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Posted at 10:52 AM ET, 12/ 1/2010

The best and the worst of the fiscal commission's final report

By Ezra Klein

fiscalfinalgraph.jpg

We won't know until Friday whether the final proposal from Alan Simpson and Erskine Bowles can attract the votes of 14 of the commission's 18 members. Right now, the outlook is doubtful. But we do have the final proposal, so we know the policy options they're offering. Here are the four best and five worst parts of the plan:

The good:

A payroll tax holiday in 2011: Simpson and Bowles embrace the Bipartisan Policy Commission's proposal for a payroll-tax holiday in 2011. Actually, "embrace" might be a strong word. They say Congress should "consider" it. Still, a nod toward the need for policies speeding recovery is better than ignoring that need altogether.

Process, process, process: The Simpson-Bowles recommendations correctly identify congressional inertia as the central impediment to deficit reduction. And so they try to address it. To enforce discretionary spending cuts, they make spending that busts the caps ineligible for the reconciliation process, demand that Congress take a separate vote, and then instruct OMB to cut appropriations spending across-the-board by the amount that Congress has overspent unless Congress takes another vote to stop them. Inertia, in this case, is on the side of the deficit hawks.

On the health-care side, they strengthen the Independent Payment Advisory Board by applying it to all health-care providers sooner. They push tax reform through a "failsafe" that automatically increases taxes if Congress doesn't rework the system by 2013. They also include rules forcing different bodies to watch over health-care spending and the full government budget and automatically offer recommendations for reform if costs exceed preset limits. Whether these are the exact right procedural reforms is up for debate -- and probably doubtful. But the commission is right to emphasize the need for procedural reforms.

Defense spending and tax expenditures are major problems: The most positive impact the commission has had on the debate has been to move two formerly sacrosanct categories of spending onto the table. There's a lot of money in the defense budget, and much of it is wasted, but when Washington talks about cutting spending, it usually talks about "non-defense discretionary spending." The commission cuts equally from defense spending and non-defense spending. Tax expenditures like the mortgage-interest deduction also tend to get a pass, but here they come under the knife. It's very difficult to imagine any budget deal that isn't aggressive on both these fronts, so kudos to the commission for adding them.

A two-sided deal on Social Security: I don't particularly like the commission's Social Security recommendations, but I do like their vision of a deal that's more than just cuts and taxes. Their proposal sharply increases Social Security's minimum benefit, making it a better deal for poor retirees, if not for the average retiree. It also increases benefits for very old retirees, who may have outlived their savings. That's a good addition to the eventual debate over the system's solvency and sufficiency.

The bad:

The tax section: In an odd bid for Republican support, the commission caps revenues at 21 percent of GDP. That's higher than they are now, or than they've been historically. But we're also a larger, older country than we've been historically, with more social spending to support. The commission's mandate was to balance the budget, not decide the size of government. This overstepped it.

But at least that made some political sense. Simpson and Bowles's timidity on tax options is odder. They correctly emphasize the need for tax reform, but they limit themselves to the design of the current system -- a system which almost all experts agree is flawed. No mention of a carbon tax or a value-added tax, both of which are preferred by many, if not most, tax-policy experts.

The 2012 start date: Simpson and Bowles start their cuts in 2012, as they assume the economy will have recovered by then. But what if it hasn't? A better approach would've been using an economic indicator as a trigger. For instance, we could've held stimulative measures like unemployment insurance and a payroll-tax cut until the unemployment rate dipped to 6.5 percent and then, when that milestone was hit, moved to austerity. As it is, there's no real guarantee we'll be recovered by 2012, and if we're not, then we shouldn't start cutting.

Raising the retirement age: If we want to cut Social Security benefits, we should cut Social Security benefits. Raising both the early and full retirement ages mainly penalizes those who hate their jobs or can no longer physically fulfill them. That's not the right way to reform Social Security.

Hobbling government: Among the plan's worst ideas is to cut congressional and White House budgets by 15 percent. Given the role of government and the complexity of modern life, members of Congress are probably understaffed even now. Taking staff away from them just means they'll either be more ignorant about the bills they're voting on, less responsive to their constituents or more reliant on lobbyists and outside players. That's a penny-wise and pound-foolish approach: The small short-term savings will probably be dwarfed by the deep long-term costs.

The same goes for the plan's other aggressive cuts to the government. One proposal, for instance, relies on "attrition" -- not to mention a three-year pay freeze -- to sharply cut the federal workforce by 200,000. "Washington needs to learn to do more with less, using fewer resources to accomplish existing goals without risking a decline in essential government services," the report says. But that's magical thinking. Companies and governments typically do less with less, and though having less saves some money on the front-end, too few banking regulators with too low pay, for instance, might end up costing us a lot of money later on. I'm for smart and targeted reforms to the federal workforce, but these aren't them.

Cowardice on health-care reform: The plan's health-care savings largely consist of hoping the cost controls (IPAB, the excise tax, and various demonstration projects) in the new health-care law work and expanding their power and reach. But the commission "does not take a position" on the new law. In the event that more savings are needed, they throw out a grab bag of liberal and conservative policies, ranging from a public option and government purchasing to Medicare privatization, but don't really put their weight behind any of them. Given that health-care costs are the single most significant driver of our long-term budget problem, the commission's decision to hide from the big questions here is quite disappointing, particularly given their self-styled focus on making hard decisions and telling unpopular truths.

By Ezra Klein  | December 1, 2010; 10:52 AM ET
Categories:  Budget  
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Next: Republicans give their definition of 'bipartisanship'

Comments

Focusing on deficit reduction when we need a stronger economy and more jobs makes no sense.

Cutting taxes as part of a deficit reduction makes even less sense. Imagine the conversation:
"Honey, how will we make ends meet?"

"Why don't we work fewer hours so that we'll have less income."

Posted by: fuse | December 1, 2010 11:14 AM | Report abuse

I don't know how liberals can advocate for a payroll tax holiday. The assumption is: a payroll tax holiday will allow both employers and employee to keep 6.2% more of their paychecks per pay period, which will in turn put more money into the economy and help it recover.

This is a nice idea, which is why tea partiers and conservatives have been saying SS and Medicare taxes have been a detriment to the economy ever since their beginning.

How can liberals advocate for reducing the revenue stream to their two main social welfare programs, at a time when those two programs are the primary drivers of our long term debt? How can they decry the Republican calls for tax cuts, and then advocate for one themselves?

This is by far the most hypocritical, dishonest and fiscally irresponsible suggestions, considering it reduces revenue to two problem programs: SS and Medicare.

Posted by: dnara | December 1, 2010 11:17 AM | Report abuse

As a Boomer, I figure the best thing I can do for all concerned is simple: die early.

So, pass me another cheeseburger, please.

Posted by: skipmendler | December 1, 2010 11:23 AM | Report abuse

"A payroll tax holiday in 2011: Simpson and Bowles embrace the Bipartisan Policy Commission's proposal for a payroll-tax holiday in 2011. Actually, "embrace" might be a strong word. They say Congress should "consider" it. Still, a nod toward the need for policies speeding recovery is better than ignoring that need altogether."

Using Keynesian assumptions, won't any positive impact in 2011 be reversed in 2012?

