In an environment where there the median individual has more debt then savings, what is wrong with inflation. Inflation reduces the real value of both debt and savings thus reducing in real value the amount of the governments debt/deficit and also individual debt.

Inflation also increases the velocity of money, as people want to spend it on real things before it is worthless and therefore is an economic stimulus.

Therefore due to the current situation, I think that we should set the target inflation at 3%/year for the next little while, and print money until that happens.

I agree with eliminating the mortgage interest deduction. As this encourages a large amount of Mortgage debt, contributing to the housing crisis that was/is still being experienced in the US. Canada has no such deduction and we have actually seen housing prices rise in the last 3 years.

Don't forget about the additional taxes that will be paid. That will bring out the other half of Americans. It's a good plan in that no one will be entirely pleased with it.

Honestly, with the level of debt in this country, a bit of inflation isn't the worst thing that can happen.

I don't disagree - as long as "a bit" doesn't turn into hyperinflation

I notice the plan offered doesn't mention rescinding the cap on social security withholding that got started up in 1986, but does include ending subsidized interest for student loans while students are still in school. I wonder how many rich old men were on the panel versus how many younger people. This plan is made of fail.

Let me summarize what you're saying, Bob: "I want to balance the budget, but not if it negatively impacts me". If everyone says that, we're not going to ever balance the budget until we have to - and if you thinks cuts are severe now, you just wait until that happens.

If I have to give up my mortgage deduction - which is a fuckload more than your student loans - you can suck it up too

Did you not notice the raise in the retirement age?

Exactly, economic policy tends to be made by better off older individuals rather then indebted younger ones. Therefore there is an inherent bias towards inflation in there policy decisions.

Have you ever seen the BBC Comedy "yes minister" Sometimes I wonder if this is how most government policy is determined. (For the benefit of the civil service masters implementing the policy)

+1 for the Yes, Minister plug joey 1.

That said, the pay freeze for federal employees (and 2 for 3 replacement ratio) doesn't exactly seem to leave the civil service masters immune from the cuts.

stratagos, as long as there exists a central bank that issues a fiat currency at interest, there exists more debt than there is money to pay it off. Therefore, there is NO balancing of the budget. There never was.

So when you talk about "cutting" services while Congress uses OUR money to bail out the fraudulent bankers (which Greenspan admitted yesterday), you'd better be god damned sure that there will be hell to pay eventually!

The bankers and Congress did this. Not you or I. It's time to stick the blame where it belongs really fucking hard.

http://dailybail.com/home/bombshell-video-greenspan-admits-to-rampant-fraud-illegal-ac.html

If this doesn't piss you off, you are already dead.

@ Darwyn - you're aware that a huge chunk of the TARP funds have been paid back, and that there are active criminal cases where fraud has been detected.... right?

Besides making the firms pay back the loans, what, exactly, do you think should be done? Nationalization? Clawback provisions? Tax everyone in the Financial Services industry?

I'm all for anger getting things done, but I'm not fond of either misplaced or directionless anger.

And do you want to just keep cranking up the debt until people won't buy it any longer?

What is *your* solution, without using buzzwords?

A jubilee. Time to scrap the present government and all the promises associated with it and install a new one and start over with a clean slate.

So we should declare all our debts - including social security obligations and bonds held by citizens null and void?

Do you have any *realistic* suggestions?

Given that no one will loan the US money in that case, where will you cut spending? Ignoring, for the sake of discussion, the serious negative consequences of a US government default

Do bankers exploiting the system anger me? Yes - but so do people who disguise their unwillingness to make hard choices behind suggestions they know won't fly, and would be far worse than the problem if they did.

military spending is out of hand. what we need is a non-partisan system for controlling defense spending, rather than congress. congressmen are accountable to their districts, which want to protect jobs, like those in my district making jet fighters. we spend 7 times more than our nearest competitor, china, which is insane. we need to get out of iraq as soon as possible, cut support to israel (who uses us like a big brother to turn to when they talk shit to bigger kids).

we need to penalize corporations that outsource manufacturing jobs. we need to add a Value added tax to goods coming in from china, respective to the currency manipulation they have engaged in.

