The Housing Bubble

“Romayne Davis”

Lettuce consider how what we name our children affects them in later life…

Reagan did not fire Volcker but it would not alter the challenge that Reagan faced and fixed. Before Carter most economists believed that high inflation and high unemployment was not even possible. Carter rewrote the texts and passed the mess to Reagan. A mess at least as bad as was handed to Obama.

http://www.forbes.com/sites/briandomitrovic/2011/02/07/volcker-and-the-reagan-legacy/2/

If you really want to know the history this is a good article.

Volcker wanted to be re-appointed, but Reagan chose not to, appointing Greenspan instead. It was seen as a firing by people at the time.

Nobel laureate Joseph Stiglitz said about him in an interview:

Paul Volcker, the previous Fed Chairman known for keeping inflation under control, was fired because the Reagan administration didn’t believe he was an adequate de-regulator

wikipedia

As your own quote demonstrates the issue was not over raising interest rates and his decision to go with his own appointee is normal. Whether someone wants to consider that a firing is opinion not fact. However, there is no question that Obama likes BBs printing of money since he did decide to reappoint him.

Nonsense. The guy who wrote this “good article” wasn’t even alive when all this was happening. Gerald Ford inherited Richard Nixon’s post-Viet Nam inflation, addressed it (I still have a “WIN” button –Whip Inflation Now) and passed it off to Carter who got it under control in time for Ronnie to take credit for it and set us on the deregulatory path to the mess we’re in today.

Reagan did NOT “fix” a damned thing, he undid all the good Carter had instituted and handed our national treasury over to his cronies. When his Budget Director, David Stockman, had the temerity to suggest that what he was doing would prove disastrous, he was famously “taken behind the woodpile” and silenced. History has vindicated him. This op-ed is bunk.

We are at Peak Debt.

Palin had the answer drill baby drill. Obama was handled an energy windfall with new drilling techniques and not only failed to take advantage of this and the ability to produce oil from coal, he actively put up hurdles. We could have almost eliminated oil imports, created jobs in the energy sector (without subsidies) and the hundreds of billions saved in imports would have created other jobs since the money would have circulated here.

So, the “fix” to debt increasing at 3x the unsustainable rate was more short-term exploitation of limited resources and potential acceleration of global climate change?

I’m sorry, but drill baby, drill, which is great for a few people, is not the answer to $600B a year international trade imbalance and another $1B a year widening wealth disparity.

Check out the history of the Alaskan pipeline, had it been built on schedule the Arabs could have shoved their oil up their royal pipeline back in 73..and opec probably would have collapsed..but no the environmentalists had their way

The oil from alaska was equal to the opec oil back then

http://www.buyandhold.com/bh/en/education/history/2002/arab.html

We could have almost eliminated oil imports,

I’m sorry, but drill baby, drill, which is great for a few people, is not the answer to $600B a year international trade imbalance and another $1B a year widening wealth disparity.

It is absolutely part of the answer. Our economy is heavily dependent on oil. In 2011, we imported 8.91 million barrels a day, approximately 44% of US consumption. Of that, approximately 25% of oil imports come from Canada. OPEC countries made up 47% of US oil imports.

Using some simple math and $100 per barrel oil price, we sent $152 Billion dollars to OPEC countries last year. We sent Canada another $81 Billion. Energy independence, or at least energy diversity, is a big part of fixing our trade imbalances and our economy.

We can’t compete with $1/day manufacturing wages and lax environmental/labor laws without implementing tariffs which lead to trade wars we can’t win (ask GM or CAT). We can compete on the technological advances of our energy exploration/extraction industries and the fungibility of oil, coal, etc.

We can compete on the technological advances of our energy exploration/extraction industries and the fungibility of oil, coal, etc.

The fungibility is why drilling more here won’t dramatically lower prices here, if it lowers them at all.

The fungibility is why drilling more here won’t dramatically lower prices here, if it lowers them at all.

It’s not about lowering prices. It’s about capital flows and trade imbalances, i.e. “The Trade Deficit”. Too much of our capital flows to OPEC and others to sustain our energy needs. With more of our capital staying within the US domestic market, more taxes flow to our Federal, State, and local governments and more Americans are gainfully employed.

Point taken. It would reduce our trade deficit.

But is there really that much oil? And would we be having a BP-style mega-oil spill every few years to get it?

Is there really that much oil? No. The USGS says there is 3-4.3 B barrels of recoverable oil in the Bakken Shale formation. Importing 9 million barrels a day, that give us… oh… 333-478 days worth of imports.

Some suggest that the USGS numbers are off by 100%, and there is actually a good 7-8 B barrels there. Oh, so 2 year’s worth of imports instead of 1 year’s worth?

Look, if you stand to profit $10 a barrel, and can be the company that gets to extract 25% of that oil… well, then your profits could be in the $10 billion range. Great for that company that can make the money.

But as a long-term solution to oil dependence? Nope.

Another way to look at it is the oil could reduce our oil imports by 10% for a decade… or maybe 2 decades. So? $10B off our $600B a year international trade deficit?

Oh, but there is other oil exploration. Yeah, and that is needed just to maintain domestic production as older wells have declining production.

We could achieve the same reduction in international trade imbalance by putting a tax on oil, increasing the price of gas, encouraging people to carpool, use public transportation and buy smaller, more efficient cars.

Drill Baby, Drill is about mass profits for a hand full of oil companies and is not a solution to the larger economic issues facing the USA.

Agreed, Darrell. Our short-sighted energy policy caters to a hugely destructive oligarchy that arguably has caused our country as much grief as any Xtian Crusade ever did Old Europe. (I’m talking to you, BP, Cheney, Condoleeza, et al.)

If we’d invested a fraction of the money in energy research that we have in our oil wars we’d already be using more efficient sources and systems, and all that oil would remain in safe-keeping under American soil for unforeseen uses and necessities– plastics and pharmaceuticals among them.

Then there are the climatological implications of extracting that much oil to be squandered as fuel, and the massive pollution of our non-renewable aquifers required to get it.

“Drill Baby, Drill is about mass profits for a hand full of oil companies and is not a solution to the larger economic issues facing the USA.”

Absolutely! But I’d favor massive drilling as part of an overall plan to eventually get our energy domestically. Or at the very least, so that we don’t get any of it from politically unstable regions full of folks that would just as soon bomb us.

Drill Baby, Drill is about mass profits for a hand full of oil companies and is not a solution to the larger economic issues facing the USA.

Come on… either you’re putting money in the hands of foreign companies and governments or you’re putting it in the hands of US companies and the US government. A strong US energy sector is good for the US economy. Profits are not a bad thing, in fact, it’s what’s driving the advances in technology to extract more difficult energy supplies.

How’s that socialist energy sector doing in Venezuela these days? My understanding is they’re seeing declining oil extraction. After they took control of the industry and kicked out the private companies, all the technology needed for deep well drilling and extraction went with the corporations.

And yes, you can force demand destruction here at home by raising fuel taxes… and in the process, destroy the US economy (more than it already is). Or did you not notice what happens every time gas prices spike in the US? Here’s a hint: lower consumer spending. We are geographically spread out and without comprehensive public transit systems. The change-over to alternatives needs to be done gradually, allowing technology like hybrids, electric, CNG, and Hydrogen to get to the masses in an affordable platform. And the infrastructure needs to be there to support those new modes of transportation.

Only problem is that the “private companies” extracting the profits (subsidized by US taxpayers) aren’t American.

And the oil is going to Japan and China.

“Come on… either you’re putting money in the hands of foreign companies and governments or you’re putting it in the hands of US companies”

OK, for a short term, but what he said is that it’s not a solution.

“The change-over to alternatives needs to be done gradually, allowing technology like hybrids, electric, CNG, and Hydrogen to get to the masses in an affordable platform. And the infrastructure needs to be there to support those new modes of transportation.”

Yes. THAT is where drilling can buy us some time.

In between, while there is a growing disparity in both availability and price, in oil vs. natural gas, it seems we should seek out more applications for the less-expensive, plentiful and readily-available natural gas. Leave corn for people and animals, not fuel.

Run-on sentence? - -) (first one)

“Palin had the answer drill baby drill. Obama was handled an energy windfall with new drilling techniques and not only failed to take advantage of this and the ability to produce oil from coal, he actively put up hurdles.”

I would guess the enviros, a key Democrat constituency, would have screamed bloody murder if Obama had played the oil self-sufficiency card, with associated environmental impacts.

“The fungibility is why drilling more here won’t dramatically lower prices here, if it lowers them at all.”

Wouldn’t having a degree of local control over the supply, rather than depending on Middle Eastern nations to maintain it, tend to give the U.S. a strategic pricing advantage?

“Wouldn’t having a degree of local control over the supply, rather than depending on Middle Eastern nations to maintain it, tend to give the U.S. a strategic pricing advantage?

I don’t think that we would have much control over how much of our new found supply would go on the world market. But if we did, then the answer to your question is yes.

“I don’t think that we would have much control over how much of our new found supply would go on the world market.”

Couldn’t Uncle Sam tax the crap out of production, subsidize it or even nationalize it as He saw fit?

That “shocking” photo was taken in another precinct entirely (look at the markings on the squad car) and had nothing to do with the OWS movement. Anyone who’s spent more than a couple of weeks in NYC has seen someone defecating in the street.

