This page has been archived and commenting is disabled.
$400 Billion Pay Go Stimulus? It’s Possible.
The whiff of deflation that the bloggers have been crying about has
turned into a very noticeable global stench. The numbers from the US
today on housing starts (record 30% drop) and the ISM manufacturing
index are just the latest in a long and growing list of indicators that
are headed in one direction. South.
The stock market knows this with a 10%+ drop of late, but the real signs
are in the bond market. Sub 3% ten-year should be considered an omen.
Nothing good will come from these lower interest rates.
Our political leaders must be crapping in their pants. Obama, Geithner,
Summers etc. are not blind. They may be publicly ignoring the signs, but
privately they are sweating big time. Their hands are tied. The
Administration tried to get Congress to pass an emergency-spending bill
to support the states and extend unemployment benefits. As of last night
that effort failed. It would appear that we are about to fall off of a
cliff.
I am pleased that Congress failed. More federal debt and spending is not
a solution. I am also happy to see that the reason this effort failed
is that our Congressional representatives have come to the conclusion
that if they vote to spend our money they simply will not get
re-elected.
I am not sure that any stimulus would really turn the tide of what
appears to becoming at us. I am certain that more deficit spending will
not solve the problem. There is today a “confidence factor” that is part
of the equation that has not existed in the past. If Washington voted
another deficit spending package of $300-400 billion the markets would
not rejoice, they would tank. A step like that would lead S&P to
downgrade our paper and we would be looking at a very long slide into a
very deep hole.
I will stick my neck out and say that if we do not have some form of
renewed stimulus ASAP we are going to be headed into negative growth
territory by the end of the year. I don’t see a depression in our future
(12 months – 10% GDP drop), but it is getting easier to forecast near
zero growth for the next 24 months. We don’t need a depression for there
to be a crisis. Negligible growth for an extended period of time will
do it just as well. Should something like that happen we would end up in
a hole we simply cannot dig ourselves out of. Unemployment would be
north of 15%. Social problems/crime would be exploding. States would be
either desperate or bankrupt. If we have no growth the federal deficit
will balloon even if spending is not increased from current anticipated
levels.
With this in mind I want to reintroduce an idea that I believe should be
considered. We need a $400b stimulus. We need it fast. And it has to be
“pay-go”. The pieces for this stimulus are right in front of us. For
the life of me I can’t imagine why the “deciders” have not considered
it.
I want to put $240b in the hands of workers and another $160b in the
hands of corporations and small businesses over a twelve month period. I
want the private sector to do the heavy lifting of fighting the
slowdown. I do not want the federal government to spend more money. The
Feds have done a terrible job. It is time for the private sector to
have a chance.
Currently workers pay 6.2% of their wages on social security
contributions, employers pay an additional 6.2%. Small businesses pay
the same total percentage. If these percentages are lowered workers will
have bigger paychecks and employers will have extra cash to either hire
more workers or invest in productive capacity.
A reasonable estimate of SS revenues for fiscal 2011 is $700 billion. I
want to drop that to $300 billion. This would imply that the combined SS
tax rate would fall to approximately 5.5% from the 12.4% or a ~58% drop
in total payroll taxes. I would skew this reduction in favor of the
workers on a 60/40 basis. The end result would put the $240b in the
hands of workers, the $160b in the hands of employers.
If something like this were accomplished, it would certainly revive
economic growth. It would be (in my non PhD mind) the smartest way to
stimulate consumption. The private sector would be spending this money.
Far better than the federal government building bridges to nowhere.
Something along these lines would spin SS out of control. I doubt that
they would recover. Therefore reducing SS revenues for a year is just
another way of deficit spending and it will not work unless SS achieves
spending cuts that are equal to the $400b in lost income. I believe
there is a way to accomplish this.
The CBO produced a report on tax rates that I thought was interesting.
The full report is here.
The data provided is from 2007 and therefore stale but I believe the
numbers today are not too far from those of 2007. The following
information is contained in the report:
The number of households
that have no children but are 65 and older and that have income(s)
greater that $384,000 was equal to 4.4 mm in 2007.
that have no children but are 65 and older and that have income(s)
greater that $384,000 was equal to 4.4 mm in 2007.
