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Health-LiveI am in the hospital with my wife of 10 years who has just gotten her gender reassignment surgery. AMA!

Mar 22nd 2017 by ashmonster • 42 Questions • 7327 Points

I am a federal budget analyst. My focus is macro fiscal policy, including the main drivers of spending and revenue, deficits, and debt. I am happy to talk about the Trump skinny budget, and I am happy to talk about the American Health Care Act, though I'm not a health policy expert. The opinions expressed here are my own and do not reflect those of my place of employment.

Q:

Has this changed how you personally identify your sexuality?

A:

Thanks for the great response. Why don't we (the government or people who can) close the fiscal gap then?


Q:

Actually, no! I identify as bisexual with a female bias, so it works really well for me.

A:

I just realized I didn't give a good enough answer on this. Sorry about that. The reason we don't is that we can't agree, and there's still a long way to go to get there. Republicans don't want to do tax increases. Democrats don't want to do significant cuts to Social Security, Medicare, or Medicaid (the parts that are actually growing). So, that leaves us at a longer-term impasse.

But, all the stuff I said about the progress is still true.


Q:

So did thisisnotmyjob know she wanted to become a woman when you two met, or did that come later? In other words, did this start out as a homo- or heterosexual relationship?

A:

Isn't LIHEAP proposed for either drastic reductions or total elimination every year?


Q:

She knew since she was about 6 years old that she wasn't comfortable in a male body. When we met, she told me about it and she started hormones shortly after. To be honest, our relationship hasn't ever been homosexual in nature, since she's always been uncomfortable with her male parts. We haven't actually had sex yet.

A:

Obama's final year called for a reduction, but his first years called for large increases. Bush 43's first budget called for an 18% reduction. That's pretty drastic, but not in the realm of complete elimination. Budgets before FY1996 are not online, and Bush 41 and Reagan were before my time, so I couldn't answer that.


Q:

What are some of the reactions you've gotten from people regarding your situation?

A:

What's a step that Americans on both sides of the aisle would agree to that would help balance the budget?


Q:

Mostly positive! When she came out of work we were really surprised at how wonderful most everyone was about it. There have been some people who can't adjust to the change, they tend to avoid her. One or two keep using her dead name intentionally. But there hasn't been any outright hostility, thankfully.

Strangers for the most part either just assume automatically that she's a girl or they get confused.

A:

Great question. The answer is that most of the low-hanging fruit is used in deals. There just aren't trillions of dollars for things that each side says is fine. In order to get to a place, one side needs to have the ability to exert its will, or each side needs to be willing to do stuff it doesn't like. One of the biggest issues with growing polarization is that agreeing to the stuff you don't like is a much bigger deal. Bush 41 increased taxes. When's that happening again? For the Joint Select Committee of Deficit Reduction, Paul Ryan was one of the Republicans appointed. Not a chance in the world that he was going to accept big tax increases. Chris Van Hollen was there on the other side. Not a chance he was going to go for major Medicaid cuts.


Q:

In all, how much did you have to pay for this? Congratulations to you both!

A:

What are some of the more surprising things that the average American wouldn't know about major spending / how the government pays for things?


Q:

Her insurance thankfully covered a big chunk of it, but we still had a copay of about $6000 which included the surgeon's costs, anesthesia, and the hospital stay. She needed to get electrolysis to remove hair in her genital region beforehand, and the insurance didn't cover it; that was about $90 per session and she had I think 10 total sessions.

A:

I think that humans generally don't deal with percentages or multiplication well. And so even if we know how much things "should" cost (questionable), I don't think anyone intuits the multiplication of that across the population. So, when people hear, "The budget is $4 trillion," that sounds crazy. But when I tell you that Social Security and health care make up half of that, it's a little less crazy. In truth, I think humans (myself included) are bad at estimating everything until they're forced to make percentages add to 100. That's how people can think that foreign aid is 28% of the budget, when it reality it's (depending on whom you ask - this is an impossible question because the classification of what's really foreign aid is too murky) is anywhere between like 0.2% and 2%.

I'd check this out: http://www.cbpp.org/research/federal-budget/policy-basics-where-do-our-federal-tax-dollars-go


Q:

just cut it in half and fold it inside the bun

A:

So all those memes are way off?


Q:

after removing all the hair

A:

Which memes? Are you talking about the ones showing defense at over 50% of spending?


Q:

How was your experience of being married with u/thisisnotmyjob during her transition?

A:

Exactly. If your figures are correct myself and many liberals have been duped. I'm way less attached to being right than the truth. I'm so sick of the twisted misinformation.


Q:

A rollercoaster, but not a scary one. When she first started on hormones, she was an emotional mess for quite some time. As she continued through her transition, it was a challenge to help her keep an optimistic viewpoint about her future and especially to encourage her to be comfortable with her body as it changed. It took a while for her to go out in public presenting as female. Sometimes it took a lot of white lies.

