The Elmendorf Rule

[Guest nicemac]

Charles Krauthammer nails this one!

The Elmendorf Rule - The Washington PostKey passage, discussing the corporate jet tax so widely tossed around by the libs:

"To put it another way, if we had levied this tax at the time of John the Baptist and collected it every year since — first in shekels, then in dollars — we would have 500 years to go before we could offset half of the debt added by Obama last year alone."

[Guest Lester Weevils]

Charles Krauthammer nails this one!

The Elmendorf Rule - The Washington PostKey passage, discussing the corporate jet tax so widely tossed around by the libs:

"To put it another way, if we had levied this tax at the time of John the Baptist and collected it every year since — first in shekels, then in dollars — we would have 500 years to go before we could offset half of the debt added by Obama last year alone."

Yes it is a good point. But it is because we are so far behind the 8 ball on budget vs revenue, there is NOTHING short of "revolution in the streets" drastic that can fix it. IOW, anything we can do to balance the budget is gonna be so extreme that enough folks are gonna be so hopping mad about it, that the next election will shoo out the current politicians and bring in another bunch to reverse the changes back to the current suicide levels of spending and low revenue.

None of the politicians of either party are being honest about how hosed we really are. None of the talking heads are being honest about it either, or alternately they are regurgitating what they were told and haven't looked very closely at the numbers.

A couple of months ago I thought maybe the problem could be fixed via tolerable tweaks. Maybe it can be fixed with tolerable tweaks, but I can't see how.

I downloaded a bunch of statistics documents from irs.gov, bls.gov, treasury.gov, etc. Spent a couple of days looking thru the spreadsheets. Playing what if games with the numbers adding columns to the spreadsheets. The data ain't secret. It just takes a little effort to study.

We are just massively hosed. The only way to balance the budget is a COMBINATION of budget cuts deep enough to cause riots AND heavy tax increases on EVERYBODY down to poverty level.

I don't like that idea one little bit. It just seems the only thing that would work. And it would only work until the next election when all the politicians who voted for it get tossed out on their butts.

We just can't cut spending enough to fix this. On the other hand, I don't want any tax increases unless there has already been DEMONSTRATED capability of washington to make serious cuts which can't be reversed come next election. If we just raise tax then the politicians will just spend more money while claiming they are cutting.

It does not look like there is a politically feasible solution. ESPECIALLY when the politicians either have not looked at the numbers close enough to know how bad it is, or they are lying about the current dire state of affairs trying to keep their office.

[Oh Shoot]

The debt can only EVER be paid off in one way: by inflating the USD so that creditors actually receive a small fraction of the original principal in actual monetary value.

Obama and Geithner are working on that fast as they can. Expect dramatic results soon.

- OS

[Guest nicemac]

RE:"The only way to balance the budget is a COMBINATION of budget cuts deep enough to cause riots AND heavy tax increases on EVERYBODY down to poverty level."

By dramatically cutting spending, we CAN get this crisis under control. We can't tax heavily enough to fix this.

[Guest Lester Weevils]

The debt can only EVER be paid off in one way: by inflating the USD so that creditors actually receive a small fraction of the original principal in actual monetary value.

Obama and Geithner are working on that fast as they can. Expect dramatic results soon.

- OS

Hi OS

Yes that seems in the cards. OTOH, we are so far behind the 8 ball that if we could write off all the current debt today, we would be back in trouble within a couple of years.

[Guest Lester Weevils]

RE:"The only way to balance the budget is a COMBINATION of budget cuts deep enough to cause riots AND heavy tax increases on EVERYBODY down to poverty level."

By dramatically cutting spending, we CAN get this crisis under control. We can't tax heavily enough to fix this.

Hi nicemac

I used to think so. I hope it would be so.

Without going back to review figures, I think to balance the budget right away with spending cuts alone would need about a 50 percent across-the-board cut in all depts.

It doesn't seem politically feasible. That big a cut would only last until the next election. Maybe there would be recalls even before the next election.

The perpetual plans foisted to fix the budget, for decades--It is always a gentle 10 year plan with most of the cuts in the final years. But the plan is always changed before the final years arrive.

