cutting to the chase

by russell

OK, so the President's bi-partisan Fiscal Commission has released a initial draft report on how to reduce the national debt.  Or, not really the whole commission, just the two co-chairs, Bowles and Simpson.

The document contains a number of bold proposals.  By "bold" I mean, guaranteed to enrage an amazingly broad cross-section of the population.  They've left very few stones unturned.

• Reduce Social Security benefits?  Check.
• Raise the FICA cap?  Check.
• Medicare and Medicaid cuts?  Check.
• VA co-pays?  Check.
• Eliminate some military weapon systems?  Check.
• Cut fossil fuel research funds?  Check.

And so on and so on.  They even want to charge admission to the Smithsonian, a measure guaranteed to make a generation of would-be grade-school field trippers cry.

Hard core.

Grover Norquist doesn't like it, and the AFL-CIO's Richard Trumka doesn't like it.

At least they got the bi-partisan part down.

There will, no doubt, be a blizzard of discussion, argument, position-taking, thoughful chin-stroking, and general low-grade pandemonium as folks dig into the details of the report.  But for my money, we  can all save ourselves a lot of time and headaches and cut to the chase by checking out Kevin Drum's analysis in Mother Jones.

Even simpler, just check out this graph from the CBO's Long Term Budget Outlook, which Drum cites in his piece:

 

Remove the increase in health care costs from the picture, and we're really not in bad shape.  Either we figure out how to manage health care costs, or we go broke.

Seems like the rest is kinda noise.

Comments

[Nate]

If only Congress and the President had been working on some kind of bill to reduce the growth of health care costs! Why, then all the Very Serious Deficit Hawks could have made great strides toward dealing with this problem, rather than it being the Cost that Dare Not Speak Its Name.

[Eric Martin]

Couple of other posts on the subject worth reading:

http://bit.ly/cU2Kim

and

http://bit.ly/bMqDBX

[Jacob Davies]

Of all the stupid crap that has been suggested as "serious policy" over the past decade, this has to be the second-stupidest. (Iraq spoils that line.)

The fact that the President didn't just dismiss it out of hand is a cause for despair. There is no way on earth that anything like this proposal should ever come near being voted on. A proposal to reduce the deficit that reduces high-end tax rates might as well have just come with "Let them eat cake" pasted across the cover.

[Rob in CT]

Look at their proposal under the long-term healthcare costs section. It's basically magical thinking. Or "Death Panels."

I like quite a few of the ideas, and I definitely like the fact that it pretty much hits all sides.

Here's the thing:

If you assume that you can flatten (bend, whatever) that healthcare cost curve - that it's doable, likely, etc... then ok, I think it's fair to say that no other significant cuts are necessary.

What if, however, you think that some cost containment will happen but not enough to plug the gap? Well then, you best be looking at some cuts to other programs. Military, other benifits programs, etc.

[Rob in CT]

Jacob - it reduces high-end tax RATES. I'm not sure, on balance, it reduces high end effective taxation. It cuts out the mortgage interest rate deduction for mortgages bigger than $500k, for instance. It also proposes taxing capital gains as income.

[McKinneyTexas]

it reduces high-end tax RATES. I'm not sure, on balance, it reduces high end effective taxation.

Exactly. The idea has been around forever: quit using the tax code to promote/discourage the good/bad behavior flavor of the day. Tax all income, or the vast majority of it over 30-50K at some rate with the higher earners paying a lower rate on all income. No need for AMT or anything else. If you have income, you pay tax.

[Carleton Wu]

I think Krugman's shooting from the hip a little too much in his analysis. eg 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.

They also propose eliminating lower rates for cap gains and interest, which matter a lot to the wealthy. Im not saying that this means that the balancing is praiseworthy, but he seems to be focusing exclusively on the downside without even acknowledging the potential upside.
Or: bullet points don't rank things in order; "deficit reduction" is indeed "literally at the bottom of the list" of goals, when that list is unordered (and, IMO, likely placed at the end of the list to emphasize it rather than minimize it).

That said, I think the underlying criticism is valid, and screws the whole exercise: the proposals are a series of bipartisan compromises on important stuff, which may even be good, but insofar as it basically reforms the tax code in a mostly revenue-neutral way, suggests chopping some known waste (eg ag subsidies) out of the budget, and then crosses its fingers on medical spending it isn't primarily a "deficit reduction" plan.

[Nate]

From my understanding of this though, the recommended spending cuts are something like 2/3 of the total amount, and the increased revenue is about 1/3 of the total. So it's already tilted in favor of the "Government bad!" side from the start. (Most of what I understand comes from here, and MattY and Kevin Drum had posts about it too, I'm supposed to be working on a lab report so I haven't gone over the blueprint in detail personally.)

[Rob in CT]

Right, McKinney. I support simplifying the code and - most importantly - ripping the subsidies (in spirit if not in name) out of it. If there is a pressing need to subsidize something, let us have a discussion about that, rather than adding deductions into the tax code.

Personally, I wouldn't drop to only 3 brackets. I like lots of brackets. I don't think they are part of the complexity problem. Brackets aren't loopholes that encourage tax avoidance. But you know what, I'm excited enough about the idea of going after the deductions that I'm willing to let that go.

I'd also phase out the sub-$500k mortgage interest deduction (say, over the course of 15-20 years... SLOWLY). Or phase out down to... $100k? Then index the deduction limit to inflation.

[Rob in CT]

then crosses its fingers on medical spending

That's the show-stopper bug here, no doubt about it.

The most fiscally conservative healthcare plan is either single-payer or "you're all on your own." Our patchwork quasi-socialistic healthcare payment system, on the other hand, is just... a mess.

[McKinneyTexas]

The majority of the cuts come from spending because it's the spending that is the problem. Taxes are going up, FICA and income tax. Because these are offset by spending cuts, conservatives cannot, in good faith, argue against one and for the other. Not all conservatives are in good faith, but what you are not seeing on the right, as opposed to the progressive left, is initial and outright denunciation. So much for Republican obstructionism.

[cleek]

From my understanding of this though, the recommended spending cuts are something like 2/3 of the total amount

yup. and roughly half of those are to discretionary spending. which means they're hoping future Congresses have the self-discipline to meet The Plan's demands.

which means they're bullsh!tting us.

[someotherdude]

"thoughful chin-stroking"

Indeed, always a hopeful sign!

that was funny.

Let's not forget the "herumphing".

[Rob in CT]

McKinney - I may have to concede that the Left has been more vocal in rejecting it, but I've seen outright categorical rejection from the Right as well:

http://www.atr.org/index.php?content=home

They pretty much hate it.

Are they the same as, e.g. Nancy Pelosi saying it's unacceptable? No. But it's not like the Right is in love w/this either.

[Model 62]

The majority of the cuts come from spending because it's the spending that is the problem...

Well that's why you're not seeing as much denunciation from the right. The report agrees with the right's (and apparently your) definition of the problem.

[Eric Martin]

So much for Republican obstructionism.

McTex: The commission itself is skewed right.

Simpson is a conservative, and Bowles is a very conservative Democrat. Thus, it should come as no surprise that liberals don't like what they came up with.

It's also kind of important that the so-called "deficit reduction" commission doesn't really come up with a plan to reduce the deficit.

[Nate]

McKinney: I'm sorry, are we supposed to engage in thoughtful serious analysis of a proposal that's tilted far to the right, attacks Social Security, is political poison, and probably wouldn't work, on top of that?

[Jacob Davies]

The problem is that deductions are far, far easier to pass than rate increases. It is budget suicide to decrease rates so sharply under the assumption that meaningful decreases in deductions will have the same lifetime. And I would take a lot of convincing to think that a 12% decrease in the top rate was actually going to be offset. I seriously doubt it.