There has been some sexual tension, but not much. Though we haven't had actual sex, we have fun however we can and are very intimate. It's a huge weight lifted for me now that she's had the surgery. I'm almost beside myself because in just a few months we can finally be together in the closest way possible.

Aside from the physical changes, the hormones have really affected her personality. She's still the same goofball but she's more outgoing and less shy. But her anxiety levels have taken off, and it has been the hardest part to adjust to, because I really don't understand it. I think though that the surgery will greatly improve that.

A:

The figures I linked to are correct. The image you see floating around is from the National Priorities Project. The percentages are correct, but they represent funding for only what's called the "discretionary" part of the budget - that which Congress actively debates each year through the annual appropriations process, rather than programs where the funding has already been agreed upon. The discretionary part of the budget is only about one-third of all spending.

The two categories are discretionary and mandatory. On the mandatory side is Social Security, Medicare, Medicaid, Food Stamps (that's another thing typically wrong the graph - it mentions food stamps, but it shows something hitting WIC), school lunches, unemployment insurance, some retirement things, and whatnot. On the discretionary side is most of what we think about when we think of government programs. It's WIC. It's Section 8. It's NASA. It's NIH. It's the National Science Foundation. It's funding the arts and humanities. It's all the tiny things that get a little big of government help. And, because of Article I, Section 8, Clause 12 of the Constitution, that's where our military budget lives. The founders were very wary of standing armies, but of course it doesn't make sense to have a non-professional army.

At any rate, it is correct that the military is over half of what Congress approves every year, but I consider it deeply misleading, and I mention it whenever I see my friends share that graph on Facebook. It's true that we aren't debating Social Security and Medicare, and so the military is getting half of what we're debating, but the whole question is "what does XX say about our priorities," and current spending on mandatory programs need to be part of that question.

I similarly don't like the statistic "we're spending more than the next XX countries combined!" Yeah, well, we're also bigger than the next XX countries combined. That would be like complaining that California is spending more on police than all of New England combined. Yeah, well, its economy is bigger than all of New England combined. The reason we're spending too much is not because of what France is doing. It's because we don't need to be ready to go to war with the entire world at a moment's notice. It's because the threats we face are not the kinds that would require major troop mobilization. So, don't get me wrong - I still think 16% is huge. I think spending 1/6 of your dollars on the military is a lot. But it's not half.

In general, if something feels crazy, you should see what a few fact checkers have to say. It might be true. Some really crazy things are true. But some have been slightly twisted.


Q:

How much of an element of voice therapy was there to the process and how much did she value that as part of her transition?

A:

Exactly. If your figures are correct myself and many liberals have been duped. I'm way less attached to being right than the truth. I'm so sick of the twisted misinformation.


Q:

We've done a few sessions with a speech therapist but ran out of the funds for it. It is very important to her, though, and we will either continue with the speech therapy or get her vocal feminization surgery if that isn't enough.

A:

This is all to say that there's currently a budget for travel and for protection, and it's not difficult to move around money to make it work. I promise you that this money was appropriated.


Q:

Do you ever get/feel negative stigma from family or friends? I know that can somewhat be controversial to some people. (P.S. I think its awesome you two found eachother and are happy! Love is love man)

A:

What is your personal opinion of the Trump budget, as presented yesterday?

E: added "personal"


Q:

Her mother took a long time to adjust to the change, and she's had other family members who cut her off completely. But for the most part her family, especially her brothers and father, has been very supportive and understanding.

My parents, though they're lesbians, also took some time to adjust to the change. They still sometimes accidentally use her dead name. I think it's more of a generational thing than purposeful ignorance; they're just not used to transgender people. My sister though has been incredibly supportive.

A:

I don't like it's priorities. We currently spend about 16% of our money on our military, and I don't think we need to spend more than that. If we want to spend more money on military, I don't think it should be at the expense of programs that keep people out of poverty.

That said, this was a very incomplete document. We'll get a lot more information in the bigger budget in May, and so we'll get a better sense of his priorities, which may look different by then.


Q:

Did the hormone therapy really throw her for a loop? What is the recovery time after surgery? What are the legal challenges of the change since you are already married?

BTW, y'all look happy!

A:

Thanks for the reply!


Q:
  1. Yes, definitely. Aside from the emotional wreck that she was when she started, it's really changed the way that she cogitates. She says it's more of an instinctual/emotional thought process instead of thinking more logically. She says "I still think of the shortest most logical path to a solution but now I'm also thinking more about the long-term effects. I'm also far less spacially aware. I used to get to level 12 on Tetris; now I can barely make it past level 6."

