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Your Take: On National Deficit Theater?

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NPRLast week, I posted that Democrat Representative Schakowsky of Illinois introduced the Fairness in Taxation Act (H.R. 1124), a bill that would add a few new tax brackets and adjust capital gains and dividend taxation for those taxpayers in the new brackets. I got into a twitter conversation with The Finance Buff and we both agreed that while it’s a nice gesture, it’s largely a hollow one. I think the same can be said for the recent House vote to cut NPR funding.

I’ve heard many a pundit call the TSA and airport security measures a big show of “security theater.” It’s theater because all the machinations only appear to keep us safe. It’s not actually safer, but with all the activity and the monitoring, the public is made to feel that we are safer when we fly. The reality is that locking the cockpit door and empowering the passenger (to fight back), are more effective at securing planes… except you can’t make that much money off it!

I feel like all the politicking around the national debt and deficit is a joke. Cutting NPR is like drinking a diet coke with your cheeseburger and thinking that you’ll lose weight. It’s even more comedic when the Congressional Budget Office says that cutting it would amount to a net savings of $0. Whereas the added tax brackets would actually generate revenue, though a minuscule amount compared to the debt, this move is entirely for show.

Everyone wants to jump on the hot new thing and ride it to the top, this election cycle it’ll be how frugal you can be.

What’s your take on this?

(Photo: mr_t_in_dc)

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60 Responses to “Your Take: On National Deficit Theater?”

  1. tom says:

    I agree… all of these proposed spending cuts are just theater.

    If Democrats or Republicans really wanted to make a financial impact, they would reform the 4 areas that need it most: Social Security, Medicare, Medicaid and Defense.

    Gates is tackling Defense, albeit slowly.

    Social Security, Medicare and Medicaid are huge burdens on this country and, quite frankly, need to be phased out over the next 20 years. If the government wants to keep some form of them for the poorest Americans, I have no problem with that.

    Until they tackle the real issues, it’s all a dog and pony show for the American people.

    • SoonerNATX says:

      socialism is an amazing idea… up until you run out of other peoples money.

    • Tim says:

      Social security outlays aren’t due to grow significantly as a share of GDP. Given that, frankly I don’t see what the big deal about Social Security is – the elderly are going to be somehow supported out of the labor of the younger generations in any case, and Social Security at least has the nice feature that it gives retirees a secure, guaranteed income. If retirees are entirely dependent on private savings for retirement, what happens if the person lives until 90 and the money runs out at age 85, or the person has some bad investments? Given how many retired people rely on Social Security for their income, you can’t just phase out SS without an alternative. And I don’t see how an alternative is going to be any cheaper – you might be able to move the burden off the balance sheets, but it’s got to be paid for somehow and your 70 year old grandma certainly isn’t going to be working for a wage to pay her own way.

      Medical cost growth is certainly a problem – I agree with you that Medicare cost growth in particular. But the problem is that health care costs are growing across the board, independent of whether Medicare or private insurance is paying. If you cancel grandma’s Medicare it’s not like private insurance is going to be any cheaper, and someone’s going to be paying (I don’t think having an army of grandparents going without medical care is a politically acceptable outcome).

      The country has a health care cost problem, not a Medicare or Social Security problem.

      I don’t think just cutting all these programs without providing an alternative that achieves the same ends is a solution, and I don’t see how an alternative is likely to be any cheaper unless it is cheaper because it forces the elderly to live below the poverty line, or prevents low income retirees from accessing medical care. Taking control of medical costs is the only real tenable solution.

      • tom says:

        Tim

        I’m not talking about phasing it out for current retirees. I’m talking about over the long run. I certainly do not count on SS in my retirement numbers, nor should anyone in their 20s. It needs to be up to the individual to plan for their retirement.

        Sure there are emergency situations and then the Government should step in, however those should be handled on a case-by-case basis.

        It’s not up to the Government to cover medical and retirement costs, nor is it up to you and me. If you cannot absolutely afford to retire on your own, then you should apply for SS and Medicare, but for those programs to cover everyone, is just ridiculous.

