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Balancing the budget
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isobars



Joined: 12 Dec 1999
Posts: 14632

PostPosted: Mon Sep 17, 2012 2:03 pm    Post subject: Reply with quote

Senior fellows at Stanford University's Hoover Institution who served in various federal government policy positions in the Treasury Department, the Office of Management and Budget and the Council of Economic Advisers published "The Magnitude of the Mess We're In" in the WSJ, at
http://tinyurl.com/8s4wzsf .
Excerpts include:

1. The next Treasury secretary will confront problems so daunting that even Alexander Hamilton would have trouble preserving the full faith and credit of the United States.

2. Annual deficit increases have averaged $1.3T beginning in 2009.

3. The U.S. Treasury debt is effectively an ARM whose interest will explode with inevitable interest increases.

4. The Fed owns an unprecedented 1/6 of the debt. Its artificial mandated manipulations are distorting the status and threaten the integrity of our banking system.

5. Our debt-to-GDP ratio is increasing at a faster rate than Greece's since 2008.

6. That adds uncertainty, stifling business spending, investing and hiring. The mountain of regulatory uncertainty and impending fiscal cliff threatens a sharp increase in taxes and a sharp decline in spending. (For more on that see the United States Chamber of Commerce Q2 Small Business Study*, available at http://tinyurl.com/9mugese , which addresses the impact of regulations on small business.)

7. The fixes are blindingly obvious. Economic theory, empirical studies and historical experience teach that the solutions are the lowest possible tax rates on the broadest base, sufficient to fund the necessary functions of government on balance over the business cycle; sound monetary policy; trade liberalization; spending control and entitlement reform; and regulatory, litigation and education reform.

* Excerpts from the Chamber study Harris poll include:

A. Eight-out-of-ten small businesses continue to think the national economy is off on the wrong track and more than half (53%) of small businesses surveyed cite economic uncertainty as their top concern.

B. Small business owners’ concerns about the future are impacting their hiring. Only one-in-five expect to add staff in 2013.

C. Health Care, specifically the ACA, continues to be a top impediment to growth, likely resulting in reduced hiring and even layoffs.

D. 96% of small businesses surveyed cite a candidate’s support for the free enterprise system as important to how they vote.

E. 90% are concerned about the impending fiscal cliff ... contributing to economic uncertainty. Almost 60% believe that the expiration of 2001 and 2003 tax rates and other business provisions, coupled with sequestration cuts will directly impact their business’s growth.

Who are we to believe, some dude in Colorado or a nationwide study of 1,225 small biz CEOs? A guy who believed CA had the right to prohibit him from leaving the state or federal fiscal professionals now comprising a west coast university think tank? An anonymous internet wanker or the scores of small biz and Blue Chip CEOs testifying in the business media every week that asinine regulations are eating them alive? (The first 25 loons who claim that means the Right wants to eliminate all regulations are dumber than a box of liberals.)

And how many dumwits will respond to something that serious with nothing but non sequiturs, cries of racism, or "right wing screed"?
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coboardhead



Joined: 26 Oct 2009
Posts: 2036

PostPosted: Mon Sep 17, 2012 3:01 pm    Post subject: Reply with quote

mac wrote:
CB--Bard's ranting is not completely insane; the recession dropped Federal revenues about 20%. Social Security is stable at the moment, indeed that surplus is propping up the rest of the budget. Cut the military at 5% a year; there is more fat than that, but cutting too rapidly creates too much chaos. Tell the middle class that they will have to either pay more taxes for Medicare, or derive less benefit. Both parties need to deliver that message. Closing loopholes will not do it, but I would close the carbon loopholes and transfer some of the taxation to carbon since the main thing we do with our bloated military is assure oil security for the western world.

Oh, and eliminate Mike Fick's benefits. Won't save much--but it's his just karmic reward.


Mac...

