Fiscal Cliff Predictions

meeze wrote:

Maybe I missed all this, but were any cuts ever proposed? Specifically I mean.

while i agree with the gist of your point here, the "sequester" provisions that were kicked two months down the road were scheduled to cut approximately $55 billion from non-defense discretionary spending and $55 billion from defense spending in 2013. (i think between january 1, 2013 and sept 30 2013 but i'm not sure about that).

so those cuts were not implemented on january 1st and in addition we have more spending on unemployment insurance than was otherwise scheduled prior to the deal. along with the expanded refundable tax credits that were extended for 5 years, the deal resulted in some net increase in spending rather than a decrease in spending.

brownsmith89 wrote:

let's talk about how survival rates for these 2 illnesses. americans fare better.

"Twice as many American seniors with below-median incomes self-report 'excellent' health compared to Canadian seniors (11.7 percent versus 5.8 percent)."

i'd say the opportunities and incentives in american capitalism have been driving research for new medications and new technologies much better than your communist health care stance.

this is interesting information. and i imagine that we could find some other stats that show american life expectancy or infant mortality is not as good as some other countries.

sticking with the premise that the results in the american system are the best ...

a) we still need to consider whether the better results are worth the extra cost. as a percentage of gdp we are spending so much more than other countries.

b) the statistic about american versus canadian seniors is interesting given that nearly all american seniors are on a government health care plan. i'm not sure that it tells us anything about government versus private sector. and it might tell us that a single-payor / medicare for all type of a program would be a good solution to america's health care issues.

First of all, you were comparing the US to Cuba and North Korea. You started the comparisons, not me.Americans fare better with colorectal cancer, but far worse that the Swedes in the myocardial infarction fatality rate and only marginally better than that Brits. I'm sure you could find all sorts of stats that argue it both ways.What factors were accounted for in the statistics that you cite? Why do low income seniors in America have excellent health? Because the government pays for their medical costs? Having better health and having better health care are two different things.As far as the research, I think you're confusing healthcare and academia. For all you know, this could push more doctors into academia.You're also confused about what communism is.To quote Thomas Paine, "to argue with a man who has renouced his reason is like giving medicine to the dead."

This thread is a like a mosh pit - come here to unload and forget your troubles for a little, slamming around your fellow men.

I would bet $5 that no woman has been on this thread since page 3.

You can have the last word on this as this thread is getting rather stale and the rhetoric will heat up again in about a month, but your response was utterly disingenuous, especially as you responded to one sentence. Have you even read the initial Simpson-Bowles proposal? It focuses heavily on the entitlement reform and spending reduction side. It talks specifically about fiscal reform that BROADENS the base while CUTTING the corporate tax rate to maintain global competitiveness. It talks about keeping progressivity in the income tax code, but it LOWERS marginal rates substantially.

Yes, it does propose raising taxes on capital gains and dividends, which we've already started doing. And I could live with certain higher taxes when the economy has achieved escape velocity and we are no longer in an anemic recovery artificially buoyed by the Fed, whose balance sheet is just plain horrifying, which they are essentially admitting. Saying that I don't want higher taxes on capital right now because there is massive global competition for capital is hardly IGNORING 50% of the commission's proposal. Try 5-10%.

No doubt there will be contractionary forces either way, and we need to "take our medicine," but your statement that cutting government spending is just as contractionary as raising marginal rates is just inaccurate on its face. Most economic studies show that raising marginal rates has a negative multiplier between of -2 to -3. Cutting government spending does not have the same impact. As for all of this Keynesian BS, remember that even the infamous Bruce Bartlett, who jumped ship from the supply side to the demand side, penned an article citing a study that Bush's Keynesian "rebates" were saved, not spent, as predicted. I've posted it here before.

I don't agree with everything in Simpson-Bowles, but there's no partisan shading and most of it focuses on flat out cutting the debt, reforming entitlements, and creating PRO-GROWTH fiscal reform. I don't agree with all of it, but it's a start, and they wanted some $4 trillion in cuts over ten years. That was the figure we were working with two years ago, even though I think the final agreement before Obama botched it was closer to $3 trillion (remember, the Gang of six wanted $9 trillion over a decade), so $3 million was a compromise at the time. I'm sure Simpson-Bowles would see the need for more than $4 trillion at this time.

I don't care how we get there. I've said that maybe lowering the exemption on estates could be part of the compromise. I can live with higher rates on "investment income" once we are out of the new normal. And nothing good will come of Obamacare, medicare, or medicaid until more of the burden is put on the obese consumer of medicine and there is true price transparency and competition in the system. As I've said many times over, this isn't class warfare. It's really generational warfare, and the Boomers and seniors need to acquiesce to the new reality that they're not going to get as much as they expected based on flawed IRR assumptions or their own flawed expectations. After all, they got us in this predicament.