        I don’t and won’t mind paying into the system knowing that I’m funding my grandparent’s retirement and medical costs and knowing that I won’t see a dime in 40 years, as long as I know that my money is being managed properly and only being spent on those who truly need it (long run on sentence…).

        • Hunter says:

          My take on SS is that society must all contribute, but only those in need should receive. I agree that not everyone needs or deserves SS and if we are going to reverse the budget crisis the retirement age must be gradually increased, and the benefit gradually decreased. This is in response to our longer, more productive lifespans, and the fact that there are more people receiving, and fewer contributing to the system. The system must mirror reality.

          • Bill says:

            So I’ve heard a lot about “means” testing social security but no one ever gets into the specifics of how it would be done. Would it be based on lifetime income? What happens to people who make a lot of money and live way beyond their means when they run out of money. Am I as someone who lives within my means going to have to support them in their golden years? If so, guess I better go book that trip to Tahiti that I’ve been “depriving” myself of.

            If it’s not based on lifetime income, what else would “means” testing be based on? Yearly income? What happens if I save all my money in a Roth? Will I be required to open my financial records to the government so that they can come in and determine if I’m “worthy” to get social security?

            Means testing may sound good for politicians but there are too many holes in the theory.

          • sophomore says:

            “From each according to his ability, to each according to his need.” That experiment worked wonderfully in the former USSR until the point that it didn’t.

          • tom says:

            @Bill,

            Best way to solve the “means” problem is to setup SS as a defined contribution plan combined with a modified version of the current system.

            In 2010 we pay 6.2% into SS. Why not take 4%, put it into a personal account that cannot be touched until age 60 or 65. The personal account pays out a certain % each year after retirement. The other 2.2% goes into the SS general fund. If the personal account does not reach a certain threshold determined by the SS administration, then the general fund contributes the difference.

            This might be a little more difficult to administer, however it essentially forces everyone to contribute to their own retirement, and helps those who cannot fully fund it.

        • Daniel says:

          If the “younger generation” is no longer promised Social Security benefits, what makes you think they’d continue to be willing to contribute to Social Security to pay for their elders? They’d be paying 4.2%, and would get nothing out of it. They’d effectively have to save an additional 10.4% (employee plus employer) to make up for the elimination of Social Security to their generation. Or they could save less and take greater risk.

          And when the Social Security system is eliminated for the elderly, where does the funding come from to pay for the disability insurance portion of the system?

          If you eliminate the benefit payout, you’ll also need to eliminate the payments (or risk revolution). And you’ll end up with no deficit reduction, and a less stable society.

          • tom says:

            We aren’t promised anything now and we still pay. It’s by law that we have to pay, so we do.

            I’m in favor of eliminating the program entirely, but I’m also an advocate of introducing a hybrid plan that is part defined contribution and part current plan.

      • Grant says:

        Tim,

        While I understand you’re argument for social security as a precautionary measure, I don’t know why we need the government to have a program for this. If the elderly worry about there income lasting for their life time they can just as easily go out and buy an annuity to cover basic costs and keep their private savings to grow for additional income. Not to mention that if we didn’t get social security deducted from our pay checks there would be much more money we could save for said annuity. I generally side with the private sector and its efficiency over large government programs. Also, one nice thing about this solution is that the government can’t borrow funds from it to pay for other expenditures. Social security was built on the ridiculous pay as you go basis rather than funding and paying this back at a future date. Insurance companies are regulated to hold their reserves for these liabilities unlike uncle Sam who sells more T-bills to fund it.

        • cubiclegeoff says:

          I don’t buy the argument that the private sector is more efficient when it comes to retirement pay. The statistics for how much people have saved for retirement are horrendous. In general, people don’t have a long-term view and can’t deal with that sort of planning. The government is terrible at this too, but Social Security is better than most areas of government.

  2. cubiclegeoff says:

    I agree, all theater. Each side is trying to make a lot of noise on issues to make sure that for the next election they can say “that side did this” or “that side didn’t do that”. Even if the issues are so minuscule and would really do nothing except be a win for one’s ideology.

    • billsnider says:

      If they are so miniscule, why talk about it? JUST DO IT and move on to the next topic?

