Where To Start?
By Mitch Berg
Joe Doakes from Como Park emails:
The question I’d like to see asked:
If Congress doesn’t reduce spending to less than or equal to realistic revenues, creditor nations will decline to buy more debt and the President will be forced to decide which checks his administration won’t mail.
If you were President, which checks would you hold back, and why?
The question is merely a hypothetical today. But if the economy doesn’t recover soon . . . well, military planners run war games all the time, trying to anticipate problems and create solutions before we’re facing disaster with only moments to react in panic. Why not politicians?
Joe Doakes
Como Park
It’s a tough question. Tougher still because I’ve been told (haven’t looked it up myself, yet) that we could shut down the entire daily operations of our government – Congress, the SCOTUS, and the entire Executive Branch, including all the Cabinet departments, including Defense and Health and Human Services, and still not attack the deficit; it’s the entitlements. (I need to look that up, obviously).
All the usual conservative suggestion – shutting down the Department of Education, defund NPR, privatize the National Endowment for the Humanities – aren’t even a whiz in the wind. What we need is to cut entitlements – Social Security, Medicare/Medicaid, Obamacare – and cut them radically.
Which means not just cutting spending, but changing the way this nation looks at retirement and health insurance.
OK. So go to it. What do we do?
August 3rd, 2011 at 12:18 pm
You seem to be assuming they won’t print money, which they will do. Brace yourself.
Printing money wantonly leads to inflation. Inflation acts as a tax, particularly on those who have saved responsibly. Those who fought against tax hikes have lost, more massively than they could have imagined.
There will be no “changing the way this nation looks at retirement and health insurance” until hyperinflation demands it. The political class is unable to say “no.”
August 3rd, 2011 at 12:32 pm
I suspect PJKelly is right.
As for entitlements, at a minimum, we’ll have to means test Social Security and raise the retirement age to around 70.
Medicare? That’s gonna be really ugly.
August 3rd, 2011 at 12:42 pm
A) As you state, entitlements are the problem, not Amtrak or NPR (not that we should waste money, just making a point on the total dollars involved)
B) Democrats believe, probably correctly, that they can win elections by telling old folks that Republicans want to cut social security and medicare/caid.
C) So any efforts to reform Big Entitlement will be met with commercials telling old people to vote Democrats or they will starve to death.
August 3rd, 2011 at 12:43 pm
And to add to my point…now immoral is that? Democrats are willing to literally bankrupt the country in order to hand on to power.
August 3rd, 2011 at 12:44 pm
A possible solution? Do what the Republicans did in Wisconsin. Say “screw getting re-elected. We are going to fix the problem even if it means getting voted out of office”.
August 3rd, 2011 at 12:52 pm
What do we do?
We continue to point out that every man, woman and child in America owes $46,708.00 in federal debt as of today, and it’s going up.
http://www.usdebtclock.org/
The national debt is over $14.5 trillion and it’s going up.
We have more people out of work than we’ve had in decades, and that’s going up.
To quote Pete Seger, “We’re knee deep in the Big Muddy, and the old fool says to press on”.
August 3rd, 2011 at 12:57 pm
Kermit, the actual national debt using GAAP (honest accounting) instead of government accounting is most likely somewhat north of $100 trillion, not $14 trillion. So every person owes not $50k, but rather closer to $300k. You can’t even hope to cover the interest when it recovers to normal levels.
What will happen? My hunch is that it will involve what PJ notes; the printing press at the fed. Invest in precious metals; gold, silver, brass, copper clad lead, and ordinance steel. Especially the final three.
August 3rd, 2011 at 1:00 pm
Entitlements:
Eligibility Age – raise the eligibility age for Medicare and Social Security to 72 for those who are 55 and younger. People live longer and in general work at less physically demanding jobs (we can still make allowances for those who are actually physically incapable of continuing to work) so they should expect to work longer before receiving benefits.
Means-test – Medicare and Social Security were meant to provide a safety net so that people don’t outlive their saving. It makes no sense for a minimum wage waitress to have to pay FICA so that Warren Buffet can get a monthly Social Security cheque and have his health care paid for. I say at whatever income level Democrats think that people are too “wealthy” to “need” a tax cut should be the level at which they don’t “need” to have benefits paid for with some other person’s tax dollars.
