News How will the looming fiscal cliff impact the US economy and job market?

[russ_watters]

I have several problems with that:
1. Calling it a "welfare" program when for 90+% of people it is not means-tested doesn't seem accurate to me.
2. Having the program work differently for 5-10%% of population doesn't seem fair to me.
3. I don't think there is enough money to be gotten that way to "fix" the program under the typical goal of maintaining the current benefit structure.
4. People tend to view maintaining the benefits output as "fixing" the program, but I look at the input to output ratio and view the program as already badly broken. If the ratio for me is going to be something like 1/5 what it was for people who retired a generation ago, or what a reasonable private retirement account could achieve, then my standard of living today is being lowered by this program.

 

[CAC1001]

I have several problems with that:
1. Calling it a "welfare" program when for 90+% of people it is not means-tested doesn't seem accurate to me.

We could means-test it.

2. Having the program work differently for 5-10%% of population doesn't seem fair to me.

If it's supposed to be a "receive what you paid in" type of program, then no it wouldn't be fair, that is why the amount of income that is subject to the payrol tax is capped. Raising the cap and capping the benefits isn't so much to make it "fair," just to make it where we have a form of old-age social insurance program if you will, that provides people who need it with a minimum form of income in old age. I am all for private retirement accounts, however sometimes those can have a blowup, for example people who saved and invested prudently for years, then lost it all in the crash, or fell for one of the Bernie Madoffs of the world, and so forth.

3. I don't think there is enough money to be gotten that way to "fix" the program under the typical goal of maintaining the current benefit structure.

Yes, I don't myself know how much revenue raising the cap would bring in.

4. People tend to view maintaining the benefits output as "fixing" the program, but I look at the input to output ratio and view the program as already badly broken. If the ratio for me is going to be something like 1/5 what it was for people who retired a generation ago, or what a reasonable private retirement account could achieve, then my standard of living today is being lowered by this program.

When you say "ratio," do you mean the amount of people paying into it for each beneficiary today versus decades ago?

 

[BobG]

I don't think a cut in benefits is on the table. What I heard was that for those 54 and younger, the age at which they can take benefits would rise. In my opinion, SS faces a demographic problem and only a demographic solution will work.

This is true. 65 was a pretty high age to retire during the era when Social Security started. You retired because you were too old to work.

But the idea of retirement has also changed as people's lives get longer. Retiring while you're still in good enough condition to enjoy it seems pretty attractive - hence the resistance to raising retirement age for Social Security.

Nobody's owed an early retirement, though, which is what retirement at 65 has become.

If a person wants to quit working even though they're perfectly capable of working, then let them pay for their life of leisure themselves.

 

[ImaLooser]

This is true. 65 was a pretty high age to retire during the era when Social Security started. You retired because you were too old to work.

But the idea of retirement has also changed as people's lives get longer. Retiring while you're still in good enough condition to enjoy it seems pretty attractive - hence the resistance to raising retirement age for Social Security.

Nobody's owed an early retirement, though, which is what retirement at 65 has become.

If a person wants to quit working even though they're perfectly capable of working, then let them pay for their life of leisure themselves.

The age was raised decades ago. I get nothing until age 67.

I think the "resistance" is that I was forced to pay into it on that basis. They spent all the SS surplus, and don't want to pay it back.

Many companies force retirement at age 65.

 

[jim mcnamara]

ImaLooser said:

Many companies force retirement at age 65.

Really?

In the US, so my HR people tell me, there are very stringent legal requirements around forcing people to retire after a certain age. Can you please cite a source for this?

What is often done is to enforce some medical examination requirements starting from day one of employment. But the employee knows he/she cannot develop some medical conditions and still be a licensed commerical airline pilot, for example. That does not seem to be what you implied.

 

[BobG]

Many is an ambiguous term. If there's many, many, many companies, then what does many companies mean?

Until 1978, the minimum mandatory retirement age was 65, per federal law (with many exceptions for occupations such as firefighter, law enforcement, etc).

In 1978, the minimum mandatory retirement age was raised to 70 (with many exceptions for occupations).

In 1986, minimum mandatory retirement ages were abolished completely (with many exceptions for occupations).

Because of the exceptions, many occupations do have mandatory retirement ages and many are lower than 65. For example, air traffic controllers have to retire at age 56. FIFA referees have to retire at 45 (at least from FIFA level competitions, such as the World Cup, and the highest professional leagues - they can still referee lower levels, so it's more a mandatory demotion age).

Culturally, many people do still envision 65 being the retirement age (regardless of the fact that SSA has already raised the minimum age to receive full benefits - a person can still receive reduced benefits earlier).

 

[russ_watters]

We could means-test it.

How far would you go with that? That's a vastly different concept than what we have now. For a lot of people, it would mean paying them a lot more than they are otherwise due under the current structure and for a lot of people, paying them a lot less. It is a complete change in the nature of the program.

If it's supposed to be a "receive what you paid in" type of program...

It is supposed to be a "receive 5x what you paid in"(roughly) type of program -- like a 401k.

...that is why the amount of income that is subject to the payrol tax is capped.

Not really -- it would be just as easy to not cap either the tax or the benefits. The only logic I can think of for the cap is at the cap, it provides a pretty decent retirement lifestyle. Anything above that doesn't really require government to force you to save for.

Raising the cap and capping the benefits isn't so much to make it "fair," just to make it where we have a form of old-age social insurance program if you will, that provides people who need it with a minimum form of income in old age.

Well, fine, but I think that because most people thought that they were saving through this program for their entire lives for an income in retirement that was well above sustenance, it would be a huge shaft to suddenly slash their benefits like that. I strongly disagree with cutting people off at the knee like that.

I am all for private retirement accounts, however sometimes those can have a blowup, for example people who saved and invested prudently for years, then lost it all in the crash... [emphasis added]

That statement is self-contradictory. It isn't possible to "lose it all" if you are investing prudently. The most popular moderately safe growth investment is the S&P 500 Index Fund, which if all of your money was invested in (not prudent), would have lost half its value in the recent crash. This, of course, was temporary, recovering all but about 12% of it in two years. That's as bad as it ever gets and if you broaden your time horizon, you'll see that since 1995, investors have realized gains of 310%, even if we include the crash. So unless someone did something really, really stupid, the typical investment has paid off like a gold mine.

..or fell for one of the Bernie Madoffs of the world, and so forth.

