The U.S. Deficit and World Economy

Thursday, November 11, 2010

Felix Salmon, finance blogger for Reuters, talks about the G20 summit, the world's reaction to the US strategy of "quantitative easing" and outlines the deficit commission proposals.

The deficit commission has made their own recommendations. How would you cut the deficit? Share your suggestions below.


Felix Salmon

Comments [41]

Fix Healthcare, You fix the deficit. from NYC

Healthcare is about 1/6 th of our Economy
(16.2 % of GDP).

Annual expenditure is about $ 2.3 trillion.
Our life expectancy is about 50th.

We spend far more than anyone else -
next highest is about 10 % of GDP.
(And they have higher life expectancy and
healthcare for all).

If we spent as much as they did, we'd
save about 800 BILLION dollars PER YEAR. (And have better care).

If you fix healthcare, you fix the deficit problem. It's that simple.

Nov. 11 2010 09:25 PM
Eliminating Mortgage Interest Deduction is FOLLY! from : Middle Class America

The proposed elimination of the mortgage deduction in the midst of a housing crisis is PURE FOLLY - which will further reduce
housing prices, increase foreclosures and
decrease new construction and growth.

After all, current housing prices already
reflect the benefits of the interest deduction - so prices would plummet.

By expanding the recession, this proposal will actually increase deficits. It is a shame
that the deficit committee can't put aside its
knee-jerk desire to transfer wealth from the impovrished middle class to the rich - just for long enough to consider the broader interests of the American people and their economy.

Nov. 11 2010 09:12 PM
ASSET tax on rich (>$ 5 M) to fix the deficit from Middle Class America

According to today's NY Times, the richest
40 people in the U.S. have 1.2 Trillion in assets.

Consider the following ASSET tax
on the rich to reduce the deficit :

Below $5 Million in Assets 0%
Above $5 Million in ASSETS 1% per year.
Above $10 Million in ASSETS 2% per year.
Above $20 Million in ASSETS 4% per year.

Since the richest 40 people in the U.S. have 1.2 Trillion in assets, this tax would generate $48 billion per
year just from taxing these 40 PEOPLE!

The tax would apply to all US citizens and
permanent residents and apply to all ASSETS (NOT income which is easier to manipulate) ANYWHERE in the world. To prevent the rich from ducking the tax by giving up citizenship and leaving, 10 years of the tax would be collected on any assets earned while a US citizen or resident on giving up of US
citizenship and residency.

This ASSET tax approach will go a long way to fix the deficit - only taxing the very rich (>$5 million) - these people already
disproportionately gained from policies for
decades. Their wealth reflects - IN PART -
their skill and work - but in large part their social and political influence and the extraordinary opportunities offered to them
by their country. Taxing them is both fair
AND effective.


Nov. 11 2010 09:07 PM
jawbone from Parsippany

Question: Why do MCMers (members of the Mainstream Corporate Media) have to relearn year after year, month after month, week after week, sometimes hour after hour the truth which dispels the Zombie Big Lies?

Every time SocSec comes up for discussion, its opponents bring out these Big Lies, the MCMers usually smile blandly or, on radio, just move on to the next guest or question, never correcting the outright Big Lies.

Now, I realize the middle word, "corporate," may have a lot of influence on how pundits handle these Big Lies, but, still, are they not embarrassed?

Have they, finally, no shame?

Nov. 11 2010 12:20 PM
Ed from Westchester

I have two comments:

1) Given the current state of the housing market, the suggestion of removing the mortgage tax deduction couldn't come at a worse time, especially in the metropolitan NYC market, with its higher home prices, for obvious reasons: many homeowners could not afford to live in their homes without the deduction, and many fewer people would be willing to buy these homes if the deduction were discontinued. It matters not that the phase out might be gradual, or far in the future (if, indeed it is) as most people buy homes for the long term, and would not want to worry about their ability to sell in 20 yrs.

2)The cap on Social Security taxes should be lifted. Most other taxes are progressive (the higher your income the higher your tax rate). The Social Security Tax is regressive: a wage earner who makes $100,000 pays a much higher rate (relative to income) than someone making $1 million. Thus, lifting the cap is not, in my opinion, a tax increase at all; it is merely imposing a flat rate on all earnings. Perhaps if the cap were lifted, the administration would be able to justify keeping the current tax rates on all income brackets rather than only those earning less than $250,000.