Say GDP will grow 3.0% in 2011 and 2012 without any action, but the payroll tax holiday will bump GDP growth to 4.5% in 2011. Why doesn't the opposite effect occur, with GDP growth falling to 1.5% in 2012?

Doesn't that put us at the same place we would have otherwise been at the end of 2012, but with additional debt?

Posted by: justin84 | December 1, 2010 11:24 AM | Report abuse

@dnara

Hypocritical and dishonest? Liberals are pushing to return tax rates on income above $250,000 to Clinton-era levels.

That is absolutely nothing like a one-year payroll tax holiday, which will have a large effect on people making less than $250,000 dollars a year (almost everyone).

Different circumstances call for different actions. Not all tax cuts are the same, not all spending is the same, not all deficits are the same.

Seeing everything in black and white and/or vague generalities is a problem, you should get it checked out.

Posted by: genericOnlineID | December 1, 2010 11:26 AM | Report abuse

--*"Why don't we work fewer hours so that we'll have less income."*--

That's not an apt analogy.

It's more like, "Why don't we quit charging up our credit cards with products and services for our neighbors so we don't go bankrupt."

Posted by: msoja | December 1, 2010 11:26 AM | Report abuse

2008:Doug H. Eakin "Whether Republican-Democrat Or A Martian-Taxes Will Have To Be Raised"
____________________

Douglas Holtz-Eakin, a former Director of the Congressional Budget Office and current chief McCain economic advisor, is an honest man--which means he's something of a liability on the Straight Talk Express.

A few months ago, he admitted to my colleague, Michael Scherer, that Barack Obama's economic plan would reduce taxes for most people.

And now, in a forthcoming book by Fortune columnist Matt Miller, he makes it clear that the next President is going to have to raise taxes.

"If you do nothing on the spending side, you're going to have to raise taxes whether you're a Republican, a Democrat or a Martian," he tells Miller...and then he immediately makes it clear that the "spending side" part of the argument is nothing more than a political fig-leaf.

"It's arithmetic." Federal revenue today is 18.8 percent of GDP and federal spending is 20 percent.

Holtz-Eakin observes that "the pressure are there" to lift spending [on entitlement programs, mostly] and taxes to 23 or 24 percent of GDP by around 2020, and to as much as 27 percent if health costs remain out of control.

Miller does the arithmetic: that's an annual tax hike of $550 to $700 billion, well beyond the range of any spending cuts that McCain has or might propose. (Those vaunted earmarks cost about $20 billion per year.)

It should be noted that Obama's proposed middle class tax cuts are nearly as foolish--and unlikely, in the long term--as McCain's, although Obama claims to pay for them by closing corporate loopholes and raising the top marginal tax rates to Clinton-era levels.

But it's John McCain who has opposed any and all tax increases, sort of--as I reported yesterday, McCain would tax employer-provided health care benefits.

He would also raise energy costs significantly with his cap-and-trade carbon emissions reduction program.)

Miller concludes:

So why does tax-cutting mania persist among Republicans, I asked Holtz-Eakin, the McCain adviser--

Holtz-Eakin himself explain to me, taxes soon have to go up substantially in any event?

"It's the brand," he said, "and you don't dilute the brand."

Miller's book, The Tyranny of Dead Ideas, will be published by Holt in January 2009. I'm about halfway through reading an advance copy and, as is always the case with Miller, this is a smart, sane and extremely well-written account of our current economic mess.

Update: What Holtz-Eakin admitted to Scherer was that the Obama's plan represented a net tax reduction over ten years.

Posted by: omaarsblade | December 1, 2010 11:27 AM | Report abuse

Hobbling the Government is a great idea. They just didn't carry it far enough. Almost all of our problems stem from the Government or people who want the Governmnet to take care of them.

Posted by: jdonner2 | December 1, 2010 11:27 AM | Report abuse

Srsly: if I can get out of here before I turn 63, then I won't be drawing on SS or Medicare funds. I also won't be serving as a cash cow to the medical-insurance-industrial complex (who would rather I stick around for as long as possible, even if my quality of life goes below "Total Suck" status) and except for my cremation, my carbon footprint will go to zero. It's a win-win all around, if you ask me. So if you find me comatose on the sidewalk, I'll thank you very kindly to NOT use CPR or a defibrillator, OKtnxbye.

Posted by: skipmendler | December 1, 2010 11:29 AM | Report abuse

Fuse, that's not an accurate analogy when speaking of the government. Government produces nothing on it's on and simply takes by force the productivity of you an I. A more accurate analogy would be if you and your wife owned a slave plantation in the south before the civil war and said something like:

"Honey, let's give the slaves a little slack this next year. Their productivity is down and their over worked. We can get more out of them if we let them keep a little more of the fruits of their labor to take care of their own families."

Posted by: therealjjj77 | December 1, 2010 11:32 AM | Report abuse

On Social Security, why not switch to private accounts that are annuitized upon retirement, with the government topping off any annuity payments that would be less than current law Social Security benefits so that no one receives less?

Posted by: justin84 | December 1, 2010 11:35 AM | Report abuse

skipmendler,

while you're being sarcastic i'd rather you be hit by a bus. Cheeseburgers can clog your arteries obviously and some foolish doctor could try and save you (and charge my insurance company a FORTUNE in a fee for service setting) and then raise my rates because of it. If you need a bus schedule let me know.

Posted by: visionbrkr | December 1, 2010 11:38 AM | Report abuse

@genericOnlineID:

An additional dollar in my pocket is simply an extra dollar. I don't care whether I got it because: a.) my marginal tax rate is lower, or b.) because of a payroll tax holiday.

Either way, the government gets less money to run its programs, and I have more money to spend efficiently in the economy.

In the case of the payroll holiday, liberals can be accused of admitting that allowing people to keep more of their paychecks will be spent more quickly and efficiently, and that introducing a middle man, via the government and its programs, is slower and introduces waste. In the end, only $.75 of each dollar taken from me might make it back to this domestic economy when run through the appropriations process.

It's not rocket science: all tax cuts are created equal. Either I get it, or the government gets it and spends it elsewhere. Maybe you should pick up a basic economics textbook some time.

Posted by: dnara | December 1, 2010 11:42 AM | Report abuse

and as Ezra states the commision largely ignores the 800 lb gorilla in the room. Now that the country is about 3-5 years behind what's happening in MA, we can look to the MESS up there to see our fate. Its not pretty.


http://www.boston.com/news/health/articles/2010/12/01/health_forum_sees_sacrifices_for_doctors_insurers/?p1=Well_Health_links

Posted by: visionbrkr | December 1, 2010 11:46 AM | Report abuse

There are many things I disagree with in this "analysis" but one take the cake.

So according to Ezra we shouldn't raise the retirement age because we would "penalize those who hate their jobs or can no longer physically fulfill them". I mean come on now Ezra.

That people don't like their job is the most idiotic defense argument I have read for not raising the retirement age.

Ezra if you don't like your job at WaPo why don't you give it to someone else?

Posted by: trumeau | December 1, 2010 11:51 AM | Report abuse

My whacko (probably less whacko than many I've read) to balance the budget by 2020.

Since we have a Republican House and Democrat Senate we have essentially fair representation to both sides. In 2011, Congress should operate under these rules.