Most of the investors of Madoff:
1. Started off rich.
2. Should have known better.

So that is not a typical situation.

When you say "ratio," do you mean the amount of people paying into it for each beneficiary today versus decades ago?

No, I mean the amount of money I'm going to get from Social Security versus the amount of money I paid in. Right now, even if the program survives unchanged, I won't get back what I paid in. That represents an 80% loss when compared to a moderately successful private retirement account. That's an enormous failure.

 

[BobG]

It isn't possible to "lose it all" if you are investing prudently. The most popular moderately safe growth investment is the S&P 500 Index Fund, which if all of your money was invested in (not prudent), would have lost half its value. This, of course, was temporary, recovering all but about 12% of it in two years. That's as bad as it ever gets and if you broaden your time horizon, you'll see that since 1995, investors have realized gains of 310%, even if we include the crash. So unless someone did something really, really stupid, the typical investment has paid off like a gold mine.

Just one caveat. As long as you haven't retired yet and are still investing money instead of pulling it out, then what you say is true (in fact, the crash is great because, for a period of time, the new money you were putting in was sure to get a fantastic return).

If you're already retired, the crash is devestating, since your living expenses don't go down temporarily. You're pulling out the same amount of money, but it's now a bigger percentage of your total investment.

Of course, if your life expetancy means you'll be relying on your investments for a long period of time, you ought to expect that stocks will be down during at least a portion of that time - but it'd be hard to plan for a few years where your investments lost half their value.

That's called risk. With a capital R.

 

[russ_watters]

Just one caveat. As long as you haven't retired yet and are still investing money instead of pulling it out, then what you say is true (in fact, the crash is great because, for a period of time, the new money you were putting in was sure to get a fantastic return).

If you're already retired, the crash is devestating, since your living expenses don't go down temporarily. You're pulling out the same amount of money, but it's now a bigger percentage of your total investment.

"Devistating" is awfully strong: we're talking about two years of double the drawdown on a 30 year expected lifespan. Even if there is no accompanying excessive growth (and there was, of course) and the person took all of their money out at once, at the worst possible time, that would only cause a 7% drop in retirement income if the loss was spread over the whole retirement.

Heck, the effect of taking the money out and missing out on the next 30 years of gains would be much worse than the crash itself!

Of course, if your life expetancy means you'll be relying on your investments for a long period of time, you ought to expect that stocks will be down during at least a portion of that time - but it'd be hard to plan for a few years where your investments lost half their value.

What? No its not! if you're investing for 30 years, the best way to plan for the time your investment loses half of its value is via a pre-determined stock to fixed income ratio and completely ignoring the movement of the market. Over that much time, the crash will fix itself if you don't do anything to make it worse. That's like rule #2 of investing: Ride it out, don't touch it; you'll just make it worse if you try to outsmart the market.

Or, more realistically: before the crash, as long as you didn't start buying extra Corvettes because your nest-egg was double what you expected it to be, the crash just brought it back down to where you expected it to be.

 

[CAC1001]

How far would you go with that? That's a vastly different concept than what we have now. For a lot of people, it would mean paying them a lot more than they are otherwise due under the current structure and for a lot of people, paying them a lot less. It is a complete change in the nature of the program.

Well not all of a sudden, but we could implement it gradually. Or, gradually fade out regular social Security, then replace it with something new that functions in the way I described.

It is supposed to be a "receive 5x what you paid in"(roughly) type of program -- like a 401k.

My understanding was that it is supposed to be a program where you get paid out what you paid in.

Not really -- it would be just as easy to not cap either the tax or the benefits. The only logic I can think of for the cap is at the cap, it provides a pretty decent retirement lifestyle. Anything above that doesn't really require government to force you to save for.

Well functionally, having no cap on the tax or benefits would work fine, but then you'd get rich people getting massive payouts made to them, which wouldn't go over too well with many of the lower earners in the population who don't understand how the program is supposed to work.

Well, fine, but I think that because most people thought that they were saving through this program for their entire lives for an income in retirement that was well above sustenance, it would be a huge shaft to suddenly slash their benefits like that. I strongly disagree with cutting people off at the knee like that.

Yes, I understand that. That's why I'd be for implementing it gradually. Also, maybe there could be a way to shore it up but make it where it provides more than enough for just basic sustenance for most people?

That statement is self-contradictory. It isn't possible to "lose it all" if you are investing prudently. The most popular moderately safe growth investment is the S&P 500 Index Fund, which if all of your money was invested in (not prudent), would have lost half its value in the recent crash. This, of course, was temporary, recovering all but about 12% of it in two years. That's as bad as it ever gets and if you broaden your time horizon, you'll see that since 1995, investors have realized gains of 310%, even if we include the crash. So unless someone did something really, really stupid, the typical investment has paid off like a gold mine. Most of the investors of Madoff:

1. Started off rich.
2. Should have known better.

So that is not a typical situation.

True, but unfortunately, a lot of people don't know all of this. The average person is pretty clueless regarding the subject of investing.

 

[Astronuc]

Here's an interesting perspective: 5 reasons to let the U.S. ride over the fiscal cliff
http://theweek.com/article/index/236714/5-serious-reasons-to-let-the-us-ride-over-the-fiscal-cliff

What's a viable alternative?

 

[russ_watters]

My understanding was that it is supposed to be a program where you get paid out what you paid in.

Why would anyone ever support a retirement savings program that returned them nothing more than they could have gotten by stuffing their cash under a mattress?

No, throughout its history, it has paid people vastly more than they paid-in: which is as any retirement investment plan is supposed to work. But it doesn't anymore. http://www.urban.org/UploadedPDF/412660-Social-Security-and-Medicare-Taxes-and-Benefits-Over-a-Lifetime.pdf

-If you retired in 1960 it paid you 6.3x what you paid-in.
-If you retired in 1980 it paid you 2.1x what you paid-in.
-If you retired in 2010 it is estimated that it will pay you 0.9x what you paid in.

(for single male earners, adjusted for inflation)

That is a travesty. We've been screwed-over by older generations and most people don't even know it.

True, but unfortunately, a lot of people don't know all of this. The average person is pretty clueless regarding the subject of investing.

Ok...but that fact doesn't make what you said before true. It may be true that people think it is common for people to "lose it all", but it isn't. Much less if they are investing "prudently".

