the fiscal commission

[Azazello1313]

for general background, read here.

 

I have mixed feelings about it, mostly I agree with this by economist greg mankiw:

 

Here is a question I have been pondering. If you were a member of the fiscal commission, what would you try to achieve?

 

The answer for liberals is easy: They want to raise taxes to fund the existing, and even an expanded, social safety net, while politically insulating the Democrats as much as possible from the charge of being the "tax and spend" party. President Obama can then campaign in 2012 that he did not break his no-taxes-on-the-middle-class pledge, but rather a bipartisan group broke it. That is, the President wants to take credit for fixing the fiscal situation but duck responsibility for having imposed higher taxes.

 

But what if you are conservative? This is harder. You can try to stick to your no-tax-increase position. The problem is that doing so would require spending cuts larger than are politically realistic. If I were king, I bet I could find sufficient spending cuts. But I am not expecting to be anointed any time soon. If the fiscal commission is going to succeed, tax increases will have to be part of the deal.

 

A reasonable position is, perhaps, that the commission should not succeed. After all, it is the president's responsibility to put out a budget. The one he just released is, as I explained in my recent Times column, not sustainable. He just passed the buck to the fiscal commission. Perhaps conservatives should not allow him to do that but, instead, should try to force him to put out a sustainable budget on his own. After all, isn't that Peter Orszag's job?

 

But let's suppose that you are a conservative and you want the fiscal commission to succeed. You will have to agree to higher taxes as part of the bargain. But what should you aim to get in return? Here is my list.

 

 

• Substantial cuts in spending. Ensure that the commission is as much about shrinking government as raising revenue. My personal favorite would be to raise the age of eligibility for Social Security and Medicare. Do it gradually but substantially. Then index it to life expectancy, as it should have been from the beginning.
  
• Increased use of Pigovian taxes. Candidate Obama pledged 100 percent auctions under any cap-and-trade bill, but President Obama caved on this issue. He should renew his pledge as part of the fiscal fix. A simpler carbon tax is even better.
  
• Use of consumption taxes rather than income taxes. A VAT is, as I have said, the best of a bunch of bad alternatives. Conservatives hate the VAT, more for political than economic reasons. They should be willing to swallow a VAT as long as they get enough other things from the deal.
  
• Cuts in the top personal income and corporate tax rates. Make sure the VAT is big enough to fund reductions in the most distortionary taxes around. Put the top individual and corporate tax rate at, say, 25 percent.
  
• Permanent elimination of the estate tax. It is gone right now, but most people I know are not quite ready to die. Conservatives hate the estate tax even more than they hate the idea of the VAT. If the elimination of the estate tax was coupled with the addition of the VAT, the entire deal might be more palatable to them.
  

One thing is clear: The Democrats in Congress would hate the five demands above. But that is precisely the point. The fiscal commission is giving the Democrats something of very high value: political cover for a major tax hike. If Republicans are going to give them that, they should get something very big in return. If the conservatives on the commission could achieve my five goals above, it might be a deal worth talking about.

[Perchoutofwater]

I'd go along with Greg Mankiw on this, and think if what he proposed was done it would go a long way toward righting the ship. Unfortunately I don't see anyway in hell the moochers will go along with it.

[bpwallace49]

Yeah . . why try to acheive comething resembling a consensus? Because the Republicans are more concerned with the next election cycle than this current year, and I am sure some Dems are too . .

 

It sure it tough to work with a person you hjave vilified for the last year and a half . . kinda makes you look like a hypocrite. Like when seven Republicans co-sponsored the fiscal commission, and then were told to vote against it when it got to the floor. All hail the party structure!!

[Azazello1313]

Yeah . . why try to acheive comething resembling a consensus? Because the Republicans are more concerned with the next election cycle than this current year, and I am sure some Dems are too . .

 

It sure it tough to work with a person you hjave vilified for the last year and a half . . kinda makes you look like a hypocrite. Like when seven Republicans co-sponsored the fiscal commission, and then were told to vote against it when it got to the floor. All hail the party structure!!

 

did you actually read what I posted before replying with this nonsensical blather?

[bpwallace49]

did you actually read what I posted before replying with this nonsensical blather?

 

Are you kidding?

 

It was also not clear before the president signed the executive order whether House and Senate Republicans would even choose to participate.

 

Az . . do you think that people care about solutions at this point? How is not participating in a commission that can both mollify their base as well as actually present some ideas a good idea? How is not participating representative of their constituents that have to live with this?

