Investors lose a trillion dollars in one day

[joeydb]

Originally Posted by Antitrust32

I think national parks should be kept through taxes also.

It wasn't an expansive list. You see where I was going - you need an element by element review of what is being spent on and whether that's legitimate or not.

You know - like a "budget" is - everywhere else in the world but Washington D.C.

[Danzig]

Originally Posted by joeydb

It wasn't an expansive list. You see where I was going - you need an element by element review of what is being spent on and whether that's legitimate or not.

You know - like a "budget" is - everywhere else in the world but Washington D.C.

discretionary spending is not the issue, and is not what is needed to fix the problems.

the biggest issue confronting the federal govt and the budget is their entitlement spending. ss, medicare and medicaid-the big three. they are eating up a major portion of the budget, and will only continue to grow. ignoring them is ignoring the biggest problem.
there must be reform-there needs to be changes made immediately. the # of credits required to be fully vested must be raised, the amount of money paid in isn't enough, pricing needs to be addressed, the age requirements to get full ss needs to change, the amount paid to people who retire before age 67 needs to be lowered, and people in a higher income bracket need to have their benefits reduced. if you retire before age 65 or 67 your money received should be reduced drastically. many people don't wait til age 65 to retire, or age 67, as there isn't much of a penalty if they retire earlier. brutal to some? perhaps? necessary to keep us going off a cliff? yes.
the current life expectancy is 74 for males, 81 for females. it's risen recently to those #'s, thus full retirement should be adjusted as well. there should be automatic increases built in to adjust any time expectancies go up.


also, keep in mind that when ss was begun, there weren't pension plans and 401ks, annuities and iras available. people are becoming more and more aware of aiding themselves in retirement. there needs to be a real investigation into just how much the ss portion of entitlements is still needed...will retirement income become less of a concern to coincide with the rising cost of medical needs? aren't we becoming more able to handle retirement income now and in future?


btw, anyone who bought life insurance before '08 needs to see their agent. your premiums should be adjusted to meet the new expectancies. but i'm sure they won't be calling you to discuss that!

[Danzig]

found this, but keep in mind this was all figured on the bush tax decreases expirig at the end of '10-so the scenarios would be that much worse.

http://www.cbo.gov/ftpdocs/102xx/doc...ter1.4.1.shtml

The Federal Budget Outlook Over the Long Run

Assessing the nation’s fiscal condition requires not only considering the current economic and budgetary circumstances but also analyzing what might happen over the long term if current laws and policies remained in place. Toward that end, the Congressional Budget Office (CBO) has prepared budgetary projections through 2080 under two different sets of assumptions about federal laws and policies. Those projections indicate that, under either set of assumptions, federal debt will continue to grow much faster than the economy over the long run.

Although long-term budget projections are highly uncertain, under any plausible scenario rising costs for health care and the aging of the U.S. population will cause federal spending to increase rapidly. Unless revenues increase just as rapidly, the rise in spending will produce growing budget deficits and accumulating debt. To keep deficits and debt from reaching levels that could cause substantial harm to the economy, policymakers will need to increase revenues significantly as a percentage of gross domestic product (GDP), decrease projected spending sharply, or implement some combination of the two.

and further down:

Returning the Budget to a Sustainable Path

How much would policies have to change to avoid unsustainable increases in government debt? A useful answer comes from looking at the so-called fiscal gap. The gap measures the immediate change in spending or revenues that would be necessary to produce the same debt-to-GDP ratio at the end of a given period as prevailed at the beginning of the period. Under the extended-baseline scenario, the fiscal gap would amount to 2.1 percent of GDP over the next 25 years and 3.2 percent of GDP over the next 75 years. In other words, under that scenario (ignoring the effects of debt on economic growth), an immediate and permanent reduction in spending or an immediate and permanent increase in revenues equal to 3.2 percent of GDP would be needed to create a sustainable fiscal path for the next three-quarters of a century. If the policy change was not immediate, the required percentage would be greater. The fiscal gap is much larger under the alternative fiscal scenario: 5.4 percent of GDP over the next 25 years and 8.1 percent over the next 75 years. (For information about how CBO makes those estimates, see Box 1-1.)


and so now, the change needs to be greater, as the tax cuts were extended. the longer we wait to take our medicine, the sicker we will be. if they don't want to increase those 'revenue enhancements' then the corrolating changes to outlays must be equal to that loss of revenue, else the problem continues to grow. if you have cancer, would you want your doctor to only cure half of it? what good would that do?

[Danzig]

more from the link above, but i hope anyone interested in this issue will read over the whole paper:


Long-term budget projections require a stable economic backdrop. For these projections, CBO assumed that even a large increase in federal debt would not affect economic growth or real rates of interest after the first 10 years.3 However, if debt actually increased as projected under either scenario, interest rates would be higher than otherwise and economic growth would be slower. The rising debt would reduce the size of the domestic capital stock (businesses’ equipment and structures as well as housing) and decrease U.S. ownership of assets in other countries while increasing foreign ownership of assets in the United States. Those changes would slow the growth of gross national product (GNP) and, as the debt burden rose, could eventually lead to a decline in economic output.4 The effects would be most striking under the alternative fiscal scenario. In CBO’s estimation, the increase in debt under that scenario would reduce the capital stock by more than 20 percent and real GNP by 9 percent in 2035, compared with the levels that would occur if the debt remained roughly at its current size relative to the economy. Under the extended-baseline scenario, federal debt would be less threatening in the near term but would lead to significant economic harm in the long run. Those economic effects mean that actual fiscal pressures under current laws and policies would be even greater than CBO’s long-term budget projections suggest, because slower growth would limit revenues and a smaller capital stock would imply higher interest rates on government debt and other financial instruments.

