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Thursday, November 11, 2010

A harsh dose of reality

The blue-ribbon, bi-partisan federal commission set up to address the crushing federal deficit is showing around a draft of its recommendations, and they're refreshingly honest. The federal government needs to cut spending, including on Social Security, and raise taxes. We can either feel the pain now or inflict it on our children and grandchildren.

Alas, the chances of the current crop of politicians in charge of the country actually doing what the commission suggests is nil. But don't tell the kids nobody warned you. Go by streetcar!

Comments (33)

There is a precedent for a country completely revamping its taxation and revenue system in a bi-partisan manner.

It happened in New Zealand in the early 1980s, and by all accounts it has worked out very well.

If you Google "New Zealand 2001 tax review," or something like that, you'll find an excellent report on what went on.

The "Overview" and Chapter 1, in particular, are brilliant essays on the pragmatic and philosophical issues involved in developing taxation and revenue systems.

What's interesting is that Australians voted down on a similar plan in the early 90s. Apparently, with Australia being a larger country, it was simply too difficult to develop a consensus. So, the chances of developing any sort of consensus in the U.S. would seem to be impossible.

It's humbling that the U.S. Government recognizes the problem while Portland and the State of Oregon are whistling past the graveyard. Portland can't just print more money and inject it into the money supply (by buying back it's own securities from the banks), and we will (very soon) lose the ability to sell more bonds to fearful public debt investors.

The Feds have the printing presses, but they are fearful. We don't, and (with the exception of Ted Wheeler) our "leaders" act as if we can borrow our way to prosperity.

Somebody needs to do a serious fireside chat with the American public explaining what will happen if we continue along our present path. You would expect that to be the President, but he's probably too chicken to do it. Maybe two years from now he'll man up.

In the meantime, Al Gore could do another movie...

I hope this goes further than Teddy's blue-ribbon panel (what'd they call it the refresh?) on spending.

Problem is that these guys in Congress get used to buying love by spending which is way easier than getting it by passing a law or raising a tax. God forbid the wrath they'll endure for taking back an entitlement.

I guess that's what you get when you have politicians running a country spending other people's money instead of people who actually have to live here and earn a living and pay bills and tazes.

Makes perfect sense. Now that the FICA revenues of the past ten years have been funneled to the top 1% of earners as income tax rate cuts, it's time to man up and take aery the retirement benefits. It's also worth noting that the cstfood commission is proposing a top marginal income tax rate of 23%.

That's "take away" and "cat food commission".

I agree with Peter. No chance our representatives could reach a consensus.

This country is divided, and there seems little hope for progress. Seeking the majority in the house and senate has become the priority for the elected, rather than doing the work at hand. The majority shifts back and forth with each election as voters get frustrated. Then all the work of those before them is reversed in a never ending cyle of nothing accomplished.

We best look for real leadership, the kind we have not seen for a long time.

So this "harsh dose of reality" is going to just blow away like dandelion seeds in the political winds?

I hate to feel so hopeless. I wonder how many years til almost nobody even remembers this deadly serious report. Two?

This "proposal" offers nothing for containing health care costs, the one true threat to the budget. It keeps Bush's massive tax cuts for the wealthy in place, paying for them with cuts to programs that help the middle-class and the poor. It admits that Social Security contributes nothing to the federal deficit, and yet slashes benefits anyway. It's Ronald Reagan's vision for government. Recommended reading:

when dealing with the budget, politicians should be made to write out whole numbers instead of rounding and shortening so they can get a grasp of how much money they are actually throwing around. For example, instead of writing $10.1 Billion, they should have to write $10,100,000,000.00. Both numbers are exactly the same but the latter has the effect of looking like what it really is--- a lot of freakin' money.

Problem is that these guys in Congress get used to buying love by spending which is way easier than getting it by passing a law or raising a tax.

Which is still easier that repealing or just not passing a law in the first place.

I fear Oregon's annual sessions will open the door to even more must do "something", regardless of how much "something" costs or if its really needed. It's like the kicker. A terrible piece of policy that makes little to no sense. Yet, without it the legislature would have spent every last dime of increased revenue leaving an even bigger hole in the budget when the revenues drop.

There's some scary stuff in there?

Why wait until 2012?

Malpractice reform? This I've got to see...

Oh come on Jack. The proposed solution is transparent class warfare- the very rich win, the working poor get f&cked again. Seriously, kill the EITC to pay for a 15% cut to the highest marginal tax bracket?

I've got a better idea. How about we cut defense spending and foreign aid by, say, 80%, and repair some of our own goddamn roads and bridges instead?

"This 'proposal' offers nothing for containing health care costs, the one true threat to the budget."

Things that make you go, damn.

"How about we cut defense spending and foreign aid by, say, 80%"

Lovely. Now we've freed up $500 billion in a $3.5 trillion budget that's running a $1.4 trillion deficit.

