Budget Puzzle: You Fix the Budget

[Olo401]

The key to your passage here is "at ~70% of full benefits".

Without a reduction in benefits, Social Security would "go bankrupt" (although that term is a little misleading).

Well even that's got a variable - how many boomers will still be alive and receiving SS benefits in 27 years?

http://upload.wikimedia.org/wikipedi....1909.2003.png
(Live Births in the US per 1000 population - blue denotes the "baby boom" years 1946-1964)

The median age of the Boomers in 2037 will be 83. By then it's safe to say a good percentage of them will have died, relieving the burden on the entire system. And that trend will only continue over time. At this point the two best options are to either raise the retirement age or raise the payroll deduction cap on a gradual basis, then lower it on a gradual basis as the stress on the system is relieved.

[Drex]

lol i checked a couple boxes and fixed it, is the government even trying?

http://www.nytimes.com/interactive/2...oices=0022800z

[Ashmada]

http://www.nytimes.com/interactive/2...oices=43x14k1f
That's roughly how we do things over here.

Also, I'm a little shocked how much money there is to be saved by closing Tax loopholes and how minimal the difference between a 2013 and 2015 mid-east troop "draw down" is. The wealth inequity is great enough that I wouldn't feel particularly bad harvesting 105 billion dollars by increasing the taxes on the top 1% of the US by 2%.

Not many people would "feel bad" about increasing taxes on high income.
High incomes pay less taxes than everyone (in relative terms, nobody with a brain and without bias would compare taxes in absolute numbers), so obviously it wouldn't be unfair to increase them.

The argument against it isn't that it isn't fair, but that it's counterproductive: basically, the tax cuts are incentive for rich people to stay in the country/come to it, effectively raising revenue, despite the cut.

Whether you buy that argument or not is up to you, but that's the reason behind tax cuts for high incomes, both in the US and EU.

[Anton]

"Debating the options" time yet?

The Bank Tax option is pretty beefy, but that's a VERY dangerous road. The problem, at the moment, is there is a big lack of risk in the system - no bank wants to lend money because the economy might go south again, which ironically is exactly why the economy is going south again (Paradox of Thrift, oh baby). The Treasury can print and print but that does nothing to help - Excess money in the system is currently being hoovered up and stuffed under mattresses, or going into the stock markets as evidenced by the return to 2008 levels with... nothing. What has the economy done to justify a return to 2008 levels? Basically, rather than grease the system back into operation, the current US saving craze, combined with a rising stock market, means it's bubble-bursting time again.

Introducing a tax on the banks that punishes risk is essentially turning the lending system to the 'off' position. The whole point of the bank is to lend money to people who don't have it so they can spend that money and maybe make it all back and then some. That's risky. Hence the loan rate. Banks taking risks is good for the economy, in the sense that with easier access to money, it's easier to shop, start a business, expand a business, buy a car, buy a house, buy a something, etc etc. Basically everything.

(The downside to taking risks is if you make a mistake, you're fucked, and if you're all-the-way-to-chapter-11 fucked, everyone else you borrowed from gets pinched)

A Bank Tax may balance your books, but providing more incentive not to lend money just clogs up the wheels even more. This is not the happy medium folks, this is extreme.

Which is why, if you meet a banker-dude invest-y type, they usually don't like government: because most of the time, government intervention means people with law degrees are going to fuck things up .

[Altariel]

While I don't really endorse the bank tax for a few reasons, I would say that I don't think the type of consumer credit risk you're talking about is really the focus of the tax. The excessive risk was really the entirely over-leveraged positions that investment banks got themselves into. They weren't laying out sufficient capital for the collateralized debt they were buying. It worked great when the housing market was booming but once prices declined, they lost their asses. It's not that the banks shouldn't lend, its just that they shouldn't take on risk without enough capital to back it up.

