Thursday, November 17, 2011
We can beat the recession and reduce the deficit
LOOKING AHEAD by Wally Dobelis.
Good news from Gramercy Park trustees: the Asian Longhorn beetle is not attacking our London planes, buckeyes, elms, maples, mimosas and golden rain, per USDA surveyors; however, if the US budget cutter Supercommittee does not reach an agreement by Nov. 23, the trigger mechanism, cutting non-mandated services mercilessly, may eliminate this USDA sub-section.
The bad news, continued. Recently this column discussed the US as the highest debtor nation, with federal debt amounting to $49,000 per US inhabitant, well over the per capita debt for Greece, currently the country most in need for huge austerity programs to qualify for EU/IMF bailouts (Italy is also worrisome). My data showed that the US GDP is nearly $15 Trillion, and the deficit is a few billion dollars more. Federal, state, and local spending is $6.9 T, with large item budgeting at $823 B for Medicare/Medicaid, $722 B for Social Security, $700 B for defense/wars, $217 B for net interest on debt, $407 B for income security and $212 B for federal pensions, with the revenue at $4.53 T covering only about two thirds of the expenditures.
To explain the revenue, the federal tax income is $2.3 T ($1,067 T in income tax, $823 B payroll tax, $191 B corporate tax), and the state tax revenue is at $1.18 T, vs. debt of $1.2 T, and local tax revenue and debt balance is at $1.15 T vs. $1.7 T.
Greece’s problem is that no bank will give it credit, because the people revolt against the necessary austerity methods. US gets credit to help it maintain a reliable world base monetary system, the dollar, and also because withdrawing credit would ruin the market for such nations as China, India and Japan, and put their economies in severe distress. But the US must show progress in coping with its deficit, a project that the new angry and jobless groups, Tea Party and Occupy Wall Street, can wreck with their single-minded demonizing.
This column will discuss the rational cures for repairing the budget, for which there are currently three major group efforts, aiming for saving $4 Trillion in 10 or 12 years, plus the bipartisan Supercommittee, due to report out by November 23, unless they cannot agree and the mandated trigger actions take over.
The President’s own bipartisan blue-ribbon Deficit Reduction Committee, led by Erskine Bowles, former Clinton official, and Alan Simpson, retired Senator (R, WY), recommends a tax reform, reductions in the entitlement programs, also in domestic spending, and in defense spending. Business is expected to accept some hits, e.g. taxes and loopholes.
President Obama’s own plan recommends cuts in military spending, higher taxes for the wealthy, and trimming spending on Medicare. This is not related to Jobs program, which envisions infrastructure WPA-type regional activity, payroll tax cuts for small businesses that take on and retain employees, which the GOP rejects, and counters by reference to an old US Chamber of Commerce plan that asks for less government controls, to foster business.
The plan submitted by Rep. Paul Ryan (R, WI), recently adopted by the House, requires overhauling Medicare/Medicaid (M/M) enough to keep tax increases off the table, basically by issuing vouchers to enable seniors to buy private insurance. He would drop individual and corporate tax maximums from 35% down to 25%.
The US Congress Select Committee (Supercommittee), of 6 Dems and 6 Reps, half Senators and half Congresspeople, has been charged by the Congress to develop an equitable method for curing the deficit, 1.2 T in 10 years. By Thanksgiving, Nov 23.2011. As expected, they do not touch the entitlements but SS and M/Mthey are stuck between “no tax increase" and "do not destroy government" positions. If they cannot agree, an automatic trigger will cut 8.7% of non-defense discretionary finds, a threat to Dems, and equal defense funds, a threat to GOP. The Dems will cut 12,000 prison terms, eliminate prison guards and border guards, cut airport searches and luggage screening, not enforce Clean Air Act and food inspections (600 jobs), cut NOAA weather report timing. You get the drift. The GOP loss will be ion defense, giving up the high priority op F-35 Joint Strike Fighter and such. The trigger spares mandated SS and M/M expense, killers that would spur voters, and taxes ( any increase will bring down the wrath of Ayatollah Grover Norquist of Americans For Tax Reform, whose pledge is threatening signers who give in with extinction –or is it only Rush Limbaugh’s wrath?) Jokes aside, the trigger product would be disastrous to the US credit rating. At this last minute, a desperate $300 B revenue increase is in the air, as is a suspension of defense cuts.
