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Simpson-Bowles as a basis for a "grand bargain"

If I were Ceasar or Octavian or Antony, I would just make a list and proscribe those with vast fortunes. The whole issue would be resolved in about one month. I would not murder anyone though, just confiscate their property and wealth. I would leave every person on the list with a token amount to suffer through on, say 50 million. The rest goes back into the kitty.
 
When I was in business school way back in the early 80s, we used modeling programs to compete with other groups in the class as if we were companies competing with each other in an industry. Teams would make decisions about pricing, product, r&d and so on in order to gain a competitive advantage and win the game. It was very complex and completely dependent upon the person who wrote the game and their subjective decisions about how much of this or that was beneficial to the company or would produce the highest output according to a model the creator wrote into the program. The rules of the game were not known to anyone but the creator of the program which is exactly how our real economy works. No one really knows which balanced approach will create the best result making this entire debate a gamble. This game was a lesson in micro economics and was infinitely simpler than a game based upon a national head to head game focusing on the macro economics of decision makers. Modeling national and global economies is damn near impossible to do, The Black Swan proves this point using statistics and behavioral models of human beings. The truth is that no one can accurately model future economic behavior except as a slope starting from some period in the past with today's latest information being a point on that slope. The point in the future can be measured or assumed to be on the same slope as the known line but there is no guarantee at all that a Black Swan will not occur. We have had normal slopes for periods of time that almost always were disrupted by unforeseen catastrophic events. These events have more to do with our overall economy that anyone can possible imagine. Within a ten year business cycle that is chugging along quite nicely, policy makers must understand the forces creating the business cycle. Does anyone really think that the internet boom would last forever? The housing boom? The financial services boom? We get into trouble every single time when we fail to understand the true drivers of a business cycle and act accordingly. Any policy that fails to identify exactly what is driving the economic in one direction or the other is going to end up in a disaster.
 

imreallyperplexed

Council Member
I agree with you on all of this. (I participated in similar simulations. They still use those kinds of simulations.)

One thing that I think is particularly problematic in this discussion with reference to entitlements is because the government really does make long term promises and obligates itself to provide particular types of benefits in the future. However, when you begin to approach the date that the obligations will come due, it is not always clear that there will be the funds on hand to meet the obligations (and the system goes bankrupt). To me, this is a kind of "entitlement bubble" in the sense that promises are made that are difficult to keep (for a lot of reasons). I do not have a solution to this problem (anymore than I have a solution for investment bubbles). But it is a problem in my opinion. So I tend to be sympathetic - in principle - to reform of (unsustainable) entitlements. Whether people can adapt in the short run in order to avoid anticipated future problems is always a dicey proposition. Witness climate change.

When I was in business school way back in the early 80s, we used modeling programs to compete with other groups in the class as if we were companies competing with each other in an industry. Teams would make decisions about pricing, product, r&d and so on in order to gain a competitive advantage and win the game. It was very complex and completely dependent upon the person who wrote the game and their subjective decisions about how much of this or that was beneficial to the company or would produce the highest output according to a model the creator wrote into the program. The rules of the game were not known to anyone but the creator of the program which is exactly how our real economy works. No one really knows which balanced approach will create the best result making this entire debate a gamble. This game was a lesson in micro economics and was infinitely simpler than a game based upon a national head to head game focusing on the macro economics of decision makers. Modeling national and global economies is damn near impossible to do, The Black Swan proves this point using statistics and behavioral models of human beings. The truth is that no one can accurately model future economic behavior except as a slope starting from some period in the past with today's latest information being a point on that slope. The point in the future can be measured or assumed to be on the same slope as the known line but there is no guarantee at all that a Black Swan will not occur. We have had normal slopes for periods of time that almost always were disrupted by unforeseen catastrophic events. These events have more to do with our overall economy that anyone can possible imagine. Within a ten year business cycle that is chugging along quite nicely, policy makers must understand the forces creating the business cycle. Does anyone really think that the internet boom would last forever? The housing boom? The financial services boom? We get into trouble every single time when we fail to understand the true drivers of a business cycle and act accordingly. Any policy that fails to identify exactly what is driving the economic in one direction or the other is going to end up in a disaster.
 

Days

Commentator
oh for the good old days, when Rome meant real power, real government; when the Senate was serious stuff.
 
