In addition to pandering to his left wing base about "Gun Control", the President has added "Climate Change" to his pander list. No doubt many will be energized by bold predictions unrelated to reality; but not Bjorn Lomborg , the environmentally-oriented economist who continues to challenge the conventional wisdom with facts and "math". It's really just policy decision-making by cost-benefit analysis instead of by emotionalism.
From his Climate-Change Misdirection article in the Wall Street Journal :
"if the main effort to cut emissions is through subsidies for chic renewables like wind and solar power, virtually no good will be achieved—at very high cost. The cost of climate policies just for the European Union—intended to reduce emissions by 2020 to 20% below 1990 levels—are estimated at about $250 billion annually. And the benefits, when estimated using a standard climate model, will reduce temperature only by an immeasurable one-tenth of a degree Fahrenheit by the end of the century.
Even in 2035, with the most optimistic scenario, the International Energy Agency estimates that just 2.4% of the world's energy will come from wind and only 1% from solar. As is the case today, almost 80% will still come from fossil fuels. As long as green energy is more expensive than fossil fuels, growing consumer markets like those in China and India will continue to use them, despite what well-meaning but broke Westerners try to do."
He recommends funding more inexpensive R&D rather than ineffective business that can't survive without government subsidies. As Lomborg puts it:
"When innovation eventually makes green energy cheaper, everyone will implement it, including the Chinese. Such a policy would likely do 500 times more good per dollar invested than current subsidy schemes. But first let's drop the fear-mongering exaggeration—and then focus on innovation. "
Sounds like a good plan - even if we were not deep in deficit-land and didn't have a proven record of choosing poorly on "chrony-capitalism" projects.
Monday, January 28, 2013
The (Embarassing) Corner
Two items at the National Review Online Corner blog today are concise statements of the state of the union:
First, Maggie Gallagher asks "why so many college graduates :
According to a new study, based on 2010 Labor Department data and led by economist Richard Vedder, the number of college graduates in the work force (41.7 million) in 2010 was larger than the number of jobs requiring a college degree (28.6 million)."
So where do the excess graduates go ? Well ,they are 5% of Janitors, 15% of taxi drivers (vis 1% in 1970) and 25% of retail sales clerks (vis5% in 1970).
Second, Peter Kirsanow asks " What Difference, at This Point, Does It Make? The media are enamored of what they perceive as Hillary Clinton’s witty riposte to Senator Johnson during the Benghazi hearings. Conservatives should employ the same question as often as possible. It’s more appropriately directed at the following:" He then lists several Trillions of Dollars expended over the past years on programs with little or no benefit. Perhaps his list could start the search for budget savings; it includes :
The War on Poverty , The Department of Education ,The Stimulus, Head Start, Affirmative Action, The Department of Energy. All provided with rationale for inclusion. Read the post.
First, Maggie Gallagher asks "why so many college graduates :
According to a new study, based on 2010 Labor Department data and led by economist Richard Vedder, the number of college graduates in the work force (41.7 million) in 2010 was larger than the number of jobs requiring a college degree (28.6 million)."
So where do the excess graduates go ? Well ,they are 5% of Janitors, 15% of taxi drivers (vis 1% in 1970) and 25% of retail sales clerks (vis5% in 1970).
Second, Peter Kirsanow asks " What Difference, at This Point, Does It Make? The media are enamored of what they perceive as Hillary Clinton’s witty riposte to Senator Johnson during the Benghazi hearings. Conservatives should employ the same question as often as possible. It’s more appropriately directed at the following:" He then lists several Trillions of Dollars expended over the past years on programs with little or no benefit. Perhaps his list could start the search for budget savings; it includes :
The War on Poverty , The Department of Education ,The Stimulus, Head Start, Affirmative Action, The Department of Energy. All provided with rationale for inclusion. Read the post.
Thursday, January 17, 2013
Observations on Demography and Destiny
It's easy to find Politicians and Pundits, in print and on TV, telling us that the current Entitlement System is Broke, Unsustainable, or Fixable with a Tweak or two. How to know what's right? Where to start?
There are 3 primary "entitlements", Social Security, Medicare/Medicaid, and Welfare. Let's discuss the Social Security System(SS) to illustrate some basic common features.