It takes spectacular stupidity or bad luck to permanently lose a large fraction of your retirement savings due to a stock market crash. And if you are investing "prudently", it is all but impossible.

"Prudent" investing really is easy:

First, a certain fraction of your investments will be in insured, fixed-income securities. Those are basically a guaranteed return and near zero chance of losing your principal (barring an asteroid strike or nuclear war).

Next, just put all of your non-fixed income investments into an S&P500 Index Fund (it is the most popular fund there is). Never in its history has it been a losing proposition over a timeframe of more than 15 years. It is so good that 'getting back what you paid in' would be considered a significant failure. The baseline for determining success/failure would be somewhere around a 4:1 return.

 

[Astronuc]

Some history on social security and Medicare:

http://www.ssa.gov/history/hfaq.html
http://www.ssa.gov/history/briefhistory3.html
http://www.ssa.gov/history/

From 1937 until 1940, Social Security paid benefits in the form of a single, lump-sum payment. The purpose of these one-time payments was to provide some "payback" to those people who contributed to the program but would not participate long enough to be vested for monthly benefits. Under the 1935 law, monthly benefits were to begin in 1942, with the period 1937-1942 used both to build up the Trust Funds and to provide a minimum period for participation in order to qualify for monthly benefits.

http://www.ssa.gov/history/briefhistory3.html#firstcheck

"Long before the economic blight of the depression descended on the Nation, millions of our people were living in wastelands of want and fear. Men and women too old and infirm to work either depended on those who had but little to share, or spent their remaining years within the walls of a poorhouse . . .The Social Security Act offers to all our citizens a workable and working method of meeting urgent present needs and of forestalling future need . . . One word of warning, however. In our efforts to provide security for all of the American people, let us not allow ourselves to be misled by those who advocate short cuts to Utopia or fantastic financial schemes. We have come a long way. But we still have a long way to go. There is still today a frontier that remains unconquered--an America unclaimed. This is the great, the nationwide frontier of insecurity, of human want and fear. This is the frontier--the America--we have set ourselves to reclaim." -- President Franklin Roosevelt August 14, 1938, Radio address on the third anniversary of the Social Security Act

Nice idea back then, and the US still had room to grow. Hawaii and Alaska were not yet states.

Ida May Fuller worked for three years under the Social Security program. The accumulated taxes on her salary during those three years was a total of $24.75. Her initial monthly check was $22.54. During her lifetime she collected a total of $22,888.92 in Social Security benefits.

http://www.ssa.gov/history/briefhistory3.html#idamay

Fuller would be an extreme case, since most folk don't live to 100. Nevertheless, many of the first recipients paid in a lot less than they received.

 

[BobG]

Here's an interesting perspective: 5 reasons to let the U.S. ride over the fiscal cliff
http://theweek.com/article/index/236714/5-serious-reasons-to-let-the-us-ride-over-the-fiscal-cliff

What's a viable alternative?

About the only thing I disagree with is the possibility of the fiscal cliff causing credit angencies to downgrade the US. Doing nothing will cause them to downgrade the US. Cutting the budget deficit (however it's done) will improve confidence with credit agencies.

Plus, the article omits the impact on unemployment completely. I think sending unemployment rates right back up (which will increase government expenditures for unemployment, etc) would be the biggest negative of hitting the fiscal cliff.

And, personally, I wouldn't like to see such drastic cuts in defense spending.

 

[SixNein]

That is a travesty. We've been screwed-over by older generations and most people don't even know it.

To be fair, the health-care benefits being received more than make up for the SSI losses.

 

[SixNein]

Why would anyone ever support a retirement savings program that returned them nothing more than they could have gotten by stuffing their cash under a mattress?

No, throughout its history, it has paid people vastly more than they paid-in: which is as any retirement investment plan is supposed to work. But it doesn't anymore. http://www.urban.org/UploadedPDF/412660-Social-Security-and-Medicare-Taxes-and-Benefits-Over-a-Lifetime.pdf

-If you retired in 1960 it paid you 6.3x what you paid-in.
-If you retired in 1980 it paid you 2.1x what you paid-in.
-If you retired in 2010 it is estimated that it will pay you 0.9x what you paid in.

(for single male earners, adjusted for inflation)

That is a travesty. We've been screwed-over by older generations and most people don't even know it. Ok...but that fact doesn't make what you said before true. It may be true that people think it is common for people to "lose it all", but it isn't. Much less if they are investing "prudently".

It takes spectacular stupidity or bad luck to permanently lose a large fraction of your retirement savings due to a stock market crash. And if you are investing "prudently", it is all but impossible.

"Prudent" investing really is easy:

First, a certain fraction of your investments will be in insured, fixed-income securities. Those are basically a guaranteed return and near zero chance of losing your principal (barring an asteroid strike or nuclear war).

Next, just put all of your non-fixed income investments into an S&P500 Index Fund (it is the most popular fund there is). Never in its history has it been a losing proposition over a timeframe of more than 15 years. It is so good that 'getting back what you paid in' would be considered a significant failure. The baseline for determining success/failure would be somewhere around a 4:1 return.

One of the goals was to protect people's money from inflation. So if you paid in 10 dollars in 1960, you should get that money back in terms of 2012 dollars. Hence why SSI is adjusted by the CPI. Now, there are problems with the CPI. Perhaps the largest problem is overestimation of inflation. Due to over-estimation, people could make a profit in terms of real dollars.So it should come at no surprise to anyone that putting government stuff on the chained CPI is probably going to happen sooner rather than later. But it also goes a long way to fixing the growth rates on these programs.

Social security isn't a bad program, and it can be fixed with modest adjustments. As I've said all along, the real challenge is health-care and military spending. And health-care is probably the most challenging of the two.

 

[russ_watters]

To be fair, the health-care benefits being received more than make up for the SSI losses.

Received by who? I'm 36.

Regardless, I'm not a hypocrite: Having a steeper trajectory of unfunded promises is not something that makes me happy. It will just be even worse when that blows up in our faces. We're just making that charade last longer.

 

[edward]

Received by who? I'm 36.

Regardless, I'm not a hypocrite: Having a steeper trajectory of unfunded promises is not something that makes me happy. It will just be even worse when that blows up in our faces. We're just making that charade last longer.

A bit off topic

I just crunched some numbers on various retirement calculators. They all seem to presume that there will be either a company pension or Social Security at retirement age. For younger people that just isn't realistic. Anyone under forty is younger people to me.

http://cgi.money.cnn.com/tools/retirementplanner/retirementplanner.jsp

 

[SixNein]

Received by who? I'm 36.

