Fiscal Mess 2

Intrepid and cherished readers Bill Fleming and Donald Pays work overtime to make this blog interesting, which is more than I ever did. I plan to double their pay. Meanwhile I will pay them in the coin that I dispense. Bill said this in reply to a recent post:

The country is NOT going belly up, KB. That's just another BS scare tactic. The most horrifying thing is you guys believe your own lies, deep in your hearts. Thus in order to be "right" you will do everything you can to self-fulfill your own Doomsday prophesies. This is true across the board, from the economy, to social, to foreign policy. And you suck people into it like people gathering around a staged train wreck. Why? Because the idea that everything might turn out okay just doesn't sell as well.

I refer Bill to my last post on this topic. Perhaps the CBO's analysis is faulty, and if Bill thinks so he is free to argue the point. If the CBO is right, and this isn't going belly up, I would hate to see what going belly up looks like.

Ps. I would like to see some evidence that the Koch Brothers, or Karl Rove, or Fox News are promoting the meme "Taxation is tyranny".

Donald has this note to my last post:

If Republicans in Congress want to prove they are responsible, raise revenue. Democrats are cutting. The problem is clear---Republicans can't say no to the banksters, Wall Street cheats and mega-corporate elite.

I could note that Donald thinks Obama also is in hock to the "banksters", but that would be uncharitable. I'll focus on the point.

Jay Cost at the Weekly Standard has a defense of the Republican's refusal to raise taxes. Cost provides this chart.

It is dispositive of the argument that taxation can solve the fiscal problem. Even if levels of taxation rise well above the historical norm of 21% to almost a third of the GDP, revenues will never catch up with spending. That's why, in the chart in the previous post, the federal debt continues to grow indefinitely.

Are we going to have to raise taxes? Yes, I certainly think so. However, agreeing to raise taxes in the absence of real entitlement reform gets us the chart above and that is no damn good. If Republicans insist on entitlement reform, what will happen? Cory Heidelberger and Bill and Donald and Harry Reid and Nancy Pelosi and Barack Obama will pound them for trying to kill Medicare. If you don't believe me, ask Paul Ryan.

The Democrats in Congress have agreed to promises of future spending cuts, but only in non-entitlement spending. That just begins the process whereby entitlement spending and interest on the federal debt squeezes out all other spending. Until and unless entitlement reform is really on the table, agreeing to revenue increases just compounds the problem.

The President has acknowledged the need for entitlement reform. What he has not done is to put any concrete proposals on the table. It is his job to provide leadership in this situation. Like that's going to happen.  Wait!

Comments

[Bill Fleming]

Ken, the rent is too damn low. http://www.youtube.com/watch?v=x4o-TeMHys0

The chart you offer here makes it pretty clear that a rent increase on the ones benefiting most from the economy would take care of it indefinitely doesn't it?

Of course we need to address entitlements. Military spending too.

All I'm saying is you don't go out and buy a $400,000 house and then quit your job. Congress and GWB authorized two unfunded wars and an unfunded Medicare prescription drug handout (translation: gift to big Pharma). If you want to dance like that, you have to pay the piper.

[Bill Fleming]

Here's a little list of ways to fix things, KB, generated by a fellow progressive (and friend of mine) on another blog. What do you think of it?

1. End the wars, bring our boys & girls home now.
2. Close half of our 600 bases overseas.
3. Allow Medicare to negotiate prices with drug companies.
4. Send some Wall Street boys to prison.
5. Means test SS and Medicare. Be reasonably generous about it.
6. Eliminate the ceiling on FICA, or double it. (Right now you quit paying FICA at $100k or so).
7. No more oil depletion allowance.
8. No more investment tax credit for shipping US jobs overseas.
9. First $100 million of an estate is tax free to each heir/blood relative. Everything over that is taxed at 100%. If Little Johnny Jr. can’t make it on $100 million, I have no sympathy.
10. Anti-trust and tax policies to keep any company from being “too big to fail.”

