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July 08, 2008

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Looks like John McCain has decided not to negotiate with himself, just like that other guy.

Step 1: "Reach across the aisle!"
Step 2: ???
Step 3: Profit!

Yay, more of the "ponies!" approach to economics from the McCain campaign.

Wages in Honduras and Guatemala are $3/day. Food stamps alone in the US are around $10/day. Public benefits are simply impossible without shoot-to-kill orders on the border. The flow of people will accelerate as the world economy deteriorates.

We spend $300 million daily in Iraq, which is a waste. But we make $8 billion in unfunded future promises daily to the people who already live here, or over 25x the daily expenditure in Iraq. We’ll never make good on these promises. I think we may be witnessing an engineered break-down of our current societal model.

A good reason to grow a garden.

One candidate has proposed something quite specific: taxing income over $250,000 a year at 2-4%.

Actually, 4-8% (you need to count both the employee and employer contributions under the current version of Obama's plan) (I say "current version" because Obama's plan has been a moving target).

Actually, 4-8% (you need to count both the employee and employer contributions under the current version of Obama's plan) (I say "current version" because Obama's plan has been a moving target).

But Von, 2,000 economists endorsed Obama's plan in 1963.

"Candidates Diverge on How to Save Social Security",

Is this a subtle nod to the "Candidates Differ on Shape of Earth" internet tradition?

Is a moving target worse than a nonexistent target?

Hilzoy:

Are you challenging John McCain's integrity?

Seriously, though, the only question is whether or not the American voter will be intelligent enough to see what their choice is this year. Because there is no choice.

DrDave: Seriously, though, the only question is whether or not the American voter

Actually, the only question is whether the Republicans will succeed in rigging the election so that McCain gets into the White House, just as happened in 2000 and 2004 for Bush. As 2006 showed, a landslide against the Republicans can overcome their vote-rigging strategy, but it does take a landslide... and given that many Americans still take as a given that Gore and Kerry lost, I fear that only a landslide victory for Obama will ensure he gets into the White House.

Ah, more magic from the pen of Perry Bacon, Jr., judged just as front-page-worthy by the Post's editors as his laundering of the Obama-Muslim smear in the guise of 'debunking' it.

Walter Pincus is still being buried on A18.

All hail the Weymouth regime.

But Von, 2,000 economists endorsed Obama's plan in 1963.

That makes perfect sense: many of Obama's economic proposals seem to be about 40 years old.

Add a ;-) to the end of the above comment at 2:26 p.m.

You're missing the obvious. According to supply-side economics, the lower the taxes, the more revenue. Clearly McCain's tax cuts will generate enough revenue to buy a whole stable of ponies.

Public benefits are simply impossible without shoot-to-kill orders on the border.

And yet, they exist in the absence of such orders.

Congrats on discovering reductio ad absurdum. If you publish now, maybe you'll beat that Pythagoras guy and get precedence!

Hilzoy I have to congratulate you on an excellent piece. But I have to depart from you on one point:

"There are, basically, two ways to put Social Security on a firmer financial footing, supposing one thinks that needs to be done. One is to raise taxes; the other is to cut benefits."

It turns out that neither proposition actually works to put Social Security on a firmer footing, not when you look at the system as a long term totality. There are ways you could restructure Social Security so that tax increases or benefit cuts would add to Long Term Actuarial Balance but under the current finance structure all you would be doing by either is accelerating the flow through of surplus dollars to the General Fund while swelling the supply of Special Treasuries and so the obligation to pay back extra principle and interest in the future.

Holding Trust Fund 'assets' in Special Treasuries is not a bad thing in itself, it is a reasonable way of tracking inter-generational borrowing, after all I was in the workforce in 1983 and expect some compensation for all the extra dollars I put in over the 35 years since. But the fact that future taxpayers do in fact 'owe' me doesn't mean that in reality that I 'prefunded' anything.

The interest on the Special Treasuries is real enough but rests on a certain assumption that may or may not be true. That assumption is that the extra borrowing allowed by the current Social Security surplus either lowered the cost of overall federal borrowing or directly financed productivity improvements in a way that justifies a claim on future productivity decades down the road. Well Bushonomics put that tradeoff claim to serious test, instead of using the Social Security surplus in some future looking way instead it was used to pay for the equivalent of the three martini lunch with the subsequent bill simply being passed on to a future generation.

Absent some structure and mechanism that would insure that FICA tax increases actually were put to some use that would make future financing of Social Security easier for future workers such increases simply enable reckless spending in the here and now.

The whole thing sounds counterintuitive, there seems to be no way that cutting costs or increasing revenues near term could cause long range harm, but that is the way it shakes out when you follow the actual dollar.
Angry Bear post XIV: Why benefit cuts and cap increases backfire

Okay 'twenty five years'.

I was a literature major, you got to give me a little break.

Bruce is right on the money. I'd fight any change to Social Security that increases the surplus it generates because it will simply be consumed by general spending.

Under McCain's definition of "balancing the budget" in 2008, we'd still be sucking up several hundred billions a year in Soc Sec surpluses. That's one enormous fig leaf.

I'd love to see Obama propose pulling Soc Sec and Medicare out of the general budget so that people clearly understand that this year's deficit is about $700 billion.

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