Regardless, I'm not a hypocrite: Having a steeper trajectory of unfunded promises is not something that makes me happy. It will just be even worse when that blows up in our faces. We're just making that charade last longer.

The IMF projected that everyone alive right now would come out ahead, but the rewards are greater at the upper age spans. At the same time, I think it's important to point out that projections on a macroeconomic level so far out aren't very good. The same is true of the projections of our federal budget. When someone says that SSI is projected to be insolvent by 2036, what is often left out is the great uncertainties involved in making such a long term projection. For example, we were running a surplus a decade ago, and the views then and today have changed dramatically.

My main concern about our economic future is our political culture. I think our political culture can tell us more about where we are going than any long term macroeconomic projection based on countless assumptions. For example, consider the comments by Marco Rubio (one of those people being primed for a potential presidential run):

GQ: How old do you think the Earth is?
Marco Rubio: I'm not a scientist, man. I can tell you what recorded history says, I can tell you what the Bible says, but I think that's a dispute amongst theologians and I think it has nothing to do with the gross domestic product or economic growth of the United States. I think the age of the universe has zero to do with how our economy is going to grow. I'm not a scientist. I don't think I'm qualified to answer a question like that. At the end of the day, I think there are multiple theories out there on how the universe was created and I think this is a country where people should have the opportunity to teach them all. I think parents should be able to teach their kids what their faith says, what science says. Whether the Earth was created in 7 days, or 7 actual eras, I'm not sure we'll ever be able to answer that. It's one of the great mysteries.

Read More http://www.gq.com/news-politics/politics/201212/marco-rubio-interview-gq-december-2012#ixzz2D6RBBC9f

I think it's reasonable to say that their is a growing intolerance to science in our political culture. Just this past year, we watched people doubt the statistics behind polling, unemployment numbers, and so forth. The same is taking place of evolution, climate change, stem cell research, nuclear technology, and even the space program seems to be viewed as nothing more than special interest. Even in economic fronts, this trend endures. For example, the CRS recently posted a study showing that there exists no evidence that tax cuts for the wealthy leads to economic growth. Republicans responded by suppressing the report. And there exists many more examples outside of that one report covering both parties.

In a basic nutshell, the problems we face are a lot bigger and deeper than spending on SSI. Quite frankly, SSI isn't a real big problem. It's undergoing some strain due to our population dynamics, but it's not something a practical hand couldn't fix. For example, the chained CPI would actually make it grow slower since it cuts out some of the overestimation of inflation. It would also help put a stop to people making money in real terms off of the SSI program. Little adjustments like these can take care of SSI.

Health-care is a different animal altogether. The first obvious problem is the health-care industry is being protected by the government from open markets. And there is enormous amounts of money and politics involved in the industry. So even very tiny changes in the industry will come with a very big fight. A fight that can end political careers very quickly since the elderly is one of the most reliable voters in America. It's a mess and nobody in congress is really willing to touch it. In fact, the problem is getting worse every election cycle. And add that to the political culture above, and it's a disaster waiting to happen.

 

[Astronuc]

Chambliss latest Republican to break with anti-tax lobbyist
http://news.yahoo.com/chambliss-latest-republican-break-anti-tax-lobbyist-195247900.html

What will work? What are the consequences?

Spending cuts? How much and what?

Tax increases? How much and what?

Revenue increases? How and what?

 

[Angry Citizen]

Chambliss latest Republican to break with anti-tax lobbyist
http://news.yahoo.com/chambliss-latest-republican-break-anti-tax-lobbyist-195247900.html

What will work? What are the consequences?

Spending cuts? How much and what?

Tax increases? How much and what?

Revenue increases? How and what?

You forgot something: Stimulus spending. If we had something like the American Jobs Act in place a couple years ago, our deficit would be lower because more people would be paying taxes, and some would be paying higher taxes.

A sizable share of our deficit is revenue loss due to the Bush recession. Making up that revenue loss requires an end to the lingering effects of the Bush recession. Keynesian economics dictates that targeted spending increases, not decreases, are key to this.

 

[JonDE]

You forgot something: Stimulus spending. If we had something like the American Jobs Act in place a couple years ago, our deficit would be lower because more people would be paying taxes, and some would be paying higher taxes.

A sizable share of our deficit is revenue loss due to the Bush recession. Making up that revenue loss requires an end to the lingering effects of the Bush recession. Keynesian economics dictates that targeted spending increases, not decreases, are key to this.

We are beyond that point now. The goal now is to immediately shrink the deficit while still allowing the economy to grow. There will most likely be very little stimulus in any form from here on out. IMO stimulus would help the economy to grow but in the short term would lead to bigger deficits, this is not the goal from what I have seen.

 

[Angry Citizen]

We are beyond that point now. The goal now is to immediately shrink the deficit while still allowing the economy to grow. There will most likely be very little stimulus in any form from here on out. IMO stimulus would help the economy to grow but in the short term would lead to bigger deficits, this is not the goal from what I have seen.

Sadly I think you're right. Little political will exists for stimulus spending when we are too busy worshiping the Almighty Altars of Debt and Deficit Reduction.

 

[Astronuc]

Dems Talk Medicare in Fiscal Cliff
http://news.yahoo.com/sen-dick-durbin-medicare-medicaid-fair-game-talks-174347426--abc-news-topstories.html

Sen. Dick Durbin said today that his Democratic colleagues in the House and Senate should be willing to address entitlement programs like Medicare and Medicaid in deficit reduction negotiations.

Well, we'll see.

 

[mheslep]

Dems Talk Medicare in Fiscal Cliff
http://news.yahoo.com/sen-dick-durbin-medicare-medicaid-fair-game-talks-174347426--abc-news-topstories.html
Well, we'll see.

Given his actual statements on the air, I think that summary from ABC News is misleading when it says Democrats should be willing "to address entitlement reform".

Durbin said he wanted "meaningful reforms" on Medicare. To do so requires some simple arithmetic to come forth. In the same segment Durbin i) rejected a voucher system for Medicare ala Ryan, ii) rejected raising the Medicare eligibility age, iii) took social security off the table.

