[kenberg]

As I get it, there has been an agreement to cut $38B from the budget, and the CBO has described it as, after adjusting for the gimmicks, really reducing spending by less than 1B. Whatever one's views on trimming the budget, honest numbers would be nice.

Robert Samuelson has an op ed piece today
http://www.washingto...N8vD_story.html
in which he criticizes both parties. Samuelson has an obsession about old people bankrupting the country through entitlements, but an idiot he is not. We have to deal with economic reality, and my trust in the powers that be is not high.

On my more pessimistic days I figure that since I am not poor, not a minority, not homosexual, not in need of an abortion, the Democrats have no interest in me. Since I am not rich, not a Christian Fundamentalist, not a devotee of Ayn Rand, the Republicans have no interest in me either. I prefer Les Paul to Ron Paul or Rand Paul and I prefer John Lennon to V. Lenin, Groucho Marx to Karl Marx. What's a guy to do?

Anyway, I am at a loss to see what should be done. Any thoughts?

[y66]

How about nothing?

According to Annie Lowrey, Congress can balance the budget in 8 years if they do nothing at all.

Quote

So how does doing nothing actually return the budget to health? The answer is that doing nothing allows all kinds of fiscal changes that politicians generally abhor to take effect automatically. First, doing nothing means the Bush tax cuts would expire, as scheduled, at the end of next year. That would cause a moderately progressive tax hike, and one that hits most families, including the middle class. The top marginal rate would rise from 35 percent to 39.6 percent, and some tax benefits for investment income would disappear. Additionally, a patch to keep the alternative minimum tax from hitting 20 million or so families would end. Second, the Patient Protection and Affordable Care Act, Obama's health care law, would proceed without getting repealed or defunded. The CBO believes that the plan would bend health care's cost curve downward, wrestling the rate of health care inflation back toward the general rate of inflation. Third, doing nothing would mean that Medicare starts paying doctors low, low rates. Congress would not pass anymore of the regular "doc fixes" that keep reimbursements high. Nothing else happens. Almost magically, everything evens out.

I suppose you could improve on this if you also cut defense spending, implement a public health care option modeled on the VA and let Medicare negotiate drug prices.

[hrothgar]

I'm squirreling money away. Long term, Costa Rica is sounding nice...

Simply put, the US is *****ed.
The populace no longer has the maturity necessary to deal with the issues confronting the country.
I'm expecting things to get real ugly...

As a practical example, look at the current debate over the budget.

I suspect that everyone knows what real long term budget reform looks like:

1. Single payer health care
2. Health care rationing for end of life care
3. Dramatically scale back defense spending
4. Simplifying the tax codes
4. Slash agricultural subsidies

Unfortunately, the country doesn't seem capable of even discussing these issues let alone implementing them

Add in a host of addition challenges related to the education system and climate change and we screwed.

[PassedOut]

y66, on 2011-April-18, 09:00, said:

According to Annie Lowrey, Congress can balance the budget in 8 years if they do nothing at all.

I suppose you could improve on this if you also cut defense spending, implement a public health care option modeled on the VA and let Medicare negotiate drug prices.

I certainly agree with letting the Bush tax cuts expire, but for reasons of both politics and fairness, the yearly alternative minimum tax and medicare doc fix problems demand a permanent solution.

Lots of things can be tweaked, but the bulk of the savings must come from reducing our obscenely bloated healthcare costs. Obama's healthcare reforms were the necessary first step, but much more can and must be done. The Post has a good piece on how Massachusetts is beginning to approach this: Massachusetts, pioneer of universal health care, now may try new approach to costs

Quote

The governor’s proposal builds on a surprising consensus among leaders from the state’s insurance and hospital industries, medical society, legislature and governor’s staff who served on a special state commission assigned to diagnose the culprit behind the soaring medical spending.

Fee-for-service medicine “is a primary contributor to escalating costs and pervasive problems of uneven quality,” the commission unanimously concluded in 2009.

In addtion to changing the fee-for-service paradigm, it is important to eliminate the incentives to perform tests merely for defensive purposes. And, as Richard says, heroic end-of-life care should be excluded from Medicare. I favor letting folks who want that heroic care to buy supplemental insurance to cover it.

