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RC Holiday Bonus: Vote for the Best Fiscal Ciffhanger!

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

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Comments (4)

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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.

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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.

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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.

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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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