1. A budget plan that is balanced in 2029(with modest economic assumption of 2.5% growth) is passed and signed into law by 12/31/2011. The plan must implement the tax and spending structure that will result is 0 deficit in 2020.

2. The top 20% seniority of Representatives and Senators agree to not run for re-election if a plan is not pass by 12/31/2011. Unless the leader put their jobs on the line it will not get done.

2. The filibuster is suspended in the senate for this work but the veto overide vots are reduced in #3.

3. Obama retains veto, but agrees to sign any legislation passed with 10% votes of minority party in respective chamber.

We've elected them and we're paying them handsomely so it time for Congress and the President to do their jobs. No excuses and hiding behind straw men. This is a chance for our elected officials to prove we have a truly exceptional form of government. Otherwise we look like a bunch of whining, bickering fools.

Posted by: chucko2 | December 1, 2010 12:01 PM | Report abuse

@dnara

What liberal is saying anything like that? The stimulus had huge amounts of tax cuts in it. And all tax cuts are not created equal. A tax cut for income above $250,000 effects only a small percentage of people and most of that money goes into savings. A pay-roll tax cut puts money in lots of people's pockets including people who will spend it rather than save it. In what world are those two things the same? Or even in the same ball park?

Posted by: genericOnlineID | December 1, 2010 12:01 PM | Report abuse

What about the hardship exemption

Raising the retirement age: If we want to cut Social Security benefits, we should cut Social Security benefits. Raising both the early and full retirement ages mainly penalizes those who hate their jobs or can no longer physically fulfill them. That's not the right way to reform Social Security.

I'd also like to hear more people take a stance on whether or not they could live with Simpson-Bowles. It is not my preferred plan but I think the deficit is a large, if not urgent, problem and I think I could live with Simpson-Bowles as law.

Posted by: Mazzi455 | December 1, 2010 12:04 PM | Report abuse

2008:Doug H. Eakin "Whether Republican-Democrat Or A Martian-Taxes Will Have To Be Raised"
____________________

Douglas Holtz-Eakin, a former Director of the Congressional Budget Office and current chief McCain economic advisor, is an honest man--which means he's something of a liability on the Straight Talk Express.
________________

A few months ago, he admitted to my colleague, Michael Scherer, that Barack Obama's economic plan would reduce taxes for most people.


And now, in a forthcoming book by Fortune columnist Matt Miller, he makes it clear that the next President is going to have to raise taxes.

"If you do nothing on the spending side, you're going to have to raise taxes whether you're a Republican, a Democrat or a Martian," he tells Miller...and then he immediately makes it clear that the "spending side" part of the argument is nothing more than a political fig-leaf.

"It's arithmetic." Federal revenue today is 18.8 percent of GDP and federal spending is 20 percent.

Holtz-Eakin observes that "the pressure are there" to lift spending [on entitlement programs, mostly] and taxes to 23 or 24 percent of GDP by around 2020, and to as much as 27 percent if health costs remain out of control.

Miller does the arithmetic: that's an annual tax hike of $550 to $700 billion, well beyond the range of any spending cuts that McCain has or might propose.

(Those vaunted earmarks cost about $20 billion per year.)
___________________

What Holtz-Eakin admitted to Scherer was that the Obama's plan represented a net tax reduction over ten years.

Posted by: omaarsblade | December 1, 2010 12:15 PM | Report abuse

@genericOnlineID:

I love the assumption that folks making over $250K "bank" most of their paycheck, which then sits idle in some bank account gathering dusts and being eaten by moths.

As you may know, we have a fractional reserve banking system in this country. Meaning, for every dollar put into savings, banks can lend approximately 20-30 times that amount out the door. An argument can be made that allowing more money to be put into savings account, rather than given to the government, will result in higher bank capital and increased lending into the economy. Or, if money is put into stocks or corporate notes, that company has more capital to hire employees or make capital expenditures.

On the other side, with the high percentage of credit debt held by the public, including high mortgages, an argument can be made that any marginal income given to low income earners is then transferred to banks to pay off excess debt that has accumulated since the credit boom of the 2000s.

Are either of these hypotheses true? Probably both to some degree, but not to all. Many low income earners will spend the marginal income in the economy. And many people making $250K a year living high price areas. $250K is NYC, LA, DC is not the same as in Idaho. But you know that.

The overall point is that the government is a jobs program: it takes from those it believes have "excess" - even though that is a blanket statement - and provides jobs/services for those they believe can not afford them. The only problem is that historically, there is terrible waste in government spending, meaning since money going into savings does in fact make it into the economy via lending and corporate spending, it is not accurate to simply say we can garnish wages of those making more than $X because they put it under their mattress.

In advocating for a payroll tax holiday, liberals are admitting that there is an opportunity cost to the economy via taxation. If a payroll tax holiday would stimulate the economy, imagine what we could have done for the past 70 years has we not had one!

Posted by: dnara | December 1, 2010 12:24 PM | Report abuse

Their are 2 possible paths towards a balanced budget. Cuts and tax increases that penalize the workers or those that penalize the rich. Every proposal should be weighed against this criteria of who benefits and who suffers. Workers or the RICH.

Posted by: chucky-el | December 1, 2010 12:50 PM | Report abuse

Ezra states, "Given the role of government and the complexity of modern life, members of Congress are probably understaffed even now. Taking staff away from them just means they'll either be more IGNORANT about the bills they're voting on, less responsive to their constituents or more reliant on lobbyists and outside players".

~~~

Good one Ezra Klein and it's the TRUTH too!

LOL!

Posted by: lcarter0311 | December 1, 2010 12:53 PM | Report abuse

Instituting a Logan's Run-type system would be a big help to the deficit.

Posted by: MosBen | December 1, 2010 12:55 PM | Report abuse

As usual, the tax increases fall heavily on the middle class. Really, tax away the mortgage interest deduction? For every homeowner of every level? Just wrong.

Posted by: wd1214 | December 1, 2010 12:56 PM | Report abuse

Their are 2 possible paths towards a balanced budget. Cuts and tax increases that penalize the workers or those that penalize the rich. Every proposal should be weighed against this criteria of who benefits and who suffers. Workers or the RICH.

Posted by: chucky-el |
~~~~

I like your post.

Simply stated and very well put.

Posted by: lcarter0311 | December 1, 2010 1:00 PM | Report abuse

"As usual, the tax increases fall heavily on the middle class. Really, tax away the mortgage interest deduction? For every homeowner of every level? Just wrong.

Posted by: wd1214"

The mortgage tax deduction is one of the most "regressive" taxes on the books. A higher proportion of low income earners rent, so they receive no deduction.

The larger question is: Why should the government care who has a mortgage? I have a hint for you: it wasn't the government that cares about the mortgage deduction, it's the ones that lobbied for it in the first place: Realtors and the banks.

The tax code is riddled with special interest deductions and loopholes. It just so happens that some of them are well designed to bring the taxpayer into it as well: they pay the taxpayer to then pay them. So when the time comes and everyone looks at the tax code and sees that we need to simplify, there are a number of tax deductions that people get angry about repealing, b/c they're in on it too.

Why wouldn't you be in favor or more tax equity to renters by eliminating the mortgage deduction, but lower marginal tax rates. You still keep the same amount of money after taxes, and the renters aren't left out of the game.