      Bill Snider

      • cubiclegeoff says:

        Not talking about it doesn’t give themselves an ideological win in the publics eye, which what they’re looking for.

  3. SoonerNATX says:

    i am not sure how, or even if, it will ever get fixed but politics is like a bad deposition. there will be the occasional fact thrown in but for the most part its just a game of trying to discredit the other side.

    However, Jim, i disagree with you if i understand you correctly. Cutting ANY program that spends money will save money. Will it amount to much… maybe not but its a start and you have to start somewhere.

    • daenyll says:

      the problem lies with having to form a review organization to determine the “best way” to cut spending in. In essence you’re spending extra money to figure out where you might save a few bucks and generally there are already departments in the government somewhere (often multiple places) that are supposed to keep costs in line or regulate different things but are not currently fulfilling that need or have no actual power to enforce regulations.

    • cubiclegeoff says:

      “Cutting ANY program that spends money will save money.”

      In the short-term maybe, but that’s false for many programs in the long-term. One example, cutting costs for inmate reintroduction programs. All that means is that the chance of a ex-prisoner going back to jail increases, and keeping people in jail is not cheap.

  4. Rick says:

    All programs need to be looked at – no exceptions. It amazes me that the defense budget is never challenged, we spend almost as much as the rest of the world COMBINED on defense. Politically you can’t speak out against or you are unpatriotic, but we are broke. I also feel b/c we spend so much we tend to use it too much (Iraq, Afganistan, Libya, etc.) We need to focus on the largest expenditures if we are serious about fixing this country’s economic issues.

  5. Texas Wahoo says:

    Can someone explain to me how cutting NPR’s funding can save $0? That’s not making sense to me.

  6. Marilyn Knox says:

    Cutting NPR in Nebraska will result in no international news of any depth on the radio. We depend on NPR for straight forward reporting of the news.

    An interesting fact was discussed last night. If big stations, that produce programs and sell those programs to smaller stations, are cut then the whole system will suffer.

    NPR is my lifeline to the news.

    • billsnider says:

      You miss the point.

      The issue is not whether NPR serves a purpose. Sciller said that they are awash in cash and don’t need federal subsidies. So why are they taking it? That is the point.

      Bill snider

      • cubiclegeoff says:

        NPR may be ok, but many of the stations that broadcast it depend on federal money.

        • billsnider says:

          I have a very radical idea.

          Those who use it should pay for it.

          What do you think?

          Bill Snider

          • Scott says:

            The PBS business model. Brilliant.

          • cubiclegeoff says:

            Great idea, but doesn’t work, that’s the whole point of the federal government. We pay for a lot of things we don’t use, but the idea is that we all benefit somehow. there are plenty of examples, roads in rural areas in the Midwest, schools, airports, corn, etc.

          • Texas Wahoo says:

            How do you know it doesn’t work?

          • cubiclegeoff says:

            Do you think most infrastructure could really be paid for only by those that use it, including airports, roadways, railroad tracks, etc? Much of this infrastructure was created decades or more ago, and could never have been paid for only by the users, especially when you think of airports which only over the last couple of decades have allowed for the significant number of flyers that now use them. This is also true with schools, which would be very different if users paid for the service only.

  7. Greg Foels says:

    It is all theater. The sad reality is that the politicians and lobyists have power that they are unwilling to release. If they wanted/were willing to improve things they would get behind the FairTax which would abolish the IRS, actually increase revenue by tapping into all of the currently untaxed income ( drug dealers, cash employees for example) and generally make life better for all of us. If you are not familiar with the FairTax you owe it to yourself to investigate. Go to FairTax.org

  8. tom says:

    Discretionary spending only accounts for 30% of the budget.

    Until the other 70% is addressed, cutting spending means little to the bottomline.

    In fact, those discretionary programs we are cutting often create jobs and actually bring in more tax revenue than is spent. Look at infrastructure projects, you spend a billion on infrastructure, you are not only funding salaries, but you are funding companies to produce products, which employ workers, who spend money on other things which employ workers… and so on.

    • billsnider says:

      Can you please tell me the source of this info?

      Bill Snider

      • pmulroy says:

        Bill,

        Here you go: http://www.whitehouse.gov/omb/budget

        A nice pretty picture of what the federal government spends its money on.

