I have been waiting to write about the 'fiscal cliff' while watching with amusement and frustration the 'negotiations' between Obama and Boehner. Now, a few financial facts are in order. This data comes from the Congressional Budget Office.
There are two projections by the CBO. One is enacted law, the other is enforced law. As enacted, our tax rates go up globally on January 1. At the same time there is a 27% cut in Medicare payments to doctors and hospitals. This latter has been forestalled by legal 'patching' for....19 years. If these laws as enacted go into force, our budget deficit will plunge from 1.13 trillion to 661 billion, and there will be further savings from across the board budgetary cuts and drawdowns in Afghanistan.
The law as enforced is a different matter. If tax rates are not raised and Medicare payments continue as current, in the CBO's own words we go in a direction 'similar to Greece'. Debt becomes an unmanageably high proportion of GDP, debt service becomes costly, our currency is devalued, we become insolvent. The time frame for this latter estimate is about 12-15 years.
These are not partisan numbers to make a point, usually by burying the point in the opposition. This is just data. As far as I can tell in reading and listening, neither Obama nor Boehner nor anyone else is paying attention to the long term problem. Instead they are playing political football with the tax rates and spending, using the budget deficit as a lever. One side insists the wealthy must pay 'there fair share' and that entitlements be cut relatively minimally. The other insists all tax rates should be kept low and government spending cut.
They're both right and both wrong. Neither side's plans and demands will appreciably cut the deficit. The last numbers on the table were a cut of 1.2 trillion over 10 years. Uh, that's 120 billion yearly for those bad at math, or 10% of the deficit. Not enough. Both tax increase and entitlement modification and reduction are necessary to close the deficit. The size of our military is also an issue for discussion. Simply put, our current tax income in no way is enough to pay for our social programs and our military.
That seems easy enough to me. But no one wants to be the Grinch who announces tax hikes and/or entitlement cuts. And so the finger pointing, in a game of musical chairs in which the last person standing must 'own' the tax increase or the entitlement cut. I thought the last deal offered was about as good as was possible- tax hikes for those earning over 1 million dollars and entitlement cuts of about 600 billion, total 1.1 trillion, plus or minus. But oddly this got axed by Obama. Boehner then put forth his plan B which could not get enough Republican votes to pass in Congress. Congress left and Obama came back from Hawaii early to talk with McConnell. And here we are.
Both sides say the other is going to ge the blame for the inevitable tax hike. There is a succinct assessment of this here, to the effect that Obama gets the blame since he nixed the last offered deal. Democrats contend the Republicans will get the blame for not putting together a package for the President and letting taxes go up for everyone. The public tend to blame the Republicans by a nearly 2:1 margin. Whether that is 'right' or not is irrelevant.h at is the impression in the public sphere.
But speaking of irrelevant, both parties are neglecting their duties to the nation while maneuvering for partisan gain. More than any issue of Republican or Democrat I am disgusted to see 'public servants' shirking their duty. But of course in the end they are us. We do not want to hear that we must cut spending and raise taxes. And so we kill the messengers by electing someone else, who learns quickly that delivering programs and tax cuts is a winner and delivering reality is a loser.
My solution-
-end the payroll tax holiday
-increase taxes for those earning more than 400,000.00.
-increase taxes for all if deficit stays above 600 billion dollars in 2013
-restrict what is covered by Medicare, not the fees. End coverage for numerous expensive procedures and drugs.
-reduce our military by 2-3 carrier groups and 1-2 divisions. The day of needing to prepare to fight two wars simultaneously is over, for us.
Problem- almost any increase in taxes is going to slow an already faltering economy. The Fed is simply printing money at this time and calling it Quantitative Easing III. It's not. The current Fed policy is a ticket to inflation combined with ongoing recession.
Ultimately we are going to have to own this and eat this, and the eating isn't going to be pleasant. Better to get it in divided doses rather than one giant system failure. We will have to risk economic slowing to control debt.
Ted
There are two projections by the CBO. One is enacted law, the other is enforced law. As enacted, our tax rates go up globally on January 1. At the same time there is a 27% cut in Medicare payments to doctors and hospitals. This latter has been forestalled by legal 'patching' for....19 years. If these laws as enacted go into force, our budget deficit will plunge from 1.13 trillion to 661 billion, and there will be further savings from across the board budgetary cuts and drawdowns in Afghanistan.
