Deficit Reduction

[cherdano]

I'm still reeling from the bet I lost to lobowolf on the Massachusetts Senate race. But this seems like a mortal lock to me. Name your terms.

Loser will make a post here admitting he was wrong, and give two upvotes to posts by the winner in this thread.

[PassedOut]

That's still easy! Try it while taking a firm stand against tax increases AND spending cuts other than reducing foreign aid!

I am against reducing foreign aid. (I have enough explaining to do when I travel.)

:P

[awm]

Here's a webpage that lets you try to eliminate the deficit by picking whatever policies you prefer. As far as my solution to this goes, raising all taxes to Clinton-era levels, getting us out of Afghanistan, and doing something about Medicare will basically solve the problem. I'm not convinced the medicare options suggested on the web page are realistic (any of them!) but you can't really solve the long-term deficit without doing something about medicare.

 

In response to Mike's post, I don't think adjusting the tax rates slightly (in either direction) will have any serious direct impact on jobs. Jobs are created when business and/or government spends money to create jobs. While one might think that lowering taxes will spur business to create more jobs, the private sector has shown a great deal of willingness to sit on huge cash reserves or to absurdly increase compensation for top-level executives rather than spending money on jobs; many businesses already have massive profit margins and are simply not hiring. One might also think that increasing taxes will spur government to create more jobs, but I think we are all aware by now that government revenues and government spending are not particularly closely related to one another.

 

To help with unemployment, I'd recommend some or all of: (1) Infrastructure projects, providing both short-term jobs and long-term competitivity (2) Green energy projects (3) Public-private partnerships where possible (i.e. instead of government building a high-speed rail, government agrees to pay half the construction costs with a private company paying the rest and getting ownership of the resulting rail line -- this reduces government's long-term involvement in the project, gives private business incentive to spend some money rather than sitting on it, encourages private business to be closely involved in the project and reduce cost overruns, and should make a long-term profit for private business if managed competently). (4) Investment in education, producing a more educated workforce as well as teaching jobs (5) A short-term deal allowing people to start receiving social security at an earlier age, helping the older unemployed to make ends meet and get out of the job market. Of course, all of this costs a great deal of money. Since I don't think that slight changes in tax rates have any serious impact on jobs, I suggest raising taxes on the wealthy (especially the capital gains rate) in order to keep the short term budget deficit under control. What I mean here is along the lines of Clinton-era levels, when the economy was booming; not some massive 70% levy on the top tax bracket like we had decades ago.

[spwdo]

http://www.pbs.org/wgbh/pages/frontline/tentrillion/view/?utm_campaign=viewpage&utm_medium=grid&utm_source=grid

[helene_t]

If the NYT budget game is a realistic, then USA does not have a serious problem. It is easy to eliminate the deficit without any sacrifices worth mentioning.

 

But maybe this is a reason to doubt if the game is realistic .....

[hrothgar]

If the NYT budget game is a realistic, then USA does not have a serious problem. It is easy to eliminate the deficit without any sacrifices worth mentioning.

 

But maybe this is a reason to doubt if the game is realistic .....

 

Alternatively, perhaps the real problem is the maturity of the electorate.

[nigel_k]

If the NYT budget game is a realistic, then USA does not have a serious problem. It is easy to eliminate the deficit without any sacrifices worth mentioning.

 

But maybe this is a reason to doubt if the game is realistic .....

 

The fly in the the ointment is new spending that Congress will no doubt pass in the future. It would be hard to come up with a game that included decisions about that spending when we don't even know what it is yet.

 

I actually think the 'no new spending' assumption is sufficient by itself to eventually balance the budget, i.e. you can keep tax rates where they are and also keep all current spending, increasing it at the rate of inflation.

[Bbradley62]

The fly in the the ointment is new spending that Congress will no doubt pass in the future. It would be hard to come up with a game that included decisions about that spending when we don't even know what it is yet.

 

I actually think the 'no new spending' assumption is sufficient by itself to eventually balance the budget, i.e. you can keep tax rates where they are and also keep all current spending, increasing it at the rate of inflation.

No, I think this is entirely incorrect. Even after a drawdown of forces in the Middle East, and an increase in federal revenue as the Recession ends, there is still more spending than revenue primarily due to retiree benefits (Social Security and Medicare). As the Baby Boomers retire over the upcoming 25 years, there will be a much higher concentration of retirees per worker than the system is designed to handle. The budget will not balance itself without a concerted effort to change some of the revenue:expenditure ratios.