[caheidelberger]

Bill, don't go confusing the issue by proposing real spending cuts alongside tax increases. We Dems are supposed to be simplistic absolutists, easy to refute for our intransigent greed.

[Bill Fleming]

p.s. KB, anyone trying to kill Medicare deserves to get pounded.

[larry kurtz]

Oremus.

Sometimes a community organizer needs to arbitrate a disagreement. The waltz into his next term will be played to the sounds of the TEA party detonating their vests in their own churches.

Let's pray for Michele Bachmann.

Amen.

[Ken Blanchard]

In that case Bill, pound yourself. You are completely in denial.

[Jimi]

Bill,

"Indeed, the Treasury report effectively touts the draconian Medicare cuts due to Obamacare, stating, 'The 2010 projection is lower than the 2009 projection in every year of the projection period almost entirely as a result of the Affordable Care Act (ACA), which is projected to significantly lower Medicare spending and raise receipts.' These Medicare cuts were the foundation for CBO finding that Obamacare would actually reduce the deficit, despite adopting or expanding three entitlement programs."

"That $15 trillion is such a big number that it is hard to understand what it means. But the government’s own actuaries and accountants have been explaining that as well."

"Medicare’s Chief Actuary reports that even before these cuts already two-thirds of hospitals were losing money on Medicare patients. With $15 trillion in future cuts, health providers will either have to withdraw from serving Medicare patients, or eventually go into bankruptcy."

Your right.....the Democrats should be Pounded!

http://www.912superseniors.org/2011/05/why-paul-ryans-medicare-is-so-much-better-than-obamas/

[Bill Fleming]

Jimi, I don't understand what point you are trying to make with your quotes up there. Sorry.

[Donald Pay]

When you provide graphs that purports to show a predicted future you have to understand what the assumptions are. The assumptions CBO makes are that the dumb Republican tax cuts for the wealthy and corporate elite remain, and that spending continues at a pace needed to maintain two and a half wars. You look at the graph and you see exactly where there was a surplus and where there wasn't, and it coincided with tax increases and defense cuts under Clinton. Thank you, KB, for proving that what we need to do is get rid of Republican tax policy, repealing the Bush and the Reagan tax cuts.

[Bill Fleming]

Exactly. KB forgets that the lines on the left of the break are fact, those on the right, fiction, and fails to notice the marked difference in pattern between the two sides. If only we could teach him to see and think as well as he writes, Donald.

[Bill Fleming]

A larger point to be made is that this whole debate and the prioritization of it in lieu of a concerted effort to create jobs, build infrastructure, and discover and implement new energy systems is a shameless GOP political distraction gambit.

9.1% unemployment, KB.

Let's keep our eye on the ball here.

Where are your post about that problem and how we can fix it?

Any employer knows s/he can only cut jobs and expenses so far before they're simply not in business any more.

This seems to be the GOP strategy. Buy the country, break it up and sell it off in chunks to the highest bidder.

No wonder they kinda like Mitt Romney.

[Jimi]

KB,

You have to be giggling....I know I am!

[Jimi]

KB,

You have to be giggling....I know I am!

[Ken Blanchard]

Projections are indeed not about the future,they are about right now. What they show is that our rate of spending is out of control. Even if revenues rise to unprecedented levels, they will not catch up with spending.

No, Donald, ending the wars won't fix it. Here is Jay Cost: "Take a closer look at the federal outlays line in the above graph and consider that, according to the CBO, 116 percent of the increase between 2011 and 2085 comes from “Medicare, Medicaid, CHIP, and Exchange Subsidies.” Spending outside federal health entitlements will effectively be cut (as a share of GDP) over the next seventy years. It’s health spending alone that keeps us rolling on down the road to serfdom."

Yes, Bill, the unemployment numbers are, once again, unexpectedly terrible. How to fix the problem? Well, we know what doesn't work, don't we? Running deficits of over a trillion a year for several years in a row, passing the buck by appointing a commission on the national debt problem and then completely ignoring the commission's work, passing a costly new health care program assumptions and so complicated that no one (including potential employers) will know what's really in for years, all these things unexpectedly didn't fix the problem. The stimulus didn't stimulate.