Holding down the spiraling levels of debt projected under either scenario could therefore result in significant economic benefits. However, accomplishing that goal would require some combination of substantial revenue increases and substantial spending decreases relative to current law. Those changes would have their own economic and social costs.

~again, this was from '09-so now the situation is even more dire, as we're two years past the point, the tax breaks didn't expire, and we're two years further into a sick economy.

[Danzig]

An alternative policy would be to hold the growth of spending in line with the growth of the economy. That approach would require significant changes in the Medicare and Medicaid programs. Many experts believe that a substantial share of spending on health care contributes little, if anything, to the overall health of the nation, so changes in government policy have the potential to yield large reductions in federal spending without harming health. However, translating that potential into reality would require tough choices. It would ultimately depend on policymakers’ willingness to put ongoing pressure on the health sector to achieve efficiencies in the delivery of health care.

Reducing other federal spending significantly below the baseline levels would be difficult as well. Spending on Social Security has risen from almost 4 percent of GDP in the 1970s to almost 5 percent today and will increase to 6 percent in 2035 as the baby boomers retire. Other nonhealth, noninterest spending averaged almost 14 percent of GDP in the 1970s but has shrunk to about 10 percent of GDP over the past 15 years—aside from the current burst of spending in response to the recession and the financial crisis. Such spending is projected to decline further over time in CBO’s 10-year baseline.

From a purely economic perspective, slowing the growth of spending would generally impose smaller costs than boosting tax rates, although that conclusion is somewhat sensitive to the specific measures that would be adopted. From a broader social perspective, citizens and policymakers need to judge the importance of various government programs and the costs of restraining spending on health care, retirement benefits, defense, and so on. That is, lower levels of spending would help address the fiscal sustainability problem, but society would have to make difficult choices about which programs to scale back. The difficulty of the choices notwithstanding, CBO’s long-term budget projections make clear that doing nothing is not an option: Legislation must ultimately be adopted that raises revenue or reduces spending or both. Moreover, delaying action simply exacerbates the challenge, as is discussed below

[Danzig]

Outlays for Medicare, Medicaid, and Social Security

Over the past 50 years, federal spending has increased as a percentage of GDP, and its composition has changed dramatically. Spending for mandatory programs has grown from about 30 percent of noninterest outlays in the early 1960s to about 60 percent in recent years. Most of that growth has been concentrated in the three largest entitlement programs: Medicare, Medicaid, and Social Security. Together, federal outlays for those three programs have accounted for roughly 45 percent of primary federal spending over the past 10 years, up from 25 percent in 1975.

In the future, projected growth in entitlement spending explains almost all of the projected growth in total noninterest spending—and the two big government health care programs largely drive that increase. Medicare and Medicaid are responsible for 80 percent of the growth in spending on the three largest entitlements over the next 25 years and for 90 percent of that growth by 2080 (see Table 1-3). CBO projects that net federal spending on Medicare and Medicaid will rise from about 5 percent of GDP in fiscal year 2009 to about 10 percent in 2035 and over 17 percent in 2080.5 Spending on Social Security is projected to rise at a much slower pace, from almost 5 percent of GDP in 2009 to about 6 percent in later years.

[Danzig]

Moreover, the fundamental cause of the rapidly rising debt in CBO’s long-term scenarios is not economic fluctuations resulting from business cycles. Instead, debt soars because of unrelenting growth in federal spending on health care programs and a rise in Social Security spending as a share of GDP, combined with a much smaller increase in tax revenues. The ever-greater budget deficits projected under those scenarios would negatively affect the economy through several channels. More government borrowing would drain the nation’s pool of savings, reducing investment in the domestic capital stock and in foreign assets. In addition, a worsening fiscal situation might put pressure on monetary policy, potentially endangering the Federal Reserve’s ability to keep inflation low and stable. If the budget continued along the path of rising debt, serious concerns about fiscal solvency would arise. Investors would require the government to pay an interest premium on its securities to compensate for the risk that they might not be repaid or that the value of their securities would be eroded by inflation. Such a premium would drive up the cost of borrowing. Finally, the longer the growth of debt persisted, the larger and more costly would be the policy changes needed to control debt, which could further increase the burden of fiscal tightening on future generations.

Most economists agree that greater government borrowing would raise interest rates and lead to greater private saving. But the offset would be far from complete, so national saving would decline.10 That decline would in turn reduce investment in the United States but not on a one-for-one basis (at least initially), because higher interest rates would attract foreign capital to the United States and perhaps induce U.S. investors to keep more of their money at home. As investment was displaced by government debt, GDP would grow more slowly and eventually decline. In the longer run, as the debt continued to grow and unless the interest premium was very large, capital would probably flee the United States, further reducing investment.