  2. In the hospital for 4 days, then four weeks of home recovery which includes doctors visits and dilation and other things.

  3. Thankfully, since we're in California, the domestic partnership that we have is still in effect even after she got her name and gender legally changed. We are getting officially married at the end of this year (she wanted to wait till she was legally a woman).

Thank you!

A:

Sure - hope you found it useful!


Q:

1.) Considering what kinds of replies you imaginably might get, how much deliberation did the two of you put behind deciding to open up such personal parts of your lives to strangers on the internet?

2.) What was your intention/goal? And do you think you're achieving it?

3.) Congrats :) And thanks for sacrificing your privacy to educate many who wouldn't otherwise look. :D

A:

I did. Just yesterday I was wondering what sorts of things budget analysts think when reading such an unusual budget. Turns out, in this case anyway, at least one of them thinks more or less what I thought (with far less swearing!).


Q:
  1. Weirdly enough, she was looking forward to doing an AmA after the surgery. She used to be very reserved about being transgender and didn't want people to know, but in the last year or so she's gotten more comfortable with the idea. She also said that she thinks it's very important to get more information out there and answer questions so people can be more accepting of transgender people.

  2. The goal for her was for her outward appearance to match how she feels on the inside, so I think we're set :)

  3. Thank you! Education is very important when it comes to these issues.

A:

Haha, well, this is my measured response the day after. Yesterday was a very long day with a lot of unhappiness. There are a lot of things I'm willing to compromise on. Food, shelter, and heating are not among them.


Q:

10 years of no sexual activity at all?

EDIT: I wrote this 4 hours ago. she had not stated that she had been raped until after I had posted this.

A:

So is my impression correct that the GOP and WH are trying to sell this budget in terms of the 'trickle down' theory that tax cuts for the richest will result in job creation?


Q:

I wouldn't say no sexual activity, just no penetration. We are still intimate in other ways.

A:

We'll have a better answer to that when we see the bigger budget likely in May. This budget only had discretionary spending (about 1/3 of the budget), and it didn't have any tax policy.

That being said, President Trump has been pretty explicit about the fact that he believes his policies will lead to higher growth, which is the concept being supply-side economics - that there will be a change in the underlying supply of labor in response to changes in tax policy. His tax cuts he proposed on the campaign reflected that. So probably, but we will have to wait to be certain.


Q:

Where are you going to put your penis?

A:

Republicans have preached that reducing taxes will boost the economy and net tax revenue will remain the same. In you experience and analysis, have you found this to be true?


Q:

In her vagina, mostly!

A:

Stealing from an answer in another place, the concept behind supply-side economics is that taxes are so high, that they disincentive work, and so, while cutting them loses revenue, it gains back at least some from increased work.

So, if your taxes are cut, you earn a little bit more per hour worked, so you might work more. But, on the flip side, you might decide that you can actually work less to get the same income, so you might work less. That's the concept, and the question is behind the income effect and the substitution effect.

It's tough because most people can't dial up or down their work. I have a salaried job. I can't go to my boss and say, "Hey, I'd like to work 5% more hours, so please pay me 5% more."

At some level, this is certainly true. If you went from 100% taxation to 90% taxation, you'd probably get more work. But from 39.6% to 35%? That's less clear, and there isn't evidence to support it. We certainly didn't have kick-ass growth during the Bush 43 era, and we certainly lost a lot of revenues. It might very well have been true for Kennedy going down to 70 percent. But that top tax rate was hitting so few people, it's hard to imagine it really had a large change. Again, it depends how many people are being affected, how much their incentives are changing, how much they're able to change their work, and how much they actually do.

Reagan's own budget group, in his final year, estimated that his first round of tax cuts cut revenues by 26%. Subsequently, he raised taxes by 14%, relative to that new base.

In truth, labor is not being supplied by prime-age folks at the rate we would expect, and it's unclear why. I don't believe it's exorbitant benefits because Europe does better than we do. Here's a very long report on the decline in prime-aged male workers: https://obamawhitehouse.archives.gov/sites/default/files/page/files/20160620_cea_primeage_male_lfp.pdf


Q:

I have now cringed so hard that I think I sucked up part of my office chair cushion into my ass.

A:

Wow, that was much to read and I still contend that the author does not understand what happens in the shadow economy as he calls it. How does he count the legal immigrant that collects the check and distributes cash to the five undocumented immigrants that work under him. How does he count the crews I compete against for construction work that are completely off the books. Do you think the guys in the hood answered his survey honestly?

I have really enjoyed your explanations of fiscal policy. Thanks!


Q:

Yeah, without going into the gory details, the glans and other sensitive parts of the penis become donor material for the reconstruction. It's a really fascinating process.

