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Home Publications Blogs Beat the Press Lindsey Graham Commits Huge Gaffe: Shows Complete Lack of Understanding on the Budget

Lindsey Graham Commits Huge Gaffe: Shows Complete Lack of Understanding on the Budget

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Monday, 03 December 2012 05:20

The Post neglected to point out that Senator Lindsey Graham, a Republican often cited on budget issues, is apparently badly confused about the basics of the budget. A Post piece quoted Graham as saying:

"This offer doesn’t remotely deal with entitlement reform in a way to save Medicare, Medicaid and Social Security from imminent bankruptcy."

This statement is absurd on its face. Medicaid is paid out of general revenue, it makes no more sense to say that Medicaid faces bankruptcy than to say that the Commerce Department faces bankruptcy. While the same is true of Medicare Part B and Part D, the Hospital Insurance portion of the program (Part A) is funded by a trust fund with a designated revenue source that is first projected to face a shortfall in 2024. If the projections prove correct, at that point it would lack sufficient revenue to pay full benefits.

While this would be a problem, it is worth noting that, contrary to the criticisms made by Graham in the piece, President Obama's reforms have extended the projected solvency of the program from 2016 to 2024. They have also eliminated more than two-thirds of the projected 75-year shortfall.

In the case of Social Security, the projections from the Congressional Budget Office show that the program can pay all scheduled benefits through the year 2035 with no changes whatsoever. Even after that date it would be able to pay close to 80 percent of scheduled benefits for the rest of the century, leaving future beneficiaries with benefits that considerably exceed those of current retirees.

The Post should have pointed out that what Graham asserted was nonsense, since many readers may not have recognized this fact. Actually, this astounding gaffe should have been the focus of the piece, since Graham is often treated by the media as an expert on the budget. It is probably worth noting that Graham typically presents views on the budget that are similar to the Post's editors.

Comments (4)Add Comment
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written by bmz, December 03, 2012 7:09
The CBO projected that Clinton's last budget plus the Social Security and Medicare surpluses, was enough to pay off the entire US debt before the Social Security/Medicare trust funds would have to be amortized for beneficiary payments, all without having to raise any taxes to pay for the amortization of those trust funds. Like Reagan before him, Bush took those excess payroll tax receipts and gave them “back” as income tax reductions, heavily weighted to the wealthy–who didn’t create those surpluses in the first place. By doing this, Bush guaranteed that income taxes would have to be raised in order to amortize the trust funds. Although the Republicans like to talk about those “47%” who in large part pay only payroll taxes as being supported and subsidized by those who pay income taxes, the truth is the opposite; ever since Reagan, income taxes have been subsidized by payroll taxes; and the failure to raise income taxes to pay back that subsidy, is to steal the money that middle-class workers have had taken out of their income to pay for their retirement.

Hence, the only problem we have with entitlements is paying back the money that we borrowed from the Social Security and Medicare trust funds. This requires that we raise income taxes in the short term to 12% to cover normal on budget expenses. And, as soon as the economy recovers, we must raise taxes above 12% to pay back the trust funds. This is why the Republicans refuse to discuss raising income taxes; they would much prefer to steal workers retirement funds, and reduce the entitlements paid for by them. We do not have an entitlement problem, we have a Republican problem.
...
written by skeptonomist, December 03, 2012 8:36
It should always be emphasized that after about 2035-40 the surplus in the Trust Fund will have been paid out and SS benefits will come directly and entirely from payroll taxes at that time. It will be up to people at that time to decide what the level of benefits and taxation will be. Thus there is no reason at all for Graham or anyone else to be concerned now about benefit levels that far in the future. The only reason to be concerned with projections is to adjust the rate of payout of the Trust Fund so that the surplus does not vanish too soon or too late - it should expire with the last of the baby boomers.
Bankruptcy
written by Paul, December 03, 2012 9:34
From Wikipedia:

Bankruptcy is a legal status of an insolvent person or an organization, that is, one who cannot repay the debts they owe to creditors.

The United States is far from insolvent. People who won't pay their debts are not "bankrupt", they are deadbeats.
skepto.
written by pete, December 03, 2012 10:45
cashing in the fund means paying out of general revenues (ie. not the 12.5% flat tax on first $104K, about $13,000 per year per worker at or above this income) already. The SS payments will never be "entirely" out of general revenues since the 12.5% flat tax will likely remain and may be increased (the old Dupont/Forbes flat tax) or extended to higher incomes while keeping payouts down for those higher incomes. Buffet and Gates and David Koch don't need no SS.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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