Finally, I think the Dems were simply awful in their campaigning this year, especially on the issue of keeping the Bush tax "cuts." The Reps were able to paint the Dems as intending to raise taxes on those earning $250,000/yr and small businesses. In reality, it was the Republican Congress and Pres. who passed the tax INCREASE in 2011, not the Dems. Thus, in reality, the Dems are in favor of tax CUTS for those under $250,000, not tax increases for those earning more than $250.,000. I cannot fathom why they let the Reps. drive the debate, and comntinue to accept the characterization of their proposal as a tax increase.

Nov. 11 2010 12:17 PM
Rosa Hill from New York

Please explain why the deficit reduction commission is targeting entitlements that are not part of the deficit -- e.g. social security and Medicare. That's using the deficit as an excuse to attack programs unpopular with the plutocracy. Why not raise taxes on the top 2% of the population? Could it be because everyone on the commission fits into that category? Raising taxes on the rich will not affect spending because they do not spend all their discretionary income. It will have some effect on reducing income inequality -- that's a positive outcome for a democracy. Finally, how about some steeper cuts in military spending? Didn't we get into our budget deficit problems by launching two completely unnecessary and unsuccessful wars?

Nov. 11 2010 12:13 PM
jawbone from Parsippany

Correction -- I left out "NOT" in this graf:

What's amazing is that a program which pays for itself through payroll deductions, is funded decades into the future, and has asked Baby Boomers to pay forward since the early '80's is being targeted for cuts -- WHEN IT DOES NOT AFFECT THE NATIONAL DEBT OR DEFICITS! Gee, think there might be some political (and perhaps financial) shenanigans going on here? Some major misleading of the public?

Nov. 11 2010 11:59 AM
gary from queens

It would help for everyone to understand the terms they use.

"Life expectancy" is defined as the average number of years a person lives beyond age 45.
"Longevity" is the average life span of the average person (ie from birth to death).

Over the last century, "Life expectancy" has not increased substantially. But longevity has increased, partly because mortalities at birth and in children has drastically declined early in the century.

In other words, on a per capita basis, there should not be more people on SS today that when it was first enacted, AS A RESULT OF LONGER LIVES. Higher population sure. But not people living longer.

Nov. 11 2010 11:56 AM
jawbone from Parsippany

Zombie lies -- it's so sad that our vaunted free press cannot kill off the lies told by some politicians in order to catapult their propaganda!

Alas, landless in Brooklyn has internalized one of these Big Lies, that SocSec's designers figured that people would die shortly after getting their benefit checks.

Reality is that people are not living that much longer. Here's a link for one source:

From the link (Paul Krugman also pointed this out and his quote is in my comment @ 1051AM - both rely on actual figures from the SocSec Administration):

"Myth: We have to raise the retirement age because people are living longer.

Reality: This is a red-herring to trick you into agreeing to benefit cuts. Retirees are living about the same amount of time as they were in the 1930s. The reason average life expectancy is higher is mostly because many fewer people die as children than did 70 years ago.3 What's more, what gains there have been are distributed very unevenly--since 1972, life expectancy increased by 6.5 years for workers in the top half of the income brackets, but by less than 2 years for those in the bottom half.4 But those intent on cutting Social Security love this argument because raising the retirement age is the same as an across-the-board benefit cut."

Another link about these SocSec Big Lies:

What's amazing is that a program which pays for itself through payroll deductions, is funded decades into the future, and has asked Baby Boomers to pay forward since the early '80's is being targeted for cuts -- WHEN IT DOES AFFECT THE NATIONAL DEBT OR DEFICITS! Gee, think there might be some political (and perhaps financial) shenanigans going on here? Some major misleading of the public?

Good luck to us all, with these politicians working this issue (and I include Obama in this, as he agreed to let Pete Peterson set up this "deficit reduction" Cat Food Commission and it is Obama who stacked the commission with members who are deficit hawks and many strongly against SocSec. Republicans have wanted since FDR established SocSec to gut it -- astonishing that a Dem president is aiding and enabling them!