The first such system was introduced in Germany by Bismark to provide a basic minimum safety net for the elderly poor. Our system was introduced by FDR in the 1930's to do the same for the elderly poor during the Great Depression. The key concept for both was that only a few people would get benefits for short periods of time; and the cost would be low and easily affordable by a relatively large worker population.
In fact, Bismark designed his version to begin paying benefits after the age when most workers were expected to die. FDR was more generous in starting benefits a bit before expected death. Even so, the US system began with more than 65 workers paying taxes for each retiree getting benefits. FDR sold his program as "insurance" rather than "welfare"and created the SS Trust Fund to "account" for the extra income over benefits payments. N.B. "Account" for funds; not "Receive" funds.
SS has always been funded as current worker contributions paying for current retiree benefits with any remaining funds used for current government operations. Those remaining funds are also accounted for as ledger entries in the Trust Fund and interest is calculated and accounted for by additional ledger entries.
Today, as a result of national demographics, there are about 3 workers paying for each retiree; and they are not paying enough. Demographic trends indicate fewer workers, more retirees and longer lifespans, leading to about 2 workers per retiree by 2025.
SS income has been inadequate to fully pay benefits since 2012. The gap is small compared to SS Trust Fund; but there are no negotiable funds in the Trust only non-marketable bonds comprising the "ledger accounts". So the Gap is filled by issuing negotiable bonds or diverting general income funds to get real funds to pay real benefits. (Or by the Obama option : print more money, inflate prices and deflate savings.)
KEY POINT : All Three Big Entitlements need today's workers/taxpayers to pay for today's beneficiaries. National and world demographic trends are going the wrong way for this to be sustainable. Some examples.
According to Slate Magazine, World population may actually start declining, not exploding. :
“For hundreds of thousands of years,” explains Warren Sanderson, a professor of economics at Stony Brook University, “in order for humanity to survive things like epidemics and wars and famine, birthrates had to be very high.” Eventually, thanks to technology, death rates started to fall in Europe and in North America, and the population size soared. In time, though, birthrates fell as well, and the population leveled out. The same pattern has repeated in countries around the world. Demographic transition, Sanderson says, “is a shift between two very different long-run states: from high death rates and high birthrates to low death rates and low birthrates.” Not only is the pattern well-documented, it’s well under way: Already, more than half the world’s population is reproducing at below the replacement rate."
Most of Europe is below the 2.1 births/woman replacement rate; the US has just dropped below that rate for the first time. Fewer children mean bigger problems funding a "Welfare State" or big entitlements.
From the Wall Street Journal Drop in Number of Children Poses Economic Challenge for California: "Declining migration and falling birthrates have led to a drop in the number of children in California just as baby boomers reach retirement, creating an economic and demographic challenge for the nation's most populous state."
Both above articles are worth reading. But if you only have time for one, I strongly recommend Joel Kotkin's discussion of Demography as Destiny: The Vital American Family :
"Yet family size is far more than just another political wedge issue. It is an existential one – essentially determining whether a society wants to replace itself or fall into oblivion, as my colleagues and I recently demonstrated in a report done in conjunction with Singapore’s Civil Service College. No nation has thrived when its birthrate falls below replacement level and stays there – the very level the United States are at now. Examples from history extend from the late Roman Empire to Venice and the Netherlands in the last millennium. .......
Falling birthrates and declining family formation clearly effect national economies. One major United States’ advantage has long been high birthrates, akin to a developing nation’s, as well as a vibrant family-oriented culture. .......
If birthrates continue to decline, Western nations may devolve into impoverished and enervated nursing homes. And without strong families, children are likely to be more troubled and less productive as adults."
Kotkin's article goes a lot further in discussing causes, dangers, and reasons for optimism. My "Family First" SS post postulated a dramatically different SS reform idea as a counterpoint to move the entitlements discussion away from incremental financial improvements to the existing impersonal social-entitlements paradigm and towards a new paradigm based on a family ethos and current demographics trends. Think of it as a start point for devising a 21st Century Social Support (not Entitlements) system. Kotkin's article provides a lot of intellectual background and encouragement for that idea; so I'll close with his closing statement .
" “No matter how many communes people invent,” the anthropologist Margaret Mead once remarked, “the family always creeps back.” Let’s hope she’s right, not only about the past but the future as well."
There are 3 primary "entitlements", Social Security, Medicare/Medicaid, and Welfare. Let's discuss the Social Security System(SS) to illustrate some basic common features.
