The Wall Street Journal said that Social Security and Medicare “have contributed to larger deficits set to exceed $1 trillion in 2020.” This is the big lie promoted by Wall Street billionaires to try to get cuts in Social Security benefits. For more than 30 years, Social Security has brought in more than it spent, which has led to the large trust fund. In fact, Social Security has run a surplus, and made the federal government deficit smaller than it otherwise would have been.

The Trump administration has already broken its campaign promise to not cut Social Security or Medicare; its budget proposal has $900 billion in cuts to these two programs over the next ten years.

What none of the major or corporate newspapers mention is what happened the last time Social Security had a shortfall in the 1980s. There was no trust fund then, so the government borrowed money until it worked out a plan to raise the Social Security tax rate on workers from 5.4% to 6.2% – a 0.8% increase that was matched by employers. Today a similar tax rate increase of 1.1%, or $11 on every $1000 of income, would do the trick.

This tax increase could be even smaller if the Social Security tax were made fairer. Right now, it is a regressive tax, that is, a tax that falls more heavily on lower-income taxpayers. The Social Security tax also only covers wages and salaries up to $128,400. So one way to make the Social Security tax more fair would be to lift the cap so all wages and salaries are taxed. Medicare already does this.

Another way would be to have Social Security tax all other forms of income that are not currently taxed. This is would include interest, corporate dividends, business profits, rental income, or capital gains from sales of stock that mainly go to high income individuals.

Either of these would reduce the need to increase the Social Security tax rate, and doing both might eliminate the need to raise the tax rate at all.

Last but not least, the projected end of the Social Security trust fund is because the trustees expect immigration to fall in the coming years. While this is what Trump and the Republicans want, increasing immigration would help overcome the funding issue, as immigrants tend to pay more in Social Security taxes than they receive in benefits.

Working people who rely the most on Social Security for their retirement and disability need to expose the lies of Wall Street and the politicians, including some Democrats. We need to fight any and all efforts to cut benefits. We also need to fight efforts to privatize Social Security, which would hand our retirement savings over to Wall Street.

#SanJoséCA #PoorPeoplesMovements #US #PeoplesStruggles #SocialSecurity #Medicare #austerity #DonaldTrump

With the debt limit extended to May 18, two other deadlines face the federal government. On March 1, the ‘automatic’ across the board spending cuts are supposed to take place. These cuts were voted into law in 2011 and are taking into effect because the government could not agree on how to make the cuts. $55 billion would be cut from military spending (exempting military pay), and $55 billion from non-defense spending (exempting Social Security and Medicare).

The other deadline is March 27, when funding for the federal government runs out. The federal government doesn’t have a budget in place for Fiscal Year 2013, which began Oct. 1, 2012. Instead, there is a temporary agreement to continue funding at last year’s level through March 27. If there is no budget and no agreement to extend funding by then, a partial shut-down of the federal government would start. During the last shut-down in 1995 and 1996, health care for veterans, toxic waste clean-up, national parks and immigration applications were among the programs cut back or stopped.

Congressional Republicans, headed by former vice-presidential candidate Paul Ryan, now claim that they will put forward a plan to balance the federal budget in ten years without raising taxes. In past budget proposals, which have called for balanced budgets in 30 years, the Republicans have targeted Social Security and Medicare, even though these two programs have not contributed to the federal government debt. The Republicans will try to use the threat of across-the-board cuts and/or a partial government shutdown to get what they really want: cuts in the safety net for the elderly and disabled, in order to protect tax cuts for the rich and continued funding for the military, which protects the worldwide empire of U.S. corporate interests.

#SanJoséCA #SocialSecurity #Capitalism #Medicare #FederalDebtLimit

Tallahassee, FL – The afternoon clouds were dark, but even the threat of rain couldn't stop students, retirees, and union members from taking a stand against federal budget cuts. About 35 people rallied outside of Republican Congressman Steve Southerland’s office here, Dec.10, demanding no cuts to Medicare, Medicaid, or Social Security.

