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Want to actually trim government bloat? Start with the hidden workforce

Good-government groups have started to weigh in on what they hope will be the president's management agenda for the coming year. The good-government groups know that you can't beat something with nothing--the something being the flood of Republican proposals for pay and hiring freezes, as well as for blunt-force reductions in workforce.

The Republican agenda will do much more harm than good. The new House majority needs only look back to President Ronald Reagan's agenda for the evidence. Like many presidents before him, Reagan started his term with a pay freeze, brought in a blue-ribbon commission of business experts to probe for savings, and attacked the middle-level bloat through what was widely known as the "bulge project."

Nothing worked. The federal hierarchy grew taller and wider, the federal workforce aged into higher ranks, and the bottom of government shrunk as contractors took on many of the inbox duties once reserved for federal employees. The Fiscal Commission's notion that the federal government should adopt a 2:3 downsizing strategy for filling vacancies will fare no better. It's a random shooting that will further eviscerate the front lines of government, where the goods and services are actually delivered, and that will fuel further growth in the contracting workforce.

This contract workforce has been growing ever larger. It reached an estimated 7.6 million employees by 2005, and has surely increased since. Roughly two-thirds of it provides services of one kind or another--from manning cafeteria lines to providing high-level management consulting, computer programming and even writing procurement requirements. When Americans get mad at big, bad government, they rarely realize that big, bad government includes three contract employees for every one full-time federal employee.

The true size of the federal government, which includes military personnel, postal carriers and contractors, is now hovering at 12 to13 million. Now that's big government. Throw in the millions of state and local government employees who labor under unfunded mandates, contained in legislation such as the No Child Left Behind Act, and the de facto federal workforce moves into the stratosphere.

Good-government groups such as the Partnership for Public Service have been ever more aggressive in calling President Barack Obama to lead as "executive in chief." This argument demands attention at 1600 Pennsylvania Avenue. As the Partnership's CEO, Max Stier, argued only days before the midterm debacle, the president "must be the leader of the entire government and accountable for making sure that it works. Without the president's personal commitment, our government's ability to meet the needs of the American people is likely to fall short."

Unfortunately, most calls for leadership skip the paragraphs on what the president might actually do to ease the public's angst about the recent meltdowns across government.

Not so for the Center for American Progress, a progressive think tank headed by former White House chief of staff John Podesta. The Center just released a report titled "A $400 Billion Opportunity." The report, subtitled "10 Strategies to Cut the Fat Out of Federal Procurement," provides a detailed agenda for harvesting between $25 and $54 billion a year.

The report provides a detailed roadmap for a 10-year effort to streamline the procurement process and make better decisions. Even including what the Center calls "ramp up time," the report estimates $330 billion in savings over a decade, which is hardly the kind of trivial savings that will come from double-sided copying, teleconferencing and the electronic paycheck deposits that should have been implemented long ago.

The Center's recommendations add yet another voice calling for a frontal attack on the needless obstacles to high performance. Not only does poor performance undermine public confidence, it also drives many talented federal employees to an early exit. According to another recent Partnership for Public Service report, almost a fifth of new employees leave within their first two years. Although the Partnership is shy about calling out the bureaucracy, past federal employee surveys suggest that many of the best employees give up early on the chance to make a difference.

Poor leadership is no doubt partially to blame, but so is the bureaucratic sloth, the hyper-inflated performance appraisal process, the absence of encouragement to break the mold and innovate, and the failed disciplinary system that keeps poor performers on the job long after they should have been fired. There is nothing quite so demoralizing to high performers than sitting next to clock-watchers who long ago forgot the public purpose that should motivate them to action.

The federal government and its hidden workforce can do better. That will no doubt require more attention from the president and his new director of the budget, Jack Lew. If the Senate does it job, Lew will be covered before the week is over. He not only brings significant budget acumen to the job, but he also cares deeply about federal management. So does his deputy director for management, Jeff Zients.

But without a strong word and firm embrace from the president, nothing will happen. As I've written before, congressional Democrats seem reluctant to provide any alternative to the Republican agenda. They need leadership, too. Until the president realizes that there are hundreds of billions to be reaped from bureaucratic reform, not to mention vastly improved performance, needed reforms will languish.

