Strands in the Tapestry: the Business, Economics, and Tax Policy Thread

[Rover]

Why has the price of gold, which is still commonly regarded as a standard for which currencies are valued (although not legally accepted as reserve since Switzerland dropped the standard in 2000, despite Donald Trump using it to pay for some real estate), skyrocketed in the past ten or so years?

Because of gold sellers taking advantage of whack job survivalists who think we'll all have to barter for food with gold in the next couple of years once Obama institutes his secret plan for the United States.

Its sorta like how sh !tty bands like Creed or Nickleback sell records for a short time, and then the next year they're doing gigs like high school proms. Its a fad. It happens.

 

[FlagDUDE08]

Re: Strands in the Tapestry: the Business, Economics, and Tax Policy Thread

Which must be why we're seeing double digit rates in our bonds, bills, and notes?

The nominal rates are being artificially set. They were also nominally set this low during the Great Depression.

 

[SJHovey]

Re: Strands in the Tapestry: the Business, Economics, and Tax Policy Thread

Why has the price of gold, which is still commonly regarded as a standard for which currencies are valued (although not legally accepted as reserve since Switzerland dropped the standard in 2000, despite Donald Trump using it to pay for some real estate), skyrocketed in the past ten or so years?

Why are there people in Missouri who have buried container boxes with two gallon cans of beans in them? I would suggest the answer to both questions is fear. Some people will always be afraid. Sometimes they're right. Usually it turns out to be irrational.

Since 9/11 especially I think a higher number of people have sought to put their money into things they perceive to be the bedrock of value, like gold. Coupled with guys like John Paulson making a play (although I thought I heard he was starting to liquidate his position in gold) and the price goes up.

 

[dxmnkd316]

Re: Strands in the Tapestry: the Business, Economics, and Tax Policy Thread

People advocating massive spending cuts are completely oblivious or willfully stupid over what's happening in Europe as we write. Hard right austerity has had catastrophic results. Negative growth. Double dip recessions. Higher unemployment. Social unrest. You name it, and its occured even in historically stable countries such as Great Britain.

Given the relatively lower unemployment in the US vs those countries, and the fact that the main source of income for most retirees is a paid for program for the next 30 years (Social Security), the US needs to achieve 5T, of 500Bn a year in deficit reductions over the next 10 years. Do that and the investment community will put their $'s back in the US as the world's most stable economy given the EU troubles and China's crumbling business model of cheap slave labor (apparently the slave laborers in Vietnam and Cambodia charge less now).

So, raise taxes on wealthy, get rid of payroll deduction tax (worthwhile but can be scaled back now), put capital gains taxes back up to 20% and broaden tax base by limiting deductions. This should raise 2T easily. 1T cut in war/defense spending plus another 1T in domestic non-entitlement spending gets us to 4T. Get the rest from Medicare/Medicaid savings in the form of fraud crackdown, tort reform, and better cost management.

Now that doesn't solve the whole deficit, and we can't count on economic growth the fill the approx 5T gap. That comes from means testing entitlements and possibly raising age of eligibility. This is STEP 2 once the first is accomplished.

Finally, people slavishly devoted to Grover from Sesame Street Norquist are idiots or have no balls. I heard the guy interviewed yesterday and he's living in his own world. Somehow despite the fact that Obama was overwhelmingly re-elected, Dems gained seats in the Senate and House, and more people voted for House Dems than GOP ones meaning the party exists as a majority solely due to gerrymandering, Grover still thinks the public is against tax hikes for the rich. Oooookaaayyyy...go back to your street corner and tell Big Bird we said hi.

Disagree here. We need to raise the SS age to 67(ish) and start indexing it to the average life expectancy. We also need to cap social security payments to those with $x million in total assets (not sure how this would work but we shouldn't be paying SS to those who don't need it). You aren't going to get defense cuts without entitlement cuts. Especially when SS and Medicare cost $1.8 trillion compared to $620 billion for defense.

So, I'm not sure how you're going to get $1 trillion from defense when spending is only $620 billion.

http://www.nytimes.com/interactive/2012/02/13/us/politics/2013-budget-proposal-graphic.html

 

[FreshFish]

Re: Strands in the Tapestry: the Business, Economics, and Tax Policy Thread

While I consider most of the people who post here to be more thoughtful and insightful than the typical politician, it is revealing in how many people repeat the same misidentification of the situation, the apparent inability to distinguish between tax revenue and tax rate.

