Osler's Razor

Those are all good ideas. I'll be surprised if all of them happen, though. The Republican Party is, for lack of a better term, being held hostage by the Tea Party. As long as the Republicans cower in fear of them instead of standing up to them and telling them to go get a reality check, I don't see there being lots of movement on this.

Of course, the Democrats could also help matters out by budging on Medicare. Both parties need to quit the theatrics and recognize that they're both going to have to give something up in order to lower the deficit.
 

That is sensible, which makes it impossible.
 

I agree with Ash and Campbell. I pray to God they get it together before August 2nd,or I think we will see a crash that will make the last one seem like child's-play.It makes me extremely angry that they refuse to raise taxes on those who can afford to pay,while the rest of us are struggling.I don't understand why the American public is not just "frothing at the mouth" at this.To 1 trillion in cuts,the President has already agreed. Step up to the plate or out on your collective ears,Boys.
 

First, "tax breaks for oil companies" is a strawman. Nobody likes oil companies, so targeting them is easy. But ending the fairly limited subsidies they get would be a drop in the bucket.

Second, a VAT seems like the opposite of what is needed right now. It might very well be a long-term solution, but it certainly is not a pro-growth policy, and will only hamper what is right now a slow and plodding recovery. The number one thing that can help the deficit is growth, and implementing an anti-growth tax policy at this moment seems like a less than good plan. Also, seems interesting to me that everyone jumped on this as a good idea when the VAT is a regressive tax that arguably effects poor people far more than wealthy people.

As far as raising the social security age or restructuring medicare, absolutely, all for it. Of course, we've already seen Democrats claiming that Republicans hate old people, children, poor people, etc. because Paul Ryan merely offered a way to restructure entitlements. They don't call social security the third rail for nothing. Democrats wont touch these entitlements because they are the source of Democrats power amongst the electorate, "vote for us, we give you stuff!" Republicans wont touch it because they get hammered for doing so, and because some of them also like giving people stuff. These programs are likely to go bankrupt, or bankrupt us, before anything changes.

Defense spending - sure, all for cuts. Just let the military decide, or at least be involved in the decisions, what should be cut. It should be Robert Gates and not Al Franken that is making those decisions.

Me, I'm with Obama. We should end the private jet tax breaks, which they project would increase revenues by 1/10th of 1%. Boom, problem solved.

This will ultimately get solved in one of three ways. (1) The USFG will default someday, probably not in August, and then all politicians will finally have the political cover to make hard choices. (2) We will raise taxes, a lot. (3) We will agree on a responsible budget that is based on realities and not on having your cake and eating it to.

Now, which one of those, given what you know about politics and politicians, seems most likely?
 

All laudable proposals, but what it comes down to is simple arithmetic:

military spending is approximately 20% of the budget and entitlement spending (Medicare, Medicaid) is a close second; and with the rate of health care inflation it will overtake military spending at some point if it already has not done so.

We cannot afford the military that we have, fighting the civil wars of other nations and engaging in reckless "nation building" across the globe.

We cannot afford the healthcare systems that we have. What we had before Obama was a trainwreck, and though Obama's and the Democrats' goal of providing universal or near universal coverage, was and is laudable their plan, which Republicans lampoon as Obamacare, will not bend the cost curve; of course, Obamacare is essentially Romneycare and it also bears a striking resemblance to the Republican congressional proposals of the 1990's. If only Teddie Kennedy put aside his more than healthy ego and worked with President Nixon's proposals in the 1970's... but I digress.

Military spending and Health Care spending- the two great entitlements- these are the great cost drivers in the federal budget deficit, everything else is small potatoes.
 

All for defense spending cuts; like RRL the military should be given the amount they need to cut and decide where to make them.

All for raising the age for SocSec to 67. Realize that the average SocSec benefit is about 14k per yr. Also think that one should pay into SocSec on their entire salary, there should not be a cut off at 'x' dollars as there is today. I am totally against privatizing SocSec as a cost saving option. People have a hard enough time managing the $$ they have. I manage my own 401k via my last employer and the changes are constant and confusing and requires internet access and a lot of financial knowledge. Internet access in rural America is limited at best; I barely get interent access in N. Durham County.

Medicare needs to be restructured but the voucher idea is not right. Anyone taken their parents to a doctor appointment lately? It is not any fun wading through the forms, questions and medications. Most have a GP, Neurologist, Cardiologist, Oncologist, etc... You get the gist? [They change my mothers blood pressure meds or dosages so often it is anyones guess what she is currently taking.]