A:

I'm glad you read it! That's a great point, and I couldn't tell you. All I know is that the government uses advanced statistical methodology to try to estimate and account for non-response bias, but we obviously can't tell. There's frequently no natural experiment to see how well the methods did.

I couldn't really expound beyond this because this isn't my area - I just know that the author, Jason Furman, is incredibly highly respected (and Matt Damon's freshman year roommate in undergrad) and is a person who does all he can to make sure he's not biasing data through omission.

Thanks! I'm glad you enjoyed it!


Q:

How do you think the cuts will affect agencies like the National Parks Service and the U.S. Forest Service?

A:

Well, for what it's worth, the budget will not pass. It's just an initial place the Trump administration is digging in for leverage. I still think it's hard to tell what they're going to do. Bush 43 more or less kept non-defense discretionary growing with inflation, and just boosted defense greatly.

I personally think that Democrats will shut down the government before letting the non-defense discretionary numbers go below what are called "sequestration levels" (the second caps, referenced in the first question above). But it's really tough to figure out political pressures.

Right now, the topline levels are essentially flat from FY(fiscal year) 2016 to 2017 to 2018, and that's on purpose. The two-year deal that boosted defense and non-defense for FY2016 and FY2017 gave more money in the first year than the second in order to create levels that would facilitate a future deal and make it harder to go below (Murray/Ryan did that as well): http://imgur.com/a/7j0D1

So, people who want more funding are in a good negotiating place for FY2018 funding (what Trump is proposing), but it will be harder in the future years because the blue bars will keep growing with inflation, and it's harder to get an increase than it is to keep something flat.


Q:

Wow, thanks for such a detailed response!

A:

Sorry I didn't got into more detail about the two you asked, it's just that there are a lot of unknowns right now. If the topline levels are relatively flat, they might not see much cutting. It's just hard to say at this point. And the specific cuts won't come to pass in the coming year (unless the politics of the budget world change dramatically).


Q:

Do you think trickle-down economics works or would you have a middle-out approach that targets an increasing demand that leads to increasing supply?

A:

The concept behind supply-side economics is that taxes are so high, that they disincentive work, and so, while cutting them loses revenue, it gains back at least some from increased work.

So, if your taxes are cut, you earn a little bit more per hour worked, so you might work more. But, on the flip side, you might decide that you can actually work less to get the same income, so you might work less. That's the concept, and the question is behind the income effect and the substitution effect.

It's tough because most people can't dial up or down their work. I have a salaried job. I can't go to my boss and say, "Hey, I'd like to work 5% more hours, so please pay me 5% more."

At some level, this is certainly true. If you went from 100% taxation to 90% taxation, you'd probably get more work. But from 39.6% to 35%? That's less clear, and there isn't evidence to support it.

Reagan's own budget group, in his final year, estimated that his first round of tax cuts cut revenues by 26%. Subsequently, he raised taxes by 14%, relative to that new base.

In truth, labor is not being supplied by prime-age folks at the rate we would expect, and it's unclear why. I don't believe it's exorbitant benefits because Europe does better than we do. Here's a very long report on the decline in prime-aged male workers: https://obamawhitehouse.archives.gov/sites/default/files/page/files/20160620_cea_primeage_male_lfp.pdf


Q:

I can't get behind trickle-down economics. It seems to me they could possibly work if you remove greed from the equation, but cutting taxes on the wealthy does nothing at all to my situation (below poverty level) and my boss just got a bit richer. A small business owner who needs seven employees to do her work is going to keep seven employees on the payroll no matter what rate her taxes are taken. Eight would just be too many, and if she can get away with paying minimum wage she certainly will.

Apple, admittedly an extreme example, has $246 billion cash on hand and 115,000 employees worldwide, yet they went to court last year over $2 million in unpaid wages for not allowing Apple store employees to take meal a rest breaks. They ultimately lost that case. Changing their tax rate will not result in higher wages, nor will it result in more people being hired. It will only result in further enriching the wealthy.

A:

Supply-side is theoretically on the individual rather than business side. Conservatives will make the argument that cutting corporate taxes is good for workers because they say that economics says that any tax on corporations is ultimately borne by workers or consumers (it does say this), but I've never been sold on that because if it were true that it were 100% borne by other folks, I don't think they'd actually argue so vehemently for lower rates.

But yes, changing the after-profit tax rate isn't going to suddenly create more demand for extra workers. That is absolutely correct. And they already got to write off that extra worker's salary for purposes of taxes anyway, so the argument extra doesn't fly.


Q:

How would you incentivize the private sector to invest more in job training, like Trump seems to want. And do you think Trump will do what needs to be done to make this happen?

