US budget wrangling

[The Brain]

The US should increase the efficiency of the things they spend on. But since this is something that no one in government is interested in maybe it won't happen.

[Sheilbh]

Maybe the best compromise is to simply cut all programs equally.

That doesn't address the question of how much to cut and whether to raise taxes.

Of course you need to raise taxes, on everyone and you should probably introduce a VAT too.  I don't agree with just a flat-rate cut it would be ridiculous.  I think immediate savings can be most quickly made in defence, because it's the largest discretionary bit of the budget.  There's lots of other small cuts that can be made across other departments - in the long-term you need to do something that stops the healthcare inflation you've seen in the US since the early 90s.

[DGuller]

The US should increase the efficiency of the things they spend on. But since this is something that no one in government is interested in maybe it won't happen.

The problem is that government spending is inefficient by definition.  If you try to make government spending efficient, then it would merely justify more government spending, which by definition is inefficient.

[MadImmortalMan]

Of course you need to raise taxes, on everyone and you should probably introduce a VAT too.  I don't agree with just a flat-rate cut it would be ridiculous.  I think immediate savings can be most quickly made in defence, because it's the largest discretionary bit of the budget.  There's lots of other small cuts that can be made across other departments - in the long-term you need to do something that stops the healthcare inflation you've seen in the US since the early 90s.

You're not wrong, but that's pretty much the boilerplate. Except VAT isn't happening in the US. Way too volatile. Even if we do all that stuff you said though, it's just a down payment toward actually fixing the problem. There aren't enough cuts to make in defense to close the gap. And we can't tax our way out either. The combined net worth of every billionaire in the US wouldn't even close the annual deficit if we seized it all right now Grallon-style. Another thing that isn't often considered by Europeans is that our federal taxes may be lower than yours, but we pay on several levels that often add up to something very equivalent to what you would see in Europe. I know you personally know this, but it bears mentioning. Our tax burden is pretty close to the rotw in most of the more eh..developed states. Corporate tax is higher than pretty much the whole world except Japan. There isn't much room to grow there. We could go tariff-protectionist and start a new Great Depression I guess.

We need a structural change. The population needs to have a completely different set of expectations when it comes to what they expect their governments to do and what they have to pay for those expectations. I don't know what to do that would be politically palatable other than an across the board slash to be honest. What if the Fed has to raise interest rates to stop inflation like in the 80s? Do you know what that would do to our deficit? I don't think the sovereign bond markets would hold together. All those "safe" retirement accounts our grandmas all count on loaded with T-bills? That worries me.


Edit: The point about medical costs is a great one. Maybe if Obamacare had had single payer in it or something, I dunno.

[Sheilbh]

You're not wrong, but that's pretty much the boilerplate. Except VAT isn't happening in the US. Way too volatile. Even if we do all that stuff you said though, it's just a down payment toward actually fixing the problem. There aren't enough cuts to make in defense to close the gap. And we can't tax our way out either. The combined net worth of every billionaire in the US wouldn't even close the annual deficit if we seized it all right now Grallon-style. Another thing that isn't often considered by Europeans is that our federal taxes may be lower than yours, but we pay on several levels that often add up to something very equivalent to what you would see in Europe.

Well you can't tax your way out of it but there's no fiscal tightening in history that doesn't include increasing revenue and the one's of the size the US (and UK) are facing have, historically, been roughly 50-50.  The UK's trying roughly 30-70 on spending cuts right now but that would be the most lop-sided.  You can't tax your way out of this but you also can't cut your way out of it.  My understanding is if you eliminated all non-defence discretionary spending you still wouldn't have closed the gap.

It's nowhere near European levels even if you include state and city taxes - and especially if you include sales taxes and all of the tax deductions and credits available - and that despite having a reasonably attempt at a welfare state and the biggest military budget by a significant distance.  On this I'm almost right wing.  I think the US (and UK) needs to get rid of a lot of deductions and credits that are available, but lower rates and brackets generally so more people are paying tax, but the rates are low and simple.  It's worth saying that right now I think the US has the problems Ireland had of depending on taxes that were particularly hurt in the recession to remove people from paying income tax.  I mean I think the US system is simply not fit for purpose any more and I think the complexity as much as anything else is a killer.  One of the most striking things I've read about US tax policy was in a report commissioned by W which had a poll that found a majority of Americans would be willing to pay more tax if they didn't have to fill in a tax return.

I know you personally know this, but it bears mentioning. Our tax burden is pretty close to the rotw in most of the more eh..developed states. Corporate tax is higher than pretty much the whole world except Japan. There isn't much room to grow there. We could go tariff-protectionist and start a new Great Depression I guess.

Japan also has the lowest sales tax of the developed world with the exception of the US (Federally).  The corporation tax is very high.  Again I think there are too many deductions and credits available.  They should generally be abolished and the tax rate lowered (incidentally I think this would be politically more difficult than most public spending cuts).  I also understand that the US corporate tax system makes it far easier to expatriate profits than most developed countries - that should be cut down on too and to his credit all of Obama's budgets have tried to change this, but failed.

