Thursday, April 01, 2010

Cynthia Tucker - Show A Pie Chart Of The US Financial Crisis But Avoids Analysis Because It Would Cause Her To Make A Judgment Against Those She Protects

Cynthia Tucker: Voters: Cut The Deficit But Don't Cut Spending

When one reads someone's arguments and works over a period time they risk becoming predictable.  

It becomes clear who they protect, who they attack.  Their general interests and agenda.

With AJC opinion writer Cynthia Tucker - her latest blog submission speaks volumes to me, mostly by what she did not say!!!

Look at the pie chart on the right side.  This is the "federal outlays" - the spending.  
The chart is from "The Concord Coalition".   This is the same group who's national "Fiscal Wake Up Call" tour I had attended nearly 3 years ago.

Long before a presidential candidate had been chosen the Concord Coalition stated clearly:  "Above all else the primary job of the next President of the United States is going to be to level with all Americans.  He or she will have to tell all Americans that we are no longer going to be able to live as we have been living.   The President is going to have to tell people to expect less from the government and that we will have to pay more taxes as a means of paying down our previous debts".

They told the packed lecture hall that the consequences of not addressing our burgeoning debt and the interest payments that it creates AND controlling the expansion of the big 3 entitlement programs (Social Security, Medicare and Medicaid) would have a calamitous impact upon the financial position of the United States.  They mentioned that the year 2016 as the inflection point.  This is the start of the precipitous flow of retirements by the "baby boomers".  They will begin to draw out of our retirement system that which there are not enough present workers to replace.  With Social Security being a "immediately pay out what they have just received in" system - the balance will be tipped.  Social Security will start drawing upon resources from the general fund as it has exhausted what payroll taxes can cover.

The Concord Coalition mentions that we can shut down the Defense Department and NASA and the Department of Energy, not spending another dime on any of these and we STILL don't have enough in savings to address the threat of this impending fiscal crisis.

I have no doubt that Ms Tucker is fully aware of all of this information.  She has access to The Concord Coalition and even more resources than I do.

My question is:  Why didn't Cynthia Tucker do her usual ANALYSIS in this posting, instead putting out the pie charts and forcing the readers to render their own opinion?

I am willing to "analyze Ms Tuckers lack of analysis".  She  can look at the chart and see where nearly 50% of the US budget is going (48%, according to the pie charts).

With the data in hand her "usual ghosts" are not available for attack:

  • Defense/War Spending
  • Tax Cuts On The Rich
Truth be told the situation is even worse because the pie chart is from the year 2007 in which the federal deficit was $168B.  This is a paltry sum compared to the $1,400B deficit from last year and the expected $1,500B for the present year.

Ms Tucker "didn't talk" because she realizes that the numbers that she has presented would force her to go against many of the core positions she has taken over the years.   These big three entitlement programs are expected to grow to (approximately) 62% of the federal budget if their spending is not controlled.

In the previous health care "battle" Ms Tucker has advocated for more federal spending in support of her notion of "Social Justice rights".   Most of the questions around affordability of the package was blown off as "fear tactics".   When the Congressional Budget Office made their report it provided cover.  The CBC is not allowed to editorialize about the SCHEMES that are contained within the package they are asked to evaluate (ie: start collecting taxes now for benefits that don't start till 2014).  Thus when they said that the package is not only "deficit neutral" but it would lead to deficit reduction - this was enough to tip the balance.   The truth is that when Medicare was crafted in the mid-1960's their projections for spending in the year 2000 were 8 times short of the actual amount spent when the year 2000 actually came.

In my view - the spending in entitlements are going to increase per the natural tendencies of the "Demand Side Economic forces" and their increasing political power.   It will ultimately be the painful truth of the budget crisis that will ultimately force massive spending cuts, lest the nation go insolvent.  Just as we are seeing cuts in education spending and (state and local) government employment that would have been unthinkable just 2 years ago.......such the case will be in our future regarding entitlements.  

Both Democrat and Republican are going to be made to see that by living beyond our means - the long term consequences will be made even more painful as real world forces cause a reconciliation. 


Greg L said...


You linked this in your reponse on my blog and I wanted to draw your attention to an issue with the numbers, particularly on social security as most charts on this are misleading.

Prior to Lyndon Johnson's attempt to hide the fiscal consequences of the expansion of the Vietnam war and Great Society, social security expenditures were treated as "off budget" mainly because the taxes being collected for it were considered trust taxes rather than revenues and the idea was that these trust taxes were to be set aside to cover the benefits when they had to be paid out. In other words, if you were to rework the pie charts to exclude social security from both revenues and expenditures, the way the budget was analyzed "pre Johnson", here's what you'd see:

1) Defense spending accounts for a far larger portion of the budget at nearly 50%
2) The deficits are far larger than what has been generally acknowledged.

Effectively, the trust taxes for social security have been taken to fund other government expenditures rather than having been set aside to cover the benefit payout. The crisis revolves around putting the money back with all the boomers retiring. Had the money been actually set aside as intended rather than spent, all remaining goverment expenditures would have had to have been reduced or funded with other taxes.

Basically, the way social security is accounted for is very misleading which leads to a misdiagnosis of what the problem actually is. That problem, IMO, is not peak boomer retirement, but the fact that the trust taxes were used to fund other government expenditures (mainly defense) instead of raising additional taxes to pay for non social security spending or curtailing it if it couldn't be funded.

Greg L said...

A correction. I said:

<<1) Defense spending accounts for a far larger portion of the budget at nearly 50%<<<

I should have left it that defense spending just accounts for a larger portion of the budget as once social security is removed, the remaining items also account for a larger percentage of the budget. So strictly from a math standpoint, the defense budget wound not account for 50% of the budget merely as a function of removing social security.

However, there is a study that I ran scross that reveals a few other accounting sleights of hand that understates this portion of the budget.

Greg L said...


Back here again with some clarifying comments. Looking again at the chart for federal budget expenditures, social security and medicare/medicaid account for 41% of the budget, however both are funded with trust taxes earmarked specifically for them. To put the current level of federal expenditures on the same basis that was commonly used before Johnson changed the accounting, you'd really have to take BOTH OF THEM "off budget". Again, the idea is that since you're collecting taxes earmarked specifically for these two items, they're really not being funded from general tax revenues. Taking both off budget would mean defense spending accounts for over a 3rd of all federal spending and by some accounts upon shifting where some of the costs are accounted for, it would be half.

Again, the main problem with social security is the fact the money collected for it was used for other things and it has to be replaced given the demographic tsunami we face while medicare was expanded but not paid for. Johnson changed the accounting to mask the level of military spending for Vietnam and that has continued to this very day. IMO, current analysis and discussion on this often does not focus on why we have the problem with the entitlement programs and shifts the focus away from other areas that really need better control and management.