Its like if my household budget is out of whack and I make a 10 year austerity plan-- 1. Eat steak for 8 years. 2. Eat hamburger for one year. 3. Eat ramen noodles the final year and the checkbook will finally balance!

[Oh Shoot]

RE:"The only way to balance the budget is a COMBINATION of budget cuts deep enough to cause riots AND heavy tax increases on EVERYBODY down to poverty level."

By dramatically cutting spending, we CAN get this crisis under control. ...

Only by gutting the big three: SS, Medicare/Medicaid, and military. Discretionary spending is less than 20% -- you could nuke all of that and still take a century to erase the debt. Hell, soon the interest on the debt alone will be equal to half of all discretionary spending.

- OS

[Guest nicemac]

Only by gutting the big three: SS, Medicare/Medicaid, and military. Discretionary spending is less than 20% -- you could nuke all of that and still take a century to erase the debt. Hell, soon the interest on the debt alone will be equal to half of all discretionary spending.

- OS

Entitlements–just gutting the big two would do it. Military spending can be cut some if we get out of Europe, South Korea, etc… Crap, we have more troops along the Korean border than we have along OUR border with Mexico.

I have been paying into SS since 1976. I would gladly forfeit every penny if I could opt out now. I know many my age who would agree.

[Guest Lester Weevils]

Entitlements–just gutting the big two would do it. Military spending can be cut some if we get out of Europe, South Korea, etc… Crap, we have more troops along the Korean border than we have along OUR border with Mexico.

I have been paying into SS since 1976. I would gladly forfeit every penny if I could opt out now. I know many my age who would agree.

Hi nicemac

Do you think it is possible for a politician to keep his job with seniors out for his scalp?

If you and your generation opt out on your future SS BENEFITS then it might make an eventual improvement. But if we also repeal the SS taxes then we are back to the same serious pickle. Nearly half of Fed revenue is SS tax.

If you terminate all SS/Medicare payments then you may balance spending against current revenue.

But abolishing the SS/Medicare taxes would also cut revenues almost in half, so that the Fed budget would still be deeply in the red. And you would have to take mom&pop into your home and pay their food, medical, and internet bills.

I'm not arguing that things should stay status quo. Just commenting on how seriously f'd is our fiscal situation.

[Oh Shoot]

....

But abolishing the SS/Medicare taxes would also cut revenues almost in half, so that the Fed budget would still be deeply in the red. And you would have to take mom&pop into your home and pay their food, medical, and internet bills.

I'm not arguing that things should stay status quo. Just commenting on how seriously f'd is our fiscal situation.

Yep. If SS had actually been run as the untouchable trust as designed instead of being dumped in the overall budget, the D.C. spending addiction would have been severely curtailed all these years, AND would undoubtedly have provided the pay out benefits on a revenue neutral basis. Actually, would probably be well in the black even after the baby boomers have all passed.

- OS

[mav]

I often wonder who is really to blame for this dire situation. The politicians or those who voted them in office and kept them in office.

I think Plato said it best, "One of the penalities for refusing to participate in politics is you end up being governed by your inferiors."

[Guest Lester Weevils]

I often wonder who is really to blame for this dire situation. The politicians or those who voted them in office and kept them in office.

I think Plato said it best, "One of the penalities for refusing to participate in politics is you end up being governed by your inferiors."

Hi Mav

I've been paying SS tax 9 more years than nicemac, so it is obviously 25.7 percent more my fault! I never wanted to pay SS tax, and can't recall ever seriously expecting to collect it even when I was young & dumb.

The whole thing is "up in the air" so much that I'm skeered to collect on it until it eventually becomes impossible to work. So I'm paying thru the nose for something I might not ever collect, even though I'm old enough to start collecting next year. I never voted to raid the SS trust fund but it must be my fault somehow.

Edited July 11, 2011 by Lester Weevils

[mav]

The whole thing is "up in the air" so much that I'm skeered to collect on it until it eventually becomes impossible to work. So I'm paying thru the nose for something I might not ever collect, even though I'm old enough to start collecting next year. I never voted to raid the SS trust fund but it must be my fault somehow.