Some of these households are two individuals others one. I estimate that
this represents approximately 6mm people. They are all receiving an
average of $18,000 from Social Security on an annual basis. That comes
to $80-100b per year.
If the SS benefits of the >$350k set were eliminated for 4-5 years
the SS Trust Fund would be net revenue/expenses neutral. Therefore the pay-go
status is achieved.
Some thoughts:
-We need to raise taxes. But if we do, that will hurt the economy. This
plan is a form of tax increase, but consumption from the >$350k, +65
set is not going to be influenced.
-There are those that scream, “Do not touch SS!!” I say the hell with
them. This does not change benefits for the vast majority of
beneficiaries. Nor does it alter the long-term financial status of SS.
-This is a tax on the rich. Yes it is. Who else are we going to tax?
-This is confiscation. Yes it is. In return I would give those that lose
benefits a dollar for dollar tax credit on any federal estate taxes
that may come due on their death. This, in theory, benefits future
generations. Keep in mind we have no estate taxes at the moment,
therefore this is a tax credit of questionable value and no impact on
the current budget.
-Let the private economy work. This is not government spending. If we
put $400b back into the proper hands it will work to stimulate the
economy. I will let the PhD’s quantify the results. I will tell you that
this will have a far greater and lasting impact then a similar sized
government-spending package.
-Unlike any of the other plans that have been put forward this is
politically “saleable”. It negatively impacts about 2% of the
population. The other 98% may benefit, but there is no social cost or
increased debt.
-This is, “Screw old rich people”. Yes it is. But ask Bill Gates or
Warren Buffett. This is in their best interests. They have big stakes in
our economy. Much larger than a few years of SS checks. My guess is
they would be big supporters. There are 300,000 SS beneficiaries that
had incomes >$1.7mm. These same folks are getting $5b of benefits
that they don’t need.
A plan like this only buys time. It does not address the long-term
issues. I hate the “kick the can down the road” approach. This is no
different. It may not work. At the end of 12-18 months we may find
ourselves exactly where we are today. Staring at a void. But on a
federal level this will not add to our debt. I can’t think of any other
approach that gives us a chance and does not include more debt.
Disclosure: This plan would take money out of my pocket. I believe it
is the right thing to do.
»
- advertisements -
I really applaud your attempt to come up with a plan that would increase take home pay for workers. I hate to use the word stimulus because that has negative connotations in my book.
The problem is that people are scared and the reality of where we are is becoming increasingly clear. Even those who may have ignored the early phase of our situation are having to acknowledge that things are not right and that government cannot fix them.
The problem that this brings about is that everyone begins to conserve, and I believe on a large scale, especially with the recognition that savings are non-existent and their assets are losing value, so those who are in a reasonable position are paying down what they owe, and those who are overextended are defaulting and walking away. Couple that with restricted credit and card issuers who are instituting extortionary practices and that's a bad recipe.
So the big question is whether or not the extra income will actually give people the confidence to spend more or will it simply become extra money socked away in a bank (for what that's worth). Further, whether businesses will use the lower SS tax to do anything productive or whether they'll use it to affect the bottom line is a good question.
Personally, I don't make a lot of money, but I don't have a lot of expenses. Everything's pretty much paid for and I don't need anything. I worked very hard and saved during my early years, lived modestly counting on being able to enjoy my early foregone consumption later on in life. At this point I'm fine but my savings rate is about 75-78% and has been for over three years now, and will stay that way until I have more confidence in what the future holds.
Which brings me to the final point, confidence. I believe that the more government flails about unsuccessfully addressing the problems; bailing out banks and corporations, circumventing the rule of law, putting forward questionable statistics and suggesting that everything is just fine, no one will be confident of anything, so as much as I think your plan has more merit than most I agree with your point that is just kicking the can further down the road.
