US deficit reduction plans

[wolfgang]

What other ways could the US get out of debt, other than what is being talked about?

How about - raise the retirment age?

Or legalize weed and tax that? No more war on drugs and tons of revenue!

[Brutha]

What other ways could the US get out of debt, other than what is being talked about?

How about - raise the retirment age?

Actually that's talked about quite a bit.
It's part of what they mean when they speak about cutting social security.

If I remember right ending the war on drugs would result in ~100 billion dollars per year when you count all the legal enforcement.
It's a very sensible decision but politically ignored.

In a similar way you could save a lot of money by cutting military spending.

[wolfgang]

Originally Posted by Brutha

Actually that's talked about quite a bit.
It's part of what they mean when they speak about cutting social security.

I though cutting social security was to can that plan on those that are collecting. Which would be one of the bills they couldn't pay. I thought, if more people stayed in the system, there would be revenue via taxes. Tell me more.

If I remember right ending the war on drugs would result in ~100 billion dollars per year when you count all the legal enforcement.
It's a very sensible decision but politically ignored.

seems like there are steps in this direction with medical weed, but nothing like taxing tobacco - having it sold at gas stations. I mean, regardless of the cost savings you just mentioned, there's also the revnue of taxing a product that is in high demand, apperently.

In a similar way you could save a lot of money by cutting military spending.

I have wondered if it's cutting military or using it more effeciently that would produced enough results. But also, as a far out idea, get the countries that benifit from the US military to owe the US money. Does the world get the US as a free world police force?

[ar81]

Originally Posted by wolfgang

What other ways could the US get out of debt, other than what is being talked about?

How about - raise the retirment age?

Or legalize weed and tax that? No more war on drugs and tons of revenue!

Just like in Greece... make citizens to pay for it. An good percentage of US debt is in the hands of mutual funds and retirement and pension funds in US.

[Curtis2011]

Originally Posted by wolfgang

What other ways could the US get out of debt, other than what is being talked about?

How about - raise the retirment age?

Or legalize weed and tax that? No more war on drugs and tons of revenue!

1. Get rid of democracy and institute an oligarchic system similar to Singapore's.

2. Never have problems again!

Problem, democracy?

[NoJobRob]

Legalize marijuana and tax it. Then we could stop flushing money down the toilet with wasteful things like helicopters that fly around looking for weed. LOL How bored ya' gotta be to do that?

Only lock up violent criminals. Make the rest work it off somehow. Nothing teaches a lesson like manual labor. And it would be pretty humbling for white collar criminals...

Get rid of income tax and implement a general excise tax on goods and services, not including food and prescription drugs. This would also encourage saving.

Outlaw toxic "investments" like derivatives. Only investments in companies, currencies, bonds, etc would be allowed, not something that's too complicated for even a physicist to figure out. This would cut a lot of risk out of the market. The behavior of Wall Street before the financial crisis is equivalent to an 18 year old kid with a Scottrade account, buying up penny stocks on margin. Dumb dumb dumb, and very noobish. Shame on you Wall Street. (And this is coming from a trader )

If a company wants to send jobs overseas, tax the ***** out of them. Write it into the tax code.



I'm sure I can think of more, but I have a movie to watch.

[Acting Like Godot]

Originally Posted by NoJobRob

If a company wants to send jobs overseas, tax the ***** out of them. Write it into the tax code.

That sounds so .... communist.

But then China would never do such a thing.

[Michael Chui]

This post was kinda interesting:

Who owns America? Hint: It's not China – Global Public Square - CNN.com Blogs

There's also apparently a nice chunk of debt from the Revolutionary War that we can't pay back because no one has proven a claim to it.

[ThoughtAddict]

Originally Posted by NoJobRob

Legalize marijuana and tax it. Then we could stop flushing money down the toilet with wasteful things like helicopters that fly around looking for weed. LOL How bored ya' gotta be to do that?

Full legalization and taxing of marijuana would bring in ~6 billion a year. Current national debt is 14.4 trillion, or 14,400 billion. While I agree that it would raise revenue, it doesn't come close to what we need.

