Fiscal Cliff Predictions

The deal is even worse than I thought. No meaningful spending cuts of any kind. Would have been much better off with the previously negotiated compromise of the fiscal cliff. That had real, and meaningful, spending cuts.

Yeah, people keep talking about lack of spending cuts.

But please write down the cuts you want.

The Republicans didn't want the cuts that were scheduled. That's why they pushed them back.

The cuts were to pay Medicare doctors less.

Chop off unemployment assistance.

Cut the military.

This was done in phases.

They are still scheduled to address the expenses.

The payroll tax break was considered a big expense and hit to the deficit and they cut that.

Stocks are rising with the news.

The deal adds $4T of deficits over 10 years vs. doing nothing.

Looks like stocks and national deficits are inversely proportional.

(yes I am making a big leap here and leaving out tons of variables)

My name is Lance wrote:

a) & b) aren't worth a reply.

c) sure, pal. barry spent every nickel of revenue during his 1st term + another $6T, but he was really quite the fiscal hawk. I concede in the face of your corrective logic..

d) hmmm...why pick years 5-8 of W's regime, vice years 1-4? Would you like to discuss the housing bubble & the Community Reinvestment Act - neither of which are tied to W's policies? How is it that we don't blame barry for any poor economic results since 2008 - in fact we credit him for saving us! - but we have no problem blaming W. for the housing bubble bursting on his watch, and in fact continue to blame W for any poor economic results 4 years after he left office?

i'll reply one last time to you. this is even less fun than usual when you just openly ignore the points you can't respond to adequately.

to clarify, i made the point about substantial tax cuts in obama's first term to suggest that he implemented the policies you think should work - large tax cuts should be what you (personally) prescribe to start an economic boom based on what you've said here. so i'm wondering why you don't give him credit for that / wondering why we haven't seen a revenue boom.

i said years 5-8 because the major tax cut legislation was in 2001 and 2003. i figured we needed some lag time to see the results of those cuts. i'm happy to use years 3-7 instead. how did median household income progress during those years? the federal budget deficit? how robust was job creation? (especially if you want to exclude the housing bubble because you claim w bush didn't cause it, so to be fair it seems like we shouldn't give him credit for construction and related jobs that were a side effect of that bubble)

X-Runner wrote:

Yeah, people keep talking about lack of spending cuts.

But please write down the cuts you want.

The Republicans didn't want the cuts that were scheduled. That's why they pushed them back.

We need to cut social security, medicaid, medicare, and defense. We also need, long term, to cut the interest expenses on the national debt. Without addressing those items all talk of reigning in deficits are nonsense. That math just won't work.

I am OK with the Social Security tax break expiring. It was very poor public policy when it was enacted.

Mr. Obvious wrote:

X-Runner wrote:

Yeah, people keep talking about lack of spending cuts.

But please write down the cuts you want.

The Republicans didn't want the cuts that were scheduled. That's why they pushed them back.

We need to cut social security, medicaid, medicare, and defense. We also need, long term, to cut the interest expenses on the national debt. Without addressing those items all talk of reigning in deficits are nonsense. That math just won't work.

I am OK with the Social Security tax break expiring. It was very poor public policy when it was enacted.

Indeed. I have talked about cutting and reforming all of these, reforming the tax code such that you broaden the base and can actually lower some rates, put a repatriation holiday into effect, and, yes, cutting defense. However, going over the cliff would've done none of those things in a substantial way. I'm not sure why we ever went back to Afghanistan to begin with, why we keep giving money to Pakistan, the Muslim Brotherhood, Hamas, etc, and why we don't start tapping our own natural resources and building thorium nuclear reactors. All of these politicians are an embarrassment, running for political cover rather than making the necessary sacrifices for the good of the nation. My guess is that the threat of the illusionary fiscal cliff merely pulled revenue forward to this year, and we will actually generate less than projected, while the CBO scored this as adding some $4 trillion to the deficit over the next ten years.

