patrick.net

Vicente says

I thought this is what the Teahadists wanted. Eliminate out of control deficit spending, and balance the budget.

Wow, is the first thought that comes to your mind anytime a policy/political thing gets brought up is what the other side thinks about it, in a sarcastic and demeaning way? I guess you think that's a productive way of actually discussing and debating policy decisions?

Troy says

1. No more mortgage interest deduction
yeay! This is just increasing prices and is no actual net benefit.

Why would someone on the left object to this? It primarily affects those with the higest mortgages, i.e., those with the incomes to carry those high mortgages. How would eliminating the mortgage interest deduction increase prices, when many people factor that deduction into their purchase decision in the first place?

Troy says

4. Cuts in Social Security and higher retirement age
This is what I object to the most. For one, we need to run down the current $2.5T trust fund before 2035, since the baby boomers are the ones who overpaid 1985-2010 so it would be unfair to them to overtax them now.

What "trust fund??????

It would not be fair to overtax those who "overpaid" in 1985-2010, but it would be fair to those after 2010 to receive less benefits in the future, even though they are presumably going to pay the same, if not higher social security tax rates (and if the income limit is removed, then certainly many more of them will be paying more into it than those from 1985-2010).??

I'll believe it when I see it.......this debt commission doesn't have any real power to do anything but simply recommend. Most of this will never make it past Congress and what does will be so watered down it won't matter much. As for the mortgage deduction, I would guess that most members of Congress have a morgage and I wouldn't be surprised if some of them have rental or vacation property as well. Also, there are so many middle class voters that have mortgages that this is nearly an impossible political feat. IF anything is done about the mortgage deductions it will be at the very top end and it would affect very few Americans.........Congress, NAR and the middle class just won't let this happen at the middle and lower middle end.

You have two number 6's there. I can completely understand every one of those except the second number 6. Unfortunately this is all just talk, I would be extremely surprised if even half of these made onto a bill. People running for election talk a big show, but when it comes down to it, few of there promises are ever fulfilled in office. You think health Insurance law was tough to pass? Even a few of these cuts will be ten times tougher to enact. It's all just talk, doubtful much will change in Washington. Stock your shelves with food, buy some gold, I think hyperinflation is in the future.

Paralithodes says

Why would someone on the left object to this? It primarily affects those with the higest mortgages, i.e., those with the incomes to carry those high mortgages. How would eliminating the mortgage interest deduction increase prices, when many people factor that deduction into their purchase decision in the first place?

I think you misunderstand Troy. He is cheering because he wants this deduction to go away as he thinks the deduction raises prices.

"4. Cuts in Social Security and higher retirement age"

Well what's the point of Retirement then? Self made people don't retire, they Die and Expire when they are done. Retirement in America directly ties to "When I can get my check every month".

I've said it often and I'll say it again, the Class of 2010 is an Uber group of Idiots. I'd prefer they not make any long term decisions that will effect many generations, if not this one. People, and that goes for ALL of us, the Silly cast of Congress included. Have just lost all touch with reality, and we solve problems looking through a minuscule pin hole, to make big decisions.

I'm sure if we can just not Screw with anything, the current 15-16 year olds and maybe younger. Seem like a pretty sharp lot. Maybe in twenty years, they'll come along and make some "For Real" for real changes and put America on a prosperous track.

I'm almost to the point I cringe when pundits critique, so it's not like there are more talented statesmen in the wings that could lead us. The Pundits are greater fools than the Shitbricks running things.

tatupu70 says

Paralithodes says

Why would someone on the left object to this? It primarily affects those with the higest mortgages, i.e., those with the incomes to carry those high mortgages. How would eliminating the mortgage interest deduction increase prices, when many people factor that deduction into their purchase decision in the first place?

I think you misunderstand Troy. He is cheering because he wants this deduction to go away as he thinks the deduction raises prices.

Maybe. If that is what he is saying, then I totally agree with him on this point.

Riots are coming? Why would people that have grown accustomed to government subsidies and handouts ever riot? Take a look at the peaceful demonstrations in London over the conservative government's plan to increase student tuitions:

http://www.dailymail.co.uk/news/article-1328385/TUITION-FEES-PROTEST-Anarchists-cause-chaos-50k-students-streets.html

RayAmerica says

Riots are coming? Why would people that have grown accustomed to government subsidies and handouts ever riot? Take a look at the peaceful demonstrations in London over the conservative government’s plan to increase student tuitions

It's pretty hysterical... The government has to increase tuition because it has to decrease funding. The anarchists are protesting because they want more from the government!

Paralithodes says

The anarchists are protesting because they want more from the government!