The president needs to step up and start reading. There is now plenty of material on management reform in his inbox. Let's hope that he doesn't outsource it to the hidden workforce.

By Paul Light

 |  November 19, 2010; 9:44 AM ET |  Category:  Bad leadership , Change management , Federal government leadership , Innovation , Leadership advice , Public leadership Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati  
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Please email us to report offensive comments.

Some days I don't want to be associated with what is said in the comment section; but today, you all have great comments and great ideas; too bad nobody's listening, government doesn't know that anyone lives outside the beltway. The REAL problem with government is: no term limits - lobbyists - contractors - civil servants turned lobbyist or contractor - congress' ability to rob every pot of money they create - congress' ability to pollute every bill they create with pork/earmark/special interests - maybe just congress ... :0)

Posted by: dragonlady45 | December 3, 2010 2:16 PM

Bureaucracy, or the word, has been used as a scapegoat for those who really do not know what they are talking about.

Any time someone needs to leave an organization with a bad opinion they lay on the word "Bureaucracy.” It is the intent many times to lay on a feeling of disorganization without having the proof.

Actually, bureaucracy was given its name by its inventor just about the time Henry Ford came up with the assembly line. If memory serves, his name was Miller.

The idea is for supervisors to collect data in a prescribed form and send it upward to middle management. Middle management then revises it in a format usable by the next upper level of management, and so on until it finally is presented to top management; e.g.; the CEO in a form he/she can work with.

We use Bureaucracy, or a form of it, any time we use the computer. The word Bureaucracy was given to the process because it represented something like moving data from a bottom draw in a bureau, or chest of drawers, to the next higher level of drawers, to the next higher level after it has been processed at each level in to a form of only that needed on up the ladder.

American successful production was built on Bureaucracy, and I would venture to say that America taught the system to the world.

Today the word Bureaucracy seems to be used only in reference to bad performing organizations when the problem is really bad performing people who are not using their prescribed system correctly. Bureaucracy is deeply embedded in our data handling systems and there is no way we can get rid of it. We can only improve on the manner we use it.

Posted by: ramseytuell | November 28, 2010 12:47 PM

The following from a website on Government taxes and and spending.

2010 US Budget $3,552,000,000,000
2010 Tax Receipts $2,381,000,000,000
Projected Deficit $1,171,000,000,000

80% of spending goes to the following:
Social Security 19.63% $697,257,600,000
Dept. of Defense 18.74% $665,644,800,000
Welfare 16.13% $572,937,600,000
Medicare 12.79% $454,300,800,000
Medicaid, SCHIP 8.19% $290,908,800,000
Interest on Debt 4.63% $164,457,600,000

Bottom line: We're spending one-third more than we're taking in. We need to balance our books. Want to cut taxes? Fine. But let's get serious and stop spending with borrowed money. That means reducing spending. And are we going to pay off our $13 trillion debt or just debase our currency?

Posted by: SequimBob2 | November 24, 2010 3:26 PM

Want to trim government excess:

Make corporations pay their own way.

Start with oil companies that will reap trillions in profits from the war in Iraq which cost the US Treasury roughly 4 trillion dollars.

A little reimbursement would be nice.

Or consider drug cartels which are having several banner years thanks to increased heroin production and sales.

Since the US occupied Afghanistan in 2001, that nation has gone from producing almost no opium poppies to be the worlds leading grower of opium poppies supply the world with billions of dollars annually in heroin.

Tax this poison.

Re-coup some of our trillions spent building up Bagram and the infrastructure in Afghanistan which has made it possible for Afghanistan to become the world's leading producer of opium poppies.

Posted by: googlesmoogle | November 24, 2010 2:13 AM

RHECKLER2002 You really are correct about Social Security... but not the way you think you are. Social Security is not counted in the deficit...but it is also NOT pay as you go... Social Security runs a surplus today... yes, more money goes in than goes out...where does that surplus go?...think about it. The GOV takes in more money than it spends on SS...the balance is "invested" in US Securities! Now at sometime, the GOV will be required to buy back those US Securities so the GOV can pay benefits to SS recepients... Does SS add to the deficit? NO because it is not counted. Does the GOV's debt grow each year because of SS? Yes, because every dollar of surplus is "invested" in US Securities i.e. Debt. Cool, huh? Not even Madoff could come up with that one.

