Fiscal Cliff

[TimG]

Look at Greece and the UK then tell me more about these cuts that don't save any money.

Except Greece is not actually cutting spending.

We are supposed to believe that the hideous economic contraction in Greece is due to the intolerable decline in government spending. The country is in its fifth year of recession, with a 6.9% decline in GDP in 2011. Another contraction of 6.7% is expected for 2012. Nominal GDP contracted from €232.9 billion in 2008 to €215.1 billion in 2011.

But, government spending didn’t actually decline. What caused the economic contraction? In part it is general economic uncertainty, but also, it is the effects of the large tax rate increases on an already-overtaxed private sector.

http://www.forbes.com/sites/nathanlewis/2012/07/15/austerity-in-greece-sure-and-theres-snow-in-mykonos-too/1

[Argus]

To achieve those 16% cuts, you could go a long way by doing the following:

- increase the social security age brackets by 2-3 years, and thereafter index it to a % of life expectancy at birth

So you want to raise the retirement age, basically. That will save some money. A lot of people will just be on welfare for a couple of extra years, of course.

- get rid of the unemployment extension that's been getting extended since 2008 due to the recession and put it back to the usual max duration

Again, taking people off pogey and putting them on welfare. I'm not sure how much that will save in the long run.

- reduce the rate of adjustments for inflation in social security and welfare benefits (i.e. the "chained CPI" method)

In other words, let inflation eat away at those retirement benefits so they get smaller and smaller and smaller.

- means test social security and medicare (those seniors who are rich enough not to need it should have these benefits phased out)

The only argument I don't really have a big issue with. The problem, of course, is people paid into social security just as they pay into CPP. If you tell them they don't get any now, well...

Wouldn't it just be better and fairer to raise taxes?

[Argus]

Except he wanted big tax increases and won't get them. This may tank Obamacare.

And your army. It may tank the tanks. You'll have to have soldiers running around in training exercises shouting "Bang! Bang!' the way the Cdn reserves did years back.

[Argus]

Ever try to extract that kind of money from the truly wealthy? It has never worked out well.

Just ask Mick Jagger where his legal residence is and why.

Are you saying nobody wealthy lives in Sweden? Or Finland? Or Germany?

Funny thing about the wealthy is most don't want to live in a third world countries. And every other country in the world has higher taxes than the US.

[Argus]

I agree as well - but the lefts tendency to ignore deep structural problems with entitlement programs is as bad as the right's obsession with tax cuts.

What are these 'deep structural problems' you speak of?

[Argus]

Your problem is you seem to think that government money comes from nothing. It does not.

The other side of the coin is some people seem to think government services come from nothing, but they don't. They require taxation. A long time ago, most of us decided we didn't want poor people dying by the side of the road from starvation or the lack of basic medical care, didn't want seniors eating dog food or freezing to death in cold apartments in January, didn't want bad food and medicine being passed out to an unwary public, not to mention children's clothes that burst into flames if sunlight hits em. Roads and bridges, police and military, doctors and border security people, meat inspectors and air traffic controllers, all that costs money. The Americans want all of that, but don't want to pay for any of it. And a big chunk of Americans seems to believe that there's so much 'waste' in government that an unlimited amount of cuts can be made without affecting them or anyone else they know.

[Bonam]

Wouldn't it just be better and fairer to raise taxes?

That is obviously subjective. Some people would rather have higher taxes and more government support, other people would rather have lower taxes and less government support. As Western nations go, the US is on the low tax low service side, and I think most Americans want to stay on that side of the spectrum rather than moving very far towards the Scandinavian style high tax high service state.

For example, I live in the US and would MUCH rather not pay social security tax, not have the social security program, and save for my own retirement with the ~$5,000 extra of after tax money I'd end up with every year.

Edited January 7, 2013 by Bonam

[bush_cheney2004]

... As Western nations go, the US is on the low tax low service side, and I think most Americans want to stay on that side of the spectrum rather than moving very far towards the Scandinavian style high tax high service state....

Yes, the U.S. is a lower spender per capita among G20 nations:

[Argus]

For example, I live in the US and would MUCH rather not pay social security tax, not have the social security program, and save for my own retirement with the ~$5,000 extra of after tax money I'd end up with every year.

It's nice if you have the money to do that. The problem is the United States is increasingly a nation of poor people who do not have the means to save for their retirement. So what are all those poor people to do when they get too old to work their menial, low paying, often part-time jobs? Die?

[Argus]

Yes, the U.S. is a lower spender per capita among G20 nations:

Cheer up. You still beat Mexico... for now.

It is the LOWEST among western industrialized nations.

[Bonam]

It's nice if you have the money to do that. The problem is the United States is increasingly a nation of poor people who do not have the means to save for their retirement.

Yes and I'm sure taxing them more will help to make them less poor.

[Argus]

Yes and I'm sure taxing them more will help to make them less poor.

If you look at any chart for income distribution in the United States you will see that over the last thirty odd years there has been a gradual transfer of wealth from the poor and middle class to a small group of uber rich people. What's needed is for tax policy to be reversed to the point it was in the fifties and sixties so that more money remains with regular people rather than accumulating in the hands of greedy oligarchs like the Kochs and Waltons.