A:

Businesses try to maximize the net present value of their profit, discounted to infinity (or at least the life of the current heads of the company). That is, they try to get as much profit over the period they care about. Currently, they do job training if they think it's helpful/if they need to (because there's a supply shortage, as during the dot com boom, rather than a demand shortage). A government policy that focused on that would be in changing the profit margins and thus the incentives for them. But we already let companies write off training and salaries as a business expense, so that's not it. We could pay them to do it! But then why not directly do it? The government actually has plenty of jobs training programs. Unfortunately, Trump's budget proposed to cut some of them. So, I'd be surprised, but you never know. We'll get more detail about all of his priorities in the bigger budget in May, which will go line by line through every account in the federal budget.


Q:

In your view, what are the biggest levers the government can pull to affect 1) spending and 2) tax revenue?

For example, while there is much focus on automobile standards for mpg capabilities, the majority of gasoline is used in industry, specifically by giant tanker ships. Are there any particular taxes that if changed would have a bigger impact on the budgets than the topics people commonly discuss?

A:

For taxes, the more money touched, the easier. So, consumption taxes hit everyone, and make a lot of money, but they're regressive. The raising just the top bracket will get less, but it's progressive. FWIW, we have a much more progressive tax system than most European countries, but a much, much less progressive benefit system (on net, thus being less progressive). A lot of European countries make a lot through consumption taxes and then much higher income taxes on poorer folks than we have, but then give out a lot more in benefits. That's not necessarily a bad way to do it, but people should just be aware of the politics of it.

For spending, half of our budget is just Social Security and health care, and another 16% is the military. http://www.cbpp.org/research/federal-budget/policy-basics-where-do-our-federal-tax-dollars-go

But in truth, it's a much tougher question because, excluding interest, health and Social Security are growing, and the group of "everything else" is shrinking: http://www.cbpp.org/research/federal-budget/program-spending-as-a-percent-of-gdp-historically-low-outside-social

So that poses a tough question. You can only cut the shrinking parts so much. Do you think we're currently spending the right amount per person with respect to health and Social Security? If yes, then you have to support more spending in the future because those, even outside of demographically-adjusted "excess cost growth," are set to grow for demographic reasons. If no (and you think we're spending too much), then those are the places to hit because they're the biggest.


Q:

This might be too broad of a topic but Ill give it a go anyways...

I contend that a representative govt. is almost inherently dysfunctional (to a degree) due to shifts in policy that occur every few years. Imagine a company that changes positions/focus/CEOs on a dime every few years. How can government programs succeed if down the line they get changed, reduced funding etc.?

Have you seen this happen to a significant degree or am I making too big a deal about it?

A:

I think that's certainly a very real thing, and bigger the bigger the issue is. For instance, we just that the Obamacare exchanges signed up fewer people this year than the previous year, which is the first time that has happened. It was the difference between the Obama administration pushing very hard to sign people up, and the Trump administration did not do anything. But we can see even more in enforcement of regulations. During the Bush administration, the Department of Labor scaled back on most activities, except for union busting.

I think it's pretty clear that having a single-party system would be more efficient in that changes would be done not for political reasons, there wouldn't be whipsawing of markets (as might happen with the health market - there's a reason some parts of Obamacare are still being phased in 7 years later), and there would be no one working to undermine laws. But I'm not really sure how to get around that, except with less frequent elections. And we don't want to make it toooo hard to pass laws.


Q:

I'm curious about your thoughts on income inequality. Do you believe it is a threat to the US and Canada's economies? Thanks for doing this AMA especially with the political climate!

A:

I don't personally like deep income inequality, but I don't think it's really a threat to economies that much. One thing that is pretty destabilizing is if more and more of the nation's income is through capital rather than through labor. Labor is a lot more reliable than capital, and so huge capital can allow for bigger recessions. In that sense, yes, but I don't think inequality itself is an inherent threat to the economy.

That said, interesting work from the staff of the IMF (of all places) seems to be making the case that high income inequality actually leads to lower growth (for ages, the construction was always "how much are you willing to impact growth to fight inequality?") https://www.imf.org/external/pubs/ft/sdn/2014/sdn1402.pdf

This actually makes some intuitive sense if you think about it. The more people that can actually buy stuff, the stronger the economy is. If you had an economy with 10 people, and 9 were destitute with 1 insanely rich, the rich person wouldn't need to be buying 10 microwaves. But spread that out, and you have more stuff bought.

Poorer folks have a higher propensity to spend, which is (a reason) why stimulus bills most target poorer folks. There's more money directly put right back into the economy.

But the conservative response would be, "Yeah, but the richer people invest, and that's worth all the growth." And that's why for ages the construction was always inequality versus growth. I've never bought that argument, but I'm not an economist. But we have evidence that that's likely not the case, so I guess there's that.

And, of course! It was actually what's been happening recently that finally pushed me too, along with a friend prodding me, haha.