My pondering was certainly not to create an offense. I have often though about my own culpability in regards to this entire mess that is the federal government. I have voted for and supported a lot of the politicians over the years who have exacerbated the fiscal problems we now face. I voted for Bush twice, and I think he was rather sorry. I don't know how many times I voted for Wamp, and he voted to give us the TARP bailout. I have voted for Frist, Corker, and Alexander. They are all pretty much big government moderates. Granted, the choices I have made would have certainly been better than the alternative, but nonetheless, they still sucked.

While there are still some good conservative constitutionalist Republicans, I am finally starting to see through the looking glass that both parties are essentially the same. Both parties are more consumed with a lust for power than they are of serving their electorate. I do believe, however, that one party will lead us down the path of ruination at a much slower pace than the other, but nevertheless, it is still the same path. It is rather unfortunate that it has taking me so long to come to this realization.

In the hopes of remedying what I helped create, I will start by thinking for myself and choosing candidates during the primaries whose views more closely resemble mine. I am done with all of the strategizing and choosing the more "electable" of candidates. The general election, however, will be more of the same assuming my candidate of choice didn't win. I will continue to vote for the lesser of evils.

[Guest Lester Weevils]

My pondering was certainly not to create an offense. I have often though about my own culpability in regards to this entire mess that is the federal government. I have voted for and supported a lot of the politicians over the years who have exacerbated the fiscal problems we now face. I voted for Bush twice, and I think he was rather sorry. I don't know how many times I voted for Wamp, and he voted to give us the TARP bailout. I have voted for Frist, Corker, and Alexander. They are all pretty much big government moderates. Granted, the choices I have made would have certainly been better than the alternative, but nonetheless, they still sucked.

While there are still some good conservative constitutionalist Republicans, I am finally starting to see through the looking glass that both parties are essentially the same. Both parties are more consumed with a lust for power than they are of serving their electorate. I do believe, however, that one party will lead us down the path of ruination at a much slower pace than the other, but nevertheless, it is still the same path. It is rather unfortunate that it has taking me so long to come to this realization.

In the hopes of remedying what I helped create, I will start by thinking for myself and choosing candidates during the primaries whose views more closely resemble mine. I am done with all of the strategizing and choosing the more "electable" of candidates. The general election, however, will be more of the same assuming my candidate of choice didn't win. I will continue to vote for the lesser of evils.

Hi Mav

Those are good thoughts and I'm about the same. One can only vote for what is available on the ballot. Few folks have enough time and money to influence the roster more than 1 vote's worth. I often vote third-party unless there is a case where it seems imperative to vote the lesser of two electable evils.

I didn't take any offense. You are correct. We get the gov we deserve apparently. It is only correct to take responsibility.

There are in the ballpark of 227 million adults theoretically capable of voting. So each adult might share about 4.41E-7 percent of the blame for the last election cycle. Not voting was a vote as well.

The older a person gets-- Then theoretically an old guy's percent of the compounded blame would be higher than young people's.

[Guest nicemac]

Anyone qualified to run for office would be a fool to do so.

Anyone willing to run is unqualified.

I know I will never collect a penny from SS. They may as well just burn the cash I send them.

I heard an interesting take the other day. If you take the 50-60 million people aborted in the US since 1973 and dump their incomes in the SS pot, we would be much more able to fund SS now.

[Warbird]

Yep. If SS had actually been run as the untouchable trust as designed instead of being dumped in the overall budget, the D.C. spending addiction would have been severely curtailed all these years, AND would undoubtedly have provided the pay out benefits on a revenue neutral basis. Actually, would probably be well in the black even after the baby boomers have all passed.

- OS

It would require a constitutional amendment to do that. The USSC ruled many years ago that SSI and the so-called lock-box was not constitutional. They said if the US Government wished to run such a program it would have to come from general funds, not by any sort of savings and investment of such. So the congress kept the program alive despite the ruling. A congressman was recently criticized for calling SSI a ponzi scheme, but in reality that is exactly what it is. Like happened with Madoff the scheme is nearing its critical mass point. A government run Ponzi scheme and I see no future end to the program.

