fiscal cliff

[akmarq]

I showed up right around the time politics became verboten on this board.

I can see why that was a good choice now.

[hairy worthen]

The oil industry accounts for 11 percent of the Texas economy, which actually is significantly up from where it was in the 1990s. By no measure is that small. It is by leaps and bounds the most important element of the state's economy.

For comparison's sake, Texas produces 6.2 percent of the agricultural output in the United States, yet agriculture makes up only .8 percent of the state's economy.
California produces by far the most agricultural products in the U.S. (17 percent of the total), and yet it makes up only 1.5 percent of the state's economy.
In Iowa, agriculture accounts for less than 7 percent of the state's economy.
So, yeah, 11 percent is a lot and oil is not a small reason for anything in Texas. Perhaps less so than in the 80s, but the state still lives and dies on the oil industry.

"Small reason" perhaps is not the correct term. Oil is still significant no doubt, however, the statement was made “Not sure Texas has a thriving economy but if they do it is for one reason -- Oil.”  That is simply incorrect. Oil has always been there.

The Texas economy is growing and becoming more diversified with other industries. High tech is a huge growth segment in Texas as is manufacturing, health care and others. I don’t know where you are going with the agriculture numbers but ok.

Now I wish this thread would drive off a cliff.

[hairy worthen]

I showed up right around the time politics became verboten on this board.

I can see why that was a good choice now.

The irony is that i come to this board to get away from the political crap. No more political stuff for me.

[Benny B]

Now I wish this thread would drive off a cliff.

If you voted for a major-party candidate for any federal office in the last election, you're a gullible, moronic fool.  Democrat, Republican, doesn't matter... you all elected a bunch of idiots who are truly representative of who you are.

To those who didn't vote: congratulations non-idiot, you let the idiots elect a bunch of idiots once again.

[ChicosBailBonds]

I'm more worried about the additional $3.9 to $4.6 trillion added in deficits over the next 10 years.    It's absolutely staggering. 

http://thehill.com/blogs/on-the-money/economy/275095-cbo-fiscal-cliff-deal-carries-4-trillion-price-tag


It makes the outrage of 2006 (which I was one screaming loudly then) look like child's play now.  Sad, it's really the only word I can think of.  Staggering and sad.

[ATL MU Warrior]

I'm more worried about the additional $3.9 to $4.6 trillion added in deficits over the next 10 years.    It's absolutely staggering. 

http://thehill.com/blogs/on-the-money/economy/275095-cbo-fiscal-cliff-deal-carries-4-trillion-price-tag

It makes the outrage of 2006 (which I was one screaming loudly then) look like child's play now.  Sad, it's really the only word I can think of.  Staggering and sad.

The above figures are based on the revenue that would have been generated over that period of time had all tax rates gone back to pre-Bush levels, correct? 

It truly is hard to fathom how this problem is ever going to be solved.  One solution:  raise taxes sufficiently to generate some real revenue (as above) and cause a recession, which will exacerbate the deficit.  Or: leave tax rates as-is, forgo the extra revenue, cut the hell out of government spending and cause a recession, which will exacerbate the deficit. 

Gotta be a solution somewhere in the middle there, but it's gonna be a pain in the rear and nobody will be happy. 

[Pakuni]

I'm more worried about the additional $3.9 to $4.6 trillion added in deficits over the next 10 years.    It's absolutely staggering.  

http://thehill.com/blogs/on-the-money/economy/275095-cbo-fiscal-cliff-deal-carries-4-trillion-price-tag


It makes the outrage of 2006 (which I was one screaming loudly then) look like child's play now.  Sad, it's really the only word I can think of.  Staggering and sad.

Well, you're correct in your dismay over the lack of spending cuts, something I sincerely hope is addressed in two months.
That said, the $4 trillion figure is a  bit misleading, in that it's only relative to going over the fiscal cliff ... something nobody realistically believed would happen - at least not in the long term - and that few believed would be beneficial to the country's financial condition.

The hope now is that these goofs can come up with the cuts needed to at least come close to balancing this out.

From the story you linked:

The CBO price tag is based on a "current law" baseline, which assumes that all components of the "fiscal cliff" will take effect, which includes a wide range of automatic tax hikes and spending cuts. Neither party in Congress is seriously considered allowing those policies to take effect unaltered.

[Pakuni]

The above figures are based on the revenue that would have been generated over that period of time had all tax rates gone back to pre-Bush levels, correct? 

It truly is hard to fathom how this problem is ever going to be solved.  One solution:  raise taxes sufficiently to generate some real revenue (as above) and cause a recession, which will exacerbate the deficit.  Or: leave tax rates as-is, forgo the extra revenue, cut the hell out of government spending and cause a recession, which will exacerbate the deficit. 
Gotta be a solution somewhere in the middle there, but it's gonna be a pain in the rear and nobody will be happy. 

Or: temper spending and foster a robust economy through which revenues will exceed expenditures. It's not as far-fetched as it seems (see: the late 1990s).

