Rod Dreher

Rod Dreher


Old people have to save America

posted by Rod Dreher

The most depressing bit of news out of Washington I heard recently was that the president couldn’t get Congress to come up with a bipartisan commission on debt reduction. The Republicans refuse to talk about tax increases, and the Democrats refuse to talk about cutting social spending. Result: gridlock. David Sanger writes that America’s spendthriftiness, combined with the political paralysis that keeps America from dealing with our indebtedness problem, will likely herald the decline of American power. Excerpt:

Unless miraculous growth, or miraculous political compromises, creates some unforeseen change over the next decade, there is virtually no room for new domestic initiatives for Mr. Obama or his successors. Beyond that lies the possibility that the United States could begin to suffer the same disease that has afflicted Japan over the past decade. As debt grew more rapidly than income, that country’s influence around the world eroded.
Or, as Mr. Obama’s chief economic adviser, Lawrence H. Summers, used to ask before he entered government a year ago, “How long can the world’s biggest borrower remain the world’s biggest power?”

David Brooks writes today that older Americans, who are consuming a vastly disproportionate share of federal revenue ($7 for each dollar spent on children), are the only ones in a position to save the country from itself. He says:

Spontaneous social movements can make the unthinkable thinkable, and they can do it quickly. It now seems clear that the only way the U.S. is going to avoid an economic crisis is if the oldsters take it upon themselves to arise and force change. The young lack the political power. Only the old can lead a generativity revolution — millions of people demanding changes in health care spending and the retirement age to make life better for their grandchildren.
It may seem unrealistic — to expect a generation to organize around the cause of nonselfishness. But in the private sphere, you see it every day. Old people now have the time, the energy and, with the Internet, the tools to organize.
The elderly. They are our future.

Good luck with that.



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Liam

posted February 2, 2010 at 9:15 am


Consider how many tea-partiers are people receiving Medicare and/or veteran’s benefits, and how readily they were aroused to oppose even something like cuts in the Medicare Advantage programs by people who ostensibly want greater fiscal discipline (but in fact only care about fiscal discipline as a talking point). Actually, Democrats did propose social spending cuts, and they were taken to the cleaners by Republicans for the effort. Gee, thanks.
What really is the case is that middle class Americans (which everyone conceives themselves as, even rich Americans) do not want the undeserving to get anything they cannot get. Undeserving is defined as “anyone not like me.”



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Mercer

posted February 2, 2010 at 9:24 am


I think Brooks by looking at federal spending but ignoring state and local spending is writing nonsense. My state spends 10k a year per student. That is plenty of money for schooling.
The federal budget is a mess because politicians are reluctant to set priorities. The federal government can’t do everything at our current level of taxation. Taxes will have to be raised and some programs curtailed. Bush and his party were terrible at this. By launching two wars, the biggest spending program in forty years and cutting taxes at the same time he destroyed any chance of a balanced budget any time soon.
At least Obama is saying we can’t go to Mars and fight in our Asian wars forever. Part of his health plan is to have more research on expensive drugs and other medical treatments before Medicare pays for them. This has been branded as death panels. Medicare is the fastest growing part of federal spending. If people don’t like his method they should suggest another way to restrain Medicare cost growth.



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Marylou

posted February 2, 2010 at 9:37 am


Mercer you sound like you don’t plan on getting old. It’s not up to government to say who lives or dies, It’s in the hands of God.



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GingerMan

posted February 2, 2010 at 9:54 am


It’s not up to government to say who lives or dies, It’s in the hands of God.
Well, just send the Medicare bill to him them. I mean seriously, I don’t mean to demean your faith, but the fiscal issues facing the country are real and Mercer’s comments should be totally within bounds of political consideration (not saying that I endorse them per se).
Saying that government has no right to say who lives or dies (and by inference then the obligation to pay for anything and everything that could possibly be of help) is simply not being intellectually serious, and even more so when wrapped up in faith. If it’s all up to God then why have Medicare at all?
– GingerMan



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Julie

posted February 2, 2010 at 10:01 am


I think David Brooks is partially right. But, it’s going to take more than the older people to get these changes made. Those of us that are almost middle age, working poor, without medical coverage is going to have to step up, and be heard. We are still making the same money we were 15 years ago, and it’s getting worse. This happened because we let the Bush Administration go too long and not be accountable. I’m willing to pay a little more taxes, to get our states off our backs, their killing us also. Especially for education, and my rights to social security, which I won’t see until I’m 70 probably. Our kids are never going to know what it’s like to be secure if we don’t fight for changes.



