Advice for Obama and Boehner: Don't be shortsighted

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I remain optimistic that the fiscal cliff will be averted. But I am dismayed that both parties are displaying shortsighted thinking as they debate fiscal cliff solutions.

With the election over, neither side has the political power to get everything they want. But having promised so much, they are finding it difficult to give up anything. Politicians are defending too much of their political turf with insufficient political power. Their actions are actually harmful to their own supporters.

TAKE THE left aligned AARP and their zealous defense of the consumer price index, which determines annual Social Security cost-of-living adjustment increases. Reducing the CPI slightly, thereby causing a slightly lower COLA increase, is an option to cut entitlement costs. AARP reacted by labeling this a “dangerous proposal.”

AARP complained in a letter to the Congress that changing the CPI would result in a two-tenths-percent cut in the COLA. Based on its letter, if the lower CPI had been used for 2013, the average COLA increase would have been cut by $3.70 per month. A dangerous proposal?

The impact over time is greater because the reduction is cumulative, and estimates show that over 10 years the change could reduce annual benefits by 4 percent.

Few seniors would welcome a smaller raise each year in our Social Security payments, but we seniors can, and should, help solve the nation’s fiscal imbalance. Small Social Security benefit cuts are an acceptable way for us to help fix the deficit.

This is where AARP’s leadership reveals shortsighted thinking. The biggest issue for seniors is not Social Security, but making Medicare affordable and stable for years to come. AARP should agree to the slight reductions in future Social Security raises, and focus their political capital on Medicare.

PRESIDENT OBAMA agreed to a reduced CPI for Social Security COLAs in the 2011 debt ceiling negotiations. He needs to do the same thing again.

Shifting to the political right, shortsighted thinking is evident in the insistence that revenue increases must not include rate hikes for upper brackets. Instead, House Speaker John Boehner has proposed revenue increases of $800 billion over 10 years by reducing still unidentified tax deductions.

The largest deductions in the tax code – tax-deferred retirement plans; mortgage interest; deductible state and local taxes; nontaxable Social Security benefits; and charitable donations, for example – are very popular and have a heavy impact on the middle class. After the targeted deductions are identified, Republican legislators will come under huge pressure to preserve them.

Additionally, Republicans have not made a convincing case that $800 billion in increased revenue is better coming from eliminating tax deduction than from increasing tax rates on the upper brackets.

Finally, President Obama has put more ideological value on those rate increases than is mathematically justified. Boehner should exchange them for entitlements cuts while their trading value is high. Then let the Democrats explain why the deficits continue unabated after they got the rate increases they wanted.

Mr. Speaker: Let go of tax-rate ideology and make the deal.

COMPROMISING TO avoid the fiscal cliff is only the beginning of America’s need to put its fiscal house in order. We are in a marathon, not a sprint, and more spending cuts and tax increases are ahead. Long-term strategic thinking by leaders from both the left and the right will better serve their followers.

(The writer is a retired U.S. Navy officer. He lives and writes in Savannah.)

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Techfan
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Techfan 12/16/12 - 08:14 am
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Joe, So someone living on a

Joe, So someone living on a fixed income, who payed into SS, shouldn't get the whopping 1.7% increase for 2013? I'm sure you see the costs of everything around you dropping so drastically that this 1.7% wouldn't be needed by seniors.

The driving force of our debt has been tax cuts (and other changes in the tax structure) and defense spending. Less revenue over 3 decades plus trillion dollar wars, be it Iraq, Afghanistan, Mogadishu, Dessert Storm, Dessert Shield, Grenada, on and on, have killed us financially. Thanks to payroll taxes only coming out of income of working people , someone making $20,000 a year pays more in payroll taxes than some living on $100 million a year from dividends. Lift the cap and count all revenue received, not matter how it comes in, as subject to payroll taxes and the funding of SS and Medicare will be solvent forever.
We spend about half of the military spending of the entire world COMBINED. Why? There's gold in them thar defense contracts. Where we used to have a private sweeping up on base, we have a civilian contractor's employee who may make minimum wage to $10 an hour. Of course the contractor may be paid $20 per person for the job. Waste. We used to have servicemen guarding areas, not mercenaries who face the same risk yet may may 10x what a soldier makes. Waste. Cost plus contract where the more they spend, the more thay make. Waste. Worthless, unneeded, unwanted weapons systems that run into the billions. Waste. Eisenhower warned us about the Military Industrial Complex, however it seems the only ones who listened were those in the MID and they're making billions. Waste.