Stratagos- I'm 37, and haven't been a student for the better part of a decade, long past the subsidization of interest on my student loans. However, student loans are exactly the best kind of spending we can do to ensure the future, and we should spend lavishly on education.

Also, before we raise the retirement age, perhaps we should have FICA continue to apply even after an individual makes six figures.

In other words, your summary, much akin to this plan, is made of fail.

also we need to tax the wealthiest people right into the fucking ground. they have gained the greatest benefit from america's society and economy, and they need to pay for it. make our tax rates commensurate with what you find in europe. i am not the greatest tax expert around, but we need a way to close up international tax loopholes. penalize countries like switzerland and the bahamas somehow?

and strat, i think it's pretty disingenuous to compare tax deductions on mortgages with student loans. student loans are treated the same as criminal fines, and prey upon people at their absolute weakest financial moment. if you end the subsidization of interest on student loans, you cut off college for all but the wealthiest people, thereby increasing the already plutocratic american society. the poor are not the problem. the undue influence of the wealthy on american policy decisions is the problem.

@bob - ok Bob, here's the Congressional Budget Office's website:
http://www.cbo.gov/

Where do *you* want to cut to balance the budget?

I don't have a problem with what you're saying about student loans *or* the social security cap - and I freely admit that I was harsher than necessary - but the problem is that if you look at *any individual program* you're going to see benefits for maintaining it.

So, you want to protect the student loan interest deduction? Boss. There's the budget. Where are you going to raise the additional revenue or make offsetting cuts elsewhere?

@omg - see, I worked my way through college - I didn't get a loan, and I didn't get some rich relative to help me out. Fully granted that I had an advantage that many do not - I lived in California at the time, and higher ed is heavily subsidized - I *also* chose to go to JCs and the Cal State system instead of a more expensive "named" UC.

Just like Bob, I invite you to look at the list and tell me where you're going to make the offsetting cuts. And while raising the marginal tax rates on the wealthy is a fine idea, I suggest you crunch the numbers and find out exactly how much revenue that will bring in before assuming just soaking the rich is going to make everything better.

I don't have a *problem* with raising tax rates, but when people talk about "the rich", they seem to think there is a huge number of Bill Gates out there you can tap. There isn't, and sooner or later, the lower you get, when you hit "the rich" you get small businesses who choose not to hire another person because their taxes just went up - so there are *consequences* for lowering that bar too low.

@omgwhathappened
I agree with you that too much is being spent on the military. But you act as if nothing is being done. My sister is working at the Pentagon right now and Gates is shutting down entire sectors, cutting out contractors, and downsizing everything, so its already being done, although the change in spending may take another year or so to become apparent. And the jobs you mentioned, the ones making fighter jets, are exactly the one's that shouldn't be cut. So many American businesses are involved in the production of those jets that the ripple effect would take out many jobs.

I personally am an economics major in college. As for your comment on taxing the richest into the ground, my answer is no. Taxation reaches a point where an increase in the tax rate decreases the total revenue from the tax. this is called the Laffer curve. Extremely high taxes on the wealthy discourage those people from working and thus do not optimize output, which decreases the velocity of money and spending.

@goldfinger:
Re: cutting widgets, part of a message I posted elsewhere:

So the obvious solution would be 'cut spending', except whenever any congresscritter hears about a cut that would affect their district they play the "this will cost my district jobs". Well, yeah. If we don't need redundant widgets, the people making redundant widgets will need to find something else to do, or we'll need to sell the redundant widgets to someone else.

The question in that case isn't "will cutting spending cost jobs", it's "does keeping those jobs justify spending taxpayer money"

Here in the UK there was a big demo against increasing student fees, and I do seem to be in the minority who don't really mind.
I come from a financially secure background, but that doesn't mean my parents are paying me through university. I'm building up a student loan like everyone else out there, and when I graduate I expect that, over the years, I will pay this back.

