[y66]

cherdano, on 2010-November-12, 11:00, said:

... I would be happy to bet that the effect of their tax proposal would be a higher tax burden for "wealthy Americans"

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.

[hotShot]

If you understand interest rates, than you know that paying more taxes now to reduce the deficit, will be cheaper than paying taxes to reduce the deficit and for the interests for years.

[PassedOut]

hotShot, on 2010-November-13, 11:09, said:

If you understand interest rates, than you know that paying more taxes now to reduce the deficit, will be cheaper than paying taxes to reduce the deficit and for the interests for years.

For sure. According to the co-chairs' proposal (page 4), the US is on a track to pay $1 trillion per year on interest payments alone by the year 2020.

Pundits are taking exception to the report's target of 21% of GDP for both spending and receipts. I suppose that number was chosen because it is the integer value closest to the value at the end of the Clinton administration, the last year of federal fiscal responsibility. I don't care so much about the actual number chosen, but I do think it important to have a specific numerical target to shoot for -- and that the target is the same for both spending and receipts.

If the majority wants spending at 21%, at 25%, or at 30% of GDP, then the target for tax receipts must match up with the 21%, 25%, or 30%. Otherwise, as you say, future taxpayers will be paying huge sums for nothing, except to pay for the free lunch enjoyed by citizens in the past.

[y66]

O.K. kibs, let's see how you'd fix the budget.

[hrothgar]

Thanks for forwarding the link...

In a startling development, the simple act of

1. Getting rid of all the Bush taxes cuts
2. Some additional tax increases
2. A sharp decrease in defense spending

solves nearly the entire problem... (Not overly surprising given that we were running a surplus before the shrub)

[Bbradley62]

y66, on 2010-November-14, 06:11, said:

O.K. kibs, let's see how you'd fix the budget.

It seems to me that this demonstrates how do-able this is. My mix was 55% tax increase, 45% spending cuts.

[PassedOut]

What a great use of the internet!

My breakdown was 50-50. The problem gets a lot harder, though, if you take a firm stand against either tax increases or spending cuts.

[hrothgar]

My plan had 743 billion in savings by 2015 and 1.7 trillion by 2030.
It consisted of 70% tax hikes and 30% spending cuts focused primarily on the military and farm subsidies.

Please note: I consider this plan to be a first step. I think that switching to a single payer system for health care could accomplish a lot more.

[PassedOut]

hrothgar, on 2010-November-14, 08:24, said:

My plan had 743 billion in savings by 2015 and 1.7 trillion by 2030.
It consisted of 70% tax hikes and 30% spending cuts focused primarily on the military and farm subsidies.

Please note: I consider this plan to be a first step. I think that switching to a single payer system for health care could accomplish a lot more.

I agree with you about single-payer and also see lots of savings available by reducing excessive end-of-life procedures. But the important thing now, in my opinion, is to chop down the deficit to curb runaway debt service costs.

Along with the interactive puzzle, the NYT has this accompanying article by David Leonhardt: O.K., You Fix the Budget

Quote

Imagine that Democrats and Republicans somehow came together and agreed on a grand bargain to cut the deficit.

They decided to cut the pay of federal workers over the next several years, close military bases, reduce foreign aid, eliminate earmarks, expand the payroll tax and cut Social Security benefits for high earners, as the chairmen of a bipartisan commission recommended last week.

Democrats also accepted the plan from John Boehner, the presumptive House speaker, to make large cuts to social programs. Republicans accepted President Obama’s proposal to let the Bush tax cuts expire on income above $250,000.

If the two parties managed to do all of this, how much of the country’s long-term deficit would they eliminate?

About one-third of it.

So congress has got to buckle down and get serious about this. Nibbling at the edges won't cut it.

[cherdano]

PassedOut, on 2010-November-14, 08:07, said:

What a great use of the internet!

My breakdown was 50-50. The problem gets a lot harder, though, if you take a firm stand against either tax increases or spending cuts.

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

[cherdano]

y66, on 2010-November-13, 10:49, said:

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]

cherdano, on 2010-November-14, 10:34, said:

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.)

[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/w...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]

helene_t, on 2010-November-14, 16:05, said:

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]

helene_t, on 2010-November-14, 16:05, said:

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]

nigel_k, on 2010-November-14, 16:55, said:

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]

cherdano, on 2010-November-14, 10:36, said:

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]

helene_t, on 2010-November-14, 16:05, said:

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, on 2010-November-14, 16:09, said:

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

Quote

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.