Consider the source; that’s always a good start.

had nothing to do with the OWS movement

Huh huh….huh huh huh…you said “movement”…huh huh huh.

Snort.

Funny how we think our economy only shrank a few percent. If you take the Fed spending that is borrowed money out of GDP the shrinkage is massive.

Borrowing is not a “Product”. Not that I can imagine.

OK, so when you asked “why don’t we have a discussion…” whom were you addressing? The media, I guess.

And I agree, and have said it many times on HBB: Occupy screwed the pooch big time by making it into Burning Man.

I don’t know who actually ordered the crackdown, but I agree that Obama didn’t stop it. I wonder, if Obama is re-elected and no longer has to pander, and Occupy starts up again, would Obama allow DHS to crack down again?

Yeah. Occupy Movement was a mismatch of 1000 failed political movements that was unable to focus on a couple good ideas that had a chance of moving forward….

At the local movement, we spent 2 weeks doing nightly workshops trying to come up with our first 3 issues… originally, it was “top 3″ but that implied these 3 were more important, which was unacceptable.

In the end we narrowed the 1000 complaints down to 3….
1) Comprehensive campaign finance reform including a constitutional amendment declaring that limiting how much money can be spent getting your message heard is not a violation of freedom of speech.

2) Banking reregulation, break up the big banks, separate commercial from investment banking, return to small community banks, etc.

3) Legalize marijuana, homosexual rights, buy local, workers rights, get chemicals and bioengineering out of food, end representative democracy in favor of self-rule, nationalized health care, another illegal immigrant amnesty, 9-11 was an inside job, end all wars, end the use of all fossil fuels….

Okay, let’s just go with a first 2….

Okay, but as long as my pet issue of XYZ is one of those 2….

“Funny how we think our economy only shrank a few percent. If you take the Fed spending that is borrowed money out of GDP the shrinkage is massive.

Borrowing is not a “Product”. Not that I can imagine.”

Why is it that when the private sector “lends” it is GDP, but if the Fed does, it isn’t?

Over the last 50 years, the financial sector has grown from under 5% of the GDP to over 20% of GDP. It all a funny money economy.

If you take the Fed spending that is borrowed money out of GDP the shrinkage is massive.

That was one of the the original purposes of the Fed. To be the lender of last resort, that prevents complete crashes.

Sheep are easier to organize than cats, so sheep will always win out in a democracy.

+1 AmazingRuss

“I wonder, if Obama is re-elected and no longer has to pander, and Occupy starts up again, would Obama allow DHS to crack down again?”

I guess that depends on how much he owes the bankers who fund his campaign…

TYPO: Add “is hard” to the end of the first paragraph.

Yep.

Obama can say he wants to strengthen the middle class, but what has we done toward that end in the last 4 years? Slow the rate of wage decline by blocking Boeing from moving high paying jobs in a strong union state to a weak union state where they can pay much less?

And I love your analogy to illegal immigration. All the Republican true believer masses thump their chests about illegal immigration and think of the Republican party as the one that will fix it, meanwhile the Republicans continue to push for open borders and amnesty for the 15+ million illegals already here.

neuro,

That’s an elegant slogan, but it’s an awfully broad statement coming from such a normally precise poster. It hardly represents the Democratic immigration proposals, which seem to be more about assimilation of those who are here and established as members of society, than “open borders” for anyone who wants to come live here. There is a huge sense of fair play in the Dem party, and cheaters who sneak over our borders aren’t perceived as playing fair. Especially by those who’ve come here legally.

And certainly the majority of Republicans oppose any more “open” immigration of any sort.

A more cynical way to put it might be that with Dems it’s about votes and with Republicans it’s about the money with which to buy those votes.

And we will all go together when we go.
Ev’ry hottenhot and ev’ry eskimo.
When the air becomes uranious,
And we will all go simultaneous.
Yes we all will go together
When we all go together,

Posts like these (Blue’s and Alena’s) remind me of why I love this blog.

Or just pretend there is no problem and party on.

So far this has worked. Why spoil all the fun by all of a sudden deciding to get serious?

“Why spoil all the fun by all of a sudden deciding to get serious?”

To take away promised payments from groups who aren’t part of your political base?

To take away promised payments from groups who aren’t part of your political base?

Or in this case, to take away promised payments from groups who are part of your political base:

http://mobile.bloomberg.com/news/2012-03-12/mississippi-whites-not-used-to-help-back-republican-aid-cutters.html

Removing the Social Security earnings cap virtually eliminates funding gap

By Josh Bivens

Removing the earnings cap on taxes and benefits improves the 75-year actuarial balance by 1.7% of payroll, thereby eliminating 90% of the funding deficit forecast by the SSA. Removing the cap would completely eliminate the deficit forecast by the CBO with its more plausible economic assumptions.

http://www.epi.org/publication/webfeatures_snapshots_20050217/

Thank you alpha-sloth for mentioning some viable solutions
to funding SSI and Medicare . But the Politicians don’t want to touch those poor rich people that might be effected by
such solutions or others that would work .

Game plan is to avoid all discussions that even suggest that the rich pay more because we have to have the rich never pay more because they give people all those jobs and they need more tax cuts if anything .

Advance the game plan by convincing the dumb voter that
taking from the elderly on SSI ( that was promised ) or people in abject poverty is a much better solution . And while your at it ,reduce those wages because those darn
workers shouldn’t have a min. wage ,who do they think they are anyway .

And while they are at it why don’t they give some more tax breaks to Ford Motor Company for just building a new Plant in Mexico where they are giving 5 bucks a hour with no benefits ,you know all those jobs for American Citizens
they provide .

Medicaid, Medicare, what’s the diff eh?

Everyone wants to “touch the poor rich people” as long as they get to define who the rich people are. Once they find out somebody else defines them as “rich”, not so much.

“Removing the Social Security earnings cap virtually eliminates funding gap”

Wouldn’t that amount to a tax increase on earnings of the 1%?

Social Security can pay 100% of its promised benefits through 2035 (I think) and 80% of all promised benefits thereafter.

The problems of Medicare and Medicaid are problems with the cost of the health care in the US, not problems with the programs themselves. If the US spent what other countries spent on healthcare the programs would be fine for their healthcare components.

I haven’t seen it considered separately, but I expect the “nursing home care once you are destitute” component of Medicaid is a problem long term (especially if the student loan system doesn’t collapse). Then again, unless we start making stuff in the US again, there might be a lot of people willing to take the lower level nursing home jobs. If supply catches up, eventually the cost could come down.

2035 or 2030 depending on who’s report you believe. That’s still unacceptable. Allowing people to take some of their ss money and invest it as they see fit would take a lot of burden out of the system. Also, as part of that alpha-sloth mentioned it before (can’t believe we’re on the same page) but the income cap must be removed to keep ss solvent.

Just remember though. No complaints when that person who put millions into the system wants some of it back.

Private accounts would take the money that makes it possible to pay 100% until 2035 and 80% there after and make it unavailable to make those payments. Unless you suggest that letting people put 50% of their payments into a private account means that they should lose 70% or 80% or 100% of their promised annuity?

No complaints when that person who put millions into the system wants some of it back.

From the article I linked to above:

“Since higher income during one’s working life translates into higher Social Security benefits, removing the cap on the benefit side would increase Social Security payments to high-wage earners.”

…and we agree alpha-sloth. I just needed to add it for emphasis.

And yes polly, if they take X% and put it into private accounts, more must be taken from their government side benefit.

I am a little nervous about people handling their own account in some Wall Street type investment based on how Wall Street is set up today . You would have to overhaul Wall Street from the gambling Casino that it is today to make me fill comfortable with that .

Simpson Bowles, Simpson Bowles, Simpson Bowles.

Raises the salary cap faster than the current pace (not a cold-water immediate elimination of the cap);

Adds a poverty level+20% minimum benefit for low-wage workers;

Adds an additional benefit for people over age 85 (with the theory that they have likely substantially exhausted other savings);

And a few other things…net effect, fixed Social Security, and actually make it a better safety net.

I am a little nervous about people handling their own account in some Wall Street type investment based on how Wall Street is set up today .

I dunno, I kind of like the idea. If people want to willingly give their SS to WS to play with, let them do it. However, I’d require that

1. Contributions are still mandatory. You still have to put X dollars in every year and you can’t withdraw until 65/67. (in other words, they don’t get to pocket the cash first.)
2. Carve-out for Wall Street is optional. You can still put 100% of your X dollars into gov SS if you want.
3. You waive any bailout. If your WS account goes south, oh well too bad. You asked to handle your own retirement and you get what you asked for.

Of course, the government can’t do that because

A) SS is pay-go; people aren’t really in control of their specific dollars.
B) The bailout waiver will never fly. Oh, all the young strapping egos will proudly sign a waiver all right — “Oh yeah well we can do better than the government” — but then when they are all 65/67 and WS has sucked them dry, they’ll come crying home to Uncle Sam, just as they always do.

Allowing people to take some of their ss money and invest it as they see fit would take a lot of burden out of the system.

Do you really expect people who over borrowed and took out subprime loans to invest it well? What happens when the stock market crashes?