Now the argument could have been made that the government simply not use those funds and allow them to ride. But we all know there was no way that is realistically possible. It's a good example of what happens when the government runs outside the parameters of what they were designed to do.

[Warbird]

The fastest way to increase revenue is with tax increases. The best way to increase revenue over the long term is to lower taxes, especially on those who start businesses, those who pay the highest portion of taxes at present(leaving them less to invest in business and employees) and on corporations. We have one of the highest corporate tax rates in the world. The threat of new taxes is one of the largest reasons for the lack of new hiring.

The Kennedy tax cuts raised revenue substantially, but were spent by congress on huge new 'Great Society" programs and Vietnam. The Reagan tax cuts, quadrupled the Fed gov revenue even faster than expected, only to be spent and then some by a congress consumed with spending. The Bush tax cuts again increased revenue, but again was spent by a drunken congress.

One factor often overlooked in the Bush tax cuts was that much was made of the 3% reduction on the wealthiest Americans. A few hundred thousand Americans effected. 3%. However the biggest impact of the cuts on Americans was the millions taken off of the income tax roles altogether when they were cut from 15% to 0% overnight, begun by Clinton in his first 2 years. Not only that but they continued the program which gave money to those who had not put in anything. This was nothing but income redistribution. It's impact on economic spending was slight, but in the end did nothing for investment in new business, expansion of business or new development.

So increased revenue does no good at all without controlled spending. Unlike with our personal bank accounts and income from salaries, macro economics does work in the same cause and effect manner. Lowering tax rates has the long term effect of increased government revenue. That is what we should be talking about now and every day. Instead we are talking about holding the line while others are saying we need to raise taxes. Even Keynes himself, the father of the economic theories rampant in much of government and econ schools across the country, said the worst possible thing to do in a recessionary period is to raise taxes.

Edited July 12, 2011 by Warbird

[mav]

Even Keynes himself, the father of the economic theories rampant in much of government and econ schools across the country, said the worst possible thing to do in a recessionary period is to raise taxes.

Bingo. Even Obama knows this, and he stated as much back in 2009.

What we have going on now is nothing more than Kabuki Theater. They are also posturing themselves for the 2012 elections.

[Guest Lester Weevils]

Yes in theory tax cuts would raise economic activity and possibly raise tax receipts.

Don't get me wrong, I like tax cuts. But tax cuts are just another form of keynsian stimulus. Especially when coupled with gov deficit spending, which has been the case almost every time except a few years following the Kennedy tax cuts.

Keynes identified a real enough economic effect, but it is only one economic effect. If all you have is a hammer then every problem looks like a nail. Economists in the past (and some in the present) thought that merely by tweaking a few keynsian multipliers that the economy can be regulated and avoid the boom/bust cycle.

It is subject to over-steer where long latencies in the impulse response induce uncontrollable parasitic oscillations in the economy. Oversteer on the top of the cycle causing it to dip too low, then oversteer on the bottom causing it to go too high.

Also this tool possibly loses effectiveness with over-use. That is a possible interpretation of the 1970's stagflation. They had been wanking the economy with keynsian techniques since the 1930's and finally the keynsian tools didn't work any more (though they had apparently worked pretty good in previous decades).

It could be about the same with tax cuts after awhile. A tax cut is just a keynsian stimulus, and after awhile the economy might not respond to the tool any more.

I like tax-cut keynsian stimulus better than the gov deficit spending keynsian stimulus but they are both keynsian stimulus. Its not like you are dumping keynsian tools just because you go with tax cuts rather than deficit spending.

It is bad when citizens do not pay any tax. If a voter doesn't have to pay for boondoggles then he is more likely to vote for any dam-fool boondoggle. I wouldn't mind another tax cut, but another tax cut would create even more lower-middle-class people who pay little or no tax. That won't be good into the future. Everybody needs some skin in the game.