Iceland ... Greece .... Spain ... UK ... France ... is the USA next? I don't think so. Our anarchists are much nicer, at least I hope so.

Paralithodes says

What “trust fund??????

The $2.5T that the upper class of this country owes the middle and lower classes.

http://en.wikipedia.org/wiki/Social_Security_Trust_Fund

Step 1: In 1983 tell the middle class that they need to pre-pay their social security benefits.
Step 2: Starting in 1985 over-tax FICA payers $1.5T over 25 years, putting their money in government bonds.
Step 3: In 2010, when the baby boom start retiring, say "what trust fund????"

There is no Step 4.

tatupu70 says

Troy. He is cheering because he wants this deduction to go away as he thinks the deduction raises prices.

I calculate the price of a $450,000 house would fall $100,000, notionally.

However, this plan also lowers marginal rates, which would militate against this adjustment.

Troy says

Paralithodes says

What “trust fund??????

The $2.5T that the upper class of this country owes the middle and lower classes.
http://en.wikipedia.org/wiki/Social_Security_Trust_Fund
Step 1: In 1983 tell the middle class that they need to pre-pay their social security benefits.
Step 2: Starting in 1985 over-tax FICA payers $1.5T over 25 years, putting their money in government bonds.
Step 3: In 2010, when the baby boom start retiring, say “what trust fund????”
There is no Step 4.

Read the entirety of your link. There is no "trust fund." There are no assets. You say that it is the money that "the upper class of this country owes the middle and lower classes."

Sorry, that money has already been collected and spent, not by the upper class, but by the government, for other purposes.

I also forgot to incldue the fact that the proposal calls for a 15 cent hike in the gas tax. Such an increased hike would surely hurt US automakers like GM. Coudl you imagine if the govt. owned 61% of them? That woudl be horrible. Thank goodness we don't own 61% of GM!!! Right?

"I’ll believe it when I see it…….this debt commission doesn’t have any real power to do anything but simply recommend. Most of this will never make it past Congress and what does will be so watered down it won’t matter much. "

It can't be watered down. The entire package has to be voted up or down as a whole with no changes.

Paralithodes says

There are no assets.

Treasuries are money-good because they represent USGOV claims on the national weal.

The Alaska Permanent Fund owns several billion of treasuries, and their treasuries are no better than OASDI's.

Sorry, that money has already been collected and spent, not by the upper class, but by the government, for other purposes.

Indeed it has. Now the debt obligation remains, and has collected $1T of accrued interest thus far.

Since the Greenspan Commission changes of 1985, the upper class has increased its income thus:

Now that it's time to back out the Greenspan deal the rich are playing poor and saying "all the money has been spent".

It's a great lie that just might work -- we are indeed a nation of idiots -- and luckily I've structured my life to have well less than $100,000 of my FICA at risk of being stolen from me.

I'm actually kinda cheering you guys on here -- if you can pull this off it will be the greatest theft in history.

Tenouncetrout says

“4. Cuts in Social Security and higher retirement age”
Well what’s the point of Retirement then? Self made people don’t retire, they Die and Expire when they are done. Retirement in America directly ties to “When I can get my check every month”.

The point is that the retirement age hasn't kept up with age inflation, and it really needs to.

HousingWatcher says

The entire package has to be voted up or down as a whole with no changes.

That was the senate version that failed in January due to a Republican filibuster. The Executive can't tell the Congress what to do with this.

"The point is that the retirement age hasn’t kept up with age inflation, and it really needs to."

There is no such thing as "age inflation." All people are NOT living longer. Minorities are not living longer. Poor people are not lving longer. Inner city residents are not living longer. Native Americans are not living longer. The main people living longer are middle class and upper middle class whites, and Asian women.

The Deficit commission proposal does not increase taxes on the wealthy.

That fact alone is enough to establish that the proposal is a just bad joke.

http://krugman.blogs.nytimes.com/2010/11/10/unserious-people-2/

thunderlips11 says

Social Security never had a problem, until the money got stolen to pay for Adventures Abroad and Highways to Nowhere and Tax Cuts for the Wealthy.

Yep. Not that it started in the year 2000, but I think the history books will show the 2000 election as an important turning point. Remember Al Gore and his lock box ? What will the historians say ? Will they just say it was because American's thought they would rather have beer with GW Bush ?

About retirement age, it is already in transition up to 67. I agree that things need to be shifted up a little, but not anywhere near the amount that life spans have increased. People do age differently, and that needs to somehow be accounted for. Maybe eventually it can be three different levels for when you start - 63,
66 and 68. Probably not very far from how it works now.

justme says

The Deficit commission proposal does not increase taxes on the wealthy.
That fact alone is enough to establish that the proposal is a just bad joke.

