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  1. #441
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    From Bloomberg:

    ‘Spending Cuts’ Lose Something in Translation

    Oh for those halcyon days when Bill Clinton was in the White House, Republicans controlled both houses of Congress, the economy was booming, unemployment was low, the peace dividend was working its magic and the federal budget was in surplus. (OK, so I omitted the tech bubble.)

    If we could just restore those Clinton-era tax rates on top earners, why, happy days would be here again!

    Not exactly. The $1.2 trillion of revenue President Barack Obama hopes to generate by raising taxes on the rich, revised from an initial $1.6 trillion, represents only a small down payment on a budget solution. By minimizing the real source of the problem, which is runaway growth in entitlements, especially health care, Obama isn’t doing the country any favors.

    Let’s look at some of the numbers. In 1998, the first time the federal government ran a surplus in three decades, outlays totaled $1.65 trillion compared with receipts of $1.7 trillion. For fiscal 2012, which ended Sept. 30, the respective numbers were $3.5 trillion and $2.4 trillion.

    Yes, tax receipts have been depressed as a result of five years of recession and slow growth. But even if they were to revert to their historical average of 18 percent of gross domestic product, the dollar amount would be $2.8 trillion, 14 percent more than actual 2012 revenue.

    Meanwhile, spending has more than doubled since 1998, a result of two wars, new entitlements, the worst recession since the Great Depression, multiple bailouts and a White House occupied in succession by a compassionate conservative (Republican George W. Bush) and an even more compassionate liberal (Democrat Obama).

    Cutting Antonyms

    Looking at projections under what most analysts view as a draconian, recession-inducing scenario -- the $600 billion fiscal cliff of automatic spending cuts and tax increases -- total spending continues to rise, according to the Congressional Budget Office’s 10-year budget outlook.

    Even with $1.2 trillion of discretionary spending cuts over 10 years as mandated by the Budget Control Act of 2011, outlays would reach $5.5 trillion in 2022, 22.3 percent of GDP, the same result as Obama’s proposed budget fix. If Congress were to extend all the Bush-era tax cuts and other special perks, government spending would hit $6 trillion in 2022.

    Even someone following the budget negotiations closely might be surprised to learn that there are no real cuts on the table in the way normal people think of them. That goes for Republican proposals, too. For example, households may decide to reduce their holiday spending this year from $750 to $500 and forgo the summer family vacation because times are tough. Those are spending cuts.

    Washington is the only place where a cut isn’t a cut. Instead, so-called spending cuts are reductions in the growth rate of outlays as prescribed under current law. Nothing is cut.

    Starting from current levels, if future spending were to grow at the rate of inflation plus the rate of population growth, 2022 outlays would be $4.8 trillion, according to Michael Tanner, a senior fellow at the libertarian Cato Institute in Washington. In other words, less than the feared fiscal-cliff outcome.

    For all of Obama’s insistence on raising top tax rates, the additional revenue he seeks doesn’t begin to solve the nation’s fiscal problems. By 2022, just three programs -- Medicare, Medicaid and Social Security -- will consume 54 percent of the federal budget, up from 44 percent now, Tanner said. And “the real explosion of entitlement costs takes place just outside the 10-year budget window.”

    The Democrats’ talk of “cuts” to these programs, which provide a social safety net for many Americans, is also misleading. Again, these are cuts in the accelerating growth rate of these programs. And if the projected savings from Obamacare don’t materialize, the outlook is even worse.

    Budget Lingo

    A glance at the historical budget tables published by the White House Office of Management and Budget puts all the talk about spending cuts in perspective. Nominal federal outlays fell by $61 billion, or 1.7 percent, in 2012, the first outright reduction since the huge post-World War II declines in 1946- 1948. Inflation-adjusted spending has shown only a handful of year-to-year declines, all small, in the decades since the post- war demobilization.

    As Tanner noted, inflation and population growth argue for nominal spending increases. But outlays topped 24 percent of GDP in each of the last four years, the highest by far since World War II and well above the 20 percent historical average.