From those statements, I think reform to Durbin is higher taxes, beyond the taxes increase about to happen on January 1, and no spending cuts to entitlements in any form.

http://www.realclearpolitics.com/video/2012/11/25/durbin_open_to_entitlement_reform_says_no_to_touching_medicare_age__social_security.html

 

[SixNein]

Dems Talk Medicare in Fiscal Cliff
http://news.yahoo.com/sen-dick-durbin-medicare-medicaid-fair-game-talks-174347426--abc-news-topstories.html
Well, we'll see.

I don't expect anything other than a gesture. To fix health-care, we either have to socialize it and wipe out a lot of companies, or we have to open it up to the markets and wipe out a lot of companies. Of course, there is always the option of dropping everyone and just have the masses doing without health-care... and wiping out a lot of companies.

 

[Angry Citizen]

I don't expect anything other than a gesture. To fix health-care, we either have to socialize it and wipe out a lot of companies, or we have to open it up to the markets and wipe out a lot of companies. Of course, there is always the option of dropping everyone and just have the masses doing without health-care... and wiping out a lot of companies.

I think the PPACA is "opening it up to the markets" - unfortunately, that is its biggest weakness.

 

[Angry Citizen]

Given his actual statements on the air, I think that summary from ABC News is misleading when it says Democrats should be willing "to address entitlement reform".

Durbin said he wanted "meaningful reforms" on Medicare. To do so requires some simple arithmetic to come forth. In the same segment Durbin i) rejected a voucher system for Medicare ala Ryan, ii) rejected raising the Medicare eligibility age, iii) took social security off the table.

From those statements, I think reform to Durbin is higher taxes, beyond the taxes increase about to happen on January 1, and no spending cuts to entitlements in any form.

http://www.realclearpolitics.com/video/2012/11/25/durbin_open_to_entitlement_reform_says_no_to_touching_medicare_age__social_security.html

i) Thank goodness.

ii) Thank goodness.

iii) Thank goodness.

Why is it that Republicans want to balance the budget on the backs of the poor? Why isn't defense spending even being considered next to subsidies for people who have trouble putting FOOD on their plate? Defense is the first place you should look for massive budget cuts, yet Republicans stand in firm opposition to it.

 

[mheslep]

i) Thank goodness.

ii) Thank goodness.

iii) Thank goodness.

Why is it that Republicans want to balance the budget on the backs of the poor?

The US federal government spends $0.8T a year on healthcare, which is increasing rapidly, and another $0.5T per year in other safety net spending like food stamps and unemployment insurance. Fifty years ago the federal government did almost none of this. So I don't accept the premise.

Why isn't defense spending even being considered next to subsidies for people who have trouble putting FOOD on their plate? Defense is the first place you should look for massive budget cuts,

Defense spending has already lost some planned increases, and is being cut as of January 1. I would cut it more, but that doesn't matter much with regards to the deficit long term. The rate of of entitlement spending increase has to decrease, otherwise in two, three decades all revenue will be spent on interest.

yet Republicans stand in firm opposition to it.

I think many oppose defense cuts, and some do not. Notably Sen Paul and Rep. Paul propose significant cuts in defense spending, much sharper than what's on the table now. And some Democrats like Sen. Boxer (Ca) are defenders of big budget military items like the F-35.

 

[aquitaine]

The US federal government spends $0.8T a year on healthcare, which is increasing rapidly, and another $0.5T per year in other safety net spending like food stamps and unemployment insurance. Fifty years ago the federal government did almost none of this. So I don't accept the premise.

The problem is, we need those things. Healthcare is a necessity. 100 years ago it didn't matter much because medicine was not that effective. But now? You can't live without it. If you have a serious health problem, and you can't afford to get it treated, what should you do? Die? Lives depend on how this problem is resolved. Without food stamps, we'd have millions of people who are malnourished and many who would just starve to death. Starving and desperate people are the seedbed of violence, it shouldn't be so surprising that the murder rate during the last Great Depression was twice what it is today.

There has to be a better way to deal with this issue than just re instituting social darwinism.

 

[russ_watters]

The problem is, we need those things. Healthcare is a necessity. 100 years ago it didn't matter much because medicine was not that effective. But now? You can't live without it. If you have a serious health problem, and you can't afford to get it treated, what should you do? Die?

That's self-contradictory: people with serious health problems couldn't live without it 100 years ago either. Yes, they died.

The problem to me is that people think/talk about needs without taking into account the cost.

This moral model for deciding that healthcare should be a "right" is awesome if you're a pharma company: You can spend however many billions of dollars you feel like to develop drugs for ever rarer illnesses and if you succeed, you can charge whatever it takes to turn a profit because as soon as the treatment is invented, it becomes a "right" for people who need it to get it, so the government pays whatever it costs. Clearly, this model is unsustainable.

If this were applied to cars -- which are also a matter of life and death as well as standard of living -- the government would be buying us all $100,000 cars, simply because they exist. On second thought, that's a great idea!

I'm seriously concerned that this logic could be the downfall of Western civilization.

No, the reality is that if someone invents a new TV or car or medical treatment, but you can't afford it, you haven't actually lost anything. We have to get back to the idea that you have to pay for what you get and if you can't afford something, you don't get it, except for absolute, immediate essentials like food.

 

[BobG]

Chambliss latest Republican to break with anti-tax lobbyist
http://news.yahoo.com/chambliss-latest-republican-break-anti-tax-lobbyist-195247900.html

What will work? What are the consequences?

Spending cuts? How much and what?

Tax increases? How much and what?

Revenue increases? How and what?

I expect Saxby Chambliss to join Lindsey Graham on the target list of the Club for Growth. (And Shelley Moore Capito in the WV Republican primary if Rockefeller retires, as expected.)

Club for Growth is different than the Tea Party. Club for Growth, like Grover Norquist, only focuses on taxes. They also don't waste their efforts on candidates like Christine O'Donnell. The goal is to put more conservative Republicans in Congress, so Republicans perceived as not conservative enough that occupy almost sure Republican seats in Congress (such as Lindsey Graham in South Carolina - do you really think a Dem would defeat whoever beats Graham in the Repbulican primaries?). They have their defeats (Mourdock in IN), but they have a much better track record than Tea Party candidates (actually, quite a few overlap and are backed by both groups).

By the way, the threat from the Club for Growth is part of the reason you see Lindsey Graham on TV attacking Obama so often. If he becomes synonymous with "anti-Obama", it's harder to attack him on the issues he has a more moderate stance on (such as immigration reform and resistance to the Norquist pledge).