. .

 

In Mankiw's article he provides a "hypothetical" of

But let's suppose that you are a conservative and you want the fiscal commission to succeed

Can you actually provide a reason of why someone would NOT want this to succeed? Besides the obvious "try to get re-elected so we cant work with the devil Obama on anything at all" of course . . .

[Azazello1313]

Can you actually provide a reason of why someone would NOT want this to succeed? Besides the obvious "try to get re-elected so we cant work with the devil Obama on anything at all" of course . . .

 

I don't disagree that there is some element of that at play. it's funny though how you put all this responsibility on the party with zero power, and none on the party with the presidency, 60 senate seats, and a big majority in the house. where is obama's fiscally responsible budget? does he not have a responsibility to promote one, rather than passing the buck to some "commission"? is it unreasonable to ask that question?

 

but I've said in other posts, and implied it here, I think, by posting a list of suggestions as to what conservatives should hope to get out of this commission -- I DO think such a commission should be created, and I DO think republicans should go along. I've said nothing to suggest otherwise, but rather than focus on what I actually said and what I actually posted, you go on this juvenile rant against republicans considering doing what I (and mankiw) are specifically saying they should NOT do.

 

so tell me again who's the one here who "doesn't care about solutions"?

Edited February 18, 2010 by Azazello1313

[bpwallace49]

I don't disagree that there is some element of that at play. it's funny though how you put all this responsibility on the party with zero power, and none on the party with the presidency, 60 senate seats, and a big majority in the house. where is obama's fiscally responsible budget? does he not have a responsibility to promote one, rather than passing the buck to some "commission"? is it unreasonable to ask that question?

 

but I've said in other posts, and implied it here, I think, by posting a list of suggestions as to what conservatives should hope to get out of this commission -- I DO think such a commission should be created, and I DO think republicans should go along. I've said nothing to suggest otherwise, but rather than focus on what I actually said and what I actually posted, you go on this juvenile rant against republicans considering doing what I (and mankiw) are specifically saying they should NOT do.

 

so tell me again who's the one here who "doesn't care about solutions"?

 

Did you even read the article? It also hypothesizes NOT participating, and just giving all power to Obama. Your linked article also says the Repubs "havent decided if they want to participate". Do you think this is in the best interests of the country? Your

 

Y'all forget that Obama has a limited shelf life as Pres with term limits. Congress does not. I would offer that unless COngress starts coming up with suggestions that may not be popular, BUT EFFECTIVE, nothing will ever get done. They are too wrapped up in their own world of re-election to care about long term ramifications. I think Obama is realizing the enormous mistake he made letting CONGRESS come up with the health care bill and putting it in the hands of Pelosi, who sure as hell doesnt represent a majority of Americans, and having her try and ram it through. I think Obama is actually realizing that BOTH sides need a voice, a stake, and some RESPONSIBILITY in doing what is right for the country. Unless Congress mans up and actually do what is in the best interests of the country, what progress will ever get done? YOUR ARTICLE says that Obama is open to any and all suggestions and recommendations from the commission, including reforming social security and Medicare/Medicaid. How can the right NOT get behind that?

 

It is like Obama is giving the right what they want . . . and now they dont know what to do with it. This is a HUGE opportunity to present their ideas, and either 1.) get them passed or 2.) have them shot down which they can still proudly point to and say "we tried". I just think that this commission represents WAY too much potential for these congresspeople to not get re-elected, even if the choices they make are what is best for the country. Our new era of divisive "we only care about ours" legislative mentality is hurting the gubment more than ever . . .

[Azazello1313]

so what you're saying is that you agree with me? you could have spared us all a lot of verbal diarrhea by just coming out and saying that from the start.

[wiegie]

Ensure that the commission is as much about shrinking government as raising revenue. My personal favorite would be to raise the age of eligibility for Social Security and Medicare. Do it gradually but substantially. Then index it to life expectancy, as it should have been from the beginning.

Actually Az and I have been saying about this same thing for at least six years. see here (not sure what happened to my initial post in that thread)

[Ursa Majoris]

Actually Az and I have been saying about this same thing for at least six years. see here (not sure what happened to my initial post in that thread)

And build yourself a completely intractable employment problem as more people have to work longer.