Cost Control – change the COLAs on Social Security to match with the Consumer Price Index so that they keep up with inflation instead of exceeding it by about 0.5 percent a year instead of indexing it by wages. For Medicare, I’m warming to Ryan’s voucher proposal. At some point we have to realize that there is only so much we’re going to be willing to pay for health care for the elderly and decentralizing those decisions by empowering beneficiaries with vouchers seems better than having some centralized IPAB or Congress or CMS that is subject to regulatory capture by whichever special interest group has the best lobbyists.
Repeal Obamacare the only “savings” came from Medicare reductions in the rate of growth (which we can achieve with Ryan’s proposal) and blatant gaming (10 years of tax increases to pay for 7 years of benefits) of the CBO score. Get rid of the new mandates that drive up health care premiums and the expanded eligibility for Medicaid and SCHIPS (which is already bankrupting the States).
Medicaid and SCHIPS– replace with vouchers and/or give more waivers to the States to experiment to figure out their own ways of controlling costs while paying for health care for the poor.
Other Spending:
Eliminate farm subsidies and corporate welfare. Pretty much eliminates most of the Departments of Agriculture (sans Food Stamps), Energy and Commerce.
Regulatory agencies (e.g. FDA, SEC, USPTO, etc.) allow them to charge user fees sufficient to cover their entire operating budgets (with Congressional and executive oversight to prevent conflicts of interest) so that they are self-sufficient and can dedicate enough resources to reduce or eliminate some of the bottlenecks that have been created in the economy. At the same time curtail their ability to enact legislation by rule-making and narrow their focus to prevent mission creep.
Eliminate baseline budgeting. Boehner, McConnell and Congressional Republicans screwed up by not pushing for this instead of asking for what will amount to a symbolic vote on a Balanced Budget Amendment. Force every government agency to justify its budget every year rather than pretty much being guaranteed the same level of funding as before . . . and just haggling over how much to increase it.
Department of Interior – make self-sufficient by allowing them to raise extraction and other user fees to cover their costs.
All of the cuts that Mitch mentioned.
That’s where I’d start – any other additions?
August 3rd, 2011 at 1:19 pm
Realistically, entitlements will be difficult to cut anyway. We’ve got a ton of problems with people who’ve planned their lives based on the entitlements and are too close to retirement to make changes. The father-in-law retired depending on Medicare and Social Security and no savings, for example. The change we can realistically make in entitlements have to be slow and gradual.
That said, we’re going to have to go on a radical diet and the Dems will fight that tooth and nail since it means that government will have to shrink no matter how much the GOP gives up on taxes. HUD? Gone. Dept of Energy? Gone. Dept of Education? Gone; Pell grants, everything. EPA? 10% remains. Defense? 50% cuts, US out of most overseas locations. NASA? 10% remains. You figure out how much control a government like that can have on its citizens and you can see why the Dems are wailing about a balanced budget.
August 3rd, 2011 at 1:42 pm
Well it’s not just that people don’t have a lot of savings. Even if you have a modest IRA, it’s being eaten alive by the Fed printing money and devaluing it. The objective is to make more people dependent on government, not less.
August 3rd, 2011 at 1:50 pm
And deal with fraud. Have any of you read the estimates on how much fraud there is in Medicare/caid? Billions a year. Vouchers to go to private insurers may help a lot as private for-profit companies have an incentive to stop fraud.
Unfortunatly defense has to be cut. We may make the same mistakes that we did in the 1930s that lead to WW2, but we have to take a chance. Maybe just keep a few strategic basis for our interests around the world, and screw our allies.
And cut deductions allowed on taxes. I know so many people who cheat via fraudulent deductions. Perhaps lower the tax rates slightly and then cut out many deductions.
And you are correct about the true deficit. The $14T is just the current loan. If the fed’l gov’t had to set up reserves for known future liabilities, it would be $100T +.
August 3rd, 2011 at 1:51 pm
Realistically, entitlements will be difficult to cut anyway. We’ve got a ton of problems with people who’ve planned their lives based on the entitlements and are too close to retirement to make changes. The father-in-law retired depending on Medicare and Social Security and no savings, for example. The change we can realistically make in entitlements have to be slow and gradual.