The first such system was introduced in Germany by Bismark to provide a basic minimum safety net for the elderly poor. Our system was introduced by FDR in the 1930's to do the same for the elderly poor during the Great Depression. The key concept for both was that only a few people would get benefits for short periods of time; and the cost would be low and easily affordable by a relatively large worker population.
In fact, Bismark designed his version to begin paying benefits after the age when most workers were expected to die. FDR was more generous in starting benefits a bit before expected death. Even so, the US system began with more than 65 workers paying taxes for each retiree getting benefits. FDR sold his program as "insurance" rather than "welfare"and created the SS Trust Fund to "account" for the extra income over benefits payments. N.B. "Account" for funds; not "Receive" funds.
SS has always been funded as current worker contributions paying for current retiree benefits with any remaining funds used for current government operations. Those remaining funds are also accounted for as ledger entries in the Trust Fund and interest is calculated and accounted for by additional ledger entries.
Today, as a result of national demographics, there are about 3 workers paying for each retiree; and they are not paying enough. Demographic trends indicate fewer workers, more retirees and longer lifespans, leading to about 2 workers per retiree by 2025.
SS income has been inadequate to fully pay benefits since 2012. The gap is small compared to SS Trust Fund; but there are no negotiable funds in the Trust only non-marketable bonds comprising the "ledger accounts". So the Gap is filled by issuing negotiable bonds or diverting general income funds to get real funds to pay real benefits. (Or by the Obama option : print more money, inflate prices and deflate savings.)
KEY POINT : All Three Big Entitlements need today's workers/taxpayers to pay for today's beneficiaries. National and world demographic trends are going the wrong way for this to be sustainable. Some examples.
According to Slate Magazine, World population may actually start declining, not exploding. :
“For hundreds of thousands of years,” explains Warren Sanderson, a professor of economics at Stony Brook University, “in order for humanity to survive things like epidemics and wars and famine, birthrates had to be very high.” Eventually, thanks to technology, death rates started to fall in Europe and in North America, and the population size soared. In time, though, birthrates fell as well, and the population leveled out. The same pattern has repeated in countries around the world. Demographic transition, Sanderson says, “is a shift between two very different long-run states: from high death rates and high birthrates to low death rates and low birthrates.” Not only is the pattern well-documented, it’s well under way: Already, more than half the world’s population is reproducing at below the replacement rate."
Most of Europe is below the 2.1 births/woman replacement rate; the US has just dropped below that rate for the first time. Fewer children mean bigger problems funding a "Welfare State" or big entitlements.
From the Wall Street Journal Drop in Number of Children Poses Economic Challenge for California: "Declining migration and falling birthrates have led to a drop in the number of children in California just as baby boomers reach retirement, creating an economic and demographic challenge for the nation's most populous state."
Both above articles are worth reading. But if you only have time for one, I strongly recommend Joel Kotkin's discussion of Demography as Destiny: The Vital American Family :
"Yet family size is far more than just another political wedge issue. It is an existential one – essentially determining whether a society wants to replace itself or fall into oblivion, as my colleagues and I recently demonstrated in a report done in conjunction with Singapore’s Civil Service College. No nation has thrived when its birthrate falls below replacement level and stays there – the very level the United States are at now. Examples from history extend from the late Roman Empire to Venice and the Netherlands in the last millennium. .......
Falling birthrates and declining family formation clearly effect national economies. One major United States’ advantage has long been high birthrates, akin to a developing nation’s, as well as a vibrant family-oriented culture. .......
If birthrates continue to decline, Western nations may devolve into impoverished and enervated nursing homes. And without strong families, children are likely to be more troubled and less productive as adults."
Kotkin's article goes a lot further in discussing causes, dangers, and reasons for optimism. My "Family First" SS post postulated a dramatically different SS reform idea as a counterpoint to move the entitlements discussion away from incremental financial improvements to the existing impersonal social-entitlements paradigm and towards a new paradigm based on a family ethos and current demographics trends. Think of it as a start point for devising a 21st Century Social Support (not Entitlements) system. Kotkin's article provides a lot of intellectual background and encouragement for that idea; so I'll close with his closing statement .
" “No matter how many communes people invent,” the anthropologist Margaret Mead once remarked, “the family always creeps back.” Let’s hope she’s right, not only about the past but the future as well."