Get rid of income tax and implement a general excise tax on goods and services, not including food and prescription drugs. This would also encourage saving.

Total tax receipts with our current system in 2010 were ~2.15 trillion. To collect the same amount of money, assuming taxes WERE collected on food and drugs, estimates range from a sales tax rate of ~30% to 54% (tax exclusive- that amount above the price of the good). Assuming tax evasion, the number drifts higher in that range. If we want to use this to pay off the debt, we'd have to go even higher.
While it would increase saving, the corresponding decrease in spending may actually harm the GDP and reduce the overall tax base. There may also be damage to overall economic growth. The amount of spending decreases the higher the tax goes, creating diminishing results. Also, the rise of black markets is likely to evade taxes, with such likelihood increasing with higher tax rates. While this may be a feasible long term plan, I don't see it working to fix our current situation.

The behavior of Wall Street before the financial crisis is equivalent to an 18 year old kid with a Scottrade account, buying up penny stocks on margin. Dumb dumb dumb, and very noobish. Shame on you Wall Street. (And this is coming from a trader )

You're too kind. I prefer to think of them as thieves who smashed a $300 car window to steal a $20 stereo. Except, instead of $20 it was several billion, and instead of $300 it was the world economy.


My proposals: Scale back Medicare coverage for wealthier seniors (including increased premiums for Part D coverage). 250+ billion over 10 yrs.
Cut discretionary spending for government agencies, with the exception of revenue-producing agencies (CFTC/SEC come to mind). 700+ billion over 10 yrs.
Let the Bush tax cuts expire. 2.6 trillion over 10 years.
Withdraw from Iraq and Afghanistan with the majority of our troops. Unknown savings, but probably 750+ billion over 10 years, depending on levels.

Obviously all armchair, based on Congressional Budget Office numbers. Looking at the numbers, I don't see how we avoid a budget crisis without both tax increases and spending cuts. The hole is just too deep. The US overspent in the past decade, entering into two wars, increasing social program benefits and taking tax cuts at the same time. We hurt ourselves both by cutting income and increasing expenditures. It only makes sense to accept that we need to do the opposite to reverse the damage.

TL;DR: The numbers are too big for small solutions. Let's increase taxes and decrease spending, both in big ways.

[ThoughtAddict]

Originally Posted by Michael Chui

This post was kinda interesting:

Who owns America? Hint: It's not China – Global Public Square - CNN.com Blogs

There's also apparently a nice chunk of debt from the Revolutionary War that we can't pay back because no one has proven a claim to it.

I've always been annoyed when people say China owns our debt. Chinese citizens and companies own such a small portion of it compared to US citizens, companies, and inter-governmental ownership.

[NoJobRob]

Well whatever happens, I'm about 100% certain I'm leaving the country. Not just for economic reasons, but others too. I've said this before, but I'm hanging around to cast a vote for Ron Paul. What bad could it possibly do that hasn't happened already? Plus I like the guy. He's actually rational, which is why no one in Washington likes him. LOL He's not afraid to throw the BS flag and show the world the man behind the curtain, and that's what we need. But if he doesn't get elected, I'm outta here. I'll vote with my tax dollars and pay them to a government that deserves them. Obviously I'm only one person so it will have no effect, but I do know others who are thinking of doing the same thing. And if I know that I'm doing it, and know others who are doing it, then there's certainly at least thousands of other Americans considering the same thing, and cumulatively that will have an effect. I'll just treat the government like a misbehaving child. "Okay Billy, since you talked that way to me, I'm taking your G.I. Joe with the kung fu grip away until you can be nice." LOL

[Brutha]

1. Get rid of democracy and institute an oligarchic system similar to Singapore's.

Singapore is democratic. The leadership gets it's power in fair elections.

Given how much US politicians got their positions through family ties I would be very wary to lecture a much less corrupt country such as Singapore on being anti-democratic.

[Curtis2011]

Originally Posted by Brutha

Singapore is democratic. The leadership gets it's power in fair elections.

Given how much US politicians got their positions through family ties I would be very wary to lecture a much less corrupt country such as Singapore on being anti-democratic.