We need a structural change. The population needs to have a completely different set of expectations when it comes to what they expect their governments to do and what they have to pay for those expectations. I don't know what to do that would be politically palatable other than an across the board slash to be honest. What if the Fed has to raise interest rates to stop inflation like in the 80s? Do you know what that would do to our deficit? I don't think the sovereign bond markets would hold together. All those "safe" retirement accounts our grandmas all count on loaded with T-bills? That worries me.

I agree.  I think it's like a revolution; it looks impossible until it's inevitable.  At some point this will stop and no-one knows when or how.

Edit: The point about medical costs is a great one. Maybe if Obamacare had had single payer in it or something, I dunno.

I don't know.  I don't even know what causes medical inflation in the US to start shooting up as it starts to in the early 90s.

[Barrister]

I don't know.  I don't even know what causes medical inflation in the US to start shooting up as it starts to in the early 90s.

It's not just the US.  Health care costs have been steadily increasing for the last couple decades in Canada as well.  I think that's also the case in the UK.

I just read an article that 43% of Alberta's entire spending is going to health care, and that % is set to increase further,

[Sheilbh]

It's not just the US.  Health care costs have been steadily increasing for the last couple decades in Canada as well.  I think that's also the case in the UK.

Oh yeah.  But I think I read that only Ireland and the UK (post-1997) had high growth rates of healthcare expenditure.  Ireland was splurging for most of those 20 years and the UK splurged abit too after 1997, but they're both caused by healthcare inflation but also a conscious decision by the respective governments to spend considerably more - that excuse doesn't work in the US. 

[Admiral Yi]

Oh yeah.  But I think I read that only Ireland and the UK (post-1997) had high growth rates of healthcare expenditure.  Ireland was splurging for most of those 20 years and the UK splurged abit too after 1997, but they're both caused by healthcare inflation but also a conscious decision by the respective governments to spend considerably more - that excuse doesn't work in the US.

Prescription drug benefit.

[Sheilbh]

Oh yeah.  But I think I read that only Ireland and the UK (post-1997) had high growth rates of healthcare expenditure.  Ireland was splurging for most of those 20 years and the UK splurged abit too after 1997, but they're both caused by healthcare inflation but also a conscious decision by the respective governments to spend considerably more - that excuse doesn't work in the US.

Prescription drug benefit.

How does that increase the cost of healthcare, as opposed to government healthcare programs?  Also when did they come into effect?

[Admiral Yi]

How does that increase the cost of healthcare, as opposed to government healthcare programs?  Also when did they come into effect?

Remove the budget constraint, increase demand.  Same as with all socialized medicine.

Early in Bush's first term.

[DGuller]

Oh yeah.  But I think I read that only Ireland and the UK (post-1997) had high growth rates of healthcare expenditure.  Ireland was splurging for most of those 20 years and the UK splurged abit too after 1997, but they're both caused by healthcare inflation but also a conscious decision by the respective governments to spend considerably more - that excuse doesn't work in the US.

Prescription drug benefit.

How does that increase the cost of healthcare, as opposed to government healthcare programs?  Also when did they come into effect?

It increases utilization.  Increased utilization of drugs also hinders people's ability to die early, further increasing their need for medication as they grow older.

[Sheilbh]

Remove the budget constraint, increase demand.  Same as with all socialized medicine.

Firstly most socialised medicine systems don't remove the budget constraint.

Secondly US health inflation is far higher in this period than anywhere but Ireland and the UK who make a conscious decision to spend lots of money.  Given that the rest of the developed world has a form of socialised medicine that answer doesn't seem to work.

Early in Bush's first term.

Okay but healthcare cost inflation kicks off in the late 80s/early 90s.  It's one of the major reasons that HMOs become the main form of insurance.

Edit:  Also from 1998-2008, according to the Kaiser Family Foundation, Medicare expenditure actually grew less than the expenditure of private health insurance.  It's apparently generally the case that the costs to government programs in the US, while higher than inflation, are still lower than the costs experienced in the private sector.  So I'm not convinced this is the answer.

[Admiral Yi]

Firstly most socialised medicine systems don't remove the budget constraint.

Removing the budget constraint means the end-user is indifferent to the cost.

[Zoupa]

The cost is hugely inflated by corporate bullshit.

[Sheilbh]

Removing the budget constraint means the end-user is indifferent to the cost.

Well I don't think that's entirely true in most socialised systems which generally include some cost for the end user, but they are heavily subsidised.

But this is one of those things where it has a different meaning in the UK.  Budget constraint in the NHS means the government isn't increasing spending.  So they still have to deliver care that's free at the point of need but with less money.  So you have the NHS that was over-worked and under-funded in the 90s with massive waiting lists, but also the incentive for various governments to constantly reform it to try and squeeze out productivity.  There's no consumption budget constraint, but one is opposed from above.