patrick.net

That is why President Obama is refusing to listen to the recommendations of his bi-partisan debt reduction commission. It recommended reforms to entitlements.

adarmiento says

the recommendations of his bi-partisan debt reduction commission

B-S didn't actually get any recommendations out of it.

"The first vote on the final recommendations, originally set for December 1, 2010, was delayed until December 3 when the commission fell short of the supermajority of 14 of 18 votes needed to approve the report."

It recommended reforms to entitlements.

yeah, cutting medicare ("death panels!") or social security isn't the solution.

Social security payees overpaid their FICA 1990-2010, with that money ($2.7T and counting) currently sitting in 'special' treasuries, so cutting their benefits now is retarded. If social security needs more money in 2030 and beyond, we should look at raising FICA gradually starting later this decade or early next (say +0.1% a year -- +$2/week on a $50k salary -- until things come back in balance).

Medicare has its own colossal problems that B-S didn't attempt to address.

B-S was a silly own-goal by Obama, his one fuck-up of incompetency that I am aware of.

Well, other than the PPACA roll-out. What happened with that was administrative incompetentcy, obviously.

As for DOD budget cuts, we don't need a $800B military.

http://research.stlouisfed.org/fred2/series/FDEFX

a $6000/yr tax on every working american:

http://research.stlouisfed.org/fred2/graph/?g=swZ

Clinton got that dead loss down to $3000/yr, and that was great.

Bellingham Bill says

we should look at raising FICA gradually starting later this decade or early next (say +0.1% a year -- +$2/week on a $50k salary -- until things come back in balance).

Are you insane? Why would we raise FICA tax on those that make $50,000 to $100,000 ? Do you realize $100,000 a year is hardly rich in such places like Washington DC, Berkeley, New York, Boston, etc. ?

It surprised me a little how staggering the cost of war is. Afghanistan cost the US 300 million per day, Iraq was 450 million per day.

The defense contractors are right in there with the Wall St cronies.

$300 million a day equates to about $110 billion in one year for the Iraq War. How much of those costs were sunken such as salaries for Army officers ? The officers were going to get paid even if there was no war.

adarmiento says

Are you insane? Why would we raise FICA tax on those that make $50,000 to $100,000 ?

SS is supposed to be self-funded. Since people above the FICA cap live longer and draw more, we should raise their FICA pay-ins to match the actuarial reality.

But we should also match actuarial reality for everybody else, too. Bigger pay-ins should result in bigger pay-outs in retirement. This would be a good thing, yes?

As for being insane, yes, yes I am.

I'd like to think if we raised taxes, it would come out of housing costs, since housing costs are bid up out of disposable incomes.

http://research.stlouisfed.org/fred2/graph/?g=sCR

housing costs / wages

jojo says

I agree with you. I also think retirement age should be indexed to life expectancy

nah, for social security, just adjust the current pay-in to match the future pay-out.

this is just actuarial science, not rocket science.

I argue that nothing would change if FICA were 2X what it is now, other than rents and home prices would be correspondingly hundreds/mo lower.

we've cut taxes, and all that happened was housing costs went up.

http://research.stlouisfed.org/fred2/graph/?g=sCR

housing costs as % of income.

Bellingham Bill says

I argue that nothing would change if FICA were 2X what it is now, other than rents and home prices would be correspondingly hundreds/mo lower.

Sounds good to me. I agree with your analysis that:

Bellingham Bill says

we've cut taxes, and all that happened was housing costs went up.

adarmiento says

$300 million a day equates to about $110 billion in one year for the Iraq War. How much of those costs were sunken such as salaries for Army officers ? The officers were going to get paid even if there was no war.

I don't think it's all that much.

The U.S. wars in Afghanistan and Iraq will cost taxpayers $4 trillion to $6 trillion, taking into account the medical care of wounded veterans and expensive repairs to a force depleted by more than a decade of fighting, according to a new study by a Harvard researcher.

