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$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.
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No, we do not need a Jubilee. That is really nonsense.
I'd vote for debtors' prison being instituted first.
What we need is to change the thinking to recognize that if you are eating food and not working, it is stolen from someone else's table. And the same for your neighbor.
What is wrong with the Jubilee idea is that I cannot Jubilee out of what Berry Soretoe has charged to my account. It really amounts to identity theft.
An interesting article by Bruce and some thought-provoking comments on this thread, but I think you two (Technovelist and Augustus) have cut to the heart of the problem, not just for SS but indeed for the entire global Depression.
The debts/contracts/entitlements on which our post-'30s system relies are unpayable. They were struck in a different era, which assumed infinite (or at least future) growth and they are now impossible for us to honour.
Augustus' comment shows what was (and is) wrong with these assumptions in the first place, and why these contracts were doomed from the start.
But, now that we are stuck with the result, I expect that default is the only, inevitable result whether we want this or not. We can make it seem 'voluntary' with Jubilee, or we can fight it and pretend every step of the way that these contracts will somehow be honoured, and wind up at the exact same place, only slower.
I would say that what is wrong with Jubilee is that it implies no punitive action. But if we begin with the acceptance that Jubilee/default is inevitable, then we can also get to work on imposing blame and assigning penalties. I would say this is also necessary, despite our modern mentality that reacts in horror to the idea of punishment or penalty, due to as Augustus says the theft that Jubilee imposes (or, simply acknowledges). This step will in fact be much more difficult even than our current pretence that these contracts/entitlements will be honoured (as we select a few that are, at the expense of the rest).
I still have to get someone to explain how default (or even more, jubilee) is going to solve the situation.
Any outcome is a solution per se . Default/ jubiliee are to be considered as solutions. Doing nothing would also solve the situation. So the question is how? (and not if?)
Looking forward to reading about that.
The idea of the stimulus applied in Australia was to offset fall in demand until global growth recovered. For Australia it worked out because China stimulated it's economy and increased demand for recources. And also the reason I believed it worked in Australia is they hit hard and early, before symptoms of recession appeared.
But if you do this and no there is global growth goes nowhere then it is simply piling up debt upon debt.
China looks to be on the retreat along with a further contraction of the USA and Europe, meaning Australia will get its recession and I think there wont be a stimulus the second time around but a maintenance of the hardest hit.
I think the US if was going to do this stimulus they needed to do it as such a level as to reach escape velocity but I wonder if their would have enough growth around to sustain the economy after this and the rocket would just fall back earth as it has with what they actually did.
In Australia much of the stimulus was in the manner of putting cash in the hands of people likely to spend it. And it worked quite well and spending levels were maintained up until recently. But this was Before there were marked job losses and Any loss of consumer confidence.
I think if significant job losses have already occurred and consumer confidence has been hit hard then it is too late, the stimulus required to create jobs as opposed to saving them is an order in magnitude different.
The question is, once the stimulus wanes where is the growth to pick up the slack going to come from unless business and consumers have borrowing capacity and banks lending capacity.
This is gonna sound weird, but the Aussies avoided the crisis (so far) because of the high levels of private/personal debt (relative to incomes) in the context of an economy with interest rate flexibility and less disruption (so far) in the debt markets for Aussie borrowers.
In short, the average Aussie was even more in debt that the average American but when the Global Financial Crisis got going, interest rates started dropping. In the USA they went from low to zero (but real mortgage rates declined far less), whereas in Australia they went from 8+% (from memory) to 3%-4% (and real mortgage rates declined significantly).
No doubt the robust demand for raw materials from China centrally-goosing it's own economy helped too, but this interest rate cut meant that, as the GFC progressed, net disposable income for heavily indebted Aussies actually INCREASED. In short, the average indebted Aussie found more money left in their pocket at the end of each week after paying all their debt service bills and expenses.
We Aussies were also still in the melt-up stage of a housing market boom that makes the USA's look quite tame. Furthermore, the relatively superior credit ratings of Australian banks (and the govt that ended up guaranteeing those banks debt), ensured that access to debt was much less affected than the USA.
Summing it all up, we had average-indebted-joe-aussie opening his wallet at the end of each week during the GFC and finding more money in there than usual. He also found that his banks were still willing to lend, were not in great distress and the housing market was looking so darn appealing that he'd 'be nuts' to not flip into more debt and something bigger-un-better.
