Question Day Answers 3:Budget Deficits

Noumenon writes:

Is Kevin Drum's story about the Greenspan deal to raise Social Security taxes plausible? Coyote Blog claims here that it's not, but I wasn't there and I don't know if Coyote's characterization of Tip O'Neill is accurate.

I think Drum's way of putting it is essentially reasonable, although I can imagine other equally reasonable ways to characterize it.  The big thing to remember about SS is that it's basically in fine shape, one way or another. 

There are two major long-term budget issues.  The first is that medical costs are rising much, much faster than income, and therefore government revenues.  That can't really be fixed by raising taxes or cutting other spending; it can only be fixed either by retreating from current commitments on health, or by finding a way to make health care costs stop rising so much.  I'm not a public policy person, but my understanding is that the ACA included a bunch of things that may or may not achieve some of that, and if it's fully implemented and all then we'll find out, over time, how much that's going to help.  Note, by the way, that it's not as much of a government budget problem as it is a health care problem -- shut down Medicare and Medicaid, and you'll solve the government budget part of it, but not the economic and personal effects.

The second long-term budget issue is that every time Republicans get the chance, they slash revenues while leaving spending the same, thus exploding the deficit.  That's been the GOP platform for thirty years now, and it's the GOP platform in the current election cycle.  Since over time the parties do rotate in office, if one of them pledges to explode the deficit every time they get a chance, the outcome is a long-term deficit problem. 

But Social Security? It's not really a significant part of the long-term budget problem.  For more on Social Security in general, see here (for future financing, see their Fact #10).