The law as enforced is a different matter. If tax rates are not raised and Medicare payments continue as current, in the CBO's own words we go in a direction 'similar to Greece'. Debt becomes an unmanageably high proportion of GDP, debt service becomes costly, our currency is devalued, we become insolvent. The time frame for this latter estimate is about 12-15 years.
These are not partisan numbers to make a point, usually by burying the point in the opposition. This is just data. As far as I can tell in reading and listening, neither Obama nor Boehner nor anyone else is paying attention to the long term problem. Instead they are playing political football with the tax rates and spending, using the budget deficit as a lever. One side insists the wealthy must pay 'there fair share' and that entitlements be cut relatively minimally. The other insists all tax rates should be kept low and government spending cut.
They're both right and both wrong. Neither side's plans and demands will appreciably cut the deficit. The last numbers on the table were a cut of 1.2 trillion over 10 years. Uh, that's 120 billion yearly for those bad at math, or 10% of the deficit. Not enough. Both tax increase and entitlement modification and reduction are necessary to close the deficit. The size of our military is also an issue for discussion. Simply put, our current tax income in no way is enough to pay for our social programs and our military.
That seems easy enough to me. But no one wants to be the Grinch who announces tax hikes and/or entitlement cuts. And so the finger pointing, in a game of musical chairs in which the last person standing must 'own' the tax increase or the entitlement cut. I thought the last deal offered was about as good as was possible- tax hikes for those earning over 1 million dollars and entitlement cuts of about 600 billion, total 1.1 trillion, plus or minus. But oddly this got axed by Obama. Boehner then put forth his plan B which could not get enough Republican votes to pass in Congress. Congress left and Obama came back from Hawaii early to talk with McConnell. And here we are.
Both sides say the other is going to ge the blame for the inevitable tax hike. There is a succinct assessment of this here, to the effect that Obama gets the blame since he nixed the last offered deal. Democrats contend the Republicans will get the blame for not putting together a package for the President and letting taxes go up for everyone. The public tend to blame the Republicans by a nearly 2:1 margin. Whether that is 'right' or not is irrelevant.h at is the impression in the public sphere.
But speaking of irrelevant, both parties are neglecting their duties to the nation while maneuvering for partisan gain. More than any issue of Republican or Democrat I am disgusted to see 'public servants' shirking their duty. But of course in the end they are us. We do not want to hear that we must cut spending and raise taxes. And so we kill the messengers by electing someone else, who learns quickly that delivering programs and tax cuts is a winner and delivering reality is a loser.
My solution-
-end the payroll tax holiday
-increase taxes for those earning more than 400,000.00.
-increase taxes for all if deficit stays above 600 billion dollars in 2013
-restrict what is covered by Medicare, not the fees. End coverage for numerous expensive procedures and drugs.
-reduce our military by 2-3 carrier groups and 1-2 divisions. The day of needing to prepare to fight two wars simultaneously is over, for us.
Problem- almost any increase in taxes is going to slow an already faltering economy. The Fed is simply printing money at this time and calling it Quantitative Easing III. It's not. The current Fed policy is a ticket to inflation combined with ongoing recession.
Ultimately we are going to have to own this and eat this, and the eating isn't going to be pleasant. Better to get it in divided doses rather than one giant system failure. We will have to risk economic slowing to control debt.
Ted
"And so we kill the messengers by electing someone else, who learns quickly that delivering programs and tax cuts is a winner and delivering reality is a loser."
ReplyDeleteExactly. To stay in congress, one must stay popular, and delivering reality is often not popular. Perhaps along with the tax hikes and spending cuts we should also attach term limits for both Senators and Reps. "Come in, do your time, then go back to your day job (or to retirement)." That might help congressmen (in their final term) to have more courage to vote for unpopular yet necessary propositions.
In the end, I think congress will have to offer even more spending cuts than what have been proposed so far...and I also agree with you that it will be better to get everything in divided doses.
What a mess. The apostle Paul was right: "Do not be deceived, God is not mocked; for whatever a man sows, this he will also reap." As a nation we have sowed the wind of fiscal irresponsibility and we are now reaping the whirlwind...
David