A lot could be saved with mandatory electronic records if you are part of Medicare or Medicaid. Argue privacy issues all you want but with everything floating around in cyberspace today nothing is private anymore.

VAT tax - RRL is right on with this being regressive. We really need a flat tax with no loopholes.

Stop subsidizing Fortune 500 companies and make them pay their taxes. As a shareholder of many of these companies I can assure you they are not passing these big profits on to my pocket now or will they ever.

Congress needs to stop whining and get to work. The President can provide guidance but doesn't write or pass the bills. They only sign the end result.
 

For RRL:

From the actual article, here is the rationale for the "high profile" cuts that do not make a difference in terms of the budget.

"In reality, the tax breaks for “big oil” and “big business” are virtually immaterial as a portion of our fiscal predicament. Even draconian defense reductions do not add up to serious savings relative to our enormous looming debt crisis—but we need to start somewhere.

More importantly, these two high profile items are absolutely necessary to signal a watershed moment in American politics. Republican lawmakers must show good faith by slaughtering their own most sacrosanct sacred cows. These shocking symbolic actions will neutralize opponents inclined to demagogue any serious discussion of confronting the entitlements at the heart of our sustainability nightmare. We cannot save ourselves without restructuring entitlements, and we cannot restructure entitlements without creating the perception that the restructure is part of a massive shared sacrifice."

Interested in your thoughts on that larger strategy...
 

WF--

I should have made clearer in my post that the closing of loopholes for oil companies was a (necessary) political step, not one with much real effect relative to other items.
 

How about slap a super heavy tax on all companies that closed manufacturing jobs in the US and shipped them overseas?
 

Waco Farmer:

I don't disagree with your point that there must be some give and take in order to get anything done that equates to a longterm solution. Here is the thing, why make it a symbolic gesture with little hope of actually having a significant effect on revenue. And why give in to Democratic pandering and scare tactices.

Instead, do this. Announce that Republicans recognize the need for real tax reform, and not just in the form of tax cuts for everyone, or new tax credits, or whatever, but real sustainable tax reform. The tax code is out of control. So, what we propose is a real overhaul of the tax code, closing loopholes, getting rid of subsidies, tax credits, etc. Tax code simplification. To correspond to this we will reduce corporate taxation (the highest in the world) and make the Bush tax cuts permanent. This will have an additional benefit of cutting the size of the bloated IRS. The net effect of this policy would be increased revenue, increased business efficiency, decreased spending, and (wait for it) increased real/effective tax rates for both individuals and corporations (which is why Democrats either can't complain or are intellectually dishonest when they do). The best part about this is that it is pro-business (both through simplification leading to increased efficiency for all businesses but especially small businesses and the lower corporate tax rate) while getting rid of all of those subsidies that prop up things like Amtrak and ethanol.

If we are going to get real reform for medicare and social security it is going to take more than symbolic movement on the part of Republicans, and we shouldn't play their game. We should instead reframe the debate, "why play a game on a broken board?" Throw it out, start again.
 

RRL=--

How in the world does bringing in less revenue solve a deficit problem?
 

Osler - how would what I'm proposing bring in less revenue? Ending subsidies, ending loopholes, ending credits, etc. These are all measures that would increase revenue. Simplifying the tax code isn't the same as reducing marginal tax rates. What I'm proposing is reducing the size of the IRS not by reducing taxation but by reducing the overly burdensome regulations and process by which taxes are filed.

Making the Bush tax cuts permanent under such a plan wouldn't decrease revenue, it would only keep the marginal rates the same while getting rid of tax breaks that some individuals (mostly wealthy) take advantage of now to reduce their effective tax rate.

Reducing the corporate tax rate wouldn't reduce revenue either. The problem isn't the rate, it is the effective rate, and right now the effective rate for a corporation is often very low because they are able to exploit loopholes, subsidies, etc. So, getting rid of all of those tax avoidance measures would mean that every corporation would be faced with a 35% effective tax rate, one of the highest in the world. Reducing that tax rate just increases competitiveness without reducing revenue because the effective tax rate would still be higher than it currently is.

I'm not arguing for a tax cut right now (though I could be persuaded)I'm arguing for tax reform that would create a net positive effect on revenue, without having to raise the marginal tax rates.
 

To those saying the military needs to have a say in the cuts to the defense budget - I agree, to a point. However, that's not revolutionary - it doesn't make sense to cut any department's budget without first getting input from that department.

