al) and consolidating more power for the government itself. It is a disasterous policy. During the 19th century, the USA grew at rates of 20% PER YEAR! It turned from a largely agrarian society into the industrial and economic power of the world. It did this with ZERO inflation. In fact, the dollar would purchase you more in 1913 (the year the FED was created) than it did when it first came into existance, lol. For over 100 years there was actually DEFLATION while experiencing the highest economic growth rates the world has ever known. Of course when Jefferson was president, the federal tax bill was something like $20 per person per year (in today's currency, lol). The Federal government really consistedd of 1 building with about 60 employees, lol. There wasn't even a standing army, in fact they didn't believe in standing armies. The absurdity that high tax rates and big government are somehow "compassionate" to poor or middle class people is the biggest lie to ever be perpetuated on the people of the world. Big government has one purpose, and that's the consolidate power and wealth to the elite. Whether it's an obvious collectivist idealogy like socialism that purports to "be for the people" or another collectivist idealogy which admits to being for the rich like fascism. They both result in the same thing.
Breen, what would you think of allowing both S.S. and the Medicare trustees to buy bonds externally, world-wide, and possibly some equities as well? This might ease some of your concerns, I would think, but might also make it damn hard for the government to sell enough bonds to finance its "Dept. of Invasion." (Perhaps, not a bad thing in the long run.) This, buying securities worldwide, is essentially how the Norwegian public retirement funds are managed.
A lot of countries do that...that is what sovereign wealth funds are, that is what the Japanese post savings does. Certainly if we had done that since the beginning of SS then we would not have a problem now. There would be real assets contributing to pay the benefits, there would have been real earnings. But as I think you suggest, if we did not take the SS revenue and spend it on current Gov. obligations then we would have had to sell a lot more treasuries in the early years to fund regular government obligations. The increased purchasing of treasuries would have made the growth of government spending a lot more visible and it would have had impacts on interest rates and monetary policy. The use of SS revenue to fund general obligations without having to auction new Treasury certificates to the public allowed the government to increase spending wihtout pressing the debt markets. It converted the SS plan as insurance to a welfare plan without anyone voting on it. It really is like an amortization logarhythim...we borrowed less in the past than we needed to (because we took surplus SS revenue) and now we will pay that back by borrowing more in the future (because the SS revenue will be in deficit to benefits) than we would otherwise have to. This might have been OK if the government had otherwise run low accumulated debt. Unfortunately the Gov. spent all the money it could find...the SS surplus, all other current revenues, and additionally from annoual deficit borrowing that has been accruing...So, now when it is time for increased borrowing to fund SS benefits that were not funded by investing past revenue....we may not be able to borrow all that money and fund other operations at interest rate costs that we can afford. The only way we can ever perform is if we create a brighter context for the future now. That is what I was talking about in my discussion of assets as wealth and source of consumption and debt earlier in this thread. Sure, taxes alone don't tell the whole story about creating a positive future context. Some taxes are very important in creating that context...taxes on capital..but others are not crucial...like top marginal rate; what is important about top marginal rate is that there is stability for planning, you can't say you will change it 2014 and not have an effect today.
Good luck with that. I've been waiting 30 years for "substantive measures", I'm rather dubious that anything will change after the next election. Where I seem to disagree with you is that because I believe voters will wait far to long to insist on change, by the time they do, SS benefits will indeed have to be meaningfully cut. There will be much anger, no doubt. What I would rather see is truly meaningful, immediate fiscal reform that completely addresses the budgetary imbalance. Don't really care if it's from huge cuts in spending, big tax increases, or something in between. And once that's done, selective default on externally held Treasuries. All this should be accompanied by a rationalizing of trade policy - current US trade policy is pure insanity and completely unsustainable. Yes, it will indeed annoy some of our trading partners immensely. The backdrop of (relatively) expensive energy is a real problem and a huge drag on the economy. Compared to the mid-90s, current oil prices are approximately equivalent to sucking a trillion dollars out of the economy. I do not see any way out of this - yes, we can switch to alternate sources (eventually, over time) but they will all be at least as expensive as current sources, and quite likely a fair bit more expensive. The drag is likely with us for good, outside the occasional recessionary dip.
I don't see how this would ever be allowed. The reality is that SS and Medicare are (or at least have been) a huge trash can into which the federal gov't could dump/hide all kinds of fiscal shenanigans. Allowing the funds to buy anything but Treasuries would obviate the point of this structure, set up by Reagan. I also believe it may be too late with Medicare - hasn't it crossed the "surplus" threshold and become a net seller rather than a net buyer of Treasuries?
This I would disagree with. It was part of the "Morning in America" plan instituted by Reagan. It's never been hidden, many (non/bi/multi-partisan) groups over the years have pointed out the inevitable problem, but the sad fact is voters didn't care. It appears they still don't, either.
Random, I don't understand what you mean, please explain it. What did Reagan do? What was the legislative change or executive order that you seem to be referrring to...can you be specific?
Reagan simultaneously moved SS off budget and increased payroll taxes, effectively turning the SS "surplus" into a giant mop to soak up the excess Treasuries created by his historic deficit spending binge. From a political standpoint, it was brilliant. From a fiscal standpoint, it is a complete and utter disaster, as that key bit of accounting gimmickry enabled everything that has come since. Reagan essentially turned SS into the first explicit SPV of the modern era, the prototype used ever since.