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Author: PuddinHead42 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 1949320  
Subject: Sequestration again Date: 12/12/2012 7:31 PM
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This has been beat to death, I am sure, but being dumb and slow, I might have just come to a realization.

The Whitehouse web site posted this when sequestration came into being.http://www.whitehouse.gov/fact-sheet-victory-bipartisan-comp...


The Deal Includes An Automatic Sequester to Ensure That At Least $1.2 Trillion in Deficit Reduction Is Achieved By 2013 Beyond the Discretionary Caps: The deal includes an automatic sequester on certain spending programs to ensure that—between the Committee and the trigger—we at least put in place an additional $1.2 trillion in deficit reduction by 2013.

So all that has to happen is $1.2T of reduction and then it does not trigger?

Interesting because Obama was asking for $1.6T in tax increases and today dropped it to $1.4T. So if the Republicans cave in on that, then the sequestration is cancelled. Do we think this is true? If so, then there will never be any real incentive to cut spending. None.

says this
Establishes a bipartisan process to seek a balanced approach to larger deficit reduction through entitlement and tax reform

But if he gets the tax increase it is over and the is no incentive for entitlement reform.

Historically, revenues have been 18% of GDP but are currently only 15%, so I agree that we should revert to the historic norms. Spending has historically been 20% of GDP, but is currently 24%.

Does anyone on this board disagree that spending should go back to 20% of GDP to help insure this country's future.

I will grant this, if the economy picks up a lot, we will get some more revenues and if spending is flat (never), then the 24% might go down to 22% for "free" (some gain, no pain). So I am willing to settle for everyone admitting in their hearts and on this board that it is important to do the hard things necessary to get spending down another 2%. Everyone must have a "shared sacrifice" on spending - defense and entitlements. Agreed?
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Author: PuddinHead42 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1844512 of 1949320
Subject: Re: Sequestration again Date: 12/12/2012 7:43 PM
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My slow brain also just had this realization, which I am sure has been mentioned many times...but if all the tax cuts expire, then the sequestration trigger is nullified and the sequestration is cancelled. Then the politicians are free to reinstate any or all of the tax cuts the next day without worry that the sequestration would start up again.

But that is cynical, right? They would never do that. Never.

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Author: PeterRabit Big funky green star, 20000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1844525 of 1949320
Subject: Re: Sequestration again Date: 12/12/2012 8:43 PM
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PH Does anyone on this board disagree that spending should go back to 20% of GDP to help insure this country's future.

I think 20% is the NORMAL figure. It will probably be higher during a recession (and aftermath). It may have to be higher than that until the boomers die off.


I will grant this, if the economy picks up a lot, we will get some more revenues and if spending is flat (never), then the 24% might go down to 22% for "free" (some gain, no pain). So I am willing to settle for everyone admitting in their hearts and on this board that it is important to do the hard things necessary to get spending down another 2%. Everyone must have a "shared sacrifice" on spending - defense and entitlements. Agreed?

Agreed.

Peter

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Author: PeterRabit Big funky green star, 20000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1844527 of 1949320
Subject: Re: Sequestration again Date: 12/12/2012 8:44 PM
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PH They would never do that. Never.

The Republican house would have to approve new spending.

Peter

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Author: NemesisToLibs Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1844529 of 1949320
Subject: Re: Sequestration again Date: 12/12/2012 8:50 PM
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"I think 20% is the NORMAL figure. It will probably be higher during a recession (and aftermath). It may have to be higher than that until the boomers die off.
"


Here is an example of ignoring reality. We have averaged only 18.3% of GDP in federal tax revenue over the last 75 years. And, we have hit 20
% twice in that period. And Peter claims 20% is normal. Typical lib!

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Author: PeterRabit Big funky green star, 20000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1844569 of 1949320
Subject: Re: Sequestration again Date: 12/12/2012 11:23 PM
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PH42 Does anyone on this board disagree that spending should go back to 20% of GDP to help insure this country's future.

PR I think 20% is the NORMAL figure. It will probably be higher during a recession (and aftermath). It may have to be higher than that until the boomers die off.

NTL Here is an example of ignoring reality. We have averaged only 18.3% of GDP in federal tax revenue over the last 75 years. And, we have hit 20% twice in that period. And Peter claims 20% is normal. Typical lib!

Nem, if you read that first sentence again, I'm sure you will notice that we were discussing SPENDING.

Back in the P-box for you.

Peter

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Author: jerryab Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1844570 of 1949320
Subject: Re: Sequestration again Date: 12/12/2012 11:25 PM
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Here is an example of ignoring reality.

Ok, we will watch you publicly demonstrate you ignore reality.

We have averaged only 18.3% of GDP in federal tax revenue over the last 75 years.

So? If that was sufficient revenue, then the US National Debt would be paid off....