[y66]

Loser will make a post here admitting he was wrong, and give two upvotes to posts by the winner in this thread.

 

Did I really say mortal lock? I just finished reading the complete Co-Chairs' proposal plus some commentary by Howard Gleckman, who seems like a sensible guy and pretty knowledgeable about taxes. I humbly admit that it seems you are indeed correct in saying that the 'effect of the Co-Chairs' tax proposal would be a higher tax burden for "wealthy Americans"'.

 

I should have known better than to bet against you. And it seems, as Gleckman says, Krugman should have known better than to make the following comments:

 

So how, exactly, did a deficit-cutting commission become a commission whose first priority is cutting tax rates, with deficit reduction literally at the bottom of the list?

 

Actually, though, what the co-chairmen are proposing is a mixture of tax cuts and tax increases — tax cuts for the wealthy, tax increases for the middle class. They suggest eliminating tax breaks that, whatever you think of them, matter a lot to middle-class Americans — the deductibility of health benefits and mortgage interest — and using much of the revenue gained thereby, not to reduce the deficit, but to allow sharp reductions in both the top marginal tax rate and in the corporate tax rate.

 

It will take time to crunch the numbers here, but this proposal clearly represents a major transfer of income upward, from the middle class to a small minority of wealthy Americans. And what does any of this have to do with deficit reduction?

[kenberg]

If the NYT budget game is a realistic, then USA does not have a serious problem. It is easy to eliminate the deficit without any sacrifices worth mentioning.

 

But maybe this is a reason to doubt if the game is realistic .....

 

 

 

Alternatively, perhaps the real problem is the maturity of the electorate.

 

 

Some truth to both of these comments. But maybe, just maybe, the time is ripe. As I tiresomely repeated in previous posts I think that a lot of the people who clamor for smaller government do not really mean it, or at least are very selective in what sort of programs they want cut. They did not seem all that excited about deficits when their guy was in the White House. For one example, I see by the morning paper that Karzai wants the US military to lower its presence in Afghanistan. Oh yes, we can do that!!! Very tempting. Give my regards to the Taliban, Hamid, see you around. That would save some cash.

 

 

The article accompanying the puzzle closes with

 

The government has not yet solved the deficit problem, the economist William Gale of the Brookings Institution says, because voters have not yet demanded it. They have rewarded politicians who say they are worried about the budget much more than politicians willing to make specific benefit cuts and tax increases. All of us would prefer generous benefits and low taxes.

 

“Whatever the eventual solution is,” Mr. Gale said, “it will probably be something that is not politically feasible now.”

 

Well, if we ain't ready now, just when is it that we might be ready?

 

 

I am finding many of the references from this thread very interesting. This is a good solid discussion. But when push comes to shove, we either are or are not ready to deal with this. I hope we are.

[Winstonm]

Anyone who seriously believes the Military-Industrial Complex would sit idly by and allow Congress and the President to cut defense spending has been living with the fantasies of Harry Potter as reality far too long.

 

The American Empire will continue on the path to ruin until it is only a historical afterthought.

[blackshoe]

Thank you, Winston, for your vote of (no) confidence.

[phil_20686]

Anyone who seriously believes the Military-Industrial Complex would sit idly by and allow Congress and the President to cut defense spending has been living with the fantasies of Harry Potter as reality far too long.

 

The American Empire will continue on the path to ruin until it is only a historical afterthought.

 

 

LOL

[kenberg]

Anyone who seriously believes the Military-Industrial Complex would sit idly by and allow Congress and the President to cut defense spending has been living with the fantasies of Harry Potter as reality far too long.

 

The American Empire will continue on the path to ruin until it is only a historical afterthought.

 

Hey, you, get off of my cloud! I'm the local pessimist.

 

There are, of course, grounds for pessimism. One example would be the notion that people who make less than a quarter mil a year are just too financially strapped to be expected to pay anything more in taxes. After all, the kids do need their i-phones and their summer trips to Europe. Otoh, it was in 1951 that my seventh grade teacher expressed the view that empires come and go, the U.S. has had a good run, now it was coming to an end. There were Commies everywhere, we had no chance. Something like that.