Yes, the sequester had specific cuts but no one in congress including Republicans wanted those specific cuts to actually go into effect. So they pushed it back.

No politician actually wants to cut spending.

Politically it is nice to say to conservatives that you want to cut spending.

Say it and you will get votes.

But the act of actually cutting expenses takes money from people and they will lose their votes or funding.

And tax cuts are nice to say and do.

This is the cycle of public debt.

Two years ago, the GOP had secured the vote for massive cutting and had agreed to 800 billion on the revenue side. It was far from perfect, but it was a start. Obama showed very poor leadership at the time. Hill-Billary would've gotten the deal done.

Sagarin wrote:

Have you even read the initial Simpson-Bowles proposal? It focuses heavily on the entitlement reform and spending reduction side. It talks specifically about fiscal reform that BROADENS the base while CUTTING the corporate tax rate to maintain global competitiveness. It talks about keeping progressivity in the income tax code, but it LOWERS marginal rates substantially.

...

It's really generational warfare, and the Boomers and seniors need to acquiesce to the new reality that they're not going to get as much as they expected based on flawed IRR assumptions or their own flawed expectations. After all, they got us in this predicament.

on the first quoted part above, i think you are really downplaying the revenue increase that was in the bowles-simpson proposal. it called for $2.7 trillion in increased tax revenue over 10 years. way above anything obama proposed to boehner - i think the maximum reported was $1.6 trillion and boehner wanted to stay under $1 trillion.

the following probably isn't the best link as a source, but it is pretty close even if the number isn't exactly accurate.

so how did the BS plan get to $2.7 trillion with base broadening and reducing marginal rates (as you accurately describe)? by starting with the rates that would apply AFTER expiration of the bush tax cuts. now that we've extended those cuts for most people, we cannot base broaden and reduce rates and raise the kind of revenue proposed by the BS commission. (we only got about $600 billion from this latest deal, so we need another $2.1 trillion - BS also assumed the payroll tax cut would go away).

on the second point, i agree. even obamacare is heavily tilted towards favoring people over 50 or 55 versus people in their 20s.

of course a single payer for all govt solution is best. All you have to do is review some of the recent posts about how brilliantly spectacular health care is in the NK, Cuba, China, etc. to see the truth in that. Govt knows best & is the best solution. That's also why Amtrak is so successful and profitable & provdes such excellent service, along with the postal service, DMV, TSA, IRS..

On top of that, the govt is so efficient and is such a wise steward of resources, that I don't see why we don't just turn over all private industries to govt control.

Just because the US has had a healthcare system that's the envy of the world for decades is purely coincidental to it until recently being a private system...

Sagarin wrote:

Two years ago, the GOP had secured the vote for massive cutting and had agreed to 800 billion on the revenue side. It was far from perfect, but it was a start. Obama showed very poor leadership at the time. Hill-Billary would've gotten the deal done.

Massive cutting is not a "start" in the middle of an economic recovery.

I'm not downplaying the revenue increase. I'm saying that even as Obama ignored his own commission until the 11th hour, neither side struck a deal remotely approaching what SB wanted two years ago, but it was a start. As for extending most of the Bush tax cuts, you can't pin that on the GOP solely. Obama and Reid wanted to extend all of the cuts except on the top 2% of wage earners. They weren't looking to sunset all of the Bush provisions. The GOP agreed to all but the top 1% essentially in the end with effectively no new spending cuts. Even though I think SB got the pro-growth policy right, which is part of the revenue-side, I think their assumptions about "investment income" were overly optimistic. It's something that should've been phased in or replaced by something else like the estate exemption.

But, I agree with you. This was a missed opportunity all around. My sense is that Boehner realized that negotiating with Obama was fruitless, because, in the end, his political philosophy of extending rates on the rich and doing so very little on the spending side was obvious. So why introduce a bill that was going to get killed? I mean, Obama had a mandate, and he was as brazen about it as Bush was after he won a second term, language that made me puke at the time (Bush - I said so at the time). Nobody has a "mandate." Most economically-literate people see the need to cut spending and they don't want to hand their kids a mess. Unfortunately, the voting populace consists primarily of the Jay Leno "Jaywalking" victims.

Obama's goal was to split the House, which he effectively did. Good for him, not so good for the country. Frankly, I don't know how we walk this back at this point, but the speech after the bill was voted on was essentially one of more spending or, cough, cough, "investment" in the economy. Heck, rates are cheap. Lets borrow ourselves to oblivion. It worked so well for the PIIGS. It worked so well for CA, IL, NY, and NJ.

