Tired of the fiscal cliff

Over at From None with Love there is a great post on fatigue over the never-ending “fiscal cliff” drama. Rather than pollute that post with my usual long comments I’ll add a few (right, like I can do few) comments here and my own digressions. (It’s a very polite “rant”)

Grover Norquist  needs to get over himself.

Wow, absolutely. If there was every much ado about nothing, this nobody defines it. Whole chunks of Congress living in terror of some random guy (scared of Kochs or Adelson I understand, but Grover, ha!). After Daddy Bush reneged on No New Taxes the Repugs treat even talking about taxes as though it were The Plague.

Then carefully explain to the public, the present 2% decrease is not revenue, but actually a decrease in the federal taxes for our future social security and medicare benefits. Income tax is revenue. Then media just say “tax”, not making a distinction between FICA taxes and income tax. People forget they use to pay the 2% towards Social Security and Medicare benefits.

Absolutely. I’m amazed at how much people miss this “cut” as just a gimmicky stimulus measure. The Repugs probably went along with this approach because it hurts the accounting for SS and Medicare. When taxes were substantially increased for SS, pre-Reagan, that actually made financial sense, as we were not accumulating the surplus any “pension” fund would need to make future disbursements. Of course, as soon as SS began to run a massive surplus (as planned) naturally it got folded into the general budget. But at least the accounting fiction of the “lockbox” still exists (even though the funds have been raided). The Federal government spent the SS surplus and now owes SSA a ton and as occurs with Bain-style takeovers and backing out on pension obligations now the Federal government doesn’t want to pay that back. So the current 2% tax “cut” actually reduces the surplus is SS and makes it look worse, exactly what the Repugs wanted.

Congress is managing by confusion. No one knows 100% what is going on. Education of the public is a must. Gridlock is no longer acceptable. Getting everyone worked up about the fiscal cliff is of no earthly value, except for the talking heads.

Again, absolutely, but I believe the confusion is deliberate. Even if we didn’t have a public with the attention span of a gnat, understanding all this is fairly hard and takes some work. So easier to just have fake drama. And again this plays perfectly into the Repugs’ plan. Since Reagan tax-cutting has been almost exclusively about the rich (with the side agenda to drown government in a bathtub by deliberately creating deficits with unpaid wars and new entitlements). For a long time just dropping the “class wars”-bomb was enough to shut everyone up, but eventually they knew someone (now, at last, Obama) would finally take the heat to call this defunding of government and massive income transfer (in the opposite direction of traditional progressive ideas) what it is, pure and simple, tax scams for the rich, period, end of story. But a good smokescreen helps cover this up. First it was the laughable, Laffer curve, supply-side nonsense (not even a viable economic theory by anyone sensible). When that ran dry, especially after Clinton proved with tangible results how ridiculous it was (higher taxes == best decade of economic growth ever, except 50s which, of course, had Eisenhower 91% top rate; in fact, economic growth is most strongly correlated with high taxes on the rich and recessions with low taxes on the rich and there is a completely sound reason for that). So after that silliness died out, then the threats of being labeled with “class warfare” worked (and thanks to Warren, for beginning the process of letting the air out of that balloon). Now they’re pretty much exhausted and so have to resort to more tricks and false drama just to try to keep the party going a little longer.

On January 1 2013, the committee would have a couple of months to devise a workable plan and present it to our elected officials to debate, refine and bring to the floor. Perhaps a over-site committee of regular citizens who live in the real world that can point out fallacies and real world logic before it goes to the floor.

Boy, what an optimist you are. :-) I can’t imagine anything sensible happening in this toxic environment. The greed of the rich drives all this (and actually they are screwing themselves, longer-term, but naturally they can’t see that), but they’ve converted it into political power. The Repugs serve their masters, but mostly hang on to their own seats (not that Dems don’t, as well) and now the obstructionism is merely a political tactic (wearing thin, I think, at long last). This increasingly partisan split, led by the right-wing entertainment complex (I love the invention of that phrase for FauxNews and Limbidiot et al) means what you propose is exactly the opposite of what any seat-hoarding politician could not abide. But we can hope that sanity could prevail again, but I think the Repugs will have to get beat down a lot worse than 2012 before that happens.