The easiest way to do this is to enact specific taxes per program which is what we have done with SS and Medicare. Then all you have to do is no co-mingle the funds. What if our taxes were split into these separate taxes:

SS
Medicare
Medicaid
Defense
Remainder

Imagine if every time you saw your paycheck or paid your yearly tax bill you got a bill for X% for each item. Then imagine if each item had a person directly in charge of that budget. Imagine...
 

imreallyperplexed

Council Member
Those are interesting ideas. Like I said, I am open to a wide range of ideas. (And I do not consider myself an expert on how things are managed now.)

The easiest way to do this is to enact specific taxes per program which is what we have done with SS and Medicare. Then all you have to do is no co-mingle the funds. What if our taxes were split into these separate taxes:

SS
Medicare
Medicaid
Defense
Remainder

Imagine if every time you saw your paycheck or paid your yearly tax bill you got a bill for X% for each item. Then imagine if each item had a person directly in charge of that budget. Imagine...
 
Can you imagine a future Congress creating a separate income statement for each of these items? It would be fairly easy to have a national debate about SS if the nation got an annual report on the inflows and outflows of the SS tax v distributions. What if each paycheck showed you how much you paid for the military and at the end of the year, you found out that our leaders spent twice as much on military as they taxed us? I for one would find this refreshing because it would not allow them to pool funds into the General Fund without express approval from Congress and the POTUS. It would make our yearly budget talks more like a cost center analysis for a division of a large multi-national.
 

Spamature

President
Unfortunately, I don't think that analogies/metaphors like that are very helpful. For example, do you see yourself as the one with the money in the backpack or the one with the baby in the backpack? Why?

Do you really think that the choice is that stark?
The idea that everything should be on the table when the eventual impact on individuals is so asymmetrical it's insane. Sure in the beginning the compromises will seem reasonable. But the fact is it's just creating a new mechanism for making incremental demands in the future with the expectation that they should be yielded to for the sake of being reasonable when ever the next impasse is reach.

Now ask yourself what are they really getting in return for putting "everything" on the table on one side ? That the other side will give up on "some" of policies that over the past decade created the very problem their trying to solve now ? In fact its even more stark when you think about it. Because that backpack full of money in the past used to be spent on firewood. Now its a part of the negotiation on how they keep from freezing to death.
 

Bluedog

Mayor
Can you imagine a future Congress creating a separate income statement for each of these items? It would be fairly easy to have a national debate about SS if the nation got an annual report on the inflows and outflows of the SS tax v distributions. What if each paycheck showed you how much you paid for the military and at the end of the year, you found out that our leaders spent twice as much on military as they taxed us? I for one would find this refreshing because it would not allow them to pool funds into the General Fund without express approval from Congress and the POTUS. It would make our yearly budget talks more like a cost center analysis for a division of a large multi-national.
Nothing wrong with that idea. It would allow for some transparency.
 
Great point. Say you and I are responsible for funding a mandatory effort neither of us can avoid funding. You have 100 million dollars and I have 100 grand. The amount needed is 1 million dollars. You could take 100% of mine and still need 900 grand from your own stash. But I would be paying 100% and you would only pay 0.91%. Is this fair? How about if the numbers are reversed? I pay 0.91% or 9 grand and you pay 991 grand or 0.91%. You still make out like a bandit because you don't ever have to spend 100% yet make the number happen...
 
You bet because they did not [Unwelcome language removed] around when they needed money. And they avoided massive increases in the money supply unless it was tied to conquest or spoils.
 

Spamature

President
Great point. Say you and I are responsible for funding a mandatory effort neither of us can avoid funding. You have 100 million dollars and I have 100 grand. The amount needed is 1 million dollars. You could take 100% of mine and still need 900 grand from your own stash. But I would be paying 100% and you would only pay 0.91%. Is this fair? How about if the numbers are reversed? I pay 0.91% or 9 grand and you pay 991 grand or 0.91%. You still make out like a bandit because you don't ever have to spend 100% yet make the number happen...
Even worse than that it going to eventually translate into real world physical physiological suffering and lost opportunity to enter the mainstream of American life for the sake of another people keeping would be an almost inexhaustible cushion against the potential for those kinds of problems But is instead just a numbers game they play between each other's egos.

