Poll:Deficit Commission Recommendations

[FinanceDude]

So, the bottom line is that there were "not enough grownups in the room" to do something about the deficit? Say it ain't so, Sam!!!

[FinanceDude]

Quote:

Originally Posted by Rustic23 The seven commission members who voted against it include: Rep. Jan Schakowsky (D-Ill.); Rep. Paul Ryan (R-Wisc.); Sen. Max Baucus (D-Mont.); Rep. Dave Camp (R-Mich.); Rep. Xavier Becerra (D-Calif.); Rep. Jeb Hensarling (R-Texas); and Andrew Stern, former President, Service Employees International Union.

Ryan voted against it because it does not address the healthcare issue adequately, according to him. He works on the budget everyday so he must know a little something about it??

[Alan]

Quote:

Originally Posted by MichaelB I wonder why the difference between how the UK and the US are responding to this. Our cultural, social and political heritage is much more similar that not, yet our reactions to economic crisis seem almost opposite. UK politicians are attempting to lead a shared sacrifice and the public is supporting the effort - at least for now. The US elected officials are still attempting to gain relative advantage and impede any action that hints of partisan advantage regardless of the overall public benefit.

I don't really know and have wondered the same thing myself. It happened similarly in the 1980s when the Thatcher government made sweeping reforms and force-fed bitter medicine to the people and pulled the economy around.

It may have something to do with the electoral system. In the UK, MP's are elected for up to 5 years instead of a certain 2 years between elections, and the upper house is composed of voting members appointed for life, plus the Head of State has never exercised her veto. (If it passes both Houses then it is good enough for her to sign). Also, if the government of the day has a large enough majority on bills they pass they can override any veto coming down from the upper house.

I listened to an article on the radio quite a few years ago that pointed out that when the USA gets the chance to set up a democracy in another country they never use their own as a model. The presenter said that this was because they recognized that a young democracy needed decisive, nimble government, and the USA's present arrangement was simply not suitable.

[Westernskies]

Quote:

Originally Posted by FinanceDude Ryan voted against it because it does not address the healthcare issue adequately, according to him. He works on the budget everyday so he must know a little something about it??

This wasn't supposed to be an end-all report; health care issues could still be addressed incrementally in subsequent legislation, where they had a better choice of addressing specific issues. I'm most disappointed in those who were more concerned about generating sound bites for their re-election campaigns than making tough choices for the good of the country.

[Alan]

Quote:

Originally Posted by Westernskies This wasn't supposed to be an end-all report; health care issues could still be addressed incrementally in subsequent legislation, where they had a better choice of addressing specific issues. I'm most disappointed in those who were more concerned about generating sound bites for their re-election campaigns than making tough choices for the good of the country.

Exactly.

[Gone4Good]

Quote:

Originally Posted by samclem Most folks say the present proposal has $3 in cuts for each $1 in new taxes, but others note that the the ratio is reversed: we'd have $2 in new taxes to $1 in spending cuts if we use the situation of just a few years ago as a more normal base case. These folks want more spending cuts.

What's the ratio we'd get if we started from the 1999 "baseline." Although spending has indeed gone off the rails, we cut taxes pretty significantly too. The "official" cost (or foregone revenue) of the tax cuts over 10 years is $4B. Slightly larger than the $3.8T deficit reduction proposal.

[M Paquette]

Quote:

Originally Posted by FinanceDude Ryan voted against it because it does not address the healthcare issue adequately, according to him. He works on the budget everyday so he must know a little something about it??

Good point. Yeah, damn. If only there were some way for him to possibly have some influence on future budget-related legislation. Then he could vote for this as a stopgap starting point, and then address changes he sees as necessary for healthcare in the amendment process, or in subsequent legislation.

Gosh. Poor guy. I suppose this was all he felt that he could accomplish.

[MichaelB]

The proposal was approved by 11 of 18 members yet important media, such as WSJ and Bloomberg, reported it was defeated. It is a disappointing outcome.