Posted by: dnara | December 1, 2010 1:10 PM | Report abuse

Look, I'm angry about several things in the proposal. I think that Rivlin and Domenici were more on target. My payroll taxes have been going to support retirees all of my working life (and I have spent my whole adult life paying FED and FICA), why should I get my benefit reduced when I retire? I hope this blessed event occurs 12 years from now when I hit 65, we shall see.

All the same I have one thing to say to those who blast this plan. Do you have a different proposal that will pass, which works equally well? At least the commission is proposing SOMETHING. If they do get lucky and get the support of 14 members by Friday, then I say pass these proposals and tinker with them later, at least you passed something.

I am really enraged that Bush and the Republicans blew through the national credit card while they kept a lock on power with the help of their syncophantic supporters. However the fact remains that the national credit card is MAXED OUT. Democrats are the ones who must deal with this problem, whether they created the problem or not.

Show some leadership and pass something or else retire, that's my advice to our elected representatives. One unquestionable point in the Commission's proposal, in my opinion, is that our childrens' future depends on shared sacrifice now. Carrying on about ideas that don't have majority support doesn't bring back the future prospects for our kids. The more equitably the sacrifice is shared the better, but at least DO SOMETHING. None of us can expect to get out of this situation without pain.


Posted by: bouvier7 | December 1, 2010 1:11 PM | Report abuse

Ezra, ezra, ezra, what is this your 25th post on something that is not going to happen?

While you are wasting your time on this, Goldman today forecast $110 a barrel oil for 2012. I think they're late. I think we'll hit that number possibly by early fall of 2011. There's huge market rally going on today as the shorts got caught short so to speak, on a positive jobs report,and good Chinese manufacturing numbers.

With ANY recovery at all, we will be in serious real inflation problems by summer, though "core inflation" will lag that. Look for a big increase in ag commodity prices, for which I believe we have only scratched the surface. Again, it doesn't matter though because that will not be included in the core inflation numbers.

Anyway, I started out to write at the beginning that Treasury yields are back on the rise again, as they will be anytime the skies clear over Europe for a few days or weeks. We're back to closing on 3.00 on the 10 year, which will be more influential on the economy than anything you've written about this unimportant report.

I understand though because Olbermann won't invite you on to talk about Treasury yields, because he knows/cares nothing about them either! LOL

Posted by: 54465446 | December 1, 2010 1:17 PM | Report abuse

For the first time in my adult life, I can honestly say I agree with Ezra Klein and truly feel he is looking out for people like me -- I DO hate my job!!! Hopefully with people like Ezra advocating for people like me, I can quit this crappy job and start collecting Social Security ASAP!

Posted by: SHLL | December 1, 2010 1:25 PM | Report abuse

Why didn't the Debt(or) Commission just read Chris Buckley's Boomtown. It makes about as much sense as the Commission which will return us to Dickens' 19th Century England. Just let the Bush tax cuts totally expire, up the FICA to a larger cap, do away with paying the Medicare claims in 14 days which leads to massive fraud, and hire a bunch of bean counters to check on any medical provider that provides "services" per patient that falls more than 4 or 5 standard deviations beyond the norm. Raising the SS age will put those poorer folks who depend upon the meager $1200 a month on welfare and we'd just be trading dollars. Of course we can always be Scrooge McConnell or Ebenezer Boehner and blather, "Are there no workhouses? Are there no prisons?"

Posted by: jharris99 | December 1, 2010 1:31 PM | Report abuse

Why didn't the Debt(or) Commission just read Chris Buckley's Boomtown. It makes about as much sense as the Commission which will return us to Dickens' 19th Century England. Just let the Bush tax cuts totally expire, up the FICA to a larger cap, do away with paying the Medicare claims in 14 days which leads to massive fraud, and hire a bunch of bean counters to check on any medical provider that provides "services" per patient that falls more than 4 or 5 standard deviations beyond the norm. Raising the SS age will put those poorer folks who depend upon the meager $1200 a month on welfare and we'd just be trading dollars. Of course we can always be Scrooge McConnell or Ebenezer Boehner and blather, "Are there no workhouses? Are there no prisons?"
----------------------------------
Oops - that should be Buckley's Boomsday.

Posted by: jharris99 | December 1, 2010 1:34 PM | Report abuse

The big Millstone.
Our pandering of the Ultra-rich and Offshore tax dodging Corporations.

Failure to increase taxes on people who earn more than $250,000/yr, and elimination of Capital Gains tax [the main income source for unworking millionaires and billionaires - who DO NOT create jobs] is, in a word, "AMORAL"!

Posted by: lufrank1 | December 1, 2010 1:36 PM | Report abuse

"What liberal is saying anything like that? The stimulus had huge amounts of tax cuts in it. And all tax cuts are not created equal. A tax cut for income above $250,000 effects only a small percentage of people and most of that money goes into savings"

This is the biggest lie festered by the liberal base.

Posted by: krazen1211 | December 1, 2010 1:39 PM | Report abuse

I agree with much of what you say about the tax elements of the proposal...in particular the notion of capping revenues at GDP at 21% when we have an aging population that will need more servicers...but the plan does have a 15 cent gas tax...doesn't that fall under the heading of a "carbon tax?"

Posted by: nanc455 | December 1, 2010 2:07 PM | Report abuse

"The mortgage tax deduction is one of the most "regressive" taxes on the books. A higher proportion of low income earners rent, so they receive no deduction."
Posted by: dnara

So you are trying to imply that because this tax is going to hit my landlord and every other landlord of an already congested rental market, that they won't transfer that extra cost onto renters? You must also believe that bankers, and insurance companies, and every other industry that is taxed(every industry) just takes the hit and doesn't transfer that cost onto the consumer. No affect on me? Seriously?! See the forest, man. This short-sightedness is exactly why 63.41% of the average American's productivity currently goes to service local, state, and federal governments(http://www.fiscalaccountability.org/?content=cogdteas10).

Posted by: therealjjj77 | December 1, 2010 2:08 PM | Report abuse

so the Prez is asking Congers to cut spending??? This is like asking the Thanksgiving turkey how it would like to be served at table!!!!

Everybody wants something for nothing. And Congers/Senate is so corrupt they will do anything for a bribe. Cut the deficit? Shurrrrrre!

Posted by: yard80197 | December 1, 2010 2:10 PM | Report abuse

"I think that Rivlin and Domenici were more on target. My payroll taxes have been going to support retirees all of my working life (and I have spent my whole adult life paying FED and FICA), why should I get my benefit reduced when I retire?"

Because the Feds got the math wrong, and someone will have to pay or benefits will have to go down.

As it stands, it looks like your benefits (and mine) will be going down. That's what we get for depending on government for our retirement.

A young worker earning $43,000 today can only expect $1,058.33/mo per Ezra under Simpson Bowles, and not until age 68 or 69. What a retirement that will be!