[punked]

If you look at any chart for income distribution in the United States you will see that over the last thirty odd years there has been a gradual transfer of wealth from the poor and middle class to a small group of uber rich people. What's needed is for tax policy to be reversed to the point it was in the fifties and sixties so that more money remains with regular people rather than accumulating in the hands of greedy oligarchs like the Kochs and Waltons.

The tides rise from the bottom to the top. You do your economy a disservice letting wages deflate and trickle up. It is that simple.

[dre]

If you look at any chart for income distribution in the United States you will see that over the last thirty odd years there has been a gradual transfer of wealth from the poor and middle class to a small group of uber rich people.

Thats a direct result of going changing the monetary system.

[Bonam]

If you look at any chart for income distribution in the United States you will see that over the last thirty odd years there has been a gradual transfer of wealth from the poor and middle class to a small group of uber rich people. What's needed is for tax policy to be reversed to the point it was in the fifties and sixties so that more money remains with regular people rather than accumulating in the hands of greedy oligarchs like the Kochs and Waltons.

That's all well and good, and I agree with the idea of progressive taxation, and think for example the last set of changes in the US tax code was a good move in that direction. Maybe some further moves could be made also. But such changes would not raise the revenue needed to keep up with the ever growing costs of social security and medicare. There is really no choice but to limit the rates at which the costs of these programs are rising to something sustainable, or else watch them bankrupt the country. If one looks at the actual numbers, rather than ideology or ideals, there is no other possible conclusion.

[dre]

That's all well and good, and I agree with the idea of progressive taxation, and think for example the last set of changes in the US tax code was a good move in that direction. Maybe some further moves could be made also. But such changes would not raise the revenue needed to keep up with the ever growing costs of social security and medicare. There is really no choice but to limit the rates at which the costs of these programs are rising to something sustainable, or else watch them bankrupt the country. If one looks at the actual numbers, rather than ideology or ideals, there is no other possible conclusion.

Actually thats not true. Most of the inflation we see in sectors like healthcare (which is more than half wages) and education are the result of people operating in two different economies. The manufacturing worker has to compete with the whole world but the doctor and teacher dont. So their wages have increased in relation to everyone elses. Some workers face global competition and some dont.

This is going to go away soon... Its a temporary situation caused by a currency imbalance. Once the US dollar dollar loses another 3/4's of its value then all the cheap imports will dry up and healthcare workers and teachers will be on the same footing as people that produce other things.

Theres a number of things distorting the market, and causing price instability but those things are by their very nature temporary and cannot continue for much longer.

Edited January 10, 2013 by dre

[Bonam]

Actually thats not true. Most of the inflation we see in sectors like healthcare (which is more than half wages) and education are the result of people operating in two different economies. The manufacturing worker has to compete with the whole world but the doctor and teacher dont. So their wages have increased in relation to everyone elses. Some workers face global competition and some dont.

This is going to go away soon... Its a temporary situation caused by a currency imbalance. Once the US dollar dollar loses another 3/4's of its value then all the cheap imports will dry up and healthcare workers and teachers will be on the same footing as people that produce other things.

Cheap imports will dry up when and only when there remain no more significant economies on Earth where wages are substantially cheaper than they are in the West. Even in the most optimistic scenarios, that's still several decades away. We still have to get there in one piece first.

Theres a number of things distorting the market, and causing price instability but those things are by their very nature temporary and cannot continue for much longer.

Depends what you call "much longer". It's long enough that we can't just ignore the issue and wait it out.

[dre]

Cheap imports will dry up when and only when there remain no more significant economies on Earth where wages are substantially cheaper than they are in the West. Even in the most optimistic scenarios, that's still several decades away. We still have to get there in one piece first.

Well you dont need total wage equality for the massive flow of goods from east to west in exchange for nothing but printed bits of paper to end because theres a lot of overhead involved in moving stuff all around the world. If the yaun doubled in relation to the dollar that would start to stem the tide, and that would have happened already except that countries like china print a gigantic boatload of the own currency and use it to buy US treasures which creates an artificial abundance of yuan and an artificial scarcity of dollars.

I think your "several decades" guess is probably pretty good. But even given the current level of benefits afforded to citizens by the social safety net I think the system will hold up until then. And if it DOES start to collapse then the cost of those goods will plummet anyways.

THe point being on a macro economic level all this stuff will fix itself.

[eyeball]

And who funds the IMF? Santa Claus?

It might as well be given the magical way money is seemingly created out of thin air.

[Shady]

If you look at any chart for income distribution in the United States you will see that over the last thirty odd years there has been a gradual transfer of wealth from the poor and middle class to a small group of uber rich people. What's needed is for tax policy to be reversed to the point it was in the fifties and sixties so that more money remains with regular people rather than accumulating in the hands of greedy oligarchs like the Kochs and Waltons.

You're still completely delusional. Taking more money from the "rich" for government to spend, doesn't increase the salaries of the less rich.

Anyways, Obama's fiscal cliff deal was a complete disaster. Big tax increases, with no spending cuts. In Canada, when we faced the same debt to GDP problem, we came up with a ration of 1 dollar of tax increases to 6 dollars in spending cuts. His deal does absolutely nothing for the fiscal problems of the country. Especially when you add in the new spending he's proposing. He's an economic wrecking ball. If the middle class thinks they have it bad now, just wait until Obama gets done his second term.