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Mercer

posted February 2, 2010 at 10:21 am


” It’s not up to government to say who lives or dies, It’s in the hands of God.”
Medicare is paid by taxpayers not by God. Other countries spend far less on healthcare and some have citizens with longer lifespans. That means some of our medical spending is wasted.



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Anti Dhimmi

posted February 2, 2010 at 10:32 am


Why is David Brooks surprised by this situation? Why are you surprised, for that matter, Rod? It isn’t as if the numbers weren’t out there. Heck, 30 years ago, during the last “Save Social Security” circus it was obvious to me that the program was a Ponzi scheme and would ultimately fail due to demographics. We cannot vote the treasury to ourselves forever, because that assumes the treasury is infinite, although we can certainly buy votes with treasury money for a couple of generations, as can be seen from 1965 through 2005 (LBJ’s Great Society through Bush’s prescription drug benefit). And Social Security is just part of the unfolding demographic and financial crisis. Medicare is essentially broke. State pension funds are in trouble. All of this was visible a full generation ago if one just looked at an actuarial table, it isn’t as if the problem was somehow invisible.
Also, Brooks is late to the “turning Japanese” issue, but then he’s part of the legacy media. Certain economic writers, such as Noriel Roubini, Karl Denninger, Mish Shedlock, have been screaming for years now that the US is headed for a lost decade (or worse) due to foolish decisions at the Federal level and by the Federal Reserve. But the dinosaurs of the oldstream media don’t read such things, because after all, they’re just bloggers. Never mind the accuracy or inaccuracy of their predictions, are they members of the Old York Times club or not? If not, ignore them, and party on. Economic reporting today looks more and more like a cargo cult, and less like analysis.
Mercer is right that there is more than enough money for education, it is not being spent wisely. But money aside, there are more serious issues in education. I know of high schools in cities such as Denver with 50% dropout rates. High school dropouts had a hard time finding work 30 years ago, what are they going to do now? As we teach to tests more and more, we see curtailment of recess in elementary school, which leads to boys acting up more in class, which leads to more drugged boys due to bogus diagnoses of “ADD”. The result can now be seen in colleges, where 60% of undergraduates are women. This may please some ideologues, but we should be wondering what it means when young men are more and more just not interested in learning much of anything. Where will the next generation of thinkers and builders come from, if half of the population is increasingly unwilling to participate in higher education?
Back to economics. Brooks hasn’t seen anything yet. The current economic situation is not a recession, where inventories got too high. It is a debt crisis, and those are not overcome in a year or two. Expect retirement age to be revised upward, and upward again. Expect retirement pensions to be cut. State retirement funds are in trouble, because of overly generous benefits and unrealistic expectations in terms of market return. There are towns in California that have gone bankrupt because they can’t afford to pay the pension benefits to their retired public employees, and it is just a matter of time before a state goes bankrupt as well. My bet is on Illinois, where a toxic combination of featherbedded unionism, tax increases and corruption has led to a bloated state sector that actively chases industry out. I am reliably informed that the state of Illinois has been stiffing state universities for months; the unis are meeting payroll and utilities out of cash reserves, not state appropriations. Some departments in Illinois have a couple of million dollars on hand, and that’s it. No, I will not reveal sources, but the information is out there. And Illinois is just one state, it may be a sigma out from the mean, but there are others not much better off.
Look, spending more than you get doesn’t work. Regardless of political party.
Please note well that I haven’t named any political parties, for the simple reason that this is a bipartisan crisis. Both parties have been spending more than can be afforded for decades. Both parties have embedded more and more spending into off-budget items that cannot be cut. Both parties have constituencies that demand more and more of the treasury, because “there’s always more money” available either by taxation or borrowing. This notion has gotten more and more pernicious. Democrats, feel free to blame Reagan, Republicans, knock yourself out blaming Clinton, but really this condition is a result of vox populi. We, the people, have done this to ourselves. When Bush decided to mail out $400 checks, how many of us protested? How many of us refused to cash them? How many states turned down the “free” money from Obama’s pork-filled stimulus last year? How many used that money not for any infrastructure, but to pay for one year of Medicaid, thereby “stimulating” nothing at all, but definitely rewarding a constituency?
We’ve done it to ourselves.
Here is a monograph that I ran across a while back. I cannot vouch for the authenticity, but Sir John Glubb really existed and really did write something with this title, copies sell for over $250. This is purported to be a free copy. There are no footnotes or references, so we cannot check his research. But read and consider what your own knowledge of history tells you.
I doubt that anyone who regularly reads this site, or the old site, will enjoy this monograph very much.
http://dariusthemede.tripod.com/glubb/
Sorry to be so grumpy, cranky this day, but these problems have been brewing for years, and if people like David “BoBo” Brooks were really as smart as they claim to be, we’d have read something like this article back in the mid 1990’s,
when certain key decisions were being made in public (such as bank “sweeps” and the repeal of law limiting bank activities). Instead he was busy writing about yuppies as some kind of permanent feature on the landscape, not realizing that leading-edge baby boomers in their 50’s would, in a decade, become leading-edge retirees, leading edge Medicare patients…
Maybe Sharon Astyk has the right idea after all.