Posted by: justin84 | December 1, 2010 2:19 PM | Report abuse

"The mortgage tax deduction is one of the most "regressive" taxes on the books. A higher proportion of low income earners rent, so they receive no deduction."
Posted by: dnara

So you are trying to imply that because this tax is going to hit my landlord and every other landlord of an already congested rental market, that they won't transfer that extra cost onto renters? You must also believe that bankers, and insurance companies, and every other industry that is taxed(every industry) just takes the hit and doesn't transfer that cost onto the consumer. No affect on me? Seriously?! See the forest, man. This short-sightedness is exactly why 63.41% of the average American's productivity currently goes to service local, state, and federal governments(http://www.fiscalaccountability.org/?content=cogdteas10).

Posted by: therealjjj77
*******************************
Rental properties are not eligible for the mortgage deduction. Hence, your landlords taxes on his rental properties will not change and your rent will not increase with a repeal of the mortgage deduction.

I agree with you that business pass taxes on to customers. It validates the old and true addage: business don't pay taxes, they collect them. I would agree with you that there is far too much money being spent on government services that could be going into savings, the economy, etc. I was merely pointing out that the mortgage deduction is also unfair and shuold be repealed. Government should be agnostic to whether someone owns or rents, and should not reward one behavior over the other.

Posted by: dnara | December 1, 2010 2:27 PM | Report abuse

Problem: Raising both the early and full retirement ages for reaching Social Secuirty mainly penalizes those who hate their jobs or can no longer physically fulfill them.

Solution: If you feel you are being penalized, either 1) get another job you do like and/or can physically do; or,
2) do nothing and live off your savings until you can begin to collect Social Security.

Forewarned, forearmed.

Posted by: fairfaxvaguy | December 1, 2010 2:29 PM | Report abuse

In 2009 the OASDI financials showed revenues of $807 billion ($574 billion from payroll contributions alone) and expenditures of $685 billion (up from $625 billion in 2008). One must suppose that a payroll tax holiday through 2011will earn the fund $0 form contributions, requiring more than $685 billion, and perhaps as much as $750 billion to be paid out of the $2.42 trillion in assets of the fund. but, if it isn't yet obvious to all who have had any interest in the Social Security situation over the last few years, that money will come from the Treasury, and the Treasury will find the money either from other taxes (no) or through issuing public debt (you betcha!). So a vote for a payroll tax holiday is a vote for increasing the national debt owned by the public by $685 to $750 billion. Now, from what quarter have we heard the loud protest about the mounting public debt?

Posted by: quickmatch | December 1, 2010 2:34 PM | Report abuse

@dnara
Payroll tax holiday, if it is like the stimulus tax cuts, doesn't mean the money doesn't get paid. It means that it gets paid through deficit spending, not through current payroll taxes. As to payroll taxes being a drag on the economy, in a technical sense this is true. But if we know the money for the programs will come from somewhere, the question is which pocket, payroll taxes or income taxes. Either way, it's getting paid (distributional impacts of course vary).

Posted by: rcd2 | December 1, 2010 2:34 PM | Report abuse

Why does Congress need all that money when they don't read the bils anyway? As Madam Nancy said, "You have to pass the bill to find out what's in it." That's how we got the awful Health Care Reform Bill!

Posted by: wqsg | December 1, 2010 2:39 PM | Report abuse

If we want to improve our debt situation, it could be done in one easy stroke, probably wouldn't even take Congressional action to accomplish.
Require all no-bid contracts to businesses under $20M require that all comers must be non-profit and all contracts with businesses making profits over 5 percent per year are immediately cancelled.
The howls would be legendary, but the noise would simply be a foretaste of what Hades is like when the demons get stirred up.
It's about time we turned some of those spigots down (I acknowledge that with hate for America so rampant around the world, we can't afford to just turn the spigot off completely).
I would estimate the "Debt Reduction Commission" apparently didn't address the issue that these contracts which are more numerous than the stars in our galaxy are about 50 percent waste and abuse by the contractors and their sub-contractors.

Posted by: Judy-in-TX | December 1, 2010 2:40 PM | Report abuse

Cut payroll tax, brinng SS tax to 250k, extend tax cuts for first 250k, change capital gains & tax it as income for Wall Street, hedge funds, etc., and reduce defense from 60% of federal budget to 40% and we'll be awash in money.

Posted by: crossroadsnow | December 1, 2010 2:40 PM | Report abuse

Cut payroll tax, bring SS tax to 250k, extend tax cuts for first 250k, change capital gains & tax it as income for Wall Street, hedge funds, etc., and reduce defense from 60% of federal budget to 40% and we'll be awash in money.

Posted by: crossroadsnow | December 1, 2010 2:40 PM | Report abuse

I'm in my mid 40s and have known for awhile that social security would probably not be there for me.

I have to be honest, though. It gets old to hear how the only people who will collect it will be the poor. So I pay in the max my whole life and that gets handed to someone who else.

I have an aunt who collects social security and has never paid a dime into it. Where's her skin in the game? Where's the incentive to stick your oar in the water and row with the rest of us?

There's the less fortunate (who I'll help) and then there's a group that doesn't contribute.

Posted by: Marina8 | December 1, 2010 2:43 PM | Report abuse

@dnara
Payroll tax holiday, if it is like the stimulus tax cuts, doesn't mean the money doesn't get paid. It means that it gets paid through deficit spending, not through current payroll taxes. As to payroll taxes being a drag on the economy, in a technical sense this is true. But if we know the money for the programs will come from somewhere, the question is which pocket, payroll taxes or income taxes. Either way, it's getting paid (distributional impacts of course vary).

Posted by: rcd2
*********************
So I think it should be fairly obvious that a payroll tax holiday is a bad way to reduce the deficit. In fact, it's a microcosm of why you can't "stimulate the economy" through tax cuts, and address the deficit, without cutting something.

Posted by: dnara | December 1, 2010 2:50 PM | Report abuse

I'm in my mid 40s and have known for awhile that social security would probably not be there for me.

I have to be honest, though. It gets old to hear how the only people who will collect it will be the poor. So I pay in the max my whole life and that gets handed to someone who else.

I have an aunt who collects social security and has never paid a dime into it. Where's her skin in the game? Where's the incentive to stick your oar in the water and row with the rest of us?

There's the less fortunate (who I'll help) and then there's a group that doesn't contribute.


Posted by: Marina8
************************
Well put. The problem is that Democrats will never distinsguish between the two cohorts of people. They will never get up and say "you are ABLE to do the work, and these programs are for people that truly cannot." Until then, you will have potentially productive people that find it easier to beleive that they are victims and will continue to live off the public dole.

Behavior will not change until lawmakers know that it will be more popular, and result in more votes, to kick potentially productive people off the public dole that should not be collecting. This is critical: you can't ask a legislator to risk his office just to say such things. Getting him unelected will do nothing to the goal. We need people to know that there is astonishing amounts of waste out there, and if they beleive in the long term fiscal health of this country, we have to support the legislators willing to kick them off welfare and spur them into finding their own means. Not extending, once again, the unemployment benefits is a good place to take a stand.

Posted by: dnara | December 1, 2010 3:02 PM | Report abuse

@ dnara,
Thanks for clarifying that. My whole angst is against any tax that is destructive of a right. People have the right to own property, have the right to sell their labor for pay and receive the fruits thereof, the right to borrow someone's money and contract such an agreement, and to dispose of their property in whatsoever manner they see fit. I have no issue with government taxing corporations and other trusts which it has created through legislative fiat, but to tax you or I engaging in our rights, I believe, is quite destructive to the ends in which government is established, that is to secure our rights, as expressed in The Declaration of Independence --
"We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable rights, that among these are life, liberty and the pursuit of happiness. That to secure these rights, governments are instituted among men, deriving their just powers from the consent of the governed. That whenever any form of government becomes destructive to these ends, it is the right of the people to alter or to abolish it, and to institute new government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their safety and happiness."