        The left side of that graphic is only going to take a larger and larger piece of the pie in the coming years. Our government is shifting from being the provider of services that are most efficiently done on a large scale (roads, defense, etc) to simply taking dollars from one group and giving them to another (entitlements).

        Of course if you are in the group receiving the dollars, there is no problem…until the money runs out.

    • zapeta says:

      Absolutely right, we can’t take care of the problem without looking at the 70% of the budget that is non-discretionary. Obviously discretionary spending needs to be addressed as well, and most importantly the tax code needs an overhaul.

  9. freeby50 says:

    This is how I understand it…

    NPR receives no direct federal funding.

    Federal funding goes to public radio stations via grants from the corporation for public broadcasting.

    The bill bars public stations from using federal grant funds to purchase NPR programming. OK so they’re cutting off NPR via the CPB funds to public stations.

    BUT they won’t bar public stations from using OTHER funds to purchase NPR programming. Since most of the funding for public stations is private funding they can easily cover the cost of NPR from other funds.

    So all the bill really does is cause public stations to use money from column B (private donations) instead of column A (federal grants) to pay for NPR programs.

    Thats why it saves tax payers $0.

    • Texas Wahoo says:

      That doesn’t make any sense. If you us private donations to fund something, it doesn’t cost taxpayers any money. If you use federal grants, it does. So shouldn’t the tax payers be saving the money that is now coming from private donations?

      • freeby50 says:

        Theres no tax savings.

        The public radio stations cna use federal dollars to pay for their employee salaries, building rent, etc.

        They will then use private donations to pay for NPR.

        Its like saying that the fed govt. doesn’t use social security money for wars in Iraq. They don’t use our SS money for wars. They put SS money into a trust fund. Then the government borrows that trust fund money and spends it on bombers and tanks.

        • freeby50 says:

          My local public radio gets 10% of its money from the federal govt. They spend 30% of their money on salaries for their employees. So they spend all their federal government money on salaries for their employees and not 1¢ of the fed. govt. money goes to NPR. See? Already legal. Public radio stations only get 5-10% of their money from the govt. and I’m sure their employee salaries, rent, operations etc is much more than that. So they can easily dedicate ALL their federal govt. funds to things not related to NPR.

          They just take the federal govt. check and sign it over to their landlord. No fed. govt. money goes to NPR that way.

          The bill in congress would allow this. They can’t keep a private org. from spending non government money on whatever they want.

          • Texas Wahoo says:

            I see what you are saying now. I would have assumed the federal government would just stop funding all radio stations (not just NPR). I’m not sure why the federal government is doing that in the first place.

  10. NCN says:

    We should move to a national sales tax, so that taxes are collected when people spend money, not when they earn it. This would eliminate the income tax, income tax loopholes, and the disincentives associated with higher tax brackets and saving money. If you buy something, you pay tax. If you save money, you don’t.

    Do away with Roth IRA, IRA, ESA, and every other “type” of savings account. Instead – Let’s just have a “savings account” where I can save for – “WHATEVER” – and my savings / planning isn’t based on tax rates, tax rules, etc. Instead, I’m just saving and investing.

    • billsnider says:

      Okay, but just one question.

      How do you propose transitioning from one system to the other without creating chaos?

      Bill Snider

  11. Hunter says:

    It’s all theatre, created by politicians that are more concerned with reelection than honorable service.

  12. Ben says:

    Meanwhile, two and a half wars going on, million$$ spent in minutes on Tomahawk missiles… and we cut $5 million to NPR.

    It’s like being $100,000 in debt, and then telling everyone how you are fixing the problem because you took the penny you found on the ground to the bank and deposited it…. Mission Accomplished.

    (Except it was the penny you dropped earlier anyhow.)

    • billsnider says:

      The point is if you see waste, then get rid of it, no matter the size.

      Bill Snider

      • bnjmn says:

        Excellent post! Those claiming that to defund NPR is a waste of time are missing the point.
        NPR is one of a million cuts that need to be made. Whatever funding NPR loses from our tax dollars will more than be made up for from muslim charities.