C'mon folks, doesn't it make sense that generally speaking a lower percentage of a higher base is usually preferable to a higher percentage of a lower base?

It seems to me that the most important question to ask about any proposed tax policy is this: how will it affect economic activity? The "best" tax is one that will not distort rational decision making by deflecting it away from "what's the best use of money?" to "what's the best after-tax use of money?" Back in the "bad old days" before 1982, people would deliberately purchase "investments" that they knew would lose money on a pre-tax basis because the tax benefits of the "investment" exceeded the money that they lost.

To take a brief detour to introduce an important practice within the US to highlight how ridiculous it is for the US to ignore it when dealing with international business:

Every state in the US that has a state income tax requires non-residents to pay income tax earned while working within that state (which makes life particularly complicated for pro athletes and touring entertainers! they have to file multiple state income tax returns). However, their state of residence, if it also has a state income tax, gives them a credit for tax paid to another jurisdiction (capped at what they would have paid had they earned it within their home state). There was a court case in NY involving Derek Jeter last year, he claims FL as his home state (no state income tax there; he won by the way).

More later I have to go now and edit in a few minutes.

 

[FlagDUDE08]

Re: Strands in the Tapestry: the Business, Economics, and Tax Policy Thread

Disagree here. We need to raise the SS age to 67(ish) and start indexing it to the average life expectancy. We also need to cap social security payments to those with $x million in total assets (not sure how this would work but we shouldn't be paying SS to those who don't need it). You aren't going to get defense cuts without entitlement cuts. Especially when SS and Medicare cost $1.8 trillion compared to $620 billion for defense.

So, I'm not sure how you're going to get $1 trillion from defense when spending is only $620 billion.

http://www.nytimes.com/interactive/2012/02/13/us/politics/2013-budget-proposal-graphic.html

It's a talking point.

One thing that isn't seen that I would like to know is the income proposed to be collected, as well as actuals from 2011 (When did the payroll tax decline come again?). If certain people are going to be championing the fact that certain entitlements pay for themselves, I'd like to see some numbers on that, as well as how those specific funds are actually being distributed. Is the government generating interest on spare SS/Medicare money, or is it being distributed somewhere else?

 

[Rover]

Disagree here. We need to raise the SS age to 67(ish) and start indexing it to the average life expectancy. We also need to cap social security payments to those with $x million in total assets (not sure how this would work but we shouldn't be paying SS to those who don't need it). You aren't going to get defense cuts without entitlement cuts. Especially when SS and Medicare cost $1.8 trillion compared to $620 billion for defense.

So, I'm not sure how you're going to get $1 trillion from defense when spending is only $620 billion.

http://www.nytimes.com/interactive/2012/02/13/us/politics/2013-budget-proposal-graphic.html

I think you may have misread my post. 1T in defense is over 10 years which is usally the timeframe used. So, 100Bn a year out of the 600Bn a year program.

Next, by law you can easily get defense cuts without entitlement changes, because if you don't reach agreement that's what happens on Jan 1st (sequestration). That leaves Obama in a much stronger position than he'd normally be in, and its something the pundidiotocricy tends to overlook as well as righties who want to go back to the framework from the debt ceiling fight while ignoring that the leverage in this stand off has completely changed.

Finally with Social Security, it might already be going up to 67 from the current 66 but if not that's fine by me. I also like the idea being thrown about of indexing the cost of living to a lower growth rate although that should not be part of the deficit negotiations. Means testing is fine too but I want to reiterate that Social Security has nothing to do with our current deficit. Its a fully funded program and will be for awhile with a dedicated income source. Not to say some tweaks won't be needed, but in the here and now its not a problem.

 

[SJHovey]

Re: Strands in the Tapestry: the Business, Economics, and Tax Policy Thread

Disagree here. We need to raise the SS age to 67(ish) and start indexing it to the average life expectancy. We also need to cap social security payments to those with $x million in total assets (not sure how this would work but we shouldn't be paying SS to those who don't need it). You aren't going to get defense cuts without entitlement cuts. Especially when SS and Medicare cost $1.8 trillion compared to $620 billion for defense.