Kudos all to a lively, good discussion. :)

Posted by: therealjjj77 | December 1, 2010 3:05 PM | Report abuse

If you want to destroy suburbs and the housing industry, along with major appliances other single-family house related industries - eliminate the home mortgage tax deduction.
It would also impoversh the millions of us whose biggest asset is our house, and who will rely on selling it to the next generation to be able to afford health care in our old age. No mortgage interest deduction = far lower house value.

If you want to save Social Security, raise or eliminate the upper limit on incomes that pay in. (Why do we always protect the rich?)

I thought these were intelligent people??

Posted by: bobgil | December 1, 2010 3:13 PM | Report abuse

@dnara -
It's not rocket science: all tax cuts are created equal. Either I get it, or the government gets it and spends it elsewhere. Maybe you should pick up a basic economics textbook some time.
----------------------------------------

People who refuse to look at reality (like the above quote states) are the main reason we are in this mess.

All tax cuts are NOT created equal. If I put a dollar into a person's hands who will spend it, the dollar goes to buying goods and services. The same dollar simply won't have the same effect (much less), if it is put into the bank or invested in stocks and bonds. If in fact we had some lack of liquidity in the system, not enough money, then investment dollars have a nice back-end effect. But we have plenty of money flowing into investments. We need more money to help provide businesses customers so they have an incentive to produce more, hire more workers, etc.

While reading your basic economics textbook, I suggest that you read on past the preface.

Posted by: reussere | December 1, 2010 3:14 PM | Report abuse

In order to raise the retirement age, there would have to be very serious protections against age discrimination, including strong regulation, heavy penalties, and reduced burden of proof. Age discrimination starts hitting at 40 and gets worse as a person ages. Someone who gets laid off at 50 would have more years to struggle with an increased retirement age.

Also, one of the best ways to control health care costs is to immediately adopt the Maryland Health Care Cost Containment System. It has been working for over 30 years. It uses state-set rates for hospitals (based on audits), requires proof of need before hospitals are allowed to purchase expensive equipment (that may sit idle and add to overhead costs if purchased mainly for bragging rights), and eliminates the need for insurance companies to negotiate rates with hospitals (they pay the state-set all-payer rate).

The proposal is good in speeding up efforts to eliminate fee-for-service medicine and get rid of the high overhead costs of individual medical practice. Health care is much less costly if provided in large group practices with heavy involvement of information technology. That was talked about during the health care debate and the benefits of organizations that work that way need to be achieved more broadly and much sooner.

Posted by: StanKlein | December 1, 2010 3:17 PM | Report abuse

ObamaCare is the elephant in the room that no one wants to talk about. But ObamaCare
is a problem, and the sooner it can be
repealed and replaced with true healthcare/insurance reform, the better.

Posted by: ohioan | December 1, 2010 3:30 PM | Report abuse

>>>Well put. The problem is that Democrats will never distinsguish between the two cohorts of people. They will never get up and say "you are ABLE to do the work, and these programs are for people that truly cannot."

But to make that distinction, we need to hire Govt bureaucrats who will decide who is ABLE and who is not. Both aspects (Govt workers and Govt 'deciders') are taboo to Republicans.

And it is not always a simple question. What about stay-at-home parents? Do we say they are 'lazy' and not entitled to SS benefits? or are they showing proper family values and that as a society we value the nurturing of children by parents?

Posted by: carlalien | December 1, 2010 3:35 PM | Report abuse

"No mention of a carbon tax or a value-added tax, both of which are preferred by many, if not most, tax-policy experts."

You are either being deliberately deceitful, or I think you really need to get out more Ezra, as this is complete BS.

Posted by: bzod9999 | December 1, 2010 3:36 PM | Report abuse

@dnara -
It's not rocket science: all tax cuts are created equal. Either I get it, or the government gets it and spends it elsewhere. Maybe you should pick up a basic economics textbook some time.
----------------------------------------

People who refuse to look at reality (like the above quote states) are the main reason we are in this mess.

All tax cuts are NOT created equal. If I put a dollar into a person's hands who will spend it, the dollar goes to buying goods and services. The same dollar simply won't have the same effect (much less), if it is put into the bank or invested in stocks and bonds. If in fact we had some lack of liquidity in the system, not enough money, then investment dollars have a nice back-end effect. But we have plenty of money flowing into investments. We need more money to help provide businesses customers so they have an incentive to produce more, hire more workers, etc.

While reading your basic economics textbook, I suggest that you read on past the preface.

Posted by: reussere
**************************
This is simply false. One of the major issues is that there is a lack of liquidity in the system. Perhaps you've heard recently about small businesses that can't get loans, or the subprime mortgage crisis?

To say that all low income earners will spend any marginal income they receive on goods and services is simply false. There are unfortunately a large number of low incomers that are serverely in debt, either through credit or housing. Marginal income to these earners will likely either be paid voluntarily to creditors, or involuntarily through collections.

Conversely, as I said earlier, money that is placed in savings can then be lent out to the economy at a rate of 20-30 times. So for every million in savings, $30M can be borrowed to start a business and hire people.

The greatest myth of the left - that low income folks immediately spend any extra income on goods and services - is a blatant generalization not based in economic reality.

Again, don't strain your brain too hard. Dollars don't sit idle in vaults, gathering dust and eaten by moths. They are used by lenders to buy houses and start businesses, to purchase equiptment and capital. Without savings, this country would be 20-30 times smaller in GDP. What we don't need is less money in savings, because the government wanted to take it all and hire some more duplicative and useless government workers, all to try and bring down the unemployment rate and win re-election in 2012. Those are not real jobs, where the service or good would be purchased voluntarily in the free market. They are part of a re-election jobs program, and it stifles real businesses from creating real jobs.

That is why all tax cuts are created equally.

Posted by: dnara | December 1, 2010 3:37 PM | Report abuse

The entire premise of the commission is flawed. They seem to assume that the rich don't have enough money, the poor have too much and the middle class should be taxed out of existence.

The tax cuts for the rich stand out as galling insults, a form of class warfare that is especially difficult to understand in light of the rapid consolidation of wealth already underway. Taxing mortgage interest may make economic sense, but most people bought their homes with the assumption of these exemptions and their homes will lose significant value when many people are already underwater. The tax on IRA contributions is puzzling since it will discourage savings when most people have too little saved already. Meanwhile, requiring people to work until 70 assumes A) They are physically capable of doing so; B) they won't be downsized long before then as have so many already this decade.

Any commission that shifts the burden of the debt off the wealth and onto the shrinking middle class is engaging in plutocratic class warfare. For a Democratic President to make proposals that would cause George W Bush to blush means that he lied to the public in 2008. This is not Change that I Believe In!