Where to compromise, in the long run?
The President’s Bowles/Simpson Committee (18 members including 12 Congresspeople) had mostly good recommendations, all discussed below, in at least three versions, unidentified here as to percent acceptability by committee members (sorry!).
To start, SS funds will turn negative in 2023, and a 2% annual increase is proposed, as is an acceleration in increasing full eligibility age (currently only to age 67). Since full benefits were designed in 1930s when median mortality was around age 65, it does not fit our current mortality pattern at ages 80 plus.
Next, cut Medicare/Medicaid expenses. Some say the Ryan method of turning over coverage and claim administration to insurers will cut unnecessary procedures and frauds; however the extra commissions to agents and office expenses (35% of premium) will eat up the savings> Insurers a re bound to follow the existing therapy protocols. It is more important to cut at the source, eliminating unnecessary protocols, and changing laws regarding tort, to cut legal expense overhead.
Use of hospital emergency rooms for basic care by indigent Medicaid patients should be revised, by putting more burden on family doctor based community clinics in WalMarts, Walgreens, and pharmacy centers and malls already existing throughout US.
Tax reform is essential, and a three- tier personal tax of 12, 15 and 27% was suggested. with capital gains taxed as ordinary income, This scale is not acceptable (e.g. it will stifle recovery, per Paul Krugman; and will cost 1.9 M government jobs, per Economic Policy Institute). Alternative: the Bush income tax cuts should be let expire at end 2012 (favored by Simpson, Alan Greenspan, Mayor Bloomberg).
More suggested savings, briefly : revise tax deductions, farm subsidies, student loans, employee contributions to health and retirement costs Charity donations are to be restructured, AMT to be eliminated. Interestingly. 70% of millionaires (however define) would not object to paying higher tax.
Interest on mortgage payment – should be reviewed, cutting unreasonable amounts and special interests.
Defense –cut 15%. with severe reductions in project development. Also, returned troops cost less maintenance in US than abroad. And, increase gasoline taxes by 15%.
There’s more to come. Wally Dobelis thanks the Third Way, and internet sources. Have faith, the trigger will be avoided.
Good news from Gramercy Park trustees: the Asian Longhorn beetle is not attacking our London planes, buckeyes, elms, maples, mimosas and golden rain, per USDA surveyors; however, if the US budget cutter Supercommittee does not reach an agreement by Nov. 23, the trigger mechanism, cutting non-mandated services mercilessly, may eliminate this USDA sub-section.
The bad news, continued. Recently this column discussed the US as the highest debtor nation, with federal debt amounting to $49,000 per US inhabitant, well over the per capita debt for Greece, currently the country most in need for huge austerity programs to qualify for EU/IMF bailouts (Italy is also worrisome). My data showed that the US GDP is nearly $15 Trillion, and the deficit is a few billion dollars more. Federal, state, and local spending is $6.9 T, with large item budgeting at $823 B for Medicare/Medicaid, $722 B for Social Security, $700 B for defense/wars, $217 B for net interest on debt, $407 B for income security and $212 B for federal pensions, with the revenue at $4.53 T covering only about two thirds of the expenditures.
To explain the revenue, the federal tax income is $2.3 T ($1,067 T in income tax, $823 B payroll tax, $191 B corporate tax), and the state tax revenue is at $1.18 T, vs. debt of $1.2 T, and local tax revenue and debt balance is at $1.15 T vs. $1.7 T.
Greece’s problem is that no bank will give it credit, because the people revolt against the necessary austerity methods. US gets credit to help it maintain a reliable world base monetary system, the dollar, and also because withdrawing credit would ruin the market for such nations as China, India and Japan, and put their economies in severe distress. But the US must show progress in coping with its deficit, a project that the new angry and jobless groups, Tea Party and Occupy Wall Street, can wreck with their single-minded demonizing.
This column will discuss the rational cures for repairing the budget, for which there are currently three major group efforts, aiming for saving $4 Trillion in 10 or 12 years, plus the bipartisan Supercommittee, due to report out by November 23, unless they cannot agree and the mandated trigger actions take over.