So, I'm not sure how you're going to get $1 trillion from defense when spending is only $620 billion.

http://www.nytimes.com/interactive/2012/02/13/us/politics/2013-budget-proposal-graphic.html

I'm really curious how much in social security benefits we spend on people with say more than $5 million in assets, or who have more than $250,000 annually in income, just to pick some arbitrary numbers.

It's absolutely silly that we have a system that would write a social security check to Warren Buffett.

My old business partner, who is now 84 years old, gets his monthly social security check. He's a pretty staunch conservative, easily worth more than $25 million, and just shakes his head at the concept that he would get such a check. Obviously he doesn't turn it down, because he's not an idiot. But people who think we'd see the uber-wealthy at the gates with pitchforks and torches if we changed the rules to cut them out are simply wrong.

 

[FlagDUDE08]

Re: Strands in the Tapestry: the Business, Economics, and Tax Policy Thread

I'm really curious how much in social security benefits we spend on people with say more than $5 million in assets, or who have more than $250,000 annually in income, just to pick some arbitrary numbers.

It's absolutely silly that we have a system that would write a social security check to Warren Buffett.

My old business partner, who is now 84 years old, gets his monthly social security check. He's a pretty staunch conservative, easily worth more than $25 million, and just shakes his head at the concept that he would get such a check. Obviously he doesn't turn it down, because he's not an idiot. But people who think we'd see the uber-wealthy at the gates with pitchforks and torches if we changed the rules to cut them out are simply wrong.

When watching "I've Got a Secret" back when it was on GSN (they probably wouldn't show it any longer, or at least the earlier episodes because they were sponsored by tobacco products), they mentioned that Col. Harlon Sanders used a SS check to create KFC, and then when he re-retired, started to collect again. It's a fun fact regarding Social Security, but it does bring up something interesting: The Colonel's collection amount did not change because of his level of income, but by the standard of living amount that everyone else received. To address your question of how much would be saved, and to borrow a euphemism from certain hippies that had notoriety in 2011, I'd say about 1% of the payments are going to them. If you cut their payments, you aren't going to make enough of a dent in the spending.

BTW, here's that portion of the episode, in case anyone is interested:

<iframe width="420" height="315" src="http://www.youtube.com/embed/Gk2HaAIqS3g" frameborder="0" allowfullscreen></iframe>

 

[dxmnkd316]

Re: Strands in the Tapestry: the Business, Economics, and Tax Policy Thread

I think you may have misread my post. 1T in defense is over 10 years which is usally the timeframe used. So, 100Bn a year out of the 600Bn a year program.

Next, by law you can easily get defense cuts without entitlement changes, because if you don't reach agreement that's what happens on Jan 1st (sequestration). That leaves Obama in a much stronger position than he'd normally be in, and its something the pundidiotocricy tends to overlook as well as righties who want to go back to the framework from the debt ceiling fight while ignoring that the leverage in this stand off has completely changed.

Finally with Social Security, it might already be going up to 67 from the current 66 but if not that's fine by me. I also like the idea being thrown about of indexing the cost of living to a lower growth rate although that should not be part of the deficit negotiations. Means testing is fine too but I want to reiterate that Social Security has nothing to do with our current deficit. Its a fully funded program and will be for awhile with a dedicated income source. Not to say some tweaks won't be needed, but in the here and now its not a problem.

My mistake on the 10-year timeframe. I think that's reasonable.

Regarding the legality of the cuts, I didn't mean to imply we couldn't have one without the other. I'm saying it just isn't going to happen on a "grand compromise" bill.

The problem with your last paragraph is that when 50% of your budget comes from entitlements, it is part of the problem. It doesn't matter if it's fully funded or not. It will be insolvent eventually. If it's not fixed, it will be a problem and a problem with a price tag in the trillions of dollars. We can cut and cut and cut to our heart's desire. But eventually, it's going to need to be cut.

I'm really curious how much in social security benefits we spend on people with say more than $5 million in assets, or who have more than $250,000 annually in income, just to pick some arbitrary numbers.