Sunday, January 6, 2013
Stealthy Taxes and a Family First Idea
The fiscal cliff deal is a classic case of crisis-driven legislation, passing an unread bill in haste, to solve an urgent problem created 2 years ago by passing crisis-driven legislation to solve, well basically, the same problem. Lack of political honesty about the real state of the nation's finances leads to unintended consequences and band-aids rather than solutions.
The Wall Street Journal discusses the fiscal cliff's Stealth Tax Hike, which raises the new marginal top income tax rate from the advertised 39'6% up to an effective45% for many taxpayers. The Hike is caused by reviving two expired 1990 tax provisions, PEP and Pease, which limit deductions and exemptions for higher-income taxpayers. As a result, some of the steepest tax increases may fall on upper-middle class earners with incomes just above $250,000. The article reports:
"The Senate Finance Committee informs us that in effect the loss of the personal exemptions, currently $3,800 per family member, can mean a 4.4 percentage point rise in the marginal tax rate for a married couple with two kids and incomes above $250,000. A family with four kids in that income range faces about a six percentage point marginal rate hike. The restored limitations on itemized deductions can raise the tax rate by another one percentage point.
Add it together and families in the 33% tax bracket could see their effective marginal rate paid on each additional dollar earned rise to above 38%. ...Those earning more than $450,000 would see their de facto tax rate rise to about 41% under the new law, not 39.6%. Add in the new ObamaCare investment taxes and the tax rate on interest income is close to 45%."
The above does not count the added 2% payroll tax on income up to $110,000 which all workers pay. It does include the ObamaCare 3.8% investment income tax which most of us won't have to pay. Or maybe we will - if we get a big one-time income boost from tapping a 401K retirement plan to pay for a family emergency; or from selling a large house to begin retirement.
I'm not surprised that the tax rates are higher than advertised; you can't expect to really know what's in a hastily-passed largely-unread bill for a while. What does surprise me is the bias against marriage and family.
These new tax rates make it financially attractive for a couple with 2 high incomes to divorce and file separately. One couple has done so and stated a web site (MisMatch.com) to help other couples do the same. More amazingly, the marginal tax rate for 4 child family is 2% points higher than for a 2 child family.
It's "Amazing" because our entitlement programs (Social Security and Medicare) face financial catastrophe because there are not enough future workers paying to support the growing number of older beneficiaries.
So, the new tax provisions encourage people to break up families and to have fewer children! Is that just an unintended consequence of haste? Or is it a symptom of policy by crisis tinkering instead of goal setting?
Perhaps we should put the horse back in front of the cart and rethink our priorities and goals to achieve the society we desire.. Do we want the Government to take care of us (with a lot of attendant control) ? Or do we want to care for ourselves and our families while providing support for the less fortunate?
To help thinking about society goals as a basis for setting policy, consider a family-oriented idea: Make Social Security a Family First Plan.
Today's workers pay 12.5% of their wages, including the employer share, to support today's retirees and hope someone else will return the favor later. The Family First Plan will use each workers taxes first to pay benefits to the worker's parents and grandparents; second to fund a personal 401k plan; and third to fund a general safety net that supports retirees who have no children or have very low income.
It may take a lot of design work, number crunching and some income/benefits realignment to turn this idea into a sustainable plan; and there's probably a generation long transition period. But it would wipe-out the current multi-generation debt burden; and the family context should help young and old to accept essential realignments.
The key point is that the Family First Plan does more than just fund retirements, it encourages individual and family self-reliance and stabilization across generations. I submit that is far more sustainable over the long term than any variation of the current impersonal Social Security system.
The Wall Street Journal discusses the fiscal cliff's Stealth Tax Hike, which raises the new marginal top income tax rate from the advertised 39'6% up to an effective45% for many taxpayers. The Hike is caused by reviving two expired 1990 tax provisions, PEP and Pease, which limit deductions and exemptions for higher-income taxpayers. As a result, some of the steepest tax increases may fall on upper-middle class earners with incomes just above $250,000. The article reports:
"The Senate Finance Committee informs us that in effect the loss of the personal exemptions, currently $3,800 per family member, can mean a 4.4 percentage point rise in the marginal tax rate for a married couple with two kids and incomes above $250,000. A family with four kids in that income range faces about a six percentage point marginal rate hike. The restored limitations on itemized deductions can raise the tax rate by another one percentage point.
