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View Diary: Obama is a liar who doesn't care? Obama loyalists are decievers? Are we doing this again? Really? (684 comments)

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  •  Ah....perhaps you do not understand the power of (5+ / 0-)

    compounding interest, or the effect of inflation.

    You suggest that I'm saying that old people will starve immediately from one dollar of cuts.   That is, of course, exactly the opposite of what I'm saying.   I'm saying that the cumulative effect of not raising social security to keep up with inflation leads to the slow starvation of senior citizens.  

    So no, I'm not hysterical.   I'm giving you an actual, physical example on the effect of inflation over time.   The price of each day's bread went up a little bit, resulting in a little less bread each day.  The good Senator in my example didn't starve on day one....or day 50 .... or even day 500.   But he slowly, slowly did starve ... and so will old people.

    Remember what happened back during the inflation spikes of the lates 70s and early 80s?   Old people ate cat food to keep from starving, because social security didn't keep up with inflation.   The social security was "chained" then, because the increases didn't come fast enough.  This is why when the original austerity commission was created by Obama, its pejorative name was the "catfood commission."  

    So....hysterical?   I don't think so.   I think I'm being exceptionally sober-minded about the effect of Obama's decision, which you yourself admit was utterly unnecessary.  

    •  Pretty Good at Math (2+ / 0-)
      Recommended by:
      gramofsam1, bepanda

      Yes, I understand compound interest.

      Yes, I understand that a dollar a month less this year, plus a dollar a month less next year, plus a dollar a month less the year after that eventually adds up.

      Even so, it will take a while before we're all eating mattresses.

      My biggest problem with the "Obama betrayed us" hysteria is the assumption that this bad option was just gratuitous and there were other alternatives that were no problem at all.  The real fact is that all the options provoke just about the same hysteria from somebody.  The only question is whose ox is getting gored.  I wouldn't mind cutting the military budget by 25%, but there are enough other people who will scream that we are all going to die that it won't happen.  I think it would be better public policy to let ALL the Bush tax cuts expire, but there are lots of people here who would tell you that they will be eating their mattresses if that happens.

      The real fact is that the federal government is basically an insurance company with an army.  Everything other than the military, Social Security, and Medicare is funded by change found in the sofa cushions.  We can't keep taking in 40% less than we spend every year forever, and all of the options to fix that involve the big ticket items in the budget and/or raising taxes on people who aren't named Bill Gates.

      •  Gore my ox! Gore my ox! (0+ / 0-)

        We could, for example, fix social security by raising the cap and eliminating the small business dodge of allowing businss owners to pay themselves a small salary and a large "dividend."  

        This would raise my taxes....but it wouldnt affect anyone making less than the social security max out right now (about $110,000).   It would be a more Progressive tax (rather than the current, uber-regressive model) and it would strengthen the safety net.

        We could also, for example, raise revenue by instituting a Tobin tax on stock transactions -- particularly stock transactions where the stock is owned for less than 7 days.   This would help eliminate volatility in the marketplace and raise revenue significantly, and tax conduct which is not particularly helpful to the society.   As an options trader, this would also raise my taxes .... but so what?  

        One could also, for example, have the federal government issue lots of debt right now, and pay own higher interest debt.   One could also, again for example, issue longer -term debt to build infrastructure which will cause the GDP to grow.

        Get rid of carried interest deduction.  Raise capital gains so that its taxed just as reguar income.  Tax companies which charge usurious interest rates.   Hell, you really want to accomplish something -- tax lobbyists, such that every dollar spent on lobbying through third parties will require payment of a dollar in taxes.  

        And here's the thing.   You say that we can't keep running deficits.  I say that, yes, for the forseeable future, we can.   Our effective interest rate is 1%, and we are the currency of reserve.   We could continue to issue debt and inflate our way out of the current budget "crisis."   We've done it before (1970s - early 1980s).

        •  Agree With A Lot of Those (0+ / 0-)

          To start at the back, I see the "we can't keep running deficits" argument this way:  The real question is how much of the federal budget goes just to debt service?  That is, we pay tax dollars, but we don't get police or libraries or aircraft carriers in return, we just pay interest on the debt.  As the debt service piece of the pie keeps growing the system becomes more and more unsustainable.  I agree that lower interest rates help that analysis, but interest rates can't go much lower then they are, so that burden will keep getting bigger.

          I agree about carried interest and transaction taxes on securities purchases.  The carried interest deal is just a scam and a transaction tax is good policy because it would reign in the high volume/low profit trades that increase volatility in the markets.  Every bit helps but I'm not sure either one would generate enough revenue to solve the problem.  There just aren't enough hedge fund millionaires taking advantage of the carried interest scam.  Fixing that is the right thing to do, but by itself it's like Romney saying he will solve the deficit by firing Big Bird.

          I also agree that raising or eliminating the cap on Social Security is an obvious fix, especially when Social Security alone starts taking in less than it pays out.  Up to now the Social Security surplus has been a substitute for higher income tax rates.  If we assume that the cap on contributions goes up, or goes away, but the cap on benefits does not change then it would start to disconnect the basic social contract of "I paid in to Social Security and I'm entitled to be paid back" which raises its own problems.  The rate of return on your social security payments has been going down over time.  It used to be a fantastic deal when social security taxes were very low compared to benefits, and raising taxes but not benefits would exacerbate that trend.

          I don't know a lot of small business owners who pay themselves dividends rather than salary because dividends are not tax deductible.  So you end up paying corporate income tax rather than payroll taxes.  The exception is for Subchapter S corporations that don't pay separate taxes, but as to them there are already rules in place to limit that practice.  Again, I have my doubts that better enforcement there would generate enough revenue to solve the problem.  Every little bit helps, but it's not enough to let everybody else off the hook.

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