Bilmes said the United States has spent almost $2 trillion already for the military campaigns in Afghanistan and Iraq. Those costs, she said, are only a fraction of the ultimate price tag. The biggest ongoing expense will be providing medical care and disability benefits to veterans of the two conflicts.

http://www.washingtonpost.com/world/national-security/study-iraq-afghan-war-costs-to-top-4-trillion/2013/03/28/b82a5dce-97ed-11e2-814b-063623d80a60_story.html

This was all to protect oil and avenge 9/11. Now we have consistently $4 gasoline and more lives lost than on 9/11, and that is just counting American lives.

jojo says

But the solution you propose is a defined contribution system vs defined benefit

productivity has been increasing dramatically over time:

http://research.stlouisfed.org/fred2/graph/?g=sDD

real per-worker GDP

so theoretically the retiree's "defined benefit" cut of the wealth should not be burdensome.

the current political problem is both "the 1%" and the retirees want their bigger slice of the nation's wealth production.

somebody's going to have to make do with less, and it's not going to be the rich, if they can help it, and they can.

http://research.stlouisfed.org/fred2/series/GINIALLRH

Top 5% is making over 1/3 the national income now:

http://taxfoundation.org/article/summary-latest-federal-income-tax-data

talking about making people work into their 70s when things are so unbalanced is obscene.

JH says

I don't think it's all that much.

http://research.stlouisfed.org/fred2/series/FDEFX

shows Bush managed to double the defense expense he inherited from Clinton.

"Mission Accomplished"

Bellingham Bill says

Mission Accomplished

Ya I was referring to the statement that the wars were not expensive because most of the money was salaries. Not true. Unfortunately, the military faces either serious cuts or increased taxes on civilians because the responsibility of caring for vets is only starting to balloon thanks to Bush's imperialism. The expenses on your chart are missing the future costs sadly.

Bellingham Bill says

we've cut taxes, and all that happened was housing costs went up.

That has nothing to do with each other.

mell says

That has nothing to do with each other.

Sure it does. More disposable income means people feel comfortable spending more on housing, which is most everyone's #1 line-item expense.

A simple thought experiment suffices. If income taxes were eliminated, would rents and housing prices go up or down?

Rents and prices are set on the bid, what it takes to beat the #2 bidder for tenancy. Boost incomes across the board and you boost the bids.

This is not dollar for dollar, but it's certainly proportional.

http://research.stlouisfed.org/fred2/graph/?g=sE7

JH says

The expenses on your chart are missing the future costs sadly.

$5T maybe. I think this might actually sink this nation as a going concern, since we lack the political maturity to actually pay for these costs as they are coming due.

I honestly have no idea what's going to happen this decade or next, when the boomer wave crests right along with Gen Y also pumping out their progeny at peak rates.

At least Japan has a lower support burden on the youth side to redirect to senior care (and Japan's senior wave is already cresting since their postwar baby boom only lasted 3 years).

I think taxes basically have to double, and we can't get it all from the top 5-10%.

But the electorate isn't willing to tolerate this bad news, so instead > > > ?

jojo says

W did a better job at stimulus spending

W had a pliant Congress for his entire term. Obama never had one, and what he did have he lost after 2 years in office.

Currency will be devalued, real benefits will be cut, 401ks and IRAs will be taxed or directed to fill hole somehow

If "the 1%" have their way, yes, LOL.

The American people aren't all that with-it so I wouldn't bet against them getting liquidated wholesale this decade or next.

Key indicator for me is the $2.7T sitting in the SSTF. If that isn't reduced towards its statutory minimum (via bond sales) by the time I hit 60, I'll know the fix is in.

And I do strongly suspect the Fed will be the buyer of these bonds, which is kinda cheating, but since these are also deflationary times, oh well.

That is why the myRA was introduced by the President when the fed announced it is pulling back on stimulus

Roths, being after-tax vehicles, are not a major cashpot for the gov to grab, especially in these ZIRPy times.

Bellingham Bill says

mell says

That has nothing to do with each other.

Sure it does. More disposable income means people feel comfortable spending more on housing, which is most everyone's #1 line-item expense.

A simple thought experiment suffices. If income taxes were eliminated, would rents and housing prices go up or down?

Rents and prices are set on the bid, what it takes to beat the #2 bidder for tenancy. Boost incomes across the board and you boost the bids.