Another thought:

When the SS surplus is invested in US Treasuries, they are “worthless IOUs”, but when private pensions and mutual funds invest in them, then they are “financial instruments”.

You would have to assume the risk and you would still need to put XYZ amount toward the government plan.

BS.

I pay into SS and Medicare the same amount as the rich guys. Yep… I pay in the max. Yet, those leeches that are currently sucking it dry paid in far less…. far far less…. and I’m suppose to accept a lesser benefit?

I don’t think so. Either make good on the benefit or return me my money.

Recently I was talking to a few of the self righteous leeches who are currently drawing SS. They say they “earned” it and of course they’re wrong. Then I did a quick calc showing them that I pay MORE into SS in a single year than they contributed in their entire working career. The silence in the room was deafening.

Menu
_______

1) We all draw the same.

2) We all draw equally less.

3) We all draw nothing… (and return to me my money)

You have to kill the cap if you want the program to remain solvent. Plain and simple.

If you’re allowed to invest outside of the government program, that’s your money to take back. You can’t have an equal draw to someone who only pays into the government program.

Frankly I’m indifferent. I couldn’t care less of the outcome of either (a)shut it down or (b) pay me the benefit current leeches are getting.

I’m in favor of getting the Medicare cost down by 50% by attaching that price fixing Monopoly Health care system
we got with all the parasites and leeches .And the Pharma Drug Companies are some of the biggest leeches ,along with the Private Insurance Companies on the back of the cash cow of Medicare /Medicaid

People just don’t associate the growth of the Pharma Drugs with the inactment of Medicare and Medicaid ,or the increase in costs coming from the Private Insurance Companies who have to make their wad.

Now all of a sudden people need to be on 10 long term drugs to survive when they use to be able to get by on
one or two . Could the food supply come under attack
at getting to the heart of why so many people are getting sick before their time needing all this expensive Pharma based Health care ? Another corrupt monopoly that’s killing people for profit .

“Then I did a quick calc showing them that I pay MORE into SS in a single year than they contributed in their entire working career. ”

I’d like to see that quick calc….

Assuming you make more than the $110K cap, and assuming your talking a “normal year” not the 2% off years that end this year… AND, assuming you are counting that you pay both halves but they only paid the employee half…

Then you would be paying $110K x 15.3% = $16.8K a year.

Let’s say they earned half of median income…. And they are 70 now. This means they earned $25K the year they retired in 2007 and $4K when they entered the workforce in 1960 when they entered the workforce. Averaging that to something like $15K a year for 45 years, their total income would have been something like $675K or more. Even at 3%, which is what each half was in 1960, their total social security tax over their lifetime would have been at least $20K.

Unless you are saying those “leeches” currently collecting Social Security made less than half median income and were not subject to any of the increase in rates that occured over the last 50 years….

Look, I’ve done the math too. We’ve been increasing the cap at 2-3x the rate of inflation. The cap was $25.9K in 1980. If that had just gone up at the rate of inflation, the cap should be $72K instead of $110K.

If we go back further, to say… 1960… the cap was $4800. Inflating to today, it should be $37K, not $110K.

The way the math works, counting both halves, someone 45 y/o with 2x median income (me) will pay in 45 *.15.6 = 7 years of income.

My 72 y/o father would have started with a rate of 6% and almost half his income would have been above the cap. I don’t have the exact numbers in front of me, but from memory, it was something like 4.5 years of income he would have paid in.

My grandfather, who recently passed at 92, would have worked a whole decade at 2%, then a decade at 3%. He worked half his working years with a rate less than 1/3rd of mine, and a cap right at median income… meaning that if he earend 2x the median income, then in the first decade he would have paid 1/10th of a year’s income and in his second decade he would have paid 1/7th of a years income. Over his entire career, including the years in the second half of his working years where the cap drastically increased, and the rate was much higher, he still would not have paid in more than 3 years of income (with half of that in his last 10 years in the workforce and the other half in the first 35 years).

So, a more accurate figure is that at current rates, I’ll pay in 2x 7 years worth of income to dad’s 4.5 years of income and grandpa’s 3 years of income.

That is a long shot from your assertion that you pay more in a year than they paid in their entire life.

The gist of your position is reasonable. Those that entered the workforce in the 80s or beyond will pay in more (because of increasing rates and cap increasing faster than inflation), than those that entered before the 1980s. And, they expect that we will not mind that the proposed changes to SS and MC will “protect those over 55″ while those under 55 can expect to bend over and take it?

Sorry, but I’m not so thrilled about getting to pay in more and get back less.

And they call it age warfare if we point out how we’re being screwed????

It’s not a longshot my friend, it’s the truth. We even had 36 years of tax returns out and the SS tables going back to 1945 when these 3 entered the workforce.

Of course the ” Greatest Generation” ( people that are about 80 to 100 years old now) that fought in WORLD WAR II paid in the least into SSI . Some of those people retired after the SSI program had been in effect for only 10 years .
Why can’t anybody give that generation a break for what
they did at the time to make it possible for us to have a
great expansive America after the War .They went through hell really .

I also believe that older generations paid higher federal income tax rates than the younger pay today for long periods of time ,so that has to be taken into consideration .

When the Baby Boomers retire soon they will have paid into SSI for 30 to 40 years in most cases . Its a problem that there is about 80 million of them . But I just want to ask this question ,because I’m curious ? Do you really think that the Politicians making new promises to the younger generations are going to honor them in 30 or 40 years from now if they don’t want to honor the ones that were already made regarding SSI ?

Dude…. these people have been collecting SS, pensions and on medicare since1981!!!!!! 1981!!!!!!

“Allowing people to take some of their ss money and invest it as they see fit would take a lot of burden out of the system.”

Professional investment fund managers are getting 1% out of their investment portfolios these days. But nonetheless, I am sure Joe SixPack could somehow figure out how to profitably invest his Social Security contributions in the Wall Street gambling casino to beat inflation.

I personally find this notion insane, and expect Romney and Ryan to fully embrace it with little MSM critical scrutiny of their proposal.

Negative rates and pension pain
Published: Tuesday, 14 Aug 2012 | 12:04 AM ET

(Reuters) - One of the overlooked victims of the fall and fall of interest rates are corporate pension plans which are facing a ballooning liability even as returns stay tepid.

That’s because market rates play a key role in valuing pension plan liabilities, and the lower they go the tougher things get for underfunded plans.

This may, over time, become a real issue for equity markets, as investors realize that purchases of shares bring not just a right to benefit from future streams of earnings but also the responsibility to meet potentially huge future streams of retiree payouts.

This is a big and growing problem, and a widespread one, with companies in the mature economies like the U.S. and Britain among the worst affected. The combined pension fund deficit of 1500 leading U.S. companies hit a record $689 billion in July, according to consultants Mercer, rising by $146 billion in that month alone. That leaves the companies just 70 percent funded.

Similarly, defined benefit pension plans in Britain, those which promise a certain payout, had a combined deficit of $416 billion, according to the UK Pension Protection Fund. Nearly 84 percent of such plans have a funding deficit.

The deficits have a number of common drivers. Investment returns have been terrible for a decade or more, even as pension funds, as they almost inevitably do, have loaded up on what just went up in price, adding bonds and selling equities. As well, retirees are simply living longer, a happy outcome, but one which means there are more payments for a given fund to meet.

Companies have also been guilty, where possible, of skimping on pension contributions, as boards rationalize that recent developments are an aberration and we will soon return to “normal”.

In terms of valuing liabilities, the big driver has been interest rates, which have fallen sharply in recent years, and especially this past year. Pension funds measure their future liability by applying a discount rate, usually tied to a market interest rate. As those rates fall, the present value of future payments the fund must make rises. The widely-cited Mercer yield curve for pensions showed a discount rate of 3.71 percent in July for an average pension fund, down from 5.3 percent a year ago.

To give an idea of exactly how powerful the effect of falling rates is on pension liabilities, consider that, according to Mercer, through US shares rose 1.4 percent in July, the 30-55 basis point fall in discount rates drove an increase in liability of between 3 and 11 percent. In a single month.

CHANGING RULES Those sorts of moves are capturing investor attention, and indeed may have been driving share performance in recent years. Morgan Stanley strategist Krupa Patel, constructed a basket of British and European shares all of which have pension liabilities of at least 15 percent of their stock market value and found they have underperformed by a whopping 27 percentage points since September of 2009.

U.S. lawmakers recently passed a bill which will allow companies there to use a longer-term rate to calculate their liabilities, a move which may in future flatter their pension deficits. It will also, obviously, allow them to report higher profits and pay out higher taxes, higher dividends and make more executive share awards. The impact on long-term shareholder value is far less sure.
…

“You have to kill the cap if you want the program to remain solvent. Plain and simple.”

WRONG.

Many alternatives are available:

1) Increase taxes on SS benefits, with exemptions for hardship, thereby returning the program to more of its originally intended purpose as insurance, not a demographic windfall.

2) Further increase the age for maximum payout.

3) Provide incentives for healthy people of retirement age to continue working, thereby keeping them on the contribution side of the program for as long as possible.

4) Raise the cap but don’t eliminate it.

I’m 100% sure creative minds could think of ten more ways to maintain program solvency besides eliminating the cap.

Than thats the Greatest Generation that your talking about
if they have been collecting from 1981 .