1. I wasn't making fun of Singapore. I actually prefer a responsible oligarchy to democracy. As human nature currently is, I feel that giving every human being a single equal vote is a terrible, terrible way to govern a society.

2. My post was half serious and half joking. I realize that nearly the entire first world population would revolt against the idea of "eliminate democracy" because in 99% of the cases, it seems to result in an abusive dictator or theocracy. In the case of Singapore however, their government is essentially an oligarchy in practice that feigns democracy, and they have been very successful with it.

(Their elected President is nearly 100% chosen by a board that is set up by the ruling cabinet members, who set restrictions on who is eligible to even run for president. The restrictions are so severe that for the last few elections, only a single man was eligible to run and thus no election was even held. Also, the majority political party in Singapore commands nearly the entire elected cabinet, with the closest opposition party controlling a whopping 1 elected seat out of more than 80 seats total)

[Brutha]

Also, the majority political party in Singapore commands nearly the entire elected cabinet, with the closest opposition party controlling a whopping 1 elected seat out of more than 80 seats total)

The fact that the population doesn't elect members of the opposition doesn't mean that no democracy exists.

Their elected President is nearly 100% chosen by a board that is set up by the ruling cabinet members, who set restrictions on who is eligible to even run for president.

Those cabinet members are democratically legitimated via the parliament.

[Vibration]

Originally Posted by wolfgang

What other ways could the US get out of debt, other than what is being talked about?

How about - raise the retirment age?

Or legalize weed and tax that? No more war on drugs and tons of revenue!

Stop making people with no healthcare or income issues pay for those who do have them.

If you were born with a disease or contracted it later in life, I'm sorry, but welcome to the human condition. In 1650, no such person would have ever assumed that it was their god given right to be spared from their condition by medical science in exchange for bankrupting their family and country. That society watched many such suffer and die. Inhumane or not, this has always been a part of the human condition.

But in 2011, Americans believe we must rid ourselves of all unpleasant experiences - that the only humane thing to do is to prevent suffering and death at any cost. The irony is that therein lies the inhumane act: in bringing down the well being of an entire nation, only to delay for a few of us, what is inevitable for all of us.

Medicare and social programs are killing the US economy.

Not able to work for your living? Your parents, teachers and others probably warned you of what this condition would lead to later in life. I'm sorry you're in this condition, but it's not my fault, and I'll be damned if I'm going to pay for you to be comfortable in the lifestyle you desire. You can chalk it up to hard luck if you'd like; I've had my share of it, and no one paid for me. Grow up, take charge of your own affairs, and pull your own weight, or else don't complain about your plight when you see everyone else but you working so hard to survive.

This attitude is the solution to America's debt crisis. The odds are about a snowball's chance in hell, I suspect.

[Solipsist]

Originally Posted by wolfgang

What other ways could the US get out of debt, other than what is being talked about?

Actually, as long as the Federal Reserve Board exists as it does, the US will never "get out of debt." The reason why, is because the US Dollar is a debt-based (i.e., "fiat") currency. If you have US dollars in your pocket or your bank account, you have debt. And you owe the Federal Reserve, because they're the ones who created the debt to begin with.

The only way to relieve this, would be to revert back to a reserve-based (i.e., "gold-" or "silver-backed") currency. Not likely to happen, but, well, it is what it is.

I was interested to discover that for all it's debt problems, Portugal is sitting on about 380 tons of gold, yet they're about to go under, because their "debt" is so high. If the Portuguese banks had any cajones, they might consider defaulting on their debt (particularly to the E.C.B., the IMF, etc.), and going back to their own currency, using their gold for reserves.

Again, not likely to happen, and, of course, it will put their economy in the tank for a bit, but, well, that's my two cents. The US sits on about 8000 tons of gold. Why not start there?

[garentee]

Originally Posted by Vibration

Stop making people with no healthcare or income issues pay for those who do have them.

If you were born with a disease or contracted it later in life, I'm sorry, but welcome to the human condition. In 1650, no such person would have ever assumed that it was their god given right to be spared from their condition by medical science in exchange for bankrupting their family and country. That society watched many such suffer and die. Inhumane or not, this has always been a part of the human condition.