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Med Rep

posted February 2, 2010 at 10:39 am


Fiscal responsibility is everyone’s problem, retirement savings is YOUR FAULT not the governments as well as your HEALTH.
1. USA has best Health care and responsiveness in world, what we need is a more viable insurance system of Higher Capitalist Qualities…ie: interstate competition with open policies that you keep like car insurance and not at work. This competition model WILL bring down costs without Government interference
2. All Unions should be outlawed in the Public Sector…It is flat out extortion that The Teachers Union can hold the Public Taxes and Policys over a barrel for lifetime employment, lifetime benefits, and ZERO Responsibility. You get Paid-You Save your OWN MONEY for retirement PERIOD – JUST LIKE EVERYONE ELSE! Why the HEll are There more Administrators than TEACHERS in California?
3. I don’t care whether you are GOP or DEM: Pay to Play Gov’t has got to STOP, No more LIP Service of “Monopoly Money” are you serious thats a disgusting line from the Worst increase in Spending History-Again Facts you can’t dispute- Now Cut Government Spending to Match Receipts!!



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Anti Dhimmi

posted February 2, 2010 at 10:58 am


Unionization of Federal employees was not allowed until 1962, when then-President Kennedy signed an Executive Order allowing it. Today, the vast majority of unionized people are in government, from the federal level down to the municipality. We are a far cry from the days of unionizing coal miners in order to force safety issues. The largest unions today are organizations such as the teacher’s union (NEA, AFT – please, these are not professional organizations), the Association of State, County and Municipal Employees, the Service Employees International Union. Many of the ASCME and SEIU are covered by both union rules and Civil Service rules, making it impossible to fire people for all practical purposes.
The US government, from city to county to state to federal, is increasingly sclerotic. Change is all but impossible, due to ever more Byzantine rule set. Ever wonder where we get the word “Byzantine” for a complex web of rules that require paid “fixers” to get through? A previous civilization, that fell from greatness…



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Joel

posted February 2, 2010 at 11:05 am


I was talking to my Mom (in her 70’s) about what health care costs, and how things used to be when she was young. She said her parents never went to doctors except right before they died. No one did. It caused me to reflect on all of our mandatory exams, check ups, smears and the like. Can we really afford to have constant preventive check ups? She also has a gay neighbor whose HIV/AIDS meds cost 30K annually – which he doesn’t pay for.
Should we just adjust to accepting death and illness more? I doubt that will happen until forced on us.



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Jack

posted February 2, 2010 at 11:28 am


The ponzi scheme has come to an end that government has been playing. For 40 years the Denocrats were running Congress and tapped into the social security funds for years to pay for liberal programs that never worked.



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Anti Dhimmi

posted February 2, 2010 at 12:01 pm


Jack, “pay as you go” Social Security pensions have been unsound in actuarial terms since the 1930’s. If the age of retirement had been revised upward to keep pace with increases in longevity, things would be different. Blaming it all on the Democrats may be emotionally satisfying, just as blaming all federal deficits on Reagan makes some people feel better, but it is pointless. It is true that Lyndon Johnson was the first President to use the smoke and mirrors game of spending FICA receipts on current expenditures while issuing a “bond” to nonexistent “trust funds”, but he sure wasn’t the last. Republican Nixon could have reversed that policy, but didn’t. Ditto for Democrat Carter, Republicans Reagan and GHW Bush, Democrat Clinton and Republican GW Bush.
It is a bipartisan mess. Pointing fingers at this party or that party won’t fix it. When the “trust fund” bonds are tapped later on this decade, we’ll discover that all such double-counting means is either increased taxes, decreased benefits, or both. Or benefits that are no longer indexed to inflation…



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Anti Dhimmi

posted February 2, 2010 at 1:39 pm


Here is an article that summarizes part of reality.
http://globaleconomicanalysis.blogspot.com/2010/02/neil-barofsky-promises-handcuffs-police.html
West Palm Beach faces a shortfall of $20 million, police demand no cuts
Over 1,300 employees of the city of Phoenix, Ariz. are paid more than $88,000 but average pay for an Arizona worker is $34,335
AFSCME organizes a protest at the legislature in New Mexico opposing a 2% budget cut, the alternative is a tax increase of $200 million
Los Angeles, California considers layoffs of 1,000 plus extended furloughs for employees not laid off
And so forth, and so on. Note that none of the above has anything to do with old people. Furthermore, I’m sure that every high paid Phoenix employee, ever West Palm Beach cop, every unionized state employee in New Mexico, every employee of Los Angeles, etc. can tell a compelling and even heartrending story about how they are different, critical to the government, etc. But the facts are simple: when median earnings are $34,000 in a geographic region, government pay can’t be more than 2x that for very many people. It’s simple arithmetic operations to demonstrate this.
It will take more than “old people” to work through the ongoing economic disaster.



