Deficit Panel's Recommended Cuts

[CADsortaGUY]

Not really. Agriculture subsidies are more popular among Republicans (as in, more than 50% of Republicans support them) than they should be.

You didn't read what I wrote did you...

 

[Darwin333]

I'd have to disagree. Even here, in one of the cheapest real estate markets in the nation, upper middle class people can afford a $500K home. My friend and his wife bought one in that price range and my wife and I could have, but decided not to do so.

I'd guess that most rich people don't have mortgages, but maybe I'm wrong.

I CAN afford a benz but since I have limited disposable income and that would take up the majority of it I don't. A $500K house in a "cheap" market is a luxury just like a Benz is. Even better if they implement it like was suggested earlier with the first 1/2 mil being exempt and everything above and beyond is taxed.

Right now most rich people have mortgages. Money is dirt cheap, tax deduction, and it frees up their cash for them to use to get richer. Hell, even I am holding onto my cash.

 

[Darwin333]

Depends on the implementation of those taxes. I pray it is not going to turn into some marked to market crap.

Why would ending mark to myth make any difference to your personal income taxes? Hell, even corporate? Don't you pay taxes when you sell the asset and doesn't the act of selling it basically mark it to market?

 

[manimal]

I'd have to disagree. Even here, in one of the cheapest real estate markets in the nation, upper middle class people can afford a $500K home. My friend and his wife bought one in that price range and my wife and I could have, but decided not to do so.

I'd guess that most rich people don't have mortgages, but maybe I'm wrong.

Well middle class means something a little different depending on where you live. For instance when we lived in NYC middle class meant you either lived in a shit-hole in the city or BFE NJ....500 grand doesnt buy you roaches and rats in the upper west side...

Culturally middle class is even harder to define and arbitrary lines dependent on numbers does little to asses the impact of any tax cut or tax increase. The difficulty herein lies in not who gets to pay less/more its how those adjustments impact the greater whole.

While the 4 odd trillion dollar cuts are across the board with every walk of life in the US feeling the impact the greatest pain will inevitability be felt by those who have the least...

If I compare the entirety of the cuts made by the commission and then compare the entire expiration of the Bush tax cuts I can say I would rather have all the tax cuts expire than to deal with the outright austerity moves proposed.

I have always thought that concentrating on the budget shortfalls before adressing long term debt would be more prudent since thats exactly what I would do in a business environment if a similar situation presented itself.

 

[Darwin333]

You have to remember that increase in benefits also stop for salary beyond $106800. For example the initial SS benefit is based on what you where making when you retired. However for anything beyond 106,800 you do not get any additional benefit. So someone whose final pay before retirement was $110k will get the same benefit as someone making $150k. Usually the proposals that I see about elmininating this cap don't seem to mention anything about also increasing the benefits for the higher pay. I suspect that people wan't the money but still want to keep the maximum benefit capped.

I can see why people want it this way considering what SS has become but the bottom line is it should not be something that is depended upon for retirement. You shouldn't EXPECT to get back more benefits because you paid more in. It SHOULD be welfare for old people not a national freaking retirement system that will drive us into bankruptcy.

BTW, at the end of the day it still isn't your money. It is a tax and once they take it you are no longer the owner nor are you actually entitled to it in the future. Unfortunately, the politicians don't want you to save either so they have to continue to make you believe that you don't need to. Hell, we can't afford for people to simply not spend more than they make much less actually save anything.

I believe that it is possible for us to prevent the eventual train wreck by making some real hard decisions right now but I have absolutely zero belief that we will actually make those hard decisions.

 

[Brovane]

I can see why people want it this way considering what SS has become but the bottom line is it should not be something that is depended upon for retirement. You shouldn't EXPECT to get back more benefits because you paid more in. It SHOULD be welfare for old people not a national freaking retirement system that will drive us into bankruptcy.

BTW, at the end of the day it still isn't your money. It is a tax and once they take it you are no longer the owner nor are you actually entitled to it in the future. Unfortunately, the politicians don't want you to save either so they have to continue to make you believe that you don't need to. Hell, we can't afford for people to simply not spend more than they make much less actually save anything.

I believe that it is possible for us to prevent the eventual train wreck by making some real hard decisions right now but I have absolutely zero belief that we will actually make those hard decisions.

It is almost like SS has become a generational promise. The younger generation will help support the older generation as they get older.

Actually the choices are not that huge if made now. They will get harder the longer that we put them off. However SS has become so polarized that people scream about it whenever there is a proposal to change it. There was a proposal to raise the retirement age in the recomended cuts to 68 and then 69 starting in 2050. So basically this would be for people just entering the work force. So they would have decades to adjust to the retirement age. Just like for me I can get full retirement at age 67 while the people retiring now get it at 65. However people are already screaming that this isn't fair for the old people. WTF? This is not about currently old people, this is 4 decades in the future. Unfortunately SS has become a entitlment system and more about wealth transfer than a retirement system with actual assets.