Maybe, just maybe, producing a budget would help a little. If, as the Democrats keep saying, we can't cut government spending that deeply all at once, at least the President could produce a plan for bringing the budget under control. Hey, wasn't there a commission that did that? You'd need a plan that included realistic numbers and not, as the Democrats are fond of, a ten year plan that leaves all the real pain to years eleven and twelve. Maybe if the people who really work and invest had some confidence that the government can get itself under control, they might be willing to invest and then a lot more folks could go back to work.

There is a reason why neither the President nor Congress can produce a short term budget or a longer range plan. It is because they cannot reconcile their nonnegotiable desires with reality.

[Bill Fleming]

Good, KB. I think that's right. How can we get them off the dime?

[Donald Pay]

Where do you get this "116 percent of the increase?" That's not possible by definition.

The problem with your analysis is you are using percentages of GDP, rather than real numbers. Of course other parts of the budget will shrink as a percentage of the budget as health care goes up and baby boomers start using Medicare. But the assumptions about GDP are another issue.

People have already paid into Social Security and Medicare for those benefits. The Republicans solution is to privatize everything ("throw Grandma off the train") which not only make costs go up, but undermines the fiscal health of the programs, and decreases the income of Grandma's sons and daughters who will have to pick up the costs. All you are doing is cost shifting, but it amounts to a tax increase on the middle class.

We've discussed health care for years. The Republicans want to continue shoveling money to the insurance industry, rather than make the necessary changes to cover everyone. They'd rather pay the insurance tycoons than pay for real medical care. If you keep the current health insurance industry, you're right that costs go out of control. Your solution---the poor and middle class must die. My solution---the health insurance industry must die.

[Bill Fleming]

Don, maybe not die, but definitely be repurposed.

[Jimi]

Donald,

You want Utopia.....Not Possible!

The Health Care debate isn't about Health Care...it is about control. You claim to want to kill the Health Insurance Industry, but all your doing is turning the Government into a Health Insurance company, which is way worse because the government can not be held responsible. The only way your decreasing costs is by decreasing the amount and quality of care...SEE CANADA and the UK.

You're participating class warfare not providing deserving solutions for a country that already has a quality Health Care System.

[Donald Pay]

Utopia is called Medicare for all, or maybe Vermont's new single payer system. Yes, it is very possible.

[Jimi]

Donald,

Vermont? What a hell of a comparison. It has a population of 625,000 people.

[Ken Blanchard]

Donald: apparently you have as much trouble with statistics as Bill has with projections. If a hundred dollar debt turns into a two hundred and fifty dollar debt, that's an increase of a hundred and fifty percent. Glad to be of service. The stats are from Jay Cost, who is very good with stats. The link is in the original post.

I understand very well why you don't want to talk about percentages of the GDP, and why Bill suddenly thinks that the future doesn't matter. If the CBO is right, then we are on a course to insolvency in short order. We may have to cut all kinds of things that Donald and Bill want to cut, and raise taxes that Donald and Bill want to raise. We are also going to have to make drastic cuts in the growth of Medicare and Medicaid. The longer we wait, the harder it is going to be on someone.

[Bill Fleming]

Oh, I think the future probably matters, KB. (Whatever that means.)

I just don't think you know anything about it.

I don't think any of us do.

Any prediction of the future is, by definition a fiction, not a fact.

Because if the future had already happened, it wouldn't be the future.

It would be either present or past.

I tell ya. The things one has to explain to these philosophers sometimes. ;^)

[Bill Fleming]

...not sure how long the CBO has been doing these predictions, but it seems like it would be a fairly simple matter for a scholar like KB to go back 90 years and find us a CBO chart that accurately projected our current financial condition.

It would add a lot of weight to his claim of the veracity of the projection he's showing us here.

