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June 26, 2012

Bull's Eye for the "Pay Later" Guy

The NH Union Leader nails Obama's modus operandi:

Since when has this President taken personal responsibility for his actions, their effects or their costs? Every American ought to be able to see by now the pattern that he has repeated since he took office:

1. Give sweeping speech proclaiming grand but vague vision.

2. Lowball the real cost of executing that vision and pay for much of it with debt.

3. If policies are enacted and then generate unintended consequences, blame the results on the previous administration.

4. If policy costs are shown to be more than the administration predicted, blame private sector “greed” and political obstruction.

Sometimes, the truth hurts:

The most recent estimate for the difference between the net present value of federal government liabilities and the net present value of future federal revenues is $200 trillion, nearly 13 times the debt as stated by the US Treasury. Notice that these figures, too, are incomplete, since they omit the unfunded liabilities of state and local governments, which are estimated to be around $38 trillion.

These mind-boggling numbers represent nothing less than a vast claim by the generation currently retired or about to retire on their children and grandchildren, who are obligated by current law to find the money in the future, by submitting either to substantial increases in taxation or to drastic cuts in other forms of public expenditure.

To illustrate the magnitude of the problem, the economist Laurence Kotlikoff calculates that to eliminate the federal government’s fiscal gap would require either an immediate 64 per cent increase in all federal taxes or an immediate 40 per cent cut in all federal expenditures.

We've often heard various progressive pundits lament the fact that we are well on our way to being the first generation who will be poorer off than their parents and grandparents. Less often heard is any honest admission that this is the logical and inevitable consequence of progressive policies.

The system works as designed.

Posted by Cassandra at June 26, 2012 07:42 AM

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Thanks. I think. Basically too scary to fully comprehend.
How this possibly be corrected????

Posted by: tomg51 at June 26, 2012 09:17 AM

There I go dropping my "cans" again. Its a local thang. /

Posted by: tomg51 at June 26, 2012 09:19 AM

When a group believes, chooses, and defends (denies) a catastrophe despite its mathematical certainty, one faces not a failure of reason, but a conflict of faith. How can one defeat the political promise of something for nothing? Not that any of us hear *any* politicos making the point that simply and clearly, btw. But what character must a group have in order to defeat that promise? Or, conversely, what character does a group have that "buys" that promise? Answering either question will reveal both the nature of and the magnitude of that which confronts the USA.

Posted by: Roy at June 26, 2012 09:29 AM

...the economist Laurence Kotlikoff calculates that to eliminate the federal government’s fiscal gap would require...an immediate 40 per cent cut in all federal expenditures.

I'm down with those cuts. Beginning with entitlements, but extending nearly everywhere else. The Feds don't need to be spending our money on things that we should be taking care of ourselves.

Eric Hines

Posted by: E Hines at June 26, 2012 11:24 AM

How can this possibly be corrected????

I think it means some combination of tax increases (which I would prefer to see come more by expanding the tax base to include people who currently pay no income tax) and spending cuts.

I don't it being one or the other - neither party would accept that.

Posted by: Cassandra at June 26, 2012 07:57 PM

I think it means some combination of tax increases....

No, the government doesn't need the money. I agree with everyone paying, I agree with eliminating the loopholes, subsidies, credits, deductions, etc.

If everyone pays 10%--period (except for a single deduction equal to half the current year Federal Poverty Guideline)--there'd actually be a net revenue gain--for which a means needs to be found for committing that increment to funding the switchover to a fully privatised SS, Medicare/aid, HSA functionality, and then to paying down the debt.

Eliminate the income tax on businesses, do away with cap gains taxes, etc.

You're probably right, though, that the Republicans don't have the stones to do this.

Eric Hines

Posted by: E Hines at June 26, 2012 11:21 PM

No, the government doesn't need the money.

The increased revenue shouldn't go to new spending. It goes to pay down the debt so our children don't have to deal with it.

When a household gets into serious debt, just cutting new spending doesn't pay down the debt they've already accrued. They need to do both - get a second job, cut new spending, and pay down old debt.

This is just so basic. The problem, really, is the financing of current spending by taking on debt: the refusal to live within a budget or match spending to revenue.

I don't believe taxes on businesses should be eliminated. Businesses benefit from public infrastructure and should be required to help pay for it. They also impose costs on society as well as bestowing benefits on it. I think these types of taxes should be lower, but I don't think they should be eliminated.

This is a big part of the problem - there's no consensus (either on the right or the left) as to what needs to be done.

Posted by: Cassandra at June 27, 2012 07:03 AM

The increased revenue shouldn't go to new spending.

Funding the switchover to privatised SS, etc isn't new spending. It's simply covering what's owed to the victims of the current entitlement structure for whom it's too late to shift to privatised accounts, in an environment where even fewer will be paying tax money into that pit. I'm just suggesting paying off one debt before another.

The problem with business taxes is that they don't pay them. Even with a tax code having no loopholes, deductions, etc, a business' tax is just another cost of doing business that's folded into the price it charges for its goods and services. The consumer--the private citizen taxpayer--is who pays these taxes. Eliminating business taxes will simply be another reduction in tax rates for the private individual.

Similarly, businesses don't benefit from infrastructure, or anything else. Their customers, us private citizens, do. Businesses are just agencies of groups of us formed to facilitate the ability of those groups of us to conduct certain of our own affairs.

Eric Hines

Posted by: E Hines at June 27, 2012 12:56 PM