The protest was part of a national day of action called by the AFL-CIO and other trade unions in response to the so-called ‘fiscal cliff.’ If Congress does not act by Jan.1, 2013, they will trigger a set of austerity measures, budget cuts and tax increases.

Carrying signs that read, “Don’t cut my Medicare benefits,” and “No more tax cuts for the rich,” protesters listened to a short stack of speakers in the parking lot below Southerland’s office.

Republican lawmakers, like Southerland, have pushed for deep cuts to programs that support workers and retirees, like Medicare and Medicaid. President Barack Obama and the Democratic Senate have proposed a compromise that includes meager tax hikes for the richest 2%, coupled with cuts to Social Security and Medicare in the form of increasing the eligibility age.

Michael Sampson, a student at Florida State University, fired up the crowd with a passionate speech explaining how budget cuts by politicians benefit the rich at the expense of working people. He said, “We see the politicians of the 1% trying to balance the budget on the backs of the hardworking people who built this country. And it is a shame!”

The crowd erupted into cheers and chanted, “When Medicare is under attack, what do we do? Stand up! Fight back!”

Next, protesters heard from David Jacobsen, the President of the Northwest Florida AFSCME Retiree Council, which represents more than 600 retired workers.

“We want legislators to keep their hands off these programs,” said Jacobsen. Speaking to Republican proposals that would force working class retirees to pay crippling bills, he added, “Medicare should never, ever, ever be a voucher program. It should be available to young people the same way it is available to me now.”

After Jacobsen’s speech, the protesters marched upstairs to Southerland’s office chanting, “They say cut back, we say fight back!” The crowd packed inside the small office and asked Southerland’s staff to pass on their demands to the congressperson.

Taking video using an office cell phone, the staff recorded a message of retirees and students speaking out. The footage was sent directly to Southerland’s phone via text. The protesters then reconvened outside briefly to discuss future actions.

For more in depth analyses of the ‘fiscal cliff’ see: http://www.fightbacknews.org/2012/9/25/federal-government-course-austerity-2013

#TallahasseeFL #PoorPeoplesMovements #BudgetCuts #crisisOfCapitalism #SocialSecurity #Medicare #fiscalCliff #CongressmanSteveSoutherland

As part of the Affordable Care Act, $716 billion was cut from Medicare spending (not funding). A big chunk of this cut was reducing spending on the Medicare Advantage program, a failed privatization plan. Medicare Advantage turned over a part of Medicare to private health insurance companies. But instead of costing less, it has always cost more than the government Medicare program to provide the same benefits. This is a no-brainer since the private, for-profit insurance companies have to pay dividends and huge executive salaries that Medicare does not. This is why 98% of Medicare spending goes to health care, while private insurance companies have spent only 80% or even less, with the rest going to shareholders, executives and waste. The Affordable Care Act tries to reign in this spending.

Medicare is paid for by the same payroll tax as Social Security, listed as FICA (Federal Insurance Contribution Act) on your paycheck. By increasing spending, the Romney plan would speed up the date where funding for Medicare runs short of projected costs, from 2024 to 2016. So why would Romney want Medicare’s financial problems to come sooner rather than later? Probably in order to push a scheme to privatize Medicare, turning it over to private insurance companies and doubling the cost to seniors.

This increase in spending would also lead to higher costs for seniors. Researchers estimate that the average senior on Medicare would pay almost $350 a year more in out-of-pocket costs to help pay for Romney’s proposed spending increase.

Fight Back! encourages all of our readers to say no to Romney’s plan, the Republican agenda and the 1% by joining the massive August 27 protest at the Republican National Convention in Tampa, Florida.