Yeah and I’m quite familiar with them. They are Exhibit A in self-entitlement.

I wonder how many of these 55+ seniors are actually going to say: “Whew, I’ll get mine but my 55- kids will be screwed. Oh well sucks to be them; I’m gonna vote for Ryan.”

“Ryan started the age wars by promising that the benefits of those already OVER 55 will not be cut.”

Are we trying to find a solution to get America functioning in a positive way again or are we little 6 or 7 year olds trying to say what’s fair? Is it fair that during the housing bubble that some were able to take out $300K, spend it, not make a house payment, live there tax and payment free for years and you and I have to pay for them in the long run? When born you didn’t come with a certificate of ‘fairness’, you came like every other living species with the ability to use your survival instincts to survive and thrive.

So how do you propose to fix the glitch? The line has to be drawn somewhere. How do you determine where?

“Generation Greed” is not pointing out anything. It is a condemnation of anyone older than you.

If not, then you really need to work on the meme. “GG” does not in any way relate to, or remind anyone, of Repubs.

BTW, I also happen to fall just below that same line.

So how do you propose to fix the glitch?

Universal single payer system, like the rest of the world enjoys.

As long as I get my SS and Medicare contributions returned to me, do what you want with the programs.

I’ve heard some 55+ folks say that we (the under 55 crowd) will at least have a chance to plan for a change…

How does a 54 year old whose “plan” was to work until they fired him (hoping that it was enough to get him to at least 62) and then not go to the doctor between getting fired and 65, change that plan upon finding out that now Medicare is a voucher system and social security isn’t there modify that plan? Now, assume he is making less than $40K a year and has less than $60K saved. No pension. Still has car and mortgage debt. Maybe signed a private student loan for the kid who went to college and is living in the basement while working for Walgreens.

And remember that the kid in the basement with the $40K debt working at Walgreens is supposed to plan for it too.

When born you didn’t come with a certificate of ‘fairness’, you came like every other living species with the ability to use your survival instincts to survive and thrive.

My 7-year old’s most recent witticism: “It’s not fair that life isn’t fair.”

“Are we trying to find a solution to get America functioning in a positive way again or are we little 6 or 7 year olds trying to say what’s fair?”

Oh, I’m all for a solution that gets America functioning again. And that means attacking and reversing the trade imbalances that have made unsustainable debt growth a requirement.

1) End free trade. Put a tariff on money leaving the country that is large enough to balance our international trade.

2) Return to the tax code of the 1950s with low payroll, sales, and property taxes with a steep income tax. Top marginal rate needs to be above 90%, with massive deductions for spending money on things that employees Americans and improves their standard of living.

What the Republicans are proposing… rich keep getting richer, continue to embrace free trade, and massive cuts to entitlements is NOT a plan to get American working. It is a plan for collapse into depression.

How does a 54 year old whose “plan” was to work until they fired him…

This is what “the future belongs to Lucky Ducky” means.

And remember that half this country’s workers make less than $500/week.

@sfrenter–

You should show your 7 year old how most 7-year-olds live in the world, and then explain that if life were “fair”, they wouldn’t be living in relative luxury in the SF Bay Area, but if one of the “average” 7-year-olds, they would be with less food, less technology, and lower quality of life. They’re lucky that life isn’t “fair”.

It may not be until they are older that they can appreciate that fact.

I can’t wait until my kids are old enough to appreciate that concept…that we in the US have it pretty damn good.

Oldsters will have no problem selling out those under 55.

I overheard the 7-year old talking with her pal (also 7) the other day.

Friend: “My family is rich. Are you rich?”
My kid: “No, but we have everything we need”.

I believe I am teaching her well. We do have conversations about money and wealth -something many people never discuss with their kids - and about relative wealth (ie., that we are very wealthy compared to most people in the world).

“Oldsters will have no problem selling out those under 55.”

Unless you sell them out first.

@sfrenter…well done. We are trying to hammer it into our 5 and 2.5 year-olds right now. One of our little luxuries is that we have a housekeeping service come in every two weeks to clean. The other day our 5-year-old didn’t want to pick up a toy because the housekeepers were coming in the next day.

My wife let her know under no uncertain terms the housekeeper’s job was NOT to clean up her mess, and that having a housekeeper didn’t mean that we take for granted what we have. If she didn’t want to pick up her things, maybe she didn’t need so many things. The toy was picked up quickly. She now proudly makes her bed, cleans up, etc..

We haven’t started the wealth conversations yet, but I’m sure it’s coming. I’m going to try to keep to what my dad always told us as kids…when we asked how much he made, or how much we had, the answer was always “enough”. I’m sure we’ll soon get into the relative wealth part of the conversation.

We also feel strongly that if your kid isn’t badly mangling phrases like “please”, “thank you”, “excuse me” (when interrupting two people speaking) and “may I please be excused” (from the table), they are learning them too late.

When we first started making our 2-year-old ask to be excused from the table, the best she could manage was “scuse peeze”, that was enough to get her down (as long as her mouth was empty when she asked).

We were at a BBQ at a friend’s house yesterday, and it sure was nice when our 5-year-old asked very politely to be excused from the table…ah, the little things.

Marginal rate above 90 pc? That is extremely conservative, in the worst sense of the word. The rich will stay rich and the poor will stay poor. High income taxes prevent others from accumulating wealth from hard work while doing almost nothing (especially in such a low interest rate environment) to impact those living off previously accumulate wealth.

Sfrenter the rich girl’s family obviously told the girl they are rich. She is going to end up a loser as an adult if she survives her teens. Proper wealthy families make their kids learn about earning wealth , not inheriting it.

“Ryan started the age wars by promising that the benefits of those already OVER 55 will not be cut.”

Republicans love to play the politics of class warfare!

It’s been proven time and time again that new taxes never bring in the revenue projected. Never, ever, ever. It’s because wealth gets destroyed and people are taken down brackets. While trickle down economics may not be 100% correct, there is truth to the fact that these “rich people” employ other people.

So with that said, comprehensive tax reform must be a part of the debt/entitlement solution. Raising tax rates won’t do that. 75% of $0 is still $0. So if you raise tax rates and leave loopholes you get nothing. You get much more revenue by lowering rates and closing loopholes.

Actually, small businesses are the largest employer in this country.

Small businesses are started by all kinds of people, many of them NOT rich.

Romney paid 12% on $23 MILLION income in 2010. What was your percentage?

Half of all corporations pay NO taxes in any given year. Despite making profits.

I am one of those employers who at this point would get hit by President Obama’s plan. My effective tax rate in 2011 on a joint return with my wife was 22%. I guess I don’t know the right accountant.

Turkey Lurkey,

Small business do generate most of the growth, especially when things are going good.

So how do you encourage the owners of these small companies to hire more people?

1) Quit enacting laws that make the owners unsure about their costs. Obamacare is a prime example but there are plenty of others. How so? Small businesses will have to pay for some of the costs of Obamacare by forcing them to buy one size fits all. No one knows for sure how much that’s going to be.

2) Don’t raise taxes so high that they decide all the work isn’t worth it. I talk to a lot of small business owners through my job and you would be surprised how many are ready to “chuck it all” and go fishing.

3) Overregulation, see #2. Many have just had it with the rules and regulations.

“My effective tax rate in 2011 on a joint return with my wife was 22%.”

Don’t worry, Mr. Small Businessman, Mitt will do his best to transfer even more of the tax burden from his zillionaire buddies to you.

No more than Obama will to transfer the burden from the bottom up. That’s the real issue here now isn’t it? As I learned while taking tests in school. Sometimes the right answer is none of the above.

Turkey,

I believe it was 13.9% on $21 million. I just saw an analysis that says that under the Ryan tax plan, Romney would have paid less than 1% on the $21 million.

I am one of those employers who at this point would get hit by President Obama’s plan.

What is this ‘plan’ you speak of?

Tax increases on those families who make over $250,000 per year. We’re by no means wealthy but by no means poor. I have a business, I pay taxes, I employ people. What is the justification for a tax increase? There isn’t one. Just because neither political party can face reality and cut the waste doesn’t mean I should pay more to fund the waste.

Can someone explain to me an argument made by some people on *my side* that I think is specious:

They say increasing taxes on the $250k and up earners will hit small business harder, because that’s the kind of what, gross income?? a small mom and pop might have.

But such a business would have plenty above-the-line expenses to subtract from gross before arriving at individual taxable income, right? Which could be a lot less or even zilch.

This one drives me crazy.

Tax increases on those families who make over $250,000 per year.

Oh, you’re talking about the ending of the Bush tax cuts. They were meant to be temporary anyway. We’re just going back to the status quo ante, which was part and parcel of the original plan. This was meant to avoid having the tax cuts increase the debt too much.

And the return to the previous tax rate is only for the wealthier, who are apparently weathering this depression better than everyone else, judging by their paychecks.

Tax increases on those families who make over $250,000 per year. We’re by no means wealthy but by no means poor.

That $250K applies to your personal income (profit), NOT the revenue generated by your business. If you can clear $250K after you’ve paid your business bills, then sorry, IMO you’re relatively wealthy, and you can afford to pay a little more. This is what the whole Joe the Plumber conversation was about.

Montana,

Note that I am not a tax accountant or anything, but I think many small business owners have the company in their name, not an LLC or a corporation.

