Politics

Obama Wants to Cut Social Security: What You Need to Know

unemployed:      2.0 to 2.5[8] (e.g., jobs program like WPA, CCC, etc.)

Once you have a stimulus plan you like, contact your Representatives and Senators and tell them to support your stimulus plan (and, if you agree with me, oppose the Chained CPI change to Social Security).

How I Would Fix the Economy

Here is my idea to get our economy back on track, with full employment and erasure of the output gap. To come up with my plan I used data from various polls about what type of programs a majority of Americans would support.

I also tried to take into account the current political realities and the fact that a group of Congressional Republicans continue to block further stimulus efforts.  My stimulus bill is slanted toward stimulus ideas that Republicans should support. The following aren’t necessarily ideas I support or endorse, simply my ideas for something that would work given the current political climate.

My stimulus bill spends a total of $1.35T through a combination of tax cuts and spending and has a fiscal multiplier of 1.77, which means it will increase GDP by an estimated $2.4T.

Type of StimulusMultiplierGDP IncreaseDescription
Bipartisan Stimulus
$500B in infrastructure spending1.5$750BThe American Society of Civil Engineer’s 2013 report card gives the nation a D+. This spending will help improve our score.
Republican Stimulus
$125B in military spending.60$75BThis will reverse the sequestration cuts and Obama’s previous low-growth military budgets and increase spending levels beyond that.
$741.2B for a full payroll tax holiday1.085[9]$804.2Eliminating the payroll tax for both employees and employers will give workers more money to spend and make hiring Americans cheaper for employers.
Democrat Stimulus
$300B in additional discretionary government spending1.35$405BThis will reverse the sequestration cuts and help to restore budget levels close to what Democrats originally requested.
$23B increase in Social Security payments1.75$40.25BInstead of cutting benefits by $23B, let’s increase them.
$162B jobs program2.00$324BWhat better way to get people back to work than by getting them back to work?

My stimulus bill has $1.351T in spending that equals $2.398T in economic output, enough to close our current output gap. We have $500B in infrastructure spending that I think both political parties can get behind. The American Society of Civil Engineers gives the nation’s infrastructure a D+ and says we will need $3.6T in investment by 2020. According to a 2013 Treasury department report, 84% of Americans support increased infrastructure spending. Everyone should be able to support this. If you are business owner of, say, a trucking company, you should be able to support this. Better roads mean less wear and tear on your trucks and improved highways mean less travel time. If you are an out-of-work construction worker, more construction jobs will be a welcome thing. If you own a restaurant where a new construction is happening, the influx of work crews during the lunch hour should be welcome business. The same 2013 Treasury report summarized numerous studies showing huge returns on investment for businesses and gains for the middle class due to more jobs. A win-win for everyone.

For the Republicans, we have a $125B increase in military spending and a $741B full payroll tax holiday. The military spending would reverse sequestration cuts and Obama’s low-growth budgets plus add some more spending on top of that. We also get a full payroll tax holiday for both employers and employees. We have tax cuts that give workers more take-home pay as well as cuts that make hiring US workers cheaper for businesses. The Republicans should like the tax cuts that go to businesses, and the Democrats should be able to accept that because workers are also getting a tax cut.

In return for military spending and tax cuts, the Democrats get $300B in additional discretionary government spending to restore the budget to pre-sequestration levels. Considering that Wall Street and the banks are still running amok, I have some ideas on how some of that $300B can be spent!

The Democrats also get $162B for a jobs program. This program would temporarily hire anyone willing and able to work at a reasonable wage, say $10 per hour. Democrats should like this program because it directly helps out the unemployed by providing jobs, and Republicans should find it acceptable because the unemployed are working for a wage, not being given a handout. A program like this would also have a majority of the public support it. According to a 2007 survey,[10]  53% of the public supports the statement “The federal government should provide jobs for everyone able and willing to work who cannot find a job in private employment.” With the economy the way it is now, I suspect the percentage may have gone up, but am unable to find updated data on public support for a jobs program.

Finally, I tossed in $23B in increased Social Security spending. The average Social Security recipient gets less than $15,000. With jobs scarce and raises to Social Security payments meager because of low inflation for the past few years, I think we need to talk about increasing benefits rather than cutting them.

My compromise bill has $500B in bipartisan spending, $866B in Republican-type spending, and $485B in Democrat-type spending. When taking into account the fiscal multipliers, you have a $750B increase in GDP due to bipartisan spending, $879B increase in GDP due to Republican-type policies, and $769B increase in GDP due to Democrat-type policies. So it’s almost equal, but slightly tilted toward policies Republicans should like and something I think everyone could get behind.

If there is some part of the bill you don’t agree with, that’s great. Just consult the handy chart and build your very own fiscal stimulus bill. Then contact your Congressional representatives with your ideas!