Nov. 11 2010 11:42 AM
gary from queens

@ SuzanneNYC

Please review many conservative columnists who took Bush to task (like Deroy Murdoch at for prescription drug plan and democrats (in the majority in 2007 congress) rejecting means testing proposed by repubs.

Please note that the deficit and dept quadrupled under 2 years of Obama. the largest deficit under bush never rose above 300 billion or 2 percent of GNP.

Repubs did not run "all three branches of government from 2001-2006 when the Bush was president". Dems were in the majority in the senate those first 2 years.

Bush faced real, non discretionary costs, such as 911 attacks, katrina, tsunami in indonesia, two pakistani quakes.

The Bush tax cuts added revenue through eco growth and the longest string of employment gains since WWII. Tax cuts can only be considered loss of revenue if you assume that people's wealth belongs to the government.

But Bush was wrong about no child left behind. we conservatives hated this big government republican as much as you hated him for not being a trans nationalist america hating liberal.

Nov. 11 2010 11:24 AM
jawbone from Parsippany

Oh, my, Alexandra from Manhattan, who wrote: I'm 32, and am resigned to work until I'm 80 anyway.

First, I do hope you don't have to work until you're 80; second, good luck with excellent health and accommodating employers if indeed you have to work that long.

I thought I would be working into my late 60's, downsized, got cancer, got some other physical and real life setbacks. Got hit by the economic tsunami, got lots less in retirement savings. Nowadays, the job market for someone very close to Medicare age is pretty awful.

Back in the 80's, when Reagan and Tip O'Neill came to their famous agreement on SocSec, raising the age of full benefits and increasing the Baby Booers' payments to provide for the bulge in retirements, I thought that working until 66 to get full SocSec would be no big deal.

It now is, alas, a very, very big deal. In my good health and good energy of my prime years, I thought, "What's one more year?" Well, further depletion of savings, if one can't find a job. Lower monthly checks, for life, for SocSec if one needs to sign up early --as more and more older workers are being forced to do, since the jobs just aren't there for that age group. And employers want to rid themselves of older workers who do tend to have higher health care costs.

So, again, Alexandra, I wish you a better situation than the one I find myself in.

Good genes, good health, good luck (which includes good markets when you need to begin using your 401K type savings!) may make things work out for some people. For others, maybe not so much.

Nov. 11 2010 11:24 AM
landless from Brooklyn

This plan will save capitalism! Americans have been irresponsible for twenty years buying the Republican line. Now people, the little people who pay taxes, have to pay more to keep the system going. Social security was never intended to fund a twenty year long vacation; you were supposed to die within five years of getting it. If people are unwilling to challenge work structure so that work is more tolerable, then accept that you cannot avoid work by getting Social Security. Medicare should be repealed and a everyone should have the same health plan. Why should an old person have the right to see doctor and a young child with asthma does not? Some of the most vocal opponents to the public option were medicare recipients. Let's all be in the same life boat. Cut the military budget. Let Europe defend itself and stop providing cover for US businesses in foreign countries. If Americans don't like this plan, they can form a third party with a socialist program.

Nov. 11 2010 11:15 AM

The grouping of proposals makes it absolutely impossible for me to vote in the poll. And besides, they all sound reasonable to me. Except maybe the gas tax, which should be even higher than they propose.
I don't see how anyone could learn anything about anybody's opinion from that poll. Its not even unscientific, I'm afraid its unhelpful as a way to frame any discussion.

Nov. 11 2010 11:04 AM
gary from queens

Alexandra wrote:
"The gap between the super rich and the super poor is gaping - we can't make it bigger."

But Alexandra, there are two kinds of "rich" people:

There are the kinds who work hard and provide a product or service that the public wants to buy. The free market reward in the wealth producing sector of our economy.

Then there are those who leech on to the none-wealth producing sector: government. These people gain wealth by supporting a political agenda and gain the graces of political leaders:

Number of bureaucrats making 150K doubles under Obama

And add to that lobbyists for anyone---be they liberal or conservative interest groups or businesses. But remember, the only reason we have big lobbying at all is because we have big government and it's ability to choose winners and losers, as oppose to free people in a free marketplace making those choices---the true democracy.

