The Economist has an excellent article about government debt, a subject increasingly worthy of attention given that "by next year the gross public debt of the ten richest countries attending the summits of the G20 club of big economies will reach 106% of GDP, up from 78% in 2007."
Obviously, the finance meltdown is a big problem, but perhaps not the largest one:
"In America, for instance, Barack Obama’s administration has ambitious plans for broader health-care coverage, though it promises to pay for it. Worse, the biggest peacetime jump in the rich world’s public debt is taking place just before a slow, secular collapse in most countries’ public finances as workers age and the costs of health care rise. According to the IMF’s calculations, the present value of the fiscal cost of an ageing population is, on average, ten times that of the financial crisis. Left unchecked, demographic pressures will send the combined public debt of the big rich economies towards 200% of GDP by 2030....The present value of the increase in America’s future age-related budget obligations is about five times its GDP."
If Barack Obama actually manages to pull off that frequently-mentioned yet never-realized fantasy of financing more government stuff through amazing cost savings, I'll eat your hat. But that aside, what is being done about the known serious problem of the aging US population? Jack all. However, the writers at The Economist are singing the same tune I am (and no, it doesn't involve enactment of a Logan's Run type scheme):
"The best way out is to tackle the costs of ageing head-on by, for instance, raising retirement ages further. That would brighten the medium-term fiscal outlook without damaging demand now. Broadly, spending cuts should be preferred to tax increases. And rather than raise tax rates, governments would do better to improve their tax codes, broadening the base and eliminating distortive loopholes (such as preferential treatment of housing). Other priorities will vary from one country to the next. But after today’s borrowing binge, doing nothing is no longer an option."
To me, it is unconscionable that the retirement age is so low, given the impending bust of Social Security and the increases in life expectancy. I also think that the tax deductions for people with mortgages is blatantly unfair (esp. given that I feel confident that poor people are less likely to own a home than richer people). I'd love to see both of these things fixed.
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Me too, but I have a hard time seeing how either one happens in a democracy. Turning home-owners and the late-middle-aged against you is no way to win an election.
*sigh*
I agree with raising the age at which you can start receiving Social Security. A large percentage of older Americans already say they will need to work in retirement, so it would make sense to raise the age.
I also think we need tax reform. I don't know if a flat tax is feasible, but something between the tax code as it is now and a flat tax would spread the tax burden around. Not only do people who have home mortgages get a break, so do people who make charitable donations, if they itemize. I don't agree with either of those things and I'm sure there's much more that I wouldn't agree with.
SS eligibility is going up, just not enough. The current cohort - 1943-1954 - get full benefits at 66. 1960 births and up will be at 67 - it will creep up in between.
There are tax breaks and credits for everything. The last couple of years, we have chosen whether to take the special deduction for college education, or the tax credit. Often one of us takes one and the other takes the other. There are a half-dozen other deductions and credits, and these are the ones you don't have to itemize. Many state and local taxes (and more every year), mortgage interest, charity, most medical expenses, either through a flex program (which is pre-deduction) or just directly as an itemized item, 401k obviously. Heres a fun one:
Depreciation on your computer or cellular phone, but only for the part of the time you use your equipment to keep track of your taxable investments (stocks, bonds, mutual funds) or as part of your job, if required by your employer
Medicare is the bomb, though. Last I heard, present value of promised Medicare benefits is $ 17 trillion dollars - that is like 1.5x annual GDP. That is the present value, NOT the total payouts in dollars. That is, if every dollar of US GDP for a full year were invested in a trust fund for Medicare, it wouldn't be enough to cover future expected Medicare costs, even factoring in compound interest. The eligibility age for it has not changed - it is still 65.
Tam, what? I thought Barack Obama was a whole new kind of superior person who would not let something like electability stand in the way of doing what's right. Ah well, Congress, can't trust them anyway.
Mom, right, and SS Disability is still there for those who are 65 and in too poor of physical health to work.
RVman, Medicare is a funny thing to consider in light of the hopes for health care reform. Many people seem to want to make all health care in this country like Medicare For Everyone, which seems nonsensical at anything less than an exhorbitant price tag.
Assuming Obama were in fact a New Model Politician who didn't care about electoral concerns, it still wouldn't work. He'd be asking Congress to do things that wouldn't work politically at all, they wouldn't do the things, and it would harm his credibility with them in the future. That's how it seems to me, anyway.
It's conceivable that he could use his popularity right now to provide leadership to make the ideas palatable to the electorate, but (a) that doesn't always work (and it harms your other plans when it doesn't), and (b) he seems to have other priorities to spend his energy on (like the financial crisis, auto/bank bailouts-or-not, climate change, health care reform...)
That said, I have no particular reason to assume that Obama is immune to electoral concerns.
Tam, right, I agree with you; that's what my vague reference to Congress was *supposed* to make you magically infer. :)
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