Q:

Does a "stimulus bill" actually stimulate? If so, for how long and how far does it reach? Do all sectors get a boost or just some?

A:

The idea behind a stimulus bill is that, given a shortfall in demand, it will be temporarily plugged by a commensurate increase in government spending.

The government already has a bunch of what are called "automatic stabilizers." Check out figure 4 on the second to last page: https://www.cbo.gov/sites/default/files/114th-congress-2015-2016/workingpaper/51005-AutomaticStabilizers.pdf

These come from means-tested entitlement programs, i.e., entitlement programs that spend based on a formula, rather than a set amount determined each year, where your eligibility is based on your income. An example is Medicaid. If you lose your job and your income, you automatically become eligible. Another is unemployment insurance. (I'm happy to give more if you're curious). So, in a recession, lots of people lose their jobs, and the government automatically spends more. At the same time, because we have a progressive income tax, people pay less of their income in taxes, so they have more to spend. And in the extreme example, we give money through the tax code in refundable tax credits (the Obama stimulus bill created some of these and expanded some other ones).

As you can see from the picture, it deepened the deficit in bad times, and made it smaller in good times.

The point of a stimulus bill is to do more. So, well-targeted stimulus bills work. Ones that don't lead to more spending don't.

This isn't to say that investment isn't great, but it's not the purpose of a stimulus bill. The only way investment in a stimulus bill is "right" is if there's immediate hiring and building. This, by the way, is why all those infrastructure investment reports in 2010 showed as many jobs as they did.


Q:

Does a "stimulus bill" actually stimulate? If so, for how long and how far does it reach? Do all sectors get a boost or just some?

A:

Haha, thank you!


Q:

Thank you, I understand that now.

A:

Happy to clear that up - sorry I skipped too many words before!


Q:

what is your biggest concern about Trump's budget?

A:

From a conceptual standpoint, it's the deep cuts to and sometimes elimination of programs that keep people out of poverty, like LIHEAP and housing programs (and of course all the programs that he didn't mention which would be due for an average cut of roughly 15%). But because it won't pass, the actual worry is that I think it sets the beginning negotiations in a really tough spot.


Q:

Which do you think causes more problems. How much money is spent or how that money is spent?

A:

Well, I approve of spending money on things that I like, so I'll definitely pick the latter. Obviously there's an upper limit - the nation can't spend more than all of it's possible income. But the US is a low-tax and low-spending nation, compared to other economically advanced countries. We could do less, but we could also do a huge amount more without even getting to the average among economically advanced countries.


Q:

Good answer, Thanks.

Follow up. Q: How do you account for value when priming the spending pumps at the center of an economy the size of the US?

A:

Thanks! How do I personally, or how does the US government?


Q:

Personally. When writing the follow up report. What are the success markers?

A:

It really depends on why we're spending the money. Just yesterday, OMB Director Mick Mulvaney was talking about the success of nutrition programs and said (incorrectly) that after-school nutrition programs weren't helping performance, and so they were failing. But sometimes we just give people food so they don't starve.

And, in fact, the government is often an entity that deliberately makes low-return investments. Roads and bridges between major areas don't need government funding to happen. But that bridge connecting those 50 people with the rest of society? That's something big. To use the Post Office as an example, NYC could run it its own independent, NYC-only post office, and stamps would be cheaper. But we have a national rate, even if you're going to Alaska. Think of how much it would cost to send stamps between places in Alaska if we had a localized stamp rate.

Anyway, this is all a long way of saying that it depends on the project. If the goal of something is to stimulate the economy, that's what you look at. If the goal is to improve test scores, that's what you look at. If the goal is to help people get jobs, that's what you look for. If the goal is just to help make people's lives less miserable, that's what you look for.

Anti-poverty programs are pretty big for me, so I assess how many people they're keeping out of poverty. I assess how much they close the poverty gap for each dollar spent.


Q:

Personally. When writing the follow up report. What are the success markers?

A:

I realized I misread your question! This has to be a priorities question, I think, and not one that budget wonks hold a special answer to. Economists will give one answer, and there are certainly programs that economists will agree make sense (automatic stabilizers and stimulus spending - see here: https://www.reddit.com/r/IAmA/comments/5zzssm/i_am_a_federal_budget_analyst_with_a_focus_in/df2ghlv/). But there's no reason that our government's goal should be maximizing economic growth at all costs. The point of growth is for that to translate into utility for people. There's no point of growing if people don't get to reap the benefits. So what about the programs that don't really help growth, but we consider necessary for civilization, like parks and some elements of the arts? So, this is why I think this ultimately becomes a values question.


Q:

How would one get into your line of work? Are you hiring any interns or entry level positions for newly grads?

A:

Do you mean politics specifically, or the federal budget world?