 

[MotF Bane]

Ban all earmarks? That'll never happen.

 

[zsdersw]

You didn't read what I wrote did you...

Yes I did. I only objected to the part of your response that I quoted.

 

[ebaycj]

Just FYI: The Mortgage deductions under consideration/discussion allow for homeowners to deduct the *interest* they paid on their mortgage from their overall earnings. Not the Principal.


Regarding the 'Plan' (Suggestion, really. Nothing has actually been cut) - (1) It appears the panel went after all of the biggest cow, and (2) according to the article, it wouldn't balance the budget until 2037 anyhow.


As a matter of practical reality: I don't see this getting passed (or even to the respective Houses) as is.

Yes, I know that you can only deduct the INTEREST paid on the first 500k

It was an unintentional omission.

 

[ebaycj]

-----------------------

It's dissapointing to see this commission completely miss the 'low hanging fruit'. Why they do not recommend dropping the special (low) tax rates for fund managers is just mind-blowing. These people make $100's of millions a year.

They also do not mention dropping the mortgage interest deduction for a second home. WTH? To profess concern about rich people getting a deduction for a lavish home then turn around and permit them to deduct for a second ($500K) home is hypocritical and stupid.

Stupid is as stupid does. And there's far too much 'stupid' in Washington DC.

Fern

These.

Also, personally, I think that it should be a smooth phase-out starting at 500k :
You get to deduct at 100% the interest paid on the first 500k.
You get to deduct at 90% the interest paid on the next 50k (so $500k - $550k).
You get to deduct at 80% the interest paid on the next 50k (so $550k - $600k).
You get to deduct at 70% the interest paid on the next 50k (so $600k - $650k).
You get to deduct at 60% the interest paid on the next 50k (so $650k - $700k).
You get to deduct at 50% the interest paid on the next 50k (so $700k - $750k).
You get to deduct at 40% the interest paid on the next 50k (so $750k - $800k).
You get to deduct at 30% the interest paid on the next 50k (so $800k - $850k).
You get to deduct at 20% the interest paid on the next 50k (so $850k - $900k).
You get to deduct at 10% the interest paid on the next 50k (so $900k - $950k).
You get to deduct at 05% the interest paid on the next 50k (so $950k - $1M).
You do not get to deduct the interest paid on the balance exceeding $1M.

Problem solved (though this would likely not get the dems as much money as they were expecting).

 

[IndyColtsFan]

I CAN afford a benz but since I have limited disposable income and that would take up the majority of it I don't. A $500K house in a "cheap" market is a luxury just like a Benz is. Even better if they implement it like was suggested earlier with the first 1/2 mil being exempt and everything above and beyond is taxed.

Yes, I know it is a "luxury" and that a couple doesn't "need" to own a $500K house in Indianapolis (a $500K house here is probably a $6 million to $10 million home in the bay area). I was just addressing the point of someone saying that anyone that can afford a $500K house is "rich." My wife and I are middle class and we could afford it, but we prefer nice vacations. My friend and his wife are middle class and probably make less than us and they bought one.

I personally have no problem with making $500K the limit after which the mortgage deduction disappears or is phased out. I also have no issue eliminating the deduction entirely for second and third homes, even though that would impact me directly and many others who have been unable to sell a second property.

As I mentioned the other day, eliminating the mortgage deduction COMPLETELY (which, fortunately, doesn't seem to be under consideration -- yet) would mostly impact the middle class. I would never support that given that there is much more low-hanging fruit to go after for savings.

Right now most rich people have mortgages. Money is dirt cheap, tax deduction, and it frees up their cash for them to use to get richer. Hell, even I am holding onto my cash.

Good point. I imagine that's especially true for second, third, etc. homes.

 

[Darwin333]

It is almost like SS has become a generational promise. The younger generation will help support the older generation as they get older.

Actually the choices are not that huge if made now. They will get harder the longer that we put them off.