Anyone who reads this and doesn't understand that the writing is on the wall for Australians too (just delayed compared to the USA and Europe) is going to get bitten hard at some point down the track, I expect. In short, we don't have much interest rate room left any more and attitudes to debt are changing.
"An interesting plan but I'd first like to try kickin' it old school and cut income and/or cap gains taxes with an eye toward stimulating business activity and ending up with more tax revenue even though it's off a lower rate."
This was the desired goal of the Bush 2003 tax cuts but the revenue increase failed to materialize as it had in past administrations.
If the problem is overcapacity then stimulating business will only add to this.
There are no simple answers.....
Bruce, lets face it what you are proposing is to break the SS "contract". I know, it was broken as soon as it rose above the 1% that Roosevelt swore would never be broken.
But this is the real core issue: you propose solving a problem by having the government break laws and agreements. It is just another step in the long line of this administration doing this. The progression would be bailing and taking over Fan/Fred, shafting GM bond and shareholders, Chrysler, AIG, and now changing SS from a retirement account to an entitlement paid out of the general fund. Additionally, a lot of the stimulis will be negated by further mistrust of a government that refuses to stand up to it's obligations.
And the stinking pile of manure is going to collapse anyway so why break contracts in order to prop it up for another few months?
How is SS a "retirement account" rather than an Entitlement?
Last I checked, people who paid in next to nothing are still cashing checks that are guaranteed for life--sounds more like a government union pension to me.
Last I checked, I'm still losing 15% and am not even promised I'll see the principal, much less any actual return. And that's assuming we somehow extend this pyramid scheme for the next few decades.
It's nothing more than a massive wealth redistribution (theft) scheme, with the added bonus of creating a constituency dependent on it so they'll vote the poverty pimps back into office forever.
Ragnar, don't you receive a yearly statement from SS with your balance? I know it's a charade, but before we let them simply ignore all their past promises, don't you think we should get them to admit that was always a ponzi?
Yeah, we don't want THOSE people around, now do we? No, we'd be much better off having honorable people like bankers and oil executives.
What amazes me still is the extent of denial that we are in anything but a depression. Much of the pain is being masked by denial: people are allowed to live rent free because banks are encouraged to hold defaulted or seriously delinquent loans. Unemployment benefits are extended ad infinitum. Underwater CRE loans are not being called. Insolvent FIRE sector institutions are permitted to survive.
We are trying hard to cling to a lost world. To accomplish this task we must hear people tell us several times per day that everything is alright and we are in a recovery. All the calculus is patterned after what has happened during pre-bubble business cycles. But that's apples to oranges. We are not just experiencing a phase in a normal business cycle.
The pretense is alarming to me because we all know what happens to people in denial. On balance, they're worse off without a doubt. When the wake up happens and it always does, they find a trail of missed opportunities and squandered advantages behind them. That makes the next phase more difficult, precarious and error prone. In geopolitical terms, it can be disastrous.
The changes necessary are not really that revolutionary. And it does not have to be a depression, unless the politicians are determined to make it into one.
We need to someway find a way to FORCE people to take jobs they don't like. So what? They do not have to take any particular job, get a better one if you can. But they Must do something for someone, someway, to earn a paycheck. There is no greater motivation for getting a better job than having a bad job. There is nothing dishonorable in having a bad job. It is dishonorable to have NO job. Tdhe politicians have reversed the difinitions.
You don't need to FORCE anyone to get a job - just start removing existing incentives to not having a job. Presto.
Wow, FORCE in great capital letters too.
Give your head a shake FFS. It's idiots like use who believe government FORCING solutions is the answer. Everyone binged on debt. The debt cannot be repaid. It must be defaulted. The banks have grown out of control sucking the life out of the real economy. The banks must be broken up and restrained. The political system is corrupt to the core and broken. It must be reshaped. Only then you'll begin to see any sort of a recovery, not finding a way to fuel consumerism temporarily once again through some "let's tax the rich" and "let's rape and pillage SS, it's broken anyway" scheme.
Worse piece Bruce ever wrote IMO.
Well said indeed. The way you "FORCE" people to take jobs they don't want is to stop paying them for jobs they don't have. The above poster is correct when he says there aren't enough of them. Many of those low paying jobs are in service and destined to dry up. Know what that means? Haircuts people. We've been living off the tenderloins and throwing out the sinewy front shoulders for a long time now.