On the only really important long-term budget factor, which is healthcare, they literally just said "We'll force healthcare to be cheaper". That's it. I can do that - "I'm going to control healthcare costs by making healthcare costs not grow as fast." I don't get a front-page NYT story for saying that.

Everything else is penny-pinching idiocy. Charge admission to the Smithsonian? What's that going to raise, a couple million a year? In a federal budget that is three point five trillion dollars? Do these people understand that the federal government spends a million dollars three and a half million times a year?

That's like someone putting together a plan to pay down $100k in credit card debt by picking up one penny from the street every month. It is about four orders of magnitude from anything that could possibly make a difference.

[Rob in CT]

Jacob,

Agreed on the Smithsonian thing, which is just wierd.

But they do propose some military cuts (not enough, IMO, but it's a good start).

Anyway, yeah, the healthcare thing is the killer. The cost-curve shall be bent! So it is written, so shall it be done!

[Rob in CT]

Regarding attacking Social Security, I was under the impression (did I misread their plan?) that it did two things:

1) means-test and cut benifits to rich seniors; and

2) increase (very slowly) the retirement age.

If #2 is THE objection from liberals, I kinda suspect its removal can be bargained for.

[Rob in CT]

Oh, I forgot #3 (not a cut): remove the cap on SS taxation.

I never understood that cap. Anyway, that's a progressive move.

[Eric Martin]

Couple thoughts:

1. Means testing SS is a poison pill: if you set it up as welfare, it will be easier to build coalitions against - especially with all the political power at the top anyway.

2. The retirement age should be lowered, not raised.

3. Removing the cap is interesting.

4. Re: Military Cuts: this is non-binding, and thus should not be considered settled. Cuts may come, or not, but not because of the commission.

[Rob in CT]

Seriously? Lowered? Why, when people are living longer, is that a good idea?

I dunno about #1 either, but I'll ponder.

...

Another problem I've seen raised (Capital Gains & Games): cutting farm subsidies (an idea I like) is... awfully arbirary. Are we to cut all industrial subsidies? No? Then why farms, exactly?

I would like to see all subsidies to business end (in exchange for an end to corporate taxation). ALL.

[Nate]

What Eric said, especially #1. Since I've moved to the South, I've been astonished by the constant "Welfare is stealing!" attitude, and the various attempts to justify it, even when Welfare is a tiny portion of the federal government, and more money is stolen every day by Wall Street.

[Rob in CT]

Hmm, yeah, ok, I'm familiar with that attitude as well. If you make SS progressive you might lose the middle/upper-middle class's buy-in.

Hows this then, leave out the means-testing but reduce the cuts to the income tax rates.

Again - that could be part of a reasonable give-and-take on this. Hopefully, the commission (which is allegedly hard at work on this) is having this sort of discussion.

[Eric Martin]

Rob: I know lowering retirement age might sound counterintuitive, but if you lifted the cap, this would make sense even though people are living longer because lifetime employment is less guaranteed, as older workers are shuffled out the door quicker.

And the retirement age keeps creeping up anyway.

[McKinneyTexas]

It's a partial cap lift, to 106K. A total cap lift is a nonstarter, essentially a 16% levy on all earned income or a combined 51% marginal rate. Not acceptable. Particularly with other tax increases built in around limiting or eliminating most deductions.

[russell]

It's a partial cap lift, to 106K.

That's correct. They're looking to get 90% of all income subject to FICA, right now it's something like 85%.

A total cap lift is a nonstarter, essentially a 16% levy on all earned income or a combined 51% marginal rate.

I agree that total cap life is a non-starter, it has less than a snowball's chance in hell.

I'm curious how you get to "essentially 16% on all earned income". Normally employer / employee split that more or less down the middle.

[Jacob Davies]

McKT: what you are not seeing on the right, as opposed to the progressive left, is initial and outright denunciation

There is absolutely no way that anyone, left or right, is going to vote for a proposal like this one. The public favors uncapping payroll taxes over any cuts in Social Security by gigantic margins. They favor progressive income tax increases to pay out the Trust Fund over cuts in Social Security by similarly gigantic margins.

Look, certain people on the right have fantasies about failing to repay the Trust Fund by cutting benefits or privatizing Social Security to pump up the stock market. Those things will never happen. It is exactly as unrealistic as those on the left who imagine that Congress could nationalize the healthcare system*. It will not happen, it is ridiculous to suggest that it will happen, and any proposal that calls for it to happen is dead on arrival.

Social Security does not have a serious budget problem. The general fund has a revenue problem because it has promised to repay the Social Security Trust Fund all the money that was loaned to the general fund through regressive taxes over the last 27 years. It used that money to decrease income tax rates. It's just about time to increase income tax rates again. Or, we could just borrow the money from the public. I prefer taxes, myself, but in either case Social Security is going to pay out or there really will be a 2nd American revolution. Nobody who's paid in the system for their entire life is going to accept significant cuts in benefits, nor should they.

The big problem is healthcare, which this report does not address at all. It is a joke.

* We may well end up with a nationalized healthcare system in an emergency scenario a few years from now just because nobody can afford private healthcare and everyone is getting dumped on Medicare and Medicaid.

[Nate]

"It's a partial cap lift, to 106K. A total cap lift is a nonstarter, essentially a 16% levy on all earned income or a combined 51% marginal rate. Not acceptable. Particularly with other tax increases built in around limiting or eliminating most deductions. "

Pity the poor millionaires, paying a 51% tax rate on the part of their income that's 5-10 times the median income in the country. A country with such punishing tax rates on the people making the most money could certainly never manage to become a superpower and would wither away to nothing!

[Jacob Davies]

McKT: A total cap lift is a nonstarter, essentially a 16% levy on all earned income or a combined 51% marginal rate. Not acceptable.

I suspect you're going to be in for a surprise a few years from now. That may not be acceptable to you, but the overwhelming majority of people don't even know there is a Social Security cap because they never hit it, would be surprised if you told them, and would sign onto extending that far sooner than they would accept tax increases on themselves or benefit cuts.

We've had a rather unrealistic view of what is "acceptable" when it comes to progressive taxes thanks to Clinton's balanced budgets and the availability of a lot of credit when Bush took us back into the red. Should credit ever get tight for the US (or need to be tight to combat inflation) and taxes need to get raised to head off benefit cuts, you can be sure that progressive tax increases will be where it gets started. Doesn't matter whether Democrats or Republicans are in office at the time.

The retirement age should be temporarily lowered right now because we have surplus labor and insufficient demand, and because the effects of someone not being able to find a job at 60 and not being able to find a job at 20 are very different. If you're 60, all you have to do is hang on for 5 years and you have no long-term career effects. You probably have some savings to rely on. If you're 20, being unemployed for an extended time does permanent damage to your earning ability, delays your progression to adult life, and so on.

A temporary drop in the retirement age (a couple of years for a couple of years) would encourage a lot of older people to retire and leave some jobs open for younger people.

Not going to happen. But it would be a good idea.

[Rob in CT]

I do think it's wise to keep marginal rates below 50%, btw. In fact, below 50% of total tax burden (so state tax included). Once you're keeping less than half of the next dollar earned, I start to take the argument that people might say "screw it" seriously.

It's not about pity. It's about tax avoidance...

[Tony P.]

As I understand it, Bowles and Simpson propose to limit the federal budget to 21% of GDP. Maybe I have the exact number wrong. But the mere notion of setting ANY exact percentage seems nuts to me.

It's like saying, "No matter what, I will never spend more than X% of my income on housing. Never mind how prices for housing, energy, food, entertainment, transportation, or tube socks change relative to one another. I will move to a smaller house if I have to. Or I will make it a point to spend more on, say, software if I have to. But I will only spend X% on housing. It's a matter of principle!"