Now, if the government combined your plan with significant spending cuts on their end that would send a signal to Americans that Washington was serious about correcting the situation, and sharing in the burden and that I think would help to calm people down a bit. Problem is I don't see that happening, in fact I see little happening at the governmental level until the full magnitude of crisis arrives at their doorstep, after all, Washington is not known for being proactive. If anything they wait until the situation becomes desperate and then we just get more flailing about and little real progress.
Again though...good idea.
I think we can all agree that to address the countries economic challenges we need effective solutions. Between the Politicians and the FED, essentially we are paying the costs, but not creating sustainable growth. It is this misuse of investment which increases the sensitivity to the debt de-leverage cycle.
A few points:
ARRA has projected outlays somewhat in line with your suggestion.
http://www.recovery.gov/Pages/home.aspx
The deeper question is why ARRA is not working? What went wrong?
Also, I would like to say we have another form of very specific stimulus called defense spending, and it is increasing.
http://www.whitehouse.gov/omb/budget/fy2011/assets/defense.pdf
So the government has and is spending. The issue is the solutions do not address the problems.
----------
Its easy to say the government is out of control, but it truely looks this way when you piece together economic policy.
There really is no other way to say this, the economy is in the hands of corrupt and stupid politicians and a greedy and uncontrolled FED.
----------
Housing is a good example of the governments planned response. For some reason they cannot understand the chart that shows how they have pulled demand ahead, through many contributors, and then are dismayed when demand and price craters. Well, this was the plan.
It is really amazing, I can have the data in front of me and see, without the intervention of magic pixy dust, that removal of stimulus will stunt growth. But, when this starts to occur there seems to be surprise. No, the plan worked.
----------
If we take a close look at how to pay for government, as it is organized today, we see that we have no intention of paying our debts. Just look at the deficit projections for 10 years. More importantly the federal governmnet has no intention of freeing the people from debt peonage.
From an accounting standpoint, it looks like the planned destruction of prosperity. The plan is to squander tax on labor to pay interest. That is the President's budget.
Mark Beck
When one looks at reported taxable income for persons 71 and older, a significant part of reported income may be simply mandated transfers from IRAs, particularly for the older part of the over 71 crowd. I doubt that anyone is actually earning any income to speak of on these assets in todays zero interest rates so it is just a mandated transfer of capital that is eaten up by income taxes. My mother is just hoping she does'nt outlive what is left.
Your Mom is taking $380k out her IRA each year? I don't think so. There are very deep pockets in America. Sadly, we have to tap them. Yes my pocket too.
How about this, a complete examination and overhaul of the TOTAL US spending. That would include Foreign Aid, Defense, off budget spending and oddities like :
http://theeconomiccollapseblog.com/
#43) Researchers at the State University of New York at Buffalo received $389,000 from the U.S. government to pay 100 residents of Buffalo $45 each to record how much malt liquor they drink and how much pot they smoke each day.
#35) A dinner cruise company in Chicago got nearly $1 million in economic stimulus funds to combat terrorism.
#11) In recent years the U.S. government has spent $2.6 million tax dollars to study the drinking habits of Chinese prostitutes and $400,000 tax dollars to pay researchers to cruise six bars in Buenos Aires, Argentina to find out why gay men engage in risky sexual behavior when drunk.
While we are at it, pay politicians the minimum wage, cut their bennies and perks. Oh and ZERO pork.
Why the fuck is it always taxes and SS/Medicare, when there is MASSIVE waste and fraud embedded in the system?
The only reason AMericans are in such personal debt is that the jobs have been stolen by the banksters, neo-liberal globalists, neo-judeo-con banksters and sent to Mexico. Who promptly lost them to CHina. Who is losing them to Vietnam.
God forbid the banksters pay a fair fucking wage.
So, of course the plebians wrack up credit card debt buying crazy items like food and daycare.
Oh, but there's always enough money for the Petraus and McChrystal crowd whose uniforms look like a Bedazzler had sex with a panzer. And for Bankster bailouts and for pharma bailouts.
Did you know pharma gets most of its IP from universities that used taxpayer-funded fellowships and grants to develop the patents. Don't buy the bullshit about pharma needing that money for R&D.