I think about a guy like Romney who would never ever ever personally need the money he stashed from the govt. Yet he was pushing a plan to have elderly people on the margins searching their seat cushions for the means to afford medical treatment.
 

fairsheet

Senator
Even worse than that it going to eventually translate into real world physical physiological suffering and lost opportunity to enter the mainstream of American life for the sake of another people keeping would be an almost inexhaustible cushion against the potential for those kinds of problems But is instead just a numbers game they play between each other's egos.

I think about a guy like Romney who would never ever ever personally need the money he stashed from the govt. Yet he was pushing a plan to have elderly people on the margins searching their seat cushions for the means to afford medical treatment.
The difference between the "economy" proposed by Li'l George and that proposed by Mitt, was profound. Li'l George suggested that if the rich got richer, we'd all get richer. He ended up being wrong, but at least his "prize" made sense. The Mitt/GOP on the other hand, suggested that unless the rich were allowed to get richer, everything would go to hell in a handbasket. Li'l George's scheme at least offered up "promise". The Mitt/GOP's scheme was nothing but extortion.
 
This type of behavior is ancient. Human history has dealt with this before and it always ends in a revolution or a bloodbath. Capitalism is a new concept and in some places like Venezuela, extreme income disparity led to a peasant revolt. Why people worship at the altar of uncontrolled wealth accumulation is something that I cannot fathom. No one truly needs more than 100 million to secure for themselves and their heirs continuous prosperity for as far as they can imagine. Let us be generous and say a person could keep up to 1 billion before massive tax penalties apply. If this happened by a tax on wealth, income disparities created by the market or just plain luck would be limited to a figure that still insures an incredible standard of living for the rich while keeping the money earned beyond that amount available for the people themselves. The people create the money, they form the basis for confidence in an economy that protects the value of the money through their efforts, their support of the law, of private property, of government itself. I see nothing wrong with a wealth tax forcing liquidation of assets beyond 1 billion. If anyone tries to make a claim that the incentive for Bill Gates or the Waltons is diminished because they can only amass 1 billion then what they are really saying is that greed is a greater value or moral guide than any other value we cherish. I for one would be very pleased to have 1 billion dollars. Would 2 billion make my life any better? I doubt it very much and even if it did make my individual life better, why should the entire society be organized around my greedy impulses?
 

Days

Commentator
they used real money, so it was not possible to increase the supply beyond the actual wealth of the empire. Rome was very good at setting up trading posts with Germanic tribes and on other borders to regions that were difficult to control through the military. So the empire's money, influence, and trade went beyond its own borders. Rome conquered half again more lands with her money as they controlled by their military.
 

fairsheet

Senator
they used real money, so it was not possible to increase the supply beyond the actual wealth of the empire. Rome was very good at setting up trading posts with Germanic tribes and on other borders to regions that were difficult to control through the military. So the empire's money, influence, and trade went beyond its own borders. Rome conquered half again more lands with her money as they controlled by their military.
That's because Rome controlled the money supply....until it didn't. Once Rome had transferred enough of its "money" to the other, the other had no more need of Rome's good will.
 

degsme

Council Member
NS,

I am not sure what you mean by "wrong numbers." I realize that the numbers are "forecasts" and the forecasts can be rosy or bleak. Personally, I like to set up several scenarios and see how the numbers add up over several scenarios. I don't take any particular set of numbers as the gospel truth. That said, you can spot large-scale trends and those trends affect folks differently.
Well for example if the Social Security and Medicare "numbers" are predicated on it never being acceptable to fund them temporarily out of General Revenues - then you have already cooked certain assumptions into the mix.
 

degsme

Council Member
Nothing wrong with that idea. It would allow for some transparency.
Well there is something wrong with specified taxes - it essentially hamstrings the process of addressing short term critical issues that need a shifting of resources (Sandy for example)

But there has been a proposal that every tax return receive back a receipt that documents how much of your taxes went to what programs down to the penny level.
 
Simple solution to that one Degs, allow for them to borrow money for that purpose but force the interest on that loan into the same bucket.
 

degsme

Council Member
Simple solution to that one Degs, allow for them to borrow money for that purpose but force the interest on that loan into the same bucket.
Meaningless. Because if DoD can borrow money say from State and pay State interest, then State needs less next year and DoD more. The NET TAX BILL is the same. You end up creating a political incentive for cross-linked loans that completely obscure the true budgeting process in ways that makes today's budget look as clear as the water in Crater Lake.
 
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