 

We need to co-opt the Tea Party: Yeah, got it, we need to deal with the deficit. Unlike Republicans, we even worry about the deficit when our guy won. So less talk about Mama Grizzlies, more action. For example, instead of yelping about death panels, some real thought about what we can afford and what we cannot afford for end-of-life medical care would be welcome. I think quite a few seniors would take a view something like "I know I will die someday, I don't expect the government to stop that, but while my health holds I would like to be able to hold on to the house, get around to visit the grandkids, and eat regularly. So act sensibly with medical care but go easy on the Social Security cuts."

 

 

 

It's true that human nature seems to require a heart attack before the need for a revised diet sets in, but maybe we can overcome that this time.

[y66]

Hey, you, get off of my cloud! I'm the local pessimist.

 

...

 

It's true that human nature seems to require a heart attack before the need for a revised diet sets in, but maybe we can overcome that this time.

 

Please define pessimism.

[PassedOut]

Peter Orszag contends that the Bowles-Simpson plan to adjust Social Security, while not perfect, should not be rejected out of hand by the democrats: Safer Social Security

 

The main flaw in the proposed Social Security plan is that it relies too little on revenue increases and too much on future benefit reductions. A reasonable objective would be a 50-50 balance between changes in benefits and changes in revenues. But the way to bring reform into better proportion is to adjust the components of this proposal, not to fundamentally remodel it.

 

Finally, even though Social Security is not a major contributor to our long-term deficits, reforming it could help the federal government establish much-needed credibility on solving out-year fiscal problems — which in turn could improve the political prospects for providing additional short-term stimulus for the economy. All of which suggests that Democrats in Congress should support the basic construct of the Bowles-Simpson proposal, while arguing for some changes to improve it. That has not, however, been their reaction thus far.

 

It is therefore crucial that the Obama administration recognize the opportunity and respond to it more positively. The White House has been handed a highly progressive reform plan for Social Security that could attract Republican support as well.

Compared with health care costs, Social Security only needs minor tweaks to fix. It makes sense to fix it right now before the tea partiers try to dismantle it.

[Gerardo]

Anyone who seriously believes the Military-Industrial Complex would sit idly by and allow Congress and the President to cut defense spending has been living with the fantasies of Harry Potter as reality far too long.

 

The American Empire will continue on the path to ruin until it is only a historical afterthought.

 

LOL

 

Rome was not built in a day (nor fell in a day either).

 

It fell one day, though.

[Gerben42]

Compared with health care costs, Social Security only needs minor tweaks to fix. It makes sense to fix it right now before the tea partiers try to dismantle it.

 

As an outsider, it seems the biggest challenge of the US health care system is to get the cost down to European level. There must be something wrong when the two major concerns about travelling to the USA are:

 

* Getting in trouble with immigration because they were over-active in connecting dots that weren't related.

* Ensuring medical coverage while visiting because costs will by far exceed the European equivalent.

 

As an outsider, I cannot imagine what exactly makes health care so much more expensive in the US compared to other countries. Are wages for medical doctors much higher than in Europe? Is it the excessive damages paid in case of a medical mishap? Perhaps someone can explain. What are the solutions proposed for this?

[mike777]

As an outsider, it seems the biggest challenge of the US health care system is to get the cost down to European level. There must be something wrong when the two major concerns about travelling to the USA are:

 

* Getting in trouble with immigration because they were over-active in connecting dots that weren't related.

* Ensuring medical coverage while visiting because costs will by far exceed the European equivalent.

 

As an outsider, I cannot imagine what exactly makes health care so much more expensive in the US compared to other countries. Are wages for medical doctors much higher than in Europe? Is it the excessive damages paid in case of a medical mishap? Perhaps someone can explain. What are the solutions proposed for this?

 

 

For starters what is the median gross revenue that doctors generate in Europe?

In general what is the gross expenses, personal and business wise?

 

Just a few of the larger expenses doctors have here:

1) Paying for a large staff, plus their medical care plus taxes for them etc...

2) Large expense for medical equipment, lab etc.

3) Mortgage on medical buiding

4) Mortgage on home, cars, kids education, etc.

5) Tution bills from education for themselves

6) Medical malpractive insurance, property insurance, life insurance, other kinds of insurance.

7) Income taxes...other taxes....such as property tax...etc.

--------------

 

Side note I was just thinking about this issue last night watching a show made in the UK on BBCAmerica.