So, yeah! I want my pork if the big boys are getting theirs by stealing it from me. Or I want my pound of flesh.
AllSingingAllDa...
"The only reason AMericans are in such personal debt is that the jobs have been stolen by the banksters, neo-liberal globalists, neo-judeo-con banksters and sent to Mexico. Who promptly lost them to CHina. Who is losing them to Vietnam."
No people are in debt because of greed and stupidity.
Any conman knows if the mark chooses not to participate the con fails.
People need to start assuming responsibility for their own actions. It isn't marketing, advertising, or access to easy credit that is the root cause. It is fucking stupid greedy people who CHOSE to live beyond their means.
Bruce,
It was a little bit disappointing to see an article like this written by you. Correctly noting the threats for the economy, you are, nevertheless, are siding with the failed approach in the end. As I understood, you are thus impying that the the whole stimulus approach is not bad, it just should be tweaked a little bit. And what are your propositions? To do a universal confiscation targeted at wealthy pesioneers, based solely on the fact that they have money. Nice. Does it solve any debt and strucural problems in the economy? No. Does it punish investors who made wrong decisions and were bailed out? No. Does it create perception that if you work hard, pay taxes and save, you will be punished when you are old? Oh, yes, it does!
You want to confiscate? Lets do it right way then!
What about cramming down the morgages though expedited court hearing? What about bankrupting Sallie and Freddie and equtitizing all their bonds? What about splitting and bakrupting all major banks and equitizing all their corporate debt??? (as a start)
Will it help with the debt and bank solvency? Yes, it will. Will it bring house prices to normal level? Yes, it will. Will it punish wealthy investors who made wrong decisions? Yes , it will. Will it affect wealth of 80% of population in positive way? Absolutely!!!
I don't disagree with you. We have to write off much of this. We could do it next month and it would insure a major recession. Maybe that is what must happen.
But you have these bozos in DC and your plan is not going to happen regardless of the merits.
I am afraid the are going to do another QE 2 on us. The total opposite of what you want. I am in the middle of you two. I want to put money back in the private sector. I want to do that without adding to the debt.
I said in the piece that this would only buy time. If we did not use that time wisely and move to the things you propose we would have accomplished little.
Agree on QE2. Still do not like your part about pensioneers. Would be better to offer 90% tax on banking executives to win it through the congress....
You want to bring houses to a market price level? Foreclose and resell. Cramming gown mortgages is a defacto price support. People do not have to own the home they occupy - they can rent. One thing that really needs to happen is that peope need to eat shit when they make a bad choice. I have a fairly modest property that I spent a lot of life energy paying off. Now, you want me to pay for someone else's home that they lied to get into and could never afford. So now that I have paid off my home, I get to pay off part of some crook's McMansion. That is wrong... people get 2 years UE bennies and yet want more... I say screw that - they are upside down in part b/c they spent everything they earned and then borrowed and kept spending.
I see alot of upside down R.E. deals and the real tipping point is people are over-leveraged. Yes, many people bought at the top, but the problem is so large b/c almost everyone seems to have levered-up. Let the market clear, let prices come down and let new, stronger buys (current renters) put an adequate amount down and assume a reason mortgage obligation.
The whole "Let's tweak it here; lets let the $350+k/Yr familes pay a shitload more in taxes." That's just all bullshit... b/c next year it will be more "stimulus" and drop the threshold to $250k/Yr familes and raise the rate. Saying that taxing high wage earners and having most other people pay less than required into a benefit trust - that sounds like Obummer's healthcare strategy?
and no, I don't think GS, C, BAC & AIG should have been bailed out either.
Generally agree on mortgage issue. Cramming down, though, has the right to exist, if done through courts. I think it might have less moral hazard, and be cheaper to society than short sales.
Good discussion, Bruce (and those responding to Bruce). It’s refreshing to have candid comments about policy.
I have a problem with the discussion so far, however, and it is this: you all are being smart, not wise. (The smart man tries to find the right answer to the question; the wise man asks: is this the right question.)
What is the right question?