There's your fix Joe. Count all income for payroll taxes and lift the cap. Keep us from being the world's policeman, and knock out the MID. Fix the tax schedule so a guy who works for a living isn't paying a 25% rate and trust fund babies and those who live on capital gains pay 13% (See: Romney, Willard). Simple, easy, but those who make the most are the ones who own the politicians and the government so it will never happen.

dichotomy
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dichotomy 12/16/12 - 12:46 pm
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Why would anyone think it is

Why would anyone think it is right to have no limit on how much someone is taxed to pay for a defined benefit with a limited maximum monthly payout. Nobody should be obligated to pay for someone else's retirement. Would you take the kind of deal you are proposing.

"Okay, I'll pay $50 a month and you pay $500 a month and in 40 years I'll get $1000 a month for 10 or 20 years and you will get $1000 a month for 10 or 20 years."

Somebody is getting screwed in that deal. I would NOT invest with that guy. Would you?

There is a cap on payroll taxes because there is a cap on monthly benefits. The PROBLEM is that NOBODY is paying enough payroll taxes in relation to what they draw out considering that people live much longer nowadays. Raising the age limit for eligibility, raising payroll taxes equally for EVERYONE up to the cap, OR making participation in Social Security optional is the only fair way to fix the system. High income earners already pay for most of the welfare hammock lifestyle, most of governement operations, and now you want them to pay for other people's retirement too.

Social Security was an ill conceived, short sighted system that was destined to go broke eventually and that destiny was hastened by greedy politicians who robbed the system to pay for MORE welfare and social program spending. Don't expect the wealthy to pay for ALL of the greed and stupidity. Somewhere, somehow, they have a right to equal treatment and equal taxation under the law. I am not aware of any legal ruling or moral imperative that says that wealthy people must pay the freight for everyone else.

Techfan
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Techfan 12/17/12 - 08:23 am
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Since life expectancy ahsn't

Since life expectancy ahsn't increased equally for everyone, why should we raise the retirement age equally? White, white collar, upper income, have health insurance, yes life expectancy has gone up greatly. Minority, blue collar, lower income, lack of health insurance, not so much. Born in 1980 and a white male-70.7 years, female-78.1. Black male-63.8, female-72.5. Upper income gives you a 4.7 year boost. I can agree on the cap, although I think it needs to be higher. We do need to count all income in the mix. My wife gets a 1099 for taxes. We have to pay income and payroll on her earnings. The same should apply for dividend and capitial gains. Money is money, it shouldn't matter where it comes from. That would cover a lot of the problem. You're 100% right on them taking payroll and lumping it in the general budget. Of course the right wing laughed at Gore when he ran and said he wanted to put it in a "lock box', not the general fund. I don't expect the wealthy to pay for everything, but when they're the only group that's seen any real income growth since the 1970's, they're the ones that should have to poney up. The top percent has seen a 275% growth in income since 1979. I don't know anyone who's increased that much. It's impossible to cut the rates on the only people seeing increase in income not run a deficit, esprcially when you add an over 500% increase in military spending.

Riverman1
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Riverman1 12/17/12 - 09:58 pm
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So you want to raise capital

So you want to raise capital gains tax rates for everybody? What about a working guy who saves and invests wisely and every few years has a nice gain? Him too? Of course when he loses the other years he can only declare a small percentage.

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