I agree that both parties have not been interested in discussing, seriously, the long term fiscal problems with both Medicare and Social Security. In my opinion, these two programs need to continue to be supported by payroll taxes. If they are short, then payroll taxes should be increased or benefits cut as you wrote.

Often the discussion involving Federal spending includes these two entitlement programs (and other pension and disability benefits) along with the other general spending. This distorts the math. In my earlier post, I was trying to illustrate how ominus the spending vs revenue ratio looks when we take these programs off the table and assume they have supported themselves and will continue to do so.

Our real deficit is close to 50% of the rest of the budget. I don't think any of us really believe we can cut this spending in half. So, the math does not seem to work unless we increase taxes or freeze spending until growth in revenue catches up.
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swchandler



Joined: 08 Nov 1993
Posts: 6033

PostPosted: Mon Sep 17, 2012 3:04 pm    Post subject: Reply with quote

Never mind what isobars has said, but I did read the WSJ article. While I'm not a financial wizard by any means, it's exceedingly clear to me that along with prudent budget cuts, income taxes need to be increased across the board for everyone. Yet surprisingly, the writers seem to have this blind faith that lowering tax rates is the solution. Needless to say, they had no comment why lower taxes over the last 10 years hasn't worked. Overall, my take-away is that the article is pure spin Republican style. Reminds me of trying to pay down an ever increasing credit card debt by paying the minimum payment. Utter foolishness.
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coboardhead



Joined: 26 Oct 2009
Posts: 2036

PostPosted: Mon Sep 17, 2012 3:11 pm    Post subject: Reply with quote

swchandler

I agree. There is a middle ground that we need to reach. Too often Medicare and SS are used as pawns in the political banter and nothing happens. It really would be great if we could treat these programs as insurance rather than government programs and separate them from the rest of the budget.
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swchandler



Joined: 08 Nov 1993
Posts: 6033

PostPosted: Mon Sep 17, 2012 7:56 pm    Post subject: Reply with quote

coboardhead,

You and I agree on Social Security and Medicare, to include many other important topics. Yet, on the other hand, Republicans would like to consider SS and Medicare as entitlement programs rather than the insurance programs they were originally intended to be. While the Republicans can't kill them because of their popularity, they would love to privatize them to benefit Wall Street and the Insurance Companies, hence their repeated attempts towards that end.

What I find ironic is the fact Republicans are dead set against the ACA, which promotes private business and better assures that folks take responsibility for themselves. It reveals that they are talking out of two sides of their mouth when promoting privatizing Medicare versus not supporting the ACA. Moreover, isn't it telling that when they talk of privatizing SS they never really admit that folks have an ample number of private avenues through IRAs, 401K, 403B and Keogh plans to invest in their future retirement. Conveniently, they avoid the real fact that the majority of folks fail to plan adequately for their retirement, and that's the real reason why SS was created in the first place.
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coboardhead



Joined: 26 Oct 2009
Posts: 2036

PostPosted: Mon Sep 17, 2012 8:30 pm    Post subject: Reply with quote

Swchandler...

While SS and Medicare have paid their way so far, it will not be the case in the future. We will simply have too many boomers in retirement at the same time. This needs to be addressed. The average citizen does not understand the funding and spending in these programs. They get lumped in with the rest of the social programs. Perhaps SS should be called a "government backed annuity". Perhaps it should be treated as such. I think a lot of folks have no understanding that SS for most folks is not a sufficient income.

I was quite outspoken against Clinton's health care plan back in the '90's. The plan required cost savings to be developed, primarily, by the providers or face severe penalties. The ACA is much more of a compromise between insurance, providers, patients and government. Actually, very similar to alternatives to "Hillarycare" that were presented back then by the Repubs. My opinion is that the Repubs hate the ACA because it was an Obama success. The other issue is the expansion of Medicaid within the ACA. A legitimate concern.