#UnitedStates #CapitalismAndEconomy #RepublicanAgenda #Medicare #RNC2012 #MittRomney #1 #RepublicanNationalConvention2012

The immediate impact of the Ryan/Republican budget plan would be to stop the expansion of Medicaid (government health care for low-income individuals and families) and block the state insurance exchanges designed to make it easier to buy private health insurance. The CBO estimated last March that these two parts of the “Affordable Care Act” (labeled “Obamacare” by its critics) would reduce the number of people without health insurance by 30 million. By blocking this plan, the Ryan/Republican budget would yank health insurance from 30 million Americans and put even more strain on local communities which are the health care providers to those without health insurance through county hospitals, community clinics and hospital emergency rooms.

The Ryan/Republican budget plan would also convert Medicaid into a “block grant.” Instead of trying the cover the medical costs of those eligible for the program, the federal government would give the states a set amount of money to run their state Medicaid programs, that will slowly increase over time. Under this plan, the federal government will reduce spending on Medicaid by 35% over the next ten years. If all of this spending cut were done by restricting the number of people getting Medicaid, another 10 million people could lose their health insurance. In fact, the number would probably be smaller, because of cuts in benefits making it more difficult to find a doctor who takes Medicaid (many already do not because of the low reimbursement rate, which is only half or less of the amount paid to health care providers under Medicare for the elderly and disabled).

What many people living in the U.S. don’t know is that two thirds of the spending on Medicaid today goes to seniors and disabled people, who would bear much of the cuts in Medicaid spending. Seniors and disabled people would also bear the burden of changes in Medicare proposed by the Ryan/Republican budget plan. While the proposed changes in Medicare would not begin for ten years (in 2022), it would lead to millions of seniors losing their insurance and the rest paying much more to private health care plans.

The first change is that the Ryan/Republican plan would start to raise the age at which one can join Medicare from, 65 to 67 starting in 2022. This would lead to a million seniors aged 65 and 66, who could not afford to pay for private health insurance, to lose their health insurance, and have the rest paying more for their insurance. This would also drive up health insurance costs for businesses that employ older workers and be an even greater incentive not to hire or even try to fire elderly workers.

Even more drastic is that the Ryan/Republican plan would end Medicare as government health insurance and instead give government subsidies for the elderly and disabled to buy private health insurance starting in 2022. But these subsidies are limited to what it would cost the government to provide insurance – which is much less than the private sector, as administrative costs in Medicare are about 2% of total costs, as compared to 20% or more for private health insurance.

What this means is that eventually the elderly would have to pay more than two-thirds of their health care costs under the Ryan/Republican plan, as compared to less than one-third under current Medicare. Thus the Ryan/Republican plan would more than double the health care costs for the elderly and disabled, forcing more and more of them to have to choose between medical costs on one hand, and food, rent and other necessities on the other. Millions could end up giving up health insurance in order to avoid hunger and homelessness.

While poor, elderly and disabled people would bear the cost changes in health care from the Ryan/Republican budget plan, the big winners would be private health insurance companies and the rich. Private health insurance companies would win as seniors and disabled are forced to buy health insurance from them, as Medicare as a government health insurance would no longer be available for them. The rich would also be winners as they could afford to pay for private insurance and their increased costs would be more than offset by the huge tax breaks that the Ryan/Republican plan would offer them.

Fight Back! encourages all of our readers to say no to the “Ryan plan”, the Republican agenda and the 1% by joining the massive August 27 protest at the Republican National Convention in Tampa, Florida.

#UnitedStates #Healthcare #RepublicanAgenda #Medicare #RNC2012 #PaulRyanBudgetPlan

According to the Congressional Budget Office, the wars in Iraq and Afghanistan could cost more than $1.5 trillion over the next ten years. The Bush tax cuts for the rich will cost about $600 billion dollars over the same period of time. Ending the wars and restoring the taxes on the rich would save more than $2 trillion, and, including savings from lower interest payments, would save about $2.6 trillion, more than the recent debt limit deal.