 

In the show women go to a male doctor who never has a female nurse in the room.On the show the doctor raped women in the examination room. The only staff seemed to be a temp answering phones across the building. We thought this was rather wierd and wondered if this is the norm in terms of staff?

 

---

 

 

Also in the usa about 50% of all medical costs are incurred in the last 6 months of ones life.

[kenberg]

Gerben asks a good question which has of course occurred to me and probably to most people. I do not know the answer.

 

Much of what we do, in medicine and elsewhere, really seems to be botched up. It's easy enough to see some errors, harder to see how to pin down which are the most destructive and hard to see what the fix is. Doctors do make pretty good salaries, but I seriously doubt that is much of a problem. Since our current view is that anyone making less than $250,000 is too poor to help solve the deficit problem, let's stipulate $350,00. Some make more, some less. On a 40 hour work week that's $175 an hour, The costs for treatment run far in excess of that rate. Cutting his salary down by 100K won't fix the problem.

[mike777]

Gerben asks a good question which has of course occurred to me and probably to most people. I do not know the answer.

 

Much of what we do, in medicine and elsewhere, really seems to be botched up. It's easy enough to see some errors, harder to see how to pin down which are the most destructive and hard to see what the fix is. Doctors do make pretty good salaries, but I seriously doubt that is much of a problem. Since our current view is that anyone making less than $250,000 is too poor to help solve the deficit problem, let's stipulate $350,00. Some make more, some less. On a 40 hour work week that's $175 an hour, The costs for treatment run far in excess of that rate. Cutting his salary down by 100K won't fix the problem.

 

 

Also note many doctors do not have any salary. I think people forget this that many people have incomes but have a zero salary.

 

Now there are many kinds of incomes.....defining taxable income may take a 1000 pages or more. :)

 

One needs to look at expenses, if just one expense say medical malpractice is 260k a year I may need a gross income of a million or more, not uncommon.

[nigel_k]

If a country has a 'single payer' system then doctors are on a fixed income. Maybe not each individual doctor, but all doctors as a group will be. This means that supply will not automatically increase to meet demand. Also, since costs are not paid directly by the recipient of care, there is no way for price to exert downward pressure on demand. Hence demand will exceed supply and the result will inevitably be rationing.

 

Where I live this rationing takes the form of waiting lists. It is quite possible to go to your local GP with chest pain, be referred to a specialist, spend months waiting for a specialist appointment, then be recommended for an angioplasty for example, wait some more months and then die before ever seeing the inside of a hospital. Unsurprisingly, the government can save a lot of money with a system like that. Meanwhile, if your dog gets sick, he can have surgery within a week but you have to pay for it.

[kenberg]

I hope we do not get bogged down in these 1100 pages. I may not know where to find the answer to high medical costs, but I am confident the answer is not in 1100 pages of discussion about salary and income.

[kenberg]

Please define pessimism.

 

 

Toward the end of her life, Kathryn Hepburn said "I think I was born at just the right time and I am dying not a moment too soon."

 

Or, from E.E. Cummings "Progress is a comfortable disease".

 

But, of course, I don't really agree. I still like the world and I plan to hang around for a while. My wife insists.

 

This thread is really useful so I don't want to wander off into philosophy. Back to the deficit.

[mike777]

If a country has a 'single payer' system then doctors are on a fixed income. Maybe not each individual doctor, but all doctors as a group will be. This means that supply will not automatically increase to meet demand. Also, since costs are not paid directly by the recipient of care, there is no way for price to exert downward pressure on demand. Hence demand will exceed supply and the result will inevitably be rationing.

 

Where I live this rationing takes the form of waiting lists. It is quite possible to go to your local GP with chest pain, be referred to a specialist, spend months waiting for a specialist appointment, then be recommended for an angioplasty for example, wait some more months and then die before ever seeing the inside of a hospital. Unsurprisingly, the government can save a lot of money with a system like that. Meanwhile, if your dog gets sick, he can have surgery within a week but you have to pay for it.

 

 

 

 

Again if docs are on a fixed income who pays all of their expenses. See the list above. Who pays the staff, who is the boss of the staff, who hires and fires etc? Who makes the decisions in running the office if the doc is not the boss and is just hired help? Who pays the mortgage, tuition, property tax, disablility insurance. pension...etc etc?

 

Again my point is there are dozens and dozens of expenses besides "just seeing a patient".