 Protecting the future of Medicare and Social Security is a responsibility of every American, we need to stop getting the 2% for our own future entitlement benefits.

Absolutely. This is definitely where your idea to really get the idea across to the public what the gimmick “tax cut” for the 98% is is critical.

The tax code needs to be simplified, so the lobbyists have no need to keep circling Congress like buzzards. Close loop holes, …

Agreed, but it’s not where most of the public thinks or where the current “reform” discussion is directed. The #1 and most egregious is the “carried interest” gimmick used to treat actual just plain old salary (bonus, actually) not as a wage. When an entrepreneur starts a real company and ends up with a “paper profit” in capgains and then eventually cashes that in and gets a break, that serves an economic purpose (truly being a “job creator”). When a hedge fund guy (and they are all guys) gets actually paycheck (for looting other people’s assets) in the here and now that can be spent on more yachts now but we call it something different anyone else’s income and tax it at absurdly low levels. Now it’s true we’d only make a dent in the deficit by closing this, but I think it’s more symbolic. Why is a small handful of people entitled to a tax exemption that almost no one else gets. And furthermore it’s provided to people whose net economic impact is highly destructive. Talk about a special interest – this is the worse.

But on the larger points the “loopholes” are mostly so complex that few in the public know anything about them. Having been a wage earner and home earner and having a few investments I’ve done all the usual middle class schedules, but in doing my mom’s taxes, mostly from income on a small piece of property, I’ve gotten a chance to wade around in some of the more obscure forms that few see (and these are still pretty simple). It’s just amazing all the gimmicks that exist there (mostly a pain for me to try to get Quicken to handle correctly). The loopholes that mean something vis-a-vis the tax code are almost entirely stuff so complex and so obscure that few in the public even begin to understand them (what percentage of the public even knows what depreciation is, much less the accelerated depreciation companies use for tax purpose versus an entirely different formula for depreciation they use for reporting to stock holders).

The loopholes that exist for any “ordinary” person are just a tiny tip of the iceberg for all the massive loopholes that exist buried away out of sight.

 Close loop holes, show the middle class they only save a couple of 100 dollars with the home owner deduction, but the people making over $250,000 save $5000 or more on that loophole.

Here’s one where I’ll take issue, not to defend the exemption per se, but to urge caution on changing this. A ton of people in the U.S. are right on the edge as to whether they can keep their homes. When I lived in California there was no way you could budget the obscenely expensive real estate there (salaries while good in Silicon Valley don’t scale up to match real estate costs) without the mortgage exemption, which in parts of the country is a lot more than $5000 for people you’d still label as “working people”. Deductions like this have been in the tax code so long that any sudden elimination of them would cause significant number of defaults and a big drop in home values (partly inflated because of the exemption, which is why, in general, tax gimmicks are bad since they distort markets) which in turn would cause more problems. Frankly, I suspect, immediate elimination of this item would probably produce a national recession and collapse in a few parts of the country (mostly blue states).

Republicans are all for closing loop holes, how much revenue will that generate?  Not enough. Or in lieu of income tax, look at what revenue a national sales tax would generate.

