OUCH! Major Pain Recomended By Bipartisan Cmt To Eliminate The Deficit

[Madeline]

You want the deficit reduced by about one-third in a decade or so? Here's what that looks like:

* A national 6.5% sales tax

* Elimination of the tax deduction for mortgage interest (replaced by a 15% tax credit)

* Elimination of the tax deduction for charitable giving (replaced by a 15% tax credit)

* Increasing social security wage taxes on high income taxpayers (at present, income earned over $106,800 is exempt from this tax)

* Depress the future social security benefit levels of all taxpayers other than the benefits of low-income people

* Changing the income tax brackets for individuals from 10, 15, 25, 28, 33, and 35% to just two: 15% and 27%. (Without knowing where they'd cut off, it is impossible to know how this would play out but it appears it is a shift of the tax burden down onto the poor and middle class and away from the rich.)

* Changing the corporate income tax rate from 15, 25, 34, 39, 34, 38% to just one: 27%. (This seems like an oversimplification, but I am guessing the new rate decreases the tax burden on most corporations.)

* Freezing defense spending; estimated to save $1.1 Trillion by 2020

* Freezing "domestic program" spending; estimated to save $1 Trillion by 2020

Implementation of these changes is expected to reduce the deficit by $6 Trillion by 2020. Today, the deficit stands at $13.7 Trillion, so these changes do not even eliminate half of that amount.

These changes are the recommendations of a BIPARTISAN Committee co-chaired by former Sen. Pete Domenici of New Mexico, who was the senior Republican on the Senate Budget Committee for more than a quarter-century, and Alice Rivlin, who served both Congress and President Bill Clinton as budget director. The proposal is a project of the Bipartisan Policy Center, which was founded by four former Senate majority leaders.

Bipartisan panel proposes national sales tax to help reduce deficit | cleveland.com

Are you prepared to suck it up to this degree or not? If not, are you willing to relinguish the goal of cutting the deficit?

Your thoughts?

 

[Paulie]

It's amazing how they can double the deficit in a year, but it takes at least a decade to then reduce the new deficit by only 1/3

 

[Zoom-boing]

Where's the 'congress will cut spending by 20% across the board' part?
Where's the 'congress will eliminate unnecessary departments' part? (this was touted by Obama during his campaign. How's that going?)
Where's the 'congress will take a 15% pay cut' part?

Why is it always on us to fix the governments fuck-ups? Screw that.

 

[loosecannon]

It's amazing how they can double the deficit in a year, but it takes at least a decade to then reduce the new deficit by only 1/3

In CA the two obstacles to budget reduction are unionized labor and pension maintenance and gridlock in the legislature.

The unions, courts and the law itself, based on contractual obligations, effectively prohibit reducing the budget enough to make a debt in what we lost in tax revenues.

The Federal government is in much the same position. What has happened in CA is about to happen at a federal level.

 

[Madeline]

Where's the 'congress will cut spending by 20% across the board' part?
Where's the 'congress will eliminate unnecessary departments' part? (this was touted by Obama during his campaign. How's that going?)
Where's the 'congress will take a 15% pay cut' part?

Why is it always on us to fix the governments fuck-ups? Screw that.

We now owe over $13.7 Trillion, Zoom-boing. Assuming we make zero prinicpal payments (which is entirely unrealistic), the interest we'll owe on that debt at a flat 5% (which is likely not a high enough estimate), is $689 Billion PER YEAR. That's BEFORE we flick on a light switch in any government office. (Someone please double check my math.)

The GDP of the US last year was $151.5 billion.

See the problem?

 

[martybegan]

Where's the 'congress will cut spending by 20% across the board' part?
Where's the 'congress will eliminate unnecessary departments' part? (this was touted by Obama during his campaign. How's that going?)
Where's the 'congress will take a 15% pay cut' part?

Why is it always on us to fix the governments fuck-ups? Screw that.

We now owe over $13.7 Trillion, Zoom-boing. Assuming we make zero prinicpal payments (which is entirely unrealistic), the interest we'll owe on that debt at a flat 5% (which is likely not a high enough estimate), is $689 Billion PER YEAR. That's BEFORE we flick on a light switch in any government office. (Someone please double check my math.)

The GDP of the US last year was $151.5 billion.

See the problem?

GDP is closer to $14 Trillion.

Google - public data

 

[Zoom-boing]

Where's the 'congress will cut spending by 20% across the board' part?
Where's the 'congress will eliminate unnecessary departments' part? (this was touted by Obama during his campaign. How's that going?)
Where's the 'congress will take a 15% pay cut' part?

Why is it always on us to fix the governments fuck-ups? Screw that.

We now owe over $13.7 Trillion, Zoom-boing. Assuming we make zero prinicpal payments (which is entirely unrealistic), the interest we'll owe on that debt at a flat 5% (which is likely not a high enough estimate), is $689 Billion PER YEAR. That's BEFORE we flick on a light switch in any government office. (Someone please double check my math.)

The GDP of the US last year was $151.5 billion.

See the problem?

My point was . . . in what you listed it was all on the taxpayer. When the freaking hell are they going to reign in spending?

 

[Madeline]

Where's the 'congress will cut spending by 20% across the board' part?
Where's the 'congress will eliminate unnecessary departments' part? (this was touted by Obama during his campaign. How's that going?)
Where's the 'congress will take a 15% pay cut' part?

Why is it always on us to fix the governments fuck-ups? Screw that.

We now owe over $13.7 Trillion, Zoom-boing. Assuming we make zero prinicpal payments (which is entirely unrealistic), the interest we'll owe on that debt at a flat 5% (which is likely not a high enough estimate), is $689 Billion PER YEAR. That's BEFORE we flick on a light switch in any government office. (Someone please double check my math.)

The GDP of the US last year was $151.5 billion.

See the problem?

My point was . . . in what you listed it was all on the taxpayer. When the freaking hell are they going to reign in spending?

Well, either way the taxpayer's ox gets gored, Zoom-boing. All that you could hope for by way of reducing spending is that the burden of government cuts would fall unevenly and your family would escape the brunt.

But return your attention to the factoids (as corrected by martybegan) I stated for just a second. We owe about $689 Billion per year just to pay the interest on our debt. Unless you think we should default, this obligation must be met with new tax dollars each and every year before a single government line item is funded.

That means we must tax GDP at a rate not below 2.19% just to service debt (someone please check my math). Put another way, if you slashed government spending down to zero, you would still need to raise $689 Billion per year just to pay interest. We cannot ever eliminate the deficit merely by reducing government spending -- we can only do it by raising taxes, and severely.

(None of that means spending reductions are not called for; IMO, all government spending items should be under review and most should not survive the cut.)

What is not obvious from the above is that in order to "eliminate the deficit" we would have to maintain the pain level for at least thirty years and that will work only if the economic forecast assumptions prove to be correct. If we do not take the hard medicine now, we are building towards an economic meltdown of epic proportions.

However, I'd suggest that "elimination of the deficit" is not a feasible goal either, and instead, we should be discussing what level of debt going forward is a good balance between our desire to be fiscally sound and our desire to maintain our standards of living.