It is interesting that logic should evade the mind of this eminent central banker. There is not going to be any fiscal remedy. The necessary funding is not going to be put in place. The public will never accept the scale of taxation it requires. Had he tried to be realistic this is where he should have started. Now all of that being so, the question is what will happen each year onwards and into the future? The President and Congress will go on cobbling together annual budgets in the future as before. Ultimately the entitlments will remain unfunded and will not be met in full into the further future. Of course other budget spending as a proportion may be cut in order to try keep a measure of entitlements working. But thats it.
cheese, What size of budget cuts and where would you place them in order to make a even a slight dent in the unfunded entitlements. regards f9
I can only comment on your question since I would not attempt an accountants detailed and professionally complete answer. A whole area which is a grossly inefficient mess is medi-care. It needs to completely overhauled, put on a business footing and efficiency made the top priority. I favour a strong defence. If you split the adult population in half, half with the higher income and half with the lower income, the upper half will tend to favor strong defence more than the lower half. So elections to President and Congress on that basis tells you how cuts might be made. Defence spending is big and is a natural target. If not the fed's social and welfare spending has to be cut. In this area I have only one central objection to cuts - that however deep such cuts might be, housing or shelter must be preserved for the worst off. I do not want anyone homeless. There must be a statutory right to shelter (bed and roof) or to a housing benefit payable to landlords for the worst off. In this matter preferences and priorities have to be decided, which may not be mine, in any scenario of deep cuts. However, continued muddle will not be catastropic because ultimately it will just mean entitlements not being met in full going into the further future.
At some point Social Security will become means tested and eventually asset tested. This is why the Fed will not let the stock market crater because it will do what ever it takes to keep the 401k's going strong. It is also why they will do whatever in their power to keep housing values up. John
Cheese wrote ""The public will never accept the scale of taxation it requires."" I respectfully disagree, sir. We, the public, will one day be taxed at 75%, and we still won't do anything about it. Past experience tells me I'm right, but I hope I'm wrong. And housing is not a "right" here in the states. Nor is eating. We do, however, have the right to earn an honest living and provide for ourselves as we see fit.
Agreed. This has happened in New Zealand. Firstly, you are means tested and your pension eligibility (which comes from the tax that you have paid over a life time) is decided. If you have worked hard and saved despite paying high taxes, then your entitlement is nothing Next you must sell you "big"home and buy a flat in order to provide living/nursing funds. Finally when you are broke, the gov steps in with the welfare payments. While all this is going on you have families in NZ who are onto their 3rd generation of welfare. Granny, mum dad and the kids and occasionally the great grand kids live in state provided houses on weekly welfare checks and nobody in the family remembers otherwise. If you tell the nice folk down at the welfare office that you are worried about your teenage kids and do not want them to embark on a life of crime, you will receive a new flatscreen/DVD to entertain them. And the situation is getting worse by the day. I could go on and on but this is enough. Yes I am a Kiwi and live abroad. The population of NZ is 4.2M in NZ and 800,000 abroad. Immigration (often of the wrong people) is maintained at a small annual positive figure to offset the 1,000 kiwis leaving permanently each week. Aussie is the big beneficiary, receiving 700 well educated hard working kiwis each week for zero cost to the tax payer. regards f9
Big difference between NZ and US is that kiwis can leave to avoid paying high taxes, Yanks cannot. Americans are taxed by the good ol USA no matter where in the world they live (only industrialized country to do this). To get out of these taxes, one must give up citizenship, something Yanks are loathe to do at any price. The US makes even this event very difficult. If you are making good cash, they will state that you are only leaving to avoid taxes, therefor, will continue to tax you for 10 more years. This is why you have individuals such as Marc Rich, that just moved all assets to Switzerland, and then said "fuck you US government". Granted, he can never come back, but I don't think he loses sleep over it.