You can divide a household's income into "housing spending" and "everything else". You can divide a nation's income into "federal spending" and "everything else". Some of the household's needs can only be satisfied by "housing". Some of a nation's needs can only be satisfied by "government". An arbitrary percentage split in either case seems mulish.

--TP

[Rob in CT]

Yes, they picked 21%. I think that's an attempt to mollify the "starve the beast!" types. It's also generally consistent with history (weighted toward recent history), if I understand correctly.

Note: they picked 21% for both expenditure *AND* income. I agree it's silly (I'd prefer 22% income, 21% expenditure, at least until the debt was significantly lower).

[cleek]

It's like saying, "No matter what, I will never spend more than X% of my income on housing.

... and the next people to own this house will never spend more than X% of their income on housing. and the people after them, too! forever! why? cause someone said so.

[Tony P.]

Yeah, cleek, I forgot to mention that point. It's a pet peeve of mine: old farts like Alan Simpson laying out fiscal principles for the "long term". We are all dead in the long run, but it's a fair bet that Alan Simpson will be dead sooner than that.

--TP

[Ugh]

I think I'm about ready to throw up my hands and support permanent extension of the Bush tax cuts because gimme! gimme! gimme!

[Marty]

An intersting exercise to remember: When Reagan approved tax hikes the year after his first tax cuts, he agreed to sign it if the Dems would give him three dollars in cost cuts for every dollar of increased revenue. He did,and despite much demagoguing by Reps to the contrary, they did.

We need guys who can make the right deals for the country.

[Marty]

If one were to put up an open thread I would point out to those who worry about new airport scanners that they can now be scanned just sitting in their car.

[McKinneyTexas]

I'm curious how you get to "essentially 16% on all earned income". Normally employer / employee split that more or less down the middle.

Yep, I was thinking of myself and other self-employed types. A salaried employee pays a marginal rate of 43%.

Pity the poor millionaires, paying a 51% tax rate on the part of their income that's 5-10 times the median income in the country.

If you define millionaires as people earning 250K or more, then I suppose your rant makes some sort of sense, but what is being discussed is actually an 8% of income instant tax increase on every income over roughly 90K. That isn't taxing millionaires. And, it is a nonstarter. It's also emblematic of how some progressives move the goal posts at will. It is border line fraud to pitch, as a position of reason, a roll back of the higher end Bush tax cuts (on incomes north of 250K) while silently intending to subsequently gig tax payers with incomes starting at 90K with an 8% of income tax hike.

[Carleton Wu]

And I would take a lot of convincing to think that a 12% decrease in the top rate was actually going to be offset. I seriously doubt it.

Well, taxing cap gains and interest at those rates should be a pretty big balancing point, plus raising the fica cap. I have no idea if the numbers add up to more or less than the cut in rate, but I don't have any reason to assume otherwise- I dont have a good feel for eg how much cap gains are claimed in the US or how that might change under a different tax regime.
otoh, that is a pretty low rate. And for people who high earners who earn most of their income as income, this would be a gigantic tax cut.
With FICA, the minimum tax rate (8 + 16 for FICA) is higher than the top rate once the fica cap is passed (in the first suggested plan), and pretty close (15 + 16 versus 35) in the second one. That is, insofar as this isn't a flat tax, this actually looks regressive unless Im missing something here.

[Hartmut]

Let's assume these proposals would be introduced in Congress as a bill. What would happen? A hailstorm of amendments. And when the 'negotiations' start anything of the least worth in this (like cuts to the 'defense' budget or to subsidies) would die instantly while in the name of the sacred duty of the balanced budget anything aimed at the not-have-mores would be ratched up even more. The GOPsters could as well hand out cyanide (or more likely strychnine) pills to the Dems.

[Bernard Yomtov]

Jacob,

The big problem is healthcare, which this report does not address at all. It is a joke.

* We may well end up with a nationalized healthcare system in an emergency scenario a few years from now just because nobody can afford private healthcare and everyone is getting dumped on Medicare and Medicaid.

This is yet another elephant in the room, or whale in the bathtub maybe.

Medicare and Medicaid are going up because medical costs are rising. The issue is not how to save on Medicare but how to hold down those cost increases.

[McKinneyTexas]

The issue is not how to save on Medicare but how to hold down those cost increases.

Perhaps. How do we hold down costs and assure ourselves of continuing, quality health care?

[debbie]

They're planning to cut only $3 billion in farm subsidies. According to Wikipedia, total subsidies are currently $20 billion. This isn't much of a cut IMO.

[Chris J]

"How do we hold down costs and assure ourselves of continuing, quality health care?"

The best place to start is to stop paying for therapies that are only of marginal benefit or don't work at all. Reliable estimates are that up to a third of all healthcare dollars go to those things. The problem is that, for a lot of healthcare providers, questionable therapies are their revenue streams. For example, tell an ENT surgeon that he/she has to use evidence-based criteria for doing tonsillectomies or ear tubes and you will eliminate over half their business. Or tell patients that antibiotics won't be prescribed for cold symptoms and you will hear howls of protest -- well, howls of "rationing." Somebody's ox needs to get gored. This will be incredibly difficult to do, short of putting global spending caps on medical care and making the special interests fight it out. I fear that's what will ultimately happen. Right now we're just rearranging the deck chairs as the iceberg gets nearer. I'm afraid nothing will happen until we hit it.

[russell]

Yep, I was thinking of myself and other self-employed types

OK, I see what you're saying.

How do we hold down costs and assure ourselves of continuing, quality health care?

IMO we need to begin by understanding what is driving costs up.

Is it end of life care? Is it chronic disease management? Is it a general lack of public health measures, leading to suboptimal health across the population as a whole (read: obesity etc.)?

Some work has been done in this area by Kaiser, maybe the Robert Wood Johnson Foundation, maybe the NIH. Private insurers and providers have a stake in understanding how to keep costs low while maintaining a good level of service, and some of them have done some good research.

But IMO it won't really make a dent unless it's made a priority at a public policy level.

To be honest, my sense is that at some point we are going to end up with some kind of public option, not because of the evil hand of socialism, but because it might just be that private health insurance, at least for basic primary care, is uneconomic.

The government already insures old folks, poor folks, some of the chronically ill, and a lot of the kids. Private insurers claim to be unable to make an adequate living off of insuring the rest of us unless they can cherry pick the population, kick people out if they get sick, or unless the government forces healthy younger folks, who would otherwise opt out and take their chances, to buy in.

If there's not enough money to be made in the private sector without limiting coverage to people who aren't sick and/or haven't been sick in the past, it should come out of the public sector. It's too essential a service to be limited to folks who don't need it so badly.

My two cents.

But yes, it's a hard problem, and it's not we can solve on the basis of political preference for "large" or "small" government. It needs to be solved on the basis of what is effective.

[Chris J]

I think the best laboratories for studying why healthcare costs so much are provided by the astonishing geographic differences in costs. These were first pointed out by the Dartmouth Atlas of Health Care (http://www.dartmouthatlas.org/) studies, which span now a couple of decades. Weird, apparently inexplicable differences in costs got a lot of attention with Atul Gawande's 2009 article about it in the New Yorker (http://www.newyorker.com/reporting/2009/06/01/090601fa_fact_gawande), in which he examined two cities with wildly different costs. It's pretty clear that physician culture is one key reason for the differences.

[wj]

@JD Nobody who's paid in the system for their entire life is going to accept significant cuts in benefits, nor should they.

Are you sure? I realize that there are lots of people with that mindset -- comes of believing what politicians tell them. But surely I am not the only one who has been paying "into" Social Security his whole life and has never had the least expectation of seeing a dime of it. I thought so in high school (early 1960s), and have never seen any reason to consider changing my expectations. It's just another tax, like all the rest.

[Jacob Davies]

The problem in the US always circles back around to the ability for corporations and wealthy individuals to funnel money directly to politicians or to securely promise them or their relatives sinecures.