 

[aquitaine]

That's self-contradictory: people with serious health problems couldn't live without it 100 years ago either. Yes, they died.

The problem to me is that people think/talk about needs without taking into account the cost.

This moral model for deciding that healthcare should be a "right" is awesome if you're a pharma company: You can spend however many billions of dollars you feel like to develop drugs for ever rarer illnesses and if you succeed, you can charge whatever it takes to turn a profit because as soon as the treatment is invented, it becomes a "right" for people who need it to get it, so the government pays whatever it costs. Clearly, this model is unsustainable.

If this were applied to cars -- which are also a matter of life and death as well as standard of living -- the government would be buying us all $100,000 cars, simply because they exist. On second thought, that's a great idea!

I'm seriously concerned that this logic could be the downfall of Western civilization.

No, the reality is that if someone invents a new TV or car or medical treatment, but you can't afford it, you haven't actually lost anything. We have to get back to the idea that you have to pay for what you get and if you can't afford something, you don't get it, except for absolute, immediate essentials like food.

My cousin didnt have healthcare. So he ended up with a stage 4 cancer diagnosis. There were many warning signs before that as the cancer developed, but because he was poor he didn't have them investigated. It was a testicular cancer, the same type that has a +90% survival rate. His death was almost certainly preventable. The result was he was dead and buried at the age of 22. He never had a chance to make something of himself, are you really telling me that he deserved this? You're wrong, you do lose something by not getting serious conditions treated: Your life.

You're making a reductio ad absurdum by comparing healthcare with cars. You can live without a car, but with serious medical conditions, like cancer, you literally cannot live without it. I somehow don't think treating cancer is going to cause the downfall of western civilization.

 

[mheslep]

The problem is, we need those things. Healthcare is a necessity. 100 years ago it didn't matter much because medicine was not that effective. But now? You can't live without it. If you have a serious health problem, and you can't afford to get it treated, what should you do? Die? Lives depend on how this problem is resolved. Without food stamps, we'd have millions of people who are malnourished and many who would just starve to death. Starving and desperate people are the seedbed of violence, it shouldn't be so surprising that the murder rate during the last Great Depression was twice what it is today.

There has to be a better way to deal with this issue than just re instituting social darwinism.

The safety net programs were created with the idea that they would help the truly destitute with costs on the order of a few tens of billions in today's dollars. Today, the costs of those programs consume most of government spending and are on track to consume all spending not paid to debt interest. Then, instead of consideration of the effectiveness of these programs or of simply slowing their growth, the response at any level of spending, $80 billion or $800 billion, is social darwinism, starvation, violence* by the desperate (without evidence).

Even if one accepts the catastrophic outcomes from reforming spending on those programs, and I do not, as a matter of simple arithmetic those programs will collapse if they continue unchanged, as even Sen Durbin admitted Sunday, insuring the outcomes those supporting the status quo claimed they wanted to prevent.

* http://marginalrevolution.com/wp-content/uploads/2011/05/Violence-Stylized-2.png

 

[russ_watters]

My cousin didnt have healthcare. So he ended up with a stage 4 cancer diagnosis. There were many warning signs before that as the cancer developed, but because he was poor he didn't have them investigated. It was a testicular cancer, the same type that has a +90% survival rate. His death was almost certainly preventable. The result was he was dead and buried at the age of 22. He never had a chance to make something of himself, are you really telling me that he deserved this? You're wrong, you do lose something by not getting serious conditions treated: Your life.

You're making a reductio ad absurdum by comparing healthcare with cars. You can live without a car, but with serious medical conditions, like cancer, you literally cannot live without it. I somehow don't think treating cancer is going to cause the downfall of western civilization.

1. "Deserve" is a completely irrelevant question. There are lots and lots of things in life that are an utter crapshoot. Yeah, it sucks that he died from cancer. A close friend of mine died from a rare form of cancer when he was in 2nd grade and he had the best available care. Definitely unlucky. My sister got and beat breast cancer last year at the relatively young age of 37. Was she lucky or unlucky? Neither of them "deserved" to get cancer, but that's life. Sometimes it is unfair. Sometimes you get cancer. Sometimes (well -- ultimately, always) you die.

2. It was you who used 100 years ago as a baseline, so please don't switch back and forth. Any treatment beyond the virtually nothing that existed back then is extra. Not getting to take advantage of all of the extras is not a negative, it is just a lack of a positve. And no, that's not the same thing.

Try it this way: I have $20. I give that $20 to the person standing next to you. Did you lose $20 or did you just gain nothing? Again, this mindset that people have that they are entitled to everything possible just because it exists is dangerous.

Regarding the car, you're missing the point of the analogy. Yes, you can live without a car, but that's not the point. The point is that if you have a car, spending more money can result in more safety. The same exists for planes, not to mention stairs. If two people are in an accident -- and yes, both could have possibly found an alternative to driving -- and the rich one has a modern car with a dozen airbags while the poor one is driving a beat-up 20 year old car without modern safety features, the rich one may live while the poor one dies. Does the poor guy deserve to die? No. Does that mean the rich guy should have bought him a better car? IMO, no. Both as a matter of morality and practicality.

At the same time, you are trying to create a false dichotomy by saying "you can't live without it" with healthcare because implies that you can live with it. Sometimes you can and sometimes you can't -- both live with it and live without it.

I don't know if you're purposely belittling the point by focusing just on cancer alone vs the downfall of Western civilization or if you just don't see it, but you are aware that we have a serious debt crisis, in part because of paying for things like cancer treatments (not to mention paying people to get rid of old cars...), right? You are posting in this thread, which is partly about that problem. The current economic downturn and related debt crisis, which is worse in Europe, exists largely because of overindulgence in entitlements. And you are aware that the problem is currently getting worse and not better, right? I'm not suggesting that we're going to collapse back to a hunter-gatherer society, but I think there is a significant non-zero risk of a long-term, significant decline in average standard of living. The healthcare cost problem is going to keep getting worse because the economic model we've chosen is flawed. Do you have a suggestion for how to fix it?