So whatever their company makes, the owners get taxed like any of us would. Yes, they have the expenses to deduct, but if they had an LLC or a corporation, they probably would have more deductions.

I am not sure how, I just know it’s a good idea to have your company incorporated or a limited liability company.

The deductions for business expenses are the same for a corporation or a schedule C filer. Accelerated depreciation and all. I helped a friend do taxes on that sort of small business before. It was one of the years that allowed a sort of super accelerated deduction of capital business expenses. He got to take them the exact same way a C corp could. Now, some people with small businesses don’t keep track of their expenses very well, and then they can’t deduct them because they don’t know what they are. A c corp has the same issue.

The difference between $250K of revenue and $250K of income reported as part of schedule C is enormous. It is the biggest lost opportunity President Obama had in the 2008 campaign. I think he could have explained it in the not Joe and not a plumber incident, but he didn’t do it.

The $250K is after your inventory expenses, after you deduct all the expenses related to your employees, all your deductions related to amortization of capital equipment, all your interest expenses, etc. Yeah, if you had a c-corp and underpaid yourself, you would have less personal income, but then you would have transferred that income to the corporation and would owe corporate taxes on it.

Oh, and once you end up with over $250K of income after expenses, you still get to take mortgage interest deduction, state taxes as a deduction, and whatever other deductions and credits the rest of us have.

$250K of income after all that? It is a heck of a lot of money.

What is the justification for a tax increase? There isn’t one.

We can bomb more people. We can have more people working in government which reduces unemployment.

If you can clear $250K after you’ve paid your business bills, then sorry, IMO you’re relatively wealthy, and you can afford to pay a little more.

You may not feel rich on this kind of money, but relative to the rest of the country, you are.

There’s perception, and then there’s the numbers.

Taking home $250K a year would put you in the top 5% of the country.

Local governments are the main creators of crippling small business regulations and taxes.

“Taking home $250K a year would put you in the top 5% of the country.”

That’s not taking home…that’s before Lord Obama and the idiots in Congress get their cut.

Small businesses ( under 50 ) are exempt from Obamacare.

“$250K of income after all that? It is a heck of a lot of money.”

OK, that’s what I thought! I’ve done quite a few Schedule C’s myself…I can see where a partnership or sole proprietorship could end up not as favorably as something more structured, but still, if a guy is netting $250k after expenses, that’s a whole different thing than gross revenue, for crying out loud.

I think people who run that one up the flagpole have never done their own self-employment taxes.

“$250K of income after all that? It is a heck of a lot of money.”

Indeed it is. It’s akin to paying all your bills at the end of the month and still having a large pile of money left in that account.

Bullcrap.

Which part do you disagree with? I don’t see how a blanket statement of bullcrap addresses any of the issues.

Not according to the CBO.

And if it’s true, as some point out here, that the rich already pay the bulk of income tax, then it follows that increasing their taxes should reap a ton of money to balance the budget.

Tax increases on the wealthy won’t make a dent in the mountain of debt we’ve accumulated.

The Case for Raising Top Tax Rates
By EDUARDO PORTER
NYTimes

Raising the top tax rates on the richest Americans could go a long way toward balancing the federal budget. Mr. Saez estimated that raising the top tax rate on the top 1 percent of earners to 67 percent would raise about $4 trillion over a decade.

$4 trillion is a pretty good dent, no? Then just think if we taxed capital gains like the income they are.

Or is balancing the budget always to be done on the backs of the middle class?

As long as there are tax havens and people who avoid paying taxes (on both sides of the pay scale mind you) the $4 trillion figure is just a number pulled out of the air.

Fundamental tax reform is what’s needed and we don’t have the people on either side who are willing to tackle it.

Raising the top tax rate to 67%? That’s not Obama’s plan…it’s raising the top tax rate to 39.6%.

He is targeting one group for an increase that won’t do squat to the debt.

And think 67% will work? Think again. My partner was traveling in Europe this summer. A common theme was rich people planning to leave France if they pass the 75% highest marginal rate.

The reason I have a job here is that my partner’s father left the UK in the 1970s (before Thatcher) when tax rates were very high. He simply left, took his capital with him and conducted business elsewhere.

The problem with progressiveness in the tax code is not income tax rates, it’s 1) the difference between long-term capital gains rates and income rates and 2) corporate loopholes.

Equalize cap gains and ordinary rates, cut out large numbers of deductions, lower all tax brackets, cut out corporate loopholes.

Don’t specifically target the successful, essentially demonizing success.

Simpson Bowles, Simpson Bowles, Simpson Bowles.

That’s what I’ve been saying all morning Rental Watch.

It takes over 10 years to lose your US citizenship for tax reasons. Maybe more. And moving won’t help. All US citizens are taxed on their world wide income. There are a few exceptions for some countries with which we have tax treaties for a limited amount of time. You won’t like the tax rates in the ones you want to live in.

Obama has decided that his best way to energize his base is to piss on the wealthy.

Romney has decided that his best way to energize his base is to piss on the poor.

The sad fact is that if you put 50 wealthy people and 50 poor people in a room, tasked with fixing the debt/deficit, we would have a deal that looks like Simpson Bowles.

People with wealth generally understand that they have it very good, and should help those less fortunate.

People without wealth generally understand that you need to outsized financial rewards for capital risk-taking and success.

In our office, we have some <1%ers (more than one voted Obama the first time). All are willing to pay more in taxes if it is in conjunction with a broader deficit reduction plan.

Right now it feels like a political statement (on both sides), not a serious discussion of solving our problems.

the $4 trillion figure is just a number pulled out of the air.

No, your statements are pulled out of the air. I’m supplying links for mine.

Fundamental tax reform is what’s needed

Exactly. Like raising taxes on the very wealthy.

The situation with my partner’s father was to keep his business going in the UK, but to simply stop investing more in the UK, and figure out how to structure new businesses to minimize the bite of confiscatory tax rates.

Rich people won’t avoid a ridiculously high tax rate altogether.

But you would be naive to believe that a very high marginal tax rate won’t impact new investment in the US.

If that’s truly what you advocate, then that works.

Because you’re right. The exemptions at the current rate are the killer.

That alone would make a huge difference.

Someone made a blanket statement about taxes on the rich not raising much money, I offered a link that refuted that. I never said it was Obama’s plan.

Nor is this, but it doesn’t involve as high rates on the 1%. In fact it involves doing nothing:

http://www.slate.com/articles/business/moneybox/2011/04/the_donothing_plan.html

The Do-Nothing Plan
How Congress can balance the budget in eight years by literally doing nothing. This is not a joke.

By Annie Lowrey

I heard Roger Altman speak a while back (served under Clinton). His comment (paraphrasing) was that the problem with focusing on raising taxes on the wealthy to solve the deficit problems is that there aren’t enough wealthy. He thought that the addition of a VAT was what would ultimately happen.

I heard Bill Clinton speak a bit later…he also threw out the VAT as a revenue raiser.

I would rather pay a higher tax rate than have a VAT–we don’t need any more complication in our lives. I’d pay something more to not have that complication.

Their point was though that you needed to broaden the tax base. They thought doing it through a VAT was most likely.

VAT makes all consumers pay.

There are too many citizens that pay no taxes.

On the plus side, it will cause housing prices to fall much further.

BTW, often hears that 50% pay no taxes, and the very quick retort is that they still pay payroll taxes.

The number I heard on the radio the other day is about 25%. In other words,

About 25% of all tax returns pay no tax (Payroll or otherwise), about 25% of all tax returns pay some or all of their theoretical Payroll tax (but nothing else).
The other 50% pay Federal Income tax.

The number I heard on the radio the other day…

Rarely a good source.

HBB’er #1: The number I heard on the radio the other day…

HBB’er #2: Rarely a good source.

I resemble that remark!

NPR. Not that they’re always right, but better than other talk radio.

That’s why loopholes need to be closed with no chance of them ever opening again. No one should be able to shelter themselves from paying taxes. There’s no free ride in life…at least there shouldn’t be.

“need to be closed with no chance of them ever opening again.”

So you are going to eliminate democracy?

We don’t have a democracy, we have a representative republic.

Taxes must be fair and loophole free. There’s no reason for Mitt Romney to pay 12% while I pay 22% and Corporation XYZ pays 0%.

There are plenty of friendly civilized tax-friendly places to which the rich can emigrate.

I tend to agree with you on this one Bad Andy ,its the tax loopholes that the 15% use to get their tax rate down .

I wouldn’t be against the government giving short term tax breaks to small business to encourage growth at times .
I just think that some of these tax breaks should be short term based on what is going on ,rather than made into long term tax breaks as the trend has been .

I agree with Bad Andy as well.

Just closing the most flagrant exemptions would help immensely.

Tax breaks for an SUV? Insanity. Incorporating your family and then deducting your kids’ allowance as a salary? GTFOD. (both real)

Apolitical gains is taxed less than wage income because it’s not… income? How is it not income?

There are plenty of friendly civilized tax-friendly places to which the rich can emigrate.

Where?

People with wealth generally understand that they have it very good, and should help those less fortunate.

I’m not so sure of this. I know quite a few people whom I would consider wealthy, but only a couple (the ones who are what I would consider “filthy rich” who will admit to being wealthy.