Agreed that some changes such as raising the retirement age are going to need to be phased in which is why I suggested it apply to those 55 and younger. However other changes such as means-testing and changing the COLAs can be done right away. Going with something like Ryan’s Medicare voucher proposal would also need to be phased in (I believe he stipulated that and I apologize for not including that).
A large part of the problem is despite the fact that people have been warned about the demographic time bomb for as long as I can remember neither voters or the people they elect have been willing to bite the bullet and deal with this problem. Instead we keep seeing the problem kicked a little further down the road (much like the debt ceiling debacle) and we all know that when it collapses people will pretend that they weren’t warned.
August 3rd, 2011 at 1:55 pm
And cut deductions allowed on taxes. I know so many people who cheat via fraudulent deductions. Perhaps lower the tax rates slightly and then cut out many deductions.
Agreed if it were up to me, I’d eliminate all but the personal deduction (which I’d increase to somewhat make up for the elimination of the others). Decisions like home ownership, procreation, charitable contributions, etc. shouldn’t be a factor in one’s tax liability. We’d probably have to phase them out which means that as the end approaches, we’d see pressure to keep extending them out a little further just like with the “Bush/Obama tax cuts.”
August 3rd, 2011 at 2:17 pm
Thorley Winston wrote:
Eligibility Age – raise the eligibility age for Medicare and Social Security to 72 for those who are 55 and younger. People live longer and in general work at less physically demanding jobs (we can still make allowances for those who are actually physically incapable of continuing to work) so they should expect to work longer before receiving benefits.
Sounds easy. It ain’t.
People working until they are 72 means fewer jobs available for the young.
Older workers make more money than younger workers, or want to. Companies will be reluctant to higher people that are 65+. Hell, they are reluctant to hire 55+ now. In reality, if you raise the retirement age to 72 you will find a lot of people getting laid off at 60 or 65 and unable to work, or unable to work for decent money, yet unable to get SS retirement benefits. No job, no employer subsidized insurance. Any nest egg they have acquired will be eaten up by the time they hit 72. Pretty miserable for them. They will be living the life that SS was supposed to spare them. Old, no one will give them a job, no money from the SS they have been paying into for many decades.
It’s fine to say that you will make an allowance for those unable to continue working, but come on. The SS system already does that, and it does not work well. Would like to tell a 67 year old carpenter that he gets no SS because he can still some kind of job – even if it’s for minimum wage?
SS was a popular program when you got out much more out of it than you put into it. Now that people are looking at much more into the program than they will get out of it, you are going to have to do more to save the program than make the relatively young get even less out of the system.
August 3rd, 2011 at 3:12 pm
Chuck wrote:
Unfortunatly defense has to be cut.
I agree. I don’t think that we have a choice. If you give people who are approaching retirement age the choice of less money for defense and an earlier retirement age they will choose the latter.
August 3rd, 2011 at 3:26 pm
All the Federal Bureaucracy needs to take a 5 to 10% across the board pay cut. The pay schedule for all federal employees is out of whack with the people paying the bills. plus a lot of us have taken cuts in our pay over the last couple years. And we don’t have the “stability” of employment that Federal employees have.
Cut HUD, Dept of Energy, Department of Education. Department of Agriculture. Cut headcounts at all remaining departments by 10%
That’s a start
August 3rd, 2011 at 3:42 pm
We also need to kick the illegal aliens off of social security! There is over $2 million per month going out to illegals that have never paid in a dime to SS and eliminate the anchor babies to prevent illegals from scurrying across our borders to make sure that their kid is born here! This is another constitutional item that the DemonRAT libturds usurped. St. Francis Medical Center in Shakopee is inundated with illegal pregnant Hispanic women on a daily basis! We start kicking them out and we change the behavior!
August 3rd, 2011 at 3:58 pm
Terry, good point on defense. I am fairly young yet, but already have concerns about my financials for when I reach mid-60s. Instead of cutting defense in a way the makes us weaker across the board, I would like to see us scale back, but have readiness there, just on a smaller scale. What would happen if we cut back one carrier group? Closed one more domestic air base and a couple of foreign ones?