We paid more in SS this year than we collected. Matter of fact, really close to 100% of all Federal revenue went to mandatory spending which is basically Medicare/Medicaid, Social Security, and interest payments. So almost ALL of our actual revenue went to entitlements and interest and thats it, no DOD, no education, no COE, no DOT, etc... To make matters worse, in order to make the budget look better in the short term we have structured our debt in a way that is equivalent to a 4 year interest only ARM when interest rates where/are at historical lows. When those rates rise we will see immediate and very large increases in those interest payments. The Fed is on round two of monetizing the debt and commodities are coincidentally up huge since they started while they simultaneously state there is no inflation. Partly because of the above the Feds biggest weapon to combat inflation is a squirt gun. BTW, the same actors that led us through the housing bubble are still in place with some actually getting a "raise". Unless your a bankster or a day trader the economy isn't getting better and doesn't look to be anytime soon so tax receipts aren't going to increase drastically anytime soon and neither is your paycheck. Massive amounts of illegal and fraudulent activity has not only gone unpunished but has been rewarded at the taxpayers expense and continues to this day. Oh yeah, and we are offshoring every job we can and importing cheap labor for those we can't.

Oh, forgot to mention that the debt is fast approaching 100% of GDP and the deficit is around 10-12% of GDP. I am not sure that most know what that last part really means, just going back to Bush deficits would remove over 5% of GDP. Inflating the debt away isn't an option either due to entitlements being indexed to inflation and the huge curb stomp it would cause to the housing market. We can only lie like we currently are for so long.


So after looking at the big picture, I would really like to hear the small (or non-huge) changes we can make to "fix" the problems. I am sorry but I stand by my original statement, we have some real hard choices to make right now. The longer we put off the pain the worse it gets. Putting off the pain is what has gotten us to where we are today and we are continuing to put it off for as long as we can. Eventually we simply won't have the ability.

However SS has become so polarized that people scream about it whenever there is a proposal to change it. There was a proposal to raise the retirement age in the recomended cuts to 68 and then 69 starting in 2050. So basically this would be for people just entering the work force. So they would have decades to adjust to the retirement age. Just like for me I can get full retirement at age 67 while the people retiring now get it at 65. However people are already screaming that this isn't fair for the old people. WTF? This is not about currently old people, this is 4 decades in the future. Unfortunately SS has become a entitlment system and more about wealth transfer than a retirement system with actual assets.

That is exactly my point. We can't implement changes that won't go into effect for decades without people screaming bloody murder. We might say we want to fix the problems but only until we learn how the problem must be fixed and then we say hell no.

 

[Darwin333]

Yes, I know it is a "luxury" and that a couple doesn't "need" to own a $500K house in Indianapolis (a $500K house here is probably a $6 million to $10 million home in the bay area). I was just addressing the point of someone saying that anyone that can afford a $500K house is "rich." My wife and I are middle class and we could afford it, but we prefer nice vacations. My friend and his wife are middle class and probably make less than us and they bought one.

I personally have no problem with making $500K the limit after which the mortgage deduction disappears or is phased out. I also have no issue eliminating the deduction entirely for second and third homes, even though that would impact me directly and many others who have been unable to sell a second property.

As I mentioned the other day, eliminating the mortgage deduction COMPLETELY (which, fortunately, doesn't seem to be under consideration -- yet) would mostly impact the middle class. I would never support that given that there is much more low-hanging fruit to go after for savings.

Of course it will impact the middle class the most as would the removal of any substantial deduction that a large portion of the middle class use. It would also pretty heavily impact the housing market we have been trying (and spending untold billions on) to prop up. That is why there is no way in hell the deduction will be removed. I would be really surprised to see it simply phased out at $500K but then again the .gov is pretty desperate for more revenue.

As far as owning a $500K house making you "rich", that is absurd. If you actually saved up enough for a 20% down payment and had zero debt you could afford that with two $60K incomes. Hell, with cheap insurance and no property taxes you might be able to get there with $100K total income (still assuming 20% down). It is a matter of what the individual family values the most, in your case you value being able to take vacations more than a more expensive home. Most Americans are like that, we want lots of "stuff" and we want it now. That is why mostly rich people live in $500K houses which is where the posters thought process is probably coming from. Middle class folk can't live in a $500K house, own two new cars, a boat, new iphones every year or two, a vacation every year, and a few ipads for the kids.

 

[IndyColtsFan]

Of course it will impact the middle class the most as would the removal of any substantial deduction that a large portion of the middle class use. It would also pretty heavily impact the housing market we have been trying (and spending untold billions on) to prop up. That is why there is no way in hell the deduction will be removed. I would be really surprised to see it simply phased out at $500K but then again the .gov is pretty desperate for more revenue.

Yeah, I agree, probably won't happen.

As far as owning a $500K house making you "rich", that is absurd. If you actually saved up enough for a 20% down payment and had zero debt you could afford that with two $60K incomes.

Exactly. People throw the word "rich" around here way too much.

 

[soccerballtux]

As far as owning a $500K house making you "rich", that is absurd. If you actually saved up enough for a 20% down payment and had zero debt you could afford that with two $60K incomes. Hell, with cheap insurance and no property taxes you might be able to get there with $100K total income (still assuming 20% down).

