Fiscal Futures
This evening I attended (with a brand new twitter friend) the MacArthur Foundation and Federal Reserve Bank of Chicago’s America’s Fiscal Future: Making Difficult Choices event.
Oh, I have lots of thoughts to share, but sharing them usually only gets half done… so I am shifting modes and sharing with you just a light dose of the questions and notes that I jotted down in my notebook as I listened to the panel. Think of it as live blogging. Does it provoke anything interesting for you? I would love to hear if anything sparks for you.
This talk seems to be focused on the deficit…with a lot of concern about how in debt the government is. (Oh geez, what about all those families who are in debt? hmmm….) Debt is actually quite difficult for families but at the governmental level, it is a floating issue (the being in debt isn’t so bad, it is the lack of confidence others have in the dollar that is troubling)…
Yikes, we have a debt-based currency, so please don’t tell me debt is bad. All our money is based on that!
I wonder what these panelist would say if we talked about the depression of 1873 and how that crisis in confidence was resolved through regulation (which lasted fairly well until computers made complex math easier and thus derivatives possible).
How much of this is fear-mongering. Really? They aren’t speaking to some current crisis (which we actually have on hand) but threaten some future crisis with terrible things like “triple digit” …was that inflation or interest rates or something?
I wonder, in a system of debt-based currency, as the economy grows, how does that work, really? Is that dependent on the growth of debt? Who holds that debt? Doesn’t something have to give?
I hear a lot of “uncertainty” but not yet a recognition of black swans and a system living in extremistan… How do these complex adaptive systems respond? How can you possibly predict them? I am so often frustrated by long term thinking that assumes some consistent or steady trajectory.
While there is acknowledgement of the Baby Boomer issue (how can we pay for all these people about to enter retirement age?) – do we understand that this is an issue in many other countries as well?
Fiscal responsibility is getting framed as if government manages a pocketbook like a family does. URgh… it is NOT like that at all. And framing it that way feels like a pretty nasty way to DUPE people.
Huh, fundemental tax reform. Suggesting two tiers 10% and 25% ... hmmm… by the way, in case you didn’t know your tax history, I looked it up again for you:
“By 1917 a taxpayer with only $40,000 faced a 16 percent rate and the individual with $1.5 million faced a tax rate of 67 percent.” then… “By 1936 the lowest tax rate had reached 4 percent and the top rate was up to 79 percent.” oooh, and if you think that was high, check out “By the end of the war the nature of the income tax had been fundamentally altered. Reductions in exemption levels meant that taxpayers with taxable incomes of only $500 faced a bottom tax rate of 23 percent, while taxpayers with incomes over $1 million faced a top rate of 94 percent. These tax changes increased federal receipts from $8.7 billion in 1941 to $45.2 billion in 1945.” And numbers of people paying count too, so “Beyond the rates and revenues, however, another aspect about the income tax that changed was the increase in the number of income taxpayers from 4 million in 1939 to 43 million in 1945.” http://www.ustreas.gov/education/fact-sheets/taxes/ustax.shtml
And where oh where did this gigantic deficit come from…
“By 2001, the total tax take had produced a projected unified budget surplus of $281 billion, with a cumulative 10 year projected surplus of $5.6 trillion.” http://www.ustreas.gov/education/fact-sheets/taxes/ustax.shtml
Oh never, mind, those deficit deniers are crazy…
One option is to phase in a carbon tax. Hmmm, interesting… Another is focusing tax increase on consumption rather than income (and especially tie this to healthcare)
Healthcare costs keep going up! Oh my! Let’s really call this ILL-care, because the costs of keeping me heathy are not so bad, it is the cost of being ill and treating illness with hospital and medicines that is expensive.
Should there be an income cap on Social Security? Hmm, I don’t know. I guess I have grown up expecting that social security won’t be around when I get to retirement age. So I just shrug at this. There might be an age hike for full payout… great, add a few more years and decrease the number of people that can live to retirement. And let’s not even begin to discuss what that does to employment issues… (especially in an information age where many of these people don’t intuitively navigate computers)
How will State and Local governments be impacted by our deficit issues? Well, expect more unfunded mandates. (ouch) and if they raise taxes at the federal level it will be harder for States to raise their taxes. If we create federal consumption taxes, those hurt States too.
Sure our treasury is allowed to borrow at low rates- we are the best looking horse in a glue factory. No, really he said that.
If you look, he says (it doesn’t matter which him- the antiquated white guy at the front of the room pontificating) – if you look at the history of deficits in many countries over hundreds of years, you can see that it often looks like borrowing is fine… then everything collapses fast. There is so much uncertainty. (Which is about as close as they got to admitting these are complex dynamic systems that a panel of old school “experts” would not be able to predict or sufficiently analyze (in time).
Haven’t we been living on mortgage debt for a long time? Is that what grew money in our economy? The issuance of debt to families?
He admitted the system is broken! Yeah!!! Now we get somewhere!
Huh, it won’t compromise national security to cut some of the defense budget, but… ummm, it does impact jobs (which can be tracked to a specific district making those cuts politically very unpopular no matter how obsolete or irrelevant the defense product is).
A great question – one that was mentioned on my European tour this summer – Is immigration something that can help solve the deficit and social security? Antiquated white guy says – well in the short term maybe, but in the long term they pull out from the system too… and anyway we just want bright enterpreneurial innovators as immigrants – that helps the economy. Okay, maybe that wasn’t in one sentence… but the parts were all there! <insert invective of choice>
Another question is about the recent G20 meeting and their commitment to lower deficits by 50% by the year 2013. Aggressive! Answer: well, some of those countries are emerging economies growing very quickly, which makes it easy to reduce debt.
Huh, you didn’t mention that before – that emerging economies grow quickly and that makes it easy to reduce debt. Why don’t we do THAT?
Another wonderful question from the floor… uh, sir, so we have all these subsidies for corn… and corn products are what leads to obesity and diabetes… which are major healthcare costs… so um, would it be prudent to reduce subsidies? (answer: well subsidies blah blah blah…. umm, yes)
Someone else asks about unemployement issues, to which they say – we didn’t look at that. What? You didn’t look at how unemployment impacts the economy, taxes, and the deficit? What experts are these?
Enough, I am out of here…