The spiral can't continue forever, of course. Either we'll fix it or it will fix itself:

1. It will fix itself by consuming (as mhselp said) a larger and larger fraction of our tax dollars until we simply can't afford to pay for more healthcare and as a result, drug compaines will stop doing research and healthcare quality will stop improving. Or:

2. (also as mhselp said) The reductions in other areas that have to be made to compensate for the "mandatory" spending on healthcare become too great to bear. You want free cancer treatment for everyone, regardless of the cost? Fine: then you can't have your roads maintained and you can't a have a police force and you can't have decent schools for your kids. Those things are not "entitlements". They aren't "mandatory spending". So they'll have to go. When our standard of living drops enough that we can't stand it anymore, we'll start to make the hard choices on "entitlements". Think that's far fetched? The consistently worst city in the US - Camden, NJ - slashed its police force by half in 2011, which significantly increased crime even more. Why would anyone do anything so idiotic? Police forces cost money and if you don't have it, you cut it. It is time we face-up to the economic and moral realities that healthcare is not a more important government function than such basics as police and that if the economy isn't doing well, everything has to take a hit.

You cannot pay for things you don't have the money to pay for. So you tell me: would you trade a lower chance of dying of cancer for a lower chance of being murdered? That's the type of choice we're already making.

 

[Oltz]

Personally I think we should go off the fiscal cliff as it was negotiated to be mandatory cuts in exchange for the debt limit increase. We have in our hisory often promised cuts inexchange for increased spending or borrowing and historically the cuts have never actually taken place. This time the cuts will happen and all we need to do is nothing.

The debt ceiling is actually going to need to be increased again very soon and the best option may be to set up a second round of mandatory cuts and rate hikes to go with it schedule them for 2014 and see if they negotiate in better faith this time in the debt reduction super committee. This is our only avenue to austerity in this country currently as nobody in Washington is willing to put themselves on the line for the needed measures.

Will it be hard yes will it have some negative outcomes yes but that is why they are tough choices. Without them we are only punishing ourselves and everyone under the age of 40 is going to need to pay or the spending of the past 30 years one way or another. The only question is when and how much extra interest the debt gets to accrue.

Personally I want to see the cuts happen before the rate increases...fool me once shame on you fool me twice shame on me.

 

[mheslep]

...
The debt ceiling is actually going to need to be increased again very soon and the best option may be to set up a second round of mandatory cuts and rate hikes to go with it schedule them for 2014 ...

Another round of cuts have to come by way of reform to entitlement programs or they really do not do much. The current small cuts in the Jan 1 sequester do not touch entitlements.

As for a second round of tax hikes, I think that's also a one trick pony. This time, Jan 1, federal taxes go up across the board, payroll taxes jump from 4.2 to 6.2%, the top income tax rate will go to 39.6+3.8 = 43.4%, dividends formerly at 15% also go to the income rate, estates worth $1M to $5M go from zero to 55%, and deductions decline so that everyone's income exposed to those rates grows. Source.

I can't see another tax hike to follow this one, at least not one with any expectation of actually bringing in more revenue.

 

[Angry Citizen]

Personally I think we should go off the fiscal cliff as it was negotiated to be mandatory cuts in exchange for the debt limit increase. We have in our hisory often promised cuts inexchange for increased spending or borrowing and historically the cuts have never actually taken place. This time the cuts will happen and all we need to do is nothing.

The debt ceiling is actually going to need to be increased again very soon and the best option may be to set up a second round of mandatory cuts and rate hikes to go with it schedule them for 2014 and see if they negotiate in better faith this time in the debt reduction super committee. This is our only avenue to austerity in this country currently as nobody in Washington is willing to put themselves on the line for the needed measures.

Will it be hard yes will it have some negative outcomes yes but that is why they are tough choices. Without them we are only punishing ourselves and everyone under the age of 40 is going to need to pay or the spending of the past 30 years one way or another. The only question is when and how much extra interest the debt gets to accrue.

Personally I want to see the cuts happen before the rate increases...fool me once shame on you fool me twice shame on me.

I'd rather have more debt than an ounce of austerity. See what austerity has done to Greece and Spain?

 

[russ_watters]

See what austerity has done to Greece and Spain?

Convinced creditors to waive some existing debt while adding new debt in order to prevent total economic collapse?

The problem you're missing here is that at some point you can't have more debt. In order to get more in debt people have to be willing to lend you money.

Personally, I would prefer that both of them collapse into anarchy for a few years. Westerners need to get slapped into recognition that government spending is not a blank check and bottomless money pit.

As with the couple of opinions above, I am in favor of allowing most of the fiscal cliff to happen, plus reforming "entitlements" (starting by stopping calling them "entitlements").

 

[SixNein]

That's self-contradictory: people with serious health problems couldn't live without it 100 years ago either. Yes, they died.

The problem to me is that people think/talk about needs without taking into account the cost.

This moral model for deciding that healthcare should be a "right" is awesome if you're a pharma company: You can spend however many billions of dollars you feel like to develop drugs for ever rarer illnesses and if you succeed, you can charge whatever it takes to turn a profit because as soon as the treatment is invented, it becomes a "right" for people who need it to get it, so the government pays whatever it costs. Clearly, this model is unsustainable.

If this were applied to cars -- which are also a matter of life and death as well as standard of living -- the government would be buying us all $100,000 cars, simply because they exist. On second thought, that's a great idea!

I'm seriously concerned that this logic could be the downfall of Western civilization.

No, the reality is that if someone invents a new TV or car or medical treatment, but you can't afford it, you haven't actually lost anything. We have to get back to the idea that you have to pay for what you get and if you can't afford something, you don't get it, except for absolute, immediate essentials like food.

I think universal health-care is worthwhile to pursue for a variety of reasons, and it can be done fairly efficiently. Even the most basic health-care access can help to prevent conditions and diseases that require intensive and life long treatments. In addition, it can help health experts identify and isolate bugs quicker. And I would even go so far as to say it's a national security risk. Overall, universal health-care should help increase our participation rate in the overall-economy due to the early prevent of conditions and diseases that takes people out of the marketplace. And a higher participation rate should lead to a more optimal economy.

But I do agree that under the existing model, such an effort will be unable to manifest itself into reality; instead, it will cause a lot of people grief. A model built on socialized crony capitalism is bound to fail.

 

[boomtrain]

I think universal health-care is worthwhile to pursue for a variety of reasons, and it can be done fairly efficiently. Even the most basic health-care access can help to prevent conditions and diseases that require intensive and life long treatments. In addition, it can help health experts identify and isolate bugs quicker. And I would even go so far as to say it's a national security risk. Overall, universal health-care should help increase our participation rate in the overall-economy due to the early prevent of conditions and diseases that takes people out of the marketplace. And a higher participation rate should lead to a more optimal economy.

you forgot to mention it'll bring about world peace...

do you have sources for any of those claims?