I’ve heard that one of the reasons North Korea invaded South Korea in 1950 was the perception that the US would not defend South Korea. And Saddamn thought he could get away with invading Kuwait.
Is there a way to have a smaller, less expensive military, but more mobile overall? If we have to put out a fire in some country, we do it by moving an existing force, not by having a precense all over the world.
August 3rd, 2011 at 3:59 pm
Bosshoss, yup. We are the world’s policeman when it comes to military. And the world’s welfare check when it comes to illegel aliens.
August 3rd, 2011 at 4:03 pm
I think, Chuck, that the US would have to become isolationist. A world ranging navy, air force, and army is very expensive. That’s why no one else does it. Becoming isolationist militarily would weaken the US trading economy but lets face it — the global economy has not been kind to American workers. American millionaires, yes. People in the middle? No.
August 3rd, 2011 at 4:07 pm
Bosshoss, the R’s are as bad as the D’s on immigration. Both parties are in love with the idea of flooding the US with low-skilled, low-payed workers. The government has decided to change the character of the people it rules.
August 3rd, 2011 at 4:58 pm
Terry, one major correction; oldsters working does not necessarily mean that youngsters will not have jobs. This misconception is one of the things that made the Depression so long and deep; FDR believed that somehow if people “shared” jobs, the economy would come back.
Reality here is that when a senior citizen earns money, he puts it into exactly the same categories that a teenager uses; spending, giving, taxes, saving. He works as a greeter at Wal-Mart or a gas station attendant (my granddad’s choice into his late 70s), then spends it in stores of his choice…..
….providing opportunities for the teenager FDR thought he’d displaced.
August 3rd, 2011 at 6:47 pm
I don’t understand your logic, bubbasan. It’s akin to saying that if everyone who was over 60 retired from their jobs today the demand for labor would go down. It’s not about “job sharing” it’s about the size of the workforce vs. the number of jobs. One of the reasons there was an employment boom during WW2 was the removal of millions of men from the civilian workforce.
August 3rd, 2011 at 7:09 pm
FYI, Bubbasan, GDP this year will be about equal to 2008’s GDP in constant dollars, yet the number of FT jobs in the US is about 6 million fewer than it was in 2008.
Although it may be true that the more people there are that work, the more wealth the economy produces, it is not true that the wealthier the economy the more jobs there are. Wealth is a necessary condition for job creation in the US, but not the only condition. American consumers and businesses have become very good at creating jobs for the Chinese, very poor at creating jobs for Americans, especially high paying jobs.
August 3rd, 2011 at 8:18 pm
Terry;
This is true to a point, but I think that the Tea Party GOP people are changing that dynamic. I had a discussion with a couple of Erik Paulsen’s staffers last week and that was a topic that was bandied about. Both of them told me that Paulsen is working with some of them to review the fraud, to which me and three of my neighbors replied; “Tell him we’ll be watching!”
On another note, I am starting to worry that psycho Shelly Moore, may win the election. Based on the info that I saw from Andy Post over on True North, she has received significant monetary support from outside of her District and outside of the State of WI. Harsdorf somehow has to get the word out that Shelly is now beholden to special interest groups.
August 3rd, 2011 at 10:06 pm
It is a sad thing, Bosshoss, that the immigration laws on the books were specifically written to keep foreigners from competing with Americans for jobs in America.
Obama had a much publicized “jobs summit” with Steve Jobs, Mark Zuckerberg, Steve Schmidt, Dick Costolo, and Larry Ellison last year. All those guys together don’t employ as many Americans as a large manufacturing corporation did thirty years ago. They have made a lot of money for Wall Street, though, and have collectively provided millions of jobs for the Chinese.
What has globalization provided for the American worker? Two hundred dollar Xbox’s and fifty-inch wide screen HDTV’s for only 15% of their annual wages? Whoopee!
Globalization was supposed to make everyone in the world get rich together. It hasn’t worked out that way, has it? Or is it heresy these days to question the wisdom of globalized labor markets?
August 3rd, 2011 at 10:27 pm
No, Terry, it’s not heresy to question the wisdom of “competing” in a rigged game.
