It's Gonna Hurt

[Tunnelcat]

Budget Proposal

So what does everybody think? Too far or not far enough to solve our debt crisis?

[null0010]

Doesn't raise taxes enough. Not like THAT will ever happen, though.

[CUDA]

Doesn't cut enough. too many people have been un-necessarily sucking on the Teet of Government for too long. they need weened off.

[Isaac]

I'll have to read this after class, but I think this will increase the workforce and lower taxes at the same time, increasing productivity and lowering prices. I'm no expert, but that sounds like we're moving in right direction!

[Foil]

After a quick perusal, what I find interesting are the tax changes.

They're basically proposing a gradual lowering of tax rates, but simultaneously reducing deductions in a way that will eventually increase tax revenue.

Personally, I think that's the right way to go for corporate taxation. Not sure about individual/household taxes, though; I'd have to see more about which deductions would be going away.

[Mjolnir]

Too early to tell, I got better information while listening to Cspan. This is a leaked plan/proposal and will definitely be a different beast from what I understand when it finally hits Congress with it.

At this point in time I have mixed feelings about it, some of it I love some of it I don't.

[Spidey]

All of this freaking out over budget cuts is unnecessary…all you really need to do is stop the spending increases. As long as the economy grows over time the deficit will take care of itself…but, I know the impulse to continue spending ever more can’t be helped…so lol on the “cuts”.

[Isaac]

All of this freaking out over budget cuts is unnecessary…all you really need to do is stop the spending increases. As long as the economy grows over time the deficit will take care of itself…but, I know the impulse to continue spending ever more can’t be helped…so lol on the “cuts”.

Real self regulation, of the economy, only works when business are allowed to adjust pricing naturally. High taxes and a "relaxed" unemployment population keeps that from happening, among other things. There are road blocks in our economy.

[null0010]

As long as the economy grows over time the deficit will take care of itself...

this is the part where i realized you don't understand the problem at all

[Isaac]

As long as the economy grows over time the deficit will take care of itself...

this is the part where i realized you don't understand the problem at all

....

http://en.wikipedia.org/wiki/Structural_deficit

[Spidey]

As long as the economy grows over time the deficit will take care of itself...

this is the part where i realized you don't understand the problem at all

Really, maybe you could expand on that thought, like explaining how if we just had a 1% growth in GDP the government taxes an additional .14 trillion more dollars a year, and why that couldn’t be a process to reduce debt rather than drastic cuts?

The GDP of this country is something over 14 trillion dollars.

Yes, it takes longer…but, it hurts a lot less…especially in a jobless recovery.

So please explain.

(I’m not saying cuts won’t work…just won’t happen)

I had to edit…sorry

[Spidey]

Sorry editing is a problem.

There is one major fatal flaw to growing your way out of a deficit, other than the obvious lack of growth. (and not actually having real zero spending growth)

You get extra points if you figure it out.

................

Isaac…we don’t have an actual structural deficit in this country, the government’s income grows every year to prevent that…what we do have is runaway spending like money grows on trees deficit.

And if you think I don’t understand the problem…lol…everyone on the planet understands the problem…it’s just too simple…

The government spends more than it takes in…period. (for whatever reasons)

[Isaac]

Sorry editing is a problem.

There is one major fatal flaw to growing your way out of a deficit, other than the obvious lack of growth. (and not actually having real zero spending growth)

You get extra points if you figure it out.

Price inflation!

[Isaac]

append:

GDP rises, but its not real growth.

[Spidey]

append:

GDP rises, but its not real growth.

Sure...but I named that one already.

Price inflation is good for government income, hey get more in taxes for each item purchased. But I suppose it also costs the government more to buy stuff…so maybe that’s a bust.

Oh yea, there is no federal sales tax, so it probably hurts, but I don’t think it a fatal flaw…just a problem.

[Isaac]

Isaac…we don’t have an actual structural deficit in this country

The structural deficit is the part of the budget deficit that WOULD EXIST even if the economy were operating at full employment. The Cyclical Deficit is the part of the deficit that increases during a downturn of economic activity. Total Budget Deficit includes both of these. It's not one or the other.

And if you think I don’t understand the problem…lol…everyone on the planet understands the problem…it’s just too simple…

HAHA! Everyone! Of course!

I'm not saying you don't. In fact you're using classical economics, when referring to a self regulating economy, which I like the most! But also, (the point of first reply) I think we have to use a mix of classical and Keynesian, because of how much restriction government has on business.

[dissent]

follow the Chuck Blahaus link over at Mankiw's blog for an interesting read.

[Spidey]

Sure…I plead guilty to over simplification.

The entire system is screwed up…for example, when they talk about deficit reduction…social security always comes up, but the social security system is supposed to be an insurance system that is totally self sustaining…lol.

So sure…simple freezing of spending is not the entire solution, but talking about budget cuts in reguards to social security, is something that should not have to be addressed either.

First when the system had plenty of money, they borrowed it…leaving IOUs in place, now that’s it’s broke they have to pay for it out of the general funds. (it was going to run out anyway)

Social security should be paid for by raising payroll FICA, then let the people know how much it really costs to run a government insurance program.

So, in reality the entire system needs to be fixed.

