Deficit panel leaders' plan curbs Social Security and Other Sacred Cows

[Gone4Good]

I know this doesn't agree with the popular narrative, but here is what the past 30 years of spending and revenue data looks like . . .

 

[Gone4Good]

I doubt that it adds even 1% to the number... but since this is a WAG... I could be wrong...

It's easy to make things up that corroborate our existing opinions. It's harder (but not much) to actually look up the data to see how our opinions stand up against reality.

From 2008 to 2010 "Human Resource" spending increased form 13% of GDP to 17% of GDP, accounting for nearly all of the increase in spending. That includes a $250B increase (1.7% of GDP) for "income security" payments alone.

 

[Texas Proud]

It's easy to make things up that corroborate our existing opinions. It's harder (but not much) to actually look up the data to see how our opinions stand up against reality.

From 2008 to 2010 "Human Resource" spending increased form 13% of GDP to 17% of GDP, accounting for nearly all of the increase in spending. That includes a $250B increase (1.7% of GDP) for "income security" payments alone.

Hey, I got a job to do... between posting Here

As I said... I could be wrong...



The same corollary can be made for the income side... we have lower income because of the crisis... and when the one get 'fixed' the other gets 'fixed'.... problem is that the spending does not go down to 'pre Obama' levels... but income does go up to the previous amount...

 

[MichaelB]

WHEN was the LAST time a govt program CONTROLLED costs? There is no precedent that ObamaCare will control costs, take a look at Medcaid/Medciare and SS for examples...........

Do we want to control cost or contain it and slow it's rate of growth? I think the latter. Health care reform provides a foundation to enable that by reducing the need for cost shifting and enabling IPAB to manage reimbursements, among other measures. It is new so there can't be a precedent.

The fiscal commission's weakest recommendations are in health care, but that is a reflection of the complexity and magnitude of the challenge and is not a shortcoming of the commission. Currently there is only one serious initiative to contain healthcare costs which is the legislation passed last year.

 

[Gone4Good]

The same corollary can be made for the income side... we have lower income because of the crisis... and when the one get 'fixed' the other gets 'fixed'.... problem is that the spending does not go down to 'pre Obama' levels... but income does go up to the previous amount...

Yup. In recent years federal revenue collapsed because of the recession. But you may also notice that even at the peak of the housing bubble in 2007 revenues were far below those of the Clinton era. So much for "dynamic analysis" that always suggests tax cuts pay for themselves.

With respect to future spending, you'll find that the majority of increased future spending is coming from Social Security and Medicare. Curtailing and paying for their growth is mostly what the deficit commission is about.

 

[Gone4Good]

The fiscal commission's weakest recommendations are in health care, but that is a reflection of the complexity and magnitude of the challenge and is not a shortcoming of the commission.

Agreed.

But it would be a huge mistake if the commission is using fictitious health care savings to understate what must be done here.

 

[FinanceDude]

Currently there is only one serious initiative to contain healthcare costs which is the legislation passed last year.

No, it was a political payoff, nothing more.............

 

[Texas Proud]

Found this graph that you can dig into the spending.... pretty neat..

Interactive Graph: Where Are Your Tax Dollars Going?


Remember that we are spending (from memory) 37% more than we take in... so you can get rid of ALL discretionary spending and not get to a balance budget...

Of course, full employment will help out there....

 

[Texas Proud]

Yup. In recent years federal revenue collapsed because of the recession. But you may also notice that even at the peak of the housing bubble in 2007 revenues were far below those of the Clinton era. So much for "dynamic analysis" that always suggests tax cuts pay for themselves.

With respect to future spending, you'll find that the majority of increased future spending is coming from Social Security and Medicare. Curtailing and paying for their growth is mostly what the deficit commission is about.

I did not agree with the Bush tax cuts... and to tell the truth I would not vote to keep them... I think there would be pain to a lot of people during a downturn, but we need to start doing something now...

Agreed that SS and Medicare are the big boogeymen... but I would also add Defense in there... we need to get it down to 15% or less of the budget... heck, even 10% would be great and also keep us as the biggest spender of defense in the world...

 

[Gone4Good]

Agreed that SS and Medicare are the big boogeymen... but I would also add Defense in there... we need to get it down to 15% or less of the budget... heck, even 10% would be great and also keep us as the biggest spender of defense in the world...

Yup, Defense is huge too. Defense spending has grown by 144% since 2000 and represent a fifth of all spending. That spending growth was never offset by either new revenues or reductions in spending elsewhere.

A decade of "guns and butter" policies has left our balance sheet in a shambles.

 

[dex]

I did not agree with the Bush tax cuts... and to tell the truth I would not vote to keep them... I think there would be pain to a lot of people during a downturn, but we need to start doing something now...

Agree, but they will be extended because politicians will say the fragile recovery will be in trouble if they are not.

 

[HFWR]

Our defense budget should be based on actual needs (current) and perceived threats (future).

 

[FreqFlyer]

You must have a pretty big mortgage to be savings $600 per month in taxes... heck, my mortgage payment is not much more than that...


A question that I would have is why should the rest of the taxpayers subsidize your big house and your kids I am not trying to single you out specifically, but that is what is happening with these deductions and credits.

I agree. Why are we subsidizing mortgage debt? If as a society we think home ownership should be encouraged then let's facilitate (subsidize if you will) said ownership.

Recent history shows americans (politicians included) don't need encouragement to get into debt.

 

[ziggy29]

Our defense budget should be based on actual needs (current) and perceived threats (future).

Agreed. But too often it depends on what state and Congressional district fighter planes are built in or where military bases are located.

