

The fiscal cliff

Getting down to brass tacks

Finding common ground on cutting spending

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Readers' comments



What about defense? Cut spending on it to only the next 5 military budgets in the world, combined. It would have to be phased in over a generation, 20 years or so. Perhaps also raise the requirement for full retirement benefits to 25 years served instead of just 20. And while we're at it, benefits can't be collected until age 55.

topcat52 in reply to pumpkindaddy

As long as the US has taken up the mantle of protecting the rest of the world, for which much of the rest of the world seems grateful, as they don't have to spend the money that the US does, the US will need to continue to spend more on "defense" than anyone else. Besides, as anyone familiar with the US constitution is aware, the national defense is one of the few responsibilities of the federal government. It should be noted that national health care is not one of them. I should also remind UK readers that there was a bargain between John Boehner and Mr. Obama which would have avoided the "fiscal cliff" before it ever existed, but, at the eleventh hour, Mr. Obama asked for another $500 billion in tax increases which killed the deal.

MySetDancer in reply to topcat52

Take it from a conservative: the U.S. military budget is too large given any reasonable mission it is likely to face for the next decades. No, we are not going to fight China for South China Sea oil. We are not going to invade Iran. Once we increase our oil and gas production we will not longer need to defend the E.U.'s oil supply in the Gulf region. Let them do it. I would rather be able to afford a trip to the doctor, myself.

Dr Lou in reply to MySetDancer

OK...I'll bite...why, exactly, should retirement benefits be cut for all Federal employees across the board?

Maybe nothing was said about it during the election by either party because it makes so little sense.

WT Economist in reply to MySetDancer

Question: lots of state and local government employees have received retroactive pension enhancements, compared with what they were promised when hired. That is one of the main causes of the current pension disaster, which is the main cause of the gutting of state and local government services. There were 1.3 million more former state and local government workers receiving retirement benefits in 2011 than in 2006, according to the Census Bureau.

Did federal employees receive any retroactive pension enhancements? Or are they only entitled to what they were promised when they were hired? And if the latter, what are the moral implications of telling them the deal is off, after they worked their whole careers?

How about retroactive tax increases as well? It turns out all that massive executive pay that was grabbed post-1995 was not in exchange for "enhancing shareholder value." And much of it was at low tax rates. So why not just re-calcuate all the taxes from 1995 on at higher rates? If the federal employees can be told they actually worked for less during those years, why not the most rapacious union of them all -- the de facto union of corporate executives and directors?

ZA Observor

Political decisions have poor economic results - any actuary can tell that the demographics of a longer living, ageing American population who already are saving too little and living off credit, creates a time and money balloon on benefit payments. That issue, on its own (aside form the fiscal "cliff"), demands capping benefits, adding a means test and incrementally increasing the normal retirement age.

However, a better long term solution requires smarter tax incentives to save - QE, cheap credit and a nation drowning in debt may suit the bankers who caused the economic melt down, but its not the way out.

Selective cuts in big-ticket, high tech military spending are also important - not as a long term strategy, but as a means to stimulate growth in the productive economy for the second Obama term. If President Obama wants to leave a legacy, it will most usefully be in reducing the buying power of derivative traders and the military apparatus over the politics of power in Washington.

Ironically, however, going over the fiscal cliff may well be exactly the US economy needs: spending cuts, and more taxes. Instead, an incoherent deal is likely which saves ego's rather than the economy.

MySetDancer in reply to ZA Observor

Please post your evidence that the bankers forced people to apply for loans they could not afford. I am very interested in reading it. I have friends who are under-water and none of them said anything about being forced . . .

As for the fiscal cliff, get ready for a tidal-wave of default loans and mortgages if this happens. I don't understand how you think this is a good thing; please post your evidence that the bankers engineered this too.

binkis1 in reply to MySetDancer

How about you just go outside the right wing propaganda and google other than newsmax, NR, and fux!
There are thousands of links to the bankers use of putting people in debt they could not afford..The NY AG has many of the banks under investigation now and there were settlements for foul-practice by Citi and Well Fargo and BofA already!

rewt66 in reply to MySetDancer

ZA Observer never said that bankers forced people to apply for loans that they could not afford. He/she said that bankers caused the economic meltdown, which is not the same claim at all.

How did bankers cause the economic meltdown? By not saying no to loan requests from people who could not afford them.

newphilo in reply to rewt66

It's not that bankers were compassionate; they resold those mortgages in various flavors of risk and also bet against those CDO's.
Mortgages were needed to give bankers a claim on an overpriced asset that would produce income (from mortgage interest); the claim was then sold to investors - and bet against!

Gary C

Limiting social security to people that "need" it would be a disincentive to saving for retirement. Why save $200,000 for retirement if it only means you don't get to collect social security until you've spent your savings?

Moving toward fixed benefits instead of the current system where people that earn more get larger benefits would encourage the middle class to save while cutting costs. This could be gradually implemented by continuing to index the minimum social security benefits to inflation but limit increases to larger benefits.