 

Far better to means test the thing, remove the earnings cap and reduce the percentage paid by both employer and employee, freeing up money to invest so that retirements can be more self-funded. Also, change the drawdown 401k tax rate to the lowest level, thereby keeping more people off SS for longer.

[wiegie]

And build yourself a completely intractable employment problem as more people have to work longer.

not true

 

the economy will create enough jobs to compensate for the larger work force (in much the same way that it has created jobs to deal with the naturally occurring increases in the labor force caused by population growth and women entering the work force)

 

If we changed the age all at once, it would create adjustment problems, but phasing in the increased retirement ages over a few decades would not be a problem at all.

 

I do think that increasing or eliminating the earning cap is not a bad idea either..

Edited February 19, 2010 by wiegie

[Azazello1313]

Actually Az and I have been saying about this same thing for at least six years. see here (not sure what happened to my initial post in that thread)

 

here it is stated rather succintly and effectively once again, with a revealing visual:

 

Americans, as well as citizens of many other advanced nations, now spend about twice as many years in retirement as they did a generation or two ago. During that time, they expect the government to provide them with income support and healthcare. Is it any wonder that we face serious fiscal problems?

 

I hope the president's fiscal commission makes raising the age of eligibility for these programs one of its main recommendations.

Edited March 2, 2010 by Azazello1313

[Azazello1313]

update on the fiscal commission:

 

Members of President Obama’s bipartisan deficit commission argued on Wednesday that the government’s mountain of debt is higher than it appears and already threatens to hamper economic growth. But on a day when Republicans and Democrats bent over backwards to be polite to one another, Democrats themselves appeared divided between fiscal conservatives and liberals.

 

At the panel’s second public hearing on Capitol Hill, the more hawkish Democrats pushed for aggressive long-term belt-tightening and argued that the most widely used measure of government debt understates the nation’s fiscal problems. But liberal Democrats pushed back, arguing that it would be a mistake to slash the deficit too quickly.

 

“It’s very important that we don’t in our zeal focus on deficit reduction right now,’’ said Rep. Jan. D. Schakowsky of Illinois. “We will need to make sure we can evaluate each of the proposals as they affect real people.”

 

The panel’s first substantive fight is likely to be about how to best measure the federal debt. Though the issue seems academic, it is a sore point in battles between conservatives who decry “unsustainable’’ deficits and liberals who complain that “deficit hysteria’’ is being used as cover to cut Social Security.

 

Sen. Kent Conrad, D-N.D., chairman of the Senate Budget Committee, argued that the focus should be on “gross’’ federal debt, which includes debt held by the public as well as debt the government owes to itself – most of which is owed to the Social Security trust fund. By that measure, federal debt already totals $13 trillion, or almost 90 percent of the nation’s gross domestic product.

 

Carmen Reinhart, a University of Maryland economics professor and co-author of a much-discussed new study of financial crises over the past 800 years, told the panel that she focuses on “gross’’ debt – and the United States is nearing a flashpoint.

 

On average, Reinhart said, nations with gross debt higher than 90 percent of their GDP have seen annual economic growth rates slow by an average of 1 percentage point. For the U.S., which has an average annual growth rate of about 3 percent, that could mean a one-third reduction in growth.

 

But most budget analysts have focused only on “publicly held” debt, which excludes trillions of dollars that the government has borrowed from the Social Security and Medicare trust funds.

 

By that measure, the government’s debt is a more modest $8.4 trillion and is slightly under 60 percent of G.D.P. In a blog post last year, White House Budget Director Peter Orszag argued that the smaller number was probably more accurate.

 

On Wednesday, Conrad firmly embraced the more alarming measure of gross debt, and said the panel should agree on an aggressive timetable for reducing it by 2020. “We should be looking over time to get at least a gross debt that is below 90 percent, and I would think over time we would want to get below that, maybe in the range of 80 percent,’’ Conrad said.

 

Alice Rivlin, a former White House budget director under President Bill Clinton and an influential Democrat, echoed Conrad. “The gross debt has got to come down over time or we won’t have done our job,’’ Rivlin warned.

 

In an interview after the meeting adjourned, Rivlin said budget analysts are focusing more on total federal debt because the government’s obligations to the Social Security trust fund are starting to come due. “The focus is coming around to gross debt, because we’re already getting to the point where we have to redeem those bonds,’’ she said.

 

But liberal Democrats on the panel were quick to take exception, warning that almost 10 percent of workers are still unemployed and that a premature shift to fiscal austerity could worsen the misery that millions are already facing.