However, I agree that the GOP needed to be more realistic about the revenue side, which is why I was upset with them when they canned plan B, because I think they could've compromised it down to the $450,000 figure and gotten much more in spending cuts. But, perhaps I'm the optimist here. Perhaps no such compromise is possible until our backs are really against the wall, which they will be.

I used to work for a chief market strategist that was on Bush's tax commission. I remember a lot of the ideas about getting rid of exemptions and deductions were on the table then. I don't recall why it never went anywhere. This isn't anything new. It's always about the political optics, which is a shame, because nobody wants to play the sacrificial lamb, but, right now, it's looking like one-party rule. And that's dangerous, in either direction

All I know is that Federal debt as a percentage of GDP was 40% at the height of the Great Depression, soared during WWII only to fall to a trough of 32% in 1974. And it has climbed steadily since, crossing party aisles, hitting 60% by 1990, 70% by 2008 and 102% by 2011. Entitlements and interest alone will eat up all revenue within 12-13 years. This is unsustainable. We cannot tax our way to prosperity.

Sorry for the bolding.

Huh?? wrote:

Massive cutting is not a "start" in the middle of an economic recovery.

I would highly recommend that people read the full report PDF on the header of this site, but the executive summary (ten pages) will suffice. It talks about deleveraging, the necessity of properly restructuring debt, and the four ways out of these crises, with austerity being the most constructive and popular.

I would also read about the Great Depression that nobody ever heard of, that of 1920-21. We cut taxes and cut government spending in half, and we were out by 1922. I realize that it's an imperfect model for today's macro-climate, as the government is a much larger piece of the pie now and we are no longer on the gold standard. But it's instructive nonetheless.

anyone know if there is theoretically a way for the house to not raise the debt ceiling AND keep paying our debt?

I'm not so worried about shutting down the government, except a default on the debt would be a nightmare. it would be good if there were some trick to keep paying interest.

there are multiple theoretical ways. unclear if they are truly constitutional.

kaitainen wrote:

there are multiple theoretical ways. unclear if they are truly constitutional.

now that i have a minute, allow me to expand.

there are at least three methods that i've heard discussed.

1) the "platinum coin" option. in short, the federal reserve generally has the sole right to print new money in this country. however, the treasury department has statutory authority to coin platinum coins. it could arguably do so in a very high denomination, say, $1 trillion, and then deposit that coin with the federal reserve in exchange for cash or treasury bonds.

while there are certainly better discussions of this option out there on the interwebs, here is one of them:

2) the 14th amendment option. this civil war era amendment talked about debt to ensure that debts incurred during the war would be paid, even though the government was in a bit of disarray during those years. it says: “The validity of the public debt of the United States, authorized by law, including debts incurred for payments of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.”

arguably this amendment supersedes any statute and any provision in the constitution itself (other than later amendments), so the "shall not be questioned" language is definitive.

white house lawyers have said that they won't rely on this.

here is one article about it from summer 2011:

3) the executive branch could prioritize spending to stay under the debt ceiling while ensuring that all interest on treasury bonds is paid.

it is unclear if the executive branch has the authority to ignore statutes and assign scarce dollars where they choose to.

and if you decide that the executive branch does have this authority, then it's not a long stretch to say that the executive branch can issue more debt even without an increase in the debt ceiling.

LOVE the platinum coin gambit. I really hope they do that. It would turn the tea party into a gargling mass of apoplectic protoplasm.

Interesting on the 14th amendment also. This whole government thing is as complex as a mick taylor guitar solo.

Thanks for this.

No Way wrote:You're also confused about what communism is.

i see that you conveniently ignore the fact that it takes double the time to get access to medical care in england and canada.

this is with lower pay and an exodus of doctors.

since i'm confused about communism, then please explain to me what it is.

explain to me how communism doesn't drive laziness, corruption, and apathy to drive a lowered standard of living.

you're confused about "academia" and reseach from pharmaceutical and medical companies that are driven by american capitalism.

"Many critics of the British system blame the National Institute for Health and Clinical Excellence (NICE), whose mission is to analyze the cost-benefit of treatments to determine which should be covered by the NHS."

"A cancer drug like Avastin, which can extend a patient's life by a few months, costs $48,000 annually per patient. It's far too expensive, by NICE's reckoning, to provide to all colon cancer patients, so it's available to none."

wow, bureaucrats deciding NOT to give treatment because of cost, so no one can get it.

you're confusing "socialized healthcare" with "equal, fair, quality, comprehensive healthcare".