A lot of dovish folks in Congress were really keen to slash the defense budget in the "peace dividend" era of the early Clinton years. Yet as soon as you suggested closing a base in their state/district, they started wrapping themselves around the flag and started sounding like hawks.

 

[samclem]

Our defense budget should be based on actual needs (current) and perceived threats (future).

It already is! "Actual needs" (of important contributors) and "perceived threats" (to re-election of various lawmakers)

 

[FreqFlyer]

Our defense budget should be based on actual needs (current) and perceived threats (future).

Agreed but it should be PAID FOR (not borrowed).

If the threats are important and serious enough to defend against then it's important enough to ask the citizens to pay for their defense.

 

[HFWR]

It already is! "Actual needs" (of important contributors) and "perceived threats" (to re-election of various lawmakers)

Agreed but it should be PAID FOR (not borrowed).

If the threats are important and serious enough to defend against then it's important enough to ask the citizens to pay for their defense.

I'm fairly certain that the way to shrink government is to require it to be paid for...

 

[FreqFlyer]

WHEN was the LAST time a govt program CONTROLLED costs? There is no precedent that ObamaCare will control costs, take a look at Medcaid/Medciare and SS for examples...........

Won't the "Death Panels" save us money by pulling the plug on grandma?

 

[jIMOh]

You must have a pretty big mortgage to be savings $600 per month in taxes... heck, my mortgage payment is not much more than that...


A question that I would have is why should the rest of the taxpayers subsidize your big house and your kids I am not trying to single you out specifically, but that is what is happening with these deductions and credits.

We have a decent income (6 figures+) and a proportional mortgage which is about 20k of mortgage interest and 30-40k on schedule A each tax return.

My point was without that extra $600, our house would become about 40-50% of net pay, which is too tight IMO- we would be better off (quality of life) by walking away and renting that reducing savings or some other savings technique if the tax break was removed. That tax cut would make whatever mortgage crisis we have now 10X worse.

 

[ziggy29]

That tax cut would make whatever mortgage crisis we have now 10X worse.

I would agree that the mortgage interest deduction can't be immediately 100% repealed because of the impact it would have on the housing market. This is also a concern with the "fair tax" or national sales tax (or VAT) that some are floating -- it also eliminates the mortgage interest deduction 100% in one fell swoop and could really tank the housing market at a time when it's already searching for bottom.

However, I see no reason why you can't (a) grandfather the deduction for mortgages that are already in place AND (b) reduce the deduction by (say) 5-10% a year for 10-20 years for all new mortgages in that time frame. That would allow an orderly unwinding of the deduction so it wouldn't have an immediate and devastating impact on home values.

 

[Gone4Good]

Won't the "Death Panels" save us money by pulling the plug on grandma?

Oh, my!

If we thought the rhetoric got [-]stupid, mis-informed, deliberately manipulative[/-] hot when the government was trying to extend benefits to people, I can only imagine what happens when we try to take some away.

 

[youbet]

Won't the "Death Panels" save us money by pulling the plug on grandma?

Yes they will. But folks will get used to the fact that spending big bux keeping geezers alive makes no sense when some younger folks are doing without needed care. You're old, you're dieing, get on with it so someone else can crawl into that bed!!

 

[samclem]

My point was without that extra $600, our house would become about 40-50% of net pay, which is too tight IMO- we would be better off (quality of life) by walking away and renting that reducing savings or some other savings technique if the tax break was removed. That tax cut would make whatever mortgage crisis we have now 10X worse.

I'm sure any changes would be phased in, so you'd retain the taxpayer subsidy of your mortgage interest for a period of years, probably a decade or more. But, there's no doubt this would depress home prices for expensive houses and for homes in vacation areas (due to the targeting of deductions for second homes).

Lots of people argue for government involvement in various economic spheres to dampen the cruel price swings of the market. It's useful to remember that changes in government policy can produce swings just as cruel and far more capricious.

 

[scrabbler1]

I would agree that the mortgage interest deduction can't be immediately 100% repealed because of the impact it would have on the housing market. This is also a concern with the "fair tax" or national sales tax (or VAT) that some are floating -- it also eliminates the mortgage interest deduction 100% in one fell swoop and could really tank the housing market at a time when it's already searching for bottom.

However, I see no reason why you can't (a) grandfather the deduction for mortgages that are already in place AND (b) reduce the deduction by (say) 5-10% a year for 10-20 years for all new mortgages in that time frame. That would allow an orderly unwinding of the deduction so it wouldn't have an immediate and devastating impact on home values.

I agree that home mortgage deduction can't be immediately 100% repealed, either. It can surely be capped and limited to first mortgages right away, though.

Your second paragraph is a good one, too. I noted earlier that personal interest was phased out (no grandfather provision) from the 1986 Tax Reform Act and losing the deductibility of credit card and student loan interest did not stop anyone from using their credit cards or getting student loans.

 

[Gone4Good]

That tax cut would make whatever mortgage crisis we have now 10X worse.

The same can be said for any tax increase or spending decrease of any consequence. Each and every one of them will have some negative impact on some part of the economy. Rest assured that every single person impacted will claim that his personal tax shouldn't be raised or his benefit be cut for this, or that, reason. Oftentimes it will be the same person arguing for both lower taxes and higher spending, while simultaneously complaining that deficits are too high.

We really only have two choices. We can do it willingly now, and in a way that spreads the pain over a number of years and decades. Or we can wait and have it unwillingly forced upon us all at once. I'll choose the former. I hope most other Americans will too.