Posted by: AxelDC | December 1, 2010 3:40 PM | Report abuse

It was Wall Street and corporate greed that brought down our economy in 2008. It was corporate greed that polluted the Gulf in 2010. It's government's job to protect us from these monopolistic monsters, and hobbling the government just leaves us at the mercy of monopolists who view American citizens as grist in their profit mills.

"Hobbling the Government is a great idea. They just didn't carry it far enough. Almost all of our problems stem from the Government or people who want the Governmnet to take care of them."

Posted by: jdonner2

Posted by: AxelDC | December 1, 2010 3:43 PM | Report abuse

I have no intelligent comment just an observation that in my lifetime I have seen America move from country that was concerned with granting civil rights, ending poverty, educating it's children, cleaning up the environment, caring for its sick and elderly, exploring space, helping third world nations progress,... to place of darkness, greed, and ignorance. If anyone can explain how we let this happen, please do.

Posted by: JTinAlex | December 1, 2010 3:50 PM | Report abuse

I concur that limiting Federal Government spending to 21% should have been an option. I would like to have seen a 19% and a 23% "What if ..." scenarios.

I totally support capital gains and dividends to be taxed at the income marginal rate. They make some vague references to tax simplification and things like value added tax. Again this hits the middle class and poor disproportionately. I haven't heard the arguments that the tax code is fundamentally flawed. I do contend that it is too large riddled with payed for corruption loopholes. One quantitative target should be a tax code of X number of pages, say 800. One that a educated person (CPA) could hope to understand.

One of the things that concerns me is, that despite protests to the contrary, Social Security money is fungible. The government is borrowing against it for current expenditures. It is a tax on the middle class that the wealthy only pay a pittance. It further brings their marginal tax rate below the 15% they pay on stock options capital gains and dividends.

The arbitrary 15% reduction on security may be too low or too high. Right now this country is paranoid, driven by fear, fear, fear. We need to relax and get a rational security budget that recognizes real risks to be taken. The goal of perfection isn't worth the cost.

Finally, I would like to see dividends be treated as an expense to encourage the payout of profits if there is no rational investment for the money. Today the obsession with Acquisitions and Mergers to "grow" while too frequently making bad investments needs to be discouraged. Besides this puts actual money back into the hands of the investors to make their own decisions.

Posted by: stanassc | December 1, 2010 3:51 PM | Report abuse

Posted by: JTinAlex >> If anyone can explain how we let this happen, please do.

It is simply the swing of the pendulum. After all, it was the lifetimes before these that moved our country from a place where the greed of tycoons built vast empires in Railroads, mines and oil - resulting in enormous wealth for a few, and great poverty for overwhelming numbers of exploited workers. In this country, we moved to that America you praised. In other countries, the exploited were twice exploited and their 'saviours' proved to be worse than the tycoons (read Stalinists and the Tsars).

Posted by: carlalien | December 1, 2010 4:01 PM | Report abuse

It is pleasant to see such strongly voiced antithetical arguments, with resorting to the all-too-usual "Re-THUG-lican -- libTARD" etc. name-calling !!! We can disagree without being A**holes!!!

Posted by: carlalien | December 1, 2010 4:13 PM | Report abuse

Everyone continue to complain, please, because that is the mot intelligent thing to do. Pick out this, pick out that, and lament.

And we wonder why our elected leaders have trouble compromising?

Posted by: bbor55 | December 1, 2010 4:33 PM | Report abuse

There's so much wrong here that it's hard to even know where to start.

Prelude to understanding all aspects of Fiscal Policy, including SocialSecurity

A short bibliography for key concepts regarding Money- and Currency- creation:

"Almost everybody talks about budget deficits. Almost everybody seems in
principle to be against them. And almost no one, literally, knows what [they are]
talking about." [Robert Eisner, The Misunderstood Economy, p.90]
http://books.google.com/books?id=jTSddYcGA6gC&printsec=frontcover&source=gbs_ge_summary_r&cad=0#v=onepage&q&f=false

How real is the federal deficit? [Robert Eisner]
http://books.google.com/books?id=ujtVRa5nYmMC&printsec=frontcover&source=gbs_ge_summary_r&cad=0#v=onepage&q&f=false

"The difficulty lies, not in the new ideas, but in escaping from the old ones, which ramify, for those brought up as most of us have been, into every corner of our minds." -- John Maynard Keynes

When you encounter a member of the media spouting nonsense about any aspect of fiscal policy, consider asking:
"has the presenter even bothered to think through any real implications of a nominal currency "deficit" in a sovereign country's own currency?" Reality is the opposite of what is usually implied by groups like the Peterson Foundation on Deficit Snake Oil.
Consider asking them to stick to crying: "the sky is falling, the sky is falling!" That would actually be more useful for their country.

The beginning of US currency:
A sovereign government can "be [tricked] into [pretending to] borrow "money’ instead of creating it"?
[Yes. Ours was] http://www.monetary.org/briefusmonetaryhistory.htm


Didn't the fundamental designation of "borrowing" and a national "debt" change, as we went from a gold-std to Post-Gold-Std accounting? As an entity, the Post-Gold-Std proposed "self-debt" of the USA population does NOT have to be repaid, is only an yearly accounting identity for tracking money supply growth, and this fact completely changes our public budget options.

Lesson of Going off the Gold Std Domestically - & winning WWII:
see 1946 article by then NY Fed Chairman Beardsley Ruml, in American Affairs, "Taxes for Revenue Are Obsolete" http://tinyurl.com/y3dkda3

Why do we even bother pretending to "sell" T-bonds? Why not just halt the pretense of debt-related money supply?
ONLY because bank lobbies pressured our Congress into passing a law requiring all currency creation to be matched, to the dollar, with Treasury bond sales. Why? Primarily to deliver a steady business in handling fees! Is there ANY utility in Treasury Bond sales? Perhaps some in managing short term inter-bank interest rates, but those reasons are grasping at straws, and could be better managed through other methods.
NO NEED TO ISSUE TREASURY BONDS
http://neweconomicperspectives.blogspot.com/2009/06/professor-l-randall-wray-responds-to.html

Tossing the last vestige of the Gold Std in 1971 (was everyone distracted by W

Posted by: roger_erickson | December 1, 2010 4:35 PM | Report abuse

Why should we support any of this nonsense when the U.S. government is assuring European Union leaders that we will back up bailouts for Greece, Ireland, Spain and Portugal to the tune of almost $1 trillion. If we have that sort of money just kicking around, why not spend it on U.S. programs. We can start with continuing unemployment benefits for those who have exhausted the 99-week limit. Or we can just put the $1 trillion in the Social Security accounts. More importantly, why is the United States taxpayer bailing out the European banks?

Posted by: edwardallen54 | December 1, 2010 5:42 PM | Report abuse

Ezra, as ususal, is horrified at the idea of spending cuts (or any reduction what so ever in the size of of our bloated federal government) except for defense spending and all for huge tax hikes (and all new taxes like the VAT to add on to the myraid of taxes we already have to pay) so we can all continue to get those wonderful big government "services". A classic liberal view to be sure and very predictable for Ezra. And of course we need more government run healthcare as always. I also loved the comment disparging the idea of rasising the retirment age causing hardship for people who hate their jobs and want to retire. I'm sure that was the original intent of SS. It would definitely be terrible for people who hate their jobs in the next 30 years, or whenever the increase in the SS retirement age kicks in, to have to work another couple of years before they can live off their government provided pension.