But in 2011, Americans believe we must rid ourselves of all unpleasant experiences - that the only humane thing to do is to prevent suffering and death at any cost. The irony is that therein lies the inhumane act: in bringing down the well being of an entire nation, only to delay for a few of us, what is inevitable for all of us.

Medicare and social programs are killing the US economy.

Not able to work for your living? Your parents, teachers and others probably warned you of what this condition would lead to later in life. I'm sorry you're in this condition, but it's not my fault, and I'll be damned if I'm going to pay for you to be comfortable in the lifestyle you desire. You can chalk it up to hard luck if you'd like; I've had my share of it, and no one paid for me. Grow up, take charge of your own affairs, and pull your own weight, or else don't complain about your plight when you see everyone else but you working so hard to survive.

This attitude is the solution to America's debt crisis. The odds are about a snowball's chance in hell, I suspect.

What percentage of the debt do social programs etc cost us?.. what percentage of the debt is carried by corporate welfare? What percentage of the debt are these two (three) wars costing us?

[Vibration]

Originally Posted by garentee

What percentage of the debt do social programs etc cost us?.. what percentage of the debt is carried by corporate welfare? What percentage of the debt are these two (three) wars costing us?

I see your point. I'm pretty sure the former leads in being the largest, but all three are going to stop, one way or another.

Just did some quick research; here's the breakdown:

File:U.S. Federal Spending - FY 2007.png - Wikipedia, the free encyclopedia

This was from FY2010 data. With more baby boomers trying to retire each year, Medicare and Medicaid are likely a little higher. 100% of the Medicare/Medicaid slice, along with some others, are paid with borrowed money. Without a doubt, these will stop, either willfully, or because America runs itself into the ground trying to keep them going, likely taking everyone else down with it because there's not a politician in America that will be responsible for someone's life support equipment being turned off for non-payment. Medicare/Medicaid and Social Security together is 43% of US expenditures, and defense is 20%. Even discounting defense spending (which I don't), these expenses have become monstrous, past the point of no return, meaning that it's now absolutely impossible to obtain sufficient income from taxes to make the payments, no matter how much the rich are taxed, and still make only the minimum interest payment on the dept.

When the soldiers, sailors and airmen return from those three wars, the government will still have to pay their salaries, or else release them from service, adding significantly to the unemployment problem.

I read where someone said they're leaving the country; I can understand that. It feels to me that America is like the Titanic, when many aboard waited to see if the problem was serious or not; by the time it was obvious, their fate was sealed.

[Acting Like Godot]

Originally Posted by Curtis2011

Also, the majority political party in Singapore commands nearly the entire elected cabinet, with the closest opposition party controlling a whopping 1 elected seat out of more than 80 seats total)

Actually, it had been 2 seats, for a long time.

And became 6, this year.

What a milestone.

[ThoughtAddict]

Originally Posted by Vibration

I see your point. I'm pretty sure the former leads in being the largest, but all three will stop, one way or another.

Just did some quick research; here's the breakdown:

File:U.S. Federal Spending - FY 2007.png - Wikipedia, the free encyclopedia

Social security and medicare are the two big budget issues going forward. Currently, however, SS is continuing to produce a budget surplus (more money collected via the SS tax than spent on SS) as it has since inception. That number will tip very soon.
Medicare is the stickiest issue. I haven't checked the numbers, but I believe it has never had sufficient income from its corresponding payroll tax. Add to it the spiraling costs of US health care and the increased number of elderly and, well... it's a problem that keeps getting bigger. One of the answers has to be a reduction in the cost of health care here. Without that, Medicare may be unsustainable in the long term.

In terms of policy changes in the past 10 years, the largest contributors to the current deficit have been the Bush tax cuts (1.8 trillion), the Iraq+Afghanistan wars (1.45 trillion), and the two stimulus packages (~0.7 trillion each, or ~1 trillion if you include TARP and the Obama tax cuts).

[cacheborn]

This gives a better idea about how much the US debt really is.

A visualization of US debt (credit card bill) stacked in 100 dollar bills

This one is better but my browser crashed while viewing it. Too memory intensive.

