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Tuesday, April 19, 2011

We need to do something about the federal deficit

Or do we?

Comments (17)

Puts me in mind of the classic "why" questions:

Why Three Dog Night?
Why not Ringo?
Why Slate?

Really? I'll start believing numbers from the government when...

This must be the plan CoP leaders are following. I wish they'd just tell us and put us all at ease!

You're comment reminds me of a bumper sticker from the past that said something like...
"If you want to know if you can trust the government, ask an Indian".

"The crisis lies in spiraling health care costs." Amen to that.

I am okay with that plan.

But if I was an elected official, I'd be demogoged on these two issues:

"Moreover, under the do-nothing plan, the government would tax a much bigger share of GDP than it currently does, and the tax burden on the middle-class would be uncomfortably high."

"It requires some very unpopular measures—such as serious middle-class tax hikes and sticking with Obamacare."

And tossed outta office faster than Rep Wu!

Kent you need to read the article closer. The key to the whole thing is letting the Bush tax cuts expire. Voila all of our taxes go up and close the deficit down. It's something that has been known about the Federal budget deficit for a long time. It's just that neither party wants to take responsibility for raising our taxes back up to where they were a few years ago.

Exactly. The "crisis" that we're currently facing is a result of widespread (Republican and Democratic) belief that continuation of the Bush tax cuts is fiscally, morally, and spiritually required.

If you believe that, all the other cuts are required and the real human pain that goes with them. If you don't, the problem is mostly fixed.

Ah yes, the old "primary deficit" meme. This is wishful thinking at its worst.

Let's not worry about running up additional debts when we're already $14 trillion in the hole. Another 3% a year is "sustainable" (Portland ought to love this). Obamacare will bend (not break) the cost curve. Social Security is just fine, as long as you don't look inside the "lock box". Oh, the doctors won't mind when we start paying them less. They'll still be happy to accept your Medicare. Good grief.

The problem with the current debate is that it always starts up with a plan that lines up a up the cart before the horse.

Then everybody proceeds to argue about what should or should not be in the cart rather than whether the horse can pull the cart for the entire journey.

We should be debating a balanced budget amendment right now. We could design it to scale it into full effect over the next decade - where outlays for ensuing fiscal years have to move closer to revenues.

Ratify it and then the debate over revenues/taxes vs. spending will have some context in Congressional elections(and we won't be careening toward insolvency).

I, for one, would be much more willing to consider "reductions in tax spending" (or whatever euphemism for taxes next emerges) with a balanced budget requirement in place.

My, what an interesting way to move towards a flat tax system and take away all those complicated deductions and ridiculous credits -- stop indexing the AMT.

More seriously, since CBO assumes consistently low interest rates, factors in consistently subdued inflation, projects consistently strong employment growth and assumes away the business cycle, its sustainable, no-expense-savings scenario is an impossible. If it hadn't been for that last blip in the business cycle the federal budget would be balanced right now.

It is abjectly poor planning to assume that the economy doesn't hit a rough patch every 5 to 10 years or so.

Oh, the doctors won't mind when we start paying them less. They'll still be happy to accept your Medicare.

Right, MJ, we need to cut spending. But not the doctors! They might object. And not defense, of course. And not the FBI, since they keep us safe. Cut welfare for sure -- but not the kind that goes to businesses or high-income individuals.

That should work.

Sorry, doing nothing is not in the lexicon of pols. They need to be actively screwing things up. Look at the tax code which gets thicker every year as an example.

We spent all weekend on the taxes; I have no adjective that could do adequate justice to the lunatic asylum logic in the rules.

FLAT TAX, dear God, we would be happy to pay more to just have taxes that take 15 minutes. Oh, and select a flat tax rate to orchestrate a sufficient gain in tax revenue, to pay off half the deficit.

Then cut all spending across the board, to every character sucking on the system, doctors, welfare moms, and all, by whatever % it takes to close the other half of the deficit. If it's a 10% across the board cut that's needed, then Sam Adams gets a 10% paycut. Relish the thought.

Then, require all budgets going forward to be balanced.

How hard is this?

Math is a cruel mistress. The current year federal deficit is $1.5 trillion dollars. That is 68 percent as much as all the federal taxes collected in the current budget. Rescinding the "Bush tax cuts" would not come close to reaching that number. If you confiscated 100 percent of all the income of the top 400 taxpayers (as reported a few days ago) you would raise "only" $138 billion - less then 10 percent of what's needed just to close this year's deficit. And of course beyond the 400, you have less and less money for the government to confiscate. Confiscating 100 percent of the income of "the rich" wouldn't close the deficit...and you could only do it once and then your budget hole opens right back up again.

Remember when Measure 66 & 67's taxes on "the rich" and "evil corporations" were going to raise $733 million? How many times are you going to be fooled by the same lies?

Living on the credit card is a fine solution. Until the credit card won't work.

The dot.com bubble led to the housing bubble: "can't lose" frothiness was the result of easy money and the presumption that asset prices only go up.

The collapse of the housing bubble forced the Feds to nationalize Fannie and Freddy in order to prevent them from jacking up the risk premiums that would have resulted in 7% 30 year mortgage rates, or higher (and protect foreign GSE bond buyers).

In doing so, they took all of those Fannie/Freddy mortgage charge offs and transferred those losses to our public debt.

Those liabilities aren't even reflected in the current debate, and represent another 50% increase in the National Debt.

It works until it doesn't. That's why gold is trading above $1,500/ounce.

Right, MJ, we need to cut spending. But not the doctors! They might object. And not defense, of course. And not the FBI, since they keep us safe. Cut welfare for sure -- but not the kind that goes to businesses or high-income individuals.

Thanks for putting words in my mouth Miles, but you're wrong.

My points about Medicare are twofold. First, many including the CBO director Doug Elmendorf, have expressed skepticism that the cuts to Medicare will actually occur, since they never have in the past. Any previous attempts to address Medicare's cost growth have run afoul of AARP and many other well-connected beneficiaries.

Secondly, if you think you can sharply reduce doctor reimbursements without affecting their participation in the program, then you probably also believe that the other provisions in the health care bill will save money too. The Easter Bunny isn't real, either.

I said nothing in my post about defense spending, the FBI, welfare or tax breaks. For the record, I support letting the Bush tax cuts expire (all of them, that is), but I am not foolish enough to believe this will magically solve our deficit problems. Nor do I believe welfare -- the "good" kind -- is really the source of most of our deficits.

Entitlement spending was a problem long before the recent recession. The unfunded liabilities they present are enough to sink us, alone. Fortunately, there are people like David Walker who have been trying to alert us to this for some time. Unfortunately, people like yourself seem more inclined to bury their heads in the sand.

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