Why does this Marxist claim social security cuts have no effect on erasing the deficit?
This socialist says that SS is entirely funded by payroll taxes levied on employers and employees, not income taxes.
Then, the Maoist would have us believe that reductions in SS payouts would not return money to the general fund to pay down the deficit, but would instead return money to the SS trust fund.
Therefore, this Marxist claims that SS cuts have no place in talks to reduce the debt or deficit.
Ronald Reagan: "Social Security has nothing to do with the deficit."
- Anonymous8 years agoFavorite Answer
Reducing the deficit may turn out to worsen your fiscal position over time -- i.e: by trying to cut down on your spending to reduce the pace at which the debt grows, you could offset your initial savings by diminishing your ability to produce and thus to pay back. But even if you do manage to improve your fiscal position by cutting, there is no reason to believe that the cuts make you better off. Whether you borrow or slow down your production, you register a waste because failing to produce is as much a cost as is borrowing.
If it seems complicated it's mainly because it is. Everything depends on how your cuts affect your output and the problem is that the effect depends on a lot of things. However, when you have enough evidence to consider the economic issue to be imputable to a reduction in demand, you know spending is expansionary and when you can tell the other side of the story -- the supply curve -- is the one which isn't right, you have material to pretend cutting would be a good thing in the long run.
Then, you have to consider which means are most efficient at achieving your goal. Do you cut on warfare spending, social security, health care, education, subsidies, etc.? Where do you cut? Or, similarly, where do you spend, if you choose to spend.
Just as a side note, if a person, even labelled as a specialist, comes on air or in a TV show and maintains that this is a simple question and that cutting always spurs growth... well, you can consider he's an idiot or, else, receives a good amount of money to fake it and make it look as if he was stupid. It's just the same as if you think the solution is ALWAYS to spend... you'd be an other kind of idiot, but still an idiot.
Of course, cutting in social programs, just as in any program which involves spending governmental revenues, should, ceteris paribus, reduce the deficit -- which would reduce the amount which is added to the debt. These cuts could imply other consequences, such as reducing the GDP... they may not be a net reduction of the deficit. They could as well contribute to GDP, in which case they'd have a net impact superior to the amount which has been cut. Under current conditions, I wouldn't count on cutting in social programs to yield additional revenues for the government. A direct link has been established since 2008 between spending and growth: the better performances in Europe are due to fiscal expansion, not austerity -- and it's not need to ask why the US is better off than everyone of them.
Basic problem at the moment is the private debt level... not the public debt. If they have too much debt and too few means to pay, individuals will cut in their spending. But their expenditures constitute corporate revenues -- and, consequently, they also pay for the wages of workers. If they cut and the government cuts, both at the same time, you need to hope someone else will be ready to buy our stuff or else firms will lower their production. That's how a demand-induced recession works. If we'd be in something akin to the 70's, something else would have happened. When the oil producers decided to cut the supply lines, the prices rose and it meant every single thing which was produced using directly or indirectly some quantity of oil would cost more to produce. I skip you the microeconomics of it, but it basically means the aggregate supply was diminished. The price levels rose while the equilibrium production level diminished. That's how you get stagflation -- high inflation and high unemployment. If you try to shift demand further in that situation, you do manage to increase GDP -- the equilibrium quantity increase. However, this comes at great costs: the inflation also rises. That's how supply-induced recessions work.
But, as the IMF quickly noted, we see stagnation without inflation and the countries seem to grow faster with greater governmental spending. If you make it more agent-based, as indebted people cut their spending to pay their debt, governmental spending makes it possible for producers to keep producing because someone will buy.Source(s): Sorry for the length, but this covers the whole picture pretty well.
- Anonymous8 years ago
in reality it has nothing to do with the economy and is sound until 2033 but adjustments or changes will have to be made gradually to keep it solvent for the future now this is the republicans side lets cut it for are own needs like war pay offs things like thatSource(s): and i believe bush got his paws into the social security funds as well
- Anonymous8 years ago
We don't borrow money to pay social security, so Reagan was right
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- ?Lv 78 years ago
Reagan would be drummed out of the modern GOP as a "liberal"
- Anonymous8 years ago
Marxism is a right wing ideology.