Todays NYT column by David Brooks is worth reading. Title is "I have a Vision" and it describes one way mature leadership could approach our current economic challenge. One highlight:

Quote:

On Thursday, I debated Paul Ryan at the American Enterprise Institute on the proper role of government. Ryan is the incoming House Budget Committee chairman and one of the most intellectually formidable members of Congress. I really admire many of the plans he has put forward to bring down debt and reduce health care costs. But Ryan and I differed over President Obama and the prospects for compromise in the near term. Ryan believes that the country faces a clearly demarcated choice. The Democratic Party, he argues, believes in creating a European-style cradle-to-grave social welfare state, while the Republicans believe in a free-market opportunity society. There is no overlap between the two visions and very little reason to think they can be reconciled. I argued that Obama and his aides are liberal or center-left pragmatists and that nothing they have said or written suggests they want to turn the U.S. into Sweden. I continued that Ryans sharply polarized vision is not only journalistically inaccurate, it makes compromise and politics impossible. If every concession is regarded as an unprincipled surrender that takes us inexorably farther down the road to serfdom, then nothing will get done and the nation will go bankrupt.

http://www.nytimes.com/2010/12/03/op...=1&ref=opinion

[Gone4Good]

Quote:

Originally Posted by MichaelB The proposal was approved by 11 of 18 members yet important media, such as WSJ and Bloomberg, reported it was defeated.

Yup, where I come from 11/18 is a solid majority . . . even a super-majority by Senate standards. Seems to me the current leadership of both houses should submit this to the floor and see how it goes.

[M Paquette]

Everybody, sing along!

YouTube - I'm against it!.wmv

[Groucho]
I don't know what they have to say,
It makes no difference anyway,
Whatever it is, I'm against it.
No matter what it is or who commenced it,
I'm against it.

Your proposition may be good,
But let's have one thing understood,
Whatever it is, I'm against it.
And even when you've changed it or condensed it,
I'm against it.

I'm opposed to it,
On general principle, I'm opposed to it.

[chorus] He's opposed to it.
In fact, indeed, that he's opposed to it!

[Groucho]
For months before my son was born,
I used to yell from night to morn,
Whatever it is, I'm against it.
And I've kept yelling since I first commenced it,
I'm against it!

[MichaelB]

Quote:

Originally Posted by FinanceDude Ryan voted against it because it does not address the healthcare issue adequately, according to him. He works on the budget everyday so he must know a little something about it??

Ryan voted against it and gave an explanation. As did the others. I suspect most that voted against have a long list of easily articulated reasons to explain their actions.

Quote:

Originally Posted by Gone4Good Yup, where I come from 11/18 is a solid majority . . . even a super-majority by Senate standards. Seems to me the current leadership of both houses should submit this to the floor and see how it goes.

+1

[Westernskies]

Quote:

Originally Posted by Gone4Good Yup, where I come from 11/18 is a solid majority . . . even a super-majority by Senate standards. Seems to me the current leadership of both houses should submit this to the floor and see how it goes.

+1

[Alan]

Quote:

Originally Posted by Gone4Good Yup, where I come from 11/18 is a solid majority . . . even a super-majority by Senate standards. Seems to me the current leadership of both houses should submit this to the floor and see how it goes.

Totally agree.



From the NYT article Michael quoted, I think this sums up where we are and it's difficult at present to see how it will change.

Quote:

If every concession is regarded as an unprincipled surrender that takes us inexorably farther down the road to serfdom, then nothing will get done and the nation will go bankrupt.

[Texas Proud]

Quote:

Originally Posted by MichaelB Right. I wonder why the difference between how the UK and the US are responding to this. Our cultural, social and political heritage is much more similar that not, yet our reactions to economic crisis seem almost opposite. UK politicians are attempting to lead a shared sacrifice and the public is supporting the effort - at least for now. The US elected officials are still attempting to gain relative advantage and impede any action that hints of partisan advantage regardless of the overall public benefit.

From what I read/heard.... in the UK the Prime Minister and the Cabinet make the budget... it is NOT voted on by the Parliment... so much easier to do what you want...

Now, if you do something that is so horrible... then they can have a vote of no confindence and 'collapse' the gvmt.... not exactly sure how this works.... just some of the things I heard when there.... Parlimentary gvmt is a lot different than what we have...

[Texas Proud]

Quote:

Originally Posted by samclem I think we should reserve the word "spend" for its traditional meaning: When a party transfers money to another party for a good or service. By this definition, special tax treatments, etc are not spending. If a tradesman replaces the windows on my home and charges me $3000 instead of $4000, did he just spend $1000? Where would that kind of math stop?

The problem is that we are talking REAL MONEY... sure, they did not 'spend' the money as it is defined... and in fact it does not even show up as spending on the Federal books...

So the $8K tax credit for buying a new house is not 'spending', but the $4K cash for clunkers is... but if I had bought a house, I would have $8K in my pocket... if I bought a new car with a clunker... I would not... I just would have paid less for the car...