If I'm the GOP now, I would hold the Dems hostage over the debt ceiling, requiring $2 in cuts for every $1 dollar in raising the ceiling. I don't care what gets cut. Merge Federal departments, gut everything by 10-20%, threaten default. The president won't want to go down that road, but he also won't want to risk what happened last time. It's obvious that he wants a permanent entitlement state and he thinks more tax hikes are imminent.

X-runner, you have pretended to be apolitical through this entire thread, even though your partisan leanings are obvious, are as my own, though I never suggested otherwise. Nobody ever accused "W" as being a fiscal conservative, even as the Medicare Prescription part D boondoggle was a political football, and he inherited a recession from Clinton and then 9/11. So, we went through a tech bubble, a housing bubble, and now we have built a massive sovereign debt bubble, all because of reckless government and Fed policy. It crosses party aisles. But they're all pussies, and the Prez is off to Hawaii to play his 112th round of golf with Usher and Pitbull and George Clooney.

Unfortunately, we can't sell California. We just need to sell Alaska at this point. Hawaii too. People can still visit. That would at least solve the deficit.

I'm OK cutting overseas aid, particularly to some of the places you mentioned, but that is not a substantial contributor to our enormous debt problem. Defense is, and is effectively a huge subsidy to other advanced democracies which as a result of US policy spend very very little on their own defense. It needs to be cut very substantially the number of overseas bases needs to be cut and we need to use our Defense Department for Defense. Or at least rename it the department of War, since that is more intellectually honest.

Neither the republicans nor democrats have any desire to cut spending, ti is clear. The repubs held the dems feet over the fire the last debt ceiling time, and we go the fiscal cliff compromise, which they then backpedaled away from as fast as they could. There were real cuts in their although they were not structural enough to be a real long term solution.

Personally I hate both parties and don't see either one as having any leadership. The repubs come in for more scorn for me simply because they are more dishonest about their intentions vs. their actions. There are no fiscal conservatives in the party, or at least none with any pull.

Social security has a surplus to date. Down the road the age to receive benefits would have to go up as the number of people eligible increase as more people live longer.

They could cap benefits to those that don't need it so much and that would save costs. They could step up the maximum taxable amount and that would cover more costs.

A better economy creates more SS income income, so more future workers would be nice.

A lot of people that lived a life of low wages really need it. They just couldn't save. And they tend to not have careers where they can work into their 70's, many manual jobs.

A lot of women took time to raise kids and didn't earn the same benefits they could have had they worked. They really need it.

Medicaid helps poor people and children. It's tough to just say bleed it out and suck it up.

More preventative care could help save costs here. Birth control would be really helpful.

With medicare maybe they shouldn't treat old people as quickly as they do. Cancer cures have extended the lives of many people who go on to take SS and medicare benefits.

If they would just die quicker it would save a lot of money.

The high defense spending seems pretty unnecessary when you look at all of the countries that don't spend a tenth of what we spend and still never get attacked.

But defense spending is a great economic stimulus when you look at everyone employed in the defense contracting business.

Yes, the SS tax break was a bad idea when it was put in.

I said so at the time.

Because you had to take it away at some point and it hurts when you raise taxes. People adjusted their budgets and now many people will be in a tough position.

We can merge the Departments of Defense and Homeland Security. We can merge the Departments of the Interior and Agriculture. We can get rid of the Department of Education, even as a lot of that money trickles to the states. We need to keep some strategic bases, but certainly not all of them. In 2011, we had $4 trillion in cuts agreed to until Obama pulled the plug at the last minute. Now, we are nowhere close.

The biggest scorn was issued by the President's own Simpson-Bowles commission, even as they, too, had to save some face:

"The deal approved today is truly a missed opportunity to do something big to reduce our long term fiscal problems, but it is a small step forward in our efforts to reduce the federal deficit. It follows on the $1 trillion reduction in spending that was done in last year’s Budget Control Act. While both steps advance the efforts to put our fiscal house in order, neither one nor the combination of the two come close to solving our Nation's debt and deficit problems. Our leaders must now have the courage to reform our tax code and entitlement programs such that we stabilize our debt and put it on a downward path as a percent of the economy.