Interestingly, I haven't yet met a science student who is complaining about the increase in fee's - seems only to be the arts students taking degree's that won't help their carreers.

stratagos...my solution is much more real than you think. Aside from the precedence of the Roman Empire invoking a jubilee, anything you can come up with will only address the symptoms of the problem. The problem, as I said, is the central bank issuing currency at interest.

Any solution that doesn't involve abolishing the central bank will fail. Period. End of story.

So you can talk all you want about fixing this or fixing that, but it will not solve anything. You are wasting your breath.

I am beyond pissed off about this and took exception to your "suck it up" attitude...as if we haven't been fucked over enough. You are free to argue with yourself about who should get fucked over more, but I for one am finished tolerating this bullshit economic system designed to keep us in indentured servitude for the benefit of the wealthy few.

Ok. So you said that's the issue.

But saying it doesn't make it so. You're making a strong claim. A strong claim like that requires strong proof.

Forgive me if I'm unwilling to burn the economy down on the strength of your say-so.

Darwyn,

I don't think I anywhere said "suck it up".

I did say that your cure is worse than the disease. I'm willing to reconsider that, but I cannot visualize doing what you suggest and it not being a complete and utter disaster. If for no other reason, what makes you think that the Powers That Be, given the flexibility to just randomly screw people over, won't screw you over *more* than you feel you're being screwed now?

I, frankly, don't grok your attitude. If you think I'm thrilled with the current system, you're wrong, but I also don't quite understand what you're suggesting - or maybe I misunderstand. You seem to be just saying "toss it all in the crapper and start from scratch", but I can't tell if you're suggesting handling the niggling little details like those currently dependent on existing programs with new programs, or just letting them all just kinda die.

You can get as peeved with me as you wish - that is your right. But I think my desire to reform the system is more likely to generate results than yours to shitcan it. However, I also realize you have strong views on this, and don't want to hear that. Fair enough - but if you have a realistic proposition, I really have yet to see it.

You're under no obligation to present it, of course, but - from this side of the keyboard - I see a lot of anger, but nothing that can be actually *discussed*

ground all domestic fighter jets for a year, hell, sell half of them.

I reckon much of the current ecomonic problem is due to the ignorance of the general public, who willingly jumped on the bandwagon and gave their money to conmen. Hopefully we will not forget this lesson! :^)

It is pointless to try and 'reform' the system. By any objective measure, the government is already bankrupt (even its own accountants with their phony accounting system that would land me in prison for fraud say so). It will never be able to pay off its debts no matter what it does - short of euthanizing all senior citizens and enacting an 70% flat income tax (and shooting tens of millions of tax rebels). The federal government spends almost two dollars for every dollar it generates in tax revenue today. That's a lot of nickel-and-dime reforms that need to happen to stop the hemorrhaging, and a lot more before the blood transfusion can start. And this is all assuming that all the bloodsucking parasitic tax-feeders who will fight any reform tooth and nail can be killed off quickly and easily (good luck with that). Our patient is already as good as dead.

Darwyn is right. The best realistic thing that could happen at this point is to let the system collapse under its own dead weight and start over. Repudiating the debts wouldn't be the end of the world. Yes, it would be harder to borrow more money in the future. But being forced to live responsibly within your means and stay out of debt is not a bad thing. If the political class had been doing that to begin with, they wouldn't be in this mess today.

And as for college student loans: this country already has too many college graduates. We shouldn't be encouraging more:
http://www.alternet.org/economy/148606/janitors_with_ph.d.s:_why_we're_spending_way_too_much_on_higher_education/

I just don't understand what's wrong with having a central bank that loans money at interest. That is the way the government controls interest rates in the country. When the Fed raises its rates, banks raise theirs. the central bank also controls the amount of currency in circulation. I just don't see where there can be an argument against the central bank. If you want to get historical, the creation of the Fed caused inflation over the following century when there was little in the previous one, but inflation is good for our debts, it devalues them