I mean that's true in healthcare, it's true in tax policy where the rich have successfully transferred the burden to everyone else, it's true in foreign policy where the mil-industrial complex pretty much bought its own war, it's true in education policy where loan subsidies are funnelled directly to private colleges, it's true in anti-poverty policy because a lot of wealthy people are mean SOBs and like having poor people around.

It's hard to see what can be done to break it. I genuinely thought Obama believed that it needed to be broken and had the character to do it, to be the bulwark in the White House that could resist the campaign contribution lure that Congress finds so difficult to ignore. But frankly that hasn't been what we've seen. He's been more donor-friendly than the House in so many areas, and his polite refusal to dismiss this chairman's report out of hand the way Pelosi did just underlines it.

[Jacob Davies]

wj: surely I am not the only one who has been paying "into" Social Security his whole life and has never had the least expectation of seeing a dime of it

The propaganda against it has been fierce since the beginning. But I don't believe you when you say you have no expectation of seeing a dime of it. In fact I wouldn't believe you if you said you only expected to get 50% of scheduled benefits. If you were born around 1950 you're going to get to retire around 2015 and you're going to get full scheduled benefits until you die, almost certainly. It's crazy to think otherwise. The Trust Fund won't be depleted until 2040 or 2050, and nobody's going to cut Social Security benefits for people who are already retired. Those people vote.

They might try to do it for people of my generation and younger, but that doesn't really make much sense. The fund is in rough balance once all the boomers die. There isn't an emergency with Social Security except in securing funding from the general fund, and that'll happen whether they have to raise income taxes or just print the damn money.

[Jacob Davies]

(To softn that a little, I do believe you when you say you thought that in the 60s, 70s, 80s, 90s, 00s. And maybe you really do believe it now. But Social Security has survived all those decades and is in good shape now. I don't think it is plausible that it would simply vanish between now and your fairly-imminent retirement.)

[Bernard Yomtov]

Russell,

IMO we need to begin by understanding what is driving costs up.

Is it end of life care? Is it chronic disease management? Is it a general lack of public health measures, leading to suboptimal health across the population as a whole (read: obesity etc.)?

Yes, but I suspect the answer is "a lot of things." And that doesn't lend itself to politics. I mean, if you can't blame it all on the insurers, or the malpractice lawyers, or the for-profit hospitals, or some other villain of choice then it won't play politically.

What I think is that reducing health care costs could be done, without reducing quality, by a lot of grunt work (given smart, knowledgeable grunts) but that has little appeal.

[Carleton Wu]

They're planning to cut only $3 billion in farm subsidies. According to Wikipedia, total subsidies are currently $20 billion. This isn't much of a cut IMO.

Yeah, to a significant extent they seem focused on a thumb in every eye rather than actually going after particular areas of waste. Raising entrance fees to national parks (Rocky Mountain just up the road is already $20 for a pass)? Stop subsidizing student loans? Some of this stuff just seems poorly thought out.
Im not sure if they've got something to address what appear to be problems in defense procurement; afaict they merely suggested canceling some expensive programs.

his polite refusal to dismiss this chairman's report out of hand the way Pelosi did just underlines it

Well, I don't really expect that from him because that's not his style. And secondly, since he established the group, he'd look an ass throwing away their work rather than using it as a starting point (or even, say, pretending to while not giving it any push).

Deficit reduction will be a package can get by the 60th Senator: Bingaman, Tester, Klobuchar, etc, plus Obama. I don't see this plan breaching that line without considerable modification, and I don't see the GOP accepting any movement to the left, particularly in this political climate.

[CharlesWT]

"I'm curious how you get to "essentially 16% on all earned income". Normally employer / employee split that more or less down the middle."

It stills comes out of the employee's income. It just doesn't appear on his check stub.

[Marty]

"to be the bulwark in the White House that could resist the campaign contribution lure that Congress finds so difficult to ignore."

You didm't question this when he went back on his initial promise to take matching funds as soon as he saw he would raise more money than McCain? Or when he got more money from the Wall Street guys than McCain?

What did it take?

[Chris J]

"What I think is that reducing health care costs could be done, without reducing quality, by a lot of grunt work (given smart, knowledgeable grunts) but that has little appeal."

Yes, those grunts exist. Much of what needs to be done is common knowledge among them. But they're not driving the bus.

[Carleton Wu]

You didm't question this when he went back on his initial promise to take matching funds as soon as he saw he would raise more money than McCain?

I believe that Obama said he would try to reach an agreement with the GOP nominee, not that he would categorically take the matching funds.

So whether he went back on his promise depends on whether you think he negotiated with the McCain campaign in good faith. iirc there was a major stumbling block around 527s, but I havent bothered to dig up links for that.
In any case, your statement has a mistaken premise iirc.

[Marty]

"In any case, your statement has a mistaken premise iirc"

I recall pretty differently.

[russell]

Yes, but I suspect the answer is "a lot of things." And that doesn't lend itself to politics.

I think that's about right.

What I really think is going to happen is that we're going to drive this particular bus off the cliff, and then patch up whatever's left and move on from there.

Or, not.

It's gonna be ugly for a while.

[Carleton Wu]

""You didm't question this when he went back on his initial promise to take matching funds as soon as he saw he would raise more money than McCain?""

"I believe that Obama said he would try to reach an agreement with the GOP nominee, not that he would categorically take the matching funds."

I recall pretty differently.

And you recall wrongly. Ah, fickle recall.

"In February 2007, I proposed a novel way to preserve the strength of the public financing system in the 2008 election. My plan requires both major party candidates to agree on a fundraising truce, return excess money from donors, and stay within the public financing system for the general election. My proposal followed announcements by some presidential candidates that they would forgo public financing so they could raise unlimited funds in the general election. The Federal Election Commission ruled the proposal legal, and Senator John McCain (R-AZ) has already pledged to accept this fundraising pledge. If I am the Democratic nominee, I will aggressively pursue an agreement with the Republican nominee to preserve a publicly financed general election." cite

There's really no way to parse "I will pursue an agreement" into "I promise to take public funding for my general election campaign, period."
Now, did he 'aggressively pursue' this goal? I dunno. I recall things falling apart over McCain's insistence that he could not exert any control over 527 ads, but Im not a mindreader, maybe that was just an excuse.

[Gary Farber]

McKinneyTexas:

The majority of the cuts come from spending because it's the spending that is the problem. Taxes are going up, FICA and income tax.

What initial year, and/or subsequent period of years, do you suggest we previously hit an intolerably high rate of income tax?

[Gary Farber]

"Seriously? Lowered? Why, when people are living longer, is that a good idea?"

By all means, I want as many 72 year old construction workers, farm workers, ditch diggers, factory workers, and everyone else who does manual labor to work as long as possible. It'll be good for them, and, after all, the work is so fulfilling, and age makes little difference in ability to compete with 20-year-olds for jobs.

So I see no problem ahead for the 43.6 million people in poverty in 2009 and more in future, at having to look for manual labor jobs at the age of 69-70, in the booming industrial economy we'll have in the next ten years, and no reason these people can't wait to retire.

What could go wrong?

It's such a sweet deal, I'll bet there will be millions of white collar workers desperately seeking those manual labor jobs at age 70, as well, given how vigorous and healthy it will keep them.

Or maybe not.

McKinneyTexas: "It's a partial cap lift, to 106K. A total cap lift is a nonstarter, essentially a 16% levy on all earned income or a combined 51% marginal rate. Not acceptable."

This is an assertion; do you have an argument to support it, perhaps, that you'd care to offer?

(Keep in mind that "I don't like it" or "I think it's too much" are not arguments, either.)

RobInCT:

I do think it's wise to keep marginal rates below 50%, btw. In fact, below 50% of total tax burden (so state tax included). Once you're keeping less than half of the next dollar earned, I start to take the argument that people might say "screw it" seriously.