Nov. 11 2010 11:00 AM
Tom from NJ

I am 69 and still working. I am self employed, so I collect SS and pay employer and employee FICA. I pay income taxes on portion of SS. I am also covered by Medicare, and pay top rate. I also pay for Medicare at same rate as everyone else. I have not done the math, but there is already a cost for well-off Americans collecting SS and Medicare. I am not complainin', just 'splainin'.

Nov. 11 2010 10:58 AM
Lee NYC from Manhattan

Two questions re: recommendations by co-chairs Bowles/Simpson:
1. Isn't a review of Social Security outside the scope of their original mandate?
2. Isn't Bowles heavily invested/involved in Wall Street? Perhaps that's why he ignored IMF's global recommendation to defray public sector costs w/taxes on the Financial Sector? (

Nov. 11 2010 10:54 AM
jawbone from Parsippany

Suburban Guerilla posts this take on the political gamesmanship behind the co-chairs' "minority of two report": It's to look so outrageous that a "compromise" which mostly goes after SocSec looks "reasonable."

Also, about all those workers living so much longer nowadays? As an earlier commenter noted, people who have put in hard physical labor (or even stressful sendentary labor) don't live as long as the wealthy, on the whole. Paul Krugman provides the figures:

Income And Life Expectancy

I’ve referenced this before, but here’s the Social Security Administration study. Look at Table 4: since 1977, the life expectancy of male workers retiring at age 65 has risen 6 years in the top half of the income distribution, but only 1.3 years in the bottom half.

(Testing a common HTML tag, bolding; hope it works.)

Nov. 11 2010 10:51 AM
antonio from park slope, brooklyn

Get a public option in that health care bill.

Nov. 11 2010 10:48 AM

@ gary Democrats are responsible for Bush's prescription drug plan?? So no matter what it's always the Democrat's fault. Let's review: Who was running all three branches of government from 2001-2006 when the Bush prescription drug plan (unfunded), Bush's No Child Left Behind (unfunded), the two Bush wars (unfunded), and the Bush tax cuts (added trillions to the deficit) were passed?? So putting Republicans back in charge should definitely solve everything.

Nov. 11 2010 10:48 AM
andy gee from new york

Geez, you should have told this guy to stuff it! How can he say that bike lanes are wasted money? 180,000 people ride by bike every day now, up 60,000 since before this round of improvements. Whereas people still in cars sicken, hospitalize, or kill hundreds of people every day from ozone, particulates, and other emissions. Wanna save money? Get people out of cars and on bikes.

Nov. 11 2010 10:44 AM
Tom Flattery from New Jersey

Reduce House of Representatives by 25%. Who would miss 'em

Nov. 11 2010 10:43 AM

guns or butter.

remember that one?

rather have the social than the homeland when it comes to security, anyday.

Nov. 11 2010 10:43 AM
Opal from NYC

Changing the age to 69 is a bad idea. It's okay if you have a sedentary job, but people who do highly physical labor it would be punishment. For all these people to have to prove physical disabiltiy is a waste.
Also, we don't know the demographics in 80 years, but having people work until 69 may take jobs from younger people. To make plans so far in advance, is not a good idea.

Nov. 11 2010 10:42 AM
Taher from Croton on Hudson

Britain’s experiment with massive reduction in government spending is just that an experiment. We will see if it works. Then we have the students demonstrating violently yesterday in London.

Nov. 11 2010 10:41 AM

Could you please not frame this in terms of liberals and conservatives. The beauty of this discussion is that people want to reduce government and shrink the deficit and pay no taxes but no one wants to suffer -- it's the other guy who should sacrifice.

Nov. 11 2010 10:40 AM
bernie from bklyn

why are we fighting two wars? seriously, it's that simple....WHY? i know what the talking points are but why isn't the population of this country up in arms about the amount of lives and money being wasted in these false wars.
i don't want to hear the ridiculous argument that our soldiers are protecting us because they are not. all they are doing is risking and losing their lives for NOTHING, all for the political whims of the sociopaths from the last administration.

Nov. 11 2010 10:40 AM
Xtina from E. Village

Defiicit reduction? By lowering taxes? ON WHAT PLANET? Let's call this what it is - how do we find a way to pay for more rich people tax cut? Why, reduce Social Security of course, which is runing a TRILLION DOLLAR SURPLUS.

