.
Monday, November 26, 2012

These Guys Are Miles Apart

 

 

Should be a big week for cliff diving.  All the deciders are back in town, and they will be talking. We got a whiff of what’s coming when #1 ranked Republican Senator Lindsay Graham (SC) squared off with #2 Democratic Dick Durbin (IL) on This Week. (link)

 

 

 

These guys made it sound as if they were in love, with plenty of things to agree on. Graham said taxes had to go up, while Durbin said he was willing to put entitlements on the table. Those are huge concession.

 

I’m watching the show, thinking Grover Norquist (no tax increase pledge guy) must be crapping in his pants when Graham  said:

 

 Grover is wrong.

 

I will violate the pledge.

 

 

If this were truly the thinking of the big shot deciders, then it would seem as if a deal could be had, and just maybe we will hit a bit of a speed bump in January, but nothing to worry about at all. At least that is how ABC and the Senators made it look.

The appearance of concessions was just for show. The two sides are miles apart when you peel back their words.

 

What Graham actually said was that he was willing to talk higher taxes, but he had a very big “If”s. He is insisting that there has to be be a deal that includes entitlements:

 

Republicans should put revenue on the table. I would trade more revenue for entitlement reform by the end of the year.

 

 

Entitlement reform? By the end of of the year?  Not a chance in a million.

 

The liberal wing of the Democratic Party is willing to go the mats to protect entitlements. If Medicare and Social Security have to be part of a deal, then there will be no deal. At least not before another five weeks goes by.

 

Durbin responded to the big “If” from Graham. The good Senator actually made it sound as if he was being reasonable, but in reality, he wasn’t.  His counter to  entitlement cuts was that maybe there could be some tweaking with Medicare to extend the solvency of the program for a few years, but no way in hell could Social Security get touched.

 

Durbin backed himself into a corner with his positions on both Medicare and Social Security. Medicare = Obamacare in a few years. There is no way the Administration is going to open the door on this. The Republicans, on the other hand would love it. 

 

Then there is the position Durbin took on Social Security. He said it should not even come up for discussion as:

 

Social Security does not add one penny to the debt. Not one penny.

 

This statement is a lie that is covered over by a dopy accounting system called the Unified Budget. In this magical world, the deficits driven by entitlements are hidden. The reliance on this accounting fiction is a dangerous path for liberals to take. The fact is, SS (and the other government retirement programs for Federal workers and the Military) are running billion dollar cash deficits today and will run Mega-Trillion dollar cash deficits for the next seventy-five years. Every penny of those deficits will result in more borrowing from the public.

 

These deficits may be “Off Budget” in the magical world of Unified Accounting,  but they do add to the publicly held debt on a dollar-for-dollar basis. The Rating Agencies are part of the Cliff discussion (like it or not); those folks are no dopes and they fully understand that Senator Durbin is all wet with his talk of Off Balance sheet debt.

 

Anyway, Graham responded to the totally weak arguments by saying he did not agree and said as flat is could be:

 

It’s not realistic to look at entitlements without adjusting age limits.

 

Both Social Security and Medicare benefits have to me “means” tested.

 

 

Means testing entitlement benefits is something that has to happen at some point. (sorry – it has to) But is this something that could be considered as part of some deal in the next few months? Not a chance in hell is my thinking. Who might be apposed to this?

 

-  Everyone on a military pension that had other income or assets. Think of most of the former officers.

 

- All the folks who worked at a Federal job, got a pension, and then moved to the private sector and earned a nice buck and yet another pension. They’re screwed with means testing.

 

- At least 10mm aged souls who are now getting the odd $24K a year from Social Security, and who also have assets exceeding $2mm (or income over $100k).

 

- Every liberal democrat in the country.

The reality is, a means test will prove (finally) to be the death knell for the entitlement programs. They will lose the claim of being self-funded (they are not today). They will lose the claim that payroll taxes are “forced savings” (they are not –they are another income tax). When these shields are lost, so will support for the programs. The “lefties” know this, many of them are pushing to go off the cliff versus accept cuts in entitlements:

 

 

 

So I’m sitting back listening to the happy talk that the two sides are coming together, and I don’t believe a word of it. There is no “fix” without entitlements being exposed for what they are. And there is no way that after their “big win” the Democrats are going to cave on their most sacred cows. For ten-days we’ve been hearing the Kumbaya talk. This week we will hear a different story. These guys are miles apart.

 

 

 

 

 

 

Comments

  1. It all looks obvious to me. It will work out like it always does.

    Namely, there will be real tax hikes and they will be done in exchange for phony phantum spending cuts that are either a mirage or a bold faced lie to begin with.

    That’s the way it always happens.

    And elected republicans are part of the scam and it is why i’m done with the republican party.

    Third party here i come.

  2. Bruce,

    You realize that NY State (likely along with others) actively encourages & advises elderly retirees on ways they can shift assets & strategically divorce in order to game the Medicaid system?

    How on earth would a means-tested entitlement system not be gamed to high heaven? What would prevent people from doing any number of asset shifting tricks to avoid the means test?

    Heck, a retiree could cash out his 401k, park it into physical precious metals & claim he’s penniless. Who’s the wiser?