The President’s own bipartisan blue-ribbon Deficit Reduction Committee, led by Erskine Bowles, former Clinton official, and Alan Simpson, retired Senator (R, WY), recommends a tax reform, reductions in the entitlement programs, also in domestic spending, and in defense spending. Business is expected to accept some hits, e.g. taxes and loopholes.
President Obama’s own plan recommends cuts in military spending, higher taxes for the wealthy, and trimming spending on Medicare. This is not related to Jobs program, which envisions infrastructure WPA-type regional activity, payroll tax cuts for small businesses that take on and retain employees, which the GOP rejects, and counters by reference to an old US Chamber of Commerce plan that asks for less government controls, to foster business.
The plan submitted by Rep. Paul Ryan (R, WI), recently adopted by the House, requires overhauling Medicare/Medicaid (M/M) enough to keep tax increases off the table, basically by issuing vouchers to enable seniors to buy private insurance. He would drop individual and corporate tax maximums from 35% down to 25%.
The US Congress Select Committee (Supercommittee), of 6 Dems and 6 Reps, half Senators and half Congresspeople, has been charged by the Congress to develop an equitable method for curing the deficit, 1.2 T in 10 years. By Thanksgiving, Nov 23.2011. As expected, they do not touch the entitlements but SS and M/Mthey are stuck between “no tax increase" and "do not destroy government" positions. If they cannot agree, an automatic trigger will cut 8.7% of non-defense discretionary finds, a threat to Dems, and equal defense funds, a threat to GOP. The Dems will cut 12,000 prison terms, eliminate prison guards and border guards, cut airport searches and luggage screening, not enforce Clean Air Act and food inspections (600 jobs), cut NOAA weather report timing. You get the drift. The GOP loss will be ion defense, giving up the high priority op F-35 Joint Strike Fighter and such. The trigger spares mandated SS and M/M expense, killers that would spur voters, and taxes ( any increase will bring down the wrath of Ayatollah Grover Norquist of Americans For Tax Reform, whose pledge is threatening signers who give in with extinction –or is it only Rush Limbaugh’s wrath?) Jokes aside, the trigger product would be disastrous to the US credit rating. At this last minute, a desperate $300 B revenue increase is in the air, as is a suspension of defense cuts.
Where to compromise, in the long run?
The President’s Bowles/Simpson Committee (18 members including 12 Congresspeople) had mostly good recommendations, all discussed below, in at least three versions, unidentified here as to percent acceptability by committee members (sorry!).
To start, SS funds will turn negative in 2023, and a 2% annual increase is proposed, as is an acceleration in increasing full eligibility age (currently only to age 67). Since full benefits were designed in 1930s when median mortality was around age 65, it does not fit our current mortality pattern at ages 80 plus.
Next, cut Medicare/Medicaid expenses. Some say the Ryan method of turning over coverage and claim administration to insurers will cut unnecessary procedures and frauds; however the extra commissions to agents and office expenses (35% of premium) will eat up the savings> Insurers a re bound to follow the existing therapy protocols. It is more important to cut at the source, eliminating unnecessary protocols, and changing laws regarding tort, to cut legal expense overhead.
Use of hospital emergency rooms for basic care by indigent Medicaid patients should be revised, by putting more burden on family doctor based community clinics in WalMarts, Walgreens, and pharmacy centers and malls already existing throughout US.
Tax reform is essential, and a three- tier personal tax of 12, 15 and 27% was suggested. with capital gains taxed as ordinary income, This scale is not acceptable (e.g. it will stifle recovery, per Paul Krugman; and will cost 1.9 M government jobs, per Economic Policy Institute). Alternative: the Bush income tax cuts should be let expire at end 2012 (favored by Simpson, Alan Greenspan, Mayor Bloomberg).
More suggested savings, briefly : revise tax deductions, farm subsidies, student loans, employee contributions to health and retirement costs Charity donations are to be restructured, AMT to be eliminated. Interestingly. 70% of millionaires (however define) would not object to paying higher tax.
Interest on mortgage payment – should be reviewed, cutting unreasonable amounts and special interests.
Defense –cut 15%. with severe reductions in project development. Also, returned troops cost less maintenance in US than abroad. And, increase gasoline taxes by 15%.
There’s more to come. Wally Dobelis thanks the Third Way, and internet sources. Have faith, the trigger will be avoided.
# posted by Wally Dobelis @ 1:18 AM 