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hlvanburen

posted February 2, 2010 at 2:41 pm


So…our nation’s future comes down to relying on the baby-boomers to be less selfish, less materialistic, and more generous with others.
We are SO screwed!!



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Quiddity

posted February 2, 2010 at 3:34 pm


Brooks was massively dishonest by conflating federal general revenues with designated taxes for trust funds (e.g. Social Security). And he did the same when it came to writing about spending. By doing so, he as able to fool readers into thinking that seniors were freeloaders. It’s all a part of the new attempt to dismantle social insurance programs, starting with the dishonoring of those special Social Security trust fund bonds.



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Anti Dhimmi

posted February 2, 2010 at 3:52 pm


Quiddity, the designated taxes for Social Security have been spent for years on outlays to Social Security recipients with the balance going to the federal general fund. The idea of “special Social Security trust fund bonds” is a myth, a scam.
Look, suppose that you take part of your paycheck and pay the rent and buy food with it. However, you also write an IOU to yourself for the same amount and stuff it in a jar. Later on, you take those IOU’s out of the jar; what will you be able to buy with them? That’s the “trust fund”. All the money that comes in via FICA is spent, then an IOU is created. You can’t spend the same dollar twice, but that is what the “trust fund” consists of.
Those “bonds” are claims on future revenues of the federal goverment. In order to honor them, either more money will be borrowed (from the Chinese mainly) or taxes will be raised. Because there’s no “there” there, the bonds are an accounting fiction.
That’s why conflating general revenues with Social Security taxes is legitimate: they all come from the same place. Brooks is wrong to blame all of this on retirees, to be sure: we did it to ourselves. We had a chance to put in place a genuine, actuarialy sound federal pension system and did not do so, because it was politically infeasible.
But if you learn nothing else from this, learn one thing: there’s no lockbox full of Social Security bonds. There’s only a promise from the federal government to pay something. And no guarantee what that “something” will be worth, either.



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the stupid Chris

posted February 2, 2010 at 4:19 pm


This is what happens when winning the argument is more important than being good.
And it’s also what happens when a culture determines to make the Puer Aeternus into its role model.
The puer typically leads a provisional life, due to the fear of being caught in a situation from which it might not be possible to escape. He covets independence and freedom, chafes at boundaries and limits, and tends to find any restriction intolerable.
The Puer is not self-sustaining, which is why the over-55 generation has for the first time in American history seeks to have the next generation pay its bills.



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Cecelia

posted February 2, 2010 at 5:52 pm


1) going after social security and medicare does not reduce budget deficits. SS is a TRUST FUND and its revenues are not part of the general budget.
2) we already have increased the retirment age. One used to be able to retire at full SS benefits at 65. Now this is what the system looks like for a typical middle class wage earner who has worked all their life – retire at 62 and get approx 1300 a month, retire at 67 (no more 65) and and get approx 1800, retire at 70 and get approx 2200.
3) SS is not a benefit – people and their employers deposit money into the SS Trust Fund based on a promise that they will then reap retirement benefits. You think SS or medicare should be reduced or abolished – fine – give me back all of my contributions plus the interest I would have earned if I had put that money into a CD for all those years. People PAY for their social security and medicare. People plan their retirement savings based on that promise to provide a return on the investment they made into the SS Trust Fund during their work years. You cannot renege on that prmoise without literally impoverishing any number of current or soon to be retired people.
4) It is advantageous to encourage retirement in that this opens jobs for the next generation. You want to force people to work longer – understand that this means the next generation and the one behind that generation will have to wait a lot longer for 1) management jobs and 2) entry level jobs.
5) SS is not going bankrupt. The problem is medicare. Note the president has propsed modest increases in both SS and Medicare contributions for people who make more than $250,000 a year. These increases have NO chance of passing.
6) We do not have the best health care system in the world. It is well past time to stop that illusion. Among the western nations we have the MOST expensive and LEAST effective (based on outcomes) health care system. All that preventive care (smears etc) has raised life expectancy – while we certainly should ration some health care especially end of life care – to eliminate preventive screenings would lower life expectancy. If you want to go back to a health care system where one could pay out of pocket – then the health care profession will have to lower their rates back to what they charged in those good old days.
7) Real wages have declined steadily since the 1970. If one wishes to have a system where people are responsible for savings for their own retirement or paying for all their health care – then real wages must rise substantially.
Brooks et.al. are being disingtenious when they get on this kick. It isn’t a ponzi scheme – what we have going on here is a shell game. Distract the people fom the real problems by pointing at the SS and medicare system. I’d suggest that a real close look at what we spend to maintain military bases and presence all of the world might be more productive. The largest increase in the Obama budget is for the military.
There is no evidence that lowering taxes on the wealthy stimulates the economy nor does it increase wealth for the middle and lower classes. The greatest period of prosperity in this country – and a time when the disparity between the wealthy and the rest of us what as a very very much lower rate – was when taxes were considerably higher than they are now (the 50’s). Dems and Repubs who play the “lower taxes” song over and over again are not living in a real world. Stop voting for people who lie to you and whose economic policies have no basis in plain common sense.