[ATL MU Warrior]

Or: temper spending and foster a robust economy through which revenues will exceed expenditures. It's not as far-fetched as it seems (see: the late 1990s).

Well darn it Pakuni I think you just solved it!

Now how do you do that?

[MU82]

I am sure you can find a number of articles that support any argument. You are using some pretty liberal leaning publications that had an agenda of making Rick Perry look bad when he was running for president. 

The only one that really made Rick Perry look bad was Rick Perry, and I'll give you three reasons why:

1. His debate skills rival those of a rhesus monkey.

2. He is easily tripped up by annoying things known as facts. (Um, Gov. Dopey, Turkey is our ally and isn't run by "Islamic terrorists.")

3. And let's see ... I can't ... The third one, I can't ... Sorry ... Oops.

[ChicosBailBonds]

Gotta be a solution somewhere in the middle there, but it's gonna be a pain in the rear and nobody will be happy. 

Bingo.  Public unions will never let it happen to protect their pensions.  On the flip side, you'll continue to see underemployment and depression on wages elsewhere because corporations cannot withstand the costs of doing business without cutting or passing them on. 

With the latest "deal", there are $43 in taxes increased for every $1 in spending cuts.  https://twitter.com/ChadPergram/status/285974557783912448

For those historians,

“In 1982, President Reagan was promised $3 in spending cuts for every $1 in tax hikes,” Americans for Tax Reform says of those two incidents. “The tax hikes went through, but the spending cuts did not materialize. President Reagan later said that signing onto this deal was the biggest mistake of his presidency.

"In 1990, President George H.W. Bush agreed to $2 in spending cuts for every $1 in tax hikes. The tax hikes went through, and we are still paying them today. Not a single penny of the promised spending cuts actually happened.”

[Pakuni]

Well darn it Pakuni I think you just solved it!

Now how do you do that?

I repeat .... see: the late 90s.
Relatively moderate tax increase on high earners, efforts to increase trade and boost exports, spending cuts and restraints, and a robust economy. All but the last - though certainly not least - item are within the government's purview. And, I would argue, would go a long way toward fostering the last item.

[ChicosBailBonds]

Or: temper spending and foster a robust economy through which revenues will exceed expenditures. It's not as far-fetched as it seems (see: the late 1990s).

Tough to temper spending when there are people that believe spending is the solution and the backbone of their ideology.  Maybe WWIII is the key, like it was the last time to justify Keynesian economics. 

[Pakuni]

Bingo.  Public unions will never let it happen to protect their pensions.  On the flip side, you'll continue to see underemployment and depression on wages elsewhere because corporations cannot withstand the costs of doing business without cutting or passing them on.  

Greedy SOBs expecting they receive the benefits to which they were contractually and legally promised.

Public unions aren't the main problem with pensions, unless you consider people expecting what they were promised problematic.
Politicians who've raided and/or underfunded pensions so that they could spend the money elsewhere are the problem.

[mu03eng]

Well darn it Pakuni I think you just solved it!

Now how do you do that?

It's actually easy from a theoretical standpoint, because there is a ton of bloat and redundancy in the federal budget and you could see a lot of savings just from consolidation of services, streamlining of military procurement, and modernization of application of and reimbursement for medical services under medicare and medicaid.

From a political standpoint it is nearly impossible because no politician wants constituents to feel any pain, but they are going to have to, it's the only way it will work.

Staggering information, that I think Tom Coburn put out there, as of right now each US citizen is responsible for $15,000 of debt more than an equivalent Greek citizen.  Additionally, we are currently at 121% debt of GDP and we are at historically low interest rates.  If interest rates go up one percent in the next year, which would still be 3% BELOW historical averages, the cost to service the debt alone goes up roughly $16.7 billion in that year, calculating debt service is tricking because it's all variable rates, but it's a ball park average.  If rates return to historical average the new tax hike for $400,000 and above would be entirely consumed by the debt service.

Revenue is needed, but the driver is spending, but no one wants to touch the spending.

[ChicosBailBonds]

I repeat .... see: the late 90s.
Relatively moderate tax increase on high earners, efforts to increase trade and boost exports, spending cuts and restraints, and a robust economy. All but the last - though certainly not least - item are within the government's purview. And, I would argue, would go a long way toward fostering the last item.

The late 1990's had the .com boom, as well.  That is never going to be repeated again.  That was a temporary gift that lead to irrational exuberance and a false economic bump.  Not sure that is the date range I would use.  It was also before terrorist attacks on the US.

[mu03eng]

Greedy SOBs expecting they receive the benefits to which they were contractually and legally promised.

Public unions aren't the main problem with pensions, unless you consider people expecting what they were promised problematic.
Politicians who've raided and/or underfunded pensions so that they could spend the money elsewhere are the problem.

I agree with you that they were promised, the problem is they shouldn't have been promised.  If a corporation overpromises and can't come through they either negotiate a reduction, find another way to pay for it, or file bankruptcy.  The workers are forced to work with the corporations to achieve mutual benefit because option 3 results in everybody loosing.