Good luck on getting any meaningful cuts, let alone actually fixing the “structural deficit”. So sue me…I’ve never actually never seen the federal government make real spending cuts. Yea they cut some here, but then increase 10 times over there.

The Republicans are just as addicted to government spending as the Democrats, so I doubt we will see anything more than cosmetic changes, and then maybe we can put some monkeys in office next time around, instead.

[Avder]

The Republicans are just as addicted to government spending as the Democrats, so I doubt we will see anything more than cosmetic changes, and then maybe we can put some monkeys in office next time around, instead.

As an added benefit, we can save money by paying them in bananas instead. There is nothing I don't like about that idea.

[Tunnelcat]

Now add to that what Obama and the Feds are up to with U.S. monetary policy. I do NOT see nice things going OUR way globally.

Inflation

Deflation

Although Obama denies it, I'm afraid I agree with Palin, of all people (quoted in the first link), that Obama want's to trigger an inflationary period after the Feds released 600 billion dollars of new money into our economy. This seems like a really old school attempt to drive down the value of government debt as a way to get it under control. Personally, I think that this is going to really backfire and ultimately lead to either deflation and a global trade war, or a Carter Era episode of stagflation. The Dems just doesn't seem to learn from the mistakes of the past.

Stagflation

Obama has hitched his presidency's future to Bernanke's policies. Obama may have just relegated himself to a single term. All the conservatives here will be happy Obama shot himself in the foot by relying on Bernanke. Let the Oligarchy begin.

[Spidey]

All hail the Oligarchy!

[Isaac]

The entire system is screwed up…for example, when they talk about deficit reduction…social security always comes up, but the social security system is supposed to be an insurance system that is totally self sustaining…lol.

If it could be ran more cheaply, why not? A budget cut can be made through the result of adjusting how the system works, improving efficacy, by lowering management cost. It's hardly science fiction... Here's an idea: banning the use of paper, alone, would lower cost. I've worked for the State of Texas and they save every piece of paper, including memos in warehouses... I'm sure the federal government isn't any better. Let's go for a complete digital system, top to bottom, and try to automate as much as possible and see how much we can cut. Heck, they might be able to sell off a few buildings in the process.

Social security should be paid for by raising payroll FICA, then let the people know how much it really costs to run a government insurance program.

I thought it was...

let alone actually fixing the “structural deficit”

Again... you mean the cyclical deficit, and you don't fix it. It's just a term used to describe a section of the total deficit.

So sue me…I’ve never actually never seen the federal government make real spending cuts. Yea they cut some here, but then increase 10 times over there. The Republicans are just as addicted to government spending as the Democrats, so I doubt we will see anything more than cosmetic changes, and then maybe we can put some monkeys in office next time around, instead.

Not after the 90's boom. Politicians are hoping to recreate that.

Fyi: Overall, I agree with you.

[AlphaDoG]

All of this freaking out over budget cuts is unnecessary…all you really need to do is stop the spending increases. As long as the economy grows over time the deficit will take care of itself…but, I know the impulse to continue spending ever more can’t be helped…so lol on the “cuts”.

As the fed government does BASELINE budgeting, this strategy works, however, the liberal left would call any spending freeze a "budget cut", and lambaste whomever supported such practice.

[Tunnelcat]

Spidey, there's probably going to be several things that will HAVE to be done to stop the money hemorrhaging of Social Security. One, raise the payroll FICA cap/limit, even eliminate the cap on income all together, even on capital gains. Raising the rate however, would be more punishing to lower wage earners. Two, bring in means testing. If a retiree has a good retirement income, they don't need as much Social Security. Three, raise the retirement age, not something I favor. Not every older person has the ability to do physical work when they reach their seventies. None of this will sit well with either recipients or current employees. Wealthier people will claim it's outright Socialistic to make them pay for the retirement of others when they get no benefits. But is it good for society to let seniors die homeless on the streets like they commonly did before the Great Depression?

When I first got married in the late 1970's, an employee could fill his or her FICA obligation after about 3 or 4 months of work. Reagan dramatically raised both the rate and the ceiling by the end of his 2 terms. Throughout the Reagan Presidency, the FICA rate went up around 7% and the ceiling went up about 60%. By the late eighties, a wage earner was now paying into their FICA obligations for the full 12 months of the year. Reagan claimed he 'fixed' Social Security, yet it's still slowly sinking. Of course, now that unemployment in high, jobs have gone overseas and the Boomer Generation is hitting retirement age, there are too few workers to pay into and prop up the system.

Conservatives, on the other hand AlphaDoG, don't want to drastically cut Military Spending either. It's their \"Sacred Cow\".

http://www.nationalreview.com/articles/ ... jim-talent

http://tpmcafe.talkingpointsmemo.com/20 ... _pentagon/

We've got two big government money sinks that no one want's to touch, yet everything is going to have to be on the table to solve the debt crisis this time. No picking and choosing between beloved programs anymore. How will the Republican-controlled House proceed now?

[Mjolnir]

I've said for years now we should be cutting our defense spending in half, it's ludicrous how much we spend.

[Heretic]

Yet Obama wants to have a civilian security force that's just as powerful, just as strong, just as well-funded as the military.

[Avder]

If I recall, the Bush administration had a couple of private security firms handling some stuff in Iraq. Didnt go so well.

Dumb idea then, dumb idea now.