And, we have hit 20% twice in that period.

Most recently under Clinton--with budget surpluses and the beginning of planning to pay off the US National Debt. So, 20% seems to be a viable number.

And Peter claims 20% is normal.

If one intends to pay off the debt and be in good financial condition for the long term--then 20% is the ratio to use. Unless, of course, you intend to run deficits forever.... It is not a quick fix--but it is a viable solution that could be implemented with the idea taxes go down as the debt keeps falling and hits certain targets. Concept is somewhat analogous to a long-term mortgage. It hurts the most at the beginning. Then it gets easier as the economy adjusts and the debt goes down.

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Author: PeterRabit Big funky green star, 20000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1844572 of 1949320
Subject: Re: Sequestration again Date: 12/12/2012 11:38 PM
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jab If one intends to pay off the debt and be in good financial condition for the long term--then 20% is the ratio to use. Unless, of course, you intend to run deficits forever....

I would love to see 20% (of GDP) spending and 20% revenue, but I will settle for 18% revenue. Or 21% spending and 19% revenue.

As long as we can keep the deficit below two percent, and grow the economy faster than two percent per year (which is possible), we will effectively pay the debt down (as a percentage of GDP).

Peter

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Author: salaryguru Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1844575 of 1949320
Subject: Re: Sequestration again Date: 12/13/2012 1:56 AM
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Everyone must have a "shared sacrifice" on spending - defense and entitlements. Agreed?

Maybe. . . But that isn't obvious to me. Sure, the GOP has done everything they could do to starve government revenue and give away the Clinton surplus to the wealthiest Americans . . . to the point that things look fairly bleak right now. We need to find a way to make our entitlement programs sustainable and that may require some short term cuts to them.

But have you noticed that we spend more money on defense than the next 15 highest defense spenders in the world?
(http://en.wikipedia.org/wiki/List_of_countries_by_military_e...)

I'm all for looking at ways to make Social Security, Medicare and Medicaid sustainable, but I also believe that we have to start by reducing our absurd obsession with starting wars and building more weapons than the rest of the world put together.

I don't think Americans should accept that we are incapable of spending as much on social spending as most of the other industrialized countries of the world. But we don't. We're ninth from the bottom of the OECD's 34 listed countries in social spending as a share of the economy.

(http://www.businessinsider.com/countries-most-entitlement-sp...)

So maybe the first question we need to be asking is why we in the US have valued war over spending to promote the welfare of our own citizens so much more than any other nation on earth.

If you use the data from the two links above and calculate a ratio of Military to Social spending by nation, the US ratio is more than double any other nation. Greece comes closest to us in the balance between Military and Social spending. Our ratio is only 2.7 times more than them. Our Military/Social ratio is 3.6 times that of France, 5.2 times that of Germany, 8.5 times that of Austria.

Social = Social Spending as % of GDP
Military = Military Spending as % of GDP
Ratio = Ratio Military to Social
Multiplier = Multiplier of US to other country ratio

Country.........Social....Military....Ratio....Multiplier
US--------------16.2------4.7---------0.2901---1.0
Greece----------21.3------2.3---------0.1080---2.7
Portugal--------22.5------2.1---------0.0933---3.1
France----------28.4------2.3---------0.0810---3.6
Norway----------20.8------1.5---------0.0721---4.0
Italy-----------24.9------1.7---------0.0683---4.2
Finland---------24.9------1.5---------0.0602---4.8
Germany---------25.2------1.4---------0.0556---5.2
Denmark---------26.1------1.4---------0.0536---5.4
Hungary---------23.1------1.1---------0.0476---6.1
Spain-----------21.6------1.0---------0.0463---6.3
Belgium---------26.3------1.2---------0.0456---6.4
Sweden----------27.3------1.2---------0.0440---6.6
Austria---------26.4------0.9---------0.0341---8.5
Luxembourg------20.6------0.6---------0.0291---10.0

I think we can do better. I believe that, long-term, the US should be able to support the welfare of our own citizens at least as much as the average industrialized nations on this planet.

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Author: jerryab Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1844622 of 1949320
Subject: Re: Sequestration again Date: 12/13/2012 10:24 AM
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I would love to see 20% (of GDP) spending and 20% revenue,

Because that spending is far less than what conservatives actually spent? LOL !!! And far more than conservatives actually raised as revenue !!

but I will settle for 18% revenue. Or 21% spending and 19% revenue.

But it takes a minimum of 20% as revenue--and therein lies your problem. Thus, you are a part of the problem. You are not proposing a viable solution and you know this to be a fact.

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Author: PuddinHead42 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1844789 of 1949320
Subject: Re: Sequestration again Date: 12/13/2012 5:37 PM
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But it takes a minimum of 20% as revenue--and therein lies your problem. Thus, you are a part of the problem. You are not proposing a viable solution and you know this to be a fact

But the historical average is about 18.3% for revenues and 20% for spending, so I don't understand why you think that poster is part of the problem and knows that is not a fact.