 

“I would hope we don’t concentrate only on numbers,’’ said Rep. Xavier Becerra, a California Democrat. “If we take a look at what ordinary Americans face, instead of just the sheer numbers, I think that will give us an accurate picture.”

 

In an interview after the meeting, Schakowsky warned that the growing “sense of crisis” about federal deficits could backfire if it provokes rapid spending cuts that choke off the recovery and send debt even higher. “I’m worried about a double-dip recession,’’ she said.

 

That wasn’t the only intramural argument among Democrats. Sen. Max Baucus, Democrat of Montana and chairman of the Senate Finance Committee, joined Conrad in calling for tax reform that would increase the “competitiveness” of American companies. The implication was that at least some corporate taxes are too high.

 

That provoked a rejoinder from Sen. Dick Durbin of Illinois, the Senate majority whip, about the need to whittle down special tax breaks.

 

“We need to find incentives for growth,’’ Durbin acknowledged politely. “But I also think there has to be some candor about tax expenditures. They’re not free. They add to the debt.”

 

Republicans on the panel generally stayed out of those arguments, though some made low-key pitches against raising taxes and for cuts in entitlement spending. David M. Cote, chief executive of Honeywell International and one of Obama’s Republican appointees to the panel, gently nudged politicians on the panel to focus on galvanizing public awareness. Cote said he was stunned when commission co-chairman Erskine Bowles warned that the government would be paying $1 trillion a year in interest on the national debt by 2020 unless Congress and the Obama administration took action.

 

“If I were a citizen and I heard that ten years out we would be spending $1 trillion a year on interest, that would get my attention. A trillion dollars! I run a big company, but that’s a lot of money.”

 

By almost any reckoning, any effort to reduce federal deficits to sustainable levels will require brutal decisions from Congress. Even by the more limited approach of counting only “publicly held’’ debt, the Congressional Budget Office projects that debt will equal 90 percent of gross domestic product by 2020.

 

To keep that debt from climbing higher than 69 percent, which would still be far higher than it was before the financial crisis of 2007 and 2008, the government would have to completely balance its budget by 2020.

 

sounds like the big disagreements here are between democrats who think there is a problem (conrad, baucus, rivlin), and democrats who aren't inclined to do much and try to minimize the problem (schakowsky, durbin, becerra, and the white house) so that no one feels any "zeal".

[bpwallace49]

update on the fiscal commission:

 

 

 

sounds like the big disagreements here are between democrats who think there is a problem (conrad, baucus, rivlin), and democrats who aren't inclined to do much and try to minimize the problem (schakowsky, durbin, becerra, and the white house) so that no one feels any "zeal".

 

No surprise there . . the Dems have never had a strong party structure that dictates terms like the Repubs do. The range of Dems on the political spectrum ranges from very moderate to whacked out loony bird land (Pelosi). They RARELY ever come to consensus on anything, wheras the Repubs decide what their platform is, and single-mindedly seek out those goals. It is a real strength of the right to have that kind of overwhelming groupthink, and a credit to their party structure.

 

 

Republicans on the panel generally stayed out of those arguments, though some made low-key pitches against raising taxes and for cuts in entitlement spending.

 

What an opportunity for the right to approach the "sane" Democrats when it comes to fiscal spending and get them on board with a reducing in spending and entitlements. I hope they get off the sidelines and engage the Blue Dog Dems in marginalizing the free spenders . .

[Azazello1313]

No surprise there . . the Dems have never had a strong party structure that dictates terms like the Repubs do. The range of Dems on the political spectrum ranges from very moderate to whacked out loony bird land (Pelosi). They RARELY ever come to consensus on anything, wheras the Repubs decide what their platform is, and single-mindedly seek out those goals. It is a real strength of the right to have that kind of overwhelming groupthink, and a credit to their party structure.

 

that is just a moronic statement.

 

What an opportunity for the right to approach the "sane" Democrats when it comes to fiscal spending and get them on board with a reducing in spending and entitlements. I hope they get off the sidelines and engage the Blue Dog Dems in marginalizing the free spenders . .

 

they are "on the sidelines" because there is no mystery where they come down (with the more hawkish dems), which is implicit even in your comment. the best way to marginalize the free spending libs is to get the "sane" dems on them, so it doesn't just degenerate into a partisan b*tchfest. I think this article is a good sign that this is exactly what is going on. I am optimistic some real progress may come out of this thing.