Any plan that does not permanently get the federal government out of the middle-class transfer payment business will fail. The federal government has to stop doing many, many of the things it's currently doing entirely.

Well, well- now that those "conspiracy rumors" about FEMA detention camps is proving to be real, everything is falling into place to continue the gutting of the good ole USA (watch the Jesse Ventura show this Friday).

There are no good solutions because the mega-rich have virtually all the cards and can withstand the pain a whole hell of a lot longer than any of us.

Eventually, the mega rich will be infected with the Midas touch, if not already.

I applaud the commission for taking the assignment seriously.

I think many of the responses here show why nothing will be done. Everyone just goes into a partisan crouch and sees it as a political problem instead of structural problem.

We won't fix anything until the timebomb blows up in our lap.

If you're under 50, get ready for your kids AND your parents to move in. If you're retired, better kiss up to your kids - you'll need them much more than you expect.

I was under the impression that I have been paying for social security every time I have gotten a paycheck since 16 years old.

What happened to my money?

"I was under the impression that I have been paying for social security every time I have gotten a paycheck since 16 years old.

What happened to my money?"

You don't pay for YOUR social security. You pay for the social security of the people collecting it now. When you are collecting it, it will be a new group of working people who are paying for yours.

Social Security is not a savings account or an insurance system; it's an income-transfer system that will work as long as enough people are working to pay for the income-earned compensation of people who no longer are.

I think many of the responses here show why nothing will be done. Everyone just goes into a partisan crouch and sees it as a political problem instead of structural problem.

Categorizing any disagreement with this proposal a "partisan crouch" is a convenient formulation if you happen to agree with a much more regressive tax system. But what if you don't? Shut up? There are some worthwhile ideas here — the home-mortgage tax credit is badly in need of reform, especially at the high end — but the fact is that not even Reagan would have put forth an agenda this bent on serving the interests of the haves over the have-nots. That Jack supports it shows, to my mind, how amazingly far to the right the political discussion in this country has drifted.

Pete, that sounds like a partisan crouch.

Has anyone here noticed that this is not the Commission report? It's the rantings of a couple of crazed old sociopaths. The commission report is due next month.

You don't pay for YOUR social security. You pay for the social security of the people collecting it now.

This is correct as far as it goes, but the rest is important too: For the last thirty years or so (except for the last year or two, when the recession and unemployment sharply reduced the tax receipts), a great deal more has been paid into Social Security in FICA taxes than has been paid out in benefits. This was the result of changes to the system in the Reagan administration, and the projections — except for the current dip — call for the positive cash flow to continue for a few more years. Where did the excess money go? Into the federal government's general funds, to reduce the deficit (and, not incidentally, to facilitate and pay for tax cuts for the very rich). The mechanism for this is for the Social Security Administration to buy bonds and notes issued by the US Treasury.

Sure, some say, but those bonds and notes are just IOU's that the government can disregard. Leaving aside the rather large issues about how, or how easily, the federal government can default on any of its debt obligations, it you accept that view of things — that the IOU's are just a bunch of paper — then in effect there is no Social Security "Fund" — it's just part of the giant federal ball of wax. If that's true, Social Security isn't going to "go broke" or become "insolvent" on its own — it's part of the federal government and no more "broke" than the Defense Department on any given day.

People who talk that way are trying to have it both ways. Either Social Security is a separate fund, and it has assets to meet its benefit obligations far into the future, or it's part of the federal government, with as much claim on general revenues as it needs for that purpose. It's a completely disingenuous analysis whose real intent is to weaken and dismantle the social safety net.

It's weird that people are worried about the deficit now, when 1)we need the government to run a large temporary deficit to increase aggregate demand, and 2)the deficit isn't any kind of problem, as the government is having no trouble borrowing money.

Pete, that sounds like a partisan crouch.

What disagreement with this proposal wouldn't you characterize as a "partisan crouch"? Look, there are some good things in the Bowles/Simpson plan, but it needs to slight a scooch over to the find the middle. The Social Security proposals are simply too heavily tilted toward cutting benefits vs. raising revenue. We also need to look hard at their assumption that the Affordable Care Act (aka, Obamacare) will lead to the savings in Medicare that they anticipate. My own thought is more needs to be done there. But this is a trial balloon and maybe with some tweaking it will work. I do hope so.

If you're worried--and I don't want you to be worried--you could read this page for a different viewpoint:

Or browse around the "Our Fiscal Security" website from the Economic Policy Institute, starting with their "Deficit 101," here:

BTW, I am very much in agreement with Jack's critiques of the city's poor fiscal management and misplaced priorities. The federal government is just a different beast altogether, IMHO.

Well if they cut spending on social security perhaps they should lift the rule that prohibits people getting a social security check from receiving other sources of income..... Did you know the most a disabled person in Oregon can get in SSI benefits is $674.00 and they are not allowed to receive other sources of income but yet they are expected to fully cover all living expenses with only $674.00


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