It's absolutely silly that we have a system that would write a social security check to Warren Buffett.

My old business partner, who is now 84 years old, gets his monthly social security check. He's a pretty staunch conservative, easily worth more than $25 million, and just shakes his head at the concept that he would get such a check. Obviously he doesn't turn it down, because he's not an idiot. But people who think we'd see the uber-wealthy at the gates with pitchforks and torches if we changed the rules to cut them out are simply wrong.

Completely agree. Not sure where to get detailed (and reliable) information on this...

 

[SJHovey]

Re: Strands in the Tapestry: the Business, Economics, and Tax Policy Thread

When watching "I've Got a Secret" back when it was on GSN (they probably wouldn't show it any longer, or at least the earlier episodes because they were sponsored by tobacco products), they mentioned that Col. Harlon Sanders used a SS check to create KFC, and then when he re-retired, started to collect again. It's a fun fact regarding Social Security, but it does bring up something interesting: The Colonel's collection amount did not change because of his level of income, but by the standard of living amount that everyone else received. To address your question of how much would be saved, and to borrow a euphemism from certain hippies that had notoriety in 2011, I'd say about 1% of the payments are going to them. If you cut their payments, you aren't going to make enough of a dent in the spending.

BTW, here's that portion of the episode, in case anyone is interested:

<iframe width="420" height="315" src="http://www.youtube.com/embed/Gk2HaAIqS3g" frameborder="0" allowfullscreen></iframe>

Even if your guess of 1% is right, that's still about $6 billion. Not enough to balance the budget. But jeez, $6 billion here, $6 billion there, like the man said, pretty soon you're talking real money.

 

[dxmnkd316]

Re: Strands in the Tapestry: the Business, Economics, and Tax Policy Thread

That's why I hate dismissing any cut with an annual savings over $1 billion (in some cases, even less than that). It starts to add up.

 

[Rover]

Re: Strands in the Tapestry: the Business, Economics, and Tax Policy Thread

In fairness on Social Security, you could set up a system where above a certain investable asset level (meaning excluding your house and property) you only get back what you put in. May not save a ton, but its real money. Some harmless tweaks like this one and slowing the growth rate of the benefits will do wonders as well as raising the retirement age over time.

In other news:

A new Pew Research poll finds that when it comes to the reaching an agreement to avoid the fiscal cliff, 55% say President Obama is making a serious effort to work with Republicans. But just 32% say Republican leaders are making a serious effort to work with Obama on a deficit deal.

Also interesting: Obama's first post-reelection job approval rating has risen to 55%, up five points since July and 11 points since the start of the year. His job rating is markedly higher than President George W. Bush's first job measure (48%) after he won reelection in 2004.

In contrast, just 25% approve of the way Republican leaders in Congress are doing their jobs, while 40% approve of Democratic leaders' job performance.

--------------------------------------------------------------------------

Looks like the ship has sailed on the GOP. I predict after making a deal The Boner ends up resigning as Speaker. No way Ryan or Cantor support tax hikes even with current polling. Boehner has been in Congress for 30 years now and he probably sees the writing on the wall. If he needs 200 Dems (assuming after the new Congress is seated) and can only deliver 18 Republicans, most likely made up of either people who know they're not running again + GOP reps in Obama districts, there's not a lot of point to having him as party leader.

 

[MinnFan]

Re: Strands in the Tapestry: the Business, Economics, and Tax Policy Thread

I'm really curious how much in social security benefits we spend on people with say more than $5 million in assets, or who have more than $250,000 annually in income, just to pick some arbitrary numbers.

It's absolutely silly that we have a system that would write a social security check to Warren Buffett.

My old business partner, who is now 84 years old, gets his monthly social security check. He's a pretty staunch conservative, easily worth more than $25 million, and just shakes his head at the concept that he would get such a check. Obviously he doesn't turn it down, because he's not an idiot. But people who think we'd see the uber-wealthy at the gates with pitchforks and torches if we changed the rules to cut them out are simply wrong.

While I don't like the idea of making SS a progressive tax, I could get on board with this if the income caps remain in place (and go up with inflation) and the rate is locked in. Without those barriers you would wind up with what we have with the income tax.