Wealth is relative.

Compared to the rest of the country, our household of 4 really does ok. But many well-off people would look at us and call us lower middle class.

Again, there’s perception and then then there’s the actually numbers.

Does this Republican idea that the poor should be taken care of by voluntary charity ring absurd to anyone ? If history is looked at, when the poor just relied on voluntary
charity they were starving in the streets ,or exploited by
the rich in a slave labor manner .

The Rich are isolated in their Ivory Towers . The only time I ever saw rich men do the right thing is with the Founding Fathers of America ,They were willing to go to their death ,( in spite of being rich and comfortable ) . It really was a odd event in history that you would have this many
well placed “Rich Men ” put themselves on the line like they did .

When John Hancock signed the Declaration of Independence he was shaking because he knew he could bring on his death and lost of wealth . A number of the signers suffered terrible fates by signing that Declaration .

Compare those rich men to what we have today . THe rich men today and the Corporations they run, or the schemes they pull off are more like Mob Kingpins in Drug Cartels .

When John Hancock signed the Declaration of Independence he was shaking because he knew he could bring on his death and lost of wealth. A number of the signers suffered terrible fates by signing that Declaration.

Indeed they did. When they said that they pledged their lives, their fortunes, and their sacred honor, they meant it.

It is absurd to an extent. Charity can and should provide for the poor to whatever extent they can. Federal welfare and unemployment initiatives are what’s most absurd though. These should be left to the states to deal with. I’m not against a safety net but these safety net programs should be a state’s responsibility and should be very closely monitored for fraud. I’m not one for European solutions, but in most European countries, if you’re on welfare you work…even if it’s picking up trash from the side of the road, you won’t collect a check for sitting at home.

but in most European countries, if you’re on welfare you work…even if it’s picking up trash from the side of the road, you won’t collect a check for sitting at home.

Do you just make this stuff up?

No. Perhaps it’s time for you to do some research. Norway, France, Germany, The Netherlands, and the UK all have workfare programs.

Perhaps it’s time for you to do some research.

No, it’s time for you to back up your grandiose assertions with some links. The burden of proof lies with the one making the claim.

I’m not the one claiming that someone’s just making something up. It’s not my job to educate you on an opinion forum.

Apparently you were making it up.

“Just closing the most flagrant exemptions would help immensely.”

Yes it would.

Am I reading this thread right? The conservatives here recognize there is a problem with too many exemptions?

Have I woken up in an alternative universes? …because this is the most rational thing I have heard in long time from anyone.

Hey, eco, look time no post! Missed ya, buddy.

Work. Life. Side projects.

Congrats on your radio gigs! I haven’t done radio in… well, a long, long time.

Have fun!

Real fiscal conservatives have always believed in a fair tax plan with few exemptions. GOP talking heads on the other hand…well…

+1….Spot on Darrell….$10. of cuts for $1. of tax and they all said no….Norquist runs the republican party…

What about just $9 cuts and no tax increase? Will Dems go for that? How about even $6 cuts and no tax increase, will Dems accept that?

Will Dems go for that?

No, because all cuts and no tax increases balances the budget on the backs of the less-wealthy, while it absolves most of the wealthy from any sharing of the burden.

“No, because all cuts and no tax increases balances the budget on the backs of the less-wealthy,”

Wrong.

Cuts and no tax increases outs us into massive recession, which lowers tax receipts and leaves us with just as big of a deficit (as % of GDP) as before the cuts.

The problem is not too much spending not too little taxes. The problem is the trade imbalances that drain money out of circulation, requiring us to borrow new money into existence, to keep the economy functioning.

We have to first accept that 1) fiat currency is borrowed into existence. 2) trade imbalances (international or domestic (rich getting richer) drains money out of circulation. 3) Our economic policies of free trade and embracing widening wealth disparity are only possible as long as debt is increasing at an unsustainable rate. 4) the apparent prosperity of the last 30+ years has been based on debt increasing at 3x the sustainable rate. 5) In the mid-2000s we hit max debt carrying capacity of the private sector (households and businesses) and we were faced with the end of the debt based economy as it had existed for the past 30 years. 6) The only way to avoid that crash was for the government to step up with the new debt/money creation that is needed to keep the trade imbalance plagued economy functioning.

Then, after we have accepted these basic assertions about our current economic situation, then we can talk about the future.

1) Just cut government spending… fine. Our trade imbalances drain money from circulation, the economy crashes, the massive debt collapses and we cascade default into depression.

2) Ignore the government deficits until we Greece and are forced to devalue our currency, wiping out the purchasing power of savings and lowering the standard of living of all.

3) Attack and reverse the trade imbalances that made the debt necessary in the first place. End free trade to balance out international trade deficits, and return to a 1950s style tax code with a 90+% top marginal rate and MASSIVE deductions for spending money in ways that employees Americans.

If the rich will only spend if it has a positive RoI, and positive RoI is not possible because the debt can’t keep increasing, then the carrot mechanism of getting the rich to spend is kaput. We need to return the stick motivation to getting the rich to spend. Namely, if you don’t spend it, we’re going to tax it away anyway.

The rich can’t keep accumulating more money if the rest of us can’t keep borrowing that more money into existence. So, we need a mechanism to not only stop them from getting richer, but that actually encourages them to spend the money they already have.

Alright, I agree.

All cuts and no tax increases attempts to balance the budget on the backs of the less-wealthy. It won’t work long-term.

Or just Do Nothing!

It’s clear that a low unemployment rate with reasonable standard of living wages for actual people living in the
USA, who spend and pay taxes in the USA is a real easy way to get revenue to support everything .

Also, Seniors spend all of their checks in the USA for basic food ,medical ,and survival ,rather than it going to Wall Street anymore for investment . Wall Street doesn’t like Seniors ,they spend on a Main Street level ,just as the poor do .

Just how much is it going to benefit the cash flow in the USA if one more rich person buys a island in some exotic
spot in the World ,or 2 or 3 houses at various locations
World wide ,or if they horde it, or if they invest it in Wall Street and it creates a bubble that raises prices, or its goes to some investment outside of USA .

Revenue ,revenue ,revenue ,cash flow ,cash flow ,cash flow, makes the boat float ,not unemployment ,low wages ,
transfer of wealth to the 15% ,often time in the form of tax breaks that don’t benefit the bee hive .

Also the price fixing Monopoly of the Health care Business
which is at outragous costs is cracking the back of America .

Medical care (never call it “health”) consumer prices increased 22% per year for the last 20 years.

That’s some serious inflation.

College tuition was almost as bad.

“Medical care (never call it “health”) consumer prices increased 22% per year for the last 20 years.”

Sometimes you just have to run the numbers….

Per capita spending was $3,285 in 1992. Had that increased at 22% per year for 20 years, then current spending would be $175,280 per person per year.

We’re actually just over $8,000 per person per year.

In reality, had per capita cost increased at the rate of inflation for 20 years, then it should be $5,373 per capita instead of the $8K. So, we’re paying about $2600 more than inflation adjusted, which is 32% more, on an inflation adjusted basis.

Or, put another way, for 20 years, the cost of health care has been increasing at a rate of about 1-1.5% above inflation.

Hey, there needs to be room in the cost for increasing profits to drug companies, insurance companies, providers… you know, the economy exists to ensure ever increasing profits and a widening wealth disparity. What are you, a communist that expects corporate profits to only increase at the rate of inflation? How is Wall Street expected to show gains 2x inflation if corporate profits only increase at the rate of inflation?

I believe turkey said “consumer prices”, not money actually spent.

It appears he/she means insurances rates, which HAVE increased, but I’m not sure about 22%.

It appears it’s… holy moly!

35%??!!!

http://ycharts.com/indicators/us_health_care_inflation_rate

Bottom of table: “Change From One Year Ago: 35.16%”

Does “Change From One Year Ago” really mean change from one year ago?

The Final one.

Correction of trade imbalances and the need for proper tariffs . You know I agree with you on that one Darrell and I see it as a major problem

“Correction of trade imbalances and the need for proper tariffs .”

Sorry, but the economy exists to ensure the rich can continue to get richer. Any proposed change that does not result in increased wealth for the top 1% wealthiest is a non-starter.

the media both mainstream and otherwise has either a left wing or right wing agenda. They’re in bed with big corporations AND the government.

Here here!

As are both political parties.

You confuse me for a Republican which is fine but your defense of Obama was clear based on calling people nut-jobs on the right. It’s that kind of rhetoric that both parties wants people to spew so they can take their eyes off from the real problem. A government out of control in almost every aspect.

It’s that kind of rhetoric that both parties wants people to spew

A government out of control in almost every aspect.

Why do you spew it too?

What rhetoric are you referring to? We have a $15 trillion debt and growing. Out of control? I’d say yes. We have thousands of military overseas with no actual end to undeclared wars. Out of control? I’d say yes. We have a wasteful government created grope squad known as the TSA. Out of control? I’d say yes. We’ve been running for 3 years without an actual budget. Out of control? I’d say yes. We have no requirement that our Congress reads bills they pass. Out of control? I’d say yes.

Your credibility is slipping as a result of your silence on the power structures that own our govt.

You don’t want to get me started on Big Pharma, Wall Street in general but especially Big Banks, Big Farm who owns the USDA and is putting family farmers out of business, etc. They create the loopholes I propose closing.

