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RC Holiday Bonus: Vote for the Best Fiscal Ciffhanger!

Original post made by Tom Cushing, Danville, on Dec 18, 2012


If you'll return with us now to the tales of yesterweek, you may recall that the Concord Coalition's game of Principles and Priorities invites players to resolve the Fiscal Cliff in their own fashion, according to the financial implications of 41 federal budget choices. Below are brief descriptions of the three finalist teams' solutions, chosen because they actually completed the game -- under less than waterboard-level duress (if only slightly, in one case).

You may vote for the Winner by emailing your choice to dxraucouscaucus@gmail.com , between now and midnight, Christmas Eve. There's a Primo's best pizza riding on the outcome, and who knows, the winner might share!

To achieve a (ahem) balanced approach, spending and revenue collections were divided into four categories: General Spending, Defense/Security, Health Care/Social Security and Taxes/Revenues.

The "Responsible Moderates" team may sound like a mythical beast to folks at both political extremes, but they weighed-in to cut General Spending by $123B, modernizing roads and schools, but cutting allocations for NIH and water quality, and ending farm and AmTrak subsidies. They would also eliminate the one-dollar bill. They cut Defense by just over $1 Trillion ($872 of which assumes orderly withdrawal from current miss-adventures) and Health Care/Social Security by $1.51 Trillion, notably by block-granting Medicaid long term care, and raising both Medicare premiums and the taxable earnings cap for Social Security payroll taxes (actually a "revenue enhancement"). Under Taxes, they'd reform the system into three simple brackets -- 10/16/26%, thereby raising $1.3 Trillion. Finally, they'd end oil/gas subsidies, raise the gas tax by 25 cents and tax global corporate profits, thereby raising another $415B. NET budget effect: 10-year surplus of $4.4 Trillion (and massive unemployment among tax lawyers).

The "YanquillaDoras" saved $78B in General Spending, (agua, escuellas y NIH -- si! Roads, no!). Their Defense cuts were slightly higher at $1.05T, cutting some R&D and a missile defense upgrade. Health Care/Social Security was also similar to the RMs, at $1.46T; they would further regulate med-mal lawsuits and punitive damages. As to Taxes, the Yanquis would keep the current system, let All Bush2-era tax cuts expire, phase-out the mortgage deduction, end oil/gas subsidies and tax global corporate profits, thus raising $373B. Net budget effect: $2.96T surplus over 10 years.

Finally, the "AlaMojos" would cut deeper into General Spending " they don't like schools, roads, NIH, water or AmTrak, but they'd keep the sawbuck, all to the tune of net $235B saved. Defense was similar to the others, at $1.05T saved. In Health Care, they'd "save" the same $457B from the payroll tax hike, but, as oldsters, they were kinder to Medicare/Aid, saving about half the amounts of the other two teams ($727B). Again taxes were a major differentiator, as they'd extend the Bush2 rates only under $250K incomes, impose a surtax on incomes over $1 million, and they would continue mortgage and charity deductions: netting-out that category at -$2.17T. Overall, the AlaMojos left us $160B in the hole, over 10 years.

Here's an attempt at a 10-year summary chart -- if it fails to convert, I will send you the detailed spreadsheet, upon email request.

RespMods Yanquis MoJos

Gen Spend $123B $78B $235B

Defense $1.01T $1.05T $1.05T

HC/SocSec $1.51T $1.46T $727B

Taxes $1.75T $373B -$2.17T

TOTAL $4.39T $2.96T -160B

Now, don't you think you could have done better; don't you wish you'd entered? Too bad, no pizza for you -- but you can still help pick the winner, so please vote!

Comments (4)

 +   Like this comment
Posted by spcwt
a resident of Danville
on Dec 20, 2012 at 8:53 am

All the teams deserve a plastic golden trophy for participating. It will boost self esteem and make things "fair."

They all deserve F's, however, for failing to understand the magnitude of the problem.

They're like a family that pats itself on the back for balancing their monthly budget, but who ignore the big bills they owe to fix a leaky roof, to repair structural damage to their house, have no retirement savings, no plan to pay off mountains of credit card debt, etc.

Congratulations. They've put forth plans to balance the $1.3 trillion / year deficits. That's easy by comparison.

We are currently short $86.6 trillion to pay for the future Medicare and Social Security benefits of everyone that currently qualifies. Where are you going to get the money for that??