Eliminating the mortgage deduction would increase taxes on those of the wealthy who have mortgages much more than it would increase them for those not considered "the wealthy."

I fondly remember the Great Rice Shortage. I think it was April 2008. When people went into a feeding frenzy buying up bags of rice at superstores, thinking that hyperinflation was right around the corner. I hope they actually ATE some of this stuff and it didn't just rot in their garage like their Y2K kits did.

Paralithodes says

Read the entirety of your link. There is no “trust fund.” There are no assets. You say that it is the money that “the upper class of this country owes the middle and lower classes.”

Sorry, that money has already been collected and spent, not by the upper class, but by the government, for other purposes.

I see this argument from time to time, and it is ignorant of the reality of finance.

A trust fund must be invested (lent) somewhere. There are only so many choices: Consumer debt, municipal debt, mortgage debt, corporate debt. Or United States treasury debt.

You could equally say "Sorry, that money has already been collected and spent, not by the upper class, but by Exxon Mobil, for other purposes." if the SS Administration had invested the trust fund in XOM.

Or

"Sorry, that money has already been collected and spent, not by the upper class, but by home buyers, for other purposes." if the SS Administration had invested the trust fund in mortgage backed securities.

The only thing I take issue with is when people quote the amount of the national debt, but don't include the SS trust fund.

Bap33 says

if we have 25% of the need, and 25% of the ability to use, and we use 25% …. it pretty much makes sense

we're literally burning away our wealth with inefficient IC engines that could be 3X more efficient with some serious R&D.

I consider this Clinton's greatest failing, his inability to get alternative energy going.

Then again, what can you do with a Republican congress other than watch Rome burn.

MarkInSF says

There are only so many choices: Consumer debt

I wonder if that "sorry, that money's already been spent" will work on my monthly American Express bill.

MarkInSF says

A trust fund must be invested (lent) somewhere

The moment it clicked for me that the OASDI SSTF is just the world's biggest SWF everything became clearer. It's 5X the size of Norways SWF. Of course, they were smarter than us, in not investing in stuff the Republicans can potentially confiscate.

I think.

MarkInSF says

I see this argument from time to time, and it is ignorant of the reality of finance.
A trust fund must be invested (lent) somewhere. There are only so many choices: Consumer debt, municipal debt, mortgage debt, corporate debt. Or United States treasury debt.

I would accept this, except for the fact that the alleged United States Treasury debt that funds the "trust fund" is not treasury debt that you, I, or anyone else can purchase on the open market. Therefore, in reality, the Social Security "trust fund" contains NONE of the choices you listed above. They are debt instruments in name only, just like the term "trust fund" is simply the use of a term. It is like lending your kids some money and then calling that loan a "bond."

Nomograph says

People have been predicting riots on pretty much a daily basis for years. There was even a “Weekly Riot Prediction” thread for quite a while.

Similar people were predicting (I assume) "riots" in France, Greece, UK, Iceland, Spain, etc. as well. When entitlements are cut in the USA, what do you think you'll see? It's been proven over and over again, people given similar circumstances predictably act the in like fashion. I fully expect riots in the USA (particularly in the inner cities) that will make these look like a Sunday school picnic.

Paralithodes says

I would accept this, except for the fact that the alleged United States Treasury debt that funds the “trust fund” is not treasury debt that you, I, or anyone else can purchase on the open market. Therefore, in reality, the Social Security “trust fund” contains NONE of the choices you listed above. They are debt instruments in name only, just like the term “trust fund” is simply the use of a term. It is like lending your kids some money and then calling that loan a “bond.”

I agree 100%.

Paralithodes says

I would accept this, except for the fact that the alleged United States Treasury debt that funds the “trust fund” is not treasury debt that you, I, or anyone else can purchase on the open market.

It doesn't matter that SS can't sell on the open market. What would the difference be? Right now when SS needs to draw down funds from it's trust fund, the Treasury has to sell bonds on the open market and give the money to SS. If SS had marketable bonds it would have to sell bonds on on the open market. Either way, the government has to sell bonds on the open market.

Like I said, the only accounting problem is not including the SS trust fund in the national debt.

Paralithodes says

is not treasury debt that you, I, or anyone else can purchase on the open market

Irrelevant since SSA only has to sell its bonds back to the Treasury and not third parties. Plus IIRC they're also structured to roll-over more efficiently, generating more interest for SSA payees.

It is like lending your kids some money and then calling that loan a “bond.”

Actually it's more like lending money to some rich kids but at any rate comparing the operations of the most powerful economic entity on the planet with kitchen table economics is usually utterly fallacious.