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Liam

posted February 2, 2010 at 6:56 pm


Welcome to means-testing for SS and Medicare benefits, the gradual phaseout of the mortgage interest and employee health plan premium deductions, and a VAT.



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Lazarus

posted February 2, 2010 at 7:35 pm


Those of us that are almost middle age, working poor, without medical coverage is going to have to step up, and be heard. We are still making the same money we were 15 years ago, and it’s getting worse. (Julie)
It is advantageous to encourage retirement in that this opens jobs for the next generation. You want to force people to work longer – understand that this means the next generation and the one behind that generation will have to wait a lot longer for 1) management jobs and 2) entry level jobs…Real wages have declined steadily since the 1970. If one wishes to have a system where people are responsible for savings for their own retirement or paying for all their health care – then real wages must rise substantially. (Cecelia)
Amen, amen, and amen! Not everybody is able to grab the golden ring in America. There are plenty of us out here in middle America who paid attention in school, played by the rules, even went back in mid-life to get more education and *still* haven’t seen any progress in our paychecks. I left a dead-end job, went back to school, and earned my degree only to graduate into the worst economy in 50 years. I finally found a job that pays approximately the same as I was earning twenty years ago, only now I’m also saddled with student loan debt and graying temples that make the twenty- and thirty-somethings I interview with think twice about hiring me (yes, age discrimination is a real thing). Meanwhile, people are saying we can’t afford to provide health care to our citizens and provide them a dignified retirement in their declining years, but my government has been able to spend billiions of dollars on needless wars and bailouts for the greedy sons-of-b****** who raped and pillaged their way through America’s economy like Sherman through Georgia. In addition, the Supreme Court just made sure that these same SOBs can use corporate money to buy their way in Washington.
Am I bitter? You’re bloody well right I am. I no longer have any illusions about our so-called democracy, and I don’t give a tinker’s d*** about being the world’s policeman, its peacekeeper, or its rescuer, for that matter. I’d be perfectly happy with life in a North American Switzerland that has made clear to all comers that any attack wouldn’t be worth the cost, but lets the rest of the world go to hell if they want to. And if it turns out to be a socialist Switzerland that provides for the basic needs of its people, so much the better.



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Peterk

posted February 2, 2010 at 7:39 pm


“The Republicans refuse to talk about tax increases, and the Democrats refuse to talk about cutting social spending.”
sorry Rod but it’s been show time and time again that tax increases result in reduced tax receipts. The key is to start reducing spending AND reducing the number of federal employees. My gosh an estimated 2.5 million federal employees?? when was the last time you ever read of the federal government laying folks off?. they don’t. or the budget cuts? ain’t no such thing. Agencies submit a budget, a budget by the way is higher than the previous year. The Congress reduces the budget request by x and they call it cutting the budget. how about instead we tell the agencies, “sorry bud, but you get no increase, your budget stays the same as last year” Businesses operate that way



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curtpenn

posted February 2, 2010 at 7:42 pm


I expect we will see massive inflation in the near future as the “cure” to our problem. 8-10% inflation over 10-20 years will “shrink” the liabilities without politicians really needing to solve any problems.