We don't have to guess; we have historical data. I suggest consulting it, if you haven't, to see if your argument is supported by the historical facts, or isn't.

wj:

Are you sure?

It could hardly be simpler: the overwhelming majority of those in Congress who voted to eliminate or severely cut Social Security would be voted out of office. Even if the majority of the Senate and the House all decide their going to take retirement at the end of their current election cycle, and voted for such a thing as lame ducks, their replacements would immediately be forced to restore Social Security, or they, too, would be voted out of office.

Politicians run to stay in office.

Why and how anyone wouldn't understand this principle, I'm not clear.

I realize that there are lots of people with that mindset -- comes of believing what politicians tell them. But surely I am not the only one who has been paying "into" Social Security his whole life and has never had the least expectation of seeing a dime of it.

Yes, I've met many such people, and many people who believe in astrology, that God wrote the Constitution, and the moon walk was a hoax. People believe all sorts of strange things all their lives in visible contradiction to how reality, or even just politics, functions.

[Gary Farber]

Marty:

You didm't question this when he went back on his initial promise to take matching funds as soon as he saw he would raise more money than McCain?

That would probablhy because he never made any such promise. I do invite you to find and cite the words in which he made such a promise. Please.

Note that claims by third parties that he made a "promise" are not evidence. You have to find his actual words stating the promise, not biased reporting that claims he made a promise, but give no cite as to where or when. Come up with a cite to his actual words, please.

"I recall pretty differently."

Marty, who cares what anyone "recalls" about a fact? Either you can cite it, or you can't. It's a fact, or it isn't. Claims otherwise are worthless, and waste everyone's time. There may be competing cites, and those can be debated, but citing your memory does us as much good as it does for me to simply assert that you're wrong because I think so, but, hey, I'm not going to bother to give you any facts to argue with.

Meanwhile, February 26th, 2008, Democratic primary debate:

OBAMA: Tim, I am not yet the nominee. And what I have said is,
when I am the nominee, if I am the nominee -- because we've still got
a bunch of contests left, and Senator Clinton is a pretty tough
opponent -- if I am the nominee, then I will sit down with John McCain
and make sure that we have a system that is fair for both sides.
Because, Tim, as you know, there are all sorts of ways of getting
around these loopholes.

Senator McCain is trying to explain some of the things that he
has done so far, where he accepted public financing money but people
aren't exactly clear whether all of the t's were crossed and the i's
were dotted. Now, what I want to point out, though, more broadly is
how we have approached this campaign.

I said very early on I would not take PAC money, I would not take
money from federal registered lobbyists. That was a multi-million-
dollar decision, but it was the right thing to do. And the reason we
were able to do that was because I had confidence that the American
people, if they were motivated, would, in fact, finance the campaign.

We have now raised 90 percent of our donations from small donors,
$25, $50. We average -- our average donation is $109. So we have
built the kind of organization that is funded by the American people
that is exactly the goal and the aim of everybody who's interested in
good government and politics that works.

RUSSERT: So you may opt out of public financing. You may break
your word.

OBAMA: What I've said is, at the point where I'm the nominee, at
the point where it's appropriate, I will sit down with John McCain and
make sure that we have a system that woks for everybody.

Or you can argue that a pencil mark on a check box is a "promise," and that by February 2008, it didn't matter what Obama was saying, because it was so close to the election. Or maybe there's some other way to claim he broke a "promise."

But it's your claim, so go ahead and support it, if you like.

But it'd be really neat if no one at ObWi ever aqain went into an "argument" based solely on what they think they remember, maybe, from somewhereorother, or what someone heard, or thinks they remember hearing, or thinks they may have read somewhere, or were told by their brother's co-worker's wife, or whatever the hell useless anecdote people tend to throw into debate as if anecdote and memory were facts, and were useful data to get correct answers.

They're not. GIGO.

And anyone who thinks otherwise isn't thinking clearly, and is inevitably, though not always, going to be wrong much of the time when they don't bother to check their facts before making an assertion.

Argue with facts, or you're not arguing, you're just asserting, and who cares? I remember the moon as being made of green cheese. Convincing "argument," isn't it?

[Brett Bellmore]

"Well that's why you're not seeing as much denunciation from the right. The report agrees with the right's (and apparently your) definition of the problem."

Actually, I think the reason the right isn't much bothering to denounce it, is because we don't take it seriously enough to bother. I mean, come on! A promise to balance the budget TWENTY FIVE YEARS FROM NOW??? The only response that deserves is derisive laughter.

You know what "25 years from now" means in politician speak? "Never".

[McKinneyTexas]

McKinneyTexas: "It's a partial cap lift, to 106K. A total cap lift is a nonstarter, essentially a 16% levy on all earned income or a combined 51% marginal rate. Not acceptable."

This is an assertion; do you have an argument to support it, perhaps, that you'd care to offer?

(Keep in mind that "I don't like it" or "I think it's too much" are not arguments, either.)

Well, if you get to make the rules of what an acceptable argument is or is not, it's going to be damned difficult for me to meet your expectations. Just as Pelosi and many others have simply said, "this is unacceptable", many others have and will say that uncapped FICA taxes are unacceptable. This is virtually self evident because it means an immediate 8% of income (not 8% rate increase) tax on every dollar above the current cap, i.e. more than double the tax increase proposed on the 250K plus earners. The current cap is at around 85-90K. So, lifting the cap entirely taxes everyone making between 85K and 250K an additional 8% of their income or an additional $13,200 in taxes on the gap between 85K and 250K. That is a huge tax increase. The Dems have been harping that they only want to raise taxes on the very wealthy, yet this play is in total contradiction to what appeared to be a firm position of only raising taxes on the "wealthy" and then only to the tune of 3.6% of income.

[McKinneyTexas]

Or you can argue that a pencil mark on a check box is a "promise," and that by February 2008, it didn't matter what Obama was saying, because it was so close to the election. Or maybe there's some other way to claim he broke a "promise."

This seems off topic, but defending Obama's misdirection on public financing is tough duty. You can parse until hell freezes over, but everyone knows he created a totally false impression and flipped. Hope and Change, Chicago-style. You bet.

[Bernard Yomtov]

ChrisJ,

Yes, those grunts exist. Much of what needs to be done is common knowledge among them. But they're not driving the bus.

I have no doubt they exist. I also agree they are not driving the bus, and that their suggestions to the driver are often ignored.

[Marty]

Once again Gary you call me for a simple statemetent by saying:

"Marty, who cares what anyone "recalls" about a fact? Either you can cite it, or you can't. It's a fact, or it isn't. Claims otherwise are worthless, and waste everyone's time."

YET YOU JUST LET SLIDE THAT I WAS RESPOONDING TO THE FACT AND CITE FILLED:

I believe that Obama said he would try to reach an agreement with the GOP nominee, not that he would categorically take the matching funds.

So whether he went back on his promise depends on whether you think he negotiated with the McCain campaign in good faith. iirc there was a major stumbling block around 527s, but I havent bothered to dig up links for that.
In any case, your statement has a mistaken premise iirc.

Not to mention, what Mckinneey said.

[wj]

JD: Social Security has survived all those decades and is in good shape now. I don't think it is plausible that it would simply vanish between now and your fairly-imminent retirement.

Well, believe it or not, that has been exactly the assumption that I have worked under. I confess that it appears, today, that I may be pleasantly surprised. But I am also extremely glad that I have made my financial plans on the basis that I did. Those who have been planning on retiring on Social Security and not much else are (or certainly should be) very nervous these days.

[wj]

the overwhelming majority of those in Congress who voted to eliminate or severely cut Social Security would be voted out of office.