That said, they didn’t hold guns to politicians’ heads to make this mess. They didn’t create the TSA, although they benefit from the scanners and other equipment that our tax money is wasted on. They also aren’t the cause of the partisanship. If they were more would get accomplished, even if it was to our detriment.

It’s not absurd. The divisiveness is clear and present and has spread like a cancer throughout Washington in ALL branches of government. It started with GWB and has only gotten worse.

This president has engaged in class warfare and partisan politics. It doesn’t take right-wing radio or Fox News to know that when you start talking about people paying their fair share (and by fair share you mean the bulk of the revenue taken in), and you didn’t build that comments. Don’t give me the DNC talking points about taking that out of context.

Republicans don’t get a pass either. 8 years of GWB were absolutely disastrous. The Republican Congress and President did nothing but kick the can down the road and cut taxes without any fundamental change to the tax code that allows for massive exemptions and corporate loopholes.

The fact that you tow the party line by calling this president establishment doesn’t make it a fact. Clinton was an establishment guy who worked with both sides whether they wanted to or not. That’s a leader. A leader this president isn’t.

This president has engaged in class warfare and partisan politics.

LOL. Jamie Dimon is his buddy. If only he would really engage in class warfare in the style of FDR or Truman, then we’d have something.

Calling Obama’s extremely mild comments about the wealthy paying slightly higher (but still historically very low) tax rates ‘class warfare’ is one of the most ridiculous overstatements/talking points making the rounds right now.

These aren’t the days of FDR or Truman (at least we hope). The comments aren’t mild, they’re pointed and repeated. They help to kill any chance of bipartisanship combined with a GOP that’s not very open minded to begin with. It’s not a message of hope, change, and unity.

What are the comments?

Seriously?

Yes.

I don’t buy that at all. If there was compromise in Washington we’d not have much to talk about.

You rest my case.

mostly children.

aka little deadbeats

HAH!

I have seen a lot of tapes like the one on Nike . it’s horrible how those people are exploited , But taking America down to that level isn’t the solution either .

I have seen a lot of tapes like the one on Nike . it’s horrible how those people are exploited , But taking America down to that level isn’t the solution either

It’s the damn union’s fault.

Can I third it? Or will the Roberts Rules of Order police come and get me?

The whole point of the way the House is set up is that it is very attentive to day-to-day politics. For better or worse.

It was the compromise with the people who wanted a more direct democracy.

But when the House was set up, we didn’t have the current election cycle. You can still have a more direct democracy with longer terms. Hell, make them 3 years. Working 2.5 out of 3 years is far better than 1.5 our of 2 years.

But when the House was set up, we didn’t have the current election cycle

Politics never stops. Even in the old days.

In the old days, the members of the House lived in their district for most of the years, and so people knew them on a more personal level. That is far different today.

Term limits worked great in Russia.

You mean like hope and change…or maybe Real Plans for Real People?

What are you? Some kinda dang commie?! Don’t make me call Un-American Activities Committee!!

You could always pull a Reagan and close all the loopholes while lowering tax rates. It might even take another 30 years before we have to do it again due to politicians pandering and adding loopholes back in. Mortgage interest write off? Electric car tax credit? Give me a break!

Reagan only lowered tax rates for the rich, thus negating the closing of the loopholes.

Rates were cut across the board just like those terrible Bush tax cuts. Don’t let partisanship blind you.

The problem with the Bush tax cuts is they didn’t fundamentally reform the tax code and there were no changes to the budget to pay for the cuts. Irresponsible government at its finest.

“Mortgage interest write off? Electric car tax credit? Give me a break!”

If it weren’t for these types of gifts to the Housing CrimeSyndicate and global automakers, we all might be able to afford a new house and car.

Yes, and if we’re not blinded by partisanship there would be no reason to continue such nonsense loopholes/write-offs.

If it weren’t for these types of gifts to the Housing CrimeSyndicate and global automakers, we all might be able to afford a new house and car.

There is no MID in Canada and their housing is even less affordable than ours was at the peak of our bubble.

From Wikipedia:

“During Reagan’s presidency, federal income tax rates were lowered significantly with the signing of the bipartisan Economic Recovery Tax Act of 1981[128] which lowered the top marginal tax bracket from 70% to 50% and the lowest bracket from 14% to 11%, however other tax increases passed by Congress and signed by Reagan, ensured that tax revenues over his two terms were 18.2% of GDP as compared to 18.1% over the 40 year period 1970-2010.[129] Then, in 1982 the Job Training Partnership Act of 1982 was signed into law, initiating one of the nation’s first public/private partnerships and a major part of the president’s job creation program. Reagan’s Assistant Secretary of Labor and Chief of Staff, Al Angrisani, was a primary architect of the bill. The Tax Reform Act of 1986, another bipartisan effort championed by Reagan, further reduced the top rate to 28%, raised the bottom bracket from 11% to 15%, and, cut the number of tax brackets to 4.

Conversely, Congress passed and Reagan signed into law tax increases of some nature in every year from 1981 to 1987″

Yes, and if we’re not blinded by partisanship

And yet you’re extremely partisan.

“The Tax Reform Act of 1986, another bipartisan effort championed by Reagan, further reduced the top rate to 28%, raised the bottom bracket from 11% to 15%, and, cut the number of tax brackets to 4.”

But what you fail to mention is not only was this sponsored by Gephardt and Bradley (2 Democrats) but while raising the bottom bracket the exemption for a married couple was more than quadrupled. You can’t just tell part of the story.

Yes ,take away second home tax breaks and limit the amount of tax break on home loans to maybe 300 or 500
thousand ,in addition to taking away a number of tax breaks for the 1 % that were never justified to begin with .

restore taxation rates to the “onerous” levels of the Reagan years….A total wasted effort unless you cut …

Am I perceiving a right wing talking point today? We are regularly being told that any increase in taxes on the rich will generate little real income (demonstrably untrue), will not ’solve the problem’ ( a strawman- something can be helpful without completely solving a problem), and anyway shouldn’t even be considered until we cut everything else under the sun.

Smells like team spirit.

It’s called the Laffer curve alpha-sloth and each individual economy will vary. That’s not just a theory, but proven. Look at the UK’s tax on the wealthy. That worked out well, it brought in over a billion pounds in new revenue each month…no…wait…it did the opposite because the rich sheltered their money.

This is why you can’t talk raising taxes, lowering taxes, adjusting taxes, without fundamental change to the system.

Don’t confuse economic reality with partisanship. While it may sound great to raise taxes on the wealthy and makes for a nice talking point, don’t confuse it with actually raising revenue. To raise revenue you must eliminate loopholes and deductions, some of which are very popular.

I was one of those sounding the alarm when GWB decided to mail everyone in the country a check. I was one of those sounding the alarm when they decided to cut taxes without changing the tax code or offering cuts in spending to offset them. Now I’m sounding the alarm about raising taxes in the same manner.

How do you suggest the system be changed?

alpha-sloth, I’ve come to the conclusion that 1 of 2 things is happening here.

1) You like to argue for the sake of argument.
-or-
2) You are so Democrat party line blinded that you aren’t capable of having reasonable conversation with someone who doesn’t have 100% of the same views.

I’ve made suggestions the entire day on how the system should be changed. It involves prioritizing spending, closing tax loopholes, and revamping entitlements so that they remain solvent. You can’t continue to deny there’s a spending, deficit, and debt problem in this country. You have to make some decisions that will be unpopular. You can’t just put on a party hat and dig your heels into the ground. Nothing will ever get accomplished if that happens.

You’ve been spending too much time on the wrong web sites, Andy. You’ve gotta back up your assertions with proof, not platitudes, ’round here.

If your idea of proof is some made up numbers on a proposal that hasn’t even been put on the table, I’d rather just get your opinion.

Even Laffer has said his curve theory was incorrect. Citing it as foundational just makes you look silly.

Citing it as foundational just makes you look silly.

Yeah, once he claimed the Laffer Curve was “not just a theory, but proven”, I had to chuckle and move on to more serious, less brainwashed posts.

Bad Andy’s posts are fountains of dubious assertions that he presents as well-established facts. That’s what happens to your thought processes when you spend too much time on dittohead media and web sites. You start taking their propaganda as base-line truths. Then you’re shocked when someone asks you to prove one of your assertions.

Laffer?

Credibility just went to ZERO.

…or subsidies to mega farms run by multi-million dollar corporations.

Right on Bad Andy about the subsidies to mega farms run by multi-million dollar corporations ,that are giving us crap food anyway .I would like to see the encouraging of the small local farmer myself ,rather than the small farmer going bust like
what happened with Ma and Pop stores when the Wal Mart
type monopolies took over .

The answer to #1 is most definitely yes.

If you say so. Now answer this one:

Q1: Is ONLY cutting spending the ONLY way to balance the budget?

No Oxide, its not, and I have never said that.

We are all going to be paying more, all of us.

CharlieTango, read into some of these posts. What you’re finding is a much more fiscally conservative mindset by a lot of these lefties (no offense to the lefties). Unfortunately we still get into the Democrat vs. Republican debate. They’re two evils and there’s no lesser of them.