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steve

posted February 2, 2010 at 8:29 pm


“sorry Rod but it’s been show time and time again that tax increases result in reduced tax receipts”
Factually wrong. The Laffer curve is mostly wrong also, working only at high tax rates. Rather than quote talking points, read some economics. If you have no time for books, read the popular libertarian bloggers like Cowen, Kling and Caplan. Also, Google tax increase, Clinton.
Steve



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Don Altabello

posted February 2, 2010 at 8:55 pm


“sorry Rod but it’s been show time and time again that tax increases result in reduced tax receipts. The key is to start reducing spending AND reducing the number of federal employees. My gosh an estimated 2.5 million federal employees?? when was the last time you ever read of the federal government laying folks off?”
They may not have laid people off, but speaking for the agency I worked for, they had significant hiring freezes in the 1990s and 200s, which means that as people retired they typically did not get authorization to stay at replacement level. In the group I work in, over 1/3 are likely to retire in the next five years, even sooner.
This whole business about supply side works in the short term or in cases where we have euro-trash style marginal rates–as in the late 1970s. Our current rates are *much* lower than what they were in the 1970s–much lower. I don’t favor socking it to the rich, but those (like Mike Pence) who think lower rates will raise more revenue have yet to tell me at what rate this stops being a benefit. Seriously, have you ever heard a detailed and technical explanation of this from any of the talking heads?
As far as this federal commission to reduce the deficit–it would probably favor tax increases over cuts in spending. My own position would be to make some serious and permanent cuts in spending as a percentage of GDP first. Then let’s talk about tax increases.



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Jon

posted February 2, 2010 at 10:01 pm


On medical care the issue isn’t old vs young: it’s the healthcare industry vs everyone else. Any reason why we can’t provide decent healthcare to everyone in this country for no more than we are spending right now? Most other nations manage to do so with even lower per capita spending. How do they do it? Easy: they pay their hospitals and doctors less. And miraculously, the sick are still treated. To be sure we probably need to throw tort reform and medical student loan amnesty into the bargain. But the only way out I can see is to demand that the healthcare industry start doing more with less– in other words, to become more productive. Prcatically every other industry in this country has had to do exactly that to remain viable. There’s no reason healthcare can’t or shouldn’t.



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godisaheretic

posted February 2, 2010 at 10:33 pm


no no no no no…
debt is a minor issue,
compared to the coming decline in fossil fuels.
NOTHING can stop the inevitable decline of American wealth.
By the middle of this century,
when there remains little to no available cheap energy,
meaning no more oil, nat gas and coal,
(and NO power even to manufacture “alternative energy”),
THEN, the Party is over!
there will be no “safety nets” for any generation.
BUT, look at the bright side…
there will be no debt anymore either.
hey, have a nice day, everybody!
necessities faith hope love joy peace to all…



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Jon

posted February 3, 2010 at 6:19 am


Re: when there remains little to no available cheap energy,
meaning no more oil, nat gas and coal
Oil will be getting rarer (though by a very slow rate of decline). We are a long, long way from peak in coal, and if you think natural gas is running short why is it declining in price?
We are going to go through a transition whereby we use less and less oil. In fact we have already passed peak oil demand in the US (in 2005– before the recession). There will be unpleasant adustments, but no reason for calamity.



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Indy

posted February 3, 2010 at 7:49 am


I agree with Rod, good luck with that, people are inherently self centered and self absorbed, some downright selfish.
Brooks has been writing about getting people to face economic facts for quite a while. In that context, I think he’s looking beyond Medicare and Social Security at why funds have been used the way they are. The problem is revenue imbalances. As I’ve pointed out, only a third of the federal budget is discretionary spending, the rest is entitlements and debt and that’s hard to overcome. I think Liam is right, means testing and a VAT are likely down the road. So yeah, the older generation kicked the can down the road on these revenue and spending imbalance issues. At least Brooks is willing to say that it is due to everybody wanting something (subsidies, pork barrel projects, the usual gimmes) and few being willing to give up anything. Some of his other columns have touched on the fact that regardless of whether they vote Republican or Democratic, many voters have been selfish. When it comes to budget issues, they look at things through a “me” prism rather than a “we” prism. Human nature. It takes a tough person to really put country first. Not many of ‘em out there.
I’ll second the comment about federal hiring freezes up thread as I know some people who were offered government jobs but had them rescinded when freezes occurred. Some of the agencies seem to be agency specific, some across the board.
There was a lot in the newspapers during the Clinton and Bush administrations about downsizing and contracting out functions. If you look what the U.S. is doing in Iraq and Afghanistan, there’s a pretty heavy use of private contractors to supplement the military and civilian personnel. Also, statistics show that the government employs a lot of knowledge workers so not surprisingly, 51% of federal employees have a college degree and 20% have graduate degrees. It’s the attorneys, scientists and other professionals that drive up the salaries. If you’re looking to make comparisons with the private sector for purposes of market based compensation, you have to compare people by profession rather than looking at salaries overall. That is, compare a federal lawyer’s salary with what a private sector lawyer doing similar work would be making.