 

[russ_watters]

Lets talk a little about the political gamesmanship going on because I really don't understand what the various players are after, particularly Obama.

Obama is repeating (CNN report I'll link when I get home) his campaign refrain of "lets begin our work with where we agree", which is the extension of the Bush Tax cuts for all but the upper bracket -- and oh, by the way also include a debt ceiling increase. He follows that with "don't call my bluff". What bluff? I don't get it. Is he saying that if Republicans don't give him the middle class tax cut extension he's going to let taxes go up for everyone? Is that what he wants anyway? Is he trying to spin a potential win-win situation by getting what he wants either way and/or blaming Republicans for a tax increase even if he actually wants it?

Beyond that, what is not on the table for Obama is interesting to me: any proposal to not raise taxes. That includes the two options for raising income taxes and also allowing the social security tax reduction to expire. So Obama is apparently not considering any proposal that doesn't raise taxes. Let me rephrase: Obama wants to raise taxes in the middle of a weak economic situation. It just isn't clear to me by how much or if he's trying to blame it on others.

And as I said, he wants a debt ceiling extension. Is there any room for negotiation and does anything else about the fiscal cliff and debt issues concern him? "Entitlement" reform? Spending cuts? Are they on the table at all?

What bothers me is that doing nothing makes something happen at least on the spending cuts and he is not clearly articulating what he really wants. Now that he doesn't have to campaign anymore, he has that "flexibility" he told Russia to wait for, so why isn't he using that flexibility to actually do bipartisan negotiation and even do things that may be politically unpopular but fiscally necessary? Instead, he seems to be doing the same leading-from-behind-while-muscle-flexing he did with his healthcare reform: make provocative, politicized, inflexible statements about a small and/or vague part of the issue and let other people figure out the rest of it.

Republicans for their part seem to be willing to deal. Several have rebuffed their Norquist pledge, to their credit (though better would have been to never sign it in the first place ) and stated explicitly that they may be willing to raise taxes. And there may be enough for an actual vote to raise taxes to pass in the House.

What worries me is a repeat of the '80s where Republicans gave concessions on tax increases and Democrats reneged on promises of spending cuts that were supposed to follow. That's what "just pass what we agree on now" really says to me. Maybe that's his plan? The problem with that though is I don't think politicians really have the stomach to accept the cuts of the "sequestration". Its just that no one is talking about it, so I have no idea at this point where that is going. We're not in an active campaign and Obama never has to campaign again. It should not be this hard to figure out what people want. Why is this so hard?

Opinions?

 

[Alfi]

Opinions?


why ask ...


unless backed by some 'authority' ... they seem-to-be not allowed here.

do you have sources for any of those claims?

 

[russ_watters]

Opinions?why ask ... unless backed by some 'authority' ... they seem-to-be not allowed here.

That is very, very wrong. In fact, I'd say you've mostly missed the point of the politics forum: it exists largely to share opinions on world events. Otherwise, it would just be a repository for links to news articles.

Assertions of facts must be supported. Opinions, by definition, do not require factual support/citation. As-worded in the guidelines at the top of the forum:

2) Citations of sources for any factual claims (primary sources should be used whenever possible).

4) When stating an opinion on an issue, make sure it is clearly stated to be an opinion and not asserted as fact.

 

[mheslep]

...
Republicans for their part seem to be willing to deal. Several have rebuffed their Norquist pledge, to their credit (though better would have been to never sign it in the first place ) and stated explicitly that they may be willing to raise taxes. And there may be enough for an actual vote to raise taxes to pass in the House.

Not just several. If Boehner speaks for the GOP, then the GOP position is a yes to raising tax revenues, though maybe not via rates:

... said Republicans are willing to accept "new revenue, under the right conditions" to get a bipartisan agreement. He repeated his opposition to raising marginal tax rates, as Mr. Obama has proposed, but opened the door to bringing in more revenue by "closing special-interest loopholes and deductions, and moving to a fairer, simpler system."

But to get those increases in new law, Obama and Reid have to address some cuts. So far, nothing. Democrats like Durbin have explicitly rejected cuts to Medicare and SS.

 

[mheslep]

...
And, personally, I wouldn't like to see such drastic cuts in defense spending.

Might I ask why not? The US spends 60% more today than what it spent at the height of the Reagan defense build up in the cold war (constant dollars)

The pending defense cuts would be on the order of $40 billion / year for ten years, against the spending of ~800B. Is that drastic?

 

[mheslep]

The President gave speech today on the fiscal cliff topics. He mentioned the deficit seven times, used 'balance' seven times, referenced 'tax'es several dozen times, but not a word on reducing spending. Not for anything. He did mention working on the deficit "next year".

http://www.whitehouse.gov/the-press...rks-president-extending-tax-cuts-middle-class

 

[BobG]

Not just several. If Boehner speaks for the GOP, then the GOP position is a yes to raising tax revenues, though maybe not via rates:

Boehner's interpretation of increased revenue:

While Boehner suggested that Republicans would still oppose Obama’s plan to take “a larger share of what the American people earn through higher tax rates,” he said the party is open to “increased revenue . . . as the byproduct of a growing economy, energized by a simpler, cleaner, fairer tax code, with fewer loopholes, and lower rates for all.”

In other words, Boehner's position is the country needs tax cuts to increase government revenue.

 

[BobG]

Might I ask why not?

Sadly, it's because I'm as optimistic about Congress's ability to cut defense smartly (vs cut defense anywhere it doesn't affect jobs in my district) as I am about their capability to balance a budget.

I wouldn't say it's a drop dead issue for me. But it would definitely raise some trepidation.

And, full disclosure, I'm a defense contractor living in a city with five military installations.

 

[mheslep]

Boehner's interpretation of increased revenue:



In other words, Boehner's position is the country needs tax cuts to increase government revenue.

I don't think that's accurate:

"closing special-interest loopholes and deductions"

with fewer loopholes

Other GOP politicians have cited the $trillion/10 years of deduction cuts found by Simpson-Bowles commission as a possible target.

Cutting deductions and leaving marginal rates as they are, would dollar for dollar be better for the economy in my view.