If American's would put down People magazine and turn off American Idol they would see that the light at the end of the tunnel is the oncoming headlight of a speeding freight train. Do we really need four color TV's, spare bedrooms, jet skis, microwaves and three cars? No. Are we all still going to have them when this is over? NO.
"You can't always get what you want....
But if you try sometimes, you just might find,
You get what you need."
Time to get our priorities straight people.
Well said, sir.
We need to someway find a way to FORCE people to take jobs they don't like.
Problem is, there aren't anywhere near enough available jobs. The ONLY way that something like this would even be possible (and it would only be for a short time, as it would end up speeding up the collapse) is to employ people as street sweepers, or other such do-work jobs. Eventually, however, after things have mostly collapsed, a very high percentage of people WILL have jobs, digging in the dirt raising food...
But... even IF there were jobs, they'd likely be too low paying to pay down any debts.
Didn't the USSR boast 'full employment' at the time of its collapse?
Best thing about this post is that it is well-reasoned and buttressed by both fact and supposition. And, gosh, it pertains to economic issues that can be cogently and dispassionately argued on. That's why, many hours later, there are but a handful of responses whereas topics of less import break the 200 post barrier in like four hours. Ahh, to return to the ZH of over a year ago when the eye was on the proverbial ball, memories...
You are not Chumbawamba.
People could just as well save or pay down debt with the SS windfall. I know I would save it as would many of my associates-dual working boomer couples who have no need to consume another item but need to save for the coming economic storm. The Genx/Y of the office would pay down their credit cards as they are paying a high interest rate.
As for businesses, corporations are flushed with cash-they don't need the money.But the windfall could help a small business retain an employee it might have otherwise layed off.
Any stimulus should go to repairing our decaying infrastructure.Our children will have enough worries on how to support an aging population let alone an aging highway system..
I understand your point on decaying infrastructure. But that is not going to work today. We have months, not years to stave off what is coming. Maybe it is best to let it happen but I doubt that anyone will be happy should it come about.
Yes, not all of the money that goes back to workers would be used for consumption. Some of it would be used to pay down debt. That is not, by itself a bad result however. All stimulus has this flaw. you can't really predict how the money is spent. I rely on the collective judgment of the 160mm workers who would benefit.
I said this could fail. But it would not cost us much to try this. The alternative is a lost decade. Do we really want that?
let it happen Bruce, that's the only solution..
Lets face reality. Lets stop kicking the can down the road.
let the people punish congress members in elections,
let the people punish bankers who abused system and took our future hostage,
lest see some Squid members in Jail, especially the one who claims doing gods work,
let the paper giants, JPM's, GS's, MS and others fall like domino cards,
at the end we will make a new world, a more honorable life we deserve than this.
I always like your postings - very interesting and informative.
Here are the probs I see.
First, I don't think we can put the toothpaste back in the tube. Game's over, we're just waiting for the economy to call it. A tax right now is too late.
Second, this plan could only work with truly altruistic people in leadership, and that just ain't gonna happen. There are no statesmen left - they died out over a hundred years ago.
Third, everyone bags on tax CUTS, but if they don't work it's because they aren't accompanied by a reduction in spending - instead spending increases. Cut government spending and you solve a lot of problems. I only see more spending in our future, and it will rise above and exceed the tax revenue. Pay go has been a complete joke. They passed a law to force them to pay as they go with our tax dollars. They don't need a law - they just need to do the right thing.
Fourth, those being taxed - the rich - won't all be as nice about this as you. It frightens me to think what they would get in return. The last thing we need is for the rich to be owed even more favors by the government.
Fifth, SS+Medicare alone constitute tens of trillions in liabilities, and they can't be covered, it just can't happen even if GDP were to recover to their idealistic levels. We could fight hundreds of iraq wars for the liabilities of those two entitlements alone.
Means testing of social security is inevitable. It is simply not fair to tax low income workers struggling to get by to keep the elderly on the golf course or cruise ship.
To a large extent, means testing has been implemented. If you review the early benefits from social security relative to the payments into the system, you will see that there was a much steeper change in benefits. Recall that it originally was only a 1% tax on employers and employees (2% total) covering the first $3,000 of income. And, since benefits did not begin until age 65, many people got nothing for their contributions as that was about the average lifespan. The difference in the minimum and the maximum was much greater.