First, I think the Repugs actually can do the math and know this is fairly irrelevant, but it’s another nice smokescreen. Second, as to national sales tax (presumably value-added tax like many countries use) this would be very regressive in the current state of the U.S. economy (nations that use it usually have much more equitable income distributions than we do). Third, my favorite answer is in fact the carbon tax (which would function economically a lot like a national sales tax). It too is regressive, but that can be partially offset with a credit against income tax (so the guy with the gas guzzler still pays at the pump, even if he gets it back in April). The carbon tax kills all the contrived speculative junk Goldman Sachs does with oil prices (these so-called “prices” are purely derivatives, not actual contracts for real oil, created just for speculators) by simply fixing the actual actual retail price (say, $10/gallon, IOW, if oil prices truly rise, then the tax falls and the retail price remains constant). Gasoline prices are going to be $10 in our lifetime and perhaps fairly soon, but Americans constantly get suckered on this. Prices drop briefly and we buy gas guzzlers, then prices skyrocket and we panic and Detroit crashes in sales. We need to even out these cycles. Tell the public today that gasoline will never again be cheaper than $10/gallon AND the price will automatically rise by 5% a year, and finely we’ll get serious about MPG, and then the car companies can get serious about solving the problem (which they can do, but they get mixed signals on this: every time they spend investment on improving cars, gasoline prices drop and the “economy” cars don’t sell; even the most popular hybrid is < 1% of its manufacturer’s total sales). So not only does the carbon tax completely close the deficit gap it actually addresses a real issue, global climate change.

Now not only is any kind of flat tax regressive it also depresses the economy. The argument Papa John’s didn’t make about Obamacare was that ALL fast food places are going to have to pay the costs and all of them will pass on that cost in increased prices and good old micro-economics of supply-and-demand will prevail, meaning there will be some across-the-board drop in consumption of fast food (the cheaper the food, the more the impact of the health care for the workers; high end restaurants will hardly notice the difference). So either sales tax or carbon tax will appear to whack the economy. BUT, the carbon tax is something that can be adapted to by technology, i.e. more efficient consumption of energy. So if it costs all of us 2X more to run our fridges, some of us will decided replacing old fridges with energy-efficient ones is a good idea. Same with better windows, more insulation, any appliance and so forth. So you offset some of the initial revenues from the carbon tax with income tax rebates on any energy saving (Cash for Clunkers was the one part of the stimulus that really worked). So the adverse effects to the economy of higher costs for almost everything is offset by new growth opportunities from technology to save energy. OTOH, there is no response to higher prices due to sales tax except to cut consumption which will then crash the economy. So carbon tax, properly done, is both stimulus and revenue generator. In some ways, it’s a bit like the success with taxes on tobacco, it raises revenue, but more important cuts consumption of a product that was associated with high secondary costs, just as carbon-based energy is.

 If I am forced by very expensive medications to sell stock, then I have to plan on capital gains. I am paying taxes annually.

One proposal, so sensible it always gets ignored, is not to exempt (or use reduced rate) on capgains, but to index them. If your assets are something you’ve held for a longer-term more than likely much of the gain is just inflation (as is the case with most of increase in home prices). So basis price really should be indexed so much of your gain would disappear. This is a really pressing problem now, as baby-boomers (like I’m doing) move into the situation you experience. Baby-boomers have assets and given most don’t have defined-benefit pension plans they will have to sell those assets, mostly to pay medical bills. This is a huge inter-generational transfer of those assets and I promise you all the government projections of revenue is planning on you (and soon me) both paying the deferred taxes on IRA/401K’s as well as capgains. And I suspect a lot of people haven’t really budgeted this and will be facing an unpleasant shock. Since COLAs are probably doomed on SS (and possibly should be) it’s all the more important that private assets go as far as they can. I really don’t get what the Repugs think is going to happen to retired people with all their draconian measures – do they really think TV images of grannies homeless on the streets is going to go over very well? The Repugs are going to have to become the advocates of “death panels” and get a lot more fond of assisted suicide if they decide to try to impoverish the relatively recent “elderly”.

I think it is legitimate for society to argue about all this, but you can’t just change rules mid-stream. If I’d thought there would be no Medicare (or Ryan’s stupid vouchers) and no SS when I was 40 then I could have adjusted to that (whether a good idea or bad, fair or unfair). But at 66 I can’t change the trajectory of my life. I never had a job where there was a defined benefits pension fund, but perhaps working for the power company might have been a career choice for me if I thought I needed that pension for my golden years. But too late to do that now, now it’s IRA/401K and assets and SS. You just can’t have an entire generation (like my parents) who became accustomed to these benefits just suddenly changed.