Gary, you are doubtless correct. No politician will vote to cut this (or any other) program unless forced. But the question is, will they be forced? If a combination of raising retirement/benefit ages, eliminating COLAs, and raising taxes will allow them to avoid it, I'm sure there will be much rejoicing.

But, consider from comments like McTex's ("So, lifting the cap entirely taxes everyone making between 85K and 250K an additional 8% of their income or an additional $13,200 in taxes on the gap between 85K and 250K. That is a huge tax increase.") It's not actually all that large. Yes, the absolute dollar amount is large; but all it means is that, instead of suddenly in the fall getting a temporary raise in take-home pay (having "maxed out" on Social Security), they will keep taking home the same amount all year. That is hardly the end of the world -- shrieks of anguish notwithstanding.

Even with the complaints that would ensue, it is a lot easier for a politician to take that step than to actually cut Social Security payments. It isn't that it would be popular, it's just that the alternatives will be worse.

[Carleton Wu]

This seems off topic, but defending Obama's misdirection on public financing is tough duty. You can parse until hell freezes over, but everyone knows he created a totally false impression and flipped.

So all of that stuff he said about trying to reach an agreement etc rather than making an outright promise, you call that parsing? The 'real truth' is what you want to believe, not what he actually said?
You can lie until hell freezes over; the facts contract you. And I am genuinely tired of both your willful inability to grasp facts and your constantly falling back on "everyone knows" to support everything from opinions to outright falsehoods.

[Carleton Wu]

YET YOU JUST LET SLIDE THAT I WAS RESPOONDING TO THE FACT AND CITE FILLED

Well, yeah, there is that. otoh, my recollection was right. If I hadn't been pretty sure, I would've looked it up. Contra Gary, I don't mind people putting what they recall, or speculating, as long as they say that's what they're doing. And then, if someone recalls differently, it's off to the google to figure out which is correct.

I do think it ought to be on the person who brought something up to validate it, although I don't mind doing it when the other person is a repeat customer. I dont want to spend my time looking up someone else's claims though, as a rule.

[Marty]

"Well, yeah, there is that. otoh, my recollection was right."

You are correct,

In fact, Mr. Obama stopped short of making a flat promise to participate in the public financing system. Asked in a questionnaire whether he would take part if his opponents did the same, Mr. Obama wrote yes. But he added, “If I am the Democratic nominee, I will aggressively pursue an agreement with the Republican nominee to preserve a publicly financed general election.”

I just wasn't thrilled that your iirc and my I remember differently were treated differently.

And, to be clear, in the same article:

While it was not a surprise — his aides have been hinting that he would take this step for two months — it represented a turnabout from his strong earlier suggestion that he would join the system.

The common perception was that he had made a strong committment. And I do get to believe, my opinion, that he used the 527 as a reason to turnaround because he had already raised more than the federal limit.

[Tom M]

For those interested, the current cap on Social Security is $106,800. Because COLA was zero for 2009, the cap will stay the same for the next year. Increases are tied to increases in average wages in the US.
So a Commission plan to raise the cap to that number would be, well, silly. Talk about arguing facts. Sheesh.
The intent of the Greenspan/Reagan largest tax increase ever, was to capture 84% of total payroll dollars. The last Trustees' Report had the last year's collections at just over 81%.
The report also points out that: The long-range cost outlook for Medicare is much improved from last year’s report due mainly to the ACA legislation...
Read the rest.

[Carleton Wu]

The common perception was that he had made a strong committment.

I would want to differentiate between situations where someone intentionally misleads and one where some people merely misunderstand or misrepresent someone's clear words.
Really, I didn't even hear about this as an big issue until brought up by political opponents. At that point, I genuinely expect that a lot of people will recall or perceive something unsupportable if looked at dispassionately, since both sides are getting spin and fragments that support their side and few people have the motivation to examine it fairly.
And I just can't see taking the words said there and extracting either a genuine pledge or even the attempt to confuse people into thinking that one was made. Which I think you agree with.

Counterexample: some people repeat the line "I can see Russia from my house" knowing that they're repeating satire rather than a direct quote. And some don't know that, Im sure. And even some of the people who do know it might repeat it in such a way as to make it seem genuine.
But there's no justification to attribute that line to Palin, in any way, just because some people have that perception.

And I do get to believe, my opinion, that he used the 527 as a reason to turnaround because he had already raised more than the federal limit.

Sure. I kinda said that already- no one can really know, other than the principals themselves. Although I think it's not necessary to treat it as an either/or- Obama's fundraising made a deal less important, which may have led to less flexibility in negotiations. For McCain, the political advantage of misrepresenting Obama's "pledge" may have had more value than any possible agreement, especially one that would attempt to limit the influence of 527s. Given those starting positions, Im not surprised that no agreement was reached.

[Sanity Inspector]

That projection goes out to 2082--ridiculous! What kind of 72 year projection could Congress have made in 1938?

[Gary Farber]

"but everyone knows"

Two point foul for making an unprovable claim that even if true, doesn't demonstrate anything other than what many people believe, which includes endless number of falsehoods.

That phrase has no place in serious discussion of anything, any more than does "I heard that" or "I read somewhere," or, in context of attempting to convince anyone of any fact, "I believe."

Use of any of these phrases renders anything that follows into uselessness. It's the argumentative equivalent of the voices of the adults in the old Charlie Brown tv specials. There's no useable content.

"Well, if you get to make the rules of what an acceptable argument is or is not, it's going to be damned difficult for me to meet your expectations."

Not me. I'd point to various Greek philosophers, and suggest never committing any of these. I had no hand in constructing any of these ideas. If you have an argument with my idea of how to argue, I suggest taking it up with Aristotle, and perhaps Abū 'l-Walīd Muḥammad bin Aḥmad bin Rushd .

On the other hand, if you wish to claim you're not making an argument, but simply expressing a personal preference, that's entirely different; you get to prefer whatever you like, however illogical, and whatever the reason.
And now, good night.

[Gary Farber]

Okay, still trying, though:

[...] YET YOU JUST LET SLIDE THAT I WAS RESPOONDING TO THE FACT AND CITE FILLED:

Remarkably, when people make statements in accordance with the facts, WHICH I ALREADY HAVE CHECKED AND KNOW, I don't ask them for proof of what I already know, or at least have extremely convincing evidence that leads me to tentatively treat as a fact until proven otherwise.

The key here is that I don't "believe" things: I look them up and find three corroborating credible sources, or already know them, but double-check to update if there's any reason to think there's new info since I last looked, and *then* I make a claim of fact.

When, on the other hand, I am presented with claims that I know to be false, or are indefensible, or are highly questionable, or are questionable, I will ask for a cite.

Which part of this do you think unreasonable?

My "beliefs" never come into it, and I never ever cite them. Because, you know, most people believe all sorts of crazy untruth. Many people have no idea what a fallacy is, or how to think critically, or use the scientific method, are functionally innumerate, have severe reading problems, are low-information, and generally aren't capable of determining truth from falsehood.

Thus one doesn't debate "beliefs." One debates facts, and not one's own facts, but the most credible facts that are most established by either controlled testing, or the best historical evidence available, and then we evaluate how reliable we think our knowledge is, and adjust our confidence in our information from there.

Then people can have meaningful conversations that aren't simply ignorant blather or subjective opinions. Which are, for argument's sake, worthless.

[Gary Farber]

"I just wasn't thrilled that your iirc and my I remember differently were treated differently."

It's extremely simple: when people make incorrect or insupportable statements, they're challenged. When people make correct or obviously supportable statements, challenging them would be, you know, being wrong.

My suggestion as to how to have people not treat your statements as incorrect is to not make incorrect statements.

It's worked out quite well for me, and I highly recommend it. The necessary accompaniment, of course, is that we all do make mistakes at times, and are wrong, and then I'm delighted to be corrected, because then I won't be wrong.