=====

Just to put some hypothetical numbers to the Tax Hike vs Spending Cut debate-- I don't see any feasible solution, but here are some crude numbers--

2011 United States federal budget - Wikipedia, the free encyclopedia

For 2011, the Congressional Budget Office (CBO) projects that if current laws remain unchanged, the federal budget will show a deficit of close to $1.5 trillion, or 9.8 percent of GDP. The CBO projects total revenues of $2.228 trillion and total outlays of $3.708 trillion for a deficit of $1.48 trillion for 2011. The deficits in CBO's baseline projections drop markedly over the next few years as a share of output and average 3.1 percent of GDP from 2014 to 2021. Those projections, however, are based on the assumption that tax and spending policies unfold as specified in current law. Consequently, they understate the budget deficits that would occur if many policies currently in place were continued, rather than allowed to expire as scheduled under current law.

On February 14, 2011, President Obama released his 2012 Federal Budget. The report updated the projected 2011 deficit to $1.645 trillion. This is based on estimated revenues of $2.173 trillion and outlays of $3.818 trillion.

We can balance with spending cuts, tax increases, or any combination thereof. Going with Obama's revised 2011 figures (and crossed-fingers that I haven't forgotten junior-high math)--

Spending cuts-- Simple! An across the board cut on all programs of 43 percent. Cut welfare 43 percent. Cut social security payments 43 percent. Cut depts of education and transportation 43 percent. Mothball 43 percent of the military and discharge 43 percent of active-duty military personnel. Because we can't constitutionally fire 43 percent of congress then we will have to cut their salaries and expense accounts by 43 percent.

Tax Hikes-- Equally simple! An across the board 75.7 percent increase of all federal taxes. Increase by 75 percent all tariffs, corporate tax, social security tax, income tax.

An example half-and-half combination-- Take the square root of the deficit and use that figure to calculate proportionally equal amounts of spending cuts versus tax increases. The spending and revenues would be adjusted to the geometric mean of the deficit.

That would be across-the-board spending cuts of 24.57 percent and across-the-board tax hikes of 32.5 percent. Which would reduce expenditures to $2.88 trillion and raise revenues to 2.88 trillion, thereby balancing the budget.

Do any permutations of the above seem even remotely politically feasible?

[Caster]

*Edit*

Think before I type. Not everything needs to shared.

Edited July 12, 2011 by Caster

[Oh Shoot]

[regarding SS as discrete trust fund]It would require a constitutional amendment to do that. The USSC ruled many years ago that SSI and the so-called lock-box was not constitutional. ...

Immaterial now anyway, way too late for that. But great info, I knew nothing about that ruling.

- OS

[Oh Shoot]

...It is bad when citizens do not pay any tax. If a voter doesn't have to pay for boondoggles then he is more likely to vote for any dam-fool boondoggle. I wouldn't mind another tax cut, but another tax cut would create even more lower-middle-class people who pay little or no tax. That won't be good into the future. Everybody needs some skin in the game....

Absolutely. Have said many times that this is another of the reasons we have lost a national ethos in the US. Folks have no vested interest, not even a sawbuck's worth.

It's also the reason that it won't be your grandfather's Depression this time around. The "me" rather than "us" syndrome would cause great disruption this time around, including significant mortality rates. People will not stand in "bread lines" this time around, even if there are any.

- OS

[Oh Shoot]

zapped by request

Edited July 12, 2011 by OhShoot

[Caster]

Yeah, I know, I know. I'm more so venting and spouting off at the mouth. The solid fact is that nothing is going to change drastically, for the better. It's not Obama's fault or the last pres or the next. Career politicians have the game in the bag. Just overlook me and my maniacal ramblings.

You ever notice freedom never works and oppression is never tolerated? So what's the deal? People just cannot get along, they never have, they never will. All the peace and love hippy rhetoric will never happen, mankind does not have the capacity to get along despite differences. So dummies like me rant on with fantasized ideas about what might work...meanwhile nothing ever changes. Nothing ever will.

From my obviously limited education, I've only ever read about long term stability comes from an absolute monarchy. No one wants that, but when one person makes decisions, at the least, something actually gets done. Can't get anything done around here [uS] what for trying not to offend some interest group.

The biggest problem with any monarchy is that absolute power corrupts absolutely. SO we are back where we started; man's inability.

Edited July 12, 2011 by Caster

[mav]

Folks have no vested interest, not even a sawbuck's worth.

Andrew Wilkow has good name for these folks, Zero Liability Voters.