http://www.marketoracle.co.uk/Article21189.html Now this being the "Economics and Financial" forum, I recognize the danger of a OP with a politician's name as it's heading, however as a purely economic matter Reaganomics and it's long term effects are very much a huge part of the issues the American Economy is facing today, the decision to raise taxes, then loot the money generated supposedly for Social Security is a dagger to the throat of Americans and as the article points out, a boon to the ubber Wealthy. Basically, no "rescue Social Security" plan that I've read does not suggest that the retirement age be raised, which amounts to a default on obligations to the FICA taxpayers have been "promised" in order to enrich the already massively wealthy. Hat tip to TMO for having the courage to dare assail St. Reagan and to point out what a long term mess that was created via those Economic Policies. Though to be fair to Reaganomics, the .Gov was SUPPOSED to stop spending the funds when the Economy Recovered in the mid 80's, they did not, and now the bill is coming due, a massive transfer of wealth (via SS's promises to pay retirement at age 65) to the already Wealthy (via lowered taxes).
One way to look at it...another would be that in the 70's high unemployment and a ghastly economic outlook left SS in such a mess that it had to be cleaned up....under Reagan unemployment fell sharply and the 70's COLA's were a disaster because of the economic condition of the country. In the 80's the rate increased, and real wages actually grew, unemployment went down adding people to the system, benefit age was raised, benefits beyond the bottom 60% were taxed and money reinvested into SS, all of this resulted in a significant increase in funding of SS....the 83 amendments were supposed to take SS off budget in order to protect them against general straight line budget cuts...but of course politicians F'd that up and now it is more of the shell game that is played to hide the debt we are actually in by not including the unfunded liabilities in our national debt...and considering this is the largest government program in the world...we are doomed, or "we the people" will default on a whole generation of little ole ladies and gents and their spouses................... Reagan added taxes on SS benefits, reinvested into the fund for high income earners, the economy expanded at such a rate that added more high threshold earners, and the fund actually had more revenue under his Presidency before and after....he took the program off budget ostensably to protect it from budget cuts, the economy was booming adding funds.... Was this the point in which spending in raw dollars went nuts....sure it is...but also the point the economy expanded at a rate never seen before or since.....and as a percentage of GDP for the totality of those years it is NOWHERRRRRRREEEEEEEEEEE near what it is today...Reaganomics might have been the catalyst but there are a lot of other ingredients past his economic policies that have made this fund a failure....... Debt as a % of GDP was fifty four in 88...it is projected t be what today.....somewhere around 90% in 2020 or something like that..........usually we agree....but blaming Reagan for SS failure is like blaming the fat guy doing a bellyflop at Coney Island for the tsunami.........IMHO................there is enough blame to go around..... I do agree though that whatever the reason or whomever to "blame"....SS is screwwwwwwwed.
I don't blame any politician, whether it be Democrat or Republican, for looting SS. You can search these forums if you like. The fact of the matter is, that's the way it is designed. If you review the history of how SS was passed, you know that on its face it was unconstitutional. So FDR et. al. came up with a scheme to try and make it constitutional. they had to call it a general tax, and not an earmark. The gist of the government's argument in 1936: http://www.lewrockwell.com/orig3/attarian7.html So in order to get SS passed, they had to make it a "general" tax and not earmarked for any particular purpose. Basically government split the bill in two, to be considered separately, as to not violate provisions of the Constitution. They wanted to the Court to consider the taxing part on its own. And the spending part on its own. If you consider them together you get compulsory insurance which was clearly Unconstitutional (wait what? Sounds like Obamacare ...) Social Security is a pay as you go scheme. So if the taxes collected exceed current expenditures that year, the SS administrator is required by law to write the general fund a check. Well, it's supposed to buy US Securities, essentially the IOU's we keep hearing about. Except, well, these IOU's are special. They don't ahve to be paid back on any set schedule, and the SS program can't sue the US govt. if they don't pay it back. The Social Security was destined to fail by design. They tried to put lipstick on a pig. The raping of Social Security fully funded Clinton's "Budget Surplus" which wasn't a surplus at all (unless you cancel the money taken/borrowed from SS)
Reagan and the Repub congress had a window of opportunity to halt government spending that first year and you're right padre they instead screwed the pooch. While Carter showed the world how to dummy down Reagan showed the next 8 guys how to spend us into the abyss. I will return to my belief and statement that JFK, for all of his woman chasing ways was the last President to truly care about doing the right things, including living within our means, and he tried to live up to the ideals of the office he held! Sad to say it got him killed!
So at the end of the day, Reagan pretty much allowed SS monies to finance the FedGov's spending orgy, and now in order to fund the FedGov, SS retirement age will be increased..again..but meanwhile the ultra wealthy benefitted tremendously via that tax cuts that should have produced the money to keep SS solvent? Basically, the old saw of the Rich get Richer is a truism, and now those outside of that top 1% of income earners will have to foot the bill via no retirement at age 67?
SS was never meant to be a retirement plan. But retirement insurance. OASDI. Those who took it to mean plan, sorry. But that's not what it was designed for, and that's not what it's actually going to do. it's impossible.
None of which answers the author's main thrust, that tax cuts for that 1% have been paid for, and will be paid for by Social Security tax payees. With Globalization destroying private pension plans, SS will by neccessity be viewed as a staple of retirement planning, politically there is no way to avoid it. Ah, St Reagan, one's halo is growing a bit tarnished.
How is it tax cuts are paid for buy those outside the 1% when the share of the 1%'s tax burden has steadily increased since 1980? That makes zero sense. The author's logic makes no sense. I'm sorry. Clearly an anti-business/anti-wealth writer with an agenda. the bold part. Isn't this the argument then, that any population growth is necessarily a bad thing? Those people who now must find work will also increase the demand pool and increase productivity. The author fails in the very beginning of his article. Those who receive social security pare down their consumption to almost a trickle. Also failing this author is the fact he doesn't recognize that Social Security is a pay as you go program. The money is not sitting there waiting for the retirees. Current workers must pay for current benefits. So you take away from one part of the economy, that year, to give to another. Oh and you tax it twice, once to fund SS, and again as income (above a certain amount). Has the author taken that into account?
Because the system put into place, along with less revenue, has allowed this to come to pass perhaps? -the author does make the point that the money should be sitting there waiting for retirees to draw from it, and that the TNotes are payable by..the very workers who had their payments stolen and spent elsewhere, in essence double taxation. -nope, the population to retiree ratio has fallen from 6 to 1 to 3 to 1, and will only grow worse, even if those workers are forced to work longer to pay for what they have already paid for there will still not be enough money produced to payoff the obligations that Reagan's System has created. Sorry, jd, the author is quite correct, moving the retirement age upwards is basically the only way to pay for both the theivery and the tax cuts. and THAT is why ultimately Reagonomics has failed America on the whole, supply side simply means "steal tax revenues for our own purposes, then force the people who have already paid into the system to work even longer to replace the money that we've spent" Wealth has only grown for the 1%, everyone else has suffered a decline, one that will grow worse moving forwards. Oh that's right, one buys into the fairy tale that "the middle class has simply moved upwards"..without the lower classes underneath them also moving upwards to take their place.