[y66]

The graph all budget discussions should start with



and more discussion of the "do nothing" plan from Ezra Klein.

That new Massachusetts model sounds a lot like the Mayo Clinic model which is perhaps the most cost-effective high quality care model we have in the U.S. It would be something if the state that sent Scott Brown to the Senate could replicate that. Maybe they can do a trade with Minnesota.

[Winstonm]

There are various figures because what to include and exclude is subjective, but the averages for what the U.S. spends annually on all aspects of defense comes in at $1 Trillion.

The only way to get the budget under control is the big three: social security, medicare, and defense.

My vote is to eliminate 95% of defense spending, create single payer healthcare, and call it a day.

PS: I could be convinced of a do nothing solution provided that doing nothing included not sending troops and weapons overseas, not starting wars we can't afford, and not spending money on obsolete weapons systems geared to fight a phantom U.S.S.R.

[barmar]

I'm all for cutting defense spending, but I wonder: how many people are employed by the DoD, and all the businesses that support it? Wouldn't cutting 95% of defense spending result in monstrous layoffs across just about every industry? Is this a "damned if you do, damned if you don't" situation? Can someone quantify how much we're damned in each case?

[kenberg]

I started this thread before the stuff about possibly downgrading our credit rating appeared, but perhaps that will be a spur.

"Doing nothing" is clever phrasing that conceals some real decision making. For example, letting the tax cuts expire would not be seen by many as doing nothing.

Some things I would like:

The tax rates will go up. Yes that includes me. We all live in this country.

Numbers become honest. I don't plan on becoming an expert on the doc fix, but the need for it is clearly a symptom of budget planning by bullshit.

For military needs, it would be a great step forward if every proposal to go to war would come with an honest budget. Wars always come in over budget and accomplish less than planned,but surely we can do better.

We have to have a serious and difficult discussion about medical costs. For example: A friend recently came home from a forty day stay in the hospital. Like me, he has good insurance. What do we believe should happen if someone does not have good insurance?

Of course we should find ways to reduce spending. Easier said than done.

[cherdano]

barmar, on 2011-April-18, 19:21, said:

I'm all for cutting defense spending, but I wonder: how many people are employed by the DoD, and all the businesses that support it? Wouldn't cutting 95% of defense spending result in monstrous layoffs across just about every industry? Is this a "damned if you do, damned if you don't" situation? Can someone quantify how much we're damned in each case?

Of course, the same is true for any form of government spending (and indeed that's a good reason to keep running a deficit while unemployment is lingering around 9%).
Nevertheless, it would be more useful to pay people to do something productive (like improving infrastructure or teaching high school kids or driving busses) than to pay them to produce weapons that we don't need (except for engaging in civil wars in Norther Africa).

[hrothgar]

barmar, on 2011-April-18, 19:21, said:

I'm all for cutting defense spending, but I wonder: how many people are employed by the DoD, and all the businesses that support it? Wouldn't cutting 95% of defense spending result in monstrous layoffs across just about every industry? Is this a "damned if you do, damned if you don't" situation? Can someone quantify how much we're damned in each case?

Back in the weird old days, when I studied macro, folks spent a lot of time and effort modeling the multiplier effect from different types of government spending.

If I spend a billion dollars on education, it will create an X billion dollar increase in GNP
If I spend a billion dollars on transportation, it will create a Y billion dollar increase in GNP

As I recall:

Investment in education had a very high multiplier effect, however, there were lots of inter-temporal issues. (Education spending is a great way to boost your GNP in 20 years time, but not so great today)

Infrastructure investment (public works products) were one of the best investments all around. Lots of jobs get created in the short term, and you end up with durable assets that will serve you for years. Take a look at China where the port / rail infrastructure is starting to become a more significant differentiator than wage differentials...

Defense spending had a VERY small multiplier...

If you're going to start slashing the budget and a primary concern is minimizing the impact on GNP is the short/medium term defense spending is one of the best ways to go.

[PassedOut]

To see how much a US taxpayer pays for federal government services and programs, the online Federal Taxpayer Receipt gives the breakdowns.