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Anti Dhimmi

posted February 3, 2010 at 2:42 pm


For most of the 1980’s, the federal government employed about 1 million people, maybe 1.2 million. This number gradually increased in the 1990’s, then began to decline. In fact, Clinton bragged on downsizing government, as Indy notes.
I read in the papers that federal employment this year will hit 2.15 million, the highest number ever. It would be interesting to see what the breakdown is, surely TSA is part of that increase. But in any event, so much for downsizing…and since borrowing from abroad is part of what pays that payroll, it is germaine to this thread.



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Anti Dhimmi

posted February 3, 2010 at 8:49 pm


Los Angeles Council members resist cuts, layoffs.
http://www.latimes.com/news/local/la-me-la-budget3-2010feb03,0,7778047.story
A majority of the council’s Budget and Finance Committee has refused to sign off on the plan to cut 1,000 jobs, a key component in the plan to plug a $208-million shortfall.
The resistance from at least a third of the council’s 15 members throws into question a major component of the city’s financial rescue strategy. And it has exasperated the council’s budget hawks, who warned that the city would fall into financial ruin if unpleasant decisions were not quickly made.
If council members try to shield each department that comes out to protest, Councilman Greig Smith said, “then we’re going to come out of this right where we were expecting to be on July 1st: We’re going to be out of money, out of cash and bankrupt.”
So, one wonders, what method of keeping Los Angeles solvent will be proposed?
Huizar said the city should borrow more money rather than deplete its reserve.
The city, like any family, should look for “unconventional ways” to address the crisis, he said.
“If I’m facing hard times . . . I’m going to go to my uncles. I’m going to go to my aunt. I’m going to ask them to borrow money,” Huizar said. “But I’m going to tell them: ‘You know, I’ve got this ’67 Chevy. I could sell it a year from now and maybe I’ll pay you back with that.’ ”
“Can we do anything like that?” he asked the city’s budget advisors.
Not to pick on one LA council member in particular, because this sort of mindset pervades government all over the place. No amount of moderate, middle of the road, let’s all sit down and talk about it chitchat will make up for the simple fact that California and Los Angeles both face bankruptcy in the next six months.
And the same is true of other states, cities, counties, etc. The crisis is here, now, and it will get worse before it gets better. Please notice that old people have very little to do with the bankruptcy staring at LA, directly. I’m sure pensions are a big expense, but they aren’t the biggest. Pace’ Ceceilia, Brooks is years too late. Maybe a decade. But he’s right in synch with government fools like Huizar. So I guess that tells me who is audience is…



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Indy

posted February 4, 2010 at 7:11 am


I don’t think Brooks is focusing on pensions, per se. I think this is a continuation of a theme he has addressed previously, one which centers on the “gimme” attitude of voting for candidates who promise not to raise taxes but who do not act prudently on fiscal matters because they fear voters’ wrath in the face of fewer services. It’s the “we want it all” attitude of the last 20 years which has gotten us in trouble.
Unselfish people are few and far between, although there are some around. I spoke to an elderly person recently about this. She said she wouldn’t have minded paying higher taxes over the years if it would have gone towards keeping deficit spending down. She thinks we needed a little sacrifice on our own part (willingness to contribute more while accepting fewer services and programs that benefited us.) The problem is, there aren’t enough people like that who keep in mind their own role in revenue imbalances. Most voters scream about income and property taxes but also whine about cutbacks in services and efforts to limit programs. It’s the “free lunch” mindset that Brooks is addressing, a selfish one which has has done a lot of harm over the last 20 years.
If you need background on Brooks’s thinking, I recommend, “The Next Culture War,” a column from last September in which he discusses the “erosion in the country’s financial values.” He covers profligacy and the airy waving off since 1980 of questions related to racking up bills without addressing revenue streams. I tend to agree with him that we need what we need what he calls a “moral revival.” But it’s difficult to get people who have justified for themselves a “gimme, gimme” attitude (personally and as they relate to government programs) to face up to this. I mean, how many people are going to be able to say, “yeah, we’ve been selfish and unreasonably demanding, time to put aside our childish ways.”
The thing is, it’s too late, the can was kicked down the road for too long. The older generation should have manned up and said, “either charge us more or give us less.” Neither party had the political will or fortitude to guide them in that direction. President Clinton rejected efforts in 1997 to slow the growth of Medicare, when the hospital fund’s solvency problems became apparent. In 2003, President Bush signed into law the Medicare prescription drug benefit bill which added millions to the deficit. Politicians know that older people are the most reliable voters so they have focused on what will garner their support. The result of this short sighted approach by both parties is that more taxes and fewer programs now are inevitable for future generations regardless of who is in office. The economic collapse of 2008 guarantees that. Interestingly, even an official associated with John McCain recently admitted that had he won in 2008, the deficit largely would be the same as it is now. No getting around that.