It is NOT about tax structures, TBTFs, over-leverage or sovereign debt. These are prescriptions to cure a disease before knowing what the disease is.
So, what is the disease, i.e., the real problem?
It is this: 1) we are not as rich as we used to be, and 2), we have no story to tell ourselves about how to transition to a world in which we are less rich. In practice this means that we have no story to tell ourselves about who is going to take the hit (and live at a reduced level compared to earlier generations, or compared to expectations, implicit promises, etc.).
The result of 1) and 2) leads to what we have now:
-- There is vast over-leverage as we put off dealing with the problem.
-- The collective “us” is devolving into a lot of smaller versions of “us” (i.e., Big Pharma, Big Pentagon, Big Finance, Big Discriminated Against Minority, Big Jew). Each group tries to impose its story on events.
-- The individual is irrelevant. Without lobbyists and money in Washington, a man counts for nothing.
-- A huge effort is underway by many interested parties to tag people of European origin as bad, as a way to justify sticking them with the loss. This is mostly Willie-Suttonism (“because that’s where the money is”), but nevertheless, the game is deadly. To impose one’s story is to impose one’s will -- i.e. gain control of the violence of the state to further the interest of one’s version of “us.”
We are not as rich as we used to be for reasons. Two immediately come to mind: we face vastly more competition from people who used to be marginalized, and we have made a transition to a regime of rising marginal cost energy -- after centuries of falling marginal cost energy.
The reasons for our being less rich are not going to go away, which means: control of the violence of the state is crucial (or its negative manifestation: ability to defend oneself from the violence of the state). In such a world, economic talk is just another form of propaganda.
"We are not as rich as we used to be"
I disagree,we still have the basis of being " rich". We have the land, we have the water, we have the resources those have not been removed and taken to a foreign nation.
The problem is we have been taught to perceive wealth differently. Land carries value, homes do not.Instead of people buying acreage with a house they buy houses with no acreage.
We still have oil but it is supposedly far too expensive to drill for in the US, except North Dakota. Obviously we have coal. We have timber. We have water.We have various minerals.
We were sold a fiction about wealth.
We have all those things you mention. One that you did not is our population. We still stand out in that catagory.
But you have to keep in mind the debt that is out there.
We are underwater like many homeowners. We own a house worth a million dollars. But we have a mortgage of $1.5mm. Nice house, but we don't really own it.
Unlocking the record cash and record profits (on a margin basis) of corporations is the key to economic growth
I failed to competently articulate that I otherwise agree with the concept.
Fundamental precept of a tax.
Everyone, and I mean everyone, has to have skin in the game. The amounts will differ significantly, as a function of income, but you can't allow anyone to have a free ride.
If you do (allow the free ride), those who have the free ride will continue to vote themselves a raise at someone else's expense.
That means welfare mothers, the disabled, etc. have to pay something in a tax rise. That way everyone will understand and contribute something to the pot. It will also diminish class warfare, which is relied upon by the corrupt to divide us.
Bruce I'd like to commend you on recommending a solution that acknowledges insolvency of the SS system.
For me the best way forward is truth and transparency and general acknowledgement that the promises we have all received cannot be honored in full.
I would like to see the concept of proportional insolvency as used in bankruptcy actions used for SS and pension plans.
Simply audit the plan, preferably using a realistic growth rate of 4-5% rather than the 7-8% that the actuaries now use, and calculate the percentage of solvency.
Then simply apply that percentage to all benefits.
Miraculously the plan has become solvent!
Is that proportional insolvency where SS recipients take it up the ass and GS gets paid 100 cents on the dollar -- that kind of proportional insolvency. They already got theirs so I guess it's cool now to ask everyone else to man up.
Rogoff, or someone who won a nobel prize for economics, said more or less the same thing and it's true, we don't have a more effective way of distributing the wealth than mailing it out to the phone book (I ferget the actual quote). And the free market works well fro finance, but for jobs there's always the conflict between machinery and people- as long as there are people to service the machines, the machines will 9/10 be more efficient. Subsidies have a checkered history - the now-industrialised countries used subsidies, barriers and government contracts to protect and grow strategic industries. Then came an unfettered Congress who got paid by business, and the subsidies never stopped - the beliefs on the founding fathers died right there. The technical application of subsidies is also incredibly important.