Posted by: RobT1 | December 1, 2010 6:05 PM | Report abuse

edward allen54:

Very smart of you to notice. I didn't even bother to write about it, because no one is interested in such things anyway coming from me. LOL

Let me pull down my post from earlier, referencing:


"Ezra, ezra, ezra, what is this your 25th post on something that is not going to happen?

While you are wasting your time on this, Goldman today forecast $110 a barrel oil for 2012. I think they're late. I think we'll hit that number possibly by early fall of 2011. There's huge market rally going on today as the shorts got caught short so to speak, on a positive jobs report,and good Chinese manufacturing numbers.

With ANY recovery at all, we will be in serious real inflation problems by summer, though "core inflation" will lag that. Look for a big increase in ag commodity prices, for which I believe we have only scratched the surface. Again, it doesn't matter though because that will not be included in the core inflation numbers.

Anyway, I started out to write at the beginning that Treasury yields are back on the rise again, as they will be anytime the skies clear over Europe for a few days or weeks. We're back to closing on 3.00 on the 10 year, which will be more influential on the economy than anything you've written about this unimportant report.

I understand though because Olbermann won't invite you on to talk about Treasury yields, because he knows/cares nothing about them either! LOL"


Many weeks ago I told people to short Treasuries and go long the dollar becasue of Bernanke. He wants to kill the deficit by debasing the currency and you can't fight the Fed. However European debt issues got in the way and investors stayed long the dollar and long Treasuries too as european debt appetite dried up and came here.

So now Bernanke was in a bit of a fix. How to drive down the dollar? Easy, by backstopping the Euro debts, everything should stabilize, and the dollar come down eventually and yields rise again. That is EXACTLY what happened today in the market.

This is temporary however. Until you see Spain's problems worked out, you can stay long the dollar, possibly until spring.

Bernanke is absolutely briliant, whether or not you agree with his goals. He makes Greenspan, with all his "obfuspeak", look like a shoeshine boy.


Posted by: 54465446 | December 1, 2010 6:54 PM | Report abuse

Sacred cows??..when the house is on fire everything burns..including cows..
We are broke..in debt..
The fix is simple
1. Across the board cut 15%
2. No new spending until budget balanced
3. Eliminate departments that states already have..like the Education department
4. Trash the income tax code..either simplfy it, or replace it with a national sales tax so the base of taxpayers can be broadened..only 40 percent pay any federal taxes now
5. Privatize the Post Office so it can actually make money
6. Remember that the goverment has NO MONEY OF IT'S OWN..only that which is earned and taxes by private citizens..the era of big daddy government is done.

When tempted to spend money on domestic programs after budget balanced, cut taxes more and let the people decide where to spend their money..not congress

Problem solved

Posted by: joed4471 | December 1, 2010 6:55 PM | Report abuse

Total Federal Debt = $13.9 Trillion

Total Federal Expense 2010 = $3.7 Trillion

Total Federal Receipts 2010 - $2.1 Trillion

Here's the math -- if we froze federal expenditures and doubled receipts (taxes) across the board the federal government would run a $0.7 Trillion annual surplus. Thus even if we double taxes and froze expenditures it would take us 20 years to pay down the debt. BUT that assumes 0% interest on our debt which clearly is not the case. Thus even if we double taxes and could find a way to freeze expenses there is absolutely no way to return to solvency in our lifetimes. That's how far out of whack our elected officials have taken us on this joy ride.

Posted by: CadronBoy | December 1, 2010 7:03 PM | Report abuse

Medicare -- too bad all the ice floes are melting.....

Posted by: rgv1129 | December 1, 2010 7:12 PM | Report abuse

Interesting article! I just now got Coupons of my Favorite Brands for free from "Printapons" you should search for them online

Posted by: lindaallen | December 2, 2010 2:25 AM | Report abuse

http://bit.ly/hbW23T – "Obama’s payroll freeze isn’t a gesture to the GOP, it’s a political power play, a quid pro quo, leverage – for the BUSH TAX CUTS debate. If 2 million federal employees can sacrifice in harsh economic times, so too can the richest 2 percent of income earners."

Posted by: BeckingOrder25 | December 2, 2010 8:22 AM | Report abuse

"Companies and governments typically do less with less"
***************

Have you ever worked in the private sector (not journalism)? My brother in law works for a company with 26 employees that had 100 two years ago. They were drowing in their overhead costs. Now they are profitable and have never served their clients or remaining employees better.

Have you ever worked in government? I could easily whack 25% of the government employees I have met who don't do anything or have meaningless jobs. I'm surprised out how many consistently can't explain their job function because they don't understand it themselves. They just collect a paycheck.

Posted by: catchilupi1 | December 2, 2010 8:29 AM | Report abuse


JTinAlex, like you, I have been asking how we ever got to this point for which Iam sorry to say, I don't have an answer. Maybe there isn't one or perhaps that is not the right question.

I grew up in the same America as you. I have always recognized the fact that America is not perfect, but at least "we" as a society, a nation, a "collective" and as individuals strove to be better for not only for ourselves, our children, but the entire world.


Each and every generation that went before us left the planet, as promised, a better world to live in than the previous generation ... up to this point ... that is. We very well may be (god forbid) the first to leave it in worse shape for future generations to clean-up.


We have a promise to keep. Perhaps all of us ought to think real hard about what that means: Because if we don't honour our promise, we will have failed our children, their children, their children's children -- all humanity. That is not a legacy to be proud of or one I want to be part of.


What kind of world do we want to leave future generations is a question that needs to be asked again and again and again, now and in the future, for humanity's sake.

Posted by: serena1313 | December 3, 2010 4:43 AM | Report abuse

Washington remains the place where the shills for the rich and powerful meet to decide how much moderate and middle income people must sacrifice to make the rich and powerful even more rich and powerful.

Posted by: oldbob | December 4, 2010 11:25 AM | Report abuse

RE: Raising the Retirement Age.

Klein writes, "Raising both early and full retirement ages mainly penalizes those who hate their jobs or can no longer physically fulfill them."

I can't imagine why economic policy should take into consideration whether a worker loves or hates his or her job. That's immaterial and if we were debating in a court of law I would ask that statement be expunged from the records.

The notion of a fulfilling profession is not only elusive to most people, but a very recent (less than 50 years old) phenomenon. Let's not muddy the issue by worrying about job satisfaction among workers.

As for those who can no longer physically perform their jobs (e.g. mine workers, farmers and other physical laborers) I thought the Simpson-Bowles proposals took that into consideration and exempted certain professions from the raised retirement age.

Am I mistaken?

Posted by: arhutch | December 4, 2010 5:12 PM | Report abuse

dnara: "Dollars don't sit idle in vaults, gathering dust and eaten by moths. They are used by lenders to buy houses and start businesses, to purchase equiptment and capital."

Not right now they're not. Businesses are sitting on tons of cash. Healthy banks are not lending--for home purchases, new business, or business expansion. By most accounts, credit is tight and it's hard to get a loan despite the easy money the fed has made available.

Why people think it will help the economy to give more tax cuts to entities which are sitting on cash is a mystery to me.

Posted by: dasimon | December 4, 2010 6:40 PM | Report abuse

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