So, which is spending and which is not

Your example with a tradesman misses the mark.... he does not have any ability to TAX you just because he wants to....

[Alan]

Quote:

Originally Posted by Texas Proud From what I read/heard.... in the UK the Prime Minister and the Cabinet make the budget... it is NOT voted on by the Parliment... so much easier to do what you want... Now, if you do something that is so horrible... then they can have a vote of no confindence and 'collapse' the gvmt.... not exactly sure how this works.... just some of the things I heard when there.... Parlimentary gvmt is a lot different than what we have...

You are correct. However, a vote of no confidence is really only possible in a minority government, and there have only been one or 2 of those in the past 50 years and they never survive long. A minority government is possible in systems with more than 2 parties. At the last election no one party had more votes than all the other parties combined so it was possible for the Tories to form a minority government, but they knew that they could always be out-voted on contentious issues, and were vulnerable to a vote of no-confidence, so instead they formed a coalition with the Lib-Dems so that the government cannot be outed before the next election unless they have a great many defections.

[SunsetSail]

Quote:

Originally Posted by Texas Proud The problem is that we are talking REAL MONEY... sure, they did not 'spend' the money as it is defined... and in fact it does not even show up as spending on the Federal books... So the $8K tax credit for buying a new house is not 'spending', but the $4K cash for clunkers is... but if I had bought a house, I would have $8K in my pocket... if I bought a new car with a clunker... I would not... I just would have paid less for the car... So, which is spending and which is not

Definition of Spend: to use up or pay out. If the government pays for something it is spending. If the government reduces the tax base in some way it is revenue reduction.

The critical difference in the end result is that for spending the government must pay administrative costs to collect revenue, allocation dollars, etc. there are much fewer administrative costs for revenue reduction.

Reducing tax base exclusions, tax code simplifications, etc. are good and I support them, but not to the extent of calling them something they aren't.

[samclem]

Quote:

Originally Posted by Texas Proud So the $8K tax credit for buying a new house is not 'spending', but the $4K cash for clunkers is... but if I had bought a house, I would have $8K in my pocket... if I bought a new car with a clunker... I would not... I just would have paid less for the car...

How about this--The Program to Feed Indigent Orphans spent $2B in 2010, and according to the budget (Congress used to make them) was scheduled to spend $4B in 2011. When mean old Congressman X votes that the spending in 2011 should instead be $3B, did he cut the program by $1B, or did he add $1B to it? In most of our personal finances, when we increase spending over the previous year, we wouldn't say that we cut spending, only in DC did Congressman X vote to "slash spending" for feeding orphans. Your use of the word "spending" to include money that the government hasn't received yet is in accordance with this way of discussing taxes/spending.

[samclem]

Quote:

Originally Posted by SunsetSail The critical difference in the end result is that for spending the government must pay administrative costs to collect revenue, allocation dollars, etc. there are much fewer administrative costs for revenue reduction.

But here's another point: even revenue reductions (tax cuts) can have very big costs to the economy, well out of proportion to their dollar amount. They do this if they cause capital to be used in a way that does not produce the highest return. All kinds of special tax exemptions, loopholes, etc do this by pushing capital to favored government uses, or by driving up legal costs and compliance costs (requiring specialized corporate structures, trusts, etc). That's one reason it is so important to simplify the tax code. The other main reason is to make it understandable and transparent--people will willingly pay more taxes if they believe others are paying their share, too.

[SunsetSail]

Quote:

Originally Posted by samclem But here's another point: even revenue reductions (tax cuts) can have very big costs to the economy, well out of proportion to their dollar amount. They do this if they cause capital to be used in a way that does not produce the highest return. All kinds of special tax exemptions, loopholes, etc do this by pushing capital to favored government uses, or by driving up legal costs and compliance costs (requiring specialized corporate structures, trusts, etc). That's one reason it is so important to simplify the tax code. The other main reason is to make it understandable and transparent--people will willingly pay more taxes if they believe others are paying their share, too.

I alluded to this in my last post regarding tax simplification and agree with you. In fact, I think you may even have understated the financial and social costs of the complexity of the tax code.

I will never willingly pay more taxes just because I believe others are paying their share. I pay what is required of me by law and not a penny more. I'm not going to argue with you on this as a generalization because I have no idea what other people would do.

None of this changes the bottom line that a spending subsidy of $X paid by the government will take $X plus $Y of revenue to fund while a tax exclusion will only take $X to fund and will be applied to the target party much faster.