In the attached link, there's an article from the Wall Street Journal that explains the problem. It is by Chris Cox and Bill Archer who served on President Clinton's Bipartisan Commission on Entitlement and Tax Reform. Web Link
To summarize, it says that due to rising healthcare costs and people living longer, Medicare and Social Security are hopelessly underfunded. To keep the promises we've made to the elderly, poor, and disabled who rely on these programs, we need around $8 trillion in tax collection annually.

In other words, it's not enough to just balance the difference between the $2 trillion of tax revenue we collect each year and our $3 trillion of annual expenses. We have structural problems with Medicare and Social Security that require another $8 trillion a year of tax revenue. Yes, you heard that right. We need another $8 trillion a year just to break even on these two program only.

Where will you get the money for that??

We need political leaders to level with the American public about what we owe. And we need to stop spreading the fantasy that we can solve our financial problems by merely increasing taxes on 2% of the population.

If we truly want the big government programs that Tom champions each week, we need an honest conversation on how to pay for it all.


 +   Like this comment
Posted by John
a resident of Alamo
on Dec 22, 2012 at 11:56 am

My Responsible Moderate plan raises $4.4T, which is almost 4x the deficit reduction mentioned in the earlier post. That would make a sizable dent in the deficit, and hopefully not be too draconian as to plunge the country into a prolonged and deep recession, which will only increase the deficit (due to lower tax revenues and higher needs-based spending programs). $4T will retard the economy, but you have to strike a delicate balance between taking some money out of current consumption in order to pay down the deficit. Ultimately the best way to pay down the deficit is by economic growth coupled with fiscal prudence, and showing that we are getting our house in order by taking a significant step toward reducing the deficit is the best way to provide that confidence to the business sector.


 +   Like this comment
Posted by John Maynard
a resident of Danville
on Dec 23, 2012 at 8:20 am

1 – the spcwt comment and analysis would be at all relevant if Social Security and MediCare were set-up like private pension plans, where those still exist – that is, like a savings account into which contributions are made, against a defined (guaranteed) benefit likely to be paid-out in the future. The Teamsters, for example, underfunded (read: "looted") the multi-employer pension funds of their members long ago, for instance, leading to legislated reform (ERISA, MPPAA).

SocSec and MCare have never, ever been set up like that. They are pay-as-you-go-plans – meaning that contributions (payroll taxes) that come-in today go out-the-door to recipients tomorrow. There is absolutely nothing new or nefarious here – they've ALways been that way.

So to talk about current 'underfunding' of obligations to be paid-out in the future is utterly meaningless. Of COURSE they haven't been funded – they never are, and never were. The same dire sounding article could have been written in 1970 – and yet, miraculously, here we are. There's no news here.

2 – the whiz-bang numbers are the result of a aggregating every such "unfunded" year of a 75-year projection into the future. Count-em, Seventy-Five years! What will the birth rate be in 2025? Inflation in 2050? How many lives lost in the great CA tsunami of 2082? How much will the Apple bailout of 2087 cost the taxpayers who remain here, and haven't yet moved on to the Mars colony? It's a silly exercise in the misuse of spreadsheet technology.

The current annual report of these matters Web Link suggests a more sane number – that even if all those factual projections are accurate, the Medicare underfunding – under current law with no changes – would be $5T, not $75T. And there's only 74.9 years left to avert that crisis!

3 – Back in its heyday, the WSJ was a great newspaper. But even then, we used to turn to the editorial page for comic relief from loonies. It has long been their stronghold. Now, with Murdoch having added this paper to his Fox News empire, it's crazy to the point of not even being funny anymore. The sky would fall every day if the chicken-pundits thereabouts had a shred of predictive credibility.

4 – among readers of this publication, spcwt is in a position to actually understand much of this. He repeatedly chooses to scare the credulous instead. Seems a rather perverse hobby.


 +   Like this comment
Posted by The AlaMojos
a resident of Alamo
on Dec 23, 2012 at 10:41 am

@ John: Paul Krugman and I think you can't take $4T, or even almost $3T (Yanqs), in both higher taxes and austere spending cuts, out of the lagging $15T economy, and not provoke Great Depression 2 -- Economic Big SNAFU. The "responsible" approach is put forth by we AlaMojos, with an essentially balanced federal budget over ten years.

And at the risk of revealing too much, what are all these big programs spcwt says Tom promotes every week? Are we talking Food Stamps (last week), the Pentagon (week before), FEMA ($13B, tiny by comparison)? Before that, you have to go back more than 20 weeks to find another big program -- a neutral description of the ACA. Sheesh. Once a boy gets a reputation ...


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