Let’s be clear. The real issue is not the deficit, it is about keeping taxes low for the rich and continuing to fund our present and future wars, while cutting programs that serve poor and working people. Social Security and Medicare did not cause the federal debt. In fact ever since the FICA payroll tax that pays for Social Security and Medicare was raised in the 1980s, these two programs have run surpluses and have helped to pay for the wars and tax cuts for the rich.

Half of all workers have no private pension plans, so Social Security is their only guarantee of income security when they retire. For more than a quarter of seniors who are lower-income, Social Security provides over 90% of their retirement income. About 40% of seniors have no private health insurance, and would suffer the most from any cuts in the Medicare.

Unfortunately, the fact is that the vast majority of politicians in Washington D.C. are more beholden to Wall Street and/or the Tea Party than they are to the interests of poor and working people and seniors. What is needed to be build a mass movement for economic justice that can unite workers, both union and non-union, and oppressed nationality communities, especially African Americans, Chicanos, and Latinos, who have the least income and wealth are who are hit hardest by cuts in government services. Students and youth and seniors are especially vulnerable to these cuts. We need to demand that the politicians bring our troops home now, end the Bush tax cuts for the rich, and protect Social Security, Medicare, and other government programs.

End the Wars!

Tax the Rich!

No cuts to Social Security, Medicare, and other programs for poor and working people!

#SanJoséCA #SocialSecurity #TeaParty #Medicare

This is the fifth in a series. See parts one, two, three, and four.

San José, CA – On Aug. 2, President Obama signed into law a bipartisan deal to raise the federal debt limit and cut federal spending. The deal increases the amount that the federal government can borrow by $400 billion now and calls for about $1 trillion in spending cuts over the next ten years. A bipartisan committee of congress people and senators will propose another $1.5 trillion in cuts, and the debt limit can be raised by about $2 trillion more.

The debt limit deal did not include any increases in taxes, which was a major victory for the Republicans and their Tea Party supporters. The Wall Street Journal editorial after the debt deal hailed it as “A Tea Party Triumph.” The lack of any tax increases is also a victory for the rich, who were able to keep the big tax cuts made by the Bush administration. Big businesses, like General Electric, which paid no corporate income taxes last year despite earning billions in profits, were also winners, as there was no increase in corporate taxes.

The big banks and other financial titans of Wall Street pushed hard for the debt deal. By cutting federal spending and reducing the amount of new bonds that the government would have to sell to borrow money, the prices of bonds will be higher. This will benefits banks, insurance companies and other investors in government bonds. Hedge fund managers will also continue to pay taxes at a lower rate than most workers.

While there were almost no specific cuts (other than a cut in federal student loans to graduate students), there will be cuts to programs that serve poor and working people. Banks and businesses have an army of lawyers and piles of cash to contribute to politicians’ election campaigns to make sure that their interests are protected. The federal government is also likely to cut back on aid to state and local governments, leading to even more cuts in schools, health care and social services at the local and state levels. The debt deal puts the federal government on a path of austerity that state and local governments have already started down.

The debt limit deal also opens the door to cuts in Social Security and Medicare. While the initial $1 trillion in cuts does not include these two programs, the deficit cutting committee is almost certain to recommend cuts to both programs. Both Social Security and Medicare have been running surpluses as the FICA payroll taxes have been greater than the benefits paid, leading to a combined $3 trillion in trust funds for these programs. But Social Security and Medicare will be on the chopping block while the two biggest contributors to the federal debt – the wars in Iraq and Afghanistan and tax cuts for the rich – are not.

Last, but not least, the federal spending cuts will make a weak economy even worse. With unemployment above 9%, the federal government needs to spend more, not less, to stimulate the economy and create more jobs. No other sector of the economy is willing and able to spend more. Consumer spending is limited by high unemployment, falling home prices and still high levels of debt. Businesses are earning record profits and have some $2 trillion in cash, but are not willing to spend and hire more. State and local governments, whose taxes are down because of high unemployment, are cutting spending and jobs. The growing financial crisis in Europe and their slowing economies are going to reduce demand for U.S. exports.