[blackshoe]

kenberg, on 2011-April-19, 09:57, said:

For military needs, it would be a great step forward if every proposal to go to war would come with an honest budget. Wars always come in over budget and accomplish less than planned,but surely we can do better.

Probably. OTOH, often (although I'll grant not often enough) how much it's going to cost is not really an immediate concern. For example, I doubt anyone in the US gave much thought, on December 8, 1941, to how much going to war with Japan was going to cost.

It seems to me that a large part of the problem is that we have a hammer (a large standing army) so a lot of things look like nails that maybe shouldn't be treated as such.

[kenberg]

I certainly agree about the war with Japan, but that war is totally different from what we do today. The entire country went into war with the intention of totally destroying the Axis powers. An early memory (I have said this before I know) was a Halloween bonfire with Hitler, Mussolini and Hirohito being burned in effigy while all us four year olds yelled such things as, hey there goes his arm. For better or for worse, we now fight battles with exit strategies and limited objectives. One of the objectives should be to stay solvent.

[luke warm]

blackshoe, on 2011-April-19, 15:13, said:

It seems to me that a large part of the problem is that we have a hammer (a large standing army) so a lot of things look like nails that maybe shouldn't be treated as such.

yep, that'll be the first thing to do when i'm dictator... well, except for my own relatively small private army

[blackshoe]

Oh, I think we're in agreement mostly, Ken. All I'm saying is we should have fewer "we have the hammer, so let's go bang it somewhere" wars, and more "those evil SOBs attacked us! Now they're in for it!" wars. Well, not "more" in an absolute sense, just relative to the "I have a hammer" ones.

It takes a year or so to train an infantryman. It takes a couple to train a SpecOps soldier. It may take longer to train some technicians. There should be an incentive* to young folks to take such training, and perhaps periodic refresher training, but we don't need a large standing army, with bases all over the world. We need a Navy and Marine Corps capable of dealing with things like piracy, or protecting our interests and people ashore (I'm not talking about fighting the Soviet Union here, or even China, more going in and getting our people out of troubles, that kind of thing). We need an infrastructure capable of supporting a quick "ramp up" to war — which we had before WWII, but I'm not sure we have it now. Too much "out-sourcing". It's not a simple problem - and it's not made any easier by the fact that those who favor the "status quo" will drag their feet and do whatever else they can think of to prevent change.

*Heinlein suggested a couple of things: only "veterans" get police/fire (and possibly other) jobs; only veterans get to vote. Not sure those (particularly the latter) would work in our society, but I suppose they provide a starting point for discussion.

[hrothgar]

blackshoe, on 2011-April-19, 16:09, said:

Heinlein suggested a couple of things: only "veterans" get police/fire (and possibly other) jobs; only veterans get to vote. Not sure those (particularly the latter) would work in our society, but I suppose they provide a starting point for discussion.

I have a lot of friend's who went through the military.

Many of them recount horror stories regarding recruit training, especially regarding attempts to "break" individuals.

I understand why this might be necessary for a functioning military.
I am horrified at the suggestion that large portions of a society should be subjected to the same types of procedures.
The thought that the only people who get to vote are the ones who have gone through psychological conditioning seems a wee bit problematic.

I have some sympathy for Heinlein's writing... It would be lovely if everyone who participated in politics had the following attitude:

Quote

Citizenship is an attitude, a state of mind, an emotional conviction that the whole is greater than the part...and that the part should be humbly proud to sacrifice itself that the whole may live.

I considered enlisting in the Army after grad school (At the time, it was one of the few places to put a game theory degree to "practical" use)

In my case "service" had nothing to do with considering to enlist. "Opportunity", on the other hand, mattered a lot.
I don't think that I am that far from the norm... (And I know a lot of military and ex military)

[Winstonm]

Richard,

If you would comment on the following - I have heard this quoted before and grabbed it from a quick Google search for Military Keynsianism. I can't vouch for the website I found it on - seems it was on a number of different sites.