The SSA is very similar to any other governmental authority (like eg. the Alaska Permanent Fund, every state in the union) that buys bonds with its surplus revenues.

When an entity buys a bond from the US Treasury, it's putting future taxpayers on the hook for the principal + accrued interest. Since FICA payers (the bottom 90%) and income tax payers (mostly the top 10%) are largely disjoint, it's more like middle-class America being forced to lend money to the wealthiest Americans, 1985-2010.

Now that the middle class needs their money back, this top 10% are paying professional liars to tell you the money's been spent already and the $2.5T of bonds SSA now holds don't mean anything.

If you believe this you deserve to have your social security money stolen from you.

And since it takes 3-4 sentences to counter "there's no money!", we will probably have our money stolen from us, since we are a nation of idiots.

"You riot folks have a pretty bad track record."

In the past, people on patrick.net have been prediciting riots over bailouts. I was not one of them because I knew very well that people don't riot over bailouts since it does not affect them personally.

MarkInSF says

Paralithodes says

I would accept this, except for the fact that the alleged United States Treasury debt that funds the “trust fund” is not treasury debt that you, I, or anyone else can purchase on the open market.

It doesn’t matter that SS can’t sell on the open market. What would the difference be? Right now when SS needs to draw down funds from it’s trust fund, the Treasury has to sell bonds on the open market and give the money to SS. If SS had marketable bonds it would have to sell bonds on on the open market. Either way, the government has to sell bonds on the open market.
Like I said, the only accounting problem is not including the SS trust fund in the national debt.

So what is your point? The money should have never been borrowed in the first place, either on the open market or from SS. Interest on the debt last year was 451 billion, which would have been much higher if we weren't at the lowest interest rate in over 75 years. That's 5 times more than we spend on education at the federal level. It's the second biggest item in the federal budget after defense. That would be the real federal budget, not including ss and medicare which are funded on their own. The true reason for improperly including ss/mc in the general budget is to make the defense budget appear to be a much smaller percentage of spending than it really is. Same goes for putting a huge amount of what should be accounted for as defense spending into other department's budgets. An honest accounting would put defense at close to 60% of the budget. Remind me again how we can balance the real budget? Al Gore (who I don't like at all) was absolutely correct to advocate putting SS/MC in a lockbox so we can honestly deal with the real budget's problems.

shrekgrinch says

The boomers created this mess yet get off the hook. Its intergenerational rape of the worst kind.

Aren't Boomers the largest and most influential voting bloc? How many of the people crafting and enacting such legislation are ~Boomers?

shrekgrinch says

The boomers created this mess yet get off the hook

Medicare is a mess because of the fight against cost controls in medical services and our fucked up health insurance system in general. This is not a generational thing, it is merely a political power thing of vested interests defending their money. Countries like Sweden can fund their entire public health care system for what we're spending just on medicare, which makes sense since if you control the profits in medical care it does not consume that much in the way of resources. But if you don't even try to control profits, health care will literally BK everyone since it's pretty high up there on the hierarchy of needs and thus its providers enjoy plenty of pricing power in any "free market".

bob2356 says

The money should have never been borrowed in the first place, either on the open market or from SS

SSA is owed $1.5T + $1T in interest and this savings has been built up over the past 25 years, an average of $60B/yr of "borrowing". If the deficit had only been that it wouldn't be any problem at all. This is why when I pull the national debt numbers from here I think the first number is the important one in tracking how far off into the weeds we're going.

bob2356 says

Remind me again how we can balance the real budget?

Raise taxes across the board. Every dollar we have to pay in taxes comes out of rents and land values in the end. Double our taxes and rents and land values will fall in response.

It is the free lunch that nobody can see any more since we're all bought into the System.

RayAmerica says

Iceland … Greece …. Spain … UK … France … is the USA next? I don’t think so. Our anarchists are much nicer, at least I hope so.

No. But our police is much fiercer and trigger-happy, laws much more severe, law enforcement much more effective, tooled, and armed, courts much less forgiving, and prison conditions much worse.

The truth is that the level of riots reveals not the degree of public desperation or hurt, but only the degree of govt. and police permissiveness. Else the worst riots would occur not in France or Greece, but in Cuba, North Korea, or China. Heard of many recently?

There is a good Russian joke:
Putin in his Kremlin office receives a report from his cabinet that miners went on strike, demanding their pay to be doubled. "All right, double their pay."
Next day airline pilots went on strike, demanding same. "That gets harder financially, but OK, let's do that."
Next week, teachers, social workers, railroad employees, truck drivers, and many others striked, demanding same. The cabinet says they don't know what to do, as the treasury can't meet those demands at all. Putin: "Kids, what would you do without me. /sigh/ Double the pay of state security officers!"