Only the federal government has the ability to borrow and spend more during bad economic times. But the will is gone, with both the Tea Party-inspired Republicans and the Wall Street-backed Democrats all too willing to cut spending. There is a short-run danger that this could be enough to tip the economy into another downturn. But even if the economy continues to grow, the limits on federal spending will leave no safety net for the economy when the next recession hits, increasing the prospects of a major depression much more likely in the future.

#SanJoséCA #SocialSecurity #federalDebt #Medicare #DebtCeiling #austerity

The Bipartisan Senate Proposal is being pushed by the so-called Gang of Six – Saxby Chambliss (R-Georgia), Tom Coburn (R-Oklahoma), Kent Conrad (D-North Dakota), Mike Crapo (R-Idaho), Dick Durbin (D-Illinois), and Mark Warner (D-Virginia). Four of them were members of the National Commission on Fiscal Responsibility and Reform which was unable to pass a proposal to cut the Federal Budget deficit. This proposal has been welcomed by President Obama, who said that he endorsed the thrust of the proposal.

In contrast to the House Republican proposal to end Medicare, cut programs for the poor and give big tax cuts to the rich, the mainstream media has described the Bipartisan Senate Proposal as a more balanced plan that would raise $1 trillion in tax revenues while cutting $3 trillion in spending.

Don’t believe this hype.

If one reads the [actual proposal](http://www.washingtonpost.com/wp-srv/politics/documents/gangofsixproposal07202011.html?hpid=z1) the executive summary states on page one that “If the CBO (Congressional Budget Office) scored this plan, it would find net tax relief of approximately $1.5 trillion.” The proposal would lower the top tax rate for high income individuals and families from 35% to 29% and repeal the Alternative Minimum Tax, which would allow high income individuals and families to not pay any taxes at all. It would also cut the corporate tax rate from 35% to 29% or less, and not tax foreign profits at all, at a time when corporations are sitting on record amounts of cash (about $2 trillion).

The bipartisan proposal would also cut Social Security by cutting cost of living increases. Social Security payments are indexed, which means that they are adjusted each year for inflation. Social Security currently uses the Consumer Price Index or CPI to make this adjustment. The bipartisan proposal would shift to the chained-CPI, which they claim is more accurate than the CPI, but would result in Social Security payments losing about 0.25% in adjustments each year, or about $3 a month for a typical person getting Social Security. While this doesn’t seem to be much, it adds up each year, so a 65 year old retiring to go on Social Security would lose almost $55 a month if they live the average 18 years, and more if they live longer.

The fact is that seniors almost certainly face a higher inflation rate than the CPI, since they have to use more health care services. Over the past year, prices for medical goods and services have risen almost twice as fast as for all other prices, excluding food and energy.

So why is President Obama backing this proposal? One reason is that Wall Street wants a big cut in spending to make sure the price of billions of dollars of U.S. government bonds is maintained. The bond rating company Standard and Poor’s warned that unless there was a $4 trillion deficit reduction, they would reduce the rating on U.S. government bonds from the current AAA (the highest) rating. This would cause the price of bonds to drop and interest rates to go up. Time and again, Obama has shown that he is more interested in protecting the interest of big banks and Wall Street than the interests of poor and working people.

*Next: the Congressional Progressive Caucus proposal*

#UnitedStates #SocialSecurity #Medicare #BipartisanSenateProposal #GangOfSix

This is the second in a series. See parts one, three, four and five.

In the current debate about what to do about the debt ceiling, there are two positions that are prominent in Washington, D.C. and in the corporate controlled media. One is the House Republican position summarized as Cut, Cap, and Balance, and the other is the Senate bipartisan position that has been welcomed by President Obama. What is missing from the debate is a clear alternative from the Democrats, not to mention a progressive position that would help the people as opposed to Wall Street. This article focuses on the House Republican position, to be followed by articles on the bipartisan position and finally a progressive or people’s position.