    • You don’t even have to divorce in New York State. Just say no.
      The “spousal refusal” scam…

      http://www.newyorkelderlawattorneyblog.com/2010/03/spousal-refusal-in-new-york-ju.html

      Also, I agree that we should “go over the fiscal cliff”. The American people voted for bigger government in the last election. Now tell them to pay for it.

    • Yes, one can cheat all they like. But who are they cheating? An outfit called the IRS. You don’t cheat the IRS and get too far. This business with means testing will be no different.

      On the 1st page of the 1040 there will be a new line. Simple yes or no:

      Do you have assets greater than $1mm?
      YES____ or NO____

      If you say no, you can get SS or cheap medicare. But if you are worth more than $1mm, and you lie, you do nine months in a Federal pen.

      When you lie to the IRS you are risking jail time.This is the way it is with all tax cheats. It works for a while, and then you go to jail. The IRS is relentless.

      And that is how the means-test is enforced.

      • Mis-appropritate customer funds -> jail time … unless you are politically connected like Corzine

        Violate Sarbanes-Oxley -> massive fines … unless you are Dick Fuld, Angelo Mozilla, etc

        Bribing members of Congress is supposedly illegal, unless you are nancy Pelosi or if you register yourself as a lobbyist

        Cheat on your taxes? I give you none other than Timothy Geithner. Or you could go with Henry Paulson who “disposed of” (aka sold) his Goldman shares without paying a penny of capital gains — all nice and legal since it was required (by govt “ethics rules”). Paulson dodged $300 MILLION of capital gains and taxes thereon.

        Go back in time a little bit: Dan Rostenkowski, multi-term congressman and ex-Chairman of the House Ways and Means Committee (which writes the tax code) was cheating on his taxes for years before he was finally convicted on almost a technicality. He claimed he didn’t understand the tax law — even though he wrote it.

        Why do you expect “we the people” to behave better than the so-called leaders of the country? Elected officials are gaming the system

        Outside the realm of the politically connected should-be felons, Medicare already has a fraud rate that is three times as high as private sector insurance (before ObamaCare kicks in).

        And spineless politicians are going to go lock up grandma and grandpa in the big house? Lets ignore the fact that most of the politicians are guilty of far worse, and just think about the image of grandma and grandpa being hauled off in chains … and how many baby boomer deadbeats are registered to vote

        SS and medicare are both ponzi schemes, and means testing won’t fix them.

      • “You don’t cheat the IRS and get too far. ”

        Tell that to the thousands of offshore tax cheats who came clean under the Offshore Voluntary Disclosure Initiative (amnesty program). A lifetime of tax fraud and they walk away with a small slap on the wrist (25% fine) and no jail-time. It’s no wonder the program was so popular…

  3. I believe that the can kicking shoes are being strapped on by politicans of all stripes. I believe there will be a deal which increases taxes “on the rich” with only a “promise” of entitlement reform. We all know this is not a solution to our problems. Americans take notice. No long term economic plan has been or will be presented by Progressives. The President submitted a budget that was so unserious that it was defeated in a democrat controlled Senate without a single vote for it. The Democrat controlled Senate hasn’t passed a budget in more than three years. Most tragically, the President totally ignored the plan submitted by his own budget commission (Simpson-Bowles). Why? Because any reforms to entitlements, the regulatory apparatus or other cuts in Government spending are at odds with Progressive ideology. In my opinion, the Progressives plan is to wait for a crisis and then propose to “solve the problem” with a VAT or carbon tax. In other words, we are screwed!

    • Enjoy the decline! says:

      And the “genius” of Paul Ryan’s “conservative” plan was any better? Calling a slight reduction in the projected growth “a decrease, a savings” is typical of the right wing nuts grasp of basic math. For the math impared: it was still an increase in the size and scope of FedGov. Follow on with his lower taxes slightly and get 5% growth per year for 30 years straight? That’s never happened in US history. It won’t happen anytime soon. Crack smoking monkey.

      Face it: all politicans are math challanged retards. We’re augering in at near light speed. Strap in it’s going
      to be a hard landing. And not one damn thing done in DC is going to change that.

      Enjoy the deline!

  4. But federal spending is – bar a return to real economic growth, which isn’t coming – completely unsustainable in the medium- to long-term as it is!

    Thus I can see neither any importance in avoiding this “cliff” nor of “reaching an agreement”. The only true answer to these budgetary problems would be a massive roll-back of the social welfare/military state coupled with large tax cuts aross the board AND comprehensive deregulation.

    And THAT isn’t coming…

  5. And to add salt to the wound, whatever they decide on, none of it was ever ment to help the economy whatsoever, but to pay the bondholders their interest payment. $10 bil a week,40% of it to foreginer’s.This is the big lie. Taxing the rich more is to just to collect more revenue to pay your share of the fat to the bondholders. As one party supports daddy warbucks & banksters and the other the welfare state. All to garner votes for empty promises that never result in a growing economy.Then the piper needs to be paid for all of the spending with money they never had and never intend to ever pay off.As long as they can keep the borrowing game going to fund the spending promises they live for another day. This will all end badly in a failed government.