[driveby]

that is just a moronic statement.

 

[bpwallace49]

that is just a moronic statement.

 

Then you obviously are not that smart, or just dont know enough about party politics to know better.

[Azazello1313]

Then you obviously are not that smart, or just dont know enough about party politics to know better.

 

here are some proposed google terms for you to look up, mr. party politics smartypants:

"gang of 14"

"TARP passage vote"

"RINO"

"ron paul"

"republicans divided"

"GOP purity test"

"social conservatives versus libertarians"

"social conservatives versus fiscal conservatives"

"tea party versus republican incumbents"

 

in a two-party system, both parties, by necessity, are broad coalitions of different types of voters and leaders. they differ within their party all the time, and there are always fights for control of the party by the various factions. to say that one major party is dominated by lockstep groupthink and a scarcity of dissent, while the other is unstructured and open to differing viewpoints -- I'm sorry, I know it fits that whole "obama is so dreamy, but that darn nancy pelosi and the lockstep GOP keep ruining everything" narrative you've got stuck in a groove in your head, but it is just so transparently ignorant and unfactual it cannot be supported on any level.

Edited May 27, 2010 by Azazello1313

[Perchoutofwater]

That's going to leave a mark.

[Ursa Majoris]

here are some proposed google terms for you to look up, mr. party politics smartypants:

"gang of 14"

"TARP passage vote"

"RINO"

"ron paul"

"republicans divided"

"GOP purity test"

"social conservatives versus libertarians"

"social conservatives versus fiscal conservatives"

"tea party versus republican incumbents"

 

in a two-party system, both parties, by necessity, are broad coalitions of different types of voters and leaders. they differ within their party all the time, and there are always fights for control of the party by the various factions. to say that one major party is dominated by lockstep groupthink and a scarcity of dissent, while the other is unstructured and open to differing viewpoints -- I'm sorry, I know it fits that whole "obama is so dreamy, but that darn nancy pelosi and the lockstep GOP keep ruining everything" narrative you've got stuck in a groove in your head, but it is just so transparently ignorant and unfactual it cannot be supported on any level.

I don't think it's a stretch to say that the Republicans are generally more disciplined than the Democrats, though.

[Perchoutofwater]

I don't think it's a stretch to say that the Republicans are generally more disciplined than the Democrats, though.

 

They generally show more self discipline, true.

[Ursa Majoris]

They generally show more self discipline, true.

Except where young boys are concerned.

[bpwallace49]

here are some proposed google terms for you to look up, mr. party politics smartypants:

"gang of 14"

"TARP passage vote"

"RINO"

"ron paul"

"republicans divided"

"GOP purity test"

"social conservatives versus libertarians"

"social conservatives versus fiscal conservatives"

"tea party versus republican incumbents"

 

in a two-party system, both parties, by necessity, are broad coalitions of different types of voters and leaders. they differ within their party all the time, and there are always fights for control of the party by the various factions. to say that one major party is dominated by lockstep groupthink and a scarcity of dissent, while the other is unstructured and open to differing viewpoints -- I'm sorry, I know it fits that whole "obama is so dreamy, but that darn nancy pelosi and the lockstep GOP keep ruining everything" narrative you've got stuck in a groove in your head, but it is just so transparently ignorant and unfactual it cannot be supported on any level.

 

Az do you think the Democrats have a sronger and more united party than the Republicans? Very simple question . . . yes or no will suffice.

 

If your point was that at certain points in history the Republican party has had dissent within the ranks, then congrats! You have stated the obvious. The relativity is in the comparison to the Democrats, which have to fight and claw to get them to agree on ANYTHING at all. (hint: how hard was it to get together the Dems to vote on health care once the Republicans made up their mind that NO ONE was going to support it?)

 

That is a compliment to the strength of the Republican party structure BTW . . but I guess that offends your "mavericky" sensibilities?

[Perchoutofwater]

Az do you think the Democrats have a sronger and more united party than the Republicans? Very simple question . . . yes or no will suffice.

 

Based on the fact that they were able to pass the health care bill against the will of the American people, I'd say they stick together pretty well.

[bpwallace49]

Based on the fact that they were able to pass the health care bill against the will of the American people, I'd say they stick together pretty well.

 

If that were so then it would have taken a LOT less time and less deals being cut.

 

Wait . . . . damn it.