[quannum]

this calculator thing is really skewed towards pro-business.

where's the public option? which would bring

budgetary savings through 2020 to about $68 billion

where's stop the war on drugs?
i could find savings (law enforcement + jail overcrowding) estimates but im too high right now.


where's stop the war in iraq/afghanistan and chop the defense budget down to 250b ?

On Dec. 19, 2009, President Obama authorized a military budget plan for a record $663 billion to defend the United States, the highest since World War II -- higher, adjusted for inflation, even than during the Korean and Vietnam wars.

on the plus side though, it shows people in clear terms just how it would be to fix this shit.

cut defense and tax the rich more done.

[aurik]

While I don't really endorse the bank tax for a few reasons, I would say that I don't think the type of consumer credit risk you're talking about is really the focus of the tax. The excessive risk was really the entirely over-leveraged positions that investment banks got themselves into. They weren't laying out sufficient capital for the collateralized debt they were buying. It worked great when the housing market was booming but once prices declined, they lost their asses. It's not that the banks shouldn't lend, its just that they shouldn't take on risk without enough capital to back it up.

Risk tax is just an alternative to preventing investment banks from being the same banks that do the rest of the shit. If they weren't "too big to fail", we would have just thrown them under the bus rather than prop them up.

[Altariel]

where's the public option? where's stop the war on drugs? where's stop the war in iraq/afghanistan and chop the defense budget down to 250b

I think the point of it is more looking at actual proposals that are out there now or what we have specifically done in the Clinton era. Here's mine.

http://www.nytimes.com/interactive/2...oices=dj1tn6p0

[Anton]

While I don't really endorse the bank tax for a few reasons, I would say that I don't think the type of consumer credit risk you're talking about is really the focus of the tax.

Why not? I ask you this: The average net worth of a Canadian is $148000 (graph says household average, 148k is per person). Gaze at le graph du jour

http://financialinsights.files.wordp.../net-worth.jpg

Now how many people age 17-35 can come even close to that? How many Boomers and retirees? The vast amount of under 35 people are massively in debt (that median, just wow), what with student loans, mortgages, credit card debt, and what have you. Any one who got caught by 2008 is now not only in debt, but watching their houses fall in price, too. The younger generation has spent itself into a hole. They are, therefore, the riskiest possible age group.

Which means the only way to justify that net worth valuation is "It's skewed to the old farts". Boomers have paid off their mortgages long ago and are leaving the workforce. They have no need for loans or mortgages at all, and they're not going to contribute to the economy anymore. Hell, the bank could raise mortgage rates to 90% and demand capital up front, and grandpa wouldn't even wake up, much less strain his pacemaker.

Okay okay, you're absolutely right: the bank tax is not targeted at hurting college grads and young families at all. But it's the workforce that stands to lose from risk reduction. Drop a pebble in a pool and the ripples stretch far and wide.
--------------------------------------------------Offtopic rant

Spoiler: show

What ever happened to "caveat emptor - buyer beware"? If the demand for Mortgage-backed CDOs far outpaced the supply for years, and the suppliers jumped through hoops to create them, even making things out of shit... so far we've blamed the suppliers, some of whom actually did lie quite blatantly to sell their product, some of whom did not or never needed to, so hot was the demand for high-yield investments. And that's not quite right.

But how about the shit it was based off? At what point can we look at the mortgage consumers, thinking they could get a million dollar house working at burger king (or not working at all), and say "your fault"? NINJA mortgage, didn't even read the print (Next year you're gonna pay out the ass!), it's all the bank's fault? How badly do they have to get punished for the dumb dumbs who pissed their loans away on chrome and glitter?

50% of all the boats in Ft. Lauderdale, FLA, were purchased by people who took a second mortgage on their house to buy one. All the bank's fault?

--------------------------------------------------Ontopic
If this isn't creepy...

Scotiabank, a canadian conservative bank that keeps better tabs on its cash than Mr. Scrooge, is no longer offering a mortgage anymore! That's right, you cannot get a mortgage at Scotiabank. Instead, you will now sign up for a "Mortgage Backed Security". This little gadget is a claimsheet for the income produced by a mortgage, held by the bank. So it's not a mortgage, but it totally is.