    Ever since the election, the president has campaigned to raise taxes on the rich, or families making more than $250,000 a year. He has encouraged audiences to write to their representative in Congress in support of what he says is his election mandate.

    Obama needs to ask something more. First, he should explain that there’s a wide gap between the benefits to which Americans have become accustomed, especially those for the elderly, and the tax revenue needed to pay for those services. In other words, Medicare as we know it isn’t an option.

    Then the president should ask the question: What do you want, and how much are you willing to pay for it? It’s something Americans are going to have to decide in the not-too-distant future, so we better start thinking about it now.

  2. #442
    ^He pronks, too! Magic Poriferan's Avatar
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    Meanwhile, spending has more than doubled since 1998, a result of two wars, new entitlements, the worst recession since the Great Depression, multiple bailouts and a White House occupied in succession by a compassionate conservative (Republican George W. Bush) and an even more compassionate liberal (Democrat Obama).
    What are those new entitlements? And how is he including the recession as a part of greater expenditure, wouldn't the expenditures related to that just be the bailout and the stimulus package?
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  3. #443
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    Quote Originally Posted by Magic Poriferan View Post
    What are those new entitlements? And how is he including the recession as a part of greater expenditure, wouldn't the expenditures related to that just be the bailout and the stimulus package?
    Stimulus spending and the growth of medicare spending under the ACA.

    It's the fact that spending has reached a new normal, even though the circumstances that required huge stimulus spending are receding.

    In Washington now there are no temporary spending programs. Once started, no program is ended.

  4. #444
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    Quote Originally Posted by DiscoBiscuit View Post
    In Washington now there are no temporary spending programs. Once started, no program is ended.
    Well, that's just a typical economic principle. Can't we see the same thing in other areas of the economy? (For example, the shift to a two-worker income in the family vs one?) Everything in the economy adjusts to meld around the change, so it no longer remains optional, and to pull the change is then like pulling a bottom block out in Jenga.
    "Hey Capa -- We're only stardust." ~ "Sunshine"

    “Pleasure to me is wonder—the unexplored, the unexpected, the thing that is hidden and the changeless thing that lurks behind superficial mutability. To trace the remote in the immediate; the eternal in the ephemeral; the past in the present; the infinite in the finite; these are to me the springs of delight and beauty.” ~ H.P. Lovecraft

  5. #445
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    Quote Originally Posted by Jennifer View Post
    Well, that's just a typical economic principle. Can't we see the same thing in other areas of the economy? (For example, the shift to a two-worker income in the family vs one?) Everything in the economy adjusts to meld around the change, so it no longer remains optional, and to pull the change is then like pulling a bottom block out in Jenga.
    You're going to have to explain yourself better.

  6. #446
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    Quote Originally Posted by DiscoBiscuit View Post
    You're going to have to explain yourself better.
    I'm not sure how, I thought I did:

    Two working parent families were not the norm; they became the norm; the economy adjusted to compensate (cost of living went up, etc); and now if one parent chooses not to work, it can be a hardship for the standard of living they are used to, that used to be supported a few decades back by one income.

    Same thing with government programs: They step in to fill a need, and at first the program is "optional" but then forces in the economy take advantage of it / raise their prices / compensate / people begin to depend on it, and trying to remove it will send a lot of things tumbling.
    "Hey Capa -- We're only stardust." ~ "Sunshine"

    “Pleasure to me is wonder—the unexplored, the unexpected, the thing that is hidden and the changeless thing that lurks behind superficial mutability. To trace the remote in the immediate; the eternal in the ephemeral; the past in the present; the infinite in the finite; these are to me the springs of delight and beauty.” ~ H.P. Lovecraft

  7. #447
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    ^I so much agree with that post. Americans have forgotten how to scrimp and save like one working parent families as well. And now if school shuts down, momma loses her free daycare and bitches about it, like its government's problem inflicting on her job when she has to figure out something else to do with her kid for those days.
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  8. #448
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    Quote Originally Posted by Jennifer View Post
    I'm not sure how, I thought I did:

    Two working parent families were not the norm; they became the norm; the economy adjusted to compensate (cost of living went up, etc); and now if one parent chooses not to work, it can be a hardship for the standard of living they are used to, that used to be supported a few decades back by one income.