The minimum benefit has been increased much more than the maximum benefit. Meaning that those who have earned and contributed more get proportionately less. Further, with the increasing lifespan, those with the minimum contributions have benefitted even more as they collect their disproportionate share for a longer term.
Now your suggestion seems to be that no matter how large the contribution over the earning years, there are some people who should get nothing. And those who have earned and contributed very little should have a guarantee of a cushion until age 125. I really don't consider that age 125 number as a fantasy. People now will have a right to get whatever it takes to extend their life forever, if possible, and it not their responsibility to be concerned about the costs.
We have somewhat a benefits problem, that is true. But the larger problem is that earning benefits does not require a contribution. We need to do more to require that more people are engaged in the contributions.
As a firmly middle-middle class earner spending 12-14 hours a day in the office only to come home where I'm surrounded by "poor" people working 0-6 hours a day and living double my lifestyle while I pay for it, this is a joke.
They're not paying any taxes, they're being paid taxes. By me.
Then there's SS, which costs me 15% a year, which will yield me negative returns if SS magically survives for 40+ years--in reality it's just flat out theft of money I could otherwise be saving for my retirement.
+104,000.
I see it differently - it's not fair that more than half the country pays no income tax at all, and gets refunds on those income taxes.
I'm not sure what taxes you are talking about that those low income workers pay, except to say the low income workers in this country have the distinction of being the only poor people in the world who have the privilege of being obese if they so choose, and have cars, and have a roof over their heads. Those are already paid for by wealth transfers.
I don't disagree with you but a 25 year old is paying a heavy social security tax that, in many cases, is simply paying his grandfather's country club dues. Better to let the young keep a greater proportion of their pay than to have the affluent elderly receive an entitlement not essential to their well being.
As to Food Stamps and Welfare oh I agree. The underclass needs to make some sacrifices too. I think Food Stamp EBT cards should be done away with and our underutilized public school cafeterias be given the task of preparing nutritious but plain meals for those who cannot afford to buy their own food. Requiring people to show up everyday for a free meal would greatly reduce the number of people 'needing' them and preserve the health of those that do.
"...the affluent elderly receive an entitlement..."
So getting back a portion of the dollars they paid into SS over their lifetimes is an entitlement?
I work with people who make good incomes and save little if no money. They could be investing in our 401k plan but choose not to. They all overspend and buy new cars every few years. I have a 30 year old car and save all I can. I will be prepared for retirement and they will not. So you want means testing to take away Social Security and Medicare that I paid for from me and give more to them. Is this the means testing you say would be fair?
I will be prepared for retirement and they will not.
You assume you'll have enough.
So you want means testing to take away Social Security and Medicare that I paid for from me and give more to them. Is this the means testing you say would be fair?
Those payments that you made were going to support the existing crop of dwindling performers. The crop that's coming up, the youth of today, will be the ones actually paying for YOUR entitlements (yes, they're classed as entitlements). Since their futures are rather bleak, well, after having to commit (albeit forced to) to bail out the RICH (bankers=rich) I'm afraid that you might find reality not to your liking.
Just sayin'...
I think we agree that entitlements are poison to a productive society.
I wish I had better economic news for you, but...
you are so hosed.
But you're in good company :)
What we need is a jubilee.
Lets reclaim the 2.5+ trillion from the SS trust fund before we can call it an "entitlement".
The biggest government "entitlement" around is the sovereign financial backing of WallStreet.
WS will collapse the economy long before the boomers do...
Low income workers still pay payroll taxes-that is what Bruce is referring to..
...which are or can be offset by entitlements.
But I'm responding to someone else's idea that the elderly are out there golfing and yucking it up in their retirement (not that there's anything wrong with some leisure after a lifetime of work). Been to wal-mart lately? Home depot? I've never seen more older people working in places like that. Just trying to provide some balance.
The government loves it when the people bicker among themselves about who has more than they do. Keeps our eyes off the culprits.
The enemy is not necessarily the rich or the poor, though there are undoubtedly nasty people in each group. The enemy is a government that interfered by offering entitlements it can't possibly honor, and then spending like mad fools when we've known for decades that SS and medicare alone will be our ruin.
Excellent point!
An interesting plan but I'd first like to try kickin' it old school and cut income and/or cap gains taxes with an eye toward stimulating business activity and ending up with more tax revenue even though it's off a lower rate.