U.S. National Debt Clock : Real Time

[Acting Like Godot]

Originally Posted by Curtis2011

The restrictions are so severe that for the last few elections, only a single man was eligible to run and thus no election was even held.

Oh, we'll be having 4 candidates this year!

[Acting Like Godot]

Originally Posted by ThoughtAddict

I've always been annoyed when people say China owns our debt. Chinese citizens and companies own such a small portion of it compared to US citizens, companies, and inter-governmental ownership.

China is your largest foreign creditor.

By the way, I don't know how you can draw comfort from the fact that some US debt is held by US entities.

Notice, for example, that the US entity that holds the most US debt is your social security trust fund.

What does this mean? It means that if the US government defaults on the debt, your social security programmes are in trouble.

Other major US holders of US government debt are, let's say, your own U.S insurance companies. What does this mean? It means that if the US government defaults on its debt, then US insurance companies won't be getting the proceeds that they had expected to receive.

This weakens their ability to make insurance payouts and forces them to charge the Americans more, for premiums for life insurance, accident insurance, medical insurance etc etc.

[Michael Chui]

Originally Posted by Acting Like Godot

China is your largest foreign creditor.

By the way, I don't know how you can draw comfort from the fact that some US debt is held by US entities.

Notice, for example, that the US entity that holds the most US debt is your social security trust fund.

What does this mean? It means that if the US government defaults on the debt, your social security programmes are in trouble.

Other major US holders of US government debt are, let's say, your own U.S insurance companies. What does this mean? It means that if the US government defaults on its debt, then US insurance companies won't be getting the proceeds that they had expected to receive.

This weakens their ability to make insurance payouts and forces them to charge the Americans more, for premiums for life insurance, accident insurance, medical insurance etc etc.

That's okay. People want to tear those down anyways. They also like cutting themselves.

[Acting Like Godot]

And there's also personal wealth.

For exampe, some of you probably have investments in mutual funds etc which invest in US treasuries (i.e US debt). If the government defaults on its debt, it means that the mutual fund doesn't get paid, which means that your investments just fell in value ...

[ThoughtAddict]

Originally Posted by Acting Like Godot

By the way, I don't know how you can draw comfort from the fact that some US debt is held by US entities.

Who said I draw comfort from it? I just get annoyed when folks use bad facts to make arguments.

[wolfgang]

Originally Posted by Vibration

Stop making people with no healthcare or income issues pay for those who do have them.

...

Medicare and social programs are killing the US economy.

I tend to agree in some ways. Although I think the real issue about health care is it's more like sick care. There's money to be made by the pill makers and they almost like people to be sick. If there was a way to prevent people from getting sick with out the huge profits insurance and pill makers get that would be much cheaper. But big money doesn't like to do that. IF this could happen, the government wouldn't see the need to throw money into the sick care industry.

Big Pharma and the insurance industry invested in an excess of $500 million in "donations" to Congresspeople in 2009 that are nothing less than outright bribes. Let's do the math. There are 435 members of the House and 100 members of the senate. That comes to 535 people divided by $500 million dollars. Hmmm, that's nearly a cool $1 million per Congressperson! It is impossible to follow the dotted lines and come to any conclusion other than Congress has an allegiance to preserving and enhancing the status quo for Big Pharma, the insurance industry, and the very wealthy who control them and many other highly profitable industries. The value of a political soul in 2009 had a price tag of less than $1 million per Congressperson. What a steal when one considers that a total health care budget of $2.3 trillion was at stake!



Learn more: Health Care Reform: Revolution or Evolution - The change we need (Part 1 of 3)

Health care spending in United States to double over 10 years as "sick care" industry bankrupts America

Statements and opinions by Mike Adams
• U.S. citizens get the worst health care bargain in the world: They spend more on health care (or sick care, actually) than any other nation, yet rates of chronic degenerative disease also remain higher in the U.S. than anywhere in the world. Clearly, the U.S. sick care system does not work.

• The real reasons behind rising health care costs in the United States are the continued disease mongering push by Big Pharma, the monopoly price fixing on medications by drug companies (supported by the FDA), the utter unwillingness of medical authorities to teach disease prevention to the population, and the continued assault on inexpensive alternatives to drugs such as nutrition, herbs and natural therapies.