This is not dollar for dollar, but it's certainly proportional.

http://research.stlouisfed.org/fred2/graph/?g=sE7

I disagree. Sure if they have more disposable income they can spend more in general, but since there are so many areas the effect on housing would be miniscule, hardly noticeable. What causes house prices to rise is the Fed and the government propping up that sector by any means, be it 85 billion of MBS/month, government "guaranteed" (= taxpayer backstopped) mortgages and section 8, plus injecting cheap credit to suppress interest rates (which is a main driver for over-committing in terms of spending), mortgage tax deductions and untaxed capital gains after 2 years (up to a certain amount). Lower taxes are good in general for everybody, what hurts the economy is sectors that are siphoning of money via government-backed extortion, be it housing, healthcare or banking.

Bellingham Bill says

I honestly have no idea what's going to happen this decade or next, when the boomer wave crests right along with Gen Y also pumping out their progeny at peak rates.

I think taxes basically have to double, and we can't get it all from the top 5-10%.

LOL. Do you envision yourself as some kind of cloud riding overlord playing with toy beings far below?

Raising children is mostly a local burden via property taxes financing local schools. At the federal level, reducing welfare subsidy for poor having children would quickly reduce the pumping out of children at that social strata, and keep more families together so the kids can be raised by their parents instead. The pay-off matrix has a huge effect on women, the primary decision makers on whether to make babies, and with whom. If Uncle Sam is not out there providing the perverse incentives, she will find herself a decent mate and raise the next generation productive member of society, on their own!

jojo says

People having more or less disposable income changes their debt to income ratios and in turn changes their bidding power.

DTI is pre-tax, so tax rates have no bearing. Tax rates would impact down payment savings, however. Problem is that if we continue to cut income taxes, the money will come from somewhere else. Like increased property taxes, gas taxes, etc.

Bellingham Bill says

I argue that nothing would change if FICA were 2X what it is now, other than rents and home prices would be correspondingly hundreds/mo lower.

Raising current FICA to 2x current level would toss many people into unemployment. You are talking about 30% tax starting with the very first $.

we've cut taxes, and all that happened was housing costs went up.

Nonsense. The tax credit on electric cars and other "environmentally worthy" purchases and the sales tax holidays many states have should tell us that lowering taxes promote private sector economic activities in general. Housing is not the only thing that people spend money on, not even the majority of where their spending money go.

BTW, money spent on housing is usually not considered discretionary spending.

jojo says

They can stop working earlier if that's an option for them

Median savings of late boomers is $100k.

http://www.dailyfinance.com/2012/11/14/retirement-savings-by-age-how-do-you-compare/

Not an option for most people. Boomers who paid into the system 1990-2010 had $2.7T extracted from them that is now sitting in the SSTF. They should be able to receive the benefits they were promised, that was the entire point of over-taxing them so.

If we now renege on this, nobody will clap louder than I. Well played, conservatives, well played.

mell says

but since there are so many areas the effect on housing would be miniscule, hardly noticeable

http://research.stlouisfed.org/fred2/series/DHUTRC1Q027SBEA

$2T/yr, 'hardly noticeable'.

Sure mell, sure.

What causes house prices to rise is

rising disposable incomes. Section 8 doesn't drive the rental market, but rents have risen 8% since the recession.

http://research.stlouisfed.org/fred2/series/CUUR0000SEHA

a lot more actually, but that's the official number.

What I rented in Sunnyvale in 2006 for $1320 now rents for $2300. There are zero Section 8 tenants in this place.

Bellingham Bill says

$2T/yr, 'hardly noticeable'.

Sure mell, sure.

What causes house prices to rise is

rising disposable incomes. Section 8 doesn't drive the rental market, but rents have risen 8% since the recession.

It's completely unnatural for a rise in disposable income to go straight to housing in any noticeable manner without all the special "incentives". You know that jumbo loans are back and so are loose online lenders. Sure you could afford a slightly more expensive place with a little more disposable income, but what really drives is is so-called affordability, a complete misnomer, via super low interest rates. I have friends already looking to "trade up", cashing in on free capital gains after 2 years and buying either a nicer place or one that's closer to the city. None of that would be possible without those exemptions and interest rates at 5%+. None of the bigger investors would have leveraged so much debt if rates were that high.

