Too Bad the Deficit Commission Didn't Go Straight For the Fed Instead



Looks like grandma is going to be eating Alpo a tad longer than we initially thought.

Bloomberg:

A presidential commission’s leaders proposed a $3.8 trillion deficit-cutting plan that would cut Social Security and Medicare, reduce income-tax rates and eliminate tax breaks including the mortgage-interest deduction.

The co-chairmen of the panel appointed by President Barack Obama suggested reducing Social Security spending by raising the retirement age to 68 in about 2050 and 69 in about 2075. The plan also would slow the rate at which benefits grow. The savings would come between 2012 and 2020.

“This country’s out of money and we better start thinking,” said co-chairman Erskine Bowles. Without “tough choices,” he said, “we’re on the most predictable path toward an economic crisis that I can imagine.”

As a Fedbasher who believes the Fed is the root of all evil and, subsequently, the root of all economic malaise, the most obvious solution to our debt problem would be to eliminate the central bank and start over with a self-regulating monetary system based on everyone's favorite barbaric relic, gold. But obviously that was beyond the scope of the debt commission's report. Hate to break it to everyone who would love to bitchfight about this proposal for the next several months or years but accomplishing that much would relieve our debt problem, force fiscal control in Congress and remove the constant political posturing over who gets a bigger piece of pie that dominates DC. All while Zimbabwe Ben sits in his marble temple sharpening his claws and writing out checks to Congress.

While some argue that their proposals are "crazy", JDA is happy to go on record as saying they may be far too optimistic. Raising the Social Security age to 69 in 2075 does absolutely no good if the Social Security Trust Fund is insolvent now. In 2050, I'll be 70 years old (assuming the Fed hit squad doesn't take me out before then) and I have all but given up on the idea of there even being a Social Security for me. Hell, I'd given up on there being a Social Security for my mother when she was ready to retire but lucky for her she escaped the evils of this world and caught the first train to Heaven earlier this year and will not have to worry about such things.

Instead, I get to watch my grandparents get gypped again on a SS allowance raise (so we can give billions to GM and the banks but not an extra $20 a month to grandma? Shame) and listen to this nonsense about pushing the Social Security age higher 50 years down the road. The obvious motive behind all this is that the "inflation is too low to warrant a Social Security increase" argument can only last so long, and definitely won't fly once the unwashed masses catch on to the true story of food inflation.

Let's be real about this entire thing: I can't name a single individual in Congress or the White House or anywhere in the entire DC Metro in the business of running the government who would actually support this. And frankly it just doesn't go far enough.

Anyone stupid enough to endorse this already saw what happened on November 2nd and Congress will turn into a revolving door built upon petty revenge and immature bitchfighting. Oh wait, it already is!

Do I have a better solution? I believe I put it at the beginning of this post. I guarantee a large chunk of our problems - and most importantly, the problem of the bubble syndrome that keeps us all strapped to the yoke of perpetual debt to feed the Fed - would melt away. Sure, not instantly (we didn't get here overnight and it isn't going to be wishful thinking and a snap of the fingers that gets us out) but eventually, the clouds will clear and suddenly fiscal restrain will be feasible without an eager debt-pusher lurking right there, conveniently, at 20th and Constitution with a hot press and unlimited fake money to lend.

Remember, we do have to pay them for that. And servicing our debt is no longer something in our capacity to do.

Whose fault is it? Well that answer should be all too clear at this point.

Jr Deputy Accountant

Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.

12 comments:

thomasbleser said...

Debt service is already more than half the national budget. Who is going "loan" us enough to make it 100%? Bad news folks. The bottom line is that from now on, if ANYONE survives, it will be in a world where those who don't work won't eat, and that will only be if we're extremely lucky enough to have anyone able to work at all.

Who do they think is stupid enough to underwrite Bush/Obama fiscal insanity by buying a treasury bond that can only be redeemed with worthless paper? Those in charge of controlling money supply and interest rates must have come from outer space, where noone has ever heard of the effects this same policy had on the Confederate States of America in the 1860's, the Weimar Republic of Germany in the 1920's & '30's, and the Nationalist KMT regime of Mainland China in the 1950's.

With or without the assistance of global climate change, local governments controlled by armed drug gangs and a few outside nukes from a terrorist organization, we are going to be reduced to a level of poverty and misery lower than what you presently see in Haiti. And don't think anything as simple as a regime change will keep this from happening: When, for example, is the last time you saw a bridge built or a tunnel completed on time and within budget in this country?

Anonymous said...

SS is dead. It won't go away-the masses won't permit it, but it will be inflated into a useless piece of junk mail clogging millions of mailboxes every month. I agree that only those with productive employment in the future will eat. The debt commission tossed out as much as they thought they could, but even that won't make a small dent in the problem. My favorite commissioner, Al Simpson, from Wyoming said it best with his ..."milk cow with 310 million tits" comment. Think rioting is bad in London, France, Latvia, Lithuania, Greece? There's nothing worse than an old hungry guy with a hunting rifle.

Horatio said...

Returning to gold is definitely not the answer. Sure it would solve many of the major problems we have with spending, and over zealous government regulation, but it would create tidal waves of new problems that would slow economic growth and would create an extremely dangerous environment vulnerable to speculators.