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Anti Dhimmi

posted February 4, 2010 at 2:40 pm


Cecelia, I suggest you read what a Ponzi scheme is. One of the hallmarks of a Ponzi scheme: the first into the game get much more back than they paid in, later suckers get back what they put in, the last ones in lose everything they paid in. The first retirees collected far more from Social Security than they paid in. Many people now are lucky to get back what they paid in (in nominal dollars, adjusted for inflation they get back less).
Social Security has been a giant, intergenerational chain letter since the 1930’s. Now we will see what the “trust funds” consist of, although many people already know that the “lockbox” is empty.
Today, Lithuania and Greece and Spain are in the headlines, because their debt/GBP ratio is bad, and their sovereign debt is not selling well. But here’s something else:
http://finance.yahoo.com/focus-retirement/article/108747/next-in-line-for-a-bailout-social-security?mod=fidelity-readytoretire
Don’t look now. But even as the bank bailout is winding down, another huge bailout is starting, this time for the Social Security system.
A report from the Congressional Budget Office shows that for the first time in 25 years, Social Security is taking in less in taxes than it is spending on benefits.
Instead of helping to finance the rest of the government, as it has done for decades, our nation’s biggest social program needs help from the Treasury to keep benefit checks from bouncing — in other words, a taxpayer bailout.
No one has officially announced that Social Security will be cash-negative this year. But you can figure it out for yourself, as I did, by comparing two numbers in the recent federal budget update that the nonpartisan CBO issued last week.
The last time Social Security was ‘saved’, it was via a tax hike and down-the-road age increases to qualify. I”m expecting the same to happen again, but we can only go to the well so many times before it breaks down.
Again I say, maybe Sharon Astyk has the right idea.



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Indy

posted February 5, 2010 at 7:56 am


Anti Dhimmi, are you sure old people in California have not supported initiatives to keep property taxes low? That’s what your saying they have nothing to do with the looming bankruptcy implies. If they haven’t supported actions to increase revenue streams, then they are responsible for the mess. You can’t keep spending more without taking in more money. Works that way for our household budgets, works that way for state government, too. Don’t want to pay taxes, then support fewer services. Same as don’t want debt, don’t keep pulling out the credit card and buying stuff based on wants, not needs.



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Anti Dhimmi

posted February 24, 2010 at 1:40 pm


Indy writes:
Anti Dhimmi, are you sure old people in California have not supported initiatives to keep property taxes low? That’s what your saying they have nothing to do with the looming bankruptcy implies.
This statement ignores history pretty much completely. The state of California has plenty of money, it also has a gooberment that has overpromised to far too many groups. You could raise taxes on property to 100%, thereby socializing the state, and it still would not be enough.
If they haven’t supported actions to increase revenue streams, then they are responsible for the mess.
Rubbish. Income streams to the state gooberment of California have increased year after year, decade after decade. Spending more than that is the problem.
You can’t keep spending more without taking in more money. Works that way for our household budgets, works that way for state government, too.
That’s right, and if a member of the household spends more than comes in, there needs to be an adjustment. The state of California is like a dysfunctional family where some members are sober and earn money, while others are alcoholics that throw parties every weekend. The tax eaters have outvoted the tax payers for years. Now the bills are coming due. Blaming California’s fiscal disaster on retirees who do not wish to be taxed out of their homes is like blaming the sober father who holds down a job for a bankruptcy caused by the son who doesn’t work, drives while drunk wrecking cars and throws parties for his friends every Saturday night.
Don’t want to pay taxes, then support fewer services. Same as don’t want debt, don’t keep pulling out the credit card and buying stuff based on wants, not needs.
You got it. Now apply it to California: the state is not a bottomless box of magic money that can be spent on every rent seeker. I repeat, you can raise taxes as high as you want, but Sacramento will spend all of that and more. What you are saying is that the responsible, sober, serious people with savings need to deplete themselves in order to bail out the spendthrifts. Would you tell a working mother whose party-boy husband kept wrecking the family car that she really needs to take a third job in order to put more money into the family budget so that the credit cards he’s maxed can be paid down? Or would you advise her that family counseling is needed, along with cutting up the credit cards so he cannot add to the debt?
Because what you seem to be saying with regard to California is this: retirees need to be taxed out of their homes so that the fun guys and gals in Sacramento can party on. Is that what you meant to say?



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