[Ken Blanchard]

I am starting to like the New Bill Flemming. We dont' have to worry about the budget deficit. We can sell off our assets, like Alaska! No one will buy California. And we don't have to worry about the future because no one knows anything about it. That demolishes the global warming argument, doesn't it? Since folks were not long ago worrying about an ice age, we can belch out all the carbon we want. Just one thing Bill, please, please don't teach me how to think.

[Bill Fleming]

Is that all you got, Ken?

That's hardly a rebuttal.

No need to get sore just because someone challenged your assertions that a 90 year projection based on assumptions that could change tomorrow were fiction and not fact.

Better to provide evidence as to how well your predictive source has performed in the past.

That's what scientists do.

But if you don't want to learn to think that way, far be it from me to insist that you should.

[Bill Fleming]

p.s.

Only one "m" in Fleming, Kenn.

I am, at long last, a true noun, not a gerund.

[larry kurtz]

bill: you know he's pimping your lemming side. knuckles=jimi=duh mass

[Bill Fleming]

Yeah, the lemmings are not my best side, LK. I'm more partial to my mother's side.

[Ken Blanchard]

Bil: sorry about the spelling. I WAS being a bit testy. I will try to be a better person from now on.

Let me try again. The CBO charts are not predictions, they are projections. Predictions are about the future and I certainly agree that the future is hard to predict.

Projections are about the present. They illustrate some process that we can examine right now by projecting it into the future. Right now, as the social programs and tax laws are designed, the factors that drive increased spending are greater than taxation is likely ever to be able to accommodate. The debt, historically bloated right now, will continue to swell and crowd out other spending and economic growth if the laws function as they have been passed.

Can we make predictions on the basis of this? I concede your point that we cannot. The Vulcans may arrive and teach us how to build hyperspace engines. A zombie apocalypse may render fiscal concerns moot. All sorts of surprises are more probable, but it is wishful thinking to suppose that unpredictables will make the situation better rather than worse. Given that our President has so far failed to end two wars and in fact started a third, it might be unrealistic to count on a big peace dividend.

I think, however, that we have to look at our fiscal situation as it is and decide what to do about. The CBO is hardly perfect, but it is certainly one of the most honest brokers of fiscal information that we have. Our fiscal situation is not sustainable. It cannot be fixed by taxation alone. It cannot be fixed by indulging in Donald's bias against corporations. We are going to have to dramatically reduce projected spending on Medicare, Medicaid, and, yes, the health care exchanges.

[Bill Fleming]

Yes, I agree with you on all of that, Ken. Thank you on the spelling thing. My dear wife knows this is a pet peeve of mine, and so when she becomes upset with me (I can never understand why anyone would) she will sometimes write out my last name with 3 "m"s. I find in those moments a good opportunity to practice my zazen breathing.

[Bill Fleming]

To recap: the point I feel your graph best illustrates is from the present marker backward to 1971.

This morning on Meet the Press, Timothy Geithner said it succinctly, "We were living beyond our means for a long period of time."

By "means" I take him to mean "revenue" don't you, KB?

Anyway, his larger point was that it took some time to get into this condition, and it will take some time to get out of it.

And clearly, some more "means" ...because after all, who wants to stop "living"? (I kid, I kid.)

[Bill Fleming]

Sounds as though the President has indeed put a plan on the table. A big one. And that John Boehner was ready to go along with it. But not Mr. Cantor. What say ye now Mr. Blanchard? http://www.bloomberg.com/news/2011-07-11/obama-said-to-challenge-republicans-for-details-of-debt-plan.html

[Ken Blanchard]

Maybe the President has a plan, Bill. If he does, I couldn't tell what it is by the article you linked. Until the President proposes actual changes in Medicare benefits, I will believe in his plan like I believe in the Easter Bunny.

[Hans]

Professor you haven't spoken once about ending taxpayer funding to higher education.

[Ken Blanchard]

Hans: Indeed I haven't. I'm not crazy. Or if I am, there's a method to my madness. Aid to higher education is part of what is called discretionary spending. If the budget is not brought under control, health care spending and interest on the debt will crowd out all discretionary spending.

[Andrea]

South Dakota Politics I really like this Topic its very use Full for my study thanks bro