Look at where we are with China. Did you know that if China lost its trade with the US it would be a net importer of goods and services? What that tells you is that the game is rigged: Europe erects trade barriers with safety and other barriers that we don’t to protect their markets while we don’t. And China rigs its currency to artificially boost their exports to the US.
I’m a supporter of free trade. But the game isn’t free now, so I’m actually opposed to the system we have now. Drop a 30% non-discriminatory tariff on all imports as a starting point and more “safety” regulations at certain “problem” countries and I’d be happy. Yes, it’s a blast of inflation and yes, we might set off a trade war, but it will force us to start to actually make things and use our own resources again.
But remember Smoot-Hawley and how bad it was? It was bad for the US because we were a next exporter at the time, not a net importer like we are now. Europe recovered from the tariff wars just fine as net importers, while we were hurt more. Perhaps now is the time to take a lesson from that experience.
August 4th, 2011 at 2:47 am
I used to be a libertarian, Nerdbert. Free trade was the tide that would lift all boats, or so I believed two decades ago.
These days I look around me for the benefits that globalism was supposed to provide. It ain’t pretty. Jobs that pay $15/hr require a college degree that costs $40k from a state college. The stock market has been flat for a decade, interest rates on CD’s run 2% and inflation is 4%.
For years Jerry Pournelle has been pushing the idea of a “tariff for revenue only”. Get rid of the income tax. All the federal government’s tax revenue would come from a tariff on imports. If the People want a welfare state, they will pay for it, now. I’m coming around to Pournelle’s point of view.
August 4th, 2011 at 7:18 am
nerdbert and Terry;
And yet, the Dear Leader and his environazi ilk, are preventing oil exploration in both Alaska and our surrounding waters and the development of oil sands/shale. According to people that I know in the oil industry, if these resources were developed, we could not only meet our domestic needs (including projected increases in demand) and be a leading net EXPORTER for at least the next 75 years! If someone can put a choke chain on the libturds and hide the checkbook, the royalties from that oil would create a budget surplus with 7 years and counting all related industries, create almost 1,000,000 jobs!
August 4th, 2011 at 8:58 am
Terry, the trick is that the economy is not a fixed size, and when Grandpa goes back to work to pay for his Medicare fees, or motorhome, or whatever, that money gets cycled around. We’ve been trying to limit the supply of labor to “keep jobs for people” for eighty years now, and it’s been eighty years of failure. It’s time to try something new, like “tell the people who are limiting labor to take a hike and get a real job.”
August 4th, 2011 at 9:25 am
For years Jerry Pournelle has been pushing the idea of a “tariff for revenue only”. Get rid of the income tax.
Run the numbers. Even a Democratic analysis (i.e. static and stupid) would insist on over 100% tariffs to get rid of the income tax and fund the government. And 100% tariffs would allow completely stupid industries (aka the auto industry) to foist off products on us of terrible quality. Remember what Detroit put out before the Japs came in?
You need some exposure to the market, but right now the US is the naive bumpkin visiting New York City and deciding to play some 3 card Monty when it comes to trade. I don’t see that changing, though. The GOP patricians listen to the large corporations and the Democrats have been straight out bought by foreigners.
I didn’t believe Ross Perot at the time. I do now simply because the US hasn’t been vigilant in protecting its interests. Instead, we’ve been using the cheap goods and a big credit line to party like there was no tomorrow. Well, tomorrow is here.
August 4th, 2011 at 11:56 am
I’m not wedded to the idea of a tariff in place of an income tax, Nerdbert. For one thing the “for revenue only” part would only last until the first plane load of lobbyists landed in D.C.
A good start would be to have something called an industrial policy. Other countries have them. If you were to ask any politician, D or R, what the industrial policy of the US is, you couldn’t get an answer, because we don’t have one. If we had an industrial policy we could at least debate whether it was working or not working.
August 4th, 2011 at 12:14 pm
Bubbasan, I am not an economic libertarian. Increasing the size of the economic pie is a necessary but not a sufficient condition for creating jobs in the US. In real terms the US GDP is 25% higher now than it was in the late 90’s when we had, for all practical purposes, full employment.
August 4th, 2011 at 10:39 pm
Kill the fatties, and get all “Logan’s Run” on the olds? I’m down with that.