Thing is...indigents, currently, are receiving care through cost shifting. The ACA attempts to limit this practice by requiring everyone to carry insurance. This is necessary, to begin reducing health care costs. So, the government will be providing more dollars at first until this gets sorted out.
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mac



Joined: 07 Mar 1999
Posts: 5581

PostPosted: Mon Sep 17, 2012 10:00 pm    Post subject: Reply with quote

Well said CB, for about 4 posts. I can see that you paid attention in math--and I hope you wear Mike Fick's scorn as a badge of honor.
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coboardhead



Joined: 26 Oct 2009
Posts: 2036

PostPosted: Mon Sep 17, 2012 10:18 pm    Post subject: Reply with quote

More like a "badge of humor"!
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swchandler



Joined: 08 Nov 1993
Posts: 6033

PostPosted: Mon Sep 17, 2012 10:34 pm    Post subject: Reply with quote

coboardhead,

As you are probably aware from my past comments, I started receiving SS a little over a year ago. It's a relatively small amount, especially since I didn't wait until my full retirement age of 66, but it has been an important part of my overall retirement plan. Also, I should point out that I retired over 6 1/2 years before starting SS, and I have significant funds that I saved over my working career to ensure a more comfortable retirement. Not enough to support a rich lifestyle, but still enough to live in a great place and to enjoy life.

You are absolutely right that there are a lot of folks that have no understanding that SS for most folks isn't a sufficient income. In reality, based on what the SS representative told me during my interview, for 90% of those starting SS benefits, it's the only source of funds for their retirement. That only supports the need to revamp and improve the program over the long term. I think that folks fail to understand what really happens over time. We all know that growth occurs over time, and that inflation does occur. With rising costs of living, almost everyone looks to a raise every year or two, even if they are doing the same job. Like you've pointed out so often in the past, healthcare costs have skyrocketed. To be honest, almost everything costs more than it did some years ago. So, why shouldn't there be some planned growth in the SS fund over time through increased contributions, by establishing higher income limits and possibly later retirement eligibility requirements. However, regarding extending the retirement age, it's only fair to acknowledge that many employers aren't going to necessarily agree to extending employment to folks that are arguably at the height of their lifetime income curve, and may also be declining in health and vitality.

Lastly, when it comes down to the costs and dynamics of healthcare, I think that we're now on a more practical path, but it's going to require a lot of time and effort to contain and then drive down costs. No doubt a Herculean task as things stand right now, but if Romney is elected and he ultimately kills the ACA, the picture will turn uglier and more untenable in no time. One can only hope that thoughtful minds prevail.
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coboardhead



Joined: 26 Oct 2009
Posts: 2036

PostPosted: Mon Sep 17, 2012 10:59 pm    Post subject: Reply with quote

swc...

SS benefits do receive cost of living increases. The problem, I see, is that these are politically driven increases to buy senior votes. Instead, the increases should be scheduled from the available funds. The payments that you and I have paid were used to finance our parents benefits, not ours...that works when there are more workers and less retirees. Not so much moving forward.

We should recognize that we are living longer and should work longer (or save more instead). Increasing the retirement age for SS makes sense to me.

Right now, those over 55 are, generally, not very employable, as you mentioned, due to high salaries and expensive health care. This should change as more of us retire, creating vacancies. There are a LOT of baby boomers about ready to leave the workforce! I see educated older worker opportunities in the future.

The number one reason I am voting for Obama is because Romney will "repeal" the ACA on "day one". This would be a mess if he is serious. I hope it is just political BS. Right now, every doc I know is implementing ACA strategies into their practices, Medicare reimbursement funding is tied into the ACA and many states (CO for one) have adopted ACA compatible preventative care into health insurance plans sold in the state. We are talking chaos!!! Not to mention the s**t that will hit the fan if Ryan goes after the $700B HE wants out of Medicare without the other concessions the hospitals have been provided on indigent care when they agreed to the cuts.

Retiring at a younger age, as you have, is inspiring. It takes careful planning as you noted. Congrats. My approach is semi-retiring for a longer time...At 50, I cut down to a three day work week. Four days of playing is all I can handle anyway!!
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