And being wrong leads to errors of thinking, and wrong conclusions, and it all ends in tears.

I'm reminded of a what strikes me as a parallel, which is Harlan (Ellison)'s advice to certain neo-writers when asked how they could stop getting rejection slips, but it would leave you with the wrong impression due to the sharp phrasing.

[Charles S]

I agree with Sanity Inspector.

On top of that, unless medical costs are growing at a faster rate than the economy overall, even pretending that it will be a crisis in 70 years is silly. What exactly is so horrible about the idea of spending 2/5th of a GDP that will be 7 times what it is now in constant dollars (assuming that growth continues comparable to the growth in the last 70 years) instead of spending 1/5th of 1/7th of that future GDP now? Certainly, I'd rather have an income of $350,000 and pay $120,000 in taxes than have an income of $50,000 and pay $10,000 in taxes. Wouldn't you rather take home $230,000 than take home $40,000? I would hardly claim I was going broke merely because my take-home hadn't increased as fast as my gross income.

Certainly, the US health care system is hideously over priced for its poor performance, and if it is simply going to become even more over priced for similar poor performance, that is a waste, but it isn't a crisis or something that will bankrupt us all. We should work on making the system perform better for its cost because it is foolish not to get better quality health care for the same cost, but we shouldn't pretend that this is an existential crisis for the nation.

On the social security tax, and extending it to higher incomes, I think the best solution would be to add a doughnut hole and then gradually close that up from the top. So immediately impose FICA on income over $1 million, and then ten years from now extend that down to $500,000, and then ten years later extend it down to $250,000, and then ten years after that close the hole. To make it even more gradual, maybe increase the tax on the top bracket by 1% each year, to give people time to adjust. So next year, people making over $1 million would have to pay 1% FICA on their income over $1 million, building up to 7% 7 years from now; then, in 2020, people making over $500,000 would have to pay 1% on income over $500,000, building up to 7% in 2027, and so on. I have a hard time seeing that being a particularly bad shock to anyone.

Certainly, if we can't bend the growth curve on medical costs, then we also need to plan to gradually increase medicare taxes (perhaps we should doughnut hole these too) year by year until they are 20% of GDP in 2080, with no tax increase whenever we are able to successfully bend the cost curve, so that the Federal government has sufficient revenue to cover those medical costs, but that is an increase in tax rates well below the growth rate of GDP, so it wouldn't represent a decrease in income. It would probably be best to arrange the tax increase so it tracked the rates of income increase (so if the top 1% sees the lion's share of increased national wealth, they should see the lion's share of the increased tax burden), since in the last 30 years we have seen a tripling of the GDP, but no real growth in income for the bottom quintile, so a medicare tax increase on the bottom quintile would represent a decrease in income.

[Tyro]

unless medical costs are growing at a faster rate than the economy overall

This is, I believe, what the problem is, yes.

Shorter Mckinney and Marty: "yes, the republicans want to eliminate social security and blow the money on stupid wars, but Obama decided to decline to use public financing." zing, guys. Zing.

I have a feeling that there is a segment of right wingers who keep telling themselves this story over and over again because it reinforces something they think is VERY VERY important. But the problem is that they then start talking to people in e outside world-- those who aren't on the right-wing weirdo email forward lists-- and suddenly have to co front how spid they sound. The sad part of all of this is tat MRty e braces this kind of stuff because he is convinced that it makes him "sound smart."

[Brett Bellmore]

"unless medical costs are growing at a faster rate than the economy overall

This is, I believe, what the problem is, yes."

It is indeed a problem at the moment. There are fundamental reasons to believe that it will not remain a problem indefinitely.

There's nothing cheaper than saying, "He's dead, Jim!". "Make out your will, because there's nothing we can do." is pretty darn cheap, too. Being powerless to help somebody is rarely expensive.

Actually doing something, that gets expensive. Especially once the problem has already arrived.

We are, for a whole host of medical problems, at the point where we've gained enough knowledge to do something moderately effective, but quite expensive, about them after they appear. My lymphoma, a death sentence only a decade ago, has a cure rate approaching 99% now. And all it took was six treatments that cost about the same as a new car, and follow up tests that aren't exactly cheap, either.

What we haven't got yet, for most conditions, (But we're getting there!) is the knowledge to prevent them. Prevention is generally cheap.

We're going over the hump right now, and it's a very expensive hump indeed. But it's just a hump, we'll be past it in, I'd guess, another two or three decades. Cheap sequencing and data mining will help with that.

As for Obama's promise... Ok, he really promised to negotiate a deal with McCain. A deal, I assume, where they'd both agree to rely on public financing. Considering that's exactly what McCain DID, I doubt it would have been hard to negotiate that deal, if Obama had felt like trying...

[Marty]

"My suggestion as to how to have people not treat your statements as incorrect is to not make incorrect statements. "

Gary, you seem to be more fixated on being pedantic and ddifficultt this weekend, I will write it off to travel stress. Your justification of your inconsistency is unlike you.

[russell]

A total cap lift is a nonstarter, essentially a 16% levy on all earned income or a combined 51% marginal rate. Not acceptable.

I completely agree that uncapped FICA is a non-starter. And just to keep the discussion grounded in some kind of reality, outside of blog comments, it's not remotely on the table.

Also to keep the discussion grounded in some kind of reality, proposed measures that increase some tax rates are balanced by others that make significant reductions.

All of that said, my question is this:

Per the CBO, we're on track to have public debt at about 100% of GDP by the end of 2012.

I have no problem saying that, even as a self-identified lefty, that gets my attention. It's something like $45K per man, woman, and child.

It's a lot of money. Just the debt service is going to start starving out necessary government operations.

If we actually do want to make that number go down, and something like a 50% effective tax rate on high earners is off the table, where does the money come from?

If we want to make that number go down, barring something like a miraculous change in our balance of trade, somebody's gonna feel some pain.

Who should it be?

[Tony P.]

Russell,

How would a change in the balance of trade figure into the federal budget deficit?

The trade deficit is imports minus exports. It's not the federal government that imports and exports; it's the private sector that does so. If the private sector stopped importing Saudi oil and Chinese crap tomorrow, the trade deficit would go away. But how would that change the federal budget deficit, which is federal spending minus federal revenue?

--TP

[russell]

How would a change in the balance of trade figure into the federal budget deficit?

I guess I was thinking via increased income and corporate tax revenue due to a more robust overall economy. More jobs, more income, more corporate earnings, more tax revenue, even at the same rate schedule.

But no, it doesn't directly translate into more federal money.

Also: think the other guy's suggestions are crap? Think you have a better idea?

Now we can now all play the Balance the Budget home game!

Big fun.

h/t Balloon Juice.

[Tom M]

We're going over the hump right now,
Oh, please. The US has the highest health care costs of any industrialized nation by a lot. See this OECD data and there's no sign that the rate of increase is going down. Based on 2009 data, we spend over $7500 per person for health care with Switzerland the next highest at $4600. (UK=3100 France=3600)
All of those industrialized countries cover all of their citizens and do it more cheaply. More importantly, they get the same or better outcomes.
If you think the insurers or drug companies are going to change behavior, especially if the ACA gets repealed, defunded, etc. you're much, much, much more disingenuous than usual.
You should also go look at the Thomson Reuters study done October 2009 for their analysis that we could take almost $750 billion per year out of our costs.
We're being looted and you think it's just a hump. Good grief.

[ChristianPinko]

Grover Norquist doesn't like it, and the AFL-CIO's Richard Trumka doesn't like it.

I think David Broder just came.