Bellingham Bill says

What I rented in Sunnyvale in 2006 for $1320 now rents for $2300. There are zero Section 8 tenants in this place.

OK, there's also quite a few new tech bubbles. I can't speak for your place, but here in SF there is section 8 housing in downtown prime locations where the subsidy is as high as my monthly rent here in the SF outskirts. SJ is apparently no different I heard.

mell says

t's completely unnatural for a rise in disposable income to go straight to housing in any noticeable manner

actually, the reason housing inflation has tracked wage inflation since 1970 -- destroying your above assertion by the way -- is because housing is a good that is not in oversupply in most areas.

Housing supply is very immobile and new supply takes a lot of capital and rigamarole to create.

This means housing is usually a sellers market, sellers being price-takers among multiple bidders.

The more desirable an area is, the more this basic supply/demand dynamic is in play.

Everyone understands first-hand how rents go up as wages go up and we have to bid against each other for houses, I wonder why you are incapable of seeing this basic facet of reality.

but what really drives is is so-called affordability, a complete misnomer, via super low interest rates

sure, that's had a big effect too, no denying that. In fact, low rates have more or less preserved the over-extension we saw in the previous decade.

Low interest rates have nothing to do with rents though, which have been rising right along with home prices.

http://research.stlouisfed.org/fred2/graph/?g=sEk

Above graph with wage index in green:

http://research.stlouisfed.org/fred2/graph/?g=sEl

Reality says

reducing welfare subsidy for poor having children would quickly reduce the pumping out of children at that social strata

jojo says

, that still won't cover the Medicare expenses. And I don't see what republicans have to do with this

conservatives want to reduce entitlements, like slow down the rate of increase in SSA payouts. That too is obscene with $2.7T sitting in the SSTF.

And yes, Medicare is another discussion entirely. The system has been kicking that can as often as necessary. Though of course GOP idiocies with Medicare Parts C and D did the program no favors.

Bellingham Bill says

Housing supply is very immobile and new supply takes a lot of capital and rigamarole to create.

This means housing is usually a sellers market, sellers being price-takers among multiple bidders.

The more desirable an area is, the more this basic supply/demand dynamic is in play.

Everyone understands first-hand how rents go up as wages go up and we have to bid against each other for houses, I wonder why you are incapable of seeing this basic facet of reality.

Go to Europe and watch successful families maybe possess 2 homes at max. throughout generations. You can watch people and families become wealthy yet they are never "trading up" their house. Only here in the US where the definition of housing has been changed from "a permanent place to live" to "always a great investment" and pumped as status symbol with the financial trickery and government/Fed/housing-lobby meddling and brainwashing I outlined above. There is nothing more to explain for me. The US is compared to other areas - very scarcely populated - and supply of land is still plenty. The only part that I agree on is that housing is always more expensive in popular areas and esp. cities with zoning laws, etc. The rest is a fucking out-of-control machinery that has co-opted the government in overdrive. But the next crash will happen and maybe next time there will be no bailout and you may see you rent cut in half again.

Is it a surprise that Bush's illegal wars bankrupted our nation, destroyed our credibility and political capital, and rendered our military incapable of stopping a genocide in Syria, and now we're unable to do anything about the Russians in the Ukraine?

No, not at all. This is why you need to pick your battles and not use the military as
- a job factory
- a means of political gain
- a way to increase corporate profits

Because if you do, you can't use it when you need it.

Yeah Obama deserves some of that blame, but Bush, Cheney, Rumsfeld, Rice, and every despicable Republican Congressman in the past 20 years deserves the lion's share of the blame.