The Office of Management and Budget has described the distinction as follows:
These [Social Security Trust Fund] balances are available to finance future benefit payments and other Trust Fund expenditures – but only in a bookkeeping sense.... They do not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the Treasury that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures. The existence of large Trust Fund balances, therefore, does not, by itself, have any impact on the Government’s ability to pay benefits. (from FY 2000 Budget, Analytical Perspectives, p. 337)

Posted by: Severus | November 23, 2010 5:12 PM

Finally someone gets it. In my agency, we were not allowed to hire but we could contract out. Contract out we did and then some. While these contractors were not personal contractors, they sure were treated as if they were. They worked side by side with us, got their instruction on the days work from our team leader. So much for the law about personal contracts. Basically, the Fed employee count went down and the contractors grew as a result, we had more people working in my building than before the "cuts". Hah!

The fact of the matter is this: Contracting out was payback for political contributors (they take home the overhead) and it was mumbo-jumbo to feed to the sheep that government was cutting fed employees. What a laugh. We grew and are still growing. But the sheep merely chewed on that cud and goes along. BTW, the contracting out was the brilliant idea of the Republicans under Reagan, so guess why it will not be cut now.

Posted by: RedRat | November 23, 2010 4:59 PM

The hidden work force is well sheltered. Federal contractors have a lobby that feeds politicians in both parties who will never bite the hand that feeds them. Many former elected officials have found high paying “second careers” lobbying jobs for these companies.

There are senior leaders, both career and appointed, who have found there are lucrative post government jobs available to those who develop requirements to hire a lot of contractors. For example, it’s estimated that contractors consume 70% ($60B) of the $85B annual intelligence budget. Look at the companies that have hired retired intelligence community SES, intelligence committee staffers and military intelligence flag officers and you will see which companies have the largest contracts. Find any large government contract and you will find far too many former senior government people who played the game when they worked for government and now reap their rewards.

Finally, there is the question asked by President Obama about how much do we pay for the same job to be done by two or more people? How many contractors do jobs that are supposed to be done by existing government employees? He never got an answer.

Unfortunately, too many senior federal “leaders” know the answer. They know where they have large, non-productive and untrained and under educated employees. They won’t confront the issue. They lack the leadership capabilities to bring this issue to the table. It is easier to hire contractors who work competently without complaint to do jobs that should be done by human resource managers, contracting officers, secretaries, support assistants, administrators, accounting, etc. and rationalize that contractors are needed because their “govies” are overworked. I can go into any federal organization and show you where productivity would grind to a halt if contractors left today. We can’t afford it.

We may not be able to do anything about former elected representatives. We can do something about better oversight of “requirements” leading to big contracts, armies of contractors and involve former senior leaders. Stop the revolving door and many “requirements” and contractors disappear.

We can do something to ensure that every federal worker is trained to do their job professionally, that every federal worker is educated to a professional and well defined standard. We can demand leaders set high standards of performance and then hold employees accountable (and help them if necessary) to pull themselves up to those standards instead of the standards being lowered to the existing competency level of the employee. We can stop hiring contractors to do the jobs government employees are already paid to do.

All it takes is leadership that serves the interests of the American people and not themselves and that acknowledges they are fully accountable for everything they do and every dollar they spend. Far too often, we come up short on both counts. How do we change it?

Posted by: highexpectations | November 23, 2010 2:06 PM

I got an email from Robert Longely Government email, who reports that all of Gongress is multi millionaires an that there growth in the Depression 2010 has grown 64 percent how does that sit with ya America ?

Posted by: JWTX | November 23, 2010 1:31 PM

Government stop the madness no Gongress man or woman who works less then 2 years should not be allowed an even less than that, should be striped of all retirement benefits this has ruined America. You all have no choice now it must be done or get rid of all of you at once you have bilked this Country for far too long. Its time to answere for all your dirty dasterdly deeds !