Add it together and families in the 33% tax bracket could see their effective marginal rate paid on each additional dollar earned rise to above 38%. ...Those earning more than $450,000 would see their de facto tax rate rise to about 41% under the new law, not 39.6%. Add in the new ObamaCare investment taxes and the tax rate on interest income is close to 45%."
The above does not count the added 2% payroll tax on income up to $110,000 which all workers pay. It does include the ObamaCare 3.8% investment income tax which most of us won't have to pay. Or maybe we will - if we get a big one-time income boost from tapping a 401K retirement plan to pay for a family emergency; or from selling a large house to begin retirement.
I'm not surprised that the tax rates are higher than advertised; you can't expect to really know what's in a hastily-passed largely-unread bill for a while. What does surprise me is the bias against marriage and family.
These new tax rates make it financially attractive for a couple with 2 high incomes to divorce and file separately. One couple has done so and stated a web site (MisMatch.com) to help other couples do the same. More amazingly, the marginal tax rate for 4 child family is 2% points higher than for a 2 child family.
It's "Amazing" because our entitlement programs (Social Security and Medicare) face financial catastrophe because there are not enough future workers paying to support the growing number of older beneficiaries.
So, the new tax provisions encourage people to break up families and to have fewer children! Is that just an unintended consequence of haste? Or is it a symptom of policy by crisis tinkering instead of goal setting?
Perhaps we should put the horse back in front of the cart and rethink our priorities and goals to achieve the society we desire.. Do we want the Government to take care of us (with a lot of attendant control) ? Or do we want to care for ourselves and our families while providing support for the less fortunate?
To help thinking about society goals as a basis for setting policy, consider a family-oriented idea: Make Social Security a Family First Plan.
Today's workers pay 12.5% of their wages, including the employer share, to support today's retirees and hope someone else will return the favor later. The Family First Plan will use each workers taxes first to pay benefits to the worker's parents and grandparents; second to fund a personal 401k plan; and third to fund a general safety net that supports retirees who have no children or have very low income.
It may take a lot of design work, number crunching and some income/benefits realignment to turn this idea into a sustainable plan; and there's probably a generation long transition period. But it would wipe-out the current multi-generation debt burden; and the family context should help young and old to accept essential realignments.
The key point is that the Family First Plan does more than just fund retirements, it encourages individual and family self-reliance and stabilization across generations. I submit that is far more sustainable over the long term than any variation of the current impersonal Social Security system.
Saturday, January 5, 2013
Ich bin ein Eurozoner - si'l vous plais
My odd title reflects the centrality of the German and French
economies to the EuroZone financial crisis, which the UK published Economist Magazine considers similar to our fiscal crisis in an article entitled : The fiscal cliff deal: America’s European moment . I bring this up because their assessment is unfortunately close to my last post.
The article discusses 3 key parallels in our situations : First is an inability to get beyond patching things up; i.e., can-kicking is a transatlantic sport; followed by the outsize influence of narrow interest groups; and finally, the failure of politicians to be honest with voters. A key quote :
" The automatic spending cuts have merely been postponed for two months ...and the temporary fix ignored America’s underlying fiscal problems. It did nothing to control the unsustainable path of “entitlement” spending on pensions and health care (the latter is on track to double as a share of GDP over the next 25 years); nothing to rationalise America’s hideously complex and distorting tax code, which includes more than $1 trillion of deductions; and virtually nothing to close America’s big structural budget deficit. (Putting up tax rates at the very top simply does not raise much money.) Viewed through anything other than a two-month prism, it was an abject failure."
The lack of political honestly not only makes it hard to devise a realistic solution to our nation's problems, it diminishes our ability to function in the world :
"The saddest thing about this week’s deal is how unaware Messrs Obama and Boehner seem to be of the wider damage their petty partisanship is doing to their country. National security is not just about the number of tanks or rockets you have. As it has failed to deal with the single currency, Europe’s standing has crumbled in the world. Why should developing countries trust American leadership, when it seems incapable of solving anything at home? ...(Obama) and Republican leaders are building Brussels on the Potomac."
That's a very sad statement considering how much further down to road to insolvency the Europeans are. We must deal with our entitlement-driven financial problems before we get to the same state. Perhaps we can do so in this year's continuing crises; but I'm more hopeful than confident. The first step is to get a lot more open and honest about our situation and the key factors - revenues, expenditures & entitlements , economic growth, deficits, debt, and demographics - that may drive a solution.
