Confused about all the GDP talk. Of course, that's the point. The truth:
Social security, welfare, and other transfer payments are not included in government expenditures. Recipients of transfer payments do not provide any current goods or services in exchanges for these payments. Hence, government expenditures on transfer payments do not involve the purchase of any new goods or services and are therefore excluded from the calculation of government expenditures.
Read more: http://www.cliffsnotes.com/...
So, why does the CBO treat Social Security and Medicare as percentages of the GDP?
Probably because there is no problem with Social Security and Medicare as, oddly, the CBO charts demonstrate. You have to love the duplicity.
I have become quite aware that it is time to learn GDP Speak. Especially as it is being used as a Major Reason for Congress to bend to the wishes of the Peter G Peterson's of the world to Dismantle Social Security and other social safety nets.
Social Security is the line in the sand. It has to be. It is the only thing keeping a majority of the elderly from sliding into deep poverty. It does not effect the deficit and has absolutely nothing to do with GDP, as defined.
Social Security and Medicare are transfer payments. Transfered from your check, to the Trust Fund/Account, and sent to those who qualify and eventually to you.
Gross Domestic Product is simply
The value of all final goods and services that a nation produces during a given period-usually a year, minus imports.
B. Exclusion of Financial Transactions, Secondhand Goods and Transfer Payments:
Many transactions occur that have nothing to do with final goods and services produced/GNP.
- Financial Transactions excluded:
a. Buying and Selling Securities: The value of broker's services is included in GDP because they perform a service.
b. Government Transfer Payments: Transfer payments are payments for which no productive services are concurrently provided in exchange
c. Private Transfer Payments: This is a private transfer of funds from one person to another and these are not included in GDP.
http://www.trcb.com/...
That's our mini-GDP lesson. It's not rocket science, but it can be used to confuse the conversation about Social Security. Don't be confused. Social Security is stable.
In the same Congressional Budget Office (CBO) recently prepared for Kent Conrad, we find the confused dialogue.
Fortunately, this CBO report includes a couple of charts (we love charts) that clarify that there is nothing wrong with Social Security.
Without these charts, if we believe the words of the CBO report, a reader could end up believing that Social Security would cause a huge spike in it's percentage of GNP. Which, oddly, isn't even a factor because GDP doesn't include Social Security (a transfer program).
Is it any wonder we, the nation, are confused every time the President and others talk about GDP? Which, btw, they do often lately. So often I felt forced to learn more about GDP as if there aren't better things to do.
Take it away CBO:
....Under current law, spending on Social Security is also projected to rise over time as a share of GDP, albeit much less dramatically. CBO projects that Social Security spending will increase from less than 5 percent of GDP today to about 6 percent in 2030 and then stabilize at roughly that level. (TRUE, mine)
All told, CBO projects, the aging of the population and the rising cost of health care will cause spending on the major mandatory health care programs and Social Security to grow from roughly 10 percent of GDP today to about 16 percent of GDP 25 years from now if current laws are not changed. (NOT TRUE, mine*)
Here's the scary talk: (By comparison, spending on all of
the federal government’s programs and activities, excluding interest payments on debt, has averaged 18.5 percent of GDP over the past 40 years.) To put U.S. fiscal policy on a sustainable path, lawmakers would have to substantially reduce the growth in outlays for those programs relative to the amounts that CBO is projecting—or else match that growth with equivalent declines in other federal spending, corresponding increases in federal, or some combination of the two.
And scarier: Federal debt—activities such as national defense and a wide variety of domestic programs—would decline to the lowest percentage of GDP since before World War II.
That significant increase in revenues and decrease in the relative importance of other spending would offset much—though not all—of the rise in spending on health
care programs and Social Security.
As a result, debt would increase from its already high levels relative to GDP, as would the required interest payments on that debt.
The terrifying conclusion: Federal debt** held by the public would grow from an estimated 62 percent of GDP this year to about 80 per cent by 2035....
http://www.cbo.gov/...
Fortunately, the charts below help clarify this a bit.
- Social Security pay out barely changes from year to year. That's a relief.
- Medicare is lumped together with Medicaid, Chip, and Exchange Subsidies.
- Social Security and Medicare are NOT included in GDP.
*The 5-18 percent increases in the report are not caused by Medicare and Social Security!!!!
http://farm5.static.flickr.com/...
http://www.cbo.gov/...
**The federal debt has nothing to do with Social Security and Medicare:
This where the taxes go. Mostly to the Military Industrial Complex and the Huge National Security apparatus used to spy on us and others to keep us safe, like those cameras at the traffic lights, satellites, etc.
Ironically, on a Social Security Scare Blog, I found this chart that demonstrates that the interest on the national debt is the most alarming issue that needs to be addressed:
http://theeconomiccollapseblog.com/...
The debt was caused by Bush's tax cuts and wars. The interest on that debt, if it isn't paid down will be a problem. Perhaps we need to scale back on some the war/national security pet projects like this one:
An Army of Cyborg Bugs?
U.S. Department of Defense seeks proposals on remote-controlled insect-cyborgs.
http://www.pcworld.com/...
How Spy Flies Will Work
by Kevin Bonsor
Browse the article How Spy Flies Will Work
http://science.howstuffworks.com/...
Seriously, sometimes I wonder if our tax dollars are being spent on programs that will, in turn, be turned against us.
Someone has to stop the Military/Security devotees from spending millions of dollars when/if someone utters "Gee, I wish I were a fly on the wall." or similar spook dreams.
So, hope this helps the next time you
Hear Social Security and GDP mentioned in one scary sentence; and
When someone else is confused you will be able to help them.
In my research I found a few smack downs of how math is being used to justify ideology. We have to keep doing the research and publishing the truth here. It think it's helping the MSM.