So any sensible plan would take a very long time for transition. You’d have to wean younger people off the expectation of entitlements (while still expecting them to actually pay the taxes for Federal government to pay back its debts to the SS trust fund) and at the same time provide them a different alternative for their future. That’s a big shock and so all of this has to be phased. Maybe back in FDR time we could have done something different than SS, but now we’ve got it and it’s a reality. Just as I said about the mortgage deduction, once something is built into people’s budget, you can’t just change it. So this transition will probably be like other things, actually have to spend money to eventually save money, and thus would, in the short-term, make the deficit worse.

Most people don’t realize that the FDA only approves a product if it does what the manufacture says it does. It doesn’t take into consideration if the product is safe or not. FDA doesn’t do anything about safety until high risk side effects or death occurs.

Actually the trials (since have been involved in them) do consider safety, but not very well as your complaint is justified. The problem is the long-term risk given that trials aren’t very long. So drugs that hurt people within the timeframe of the study get rejected, but not for chronic use. Yet a lot of drugs are for lifetime use (one of my main motivations to finally get serious about my blood sugar instead of just taking another pill like I did for cholesterol). But safety is just part of the short-term mentality; likewise the efficacy is not considered in long-term. For instance, with statins they, as you say, do what the manufacturer says, lower cholesterol. Wonderful, a number on a blood test changes. BUT, am I the least bit healthier? Am I really less likely to stroke out or infarct? I asked exactly this question to my doc, already having researched in on the net, and in fact, there is little long-term evidence of the benefits of statins (not that I intend to stop using them). Same with BP meds. In fact, many meds merely compensate for one deficiency by hyper-stimulating something else (like kidneys in most BP meds), so you don’t stroke in short term but end up on dialysis in long-term. The trouble is, there is really no way of financing long-term trials, which are also difficult to run (imagine trying to track a group of people for 20-40 years and know everything they’re doing about their health).

 The Congress needs to do what is right for all of us, including the Democrats. Undo the gridlock, please.

Again, totally agree with the sentiment and keep up the optimism, but I’m having a hard time seeing how we actually get to the point where Congress does what is right. I fear there is something more complex and insidious than mere temporary insanity. The various restrictions on voting (no direct election of Senate, only property owners, etc.) of the founders was somewhat based on the clearly elitist idea that the masses can’t be trusted in democracy to not just be a mob, swayed by whoever lies best. I hate to accept that idea but I fear it is true and that modern communications, plus the red/blue divide, may mean doom for “democracy” (really representative democracy, not sure if direct democracy would be better or worse).

The trouble is that red and blue do already and increasingly will live in alternate universes. Naturally I blame it all on FauxNews and ClearChannel for merely being a propaganda apparatus which combined with the sad state of education (lack of critical thinking) means 40+% of the public believes (and won’t listen to anything else) sheer nonsense. We are living in echo chambers. The couple of right-wing friends I have view the other news the same way I view Fox, that it’s all lies. A couple of my friends are actually scientists, but believe global climate change is hoax of the liberal establishment. They are PhD’s and denounce other PhD’s and would listen to non-degree “weathermen” simply because they believe the left always lies. Even smart people can rationalize anything if they ignore facts and fit everything they do hear into their worldview. I have friends from business school who were taught the same economics I was and yet they believe some of the right-wing fantasy about finance while I totally dismiss it (including eventually abandoning some concepts I was taught, like the efficient market hypothesis). Every now and then I think, well, we can make progress and change (like the shifting opinion of same-sex rights), but for every step forward, then I see a Jindal subsidizing religious schools with taxpayer money to teach creationism. Economic knowledge has always been low in the American public but today it’s appalling low. And that movement to get rid of those boring civics classes you and I took means tons of people today have zero clue how government actually works. Across the board there is vast anti-intellectualism (or even just respect for facts and truth), appalling ignorance, indifference, and gullibility for false prophets (it’s worse than even amusing how much TV puts on disaster nonsense tied to 12-21-12; it shows what the studies show, that the U.S. public is astoundingly ignorant now; the Kardashians are more important to many people than tax policy is).