 

[dxmnkd316]

Re: Strands in the Tapestry: the Business, Economics, and Tax Policy Thread

Why keep the income caps?

 

[FlagDUDE08]

Re: Strands in the Tapestry: the Business, Economics, and Tax Policy Thread

In fairness on Social Security, you could set up a system where above a certain investable asset level (meaning excluding your house and property) you only get back what you put in. May not save a ton, but its real money. Some harmless tweaks like this one and slowing the growth rate of the benefits will do wonders as well as raising the retirement age over time.

There's only one issue with this: On average, people are only getting back about 90% of what they put into the SS fund. It's been cited several times on here. Now, if you'd like to consider doing what NYS does with the standard deduction when it comes to the benefits paid (hint: NYS's standard deduction is soon to change for the first time since 1986), it's an interesting method of using inflation to your advantage, but then you are dependent upon a country's currency being inflated (which is happening in the short term), but it isn't a long-term solution.

 

[MinnFan]

Re: Strands in the Tapestry: the Business, Economics, and Tax Policy Thread

Why keep the income caps?

Because SS is not supposed to be a progressive tax. As it is, the rich already recieve less than they put in.

 

[Rover]

There's only one issue with this: On average, people are only getting back about 90% of what they put into the SS fund. It's been cited several times on here. Now, if you'd like to consider doing what NYS does with the standard deduction when it comes to the benefits paid (hint: NYS's standard deduction is soon to change for the first time since 1986), it's an interesting method of using inflation to your advantage, but then you are dependent upon a country's currency being inflated (which is happening in the short term), but it isn't a long-term solution.

Didn't know that and it makes me curious. Why then is the system supposed to going bankrupt if 1) people are only drawing 90% of the total funds contributed, and 2) while the ratio of workers to retirees has gotten lower, there are still far more workers than retirees (maybe 3 for every 1?). My thought was that people were taking in more than they contributed on average, hence the problem or perhaps that's projected to happen in the future as people live longer???

 

[FlagDUDE08]

Re: Strands in the Tapestry: the Business, Economics, and Tax Policy Thread

Didn't know that and it makes me curious. Why then is the system supposed to going bankrupt if 1) people are only drawing 90% of the total funds contributed, and 2) while the ratio of workers to retirees has gotten lower, there are still far more workers than retirees (maybe 3 for every 1?). My thought was that people were taking in more than they contributed on average, hence the problem or perhaps that's projected to happen in the future as people live longer???

My hypothesis is one of two things: One (and is probably the reasoning behind GWB's report of this during a State of the Union address), the ratio of workers to retirees is expected to drastically change now that the baby boomer generation is about to reach retirement age. Two, and is the reason why I asked this question earlier for some proof on this, is concerns that the surpluses are not being invested in order to account for helping against these unrealised debts, and are instead being used to attempt to balance the budget (which we know Clinton AND Dubya did, I don't know if others did or do though). If we're going to claim that it funds itself, then you truly need to keep the funding separate. The income from SS goes ONLY to SS, and anything extra goes ONLY to either a bank account or treasuries in order to collect interest, and then that money is used only for social security funding. As a good example, consider Harvard's endowment fund. According to someone I met during an ECAC hockey game, the interest generated from Harvard's endowment fund is enough to pay for everyone's tuition at that university. Why couldn't we look to do the same for Social Security?

 

[FreshFish]

Re: Strands in the Tapestry: the Business, Economics, and Tax Policy Thread

Why keep the income caps?

Why honor any act of reciprocity when it becomes inconvenient for you to keep your word? (not "you" personally, "you" generically...)

There is a cap on income that is included in the benefit formula. that same cap applies to income upon which the tax is assessed. T^t for tat.

You want to reject half of a deal while keeping the other half of the deal in place because you forgot a deal was made in the first place?

100% of the so-called Social Security "trust" fund is already "invested" in US government bonds which have to be honored by the "full faith and credit" of the US treasury.


Right now, Social Security tax revenue that comes in on Monday is mailed out as benefits on Thursday, and the shortfall is made up from interest on the bonds.




An alternate solution might be just to acknowledge economic reality and drop the distinction between Social Security tax, Medicare tax, and income tax. It all goes into the same big pot and out again anyway.