    Same thing with government programs: They step in to fill a need, and at first the program is "optional" but then forces in the economy take advantage of it / raise their prices / compensate / people begin to depend on it, and trying to remove it will send a lot of things tumbling.
    You're understanding it backwards.

    The increase of women in the workforce, and the growth of the workforce generally, combined with automation and globalization meant that per capita wages slowed in growth relative to the economy generally.

    More people clamoring for slices of a pie that isn't growing as quickly as the economy means less pie for each. The economy doesn't shift for us. We shift for it.

    The last part of your last sentence really addresses the issue (the economy is too inelastic to be greatly effected by your other points there). If people treat a program as permanent when it was explicitly designed to be temporary its their fault. If fiscal pain is unacceptable when felt by anyone but the upper class (tax the rich to pay for our benefits even though that won't cover the bill) we wont ever get our spending in order. Hence in my article:

    Obama needs to ask something more. First, he should explain that there’s a wide gap between the benefits to which Americans have become accustomed, especially those for the elderly, and the tax revenue needed to pay for those services. In other words, Medicare as we know it isn’t an option.

    Then the president should ask the question: What do you want, and how much are you willing to pay for it? It’s something Americans are going to have to decide in the not-too-distant future, so we better start thinking about it now.
    Taxes will have to go up on everyone, and spending will have to structurally be changed so that programs don't get a blank check forever because the employ umpteen federal employees and benefit umpteen thousands of (insert preferred voting bloc here). If the response to any request to spend less is, "but you're sacrificing (insert emotionally resonant group here)", then we can never hope to deal with our problems. When any plan to diminish entitlement spending is colored as being morally bankrupt with no basis in sound fiscal policy, we are unable to have a two sided conversation on the issue.

    There are two equally important sides to the issue.

    1) We need to make sure we run the government effectively and efficiently so that the engine of our success, the economy, can continue to grow and benefit us all

    2) We need to do our best to look after our people in whatever ways we can

    When people are deciding to work less so that they can still qualify for benefits, something is wrong.

    Surely we owe a duty to our people to help them get on their feet in their time of need. Barring issues that justifiably qualify others for ongoing assistance (disability etc..) every assistance program should have weaning feature that diminishes benefits over time and incentivizes a full return to the labor force while also spending $ more efficiently.

    More specifically, quit running the benefits as tax expenditures or some other financial/legal vehicle that's going to require entire agencies of federal workers to analyze and distribute the benefit. It should be a strait transfer into the hands of the needy so that bureaucratic hands stay out of the pie.

    Also, if you want to offer unemployment assistance, make public works labor a requisite to qualify. No money should be given to those unwilling to labor in some manner for it, and the labor should be designed to get as big a bang for the assistance buck as possible.

    My thoughts on the issue are still nascent, but that's a beginning.

  9. #449
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    Here is something to help guide your intuition. Compiled from data from bls.gov:



    • Average Production Per Employed is calculated by dividing real GDP by the total labor force employed.
    • Average Per Capita Income is calculated by dividing real GDP by the total population.
    • Percent of Population Employed is calculated by dividing the total labor force employed by the total population.
    [SIGPIC][/SIGPIC]

  10. #450
    ^He pronks, too! Magic Poriferan's Avatar
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    The Republican party would really stand to gain by having all of their states institute open ballots for all their races including primaries. It's one of the few detailed ways they can reduce the malignant effect of an extremist base.

    Here's some commentary about the state of the Republican party that I generally agree with.


    But if Republicans continue to be led around by, and live in fear of, a base that denies global warming after Hurricane Sandy and refuses to ban assault weapons after Sandy Hook — a base that would rather see every American’s taxes rise rather than increase taxes on millionaires — the party has no future. It can’t win with a base that is at war with math, physics, human biology, economics and common-sense gun laws all at the same time.
    He mentions the disability treaty, but he doesn't even mention Boehner's totally botched "plan B" vote or Mitch McConnel fillibustering his own bill.
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