Suggested Discussion Outline

Post Reply
Posts: 1709
Joined: Fri Jun 29, 2007 8:43 pm

Suggested Discussion Outline

Post by johnkarls »

A. Recent and Looming Country Bankruptcies – Lessons To Be Learned

A-1. Iceland
A-2. Greece
A-3. Ireland
A-4. Portugal
A-5. Spain
A-6. Italy

B. Implications of a U.S. Governmental Bankruptcy

B-1. Loss of ability during economic downturns to run governmental deficits to stimulate the economy.

B-2. Economic dislocations as the U.S. dollar becomes worthless while foreign holders scoop up whatever is available and while the U.S. tries to export enough to earn sufficient foreign currency for the U.S. economy to run on (similarly to the way Germany’s economy ran on the British Pound in the 1930’s after the Reichmark became worthless and similarly to the way the Russian economy de facto ran on the U.S. dollar following Glasnost)

C. The Failure To Fund The 2010 Health Care Bill

C-1. Half the admitted cost of covering 32 million additional U.S. citizens assumed to come from savings in the Medicare Program which is already bankrupt so it won’t happen.

C-2. Half the admitted cost of covering 32 million additional U.S. citizens assumed successfully dumped in the form of a Medicaid mandate on the states which are already bankrupt so it won’t happen – which, incidentally, is why 27 states have sued the federal government to have the 2010 Health Care bill declared unconstitutional (quite a few additional states filed Amicus Curiae or friend-of-the-court briefs) and it should be noted that the 27 states (plus friend-of-the-court states) have prevailed at the trial-court level.

C-3. The un-admitted cost of such things as the bans on insurance companies (A) taking into account pre-existing conditions, (B) imposing lifetime caps, (C) etc. – takes the form of higher premiums on the young and healthy, who are now forced or mandated to buy insurance.

C-3-a. Compare to life insurance where the individual buys a cheap term-insurance (rather than whole-life) policy until middle age and then wants his/her children to pay the premium increases on the term insurance that occur with old age.

C-3-b. Compare to the institution of social security during the Roosevelt administration to create a retirement pension for the senior citizens who had never saved for their retirement – forcing each generation to bail out the one that preceded it.


D. The Two Debt-Commission Sets Of Recommendations

D-1. Spending Reductions – generally in the form of caps for various categories of expenditures, though some examples of spending cuts were listed.

D-2. Tax Increases – taking the form of slight rate reductions accompanied by the disallowance of most deductions, on the assumption that the electorate is too stupid to notice that their total tax bill is increasing if the rate is declining slightly.

D-3. Items of Note =

D-3-a. The spending reductions in both sets of recommendations are very limited – probably not enough to satisfy the T.E.A. Party (which, according to the House of Representatives Majority Leader, stands for “Taxed Enough Already”)

D-3-b. Tax increases in the form of slight rate reductions accompanied by the disallowance of most deductions has already been tried!!! It was called the Alternative Minimum Tax. The Democratic Party has fought long and hard over the last 15-20 years to eliminate the Alternative Minimum Tax because it falls hardest on Blue States which have the highest levels of state taxes, the deductibility of which is banned under the Alternative Minimum Tax.


D-3-d. The T.E.A. and Republican parties, through their control of the House of Representatives, can simply refuse to appropriate anything more than the 2008 levels of expenditures which is their announced objective. It should especially be noted that –

D-3-d-i. This strategy does not involve shutting the government down from a refusal to approve increases in the national debt ceiling (which they can then treat as mere PR events).

D-3-d-ii. This strategy only involves shutting down the programs started after 2008 (and reducing older programs to their 2008 levels) AND PUTS THE DEMOCRATIC-CONTROLLED SENATE IN THE POSITION OF HAVING TO SHUT THE GOVERNMENT DOWN BY REFUSING THE 2008 LEVELS.

D-3-d-iii. In general, the 2009-2010 increases in spending took the form of some infra-structure spending and a massive additional amount of federal aid to state and local governments so that they did not have to fire teachers, police and fire-fighters. So basically there is a Hobson’s Choice = whether to move a chunk of the massive Federal deficit (currently estimated by the non-partisan Congressional Budged Office as $1.5 trillion/year) back to the bankrupt states.

E. The 6.5% National Sales Tax Proposed By The Rivlin-Domenici Commission

In economic theory, a national sales tax is identical to the value-added taxes (“VAT”) imposed by the typical European country. The only differences are: (A) mechanically, a European VAT is imposed at every stage with, for example, a manufacturer charging VAT to customers but subtracting from the amount of VAT it collects the amount of VAT it paid to its suppliers before turning the balance over to the government, (B) typical European VAT’s are imposed at different rates on different goods and services and, so far, the Rivlin-Domenici sales tax is 6.5% across the board, (C) typical European VAT’s are much higher (often 20% of more) which is why national sales tax/VAT proposals have been so toxic in U.S. politics as the “thin edge of the wedge.”

F. Comparing the Rivlin-Domenici 6.5% National Sales Tax To Fund General Revenues And Our Proposed European-Style Gasoline Excise Tax To Fund Social Security, Medicare and Medicaid.

F-1. European countries typically have an extremely-high excise tax on motor fuels to fund social security and universal health care.

F-2. Loading the tax with a higher rate on motor fuels achieves, instead of raising general tax revenue, the objectives of (A) adequate permanent financing for social security and universal health care if the rate is adjusted over time for whatever is needed to fund those programs, (B) reducing carbon emissions, (C) reducing the international balance-of-payments deficit, and (D) increasing national security by reducing the reliance of the U.S. and its allies on foreign oil.

F-3. In considering whether to recommend a Six-Degrees-Of-Separation E-Mail Campaign for a European-Style Gasoline Exise Tax to fund social security, medicare and medicaid, we should resist the temptation to broaden the tax base to all carbon fuels (for example coal which is the overwhelmingly-predominant fuel for electricity-generation plants) because –

F-3-a. A motor-fuel tax to fund social security-medicare-medicaid is simple and easy to explain to the American public as something that will work because of the European examples.

F-3-b. Broadening the base to all carbon fuels will poison the proposal in the perception of the American public, the majority of which will then view the idea as just another expensive global-warming proposal.

F-4. Obviously, enacting a European-style motor-fuel tax to fund social security and health care will require some political leadership –

F-4-a. But probably less leadership than cutting spending or increasing other taxes!!!

F-4-b. Just because our pols don’t like to exhibit leadership shouldn’t mean that we don’t give them the chance!!!

Post Reply

Return to “Discussion Outline - Reports By Two Deficit-Reduction Commissions - Feb 9”

Who is online

Users browsing this forum: No registered users and 1 guest