A Debt Ceiling Revenue Solution

An estimated total of $8.1 Trillion is currently held in IRA and 401K plans. This may not include 401K style plans available to government employees and the self-employed. I did not find a breakout for traditional (put in pre tax dollars and pay regular income tax on withdrawals) versus Roth (put in after tax dollars but pay no tax on gains) plans but it is probably safe to assume the largest amount is in the tax deferred traditional IRA plans.

These funds may offer the debt ceiling warriors a way to increase revenue to keep the Democrats happy but without raising taxes, keeping the Republicans happy. By repealing the traditional 401K/IRA plans but keeping the Roth IRA, dollars contributed to 401K/IRAs would be taxed thus increasing revenue. Taxpayer income for living expenses (food, housing, transportation, leisure etc.) would remain the same. Only the savings investment dollars would be reduced due to taxes. However, the net investment money could be put into a tax free Roth IRA which in the long run is probably a better investment. A one time good deal could be offered to people holding investments in 401K/IRA tax deferred plans to convert to a Roth style plan by paying a low flat tax (immediate revenue to the government) on the transferred funds. Most people would have to sell some of their investments held inside their 401K/IRA accounts to cover taxes. Therefore conversion would have to be spread over several years so as not to disrupt the markets. Some may choose not to convert due to factors such as life expectancy.

The end results are: more cash to the government for the short-term, no living expense cash flow effect for the taxpayer, no change in tax rates except for the special conversion tax, no fear of the IRS or Congress grabbing your Roth retirement income.

This proposal still leaves open the questions of spending reductions, balanced budget amendments and tax reform but it does get us past the current impasse on revenue. The other issues can be settled November 6, 2012.

Cross posted on Sound Politics

Go All In On Debt Ceiling And Lose!

Republicans bolstered by 84 new members mostly from the Tea Party/conservative ranks took control of the House of Representatives on January 3, 2011. Almost immediately, the House instigated a government shutdown crisis by demanding budget cuts from the Obama administration. It was resolved by some