I didn't think of the math, that that house is spread over 30 years of payments. That's a good point.

 

[piasabird]

Well if they want to really cut spending, eliminate all of these trips overseas by presidents and congress, and when they need to go,limit it to just a few people. Then let the Cabinet and congress take a symbolic 10% Cut in Pay just to show them what it means to cut spending. Then cut everyone's pay in the government that makes over $80,000.00 by 10% also. Cut all farm subsidies. Cut all deductions for student loans, cut all deductions for mortgage. Cut SS for people who have other income such as pensions. SS was never meant to be a guaranteed income stream but a last resort for poor people. If both people work in a marriage only allow one of them to draw social security, but at the highest rate for the couple. Get rid of early retirement payments for Social Security.

Reduce military spending by slowly reducing the people serving overseas by attrition. Slowly cut back on sending people overseas and let them serve instead on our southern border, in the coast guard on the sea and in the air. Build a few border outposts along the border in likely border crossing areas. Withdraw from overseas conflicts. We can start a few newer divisions that are mobile and can strike anywhere in the world withing 72 hours to counteract terrorists whose job it is to go in wipe out training camps or strongholds and then leave just as quickly. It is not cost effective to maintain thousands of troops in a war zone for periods of years.

What is really needed is a straight accross the board cut in deductions for the middle class. I think we often give the poorest people too many benefits. Benefits in education should never be 100% of books and tuition. In all cases those receiving education benefits should be expected to pay a certian percent of their education or at least pay a minimum amount, so they have skin in the game.

Require those on aid in School to maintain at least a 2.0 grade average in school or their aid will be cut. Serious reform needs to be made in high schools requiring at least a 2.0 GPA/GRADE to pass a class. D's are for Dummies.

 

[zephyrprime]

These.

Also, personally, I think that it should be a smooth phase-out starting at 500k :

This is unnecessary. A million dollar home is deductible up to $500K. This is how tax math in general works. Graduated phaseouts are unnecessary because there aren't critical thresholds where you suddenly get hit by all the tax from the lower brackets.

 

[Craig234]

Economists are good for one thing. Telling you what happened in the past.

Really? So Economists are great at giving one clear explanation for things from the causes of the Great Depression to how well the Fed has done?

One of the main functions I see economists having is to strip the humanity out of policy, to convince leaders to act without consideration of human issues.

Robert Kennedy's great quote about the difference between 'GDP' and 'human issues' in society comes to mind.

They can suggest disastrous policies. See, for example, the disasters of Milton Friedman while advising other countries' dictators, enforced at the point of a gun.

Of course, they have a lot of useful purposes, but providing good policy for society often is not one. A few are much better - Krugman, Johnson, Galbraith et al.

Economists seem not to appreciate a lot of issues about their numbers, and a lot of 'bad systems' that are productive are just fine under their measurement.

That works better when balanced by a 'rising tide lifts all boats' government ensuring that the big money from a bad system benefits everyone.

But modern right-wing ideology pushed on people for decades had greatly reduced that.

Now, we're more in a 'race to plutocracy', and a lot of human needs are 'non-productive wasteful expenses' to economists. Including for many the middle class quality of life.

Clearly what we're doing as a society is far more political corruption for the rich, than following 'good economic policy'.

Over a few decades, we've had great shifts - moving to two-income households that resulted in more productivity going into the pockets of the rich (100% after inflation to the top 20%, 80% of the growth to the top 1%), the tech bubble reducing middle class investor wealth (it also hurt the top, but as a class they are still way, way up over others), the housing bubble, etc.

Now, the 'debt commission' is aimed at fullfilling Grover Norquist's 'starve the beast' strategy payoff: first, shoot up the debt, then attack the middle class benefits as unaffordable.

Get them cut in ways they never could in simple political debate in a time of normal debt, not for good policy - but to help the rich reverse the middle class gains under FDR.

Save234

 

[manimal]

Now, the 'debt commission' is aimed at fullfilling Grover Norquist's 'starve the beast' strategy payoff: first, shoot up the debt, then attack the middle class benefits as unaffordable.

Get them cut in ways they never could in simple political debate in a time of normal debt, not for good policy - but to help the rich reverse the middle class gains under FDR.

Save234

Sadly this is coming to fruition before our eyes...

 

[evident]

I dont like it because it basically screws over the age 20-40 demographic the most.

it seems like all the boomers get a free pass and get grandfathered in to alot of the medicare and SS stuff while all the hard working 25 year olds starting out in their careers are going to be losing all the homeowner breaks, as well as dealing w/ higher retirement age, etc and all this other BS.