The House Republican position of Cut, Cap, and Balance starts with Republican Congressman Paul Ryan’s proposal to cut almost $4.5 trillion in spending over the next ten years. More than two thirds of these cuts, or about $3 trillion, would come from programs helping lower-income households, including Medicaid (health care), SNAP (food stamps), and Pell Grants (college financial aid). Pell Grants would be cut 50% in the first year of the Ryan proposal.

Ryan’s proposal would also eliminate Medicare as a federal health insurance program and replace it with vouchers that individuals can use to buy private health insurance. Under this plan, seniors would have to pay for most of their health care costs, since the vouchers would not cover the full cost of private insurance. (Oh, yes, the private insurance companies would gain billions of dollars in profits too.) It would allow private insurance companies to charge more for older seniors, guaranteeing that all but the most well-to-do elderly will not be able to afford health insurance. It would also eliminate Medicare for 65 and 66 year olds.

The Ryan proposal also includes more than $4 trillion in tax cuts, with nearly all of the benefits going to households making $200,000 or more. To reduce the deficit, the Ryan proposal would eliminate many tax credits, deductions and exemptions. Many of these tax breaks do benefit middle-income and working households. On balance, the Ryan plan is one of massive cuts for the poor and elderly, higher taxes for working and middle income people and big tax breaks for the well-to-do.

The House Republican position also includes Ryan’s proposal to cap the level of federal government spending as a percentage of the total economy measured by Gross Domestic Product or GDP. It would lower federal spending to 14% of GDP (excluding payments on interest) and lower non-interest, Medicare, Medicaid, and Social Security spending to 3.5% of GDP by 2050. Given that military spending alone comes to about 5% of GDP today, even with cutting the military by 30%, *every other federal program* would have to be eliminated. This includes all spending on education (college financial aid, Head Start, and other), research on new medicines and diseases, the Environmental Protection Agency (EPA), food stamps, unemployment insurance, Temporary Aid for Needy Families (TANF or welfare), Earned Income Tax Credit (EITC for low-income working parents), housing aid for low-income and elderly renters, etc.

Finally, the House Republican plan calls for a balanced budget amendment to the U.S. Constitution, which would require the federal government to balance tax revenues and spending every year. But at the same time, they refuse to say how they would balance the budget with no new taxes. House Republicans have also refused to cap military spending, which has grown faster than Social Security and Medicare – military spending has grown more than 155% over the last 12 years, more than the 147% increase in Medicare and 86% increase in Social Security. To actually balance the budget without cutting the military and interest on the debt, other spending would have to be cut in half – meaning big cuts for Social Security and Medicare.

Supporters of the balanced budget often argue that households have to balance their budgets, so why shouldn’t the federal government? But in fact many households do not balance their budgets each year. How many people can buy a home without borrowing money? If all households had to balance their budgets, almost no one would be able to buy a home. Many, if not most people would not be able to buy a car. Many, if not most students would not be able to go to college. Borrowing money is not evil, it can be good if it is spent on something that will pay off over a long period of time, like a house, a car, or a college education.

While the federal government does pay for key infrastructure like roads and bridges that could be paid for by borrowing, it also plays an important role during recessions like the one we just had from 2007 to 2009. During a recession, millions of people lose their jobs, so households cut back on spending. With less spending, businesses have fewer sales, so they cut back. With less spending and less income, tax revenues go down, forcing state and local governments (which already have balanced budget requirements) to spend less. As the recession spreads to other countries, they buy fewer American products. The only sector than can borrow and spend more is the federal government, to try to put people back to work. If the federal government has to cut back even more because of balanced budget amendment, the recession could well turn into a depression. This is what happened under the Republican President Herbert Hoover, whose efforts to balance the federal budget helped turn the recession that started in 1929 into a Great Depression that lasted for more than ten years.