Posted by: JWTX | November 23, 2010 1:27 PM

Sure, Ronald Reagan said he would cut and he didn't. So that means we shouldn't cut now? What kind of crazy talk is that? BOTH parties have spent too much money. We are in deep debt, get it? Poor, pitiful Pearlstein sez: "The Republican agenda will do much more harm than good." It isn't the "Republican" agenda. Its the agenda of MOST INDEPENDENT THINKING AMERICANS. We are in debt. We need to cut spending. Being smart does not mean participating in our own destruction. Very sad that I think no real cutting will be done and the U.S. will default on its debt. Smoke and mirrors, and budget tricks don't work. Stupid Americans, tricks are for kids.

Posted by: shred11 | November 23, 2010 12:31 PM

There is one thing more demoralizing than high performers sitting next to clock watchers.

That is high performers (or even just good emplpyees) who experience the maxim that "No good deed will go unpunished." Not only can't you do anything useful, or inovative, but those that do, are considered "rocking the boat", "not team players" and are punished accordingly.

Posted by: OldGeezer | November 23, 2010 10:02 AM

I don't suppose that there is any relevance to the fact that contractors are not unionized, and unions bought the election 2 years ago? Isn't that the real problem with contractors?

Posted by: Steve59 | November 23, 2010 9:37 AM

Modern day Republicans are not as smart as Eisenhower when it comes to the real world. He saw what was, and moreover what could be in an unchecked world. He warned against the military-industrial complex, a warning that went unheeded by Reagan and GHW Bush. Reality was totally lost on Dumbya. That guy set the train in motion and left it running full throttle toward a crash, impeded only at the last minute by the rest of the country. Dumbya also promoted reckless policies that gave away control of the financial industry and upset the delicate balance of government finance by making tax cuts with no spending cuts. Tax cuts never pay for themselves, in spite of the idea that they will generate more "business" that will generate more tax revenue. Never has or never will happen, but that is lost on Republicans.

We need changes, but the so called leadership of this country can't make the decisions. Maybe we can stumble through, we can only hope.

Posted by: ronjeske | November 23, 2010 8:43 AM

...Furthermore, if you accept Light’s estimate as true, then the government is getting quite a deal on those contractors because for less total dollars expended on personnel, the private sector is providing the government with three times as many people.
-Elise Castelli, Media Relations Manager, Professional Services Council
I think he only meant that there are three times as many contractors supporting the government as there are federal employees. While that may not be the case across government, it is definitely true in some agencies. The fact remains that there are a lot of contractors supported by the federal government. However, listening to interviews in the media would lead one to believe the budget could be balanced if we just fired all of the federal employees. Taking that approach, contract workers could continue to live off the government dime, making as much or more than federal employees and Congress would maintain its relationships with the contracting companies as campaign funding sources. Makes sense to me.

Posted by: Vze2sr66 | November 21, 2010 6:35 PM

Stop hiring contractors, now! It costs 3 times what a Federal employee costs, to do the same job. There are so many overpriced contractors with snouts in the trough. Big companies, and small. Fraudulent 8(a) companies and now Alaskan Native companies (typically only the most tenuous PO box connection to anything Alaskan) who swindle the US taxpayer. Stop it all, now!

Posted by: Client_9 | November 21, 2010 3:35 PM

WastingtonDC: Hero government employees often save a hundred million dollars in a few years, some save billions over their careers. They view the taxpayer's disgust for public employee unions as long overdue, still doomed to be ineffective.

Actual savings, as opposed to the false savings blather spread about so widely by the abamination, usually arise when invulnerable managers stand up, and stop public employee union's excesses. Almost all of those union excesses comprise Fraud, Waste, Theft, or Abuse, should be prosecuted as such, but never are, and cannot be, for the same reason Charlie Rangel will get his hand slapped, instead of jail time.