Why the extra silly business? There is a fear that the Canadian real estate market is going to correct to the downside sometime soon (and IMO it probably will). Ah, but you see, there is a caveat in the Canada Bank Act that says if a house value should plummet below the face of a mortgage, the bank has to close the account (ie: foreclosure). The bank holds on to the house, and you walk away. Broke, but you eventually do get to walk away.

However, with a not-really-a-mortgage mortgage, the bank can and will keep collecting long after your house becomes a worthless hulk, thanks to that little loophole.

Imagine if, instead of houses being foreclosed in the states, people had to continue to pay the crazy pre-2008 mortgages they signed up for on a house worth only a fraction of the rate and coupon they have to pay? Not risky for the bank at all! Scares the shit out of me though.

[SephYuyX]

Easy
http://www.nytimes.com/interactive/2...oices=zw5rg020
All of Domestic programs and foreign aid and Medicare and Social Security since all of that is worthless junk, and then reduce troops to 30k, and reduce noncombat comp.

Aside from Rich Tax, you dont need to touch taxes at all. I left most of the miltary stuff alone because security is the last thing that should be touched in anything really, government, private, events, etc. I wanted to reduce the nuclear and weapons programs, but they do stem a lot of future tech, namely in the medical field oddly enough.

[Altariel]

I mostly object to the idea of punitive/behavior based taxes in general. In theory if they succeed in their goal, they should not be a significant generator of revenue. Anyhow, I do support banks being required to be sufficiently capitalized for their level of risk taken, I'd just prefer such things to be handled through oversight and regulation rather than tax policy.

I do agree that a portion of the blame for this crisis belongs to consumers. I bought a modest $64k house 7 years ago, something that I knew was affordable for me, while people that I know weren't making more than me were buying properties 4 and 5 times the price of this one. That being said, who can you place more of the blame on, the inexperienced consumer who is being sold the house of their dreams for little or no money down or the lender who knows full well what they are doing? I'm not saying the banks should freeze the credit markets but they need to be responsible in the credit risks they are offering. That being said, if anyone should have been aware of the risks, it should have been the investment bankers but they were the ones driving the demand for the collateralized debt in the first place. Even if you can't expect Jimbob working at Burger King to know he can't afford that million dollar house, you'd think that the top paid financial "geniuses" in the country would.

[Weeks]

lol i checked a couple boxes and fixed it, is the government even trying?

http://www.nytimes.com/interactive/2...oices=0022800z

You became the least-popular regime in American political history, it's almost certain that you damaged economic growth by shifting the tax burden onto the lower classes (As well as the bank tax, which is definitely a tricky issue), and the administration that is swept into office after yours un-did everything substantial.

If you're going to piss off the constituency but get stuff done, just turn the clock back two presidencies. Tax rates back to where they were, control military spending, balanced budget.

[Anton]

I mostly object to the idea of punitive/behavior based taxes in general. In theory if they succeed in their goal, they should not be a significant generator of revenue. Anyhow, I do support banks being required to be sufficiently capitalized for their level of risk taken, I'd just prefer such things to be handled through oversight and regulation rather than tax policy.

Ya got it. Full marks, something Dalton McGuinty has no concept of.

That being said, who can you place more of the blame on, the inexperienced consumer who is being sold the house of their dreams for little or no money down or the lender who knows full well what they are doing? I'm not saying the banks should freeze the credit markets but they need to be responsible in the credit risks they are offering... Even if you can't expect Jimbob working at Burger King to know he can't afford that million dollar house, you'd think that the top paid financial "geniuses" in the country would.

If you want to buy a car, you ask drivers and mechanics. What kind of fool asks the toyota dealership for car advice?