• Skyrocketing health care costs are bankrupting the U.S. economy and forcing businesses to shut down or move overseas. Half of all personal bankruptcies in the United States are due to medical bills. The sick care industry seems bent on leaving Americans bankrupt and living in a state of ongoing disease diagnosis and "management" rather than teaching people how to actually prevent disease.



Learn more: Health care spending in United States to double over 10 years as "sick care" industry bankrupts America

[JSB]

With the current US Congress unable to get its act together and act like responsible adults, it looks like the debt ceiling is not going to be raised by next Tuesday.

However, there are still tax revenues being collected, so while the US will not be able to pay everything it has budgeted, it will be able to continue to pay part of it until Congress stops squabbling and actually raises the debt ceiling.

Default on US debt is prohibited by the 14th Amendment to the US Constitution, and if the Administration refuses to services existing debt while there are funds to do so, the President will likely, and justifiably, be impeached. So, the government will have to service debt first, meaning Social Security, Medicare, Federal and military paychecks, etc. will not go out until these issues are resolved.

My question for anyone who understands this: if interest on existing debt is paid, why would the markets consider this a default on US Treasury Bonds? Everyone says we are looking at a default on Tuesday, but aren't we really looking at a temporary shutdown of the US government and public services? What am I missing here?

Also, if the US were to default on bonds, would the markets treat this the same way they would treat a Greek default? Certainly the US would lose it's AAA rating and interest rates would go up, but it is capable of servicing its debt, and will continue to pay interest on its debt once the current political pissing match is settled, whereas Greece will likely default "for real" and never pay its outstanding debt simply because it can't.

So, yes, it would be a serious shock to the financial markets, but are we really looking at the inevitable-global-great-depression-2 scenario that pundits are throwing around?

[JDuff]

This is an important issue for America but also the whole world. I am suspicious when raising the debt ceiling was never an issue the previous 50 odd times, but it is now. Obviously America needs to cut it's deficits substantially, but this needs to be a 10, 20, 30 year re-structuring. I worry that the Tea Party demands too much, too soon, threatening America and the whole globe needlessly.

Furthermore, they are wrong to argue that taxing the richest hurts the economy. Taxing companies too much hurts the economy - corporation tax should come down, for example. Taxing rich individuals doesn't make much difference, especially when we are talking multi millionaires and billionaires. Overall, in my opinion, the broadest shoulders should carry the heaviest burden. They will be fine whatever, but the poor will suffer tremendously as a result of these cuts. In any capitalist system the necessity is a pyramid scheme, and I think it's fair that the massive minority who have all the wealth contribute far more than the massive majority who have relatively minuscule wealth. For example, the productive members of a factory are the 999 doing the work on the floor, not the guy sitting in his office drawing charts and pocketing massive loads of cash.

In the long term, I think America should cut it's military spending by 20%. This would say 1.2 Trillion on it's own in 10 years. They would still be way ahead of everyone else in world spending. Can America not cut it's military spending a lot more? Secondly, the world needs to look at a united policy of recuperating from the Banks, as Gordon Brown proposed. The people who caused this crisis have to be the ones to pay. How are we getting these trillions of dollars back from the banks? What regulations are we going to use to limit their power? How can we protect civilians and tax payers from this greed? This should be the central question.

And finally, you should be looking to the future. Oil is going to run out - this is a fact. The strongest future economies will be the quickest to adapt to keep the fuel going. There is going to be millions if not billions of electric cars in 50 to 100 years. Why not invest in creating the new future of the automobile industry for example, or in fibre optic internet - look to the future rather than short term fixes!!!

[Acting Like Godot]

Originally Posted by JSB

So, yes, it would be a serious shock to the financial markets, but are we really looking at the inevitable-global-great-depression-2 scenario that pundits are throwing around?

Well you know that I work in an investment bank.

Yesterday an internal paper was circulated to me, analysing the implications of the US debt crisis.

Probability of an actual default is assessed to be very low.

Probability of a rating downgrade by at least one rating agency is considered very high.

Probability of no default and no rating downgrade is considered very low.