Deleting the precise details of this paragraph's sentences about a public employee observed jumping down into an extremely important job site, telling his workers to "kill this job again" or expect the 12 hour daily Over Time days for all union members on site to stop, (costing US taxpayers $1,000,000 per day) is, I admit cowardice. The taxpayer hero,sitting atop a locker, said: "I have been looking for you, come with me." Millions saved, no prosecutions, no retribution against the innocent heroes then, or now, decades after a near treason financial crime, when names and places would give public employee union members engaged, then and every day of my life, in protecting their member's fraud waste and abuse, a thread to pull, to harm heroes still protecting the lives of US military people, certainly put at risk by union excesses.

The four public employee union members and their shop's co-conspirators, had apparently deliberately spoiled the ongoing installation at least once, by installing studs into a close fitting piping part, guaranteeing it's return, for refitting when it could not be installed into the confined space that required it to be installed without it's studs. The delay cost up to $1,000,000 per day, and endangered the lives of crew members in a multi-billion dollar asset. It is repeated every day of our lives, extorting union overtime pay.

That huge public employee union work force destroyed their unique industrial capacity. The end of 15,000 union member's jobs, and impoverishment of their entire region's peoples followed, as socialist union baiting night follows sunlit free market days.

I challenge any authority/media to simply walk with me, at any government site, public, or classified, and observe a dozen provable union excesses that endanger the public, our military and our Republic, for unearned pay and benefits.

In the meantime, a legal executive order can allow all government employees to choose which 8 hours they take, as unpaid furlough each pay period with performance during this financial emergency required for their personnel evaluations. It will begin the fiscal discipline US taxpayers require. A little thought will extend those legal furloughs to institute the four day government week, with vast savings from shutting down buildings hardly used anyway. WakeUP!

Posted by: WastingtonDC | November 21, 2010 3:18 PM

1) Get us out of the wars IMMEDIATELY and trim the defense budget. Disgust over Bush's idiotic wars is the entire reason a Democratic congress was elected in 2006 and a Democratic president in 2008. The fact that these "Republican" problems did not abate but remained business as usual cost the dems the house in 2010.

2)Tax the living hell out of all imports. Make the import tax flat-rate and across -the-board. We have lost all of our real jobs to outsourcing.

3)Completely stop mandating/subsidizing ethanol. It uses more energy than it returns, it contributes to worldwide famine, starving millions, and it destroys one of our few remaining EXPORTS.

Anything short of this is spitting in the ocean.

Posted by: jeff20 | November 21, 2010 12:31 PM

In my business as an architect we went through three recessions by all taking a ten percent paycut across the board-including owners and partners. No conferences, no expenses, and no frills.We kept the business intact and when the market recovered we recovered and thrived. How about the entire government structure taking a two percent paycut...everybody. I wonder what that could do?

Posted by: rms1042 | November 21, 2010 11:03 AM

The provincial government of Ontario made major strides in management reform during the 1990s, in both cutting their workforce AND increasing the efficiency with which programs were run. But in order for this to work, the Congress would have to be willing to give up a lot of power, and they're not very good at that. Congress and Administration will only step up to the task of managing the Federal government's programs and personnel more efficiently when they are forced to by enactment of a constitutional amendment requiring that the Federal Government's budget be balanced- like what is required by most states. This could have been done a long time ago, even during the Cold War. There should be a requirement that a two-third majority of both houses would be required to enact new programs or expand existing ones beyond levels currently funded, and the same with exemptions to the tax code. Within five years, the Federal budget would be balanced.

If the Federal budget continues to explode, we won't have any money left for entitlement spending at all. Modest trims now are the only way to prevent draconian cuts later. I hope that these newly elected Tea Party people will look at all parts of the Federal budget, including defense, like Ryan and Paul are advocating.