And, despite being in technology, I think technology is making it worse. I worked in the first for-profit Internet business, supplying news, and now I regret that (even though my participation had nothing to do with the big trends). Clearly the Internet has killed journalism (and blogs are not much of a substitute for real reporters), so news is now mostly entertainment, driven by popularity rather than truth. Democracy requires an informed and sensible public. Demagogues will always exist and the only defense against a self-serving political aristocracy, esp. like the Repugs, is a public that won’t put up with it. But instead we live in a world where a handful of “low information voters” (way better term than “undecided” or “independent”) decide.

And what is going to change any of this? It’s not just these short-term issues that are crazy, it’s much more the long-term issue of how can this country govern itself with an ignorant and disengaged public and a professional political class that serves only itself.

I am retired, disabled and elderly and constantly wonder why all these elected people are willing to put themselves and having their way in front of what is best for America. Greed is such an ugly word.

As once was said, Right On, Sister! The only silver lining I see is that the lobby groups for us are pretty strong and most politicians have ample years on their clock and that we probably won’t get screwed too bad. And some of the time I do think selfishly that way, again because it’s a little late to have different plans (I’d love to still be working, just my employers didn’t think that was such a good idea, plus they need me out of the way so the younger people can have the few jobs left in the U.S.).

I am constantly reminded by something very important about Medicare. Whether I get any or not, my parents did. And while my mom loves to forget that Medicare started in my lifetime, not hers (and therefore every one of my paychecks had Medicare tax, few of hers did) and therefore she has gotten a benefit she didn’t actually pay for (very much), nonetheless it is a GOOD DEAL FOR ME. You’re quite aware of medical costs, but many (like me before I moved here to help my parents) were not. But I was protected, not just my parents. What if I, as the only child, had to pay those bills once their funds were exhausted. Now they lived a very long time and, if you will, got more than their share (I have friends who passed without every getting a penny). But that is insurance. I’m happy to pay my car insurance and never collect a dime, because collecting would be I had an accident. I don’t want an accident just to get my money back, but if I do have one I will be glad I paid premiums all those years. So as to Medicare if I croaked tomorrow I’d get screwed, never collecting what I paid BUT for most of my middle age life I had the insurance/security of knowing my parents would be OK. That’s what the kids forget. Sure they hate paying for us, but paying insurance is a lot cheaper than being the one out of ten to pay huge costs. And that’s why it’s so sad we couldn’t just do single-payer and put everyone on the system. No one wants to be sick, just to collect benefits. I’m quite confident anyone would prefer to not have health issues even if that means never getting a dime back from the insurance (tax) premiums. But for everyone, young as well as the old, having some security lets everyone get on with their life.

Right now today’s joke is all the kids, at way too old, still living in parents’ basement, but, kiddies, watch how much fun it will be if you adopt the Ryan plan and then have mom and pop back in your basement!

About dmill96

old fat (but now getting trim and fit) guy, who used to create software in Silicon Valley (almost before it was called that), who used to go backpacking and bicycling and cross-country skiing and now geodashes, drives AWD in Wyoming, takes pictures, and writes long blog posts and does xizquvjyk.
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One Response to Tired of the fiscal cliff

  1. dmill96 says:

    The new scam the Repugs have thought of is to allow the tax cuts for greedy rich to expire, but pass bill to extend tax cuts for 98% and as rider exempt DOD from the cliff cuts, and then just let the rest of the cliff occur (meaning more severe spending cuts than they could get Obama to sign) so they don’t have to use the debt ceiling to try to take away Social Security for more war spending.

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