The official stand of the Democratic party is to ignore the problems and maybe they’ll go away. Raise taxes and maybe we’ll get some more revenue. Maybe if we give more handouts we’ll get some more votes. Maybe if we give some of those handouts to big corporations they’ll like us more and donate to our cause.

The official stand of the Republican party is to keep tax cuts without fundamental tax reform. Pretend to cut spending by moving numbers around on paper while benefiting our corporate sponsors. Claim not to want government all up in our business…unless it’s someone’s bedroom, what they put into their bodies, involves any type of freedom of speech, or involves minding our own business in foreign affairs.

‘Why do you keep this up? Is this a “left” only club? If so you should put up a sign.’

I’m guessing the reason is that I don’t have time to waste on watching Sean Inanity or listening to Rush on the radio. Hence I am always shocked and appalled when their talking points show up here on the HBB.

“Claim not to want government all up in our business…unless it’s someone’s bedroom, what they put into their bodies, involves any type of freedom of speech, or involves minding our own business in foreign affairs.”

In other words, not only are Republicans terminally stupid, but they are also not even true to their own principals of limited government.

“there is something unsustainable about all this.”

+1

The piece that people miss entirely about the current trajectory of government is that the people who get screwed if we keep going down this path is the little guy. The non-stop printing of money will eventually result in inflation (some of which we seem to be seeing already in form of food and energy), which hurts the little guy most of all, and is not indiscriminate in who it harms. It is less damaging (and can even help) people with wealth, hurts people without.

Whenever I raise this point in a fight to get people to understand the path we are on, their eyes glaze over.

The non-stop printing of money will eventually result in inflation

Like in Japan?

Like nearly every other example with a fiat currency.

Japan is one of very few exceptions, which appears to be a result of their own people being the primarily lenders to their own government.

It also helps when you actually make stuff and run trade surpluses.

‘People have been betting that Japan was out of borrowing capacity’

Something about the economic models and theories have not explained reality for a long time. Friedman linked money creation and inflation. It stood up at the time. But money supply expanded for many years under Greenspan and we didn’t see a similar increase in inflation. So something else is at work, but the PTB either refuse to address it or are ignorant. The economic profession is largely silent, with the exception of the Austrians.

It’s pretty complicated, but what do we know? That Japan had stock and RE bubbles, and have been in a recessionary period of deflation ever since. The current RE bubble is global. That traditional indicators like precious metals and interest rates aren’t responding as they did in the past. Others can probably think of things like this.

We also know that the central banks are having to suppress rates, for years now and no end in sight. At the same time they buy trillions in debt, public and private. They tell us it’s to ’save’ the financial system. I would suggest that these actions, once reserved for ‘emergencies, are standard operating procedure now. And that to me indicates we are in an extended period of deflation. The first thing to determine is, when did it start? What role have debt based bubbles played? I could go on. But for the Fed to insist that this is a redo of the 1920’s is silly. And to keep pointing to low inflation as success is akin to burying their head in the sand. This isn’t the time to pretend to be an ostrich.

But money supply expanded for many years under Greenspan and we didn’t see a similar increase in inflation.

The inflation was seen in the lack of deflation that would otherwise have occurred due to globalization and trickle-down economics. It was most notable in asset prices.

But money supply expanded for many years under Greenspan and we didn’t see a similar increase in inflation.

Except the housing bubble.

Lame. Olympics soccer win doesn’t count.

You’re just saying that because Team USA (men’s) didn’t even qualify.

As for not counting, a sold out Wembley begs to disagree.

And FWIW, there were more than a few heavyweights on the Brazilian team. Most of those guys will be playing on Brazil’s 2014 World Cup Team, including Brazil’s current superstar, Neymar da Silva Santos.

And pension collapse would not be the result of debt default?

The pensions hold debt, and are planning on achieving rates of return that are simply impossible for public that is burried under too much debt to pay.

Don’t raise interest rates, insufficient interest. Do raise interest rates, and the debt poofs out of existence.

Either way, there is no free lunch, and the smaller, GenX is not in anything close to a good financial position that would be needed for them to fund the retirement of the Baby Boomers.

“And pension collapse would not be the result of debt default?
…
Don’t raise interest rates, insufficient interest. Do raise interest rates, and the debt poofs out of existence.

Either way, there is no free lunch,…”

I’m not the one who ever suggested there was a free lunch…

“I’m not the one who ever suggested there was a free lunch…”

By implying that raising interest rates will fix the pension funding short-fall, you are implying there is a free lunch. You are ignoring that those that owe the debt have to be able to afford to pay the higher interest.

Just raising the interest rates doesn’t fix the pension funding issue if those that owe the money can’t afford to pay the hire interest rates.

SOMEONE is going to have to pay for Boomer retirement, and given the current economic state of the median household, it isn’t going to be the median household. The “well above median” income have congress on their payroll to ensure it isn’t going to be them. That leaves the ever shrinking “upper middle class” left to carry an ever larger share of the cost.

And guess what. They can’t afford it either.

“By implying that raising interest rates will fix the pension funding short-fall, you are implying there is a free lunch.”

I didn’t say that, or even suggest it.

What I did suggest is that the low rate environment we are in is a pension plan killer, and the Fed is contributing to the problem by squashing yields.

“I see low interest rates as a symptom of low demand for borrowing money or capital. What would cause this?”

QE1, QE2 and Operation Twist don’t exist on your planet, then?

You’ve just summed most MBAs, small business owners and their like.

Yep, Gant charts are still the norm for project management…

Though with the mainstreaming of Agile Development, the time frames represented in the Gant charts have been compressed to days/weeks for a release cycle vs. months/years normally represented with Waterfall/SDLC methodology.

What’s the benefit you ask? Supposed to reduce risk by forcing prioritization of features, fast prototyping and quicker end-user feedback. What’s the catch? PITA to manage for large, complex projects with lots of dependencies. Lot’s of shortcuts used to account for truncated development schedules: lack of documentation, poor code practices, etc.

I should start a column/blog…….

My youngest was moving into an apartment last year, one of her buddies was helping her. I’ve known this girl since she was 6. Anyhoo, she’s telling me how college sucks, how the job market sucks, that 18-21 year old boys suck, etc. etc.

She concludes this conversation by blurting out..”I’d just like to live in the forest, run around naked and (fornicate) all the time !!! ”

My mind immediately started swirling around in about a half dozen different directions:

-Stunned that she would even say that out loud, especially to me.

-Realizing that she said it to me, because I’m her friend’s dad, and old guy, and registers a zero point zero on the attractiveness meter.

-Trying to picture that in my mind (she’s nice looking).

-Trying hard not to say “Well……I could make that happen”.

-Working out the logistics of making it happen in my mind.

Some things are best left unsaid.

Anyone who says “money can’t buy happiness” has never had any money.

Or had more than he ever needed.

I just want enough to buy a little bit of happiness.

But redistributing happiness is Socialism.

But redistributing happiness is Socialism.

It makes some happier when others are sad.

Tell it to Ronnie Wood! Maybe money is everything.

Just because it’s “too gross to even contemplate” doesn’t mean someone won’t contemplate it.

The Perfect Salary for Happiness: $75,000

Now we have more details from the study, conducted by the Princeton economist Angus Deaton and famed psychologist Daniel Kahneman. It turns out there is a specific dollar number, or income plateau, after which more money has no measurable effect on day-to-day contentment.

The magic income: $75,000 a year. As people earn more money, their day-to-day happiness rises. Until you hit $75,000. After that, it is just more stuff, with no gain in happiness.

That doesn’t mean wealthy and ultrawealthy are equally happy. More money does boost people’s life assessment, all the way up the income ladder. People who earned $160,000 a year, for instance, reported more overall satisfaction than people earning $120,000, and so on.

“Giving people more income beyond 75K is not going to do much for their daily mood … but it is going to make them feel they have a better life,” Mr. Deaton told the Associated Press.

http://blogs.wsj.com/wealth/2010/09/07/the-perfect-salary-for-happiness-75000-a-year/

Giving people more income beyond 75K is not going to do much for their daily mood … but it is going to make them feel they have a better life,”

That’s a subtle difference to infer from the data. I wonder what it implies?

If you hit on a hundred a day, you only need a 1% success rate.

Yup, just thinking the same thing myself. Gotta check the status — and worse yet you gotta check the status without anyone knowing that you’re checking status.

Not helpful that guys, unlike gals, think that rings are optional.

Yup, just thinking the same thing myself. Gotta check the status — and worse yet you gotta check the status without anyone knowing that you’re checking status.

Being the good HBB-er that I am, I plunked the guy’s last name into the Pima County Assessor property owner database. I got a hit with his name. And that of his wife. They have JTRS on the house deed. That’s Arizona-speak for “joint tenancy with right of survivorship.”

“I just realized that the fellow KXCI deejay student I had a crush on is married.”

How old is he? (Just curious cuz you said he’s a student)

Hmmm, there’s an idea. But it sounds like stalking, doesn’t it. And part of me is always afraid to find out…

How old is he? (Just curious cuz you said he’s a student)

Guy’s in his early sixties. And that’s not at all unusual. This deejay class attracts everyone from teenagers to those on Social Security.

CAFRs.

Learn them. Know them.

http://www.sco.ca.gov/ard_state_cafr.html

Each state has one.