But it's not so much about what the government can for the economy, really it isn't. American business is still remarkably dynamic, the opportunity to make a profit was the motivation, the accounting benefits that come with running a publicly listed company further helped the the business environment gain serious size. But it's not only the soft rules and the money, it very much is the people the people, who get the strategy of what to do to succeed ten years down the road. The government lays down the rules, in that sense it is critical - wrt subsidies, it a sense of softer accounting rules in populist, wealth-generating-for-individuals industries, also small businesses, which perhaps could be considered while hardening the accounting rules in the wealth-concentrating-in-a-few-hands industries - thereby encouragaing the rather wealther economic cousins to hold capital in those more effficient vehicles. Add provisions for productivity or R n'D, phase out the rules over a known timeframe.
Bruce do you really want the government economic genius of Nancy Pelosi to allocate our resources? BTW she said yesterday that paying unemployment insurance creates jobs, it is hopeless to think Washington will do anything at all positive to the macro environment.
Create INCENTIVES through tax policy - money in consumers hands will be hoarded or put into 4G Iphones. If you want an industrial response there must be incentives to hire and produce, which, because of our high cost of labor, means choosing an industry and PROTECTING it thru punative tariffs, which would probably start a trade war with China. We know how that worked out last time - utlimately there will be more war - that will be Bam Bam's "solution" to joblessness
No I do not want Nancy making choices for us. The Feds have failed. This would not put one cent in the hands of Washington. It would all go directly to workers and employers. A pure private sector stimulus.
The only solution is to get people out of debt, period. Lump sum stimulus to all taxpayers for about $25k each, payable as a government coupon useable to pay down debts. Benny is going to print $3-$5 trillion anyway, so the people, who are the ones that should have gotten the money last time, should get the money. Give it out in 25 $1k coupons. You can use it to pay cc debt, loans, mortgage downpayment, pay off a vehicle( not buy a new one), etc... This puts the money back to the banks, people out of debt, and people have money to spend again. Just crackdown on the credit issuance. Everyone wins, even stinky Ben comes out looking like a king. We aren't going anywhere until the people get out of debt and the rules are re-written as to how much credit you can take at one time. Well, this is my idea of course how to solve the problem. There still needs to be regulation, but in addition to regulation, there has to be enforcement, which is what was missing all along.
Banksters won't get their cut then. But this should have been done in fall '08.
You might be wrong. You can't grow anything by consuming it or something else. You need to actually produce something.
the best course of action is inaction. let the market work this out itself no stimlus, no governement reacharound meddling, nothing. those that have positioned themselves correctly will win, those that didnt will lose. as painful as it may be for a short period of time, it is the best and only solution. we are heroin addicts staving off rehab.
Au, I assume that you are positioned correctly by being long gold?
That is not correctly positioned if we are headed for a very steep slowdown. That actually might be the worst position of all. If what happens is what I think will happen there wil be many strapped people out there. What might they do to eat? Sell what they have. Including gold. Watch what you wish for.
b
Bruce,
Within the big picture, we are witnessing yet another failure of fiat currencies. To not be long PMs, agricultural items, and necessities is not smart in my opinion. With that being said one should never over allocate. I am also of the opinion that our ploliticians will indebt everyone until the bitter end so my solutuion will prob never pan out
You say to put the money in the hands of the workers and businesses? It already is in their hands...don't take it away as a tax and then give it back to them as a stimulus!! Obama blew his stimulus $$ on short-term projects that do not create a revenue stream. I knew we were toast when I saw that stimulus package.
Chris Matthews is calling for lightrail! Yes, and let's buy a Guicci handbag for every woman in America.
Dumbasses extraordinaire! Never had to produce a thing in their lives. Stop spending, pay the debt and let the savy people begin to create jobs.
I am not taking it and then giving it back. I am saying never take it all. I want to keep money out of the hands of the deciders. I want the money in the hands of the private sector.
