Published by El Nuevo Herald on July 30, 2015
According to the nonpartisan Congressional Budget Office (CBO), 2017 there are no funds to pay disability benefits, known as disability insurance. However, according to the law Deficit Control Act of 1985, it is presumed that the Social Security Administration will pay benefits to the disabled, even though the reserves to undertake such payment are exhausted.
The major source of income for Social Security are the payroll taxes. Indeed, although employment has increased recently, it is not enough to collect the money needed in order to be able to pay retirement benefits, survivors or disabled.
The increasing productivity is an important factor in this respect. It happens that productivity is the worst enemy of employment. To the extent that continuing technological advances, productivity increases, but employment decreases. So, they are inversely proportional.
For example, now the online negotiations on the Stock Exchange are faster and more numerous, but have left without jobs all manual operators. Likewise, we see more letters but less postmen, more news but fewer reporters, etc., etc.
Realistically, the most effective way to create jobs is to invest in America, not in other countries.
After the crisis of 2007-2009 and until 2012, there was a significant decline in economic activity, which resulted in the tax expense grew disproportionately while revenue decreased dangerously.
Because of that respectable deficit, the US public debt reached 74% of gross domestic product (GDP), becoming in the second largest step after World War II. Although the average of that debt in the last 50 years has been 38% of GDP, it is estimated for 2025 will reach 78%.
Many even believe that something similar happened in Greece, by having high taxes, massive debt and welfare system too generous. Of course, there are important differences between Greece and the United States.
Greece had contracted its debt in drachmas, but now owe money in euros, which means that control of the Central Bank lies with Europe. In contrast, the US Federal Reserve knows that necessarily they are going to buy US government bonds.
In fact, Greece can not even ensure that the European Central Bank (ECB) will purchase all Greek bonds that European banks have acquired. However, the ECB has been buying Greek bonds, but conditioning the country: in fact, has "suggested" to Greece hotel taxes increased from 13% to 23% and in the case of restaurants, from 6.5% to 13% .
So, it seems that Greece would jump to some sort of fiscal cliff, where they increase taxes and must cut spending.
Fortunately, the situation in America is different. According to the projections of the Congressional Budget Office, if we want the debt for 2040 maintained at least at 74% of GDP, we should increase revenues by 6% or decrease expenses by 5.5%.
That additional contribution of $ 210 billion would be income or expenditure of approximately $ 650 per person per year, something not too hard to achieve. For example, betting less lottery really means more than $ 650 annually.
There are sectors who believe that rejecting Obamacare will solved the problem. It is quite the opposite.
Repel the Obamacare will increase the deficit by $ 137 billion over 10 years, mainly because the net savings that serves as provision for current health coverage would decrease considerably, in addition that 23 million young people would remain uninsured by 2017 .
Actually, the US economy is strong, despite comments and partisan interests.
For example, the Dow Jones hit a record high of 18,000 points this year, when in 2009 it was 7,900. The S & P 500 index managed a score of 2,100 while in 2009 it was only 805.
And the fiscal deficit is now only 2.7% of GDP, very different from 2009, when it was 9.8%.
If this is not economic improvement, how could we call it ?
Economist and journalist.
BenSales@att.net
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