      • cubiclegeoff says:

        Defining what waste is is not as easy as it sounds. And true “waste” in the government is less than we think.

        • billsnider says:

          What do you think of Harry Reid’s complaint that he does not want the $6,000 funding for cowboy poetry elimimnated from the federal budget?

          That is not waste?

          Bill Snider

          • cubiclegeoff says:

            We may agree that it’s waste, but there are obviously people that don’t see it as waste. It’s all subjective.

  13. Donald says:

    Maybe if GE actually paid some corporate income tax instead of getting tax refunds we could cut one or two fewer things. But then again I’m sure they pass along all those tax savings to their customers, right?

  14. skylog says:

    jim,

    you nailed it, as have many others out there. until the big ones, like defense, are truly tackled, all of these small proposed cuts mean just about nothing (in terms of tacking the problem). sadly, the population as a whole either does not get this or is in denial, and continues to get caught up in this show. that is not to say one should not fight cuts like this, just that they should lose sight of the bigger picture.

  15. All of the cuts that we’re making and that we want to make are drops in the bucket. The real issue is that the government isn’t taking in as much money as it spends on a yearly basis, we have a lot of debt that is accruing interest, and we don’t have a real plan to get us out of debt and to control our spending. Cutting funding for NPR will obviously save money, but it’s such a small amount (and the dollars spent on NPR are useful one; NPR is a good thing and a worthwhile item to spend on), that it is a joke. We need to figure out how we are going to pay the non-discretionary bills, because those are the ones that are causing this mess.

  16. Joe says:

    I still say we move to a flat tax. Then everyone has to pay the same percentage.

  17. This theater is getting old. My prediction: financial crisis imminent, it will make 2009 look like the good life! Diversify your investments and stockpile food and water. It’s gunna get bad guys!

  18. bnjmn says:

    !!!Defunding NPR is not about deficit reduction. It is about responsible use of tax dollars.
    The federal Govt has no business funding NPR anymore than than tax dollars should fund the EIB network.
    NPR along with a thousand more cuts must be made. NPR is just another glaring example of misplaced funding.!!!!

  19. Glenn Lasher says:

    I would like to see the Dave Ramsey approach applied to the government. I’m going to piss off liberals and conservatives alike by saying that we need to both cut services and raise taxes.

    I would like to see a tax system reboot. Declare all existing tax laws null and void and off the books, and replace them with a very simple system. This simple system will tax all persons and corporations at X%, period, end of sentence, no exceptions. Businesses will be taxed on profits; non-businesses on income.

    I would like to see the current expenditures (not debts) put on a list in order from highest to lowest, and they should be examined for efficacy in that order. I will not mention any particular programs that are ineffective at this juncture, but there are some that jump out.

    Finally, the nation’s creditors should be listed, smallest balance to largest, and paid off in that order. If nothing is left to do this, then either the taxes need to go up higher, or the expenditures need to go down lower.

    In the recent bad economy, people and businesses have had to learn to do with less or fail. The government needs to do with less, because if it doesn’t it’s going to fail.

    …and I want you to understand that this view is coming from someone who supports health care reform, but realizes that we might not be able to afford it at this time.

  20. Strebkr says:

    I would love to have the option to opt out of Social Security. To have my 7.65% and my employers 7.65% go to my own fund would be awesome.

    • cubiclegeoff says:

      It’d seem great, but what happens to those that opt-out but then need social services for some reason or another?

      • tom says:

        I don’t agree with an opt-out policy. Too many people are irresponsible when it comes to saving.

        I’d like to see a hybrid privatized/government program:

        80% of your own and your employers SS taxes go into your own private fund. The other 20% goes into the general fund.

        When you chose to retire, if you do not meet a certain $ threshold, then the general fund contributes the difference.

        I have no problem contributing 20% to help those in need, but only if they are helping themselves.

      • Strebkr says:

        I guess I think I could just do it better myself. Thats not true of most people, but some. To opt out, you would have to have the money go directly to some sort of IRA or 401k type vehicle. The money would not be allowed to be touched until normal SS retirement age. No loans from it and no option to disburse.

        That would be a nice way to keep people from dipping in too early.


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