Q:

Dead serious....where does the money go. They keep saying the US is the richest country in the world but everything seems to be old and falling apart. I am an average person and the government takes a good chunk of money out of my paychecks but I can't see the effect it has or where it seems to magicially vanish too.

Also how corrupt is the government in your opinion?

A:

By corrupt, do you mean, like as a kleptocracy? Or just wasteful?

On where our tax dollars go, I'd start with this: http://www.cbpp.org/research/federal-budget/policy-basics-where-do-our-federal-tax-dollars-go

Half of our spending goes to Social Security and health care. Another 24 percent goes to military and vets. That's 75% right there, so if you like those things, I think it's harder to think of it as largely a waste? Another 6% is interest, which we have to pay, and another 10% is other social safety net, which leaves approximately 11% on all else.

The US has a lot of money that the federal government doesn't touch. Among economically advanced countries, we are a low-tax, low-spending country (by a lot).

I'd also say that a lot of times we don't see the effects of government. Do we see it when the Consumer Product Safety Commission makes a dangerous product illegal, and then we don't die? Or do we just notice it when the government isn't doing it's job and things go wrong? Do we see it when the USDA successfully keeps us from getting poisoned? So, I think the idea of government use is harder when talking about the remaining bit of the budget.


Q:

Is social security fixable for my generation (born 1990's)? If so, how? If not, why not?

A:

Great question! Social Security indeed is projected to have a net liability, with the Trust Fund running out of money in 2034 (if you trust the SSA actuaries, or a little sooner if you think CBO is more correct). After that, it will begin to pay out money only as it takes it in, which would be roughly a 25% cut in benefits. So, it's definitely not going away, but due to demographic issues, unless changed, all of our benefits will be significantly lower than they would be if we don't do anything.

There are four options for dealing with it: 1) Raise taxes and put them into the SS Trust Fund 2) Cut benefits (but that's the same as letting them get automatically cut) 3) Some combination of 1 and 2 4) Dump money from the General Fund (all of our other taxes) into the SS Trust Fund, and pay benefits through deficits.

The fifth option is magic unicorn growth.

Point four might seem like a trick to you, but it's a real option. Many times when we've had to plug the Highway Trust Fund (due to issues about how we wrote the gas tax, which pays for the Highway Trust Fund and the LUST Trust Fund (fun name)), we just transferred money into it. Section 257(a) of the Balanced Budget and Emergency Deficit Control Act of 1985 tells CBO to create the baseline to assume that all obligations can be met. What this means is that, even if Social Security were to be projected run out of money in the baseline, CBO would project the Trust Fund to pay out benefits as if it had all the money. CBO projects this in the creation of its deficits, off of which all estimates of how much things cost are based. In other words, deficits are projected to be "artificially high" because they assume we're already going to pay out all of our SS and Medicare benefits. That's why the statement "We're running out of money because of SS" and "We can't afford to pay SS benefits because we're running out of money" are incompatible.

So, what this means is that, deficits already assume we're spending that money, and so a bill that instructs the Treasury to put money into the SS Trust Fund is actually costless, relative to the deficits already assumed. This means there's not budget point of order against that. What's more, it means that CBO will call anything less than that a benefit cut relative to baseline assumptions. This means that the politics are even more strongly in favor of Social Security than they might otherwise be.

I do not necessarily think it's too unlikely benefits will be cut some, but, again, at max they're being cut around 25%. And I think it's entirely possible that there are no cuts when the time comes around.


Q:

Wow, thank you for the detailed answer. Even if I don't enter economics as a career, I think I'll always be interested in these kinds of issues. I've heard often about how military spending is too big, but I don't think I've ever heard about arguments for the other side beyond "cause 'murica," so these insights are helpful!

A:

Well, for what it's worth, I think that if you're at the point of defending a government program based solely on the job it creates employing, you're losing the argument. But that's a real thing, and that's part of the real political difficulty in cutting anything, but particularly the military (because members of the military are not viewed as simple bureaucrats).

It's just to say that there's no cut that doesn't have an immediate impact on real human beings.

I did not mean to dissuade you from economics, and I'm sorry if it came off that way. I frequently wish I had more of a background in economics and often consider doing a one-year Masters in Economics program. I just meant to say that it's difficult and sometimes quite competitive.


Q:

Oh, don't worry! At this point, my viewpoint is "explore everything and probably change my major 30000 times" so don't worry. Again, thank you so much for the detailed responses. This AMA is the most nerdy fun I've had in awhile.

A:

Haha, fair enough! And of course - I'm glad you found them useful! :)


Q:

Looking at current projections, where could you see the debt going to in the next four years?

Following the cuts of the EPA there were heavy opposing cries from citizens, how do the cuts of the EPA contribute positively to the government?