Washington missed this magic moment to do something big to reduce the deficit, reform our tax code, and fix our entitlement programs. We have all known for over a year that this fiscal cliff was coming. In fact Washington politicians set it up to force themselves to seriously deal with our Nation’s long term fiscal problems. Yet even after taking the Country to the brink of economic disaster, Washington still could not forge a common sense bipartisan consensus on a plan that stabilizes the debt.

It is now more critical than ever that policymakers return to negotiations that will build on the terms of this agreement and the spending cuts in the Budget Control Act. These future negotiations will need to make the far more difficult reforms that bring spending further under control, make our entitlement programs sustainable and solvent, and reform our tax code to both promote growth and produce revenue. We take some encouragement from the statements by the President and leaders in Congress that they recognize more work needs to be done. In order to reach an agreement, it will be absolutely necessary for both sides to move beyond their comfort zone and reach a principled agreement on a comprehensive plan which puts the debt on a clear downward path relative to the economy.”

X-Runner wrote:

But defense spending is a great economic stimulus when you look at everyone employed in the defense contracting business.

We have to stop defense spending as corporate welfare.

Neither the public, nor markets have the appetite for another self-created GOP crisis. If the GOP holds up the debt ceiling, they'll pay a very steep price. Obama has said enough times he's not going to negotiate over the debt ceiling. And, he shouldn't. No president should. There's a time and a place for everything. Congress should take responsibility for it's own budget decisions, not walk away at the last minute when the bill is due. There's a productive way to do it all via a grand bargain. Putting the nation through a hostage crisis is an epic blunder in the making.

Sagarin wrote:

If I'm the GOP now, I would hold the Dems hostage over the debt ceiling, requiring $2 in cuts for every $1 dollar in raising the ceiling. I don't care what gets cut. Merge Federal departments, gut everything by 10-20%, threaten default. The president won't want to go down that road, but he also won't want to risk what happened last time. It's obvious that he wants a permanent entitlement state and he thinks more tax hikes are imminent.

Yes, I have tried to sound an apolitical tone as strong partisan words do not get conversations going with all involved.

Like commenting on the President going off to play golf as it insinuates that he doesn't do much work.

And the concept of holding the debt ceiling hostage is a terrorist approach.

It's walking into the room with a hand grenade and threating to pull the pin and kill everyone including yourself if you don't get want you want.

The fiscal cliff wasn't the same same thing.

They either agreed to a compromise in taxes or taxes went up.

Either agree to a spending plan or programs will be cut that both sides didn't want.

The result of not doing anything would have been bad but we would have survived.

We would not survive a cap on the debt ceiling.

Actual payemnts that were set up as obligations will stop.

To hold it hostage would mean that you were willing to stop these payments.

It caused a hit to our credit rating and stocks to drop severely in 2011 just because they came close to missing payments.

Put the grenade down and engage in dialogue and go with the voters.

Maybe try and broaden your base of voters and win some Senate seats for next time.

The GOP is going to pay a steep price no matter what they do. So they should back the president into a corner. Interesting that Rubio voted "No." We need to deleverage, and the longer we put this off, the more painful the medicine will ultimately be. The president's idea of a grand bargain is more tax hikes in exchange for minor spending cuts, no real fiscal reform, and minor revisions to entitlements. Hell, he wouldn't even take up the idea of using a different inflation gauge for future projections, which was a Democratic proposal to begin with. Oh, he may fly around in Air Force One to exotic golf locations a little less as part of the arrangement. Maybe cut one trip per year.

i appreciate and generally agree with the input of mr. obvious and sagarin on the big picture of what needs to be cut.

the devil is in the details of course. medicare has to be cut in some way, as does medicaid. defense spending too.

on medicare, obama trimmed future growth as part of the ACA (and then spent the savings on other provisions in the ACA), and romney and ryan promptly attacked him for it. remember sarah palin and the ridiculous "death panels" line of attack? and now congress, especially republicans, want to eliminate the independent board that the ACA set up to examine cost effectiveness of various medical procedures funded with medicare dollars (IPAB, i think it is called; something like that).

a lot of the medicaid spending growth is related to nursing home care near the end of life. cutting that spending will not be easy.

and as mr. obvious just pointed out, a lot of the defense spending is corporate contractors. the amount we have spent, for example, on the new fighter jet (joint strike fighter?) is insane and completely unrelated to any real world military need.

lastly, i still think we are undertaxed, especially the middle class after this most recent round of tax changes. even with meaningful cuts to medicare, medicaid and defense, we are likely to have a federal budget around 20-22% of gdp, and i don't think that current tax policy will get us enough revenue to pay for that.