Social Security can be saved. The tax should simply be raised to all income rather than be limited to 106,800. In terms of equity that is the only valid solution.

Anonymous said...

Returning to gold or some other concrete, objective, non-manipulable standard is the only way to keep the egghead central bankers from blowing us up again and again,

Horatio said...

Central bankers do not blow us up. They try to ease the inevitable business cycle fluctuations. Their ineffectiveness is obvious, but they are not the cause of business cycles.

Anonymous said...

Bwahahahaha!

And Alan Greenspan's easy money and implicit TBTF guarantee had nothing to do with creating the biggest asset bubble in the history of the world?

You need to broaden your reading list beyond Fed papers and clueless academics, my friend.

Horatio said...

It certainly didn't help the situation but no it is not the direct cause of the asset bubble.

Financial bubbles existed long before the Federal reserve came into existence. The only reason this bubble seemed so large was through amplification of derivative trading hinged on the values of the real estate. This economy is also the largest of all time so it's obviously going to create events that seem much more significant than the past.

No one directly knows what causes Economic bubbles. It extremely hard to quantify relationship in today's extremely complex economic system. Presumption that the Federal Reserve causes bubbles inconclusive and ill informed.

chairmanben said...

Stop this squabbling.

Talk about more things. Like Ford discontinuing the Crown Vic / Lincoln Town car.

You expect me to ride a White House. Caddy? (goodness knows what'll find stuck behind the seat)

Horatio,

You're really cute, do you have any evidence that supports your argument? The burden of proof is on the one guy who actually believes the Fed does not cause bubbles.

The Federal Reserve is inflationary by its very existence as we have to ask them to print more money just to pay them back for the money they have already printed. That's not reckless and stupid on our part?

I would not be so ignorant as to say the Federal Reserve is the ONLY source of economic malaise (I said "the root" not "the only place from which it comes") but it is the most obvious subject. Add to that a lax regulatory environment, idiot legislators and debt-hungry masses and you get the recipe for total economic meltdown.

Horatio said...

The Federal reserve is supposed to play a part in mitigating the adverse effects of natural business cycles which are partly driven by the emergence of Economic bubbles.

As I said, Economic bubbles existed before the Federal Reserve existed. There is no reliable empirical evidence supporting what causes Economic bubbles. It is highly debated. Cognitive human behavior is the likely culprit of the optimistic over valuation of assets.

I will concede that the Federal Reserve is inflationary by nature, but it enables the economic growth that the world economy now demands.

The Federal Reserve is keeping our GDP stable right now. Without its constant pumping of money into the economy we would have the double dip recession everyone is afraid of. This would destroy the stock market which in turn destroy 401ks, pensions, and other retirement vehicles.

Yes it is Fiat Money, yes it is inflationary, but it is necessary for our economic environment. We are a creditor nation. I'm sure the economists in Washington are probably thinking that the best way to manage the debt to China is to initiate an inflationary economic policy. Whether that's a feasible way to deal with debt is another discussion.

Currency is the physical manifestation of the confidence that people have in a government. It is the confidence that gives it value.

Gold is only valuable when people have confidence in it.

On the fact that the government has to pay interest on its own money is also an attribute of confidence. If interest is charged on the money created, it has value. If there was zero interest what would prevent the government from printing an infinite amount of money?

It can never be paid back however. This is definitely a problem that I have with the structure of the Federal Reserve. This is a structural issue that cannot be solved with the reenactment of the Gold Standard. Not without putting the United States at a competitive disadvantage. Any suggestions?

Horatio said...

The Federal reserve is supposed to play a part in mitigating the adverse effects of natural business cycles which are partly driven by the emergence of Economic bubbles.

As I said, Economic bubbles existed before the Federal Reserve existed. There is no reliable empirical evidence supporting what causes Economic bubbles. It is highly debated. Cognitive human behavior is the likely culprit of the optimistic over valuation of assets.

I will concede that the Federal Reserve is inflationary by nature, but it enables the economic growth that the world economy now demands.

The Federal Reserve is keeping our GDP stable right now. Without its constant pumping of money into the economy we would have the double dip recession everyone is afraid of. This would destroy the stock market which in turn destroy 401ks, pensions, and other retirement vehicles.

Yes it is Fiat Money, yes it is inflationary, but it is necessary for our economic environment. We are a creditor nation. I'm sure the economists in Washington are probably thinking that the best way to manage the debt to China is to initiate an inflationary economic policy. Whether that's a feasible way to deal with debt is another discussion.

Currency is the physical manifestation of the confidence that people have in a government. It is the confidence that gives it value.

Gold is only valuable when people have confidence in it.

On the fact that the government has to pay interest on its own money is also an attribute of confidence. If interest is charged on the money created, it has value. If there was zero interest what would prevent the government from printing an infinite amount of money?

It can never be paid back however. This is definitely a problem that I have with the structure of the Federal Reserve. This is a structural issue that cannot be solved with the reenactment of the Gold Standard. Not without putting the United States at a competitive disadvantage. Any suggestions?

W.C. Varones said...

Horatio,

Business cycles are a natural, normal, and beneficial feature of a well-functioning economy.

It takes a corrupt and/or incompetent central bank to turn those normal business cycles into epic bubbles and crashes.