Was the amount of money cut really worth it?

A:

Debt net of financial assets as a percent of GDP is projected to reach 68.2% by the end of fiscal year 2017 (which ends September 30th). By the end of FY2021, it is projected to have increased very slightly to 70.7%, after which it is projected to increase a bit more rapidly, hitting 80.5% by the end of FY2027.

These projects assume now changes to current policies - that programs that need to be reauthorized are reauthorized in the same way, that we fund discretionary appropriations at sequestration levels and adjusting for inflation afterwards, and that existing permanent programs continue to work in the way they're currently set up. This also assumes no recession.

FWIW, the EPA policy is just a request from the administration, as opposed to a cut that's been enacted. Right now, Congress hasn't agreed to the overall amount of spending they want to happen next year. After that, it will need to agree to how much spending happens on the non-defense side. After that, the budget committees will file levels setting a maximum amount of spending for each appropriations subcommittee, and after that, the subcommittee that has jurisdiction over the EPA will write a bill with funding for the EPA. If Congress agrees to that, and Trump does, only then will we know the level.

I would be very surprised if cuts even close to that deep come to fruition - among other things, because I would be immensely surprised if the 10ish% cut overall to non-defense happens. This just sets to starting point for discussions.


Q:

Super late to the AMA, but are there any good books you recommend? Preferably in line with the topic at hand. Great answers, by the way!

A:

Haha, that's an important caveat, or else we could have gone off in all sorts of different directions. I'm glad you've enjoyed it!

Stan Collender has a guide to the federal budget that's really quite excellent. Unfortunately, it was last updated I think in the year 2000, so some things are a little dated. https://www.amazon.com/Guide-Federal-Budget-Stanley-Collender/dp/0847684032

This CRS report by Bill Heniff is absolutely worth reading, although it's pretty dense: https://fas.org/sgp/crs/misc/98-721.pdf

The tough thing about the federal budget is that there really are very few instruction manuals. A lot of the knowledge is passed through word of mouth and direct teaching. As I mentioned in other places, the budget world is very, very small, and much of it is very technical, and so there isn't quite as much content put out for non-budget folks.


Q:

My understanding is that before Trump's budget proposal, the USA already spends over $500 billion on the military alone.

What is the military going to do with an extra 60 billion?

A:

The specifics of where it would go aren't fully detailed, but there are always more projects that could be funded. There's always more R&D that could happen, and there are always more people we could hire. Allegedly there's a readiness gap, wherein the military feels that if we needed to deploy tens of thousands of troops immediately for a massive ground assault, folks aren't properly trained. And so funding would theoretically go towards that. And of course, higher pay is more competitive and can attract better people.

But, yes, this is a rhetorical gesture. You can tell because of how non-specific most of the DOD section in here on pages 21 and 22 of the PDF (15 and 16 of the report): https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/budget/fy2018/2018_blueprint.pdf


Q:

Since we have a debt based currency, over the long run will we have to continually grow the debt to sustain the currency?

A:

I'm sorry, I wish I knew more about monetary policy, but I really don't. But from what I know, I don't believe that should be the case among other things because we also control our own monetary supply, and our debt is in our own currency, which is also the world reserve currency. But I'm pretty outside my area on monetary supply.


Q:

You just showed that you know 100x more about monetary policy than the person you replied to. Seriously. "Debt based currency" is a meaningless term. If you see someone use it, it's generally a tell that they read far right wing tinfoil hat type sites. I've asked people who use this term to explain what it means and they can't.

A:

I typically have a rule against engaging with gold folks because it's always pointless. Given that this was my first AMA (and really, first time on Reddit, except for the occasional search for deep video game-related knowledge), I figured I should answer everything! You can see my mistake carried out below.


Q:

Heh heh heh. Maybe it will make for a good story at the office water cooler on Monday morning.

A:

Yeah, this is definitely coming up, haha.


Q:

Solar, exactly. But most of our economy is based on Oil. We were head in the right direction. And since Trumps new budget completely guts the NASA budget, I don't think we'll even research the mining technology let alone fund a mission.

A:

Sure, yeah. I should have made two separate points. First, I think we can keep growing because of other resources. The reason we weren't growing for thousands of years is that we weren't really accumulating stuff. We were just living.

Second, though, just living at current levels is way better than just living in poverty. That is, I'm not convinced that growth itself is the party. I think having sweet things is the party.


Q:

having sweet things is the party.

touche, we would essentially be living sustainably at that point... in the dark lol

A:

Yep! Though your fun part at the end brings up a good point that a lot of the valuation that we have right now is based on current costs of energy. If that goes up, a lot of our machines become a whole lot less valuable. So I amend my point to admit that the value of life would go down, but yes, it would still be pretty sustainably, but just in the dark. :)