In the public sector, there is no such incentive for both sides to cooperate in difficult times.  Yes politicians have essentially double counted, but, to mix metaphors, that die has been cast and we have to play the hand we are dealt.  So they may have been promised but it's not something we can support any longer.

Lastly, I would love for someone to do the leg work of developing a federal budget from scratch.  Current obligations and debt, then determine future spending and revenue and make sure they match.  All this baselining off the current budget means bad data, bad assumptions, and bad budgeting.  We need some to zero sum the federal budget.

[GGGG]

Couple points regarding public pensions.

No one argues that people currently in the system should have their pension taken away.  People do argue how much a public employee should pay each month, versus what the public entity should pay.

The other argument is with future public employees.  Should they be converted to defined contribution programs?  Should their retirement dates be adjusted?

[Pakuni]

The late 1990's had the .com boom, as well.  That is never going to be repeated again.  That was a temporary gift that lead to irrational exuberance and a false economic bump.  Not sure that is the date range I would use.  It was also before terrorist attacks on the US.

The people affected by the Oklahoma City bombing, embassy attacks in Dar es Salaam and Nairobi, the USS Cole attack and in the largely unsuccessful (fortunately) first WTC attack might beg to differ.

The .com boom was no more or less false than the housing boom of the 2000s or the defense spending boom of the 80s. False isn't really the correct word. Temporary, perhaps. But ain't that the definition of a boom?

[ChicosBailBonds]

Greedy SOBs expecting they receive the benefits to which they were contractually and legally promised.

Public unions aren't the main problem with pensions, unless you consider people expecting what they were promised problematic.
Politicians who've raided and/or underfunded pensions so that they could spend the money elsewhere are the problem.

They were promised by politicians that needed them to get into office.  It's why FDR...FDR MIND YOU...FDR said public employee unions should not be legal.  He was right.  When you have the fox negotiated with themselves to cover the henhouse, you have major problems.  "You give us ridiculous pensions, the ability to retire at age 50 on $100K a year pension and I'll give you the votes to stay in office to wash, rinse and repeat".

It is bankrupting this country, has already bankrupted 4 cities in California with more on the way.   

I agree with you that the pensions have also been raided, but let's not kid ourselves into thinking what was promised could ever be achieved in the first place.  Quid pro quo and we are dying as a result of it. Trillions in unfunded liabilities that are unfunded even without the raiding.

[ChicosBailBonds]

Lastly, I would love for someone to do the leg work of developing a federal budget from scratch.  Current obligations and debt, then determine future spending and revenue and make sure they match.  All this baselining off the current budget means bad data, bad assumptions, and bad budgeting.  We need some to zero sum the federal budget.

I would just love if the Senate would merely pass a budget...which they are required to do by law.  It's now been 3.5 years since we had a budget.  Insanity.

[Pakuni]

Couple points regarding public pensions.

No one argues that people currently in the system should have their pension taken away.  People do argue how much a public employee should pay each month, versus what the public entity should pay.

Define taken away.
Taken away entirely? No.
Reduced from what has been contractually (and in some cases constitutionally) pledged? Yes.

The other argument is with future public employees.  Should they be converted to defined contribution programs?  Should their retirement dates be adjusted?

Yes, that's also being discussed. But by and large, most public unions have gone along with reductions, in one form or another, for future workers. Even here in Illinois.

[Pakuni]

They were promised by politicians that needed them to get into office.  It's why FDR...FDR MIND YOU...FDR said public employee unions should not be legal. 

FDR said no such thing.

He was right.  When you have the fox negotiated with themselves to cover the henhouse, you have major problems.  "You give us ridiculous pensions, the ability to retire at age 50 on $100K a year pension and I'll give you the votes to stay in office to wash, rinse and repeat".

I'm not sure how things are in California, but the average public worker pension here in Illinois is less than $40,000. For a teacher, it's a whopping $45,000. And, keep in mind, these are people who get no Social Security.
The average public pension in Wisconsin is less than $25,000.

Trillions in unfunded liabilities that are unfunded even without the raiding.

Unfunded because legislators chose not to fund them.

[PBRme]

In addition to the .com boom you had  the productivity boom that came with these new technological capabilities and you had a once in century reduction in the number of people retiring due to the natural reduction in births at the end of the depression and the second world war.  This caused a reduction in entitlement growth that was not seen at any other period and was the major reason for the narrowing of the budget deficits (massive amounts of Social Security money being counted as general revenue and lowering the deficit.

[akmarq]

This seems to be the right moment to put out there that the federal budget is not really all that similar to a state budget.

The federal government is able to borrow at negative interest rates in the current economy and has monetary control. The risk that our government becomes insolvent is not even really worth talking about this point. The US has basically nothing in common with Greece and the European nations that are currently struggling.

All this state budget talk is very interesting, but it really has nothing to do with the fiscal cliff and isn't going to offer anything in the way of real insight on the issue.