That's actually already worked before under Reagan and Clinton most notably. Plus it's much more psychologically stimulating and morale boosting to those in the business class that are likely to make shit happen in the economy. Throw small businesses some bones too.
Bruce's plan will weird out a significant amount of people - not voters as a whole maybe but the kinds of people one hopes will juice the private sector. "Do #@$% what?" "slippery slope" and "am I next?" will be thrown around a lot and take focus away from firing up of the engines of American greatness - especially after Obama bores/confuses/scares everybody to death explaining it on TV.
+1. I also disagree with taxing SS benefits for the wealthiest. I am very aware that they may not NEED it. Whose effing decision is that to make? These are the very people that ACTUALLY paid in at a level proportionate to what they're getting back. To take it from them while people who paid in little or none continue to get theirs is the ultimate kick in the nuts.
I would support SS haircuts across the board, but not to single out the only SOB's who actually paid for it.
At the end of 12-18 months we may find ourselves exactly where we are today.
But if we cleared the decks now, took our bitter pill and swallowed it, allow all sham assets to be crushed we could start on a FIRM foundation. Yes, the path back is going to royally suck (and that's an understatement) but we would be through it. Hell, we may even be able to bring down a few of the institutions that helped put us in this mess in the first place. I think your heart is in the right place, but I just want some of the basics back. Transparency, an economy that doesn't thrive off of the consumer, real business investment, real innovation. I don't think we can get there until we "atone" for our debt induced decades old party.
Regrettably, I agree. The fastest and least painful path out is to let deflation occur. Until it does, our only choice is to pick ways to continue blowing up the bubble. Each time we do that, the necessary deflation is even more painful. Eventually it will be forced on us. And all we will have to show for our efforts to reinflate the bubbles is the 10 trillion in Federal debt Obama projects over the next ten years, which will make the recovery much more painful.
It's a job that's never started that takes the longest to finish...
This plan is a funded version of the failed Bush-Pelosi 2008 tax cut and the various Obama giveaways. Simply lowering taxes on workers and their employers (mostly small to mid-sized business people) is a one-time quick fix. The sudden one-time multiyear confiscation of promised benefits to the high earners on SS will further prove that you can't trust anything the govt promises you and therefore will have important counterproductive effects that may even outweight the beneficial fiscal effects. To the point that many of these high earners are actually working and contributing to society, they may say "F" it and just either retire or slow down, and then society loses the fruits of their labor plus their taxes.
Instead, the govt needs to spend its money more wisely, get out of Afghanistan, and stop its micro-management of the economy. It must must must stop encouraging a bloated housing sector. Americans have vastly more housing per capita than they need. Subsidizing this overconsumption that then sucks in imports of "stuff" to fill these large homes is lunacy. This proposal simply perpetuates the current malinvestment and thus will jumpstart nothing much.
Deflation, 30-year yields plummet:
http://displacedema.blogspot.com/2010/07/30yr-yields-plummeting.html
On this point, however, I disagree:
"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."
Bruce, not so sure unemployed people are as pleased as you. Be more considerate of them. Their benefits should have been extended.
NO. NO. NO. Their benefits should not have been extended. This is a prime example of why we're going down the shitter.
***I feel for these people, and my own job is on the ropes, perhaps placing me in their same shoes shortly.
We cannot continue to pay people with money we do not have, for work they do not perform. Unemployment is meant to be an employer/employee funded stepping stone, not a perpetual entitlement. It doesn't give anybody warm fuzzies to do this, Leo.
Here is where Mako steps in and finishes the story.
One year is enough Leo. We are not such a rich nation any more. How long would you propose? A few more months? That helps no one. A few more years? we can't afford that.
leo
do you know what the citizens of california have been spending their govt benefits on? strippers and slot machines. seriously. you can take your cali "needy families" card and use it to buy a blowjob and a few hands of blackjack. this is being changed as we speak, but the fact is, govt handouts, in their current iteration, dont work. dont hide your personal motives behind other people's suffering, its unbecoming.
The USA is flat dead broke. There is no money to pay for this.
Few people want to cut people off from u/e benefits, imo.
We just want to see offsetting cuts in other gov't spending. Tell me there is no waste or fraud that could be cut to pay for extended u/e benefits.
Personally, I don't care for the "tax the rich" part of Bruce's argument. It is too quickly the case that "the rich" becomes "anyone with a job".
But Bruce can't be wrong in saying it's time to give the private sector some resources to see what happens. History suggests that good will come of it.