Another idea to help keep medicare and social security solvent is billing the estates of people that use more benefits than they paid in the shortfall. Most estates wouldn't be able to pay the bill but many would. This would also encourage medicare recipients to be more aware of what the health services they use cost.

MySetDancer in reply to Gary C

People forget that Social Security benefits are taxable income, and if you are the hated "rich" a large percentage gets returned to the Treasury. But not the SS Administrationn where it belongs.

Please explain your assertion that a fixed benefit would provide any encouragement to save. There is no evidence that Americans save very much except at higher income levels. The poor and lower middle-class are not going to save now for a small fixed benefit later. Why strive to earn more if the Federal benefit is fixed? Just do the minimum and wait.

Gary C in reply to MySetDancer

I don't hate the rich. My proposal is to give the same Social Security benefits to the rich as are given to the poor or middle class. This is more generous to the rich (and the portion of the middle class that saves/invests) than proposals to means test Social Security.
Most middle class Americans save less than they end up getting in Social Security benefits. If they had to spend down these savings before getting Social Security their savings wouldn't improve their lives. There's a disincentive to save.
If benefits are fixed regardless of wealth, retirees that saved wouldn't lose benefits - this disincentive would go away. If benefits are fixed at the lower rate poorer Americans currently receive there would be an incentive to save more to maintain an acceptable standard of living. Probably not a big enough incentive for people to save.
A "large" percentage doesn't go back to the treasury. Federal tax rates, with the exception of 1989-1990, are at their lowest levels since 1931.

MySetDancer in reply to Gary C

I am still confused. SS benefits are based on (1) the number of quarters SS taxes are paid (2) the total amount of SS taxes paid and (3) the age of starting to receive benefits. Income taxes are then paid on those SS benefits.

The longer and harder I work, the more income I make, the more SS taxes I pay, and the more SS benefits I receive. It also give me the chance to save more. Isn't this an incentive? It is for me.

Advocating reduced benefits might cause people to work harder and save more money, but doesn't that also result in more SS taxes being paid for no more benefits as well as reduced taxes paid on SS benefits? How that would balance-out is beyond me if some people kind of "give up" on the system.

I view income tax on SS benefits as a kind of means-testing. Besides, real means-testing would encourage hiding income and wealth from the SS tax-man!

Gary C in reply to MySetDancer

Maybe we agree more than you think. I'm saying means testing SS benefits is a bad idea. Not giving people SS benefits just because they have other wealth of income could discourage savings or continuing to work.

If SS benefits need to be cut to keep the SS system solvent we shouldn't reduce the minimum benefits or eliminate benefits to the wealthy. SS benefits should still be based on age and quarters SS taxes were paid.


How about a tax credit for suicides? The younger the individual at the time of death, the greater the tax credit for heirs. This would be a clear incentive to cut the liability tail of an aging population. After all reducing the population of oldies would cut health care costs at the least reduction in productivity.

Sense Seeker in reply to FlownOver

"The younger the individual at the time of death, the greater the tax credit for heirs."

Bad idea. You'd want to start the scheme at retirement age, not before when people still work and pay taxes.

WT Economist in reply to FlownOver

The AARP might go for it, if it only applied to those currently age 54 and younger.

And it one had to commit suicide in such a way as to preserve organs for transplant to those already receiving Medicare and grandfathered in because they don't have time to adjust.


These are the fruits of Southern Reconstruction Invidious Social Economics.
A few hundred years of slavery followed by, retaliative policies that left us minorities with a shortage of minority doctors. So now we have tort reform to allow the Veterinarians that pass for doctors to "practice" on minorities. And now we have a medical system that belongs to an elite Republican Party but that wants to take its fees from those who work for themselves or for the Government.

Mitch McConnel does not have the interests of the country in mind. He's trying to salvage his economic pig that is stuck under a fence of population reality that his constituents failed to treat fairly for centuries and he wants to fix it on a fall guy called the president. Smaller Government! A Nation of Laws! The very nature of LAW is that it doesn't change.

pumpkindaddy in reply to surfson

While I'm sympathetic to the gist of your argument, laws, both scientific and legal, do change. Scientific laws are simply summaries of observations that have not been known to be otherwise, up until the present. Laws in a society are what that society at that point in time makes legal, or illegal. If you think there is natural law, that's just magick.

MySetDancer in reply to surfson

I think the issues you raise suggest other issues we can not solve in this forum.

The very ideas that you suggest are ironically proved false by the fact that your President and many in his administration as well as a significant percentage of elected representatives and mayors of cities in Southern States are of a certain demographic. With some effort, anyone, regardless of race, creed, or gender can succeed in this country. Of course, there are plenty of juvenile excuses too . . .

If you don't like the rule of law, you could ask your President to suspend them like the new dictator of Egypt just did . . .


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