So long as caveat emptor is the basis of property law, no, this is not the case. And since a fiduciary cannot profit from the assistance without principal's consent, and a fiduciary cannot have a conflict of interest, no, the bank selling you the mortgage has no fiduciary duty (don't you read the disclaimers on those things?). This isn't an 'opinion' of who should or who should not be liable - to the best of my knowledge, it simply is not the case.

That being said, if anyone should have been aware of the risks, it should have been the investment bankers but they were the ones driving the demand for the collateralized debt in the first place.

You know, for the most part it was investors who got boned on these things, they didn't do it knowing all the way. Shit, even the sellers didn't know what they were selling. There are a whole slew of problems and conflicts you're thinking of, but here is a gross oversimplification to match yours: The bubble in 2008 was the result of a series of markets designed to offer access to trading and profiting off of real estate in the US, specifically mortgages, which for since-anyone-could-remember were always paid to the banks on time.

The interest rate on US bonds the whole while was 2%. Money seeks a return, investors were looking for safe, high-yielding opportunity (always have always will), and found it in the US housing boom. Forget everything you know about everything: Why would you enter a 10 year bond at 2% when money flows like water, if someone said you can enter in on a mortgage (remember: totally safe at the time) for 6-10% returns, year after year?

There was so much demand for MBS, banks shifted focus from quality to quantity (here's where things started going bad). So, yes, investment bankers, investors, joe blow investors, money managers, hedge fund managers, baby boomers, your uncle steve, income trust managers, portfolio managers, the entire world over drove the demand for CDOs and it wasn't like everybody knew this was fucked up but they were gonna catch it while it's hot and get out before the crash. Nobody, government, banks, investors, knew just how much risk was involved in these new financial instruments, and in the end very few profited either.

This is all pretty offtopic now but if you're really interested in the full story, I absolutely recommend watching

CNBC - "House of cards". It's dynamite good
and reading
http://en.wikipedia.org/wiki/Subprim...nd_information
http://en.wikipedia.org/wiki/Subprime_mortgage_crisis

Now SURELY someone limited Medicare in here, because that was like a third of the 2030 deficit

[Altariel]

Yes, getting off topic and yes I am certainly simplifying the situation because the main point was whether a bank tax is an appropriate federal budget balancing tool. There should be regulation of capitalization in finance, enforcing it in tax policy seems like a political game.

Incidentally Medicare does need addressed and soon but the options presented either don't get to the root of the problem or are entirely politically infeasible.

[Weeks]

Now SURELY someone limited Medicare in here, because that was like a third of the 2030 deficit

The sustainable growth rate is terrible policy that ignores what's really wrong with health care in this country and assumes that an across-the-board cut in reimbursement will cure all the ills. It may long-term, by limiting Medicaid/Medicare recipients' access to health care, but there are good reasons it has never been implemented in the 13 years it's been a law. Even the half-assed health care bill we got last year contains massive improvements.

[volcanicweather]

I decided to cap medicare - why the hell not? here's what I would do... http://www.nytimes.com/interactive/2...oices=s5p546lk

[Drex]

CNBC - "House of cards". It's dynamite good

the rampant stupidity running through some of these people is astounding.

"herp derp lower monthly payments are good so i can put in a sidewalk, fuck the long term i got me some pavement".
"hurr government didn't regulate us so we hired retards to sell loans, what could go wrong? it's da government's fault for not holding everyone in the world's hands."
"lol i dunno, i asked how this would work and they told me it would so i didn't mind lying about my income and saying i made 4x as much as i do."
"yeah we bought a house we could barely afford, but that wasn't good enough, no we put a pool in that bitch and started having kids. if we're gonna have a house it has to be perfect, cause we deserve the best". entitlement at it's finest.
"we bought a house, refinanced it twice, and then bought lots of new furniture, paint, fixtures, and other shit."

i know every case is different and there were tons of people that lost their homes without acting like morons, but jesus, some of these people i just can't sympathize with. for how important to their lives these homes were, they sure didn't seem to give a fuck at the time.