The most obvious solution is to SHUT DOWN the f'ing federal reserve and have the treasury start issuing currency that is not backed by f'ing debt!!! And hire some economists who don't find "economics is hard to understand."
I don't think any kind of "stimulus" will do anything at this point. The time to take the medicine was 40 years ago. The patient is terminally ill now.
Not quite ready to go so gently. Ask the question, "where has the money has gone?" Since a large part must be inside the asset base of US corporations, a large part is in the value of the kalaiedescope of Government agencies, a relatively small amount is siphoned off in personal sweeteners. ..some trillion of it is sitting quietly in US banks. ..So the money is there, the question is how to enable that to be used for the purpose that it is needed- to grow Ag. Demand in some sustainable fashion.
Consumerism is, in my opinion, tanked out. It's a nice driver of the economy, it's an inflationary driver of the economy, and this is exactly what it ultimately leads to; a financial landscape where hills of money are painted by, ultimately, the central bank. There is a sort-of a theory of the free-market hypothesis which implies that the market price indicates a best, or likely, return on capital. Does this by averaging out diverse opinions. At the moment the market price seems to be saying that markets are saturated and have little room for further growth. At times like this, the Government, bless their socks, does indeed have a mandate to step in. And through political machinations, open up new markets, new areas where the economy, or mans' labor, can be employed. The Central bank is mandated as such, to promote full employment.
We have fabulous 'regulatory capture' in US, how much do you consider that to be the sty in the eye? If it effects economic policy in the US, then it is at the very heart of the matter. How is the passage from Revelations not inimicable to New York Fed and Southern District court? Destiny, is it written in stone? They're taking me back inside now.
Anytime anyone proposes that the government promote "new markets" I have to shudder. That's how we got into this mess in the first place, though it goes way further back than we'd all like to admit (to this country's inception).
What we need to be looking at is killing existing subsidies. It does little good to promote something that's in competition with something else that you're subsidizing way more of: the entrenched program will only be goaded (by fat cat corporate types) into getting even more, as they'll start to complain about "losing market share and valuable jobs." I can think of no better example than the corn industry as teamed up with the ethanol industry (program): I'm sure that we'll ratchet up the algae fuel subsidies to help make That fuel more competative with the highy subsidized corn ethanol industry, which will require more subsidies to the algae-based fuel industry to help make them more competative with the corn-based ethanol industry, which...
Politically impossible, and more harm than help anyway. We are now in the stimulus unwind phase. Try to calm down and take things as they come. Better late and miserable than really late and devastatingly violent.
According to the Supreme Court, there is no property interest in Social Security benefits. So cutting them is not confiscation and not a legal problem. And lowering taxes is not confiscation, it is the reduction of confiscation. So, good! I like the constructive nature of your proposal. The complexity of Social Security Ponzi underscores just how unwise it is for members of a society to have each other's hands in each other's pockets with the state acting as the middleman. This is statism, of course, and designed this way by the state so it could broker the flows as a perpetual parasite. Or until the host dies, which is what it will take to unravel this mare's nest of conflicting interests. The aged have the votes to accord themselves endless (they think) benefits at the expense of the young. But they will not be able to enforce these laws against the young, who will rebel, either actively or by going "on strike". Social Security, Medicare and the national debt are Gordian Knots which will only be resolved by the bankruptcy of the United States government. Godspeed.
A new tax is just a camel with its nose under the tent. New taxes always start out small and only affect a few who can easily afford them, as in this proposal.
Instead of proposing a new tax, why not
1 Reinstate the estate tax. The object of this tax is to avoid the formation of family dynasties. Once family wealth, such as the Waltons (which I recall reading ten years ago was worth $250 billion, so they may have closer to $1 trillion at this point) gets above a certain threshhold, just the interest on the interest their wealth earns sucks money out of the economy. In effect, a large chunk of our taxes go to pay that interest, all because the estate tax was abolished. It's a good thing to abolish or prevent these family dynasties; otherwise we get de facto feudalism, which seems to be largely the case right now.