A lot of people think it is ok to run a small deficit, I think even Buffett. 2% (20% - 18%) is acceptable to many.

All the democrats keep saying how great the Clinton economy was and we should just let the upper brackets go back to those good ole days. Guess what, ALL the rates were higher, that is why it worked. And the spending was lower. Obama does not want ALL the rates higher. You can't move 15% rev to 18% or 20% on the backs of the 2%. Yes they should pay more, but it is not possible to fix the problem just by taking more money from them.

I also did not see you mention what spending cuts you thought would be acceptable to drop spending by at least 2% of GDP to inch back towards historical normals. Please enlighten us.

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Author: NemesisToLibs Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1844805 of 1949320
Subject: Re: Sequestration again Date: 12/13/2012 7:20 PM
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Jerry misses the point. First the US government has no control over what % of the GDP takes in revenue. Second, if taxes reach a threshold, the GDP growth rate slows down. Even when taxes were at their highest in terms of top marginal rate, we were doing no better on average then we are today as % of GDP.

People who think the government can generate more tax revenue then the GDP are living in la la land or are in major denial from liberalitis.

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Author: jerryab Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1844818 of 1949320
Subject: Re: Sequestration again Date: 12/13/2012 8:38 PM
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I also did not see you mention what spending cuts you thought would be acceptable to drop spending by at least 2% of GDP to inch back towards historical normals. Please enlighten us.

Military spending is finally starting to drop as the wars are wound down. That will easily make up a large part of the future drop in expenditures.

A switch to SP/UHC would save $1T/year--in cash. That is a sacred cow the conservatives will have to sacrifice. After all, it *is* a cut in entitlements/Medicare/Medicaid <G>.

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Author: PuddinHead42 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1844982 of 1949320
Subject: Re: Sequestration again Date: 12/14/2012 1:06 PM
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Military spending is finally starting to drop as the wars are wound down. That will easily make up a large part of the future drop in expenditures.

A switch to SP/UHC would save $1T/year--in cash. That is a sacred cow the conservatives will have to sacrifice. After all, it *is* a cut in entitlements/Medicare/Medicaid <G>.



Wasn't one of the tricks of the war that it was "off-budget" and therefore did not really get counted? If that is true, then it would not really affect the budget numbers as it runs down. Also, Obama keeps talking about using the money "saved" from the war to spend on something else. We are borrowing to pay for way, so there really is no money "saved", only saving debt.

It also seems the administration is trying to recount $1T in cuts made a while back, so that seems disingenuous and detrimental to negotiations.

I imagine someone can find any number of studies that say SP/UHC will cost $1T extra a year instead of saving it. And it is *NOT* a cut to entitlements, it is a shift of entitlements at best.

Medicare is in great trouble and needs to be fixed, both independently and as a part of a "grand bargin" that moves us away from all the other cliffs that lay ahead of us. You know in your heart that people can't keep living longer and longer and still get benefits at a young age - you know, as Obama says, "the math just does not work". Post some real ideas you then the dems should propose to save Medicare, and not just a shell game with UHC.

Social Security is supposed to be "pay as you go", so people don't want to include it in budget talks, but it has to be. First, it loans a ton of money to the Gov, which then gets spent and must be repaid back out of general taxes. (no lock box) Second, we are starting to eat into the reserve and draw it down. With more baby boomers retiring, that is going to accelerate. There will be no surplus, no loan to the Gov. Then general funds will be needed to support everyone on it. The younger generation needs to be sent a signal that they have to plan better for themselves to supplement SS. A 20 year old has to accept that they have to retire 2 years later than their grandparents. That is fair. Offer that to me.

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Author: jerryab Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1845221 of 1949320
Subject: Re: Sequestration again Date: 12/14/2012 10:29 PM
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Medicare is in great trouble and needs to be fixed

SP/UHC covers it completely.

Social Security is supposed to be "pay as you go"

It is.

Second, we are starting to eat into the reserve and draw it down.

Of course. That was the idea of the SSTF in the first place.

There will be no surplus, no loan to the Gov. Then general funds will be needed to support everyone on it.

Only if nothing is done. With a few modest changes, Social Security is sound for 75+ years.

A 20 year old has to accept that they have to retire 2 years later than their grandparents. That is fair. Offer that to me.

Already happening. Anyone born 1961 (?) or later hits retirement set at 67.

people don't want to include it in budget talks, but it has to be

Silly. Social Security has a dedicated income stream. Modest changes fix it. So no need to have it on the table--there are no savings to be realized. That is, unless you want your bank to start confiscating your savings accounts "because they need the money". Not quite....

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