Here's the other thing - there is a LOT of fat in the defense budget. Secretary Gates realizes that, but that's not enough - not when there are plenty of other high-ranking officials, military and civilian alike, who have their own pet projects they want to see funded.

RRL - We need the Al Franken types who will grill DoD about why particular projects need funding or why we're spending money a certain way. There's a lot of stuff we could cut from the defense budget without sacrificing one iota of national security.

As I've said before, the defense budget and the military as a whole is not sacrosanct. I'm perfectly fine with Congress, not the Pentagon, having the final say on what does and does not get cut. In fact, I prefer it - civilian oversight of the military is one of the many (and one of the most important) things that sets us apart from many of the other countries out there.
 

RRL--

Why do I think your plan will lower revenue?

You are talking about lowering tax rates. Sure, you also talk about how you are for closing loopholes... except when you aren't.

Here, for example is RRL on an obviously stupid subsidy for oil companies:

"First, 'tax breaks for oil companies' is a strawman. Nobody likes oil companies, so targeting them is easy. But ending the fairly limited subsidies they get would be a drop in the bucket."
 

Defense spending should be divided into two entities. (1) Conventional weapons and forces to protect our country from attack and (2) A department of international threat prevention. The historical truth that the more one spends on conventional defense the less secure one becomes. The more one spends on securing good relations with your neighbors the more secure one becomes. So,spend an equal amount on the latter and get more bang for your buck. Fund them equally and watch the spending go down.

Social security age eligibility must be raised as life expectancy increases. It will make entry into the job market more difficult.

Tax breaks for oil companies is obviously needed but is too narrow a target to make a difference. The right direction but thonly the most obvious. Hedge fund managers who make a billion dollars a year and have ab exemption so to be taxed only as capital gains. We must return to the days when Corporations didn't demand tax breaks to secure profits. We can support our Corporations in better ways than through special tax breaks. Corporations can be good citizens and thrive. Restore the fair corporate taxes we once had if one truly wants to lower the deficit

Restrict Medicare and the cost of growing old goes up. Individuals will pick up the cost and will not get the same deal as Medicare.Bad idea. Restrict the increasing costs by sensible health care reform, informed by actual medical providers and not by their business interests. For profit medicine is dangerous to our old folks health and our country's pocket book.

Value added tax on luxury items only. This is no time for regressive taxation with the disparity in income growing at such a rate.

We all want to be millionaires and some of us worry about our luck running out. Some of us worry that the government will want some of our wealth when we hit the jackpot and some worry no one will be there when they are down and out. We have two parties, one for each group, stirring up their fears, going for money and votes. There are sensible solutions to lower our deficits, at the appropriate time. We can be both a compassionate nation and a country where honest hard work pays off. Unfortunately as anon suggested; it seems that what is sensible makes it impossible.
Dad
 

RRL:

Here is why the symbolism is important: everybody must lose to win.

In truth tax hikes on corporations and high earners (or reduced rates on corporations and high earners) do little for our long-term crisis.

We need to wean ourselves off the magical thinking that says as long as you spend money you don't have, you will always have plenty of money (neo-Keynesian). Likewise, we need to get over the idea that the lower tax rates go the more tax revenue we will collect (neo-Supply Side). Or that we can pay our bills will somebody else's money (Gen US).

And, RRL, I understand that you are advocating something real and non-magical with the reformed tax code.

But here is why I favor the VAT in addition to the current mess as opposed to complete breakdown and start over:

The current tax code gives Congress something to do. It is theoretically progressive. It keeps a lot of tax lawyers and accountants in business. Just understand that the tax code is going to be a festering sore subject to the various political cycles. An inconvenience but not a lethal device.

But, if you add the VAT, we get back to a real-world revenue source based on real math--and steers us away from outlandish projections of additional money based on unreasonable future growth. It needs to be regressive because everybody who votes in this country ought to be connected directly to our fiscal health.

Adding the VAT is doable. Scrapping the code seems a bridge too far right now (in part because it is a signature conservative idea).
 

1) Slash defense spending.

Sounds good, there is a lot of fat there.

2) Raise the eligibility age for Social Security benefits.

Sounds good. I vote 70. Alternatively, I'd prefer to privatize social security. Surely even Christine's un-internetted folks can do better than the Feds have done with the current bankrupt and regularly pillaged "trust fund."

3) Cut away tax breaks for oil companies.

I am 100% certain that any financial loss suffered by the oil companies will be passed on as increased price to consumers. I'm also 100% certain that this is true of any tax (or removal of tax breaks) with respect to any industry.