2 The military. Evidence points in the direction that we will soon be fighting 3 wars--Iraq, Afganistan, Iran. How many Americans are in favor of these wars? If you ask the man on the street if he would prefer to have $1 trillion per year go toward these wars as opposed to go into the economy, even in the form of reduced taxes, will he say, "Oh no, by all means continue with the wars " ? While we're at it, we could begin to shut down military bases and reduce the pentagon to a 1-gon, budgetarily speaking.
3 Eliminate the deduction for real estate taxes and interest for a personal residence. This is the biggest fattest, most counter-productive form of welfare we dole out to homeowners. It undoubtedly played a humongous role in creating the housing bubble. There's no economic reason to continue this subsidy, given that the housing sector is over-built and that it is unfair to favor owners over renters in any case.
"No new taxes - reinstate the estate tax."
HA!
Wow, what a unique approach - tax and spend. You should run for Congress.
Or, even worse, cut and spend...
Taxes in the US are some of the lowest of all countries. But thanks to the talking-heads (who make $200k/yr telling the $20k/yr folks that the problem is with the $40k/yr folks) it's all been twisted.
That stated (correctly), THE problem is that the system ONLY works because of growth, and that growth is now dead, doesn't matter what tax scheme one wants to apply, abolish ALL taxes, whatever, the system is collapsing because the infrastructure that it runs on was built to operate on $20/bbl oil and is trying to run on $70+/bbl oil AND grow! The rulers do NOT want people to understand this lest humans evolve to understand that growth cannot be sustained AND grow: growth holds the do-nothing ruling elite (bankers etc) above the unwashed masses.
When the money is all gone, down a rat hole, who will get the blame?
The workers have been destroyed, their jobs gone, to who's benifit?
When the universities burn, I will feel the warmth, and know justice again.
When SS came in it was a clever way to sell a tax INCREASE to the public. Now it's a mess. Govt should spend less/tax less/run no deficits/pay off/down its debt.
Perhaps in a parallel universe . . .
It certainly was. they collected the taxes for a couple of years before paying the benefits. that helped prolong the depression.
I refuse to get lost inside the box of stimbubulous. Giving people back the fruits of their labor to do as they please is fine. But the empire's course is set. The inertia is enormous. The chances of turning the ship of state before it is torn asunder on the jagged shoreline it is making a bee line for are 0. What becomes of Western Civilization is unknown, but I suspect it will develope a distinctly asian flavor.
Big fan of your "screw the old rich people" via SS proposal.
I think SS needs to be viewed more like unemployment insurance... ie: a last ditch safety net for the worst off who are teetering on the edge, not a guaranteed entitlement.
That has been somewhat the Republican Party view from the beginning of the Ponzi scheme. I hate to make this too political, but looking through the thread you can see that now the problem is paying the promised benefits to those who actually put money into the deal. So, without the unsound promises, would ther have been the contributions? It should have simplhy been some sort of minimum welfare scheme from the beginning. The excess contributions for the last 70 years have been used to fund whatever the Dems wanted. This problem is one of compounding over years and decades. I'm in agreement that the Republican party went on a spending spree while they had both bodies. However, before Gingrich, the Dems had run the show for 40 years and set the whole thing on the monsterous entitlement course that has brought us to this situation.
Retirees and the Tea Party are largely Republican and support Social Security.
Both Dems and Repubs have raided the SS fund.
Maybe five years ago this was a solution that could have been discussed. But unfortunately, we have past the point of no return. We can expect continued disintegration in the economy as businesses react to the changes in governmental regulation, and the defaulting on debt begins to occur on a larger scale. Eventually this will result in civil unrest and strife. The one percent of the wealthiest must worry about whether they have the survival mentality, because unfortunately paper money will not be enough to keep their security forces covering the asses. I hope we do not see the world that was depicted in the movie, “The Road”, but it is possible if they attempt to pull out a world war to fix the financial woes. Sleep peacefully.
Aside from its moral hazard issues, this is another Keynesian idiocy, which cannot work. We need a Jubilee (i.e., cancellation of all debts), and we're going to get one whether we like it or not. We might as well get used to the idea.