Quote

On May 1, 2007, the Center for Economic and Policy Research of Washington, D.C., released a study prepared by the global forecasting company Global Insight on the long-term economic impact of increased military spending. Guided by economist Dean Baker, this research showed that, after an initial demand stimulus, by about the sixth year the effect of increased military spending turns negative. Needless to say, the U.S. economy has had to cope with growing defense spending for more than 60 years. He found that, after 10 years of higher defense spending, there would be 464,000 fewer jobs than in a baseline scenario that involved lower defense spending.

Baker concluded:


"It is often believed that wars and military spending increases are good for the economy. In fact, most economic models show that military spending diverts resources from productive uses, such as consumption and investment, and ultimately slows economic growth and reduces employment."

[hrothgar]

Winstonm, on 2011-April-19, 17:07, said:

Richard,

If you would comment on the following - I have heard this quoted before and grabbed it from a quick Google search for Military Keynsianism. I can't vouch for the website I found it on - seems it was on a number of different sites.

Hi Winston

I suspect that this has to do with the same type of inter-temporal dynamics that I referenced with respect to education...
(Doesn't give you much bang for the buck today, but 20 years from now you're glad that you did it)

Sounds like this study is claiming that military spending is the converse.
Nice in the short term, not so good 6 years down the road.

Most analysis of multiplier effects have a relatively short time horizon.

We increase government spending by $X today, we look at the increase in GNP / GDP the following year.
Using this type of measure, investments in military spending have a positive impact on the economy in the short term.

The analysis that you are reference is probably attempting to model the opportunity cost associate with military spending and conducting a long term analysis.

The core trade off probably involves

1. A relatively large base GDP with a relatively small growth rate
2. A relatively small base GDP with a relatively large growth rate

If you have a short planning horizon, you prefer option 1
If you have a long planing horizon, you prefer option 2

I'm sympathetic to the argument, however, its a very tricky case to make.

Many inter-temporal models involve rational expectation type arguments that claim that Kenysian type stimulus programs don't have any real effect on the economy.
Its interesting to see this counter example.

[Winstonm]

hrothgar, on 2011-April-19, 18:21, said:

Hi Winston

I suspect that this has to do with the same type of inter-temporal dynamics that I referenced with respect to education...
(Doesn't give you much bang for the buck today, but 20 years from now you're glad that you did it)

Sounds like this study is claiming that military spending is the converse.
Nice in the short term, not so good 6 years down the road.

Most analysis of multiplier effects have a relatively short time horizon.

We increase government spending by $X today, we look at the increase in GNP / GDP the following year.
Using this type of measure, investments in military spending have a positive impact on the economy in the short term.

The analysis that you are reference is probably attempting to model the opportunity cost associate with military spending and conducting a long term analysis.

The core trade off probably involves

1. A relatively large base GDP with a relatively small growth rate
2. A relatively small base GDP with a relatively large growth rate

If you have a short planning horizon, you prefer option 1
If you have a long planing horizon, you prefer option 2

I'm sympathetic to the argument, however, its a very tricky case to make.

Many inter-temporal models involve rational expectation type arguments that claim that Kenysian type stimulus programs don't have any real effect on the economy.
Its interesting to see this counter example.

Thank you, Richard

[blackshoe]

There is a discussion in Starship Troopers (in one of Rico's classes in "History and Moral Philosophy") about why their system was set up so that only veterans got the vote. I don't remember all the details, I'll have to see if I can dig it up. IIRC, the "answer" was similar to what you quoted, Richard, about citizenship, and not because of any "psychological conditioning".

I just finished one of J.D. Robb's crime novels (Treachery in Death) in which one of the bad guys was ex-military, of just the type you fear. He followed orders, without question, even when the orders were to kill people (he was a cop, and he was told to kill other cops, so he did it, no questions asked). But there's that thing our Founders talked about - an informed electorate. Rico's society's emphasis on studying "History and Moral Philosophy" was supposed to provide an electorate whose members would do the morally correct thing, rather than simply following orders. Granted it's an ideal, and maybe (probably?) not achievable in the real world, but like you I keep thinking "it sure would be nice if..."

I tend to mistrust anything with the word "Keynesian" attached to it, but I have to admit the argument that, long term, ever increasing military spending is a Bad Thing™ seems to make some sense to me.