  6. The final back room deals have less to do with Republican VS Democrats then it does with large donors and what they expect to extract out of this transaction. The media never discusses who or what they are asking for but they write the final script. The big issue facing the Republicans at the national level is that they have a very narrow focused electoral power base, the Southern Bible belt, which includes the day to day believers and the large donors so they cannot afford to piss off this segment of the party. The Republicans lost during the great government shutdown and face a similar fate now so the leadership may opt to fight and lose and thereby hold its base together.

    • Bruce, I know you are trying not to have to edit comments on your blog — but this “ron” guy is nothing but partisan politics 100% of the time. Plenty of people slip in political jibes here and there, but this “run” loser does nothing but bitch full time about his hatred.

      If I wanted to read about politics, there are much better blogs than yours. I read for your market commentary.

      Think about locking this “ron” guy out. He is a loser who still believes there is a difference between Dem and Rep crooks, and worse, he won’t shut up about his opinion

  7. Means testing by net worth and household income is reasonable and not much different than raising taxes on the rich because either way the rich will pay. They already received their benefit threw decades of low taxes making it possible to get wealthy.

    Stealing years of retirement from people who work hard for a living by raising the retirement age isn’t reasonable. Nobody would cheer on having 68 year old police and firemen so why think it’s ok to have other people work hard for more years ?

    For every action, there is a equal an opposite reaction. If older people don’t retire, the young won’t be able to find jobs. All it amounts to is middle aged people either support their parents in retirement or their adult kids who can’t find jobs.

    • Jim,MtnViewCA,USA says:

      Sounds good, but at least in my town we have several new fire stations. Each has a complement of firemen who make 6 figure salaries and get big pensions. Their vehicles are gynormous, shiny and pricy, and get about 3 gal/mi.
      A huge part of the money comes from the federal gov’t. I assume they passed a bill some years back to federalize these expenses so that poor communties could afford fancy new fire stations and equipment. BTW, we don’t have many fires anymore. Better building codes, far fewer smokers. Mostly these guys sit int he station. Occasionally they drive their behemoths to traffic accidents to administer CPR. We could go with small, nimble medics…but no.

      Frankly, the whole program is unneeded and a waste. I don’t really get exercised at the thought of these “poor oppressed workers” being means tested. They’re feasting on the People, not serving the People to be honest.

  8. “Means testing entitlement benefits is something that has to happen at some point. (sorry – it has to)”

    Why should I get dinged after having paid in the max to SS for years? Means testing will only fly if EVERYONE gets tagged – that means current retirees and government employees plus reducing benefits across the board even for those below the means test. Otherwise the boomers will see this as grossly unfair to what they had been promised and will vote the Republicans into the ground.

    • You can subscribe to partisan rhetoric all you want, but there are no innocent (or honest) politicians. Blaming the messengers (aka Republicans at the moment) for telling you that the ponzi scheme cannot last is just illustrating your own lack of education.

      You did not “pay into SS” … ever. You paid into the gov’t general fund, where politicians of all stripes and political affiliations spent it on pork barrel crap to get your vote. They lied to you (with your full cooperation and consent) that you could have your cake, eat it, and borrow more cake from your children — and there would still be cake left over for your retirement… and being a selfish ignorant fool, you actually believed something you knew was way too good to be true.

      You are an accomplice to the crime, not a victim

      • No disagreement with anything you are saying (except my “lack of education” and being an “accomplice to the crime” – I knew like you that this was a ponzi scheme decades ago). My point is that it will be far more politically palatable if everyone takes a hit of some form or another. Even though I have often supported Republicans in the past, I find it highly ironic that they would choose to specifically target boomers on this. That will come back to haunt them badly.

        • You either target the boomers or you target their children. You are a fool if you think you can avoid taking one side or the other.

          As for “Republicans” targeting boomers (as if that were possible without Democrat’s cooperation), politicians are survivors. They will lie, cheat and steal. They will make false promises. And they will switch sides the moment it suits them.

          Many members of Congress are near retirement, and want to kick the can down the road a few years — get their own retirement packages in stone and leave the bankruptcy to the suckers (aka younger politicians).

          The younger politicians (and those with less political favors to call in on corporate boards) know they are going to be stuck holding the bag when selfish boomers realize that defeasing retirement costs at Bernanke’s artificial interest rates is mathematically impossible.

          Either interest rates normalize (and government spending reduced accordingly), or boomers must work full time until they are 90 years old. Raising tax rates on a shrinking tax base is just a delusional way to kick the can down the road a few years. Do you really think boomers are going to work until they are 90? Forget about how they might vote… Do you think they are able to work to 90 years old?

          Plenty of political leaders have thought that younger generations don’t matter — go look up “revolutions” at your local library or book store. Boomers came into the world as flower power rebels fighting against the man … now they are the man.

          Boomers are going to face a much harsher retirement than they hoped, AND younger generations are going to have to kick in for their parents generation living beyond their means.

          Anyone can tell you you can have your cake and eat it too. Only a fool would believe them

          • what about pie….

            Republicans and Democrats, same shit, 2 different piles…

            I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them.
            Thomas Jefferson