I'll try to address some of these in future posts, starting with some observations on political honesty or openness in the fiscal cliff deal.
The article discusses 3 key parallels in our situations : First is an inability to get beyond patching things up; i.e., can-kicking is a transatlantic sport; followed by the outsize influence of narrow interest groups; and finally, the failure of politicians to be honest with voters. A key quote :
" The automatic spending cuts have merely been postponed for two months ...and the temporary fix ignored America’s underlying fiscal problems. It did nothing to control the unsustainable path of “entitlement” spending on pensions and health care (the latter is on track to double as a share of GDP over the next 25 years); nothing to rationalise America’s hideously complex and distorting tax code, which includes more than $1 trillion of deductions; and virtually nothing to close America’s big structural budget deficit. (Putting up tax rates at the very top simply does not raise much money.) Viewed through anything other than a two-month prism, it was an abject failure."
The lack of political honestly not only makes it hard to devise a realistic solution to our nation's problems, it diminishes our ability to function in the world :
"The saddest thing about this week’s deal is how unaware Messrs Obama and Boehner seem to be of the wider damage their petty partisanship is doing to their country. National security is not just about the number of tanks or rockets you have. As it has failed to deal with the single currency, Europe’s standing has crumbled in the world. Why should developing countries trust American leadership, when it seems incapable of solving anything at home? ...(Obama) and Republican leaders are building Brussels on the Potomac."
That's a very sad statement considering how much further down to road to insolvency the Europeans are. We must deal with our entitlement-driven financial problems before we get to the same state. Perhaps we can do so in this year's continuing crises; but I'm more hopeful than confident. The first step is to get a lot more open and honest about our situation and the key factors - revenues, expenditures & entitlements , economic growth, deficits, debt, and demographics - that may drive a solution.
I'll try to address some of these in future posts, starting with some observations on political honesty or openness in the fiscal cliff deal.
Thursday, January 3, 2013
Happy New (Year) Continuing Crises and Resolutions
Welcome to the New Year! And a new blog.
After much drama, the well- hyped fiscal cliff is now avoided (postponed, delayed, played for all its worth ). The mini drama about the Speaker of the House vote is also resolved with Speaker Boehner winning a squeakily narrow re-election bid, beating --- well, no one. What a thrilling way to end and begin a year.
If you enjoyed this political Kabuki theater of the absurd, don't worry, there are many more chapters to be played out this year with continuing crises and resolutions for all. If you are concerned about the state of the nation and seeking serious solutions, I suggest alcohol, humor and venting. I'll offer a little of the latter two.
What did happen with the fiscal cliff ? Well, it's a two part cliff - spending and taxation.
The spending half (sequestration) got postponed for 2 months with no clear path to a compromise. So we can look forward dealing with it and raising the Debt Ceiling at the same time. Another predictable fearful crisis looms !
The taxation half got resolved by making permanent all the demonically unaffordable "Bush Tax Cuts" for all but those few taxpayers making over $400,000 (or $450,000 for a couple); thus saving the middle class while making the rich pay more - or maybe not. The resolution ended the payroll tax "holiday"; so workers will see their paychecks hit with an extra 2% tax. There are more details, but those are the highlights. What's the bottom line? The government collects about $600 Billion over ten years - or about $60 Billion per year in new tax revenue. That will be a great help in reducing our over $1 Trillion per year deficits and over $16 Trillion in Debt.
By the way, that taxation cliff bill included several multi-billion dollar spending increases for various special interests, like more windmill subsidies. Maybe those will be addressed later at our scheduled spending crisis in two months. Or maybe not, since only the sequestration spending is formally on the table.
You remember the Sequestration Breakthrough of 2011? The President and Congress couldn't decide whether or how to cut spending or increase taxes before hitting the Debt Ceiling, failing to pay our national debts, and going "bankrupt". That crisis was resolved by the Government giving itself the rest of the year to figure out how to get new funds and cut spending or, failing that, automatically "sequestering" or cutting the needed funds equally from Defense and other Domestic sources. Well, nothing got fixed in 2011or 2012, so we were due to cut those sequestered funds on 1 January 2013.