Posted by: armyofone | November 20, 2010 7:42 PM

The root cause of the Federal Government's inability to function (cf. Katrina and Wall Street Bankers and Bernie Madoff) is Congress. Congress proposes some new, expensive function for government to do. It is left to the Executive Branch to figure out what Congress was on about when it passed the enabling legislation. It is left to the Executive Branch to organize, staff, and ask for funds to run the function as the Executive understands from reading the legislation what it is that Congress proposed. Then, if delivery of the services or goods turns out to be less than optimal, who is in a position to argue for reforms in the event anyone in the government gives a hoot about whether the function is fulfilled or not? Some members of Congress (and Senators) will pick some government function and call for its reform or repeal or cutting its funding. Do we really want fewer meat inspectors? Do we really want filth in our food supply? Of course, some business operators would be delighted to deliver filth and charge for wholesome. The government is the only entity that is able to counter that way of operating. On the side of businessmen, some in Congress (and the Senate) call rule enforcement job-killing nanny-state behavior that costs a lot, puts little trust in business operators, and imposes burdensome requirements on the manner in which businesses operate. Meanwhile, the staffing is high when compared to effectiveness. And plenty of money is spent accomplishing little to nothing. For decades on end. Congress occupies itself fund raising and bashing the opposite party.

Posted by: BlueTwo1 | November 20, 2010 5:32 PM

No. START with the bloated salaries, exclusive health and retirements, and special travel benefits of Congress.

Posted by: pjohn2 | November 20, 2010 3:50 PM

To really cut spending, we need to think differently, and put in place procedures to make correct decisions about spending and taxes routine. A way to start is to go through the entire budget line-by-line and determine which expenditures are national priorities, or just local issues. I estimate there is at least $160 BILLION per year in Federal spending for local issues that can be cut, or allocated fairly by giving all Representatives an equal share and Senators a double share. At $160 BILLION, Representatives would each get $300 million and Senators $600 million to decide on each year. They can choose to:
A) Vote to cut all or some spent for local issues, or use their share to
B) Provide a tax cut or credit for their district or state alone, or
C) Choose how the money is spent on something that benefits their district, or
D) Give it state or local legislators to spend, or
E) Give it to a Federal agency to spend.

Many would choose spending cuts, or if a majority didn't agree then they would choose tax cuts or worthy projects for their district. This procedure divides the local money evenly regardless of which committee a legislator is on, or how much seniority they have. It creates a self-reinforcing pressure to declare currently untouchable parts of the budget as local issues because the pool of money that is divided evenly grows as more and more of the budget is identified as "local".

Is welfare a national or local priority? Is a particular highway or airport or border fence or military base a national or local priority? Each time an item is declared "local" the shared pool of money grows that each legislator can personally allocate, or Congress can cut. Of course GAO accountability would trace spending so the next election could ratify or reject these spending decisions, and people would get out and vote when their legislator could personally influence so much spending or tax cuts. If all the local priorities in the Federal budget were identified and the money either cut or allocated this way, the votes to defund Federal agencies would be there - and the size of the Federal government would be cut. As certain districts and states choose lower taxes instead of their share of Federal dollars, businesses and people would move there and put pressure on the others to also lower taxes instead of spending so much. This mechanism uses human nature to push down federal deficits, and would also work at State and County levels. Instead of individual legislators being powerless against deficits and poor spending choices, this change empowers each one such that elections would matter to each district to end voter apathy.

Posted by: DMBicksler | November 19, 2010 10:24 PM

Light asserts there are now at least 7.6 million contractors comprising a “hidden” workforce that must be cut. Light is wrong. His own researchers have acknowledged his estimates of the size of the “hidden” workforce do not reflect the actual number of contractors working on behalf of the government. Rather, they reflect the economic ripple effect of government contracting—the economic and employment benefits generated as a result of business growth. Light generated this flawed figure by misapplying the Commerce Department’s Regional Input-Output Modeling System (RIMS), which estimates the impact of a dollar spent on a local economy. That means Light’s assessment of the economic impact of a dollar spent on contracting doesn’t just measure the number of jobs created as a direct result of a government contract. RIMS also measures the the multipliers associated with those new jobs, such as the nearby restaurants and dry cleaners that can now hire more employees because of the patronage new workers at a certain location generate. As a result, a RIMS analysis reflects the full range of employment impacts, not only contractor and subcontractor workforces that are directly hired as a result of a federal contract award. Thus it is inaccurate to say for every federal employee the government employs three contractors. Furthermore, if you accept Light’s estimate as true, then the government is getting quite a deal on those contractors because for less total dollars expended on personnel, the private sector is providing the government with three times as many people.
-Elise Castelli, Media Relations Manager, Professional Services Council

Posted by: ECatPSC | November 19, 2010 5:24 PM

Social Security is related to Federal budgets and to the deficit.