Sure, costly wars need to be avoided and ended, in fact there has never been a better time for an isolationist policy. But at the same token let's remove the MBS buying to the tune of 85/75/65B per month, let's remove mortgage deductions, government backed mortgages, section 8 in "prime" locations, let's stop injecting credit and let interest rates adjust, and - if Bill is correct - housing/rents have nothing to fear as they just "track wage inflation". This is nothing but the greater sucker game. Even the Fed propelled stock market is mostly paper gains (esp. in "tech"-land) and there are those who realize them and bid up housing prices and rents, but only by selling their shares to those left holding the bag who will then cause the next crash as their purchasing power evaporates with the next big selloff. If you take all the speculation out and would only use steady income (wages) as a means to purchase property or rent, remove all the shenanigans and treat it like any other debt, housing would first implode and then stagnate, rise and fall slowly somewhat in lockstep with wages.

jojo says

No one can see the future and to make promises on the backs of future generations is just theft, plain and simple.

'blah blah blah is theft' thought-terminating cliche.

the cost of living can't rise more than wages, which makes defined benefit viable.

even if gasoline and food increased 3X, something else would fall to compensate.

In economics, economic rent is an analytic term for the portion of income paid to a factor of production in excess of its opportunity cost.

http://en.wikipedia.org/wiki/Economic_rent

Rents in housing and health care are around $2T/yr.

http://research.stlouisfed.org/fred2/graph/?g=sEr

half the $4T outflow.

'Defined benefit' is just the way the 1% with their trillions wants to fuck over the working class more.

I'm surprised you can't see this.

jojo says

Bellingham Bill says

I'm surprised you can't see this.

Cant see what? That when you make a deal with someone they might not pay up? Sure i see that. So people and groups should get paid now and not later. No contracts for 30 years in the future, because thats a long way off and a lot of things can change. Right?

Agreed. Anything that "guarantees" a certain return/payout at a future time is suspect and prone to fraud. I'd rather see them employees getting a higher salary but take care of their retirement. Now, that doesn't mean that such a system cannot work, many countries have government defined pensions, but they need to get adjusted regularly depending on how much total money is in there (depends on early dropouts and rate of returns etc.) and need to have the strictest form of punishment for any abuse, misuse, temporary withholding or redirecting of such funds as well as promising returns in any way that cannot be guaranteed, life in prison or capital punishment. Otherwise it's just another slush fund for government cronies, connected corporations and influential retirees. But in a country where the rule of law has been partially abandoned it's totally possible that even such strict laws would simply not be enforced, leading to the Detroits of today.

jojo says

@mell

yep, i agree completely. Right or wrong and for whatever reason the money is not there. Making the same mistake over and over is just stupid and at some point its their own fault.

This is the main problem of this economy, that cheap credit is injected and a chunk siphoned off immediately, leaving the recapitalization up to forward promises on labor and honesty. And the time span on the forward promises on future labor/production become longer and longer. 5/10 year mortgages/loans are somewhat risky, 15 yr ones riskier and 30 year ones the riskiest. But the middlemen don't care and in fact look for any means to extract the possibly biggest share of money rapidly while pushing the loan duration and amounts to the maximum possible limits, using zero down, government backed mortgages/FHA etc. I would get rid of real estate agents altogether and disband the NAR, but in the meantime I would issue an executive order that realtors get paid there commissions in equal fractions with every mortgage payment, and payments would stop on defaults. Until there is no taxpayer-funded, government stoppage of any MBS or mortgage anymore. My guess is the real estate industry would shrink to a healthy equilibrium and the economy become more productive ;)

Bellingham Bill says

In economics, economic rent is an analytic term for the portion of income paid to a factor of production in excess of its opportunity cost.

http://en.wikipedia.org/wiki/Economic_rent

Rents in housing and health care are around $2T/yr.

http://research.stlouisfed.org/fred2/graph/?g=sEr

half the $4T outflow.

Your typical "throwing a bunch of shit charts on the wall and see what sticks" tactic. Expenditure on housing and utilities is not at all the same thing as expenditure on renting. Most housing expenditures are for ownership and mortgage expenses, as roughly 2/3 families own their homes and they are usually the higher income 2/3 with more money to spend on housing. Not to mention, while food quality has been decreasing, gasoline consumption per person also decreasing, the houses have grown in size dramatically in the past few decades!

jojo says

Reality says

lowering taxes promote private sector economic activities in general.

In your opinion what is an appropriate tax rate or structure?

Lower than the year before and simpler than the year before. Rinse and repeat every year.