Nobody wanted to do that, so we had the great fiscal cliff drama that just ended by further postponement. Now we have the new 2013 Fiscal Cliff Do-Over in two months coinciding with a new Debt Ceiling crisis. Deja vu anyone ?
Of course, the really big fiscal driver ( Entitlements - Social Security, Medicare, and Medicaid) are not really on the table for negotiations yet; nor, it seems, is the Federal Budget. The Senate has not passed a budget in 3 years and isn't likely to this year which means we will have renewed House - Senate negotiations over a 2014 Continuing Resolution to fund the government past 1 October 2013.
Happy New Year! Looking forward to continuing crises and another Continuing Resolution.
After much drama, the well- hyped fiscal cliff is now avoided (postponed, delayed, played for all its worth ). The mini drama about the Speaker of the House vote is also resolved with Speaker Boehner winning a squeakily narrow re-election bid, beating --- well, no one. What a thrilling way to end and begin a year.
If you enjoyed this political Kabuki theater of the absurd, don't worry, there are many more chapters to be played out this year with continuing crises and resolutions for all. If you are concerned about the state of the nation and seeking serious solutions, I suggest alcohol, humor and venting. I'll offer a little of the latter two.
What did happen with the fiscal cliff ? Well, it's a two part cliff - spending and taxation.
The spending half (sequestration) got postponed for 2 months with no clear path to a compromise. So we can look forward dealing with it and raising the Debt Ceiling at the same time. Another predictable fearful crisis looms !
The taxation half got resolved by making permanent all the demonically unaffordable "Bush Tax Cuts" for all but those few taxpayers making over $400,000 (or $450,000 for a couple); thus saving the middle class while making the rich pay more - or maybe not. The resolution ended the payroll tax "holiday"; so workers will see their paychecks hit with an extra 2% tax. There are more details, but those are the highlights. What's the bottom line? The government collects about $600 Billion over ten years - or about $60 Billion per year in new tax revenue. That will be a great help in reducing our over $1 Trillion per year deficits and over $16 Trillion in Debt.
By the way, that taxation cliff bill included several multi-billion dollar spending increases for various special interests, like more windmill subsidies. Maybe those will be addressed later at our scheduled spending crisis in two months. Or maybe not, since only the sequestration spending is formally on the table.
You remember the Sequestration Breakthrough of 2011? The President and Congress couldn't decide whether or how to cut spending or increase taxes before hitting the Debt Ceiling, failing to pay our national debts, and going "bankrupt". That crisis was resolved by the Government giving itself the rest of the year to figure out how to get new funds and cut spending or, failing that, automatically "sequestering" or cutting the needed funds equally from Defense and other Domestic sources. Well, nothing got fixed in 2011or 2012, so we were due to cut those sequestered funds on 1 January 2013.
Nobody wanted to do that, so we had the great fiscal cliff drama that just ended by further postponement. Now we have the new 2013 Fiscal Cliff Do-Over in two months coinciding with a new Debt Ceiling crisis. Deja vu anyone ?
Of course, the really big fiscal driver ( Entitlements - Social Security, Medicare, and Medicaid) are not really on the table for negotiations yet; nor, it seems, is the Federal Budget. The Senate has not passed a budget in 3 years and isn't likely to this year which means we will have renewed House - Senate negotiations over a 2014 Continuing Resolution to fund the government past 1 October 2013.
Happy New Year! Looking forward to continuing crises and another Continuing Resolution.
Introduction
I'm Gene and this blog will present my views on a random assortment of topics. Comments are permitted; offensive or self-promotional ones will be deleted. Interesting perspectives are encouraged.
This is my fourth blog. I stopped posting about 4 years ago which may indicate a short attention span or a poor selection of enduring themes.
Hence this blog has no "theme", but will let me explore ( or vent about) issues that interest me. Topics will reflect my experiences : a career in information technology ( computers, communications, sensors, and networking), a lot of retirement catch-up on economics and social policy, and an abiding enjoyment of horses and rural living.
This is my fourth blog. I stopped posting about 4 years ago which may indicate a short attention span or a poor selection of enduring themes.
Hence this blog has no "theme", but will let me explore ( or vent about) issues that interest me. Topics will reflect my experiences : a career in information technology ( computers, communications, sensors, and networking), a lot of retirement catch-up on economics and social policy, and an abiding enjoyment of horses and rural living.
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