For decades the Government has been collecting more in Soc Sec taxes each year than the Government paid in Soc Sec benefits. Instead of investing this excess cash flow in assets than be resold, the Government spent this excess cash each year on other Government programs and gave the Soc Sec Trust Fund Government IOUs. These IOUs have been low interest loans that have subsidized other government spending. These IOUs to Soc Sec have not been counted in budget deficits and are over and above the official US debt.

Now, for the first time Government is collecting less in Soc Sec taxes than it has to pay in benefits. In theory, this just means the Soc Sec Trust fund starts cashing in some of the IOUs that have been piling up for decades.

Government's problem is that repaying the IOUs turns positive cash flow to negative cash flow. This is like someone took out a reverse amortization mortgage on their home with no payment due for ten years. They bought toys, travelled and ate at fancy restaurants using borrowed money until the loan payment became due.

Now, Soc Sec needs Government to start paying it's IOUs, but Government doesn't have any assets to resell to pay the IOUs.

To repay IOUs, the Government has three choices:
(i) cut other Government programs,
(ii) increase taxes, or
(iii) borrow more money from somewhere other than the Soc Sec Trust Fund.
The fourth solution is to default on the IOUs, which means reduce Social Security benefits.

Note, I'm not blaiming either political party more tan the other. Government was doing the same thing no matter which political party was in office. Neither party ever resolved the problem by investing the excess cash flow in real investments that can be resold to pay the IOUs. Both parties spent the money and gave Soc Sec IOUs that are due now.

What to do?

Most Dems appear to want increase Soc Sec taxes substantially for the "rich", and reduce benefits somewhat for the "rich." That would postpone the date the IOUs become due by allowing lower benefits to be paid out of higher Soc Sec taxes each year. If you raise Soc Sec taxes high enough, it even creates more positive cash flow Government can borrow giving more IOUs. Then, you don't reduce other Government spending, but the problem keeps getting bigger and bigger, like borrowing $200,000 to repay a $100,000 mortgage.

Republicans seem to favor some combination of reducing benefits and cutting back other Government spending to start repaying IOUs.

Have we heard this dispute between the two parties before? Higher taxes vs. spendng cuts. In the past, the result has been more borrowing as a compromise. Will that be the result again? Will lenders let it be, or will the US be the next Greece or Ireland? Stay tuned.
It is, however, disengenuous to say that Soc Sec has nothng to do with the national debt.

Someone should go to jail.

Posted by: jfv123 | November 19, 2010 4:23 PM

Food for thought:

1. The U.S. health care system is typically characterized as a largely private-sector system, so it may come as a surprise that more than 60% of the $2 trillion annual U.S. health care bill is paid through taxes, according to a 2002 analysis published in Health Affairs by Harvard Medical School associate professors Steffie Woolhandler and David Himmelstein.

2. Social Security adds to the deficit Reality: It's not just wrong—it's impossible! By law, Social Security's funds are separate from the budget, and it must pay its own way. That means that Social Security can't add one penny to the deficit.

3. Benefit cuts are the only way to fix Social Security. Reality: Social Security doesn't need to be fixed. Baby boomers were being planned for decades ago.

But if we want to strengthen it, here's a better way: Make the rich pay their fair share. If the very rich paid taxes on all of their income, Social Security would be sustainable for decades to come. Right now, high earners only pay Social Security taxes on the first $106,000 of their income. But conservatives insist benefit cuts are the only way because they want to protect the super-rich from paying their fair share.

4. Politicians forget to tell the news media privatizing Social Security will add $700 billion to the deficit annually for the next 20 years.

5. Medicare is NOT free. Millions of people using medicare insurance STILL pay into medicare insurance every month.

6. The military industrial complex requires 60% of every tax dollar.... way tooo much money.

Posted by: rheckler2002 | November 19, 2010 2:43 PM

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