I'm not sure that increasing this cost to consumers and businesses is the best move right now.

4) Restructure Medicare.

Pretty words.

5) Consider a mild value-added tax.

No problem with this except that increasing the cost of goods in this economy seems ill-timed.

Also, "mild"? You mean, mild for now, right?
 

Osler - I think ending the subsidies/loopholes for one industry (such as oil) is a drop in the bucket. But when you talk about doing it for ALL businesses across the board then I think you're talking about a fairly substantial hit. Look, lets assume right now that every oil company only pays an effective rate of 5% (this isn't all that absurd since companies like GE have a negative effective tax rate many years). Lets assume that you end all oil company tax breaks and they all start paying 35%. You would see an increase in revenue there, but it would be in one place. And even if you lowered the corporate tax rate to 30% or 25% you would still see total growth in revenues.

Now, apply that same principle to all corporations, businesses, etc., claiming deductions, credits, exclusions, etc. to avoid paying taxes on profit. Lets assume the effective tax rate on corporations in this country is somewhere between 15% and 20%, based on dollars and not on simple numbers of businesses. If that immediately goes up to 25% across the board then revenue increases, and since it applies to everyone and not just oil companies it goes up a significant amount. Yes, we cut the tax rate 10%, but that reflects a reality that most businesses (at least the ones making the most money) aren't paying even that right now.

And this is more than a symbolic change, it is a total change in policy to recognize the reality that we need more money, but to do so in a way that also offers businesses a chance to increase efficiency.

Lets put it this way, we have one of the highest corporate tax rates in the world. Take away the subsidies and keep it that high and there wont be increased revenues, because they'll just leave. We got to give ourselves a chance.
 

TGP - Surely even Christine's un-internetted folks can do better than the Feds have done with the current bankrupt and regularly pillaged "trust fund."

I dare say the pillaged "trust fund" of Social Security is in fact a safety net and not suppose to be a persons nest egg. Referring to it as a trust fund (as people often do) makes it sound elitist. 14k is a lot of money to a lot of people in this country and they know how to survive on such.

Could they do better? Perhaps, but what if they can't?
 

Simplifying the tax code would be great. Of course, there are legions on both sides of the aisle and scores of lobbyists who will oppose it. Filling out your federal taxes should take about an hour tops; John McCain, before he went coo coo for Cocoa Puffs, suggested just that.

Presently, fifty-three percent of American wage earners DO NOT PAY any income taxes. This is a travesty. Everyone should pay, even if it costs the federal government more money to process the return than what the government nets from it. It is just the principle.

Don't get me started on companies like GE,it gets my Irish up.

Corporate tax rates and real corporate taxes need to be competitive with Western European countries. We are presently around 35% I beleive. Cut corporate tax rates, so that we have the lowest rate among any industrialzied Western nation; at this time, I think that Ireland holds that distinction.

When, it comes to individual rates, let's stop pretending that Neo-Keynsianism does anything of value. We are just kicking the can down the road. Also, let's forgo the passionate defences of Neo-Supply side- you get to the point where you can continue to cut marginal rates and see no growth in government revenues to help reduce our fiscal mess, though you will see job gains in China (thank you Dick De Vos).

Republicans have some laudable ides with flattening individual rates and with eliminating ALL EXEMPTIONS, DEDUCTIONS, et al. The problem is Paul Ryan's ideas would yield a dramatic increase in income tax owed for people making less than 100K per year and a decrease in income tax owed for those making more than that.

The only way we are going to get out of this mess (budget and deficit) is to: 1.)Cut Spending (i.e. just like you tighten your belt at home) 2.) Bring in more revenue to specifically and only pay our outstanding bills and 3.)address the issue of health care entitlements (Medicare and Medicad and others) which affect everyone, but are a particular bone of contention among the "middle class."

Furthermore, for those of us still working, we all know that Health Care Expenses are the issue. Get that under control and we are on our way to a more sustainable economic future.

Rambling Spot
 

Sure nobody will ever read this, but here is Bill Clinton on the corporate tax rate:

"“It made sense when I did it. It doesn’t make sense anymore — we’ve got an uncompetitive rate. We tax at 35 percent of income, although we only take about 23 percent. So we should cut the rate to 25 percent, or whatever’s competitive, and eliminate a lot of the deductions so that we still get a fair amount, and there’s not so much variance in what the corporations pay."

Me and Bill, on the same page.
 

Vive Bill Clinton and RRL...