Nov. 11 2010 10:38 AM
Alexandra from Manhattan

I am more than willing to pay more taxes and work longer (I'm 32, and am resigned to work until I'm 80 anyway) if it means that the US could get back to being truly competitive in the financial world. We have to stop keeping multiple military fingers in multiple countries.

What we can't do is steal child tax credits and other benefits for the poorest in our country. The gap between the super rich and the super poor is gaping - we can't make it bigger.

Nov. 11 2010 10:37 AM

from NPR this week "Why U.S. Taxpayers Are Paying Brazilian Cotton Growers"
US pays brazilian farms after WTO says cotton subsidies no good.
why not let the market work out where I get my cotton. why do US farmers need socialism from me?

Nov. 11 2010 10:37 AM

I think the age to collect ss should be implemented a lot sooner if its going to have any effect.
higher income earners should pay more but business should pay less than dollar for dollar.
I strongly favor increasing the gas tax dramaticcaly to force conservation.

Nov. 11 2010 10:37 AM
yosif from Manhattan

get that public option back in! It's a two-for. Jobs and deficit reduction. All those people who want to retire will do so because they can now afford non-employer based health insurance and that will open up jobs for younger people. A jobs program and health insurance deficit reduction.

Nov. 11 2010 10:37 AM
Jack Jackson from Central New Jersey

Current Fed budget is 24% of GDP and since GDP is half income/half expense having a top tax rate of 24% seems like a non-starter. To cut the deficit, I would:

Lower the FICA rates but apply it to 5X the household median income of earnings. (I would stop the corporate match of FICA at 3X. The amounts that would otherwise be collected (thru 5X) would go to public campaign financing)

Raise the SS retirement age - 70-72 seems okay to me but harsh environment workers would need an exception.

Give workers an option to legally 'evade' FICA taxes for either the first five years or last 12 years of their work life.

Cut defense spending back to percentage of GDP when Bush II took office.

Expand Veteran's Hospitals role in a medical delivery to the MediCare eligible and bottom two quintile households.

Nov. 11 2010 10:35 AM
gary from queens

Smoke asked: "Why do we keep giving the wealthiest a break on this and other taxes?"

Answer: Because Democrats oppose all means tests for any any socialist program, be it SS, or Bush's prescription drug plan.

Nov. 11 2010 10:34 AM
bob from huntington

regarding eliminating the tax deduction for mortgage interest on homes over 500K,
what costs 200K in some parts of the country costs more than 500k in others
(i.e. georgia vs. new york), so how would this be applied fairly?

Nov. 11 2010 10:33 AM
Xtina from E. Village

This Felix is extremely difficult to listen to. He sounds like he can barely force a word through his gullet.

Nov. 11 2010 10:31 AM

Terrible way to structure a poll - I didn't notice the word LEAST until after I had voted. Also, I would rather have ranked them in order from Most Preferred to Least Preferred.


Nov. 11 2010 10:29 AM
Smokey from LES

Let's start by removing the cap on contributing to Social Security! Why do we keep giving the wealthiest a break on this and other taxes?

Nov. 11 2010 10:28 AM
Tamar Haspel

A suggestion for how the debate on the deficit reduction proposals should go forward: in order to object to a cut, you have to propose an alternative.

Nov. 11 2010 10:27 AM
gary from queens

Republicans would be receptive to removing the home mortgage deduction if it were proposed in conjunction with a flat tax--no deduction simplified tax form.

Nov. 11 2010 10:26 AM
Robert from NYC

Democracy Now did a good segment on the deficit commission this morning, I recommend watching it either on their website or later today on CUNY @ 6:30pm.
Erskin Bowles you might want to know is on the Board of Goldman Sachs according to that report. The one item I don't see any problem with is raising the age one receives Social Security a year or two. It seems folks are living longer these days and many folks want to work longer. I'm in the 66 year old age group to be eligible for SS. But lowering SS or Medicare are definite NO NOs!

Nov. 11 2010 10:26 AM
green guy from Brooklyn

I beg you -- *beg* you -- please stop saying "drill down" and "unpack."

That is all.

Nov. 11 2010 10:23 AM

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