Deficit debate driven by the wealthy

[bemildred]

There must be a reason that every time I hear the term "fiscal cliff," the image that comes to mind is of Wile E. Coyote pumping his feet in midair just before plunging into the valley below.

Is it that the debate over when and how to cure the federal deficit has reached new heights of cartoonish inanity? That we are now being treated to finger-wagging about the need to get our fiscal house in order by corporate CEOs like JPMorgan Chase's Jamie Dimon (trading loss $5.8 billion and counting, potential cost to ratepayers from alleged manipulation of the California electricity market $200 million and counting).

Or is it that the remedies for the deficit always seem to involve cutting taxes for the top 1% of U.S. income earners while cutting Social Security retirement benefits (average monthly check: $1,230) for everyone else?

http://www.latimes.com/business/la-fi-hiltzik-20120729,0,2146392.column

[dkf]

1. The fiscal cliff is in regard to a possible recession because the economy isn't growing fast enough

to weather a tax increase along with cuts in spending. That is a shorter term problem.

The cuts to social security/Medicare are due to the future demographic shifts of an aging population and spending growth rates that exceed the growth rate of the economy. That is a longer term problem that will solve itself with automatic cuts in funding at that time anyway. The thing is if you don't want those cuts to be drastic you need plans for solvency now.

It makes sense if you understand the projections.

Leave it alone and it will be more painful later. So be it.

[PETRUS]

2. Do not conflate Medicare with Social Security

Social Security is fine. Medicare is where the projected outlays become a problem. In this case it's important to note that the problem is not due to excessive benefits, but rather the excessive prices commanded by the US medical oligopoly. If our per capita health care costs were in line with our peer group we would be projecting budget surpluses. That is the problem we should be addressing.

By the way, demographic shifts are nothing to be alarmed about. Productivity growth more than makes up for that. Today the ratio of workers to retirees is 2.8 to 1. It is expected hit its low point in 2035 at around 2 to 1. Examining the low point (i.e. worst case scenario), this implies an additional 7% or 8% to fund retirement. But productivity and wage growth is projected to increase by around 40% in that period of time, far more than we need to maintain standards for both workers and retirees.

[dkf]

6. Are you seriously talking about wage growth?

I hope you are right but I think the idea is laughable.

[PETRUS]

7. Productivity growth

We could take the gains as added leisure time; perhaps the standard work-week will be 25 hours in a couple of decades. But if not, the gains will be realized as income. Or perhaps capitalism just isn't viable in the long term and we need to reorganize the political economy. But Pete Peterson and his army of hacks and chicken littles aren't making those arguments. They are trying to scare people with total BS. Don't fall for it.

[bemildred]

3. There is no fiscal cliff, the cliffs are in rigged markets and bubble economics.

Like in 2008.

[Igel]

4. 8 years ago this wasn't the case.

8 years ago the budget debate was driven by (D) who argued that a large deficit was bad for the economy. In a recession, in 2008, after trimming a stimulus, some famous constitutional scholar said that fiscal responsibility was a key goal--echoed by a prominent House leader at the time--and that you don't raise taxes in a recession.

Not raising taxes in a recession or slowdown was, in good Keynesian logic, because you want to increase, not decrease, demand. Why, in a recession, the scholar wanted to cut the deficit I don't know (except possibly because it would score political points ... among the 1% that was his power base? ... no, that wasn't really his power base).


Of course, the smart-ass response is that the deficit debate is driven by the wealthy in the same way that the methane debate in a coal mine is driven by the canary.

[Fumesucker]

5. The poor and middle class have a voice in American politics?

Who knew?