[Tom M]

I completely agree that uncapped FICA is a non-starter.
Even if you did, the amount it would raise would be insufficient to handle much more than the debt service. The tax currently raises about $800 billion per year and that represents about 81.4% of total payroll dollars. If there was no cap, then the incremental amount would be about $200 billion. Not inconsequential, but no enough to pay down debt.
Medicare costs per $ of payroll are not capped and according to the Trustees' Report:
The long-range cost outlook for Medicare is much improved from last year’s report due mainly to the ACA legislation. The 2009 report projected Medicare costs to increase to 7.2 percent of GDP by 2035, reaching 11.4 percent by the end of the 75-year projection period (2083). Average federal revenue is around 18% of GDP which means there needs to be a substantial increase in taxes sooner (preferred) or later.

[jrudkis]

We're going over the hump right now,
Oh, please.

Pretty sure he was talking about technology being over the hump for cheaper treatment.

[Tony P.]

Russell, thank you! The Balance the Budget home game is fun! Just for the record, my solution is as follows:

SPENDING CUTS:
Reduce Navy and Air Force fleets
Cancel or delay some weapons programs
Reduce the number of troops in Iraq and Afghanistan to 30,000 by 2013

TAX CHANGES:
Reduce the tax break for employer-provided health insurance
President Obama's proposal (estate tax)
President Obama's proposal (cap gains and dividends)
Allow expiration for income above $250,000 a year
Payroll tax: Subject some incomes above $106,000 to tax
Millionaire's tax on income above $1 million
Eliminate loopholes, but keep taxes slightly higher
Reduce mortgage-interest deduction by converting to credit
Carbon tax
Bank Tax

This combination balances the budget for both 2015 and 2030, according to the NYT numbers. Let's see what the masochists who want to do it all on the spending side come up with.

--TP

[LongHairedWeirdo]

I'd like to point out that, by capping the maximum tax rate at a ridiculously low 23%, there'll be a 3 to one incentive to:

cut wages and benefits
move jobs overseas to save labor costs
produce shoddy items, thereby saving money
act in any way (honest or dis-) that increases profit.

It's true, there'll be little incentive to shelter income, but there's correspondingly little incentive to use it or lose (too much) of it.

Tax policy is a very tricky thing; there's a reason that, under a 70% marginal rate, the middle class did much better than they did under a 30-40% top marginal rate.

[Carleton Wu]

We're going over the hump right now, and it's a very expensive hump indeed. But it's just a hump, we'll be past it in, I'd guess, another two or three decades. Cheap sequencing and data mining will help with that.

I hope so, but I also doubt this very much. We're well into prevention-is-cheaper-than-cure for a whole bunch of things. A lifetime of statins is cheaper than a single heart attack. Vaccines are much cheaper than the diseases they protect us from. Bike helmets are cheaper than head injuries.
Over time, I expect two things to continue the trend of healthcare costs rising: 1)we'll cure everything, and, as you say, initially the cures will not necessarily be cheap, 2)people will live longer, and so will get more chances to get the expensive diseases over their lifetimes, and 3)by the time we've cured pretty much everything, people will already be spending a great deal of money on keeping themselves alive as long as possible, and those costs will go up over time as the life-extending technologies improve.
We'll spend a long time extending lifespan, until we've got effective immortality, and *then* I expect healthcare costs to stop rising.

How would a change in the balance of trade figure into the federal budget deficit?

IANAE, but they are actually connected, albeit indirectly. When I buy a Japanese-made TV, some of my dollars are converted to yen by someone. Ergo, it slightly drives the dollar down relative to the yen. So if there's a big trade deficit and no budget deficit, pretty soon all that one-way trading will lower the dollar to the point of making the trade deficit more or less disappear (by making Japanese goods more expensive here and US goods less expensive there).
But the budget deficit provides another place for those excess yen to go- they can be converted into dollars and used to purchase bonds, thus keeping the exchange rate level.
Now, there are a lot of other moving parts- state governments, private actors, foreign investments, etc. But yeah- borrowing from foreigners boosts the value of the dollar relative to their currency, making imports less expensive and exports more so for us.

[Charles S]

Oddly, Bowles-Simpson's proposal to tax Cap Gains as income doesn't even show up in the NY Times list of options.

My list was pretty much the same as TP's although I made more military cuts (not that they make any real difference to the final numbers). I'd rather a have a financial transaction tax and a Tobin tax rather than a bank tax, but a bank tax makes a decent substitute. Likewise, I favor a carbon credit auction rather than a carbon tax, but the difference isn't huge.

The cuts only option only works if you select the magic pixies of "Cap medicare spending." We already have a sustainable growth rate formula instituted in the 90's to do exactly that, but it perpetually gets temporarily over-ridden by congress, so even if the political will existed to implement the cap, I have a hard time seeing the political will to not keep short-circuiting the cap.

[bobbyp]

"But the budget deficit provides another place for those excess yen to go- they can be converted into dollars and used to purchase bonds, thus keeping the exchange rate level"

Somehow I think not. The Japanese exporter gets a dollar. They can sell the dollar to get yen or buy something else. If they sell the dollars in volume, the value of those dollars will go down (cp). If use the dollar to buy treasuries, they increase the demand for treasuries and the price will go up (i.e., lower interest rates--if you believe this is how it actually works).

Further, there is no law that says the Treasury has to issue more debt instruments (i.e., increase the "deficit") just because foreigners are demanding them. The central bank decision to buy or sell debt is a monetary policy, not a fiscal one.

Outstanding debt is a stock. The deficit is, I believe, a flow. You appear to be confusing them if I am not mistaken.

[bobbyp]

Tying SS payments to the CPI is a benefits cut. Benefits amounts are currently adjusted to changes in the wage level. If you actually believe in or wish for a RISING STANDARD OF LIVING, wages must rise faster than prices (If you do not feel a RISING STANDARD OF LIVING is a desirable policy goal, just say so).

Thus, the economy in the future is assumed to be richer than the economy today. Benefit levels, in real terms, should reflect that basic fact.

[bobbyp]

It's a lot of money. Just the debt service is going to start starving out necessary government operations.

If the Fed buys all the new debt (and it's buying tons of it right now)the interest, by law, is refunded to the Treasury. All else being equal, this reduces debt service as a line item in the budget.

It bears repeating (over and over, it would seem): The problem is not financial. It is political: Who gets what....that is the issue.

We spend outrageous amounts each year on so-called "defense". Where is the outrage that we "cannot afford this"? Where?

[bobbyp]

Eliminate the deficit? Not a wise goal, but here's how: Gut defense spending, raise taxes on the rich. Easy.

Now one may argue this is not a "real choice" due to the politics, but the numbers are irrefutable.

[Carleton Wu]

If use the dollar to buy treasuries, they increase the demand for treasuries and the price will go up

Yeah, that's correct. Buying bonds increases their price and reduces yield. Im not sure why you think that this contradicts the whole scenario- the US has been and continues to be able to borrow pretty cheaply.
Of course, the Japanese buyer in this scenario isn't going to drive yield to zero, he'll find other dollar investments or convert to yen. And, of course, there are many other things driving the interest rate.

Further, there is no law that says the Treasury has to issue more debt instruments (i.e., increase the "deficit") just because foreigners are demanding them. The central bank decision to buy or sell debt is a monetary policy, not a fiscal one.

Sure. I covered that when I said if we're not running a fiscal deficit, a constant trade deficit will force the dollar to depreciate compared to eg the Yen. I didn't say that the Japanese were forcing the US to borrow money, just that US gmvt bonds are one investment option for them when holding dollars. One that, as it turns out, also prevents the dollar/yen ratio from changing. No one's forcing them to invest here or forcing the US to run a deficit.

Further, there is no law that says the Treasury has to issue more debt instruments (i.e., increase the "deficit")

That would be increasing the debt. The deficit is the yearly gap between revenues and expenditures. So, running a deficit means adding to the debt, and issuing more bonds. If we stop running a deficit then the debt will stay constant (and roll over as bonds mature); all else equal this means that those trade deficit dollars need to be converted or find other dollar-based investments.