*Next: The Bipartisan Senate Proposal and President Obama*

#SanJoséCA #Medicare #DebtCeiling #CutCapAndBalance

San José, CA – In less than a month, the federal government will have to either raise the limit on how much it can borrow, or will have to slash spending by $120 billion each month. This is about 40% of total spending, or about the same as stopping all payments for the military and Social Security, the two most costly federal programs. The Republicans in the House of Representatives are threatening not to raise the debt limit unless the federal government promises to slash spending on domestic programs, including dismantling Medicare and putting most of the cost of health care on seniors.

This is the first of three economic commentaries to explain this issue. This commentary will be about how the large federal government debt came to be. The next two will be on what the Republican congress and the president are negotiating and what should be done about the federal budget deficits and debt that would help poor and working people.

Today’s federal government debt, often called the ‘Public Debt,’ goes back about 80 years to the Great Depression. In 1930, just after the start of the Depression, the federal government debt was very small, about $16 billion or 15% of the size of the economy as measured by GDP.* Almost all of this was borrowed during World War I, when the debt went up seven-fold.

Between 1930 and 1944, the federal government borrowed large sums of money, first to pay for the New Deal programs to try to aid those hurt by the Great Depression, then a much larger amount to pay for the military costs of World War II. By this measure the public debt went from 15% to 50% of GDP at the start of World War II, and topped out at 120% of GDP in 1945.

But between 1945 and 1980, the public debt fell to only about one-third of GDP. This was because the economy grew relatively quickly after World War II, boosting GDP. At the same time, the federal government did not have to borrow a lot, as their budgets were more or less balanced between tax revenues coming in and spending going out. Then in the 1970s, economic growth slowed but inflation picked up. Inflation made the money value of GDP go up, but the money value of the debt did not.

The big rise in the federal debt came over the last 30 years. There was a big increase in the 1980s as President Reagan cut taxes, especially for the wealthy, and increased military spending, leading to large budget deficits that added to the public debt. This was briefly reversed under the Clinton administration, which raised taxes on higher incomes and limited increases in government spending, leading to federal budget surpluses, where tax revenues were greater than spending, from 1997 to 2001. Tax revenues also went up with the long economic expansion in the 1990s, which went on for 10 years without a recession, the longest in U.S. history.

But then in 2001, the new Bush administration cut taxes, again benefitting the wealthy the most, invaded and occupied Afghanistan and Iraq, and dramatically increased military spending. There was also a recession in 2001, with a long jobless recovery, that cut tax revenues. Federal budget deficits came back and the federal debt grew rapidly. Then when the recession that began in 2007 was followed by the financial crisis in 2008, federal tax revenues sank as more and more people lost their jobs (about 80% of federal taxes come from income and payroll taxes).

The Obama’s stimulus spending in 2009 and 2010 came to about $800 billion dollars, or a bit less than 6% of the total public debt that is now more than $14 trillion ($14,000,000,000,000 or over 90% of GDP). The other 94% of the public debt mainly comes from three things: wars (from World War I and World War II to the current wars in Afghanistan and Iraq), tax cuts in the 1980s and 2000s, and the loss of taxes and extra spending on unemployment insurance and other social welfare programs during bad economic times.

Note that spending on Social Security and Medicare is not why the federal debt is so large. In fact, Social Security and Medicare taxes (known as FICA or federal Insurance Contribution Act – look for it on your paycheck!) have been greater than benefits paid, so that the combined programs have built up a surplus of more than $3 trillion. If Social Security and Medicare had run balanced budgets over the last 25 years, federal budget deficits would have been much larger during this time.

\* Economists usually measure the public debt against the Gross Domestic Product, or GDP, which is the total value of output of goods and services produced and about the same as the total amount of national income. Using this measure allows one to compare the public debt over time as the economy grows and prices change.

Next: what the Republican Congress and the President are negotiating, and what should be done about the federal budget deficits and debt that would help poor and working people.

#SanJoséCA #SocialSecurity #federalGovernmentDebt #Medicare