The president doesn't want a grand bargain. He has his own sacred cows, just as the GOP does. The Simpson-Bowles statement says it all. A big swing and a miss. You don't need to agree with me. Just read their statement. The point is, the debt ceiling should be used to FORCE a grand bargain, one that includes major cuts, even if implemented over a decade to diffuse the pain.

kaitainen wrote:

lastly, i still think we are undertaxed, especially the middle class after this most recent round of tax changes. even with meaningful cuts to medicare, medicaid and defense, we are likely to have a federal budget around 20-22% of gdp, and i don't think that current tax policy will get us enough revenue to pay for that.

So why don't we focus on growth? Fiscal reform and energy infrastructure that promotes growth? Raising taxes isn't really revenue, and, in fact, might bring in less revenue than closing loopholes and getting rid of subsidies would've. Revenue comes from a strong economy whereby everyone is participating and we don't need to fight about tax rates. Raising taxes and regulations on small businesses or people in that category that file on their personal returns will merely crimp growth.

Frankly, we shouldn't be giving 75-year olds hip replacements and heart procedures because of their reckless spending and eating habits, especially when you consider that this generation is the first that is expected not to outlive its parents, on average, and especially when there is so much shit in the food we eat, the water table, and the drugs our doctors pedal. This isn't class warfare. This is our parents stealing from our children's future (and ours to a large extent). The real entitlement attitude lies with Boomers and seniors.

So, we want to be more like Sweden? Well, guess what... Sweden only pays out pensioners' liabilities commensurate with economic growth, which means they get cut when times are bad.

I don't see the point in debating politics with someone so moronic that they insist Obama has been a tax cutter on a grand scale. It's like talking baseball with an old guy who thinks the Dodggers still play in Brooklyn. Pointless..

Sagarin wrote:

Frankly, we shouldn't be giving 75-year olds hip replacements and heart procedures because of their reckless spending and eating habits, especially when you consider that this generation is the first that is expected not to outlive its parents, on average, and especially when there is so much shit in the food we eat, the water table, and the drugs our doctors pedal. This isn't class warfare. This is our parents stealing from our children's future (and ours to a large extent). The real entitlement attitude lies with Boomers and seniors.

i think that current policies are too tilted in favor of seniors as compared to the rest of the country. i don't know what the solution is though. if the 75 year old in your example has no means available to pay for the needed hip replacement, are we willing as a society to force that person to suffer? it's not like a 40 year old who could theoretically at least work in the future to pay off medical debts.

as for your tax comments, i am not tied to any particular mechanism of raising revenue. it could be a carbon tax, a VAT or other consumption tax, revenue from a cap and trade system, elimination of loopholes, or some combination of these things along with commensurate changes to marginal income tax rates.

i think that a lot of our government spending will tend to rise though along with economic growth. things like social security, interest payments on debt, medicare spending, defense spending, federal employee salaries and rents - all these things will go up faster if the economy is growing faster. that's (partly) why i look to a target of percentage of gdp rather than a dollar number.

and i am definitely in favor of investing in energy (and other) infrastructure; especially while we are able to borrow for 30 years at about 3 or 3.5%.

the bottom line is that most informed observers, including several contributing here from various points on the political spectrum, agree that congress and the president need to get to work on the details of trimming the long term projected costs of politically popular items like medicare, medicaid and defense spending. and there is nearly as strong a consensus that there needs to be an increase in revenue of some amount. what is frustrating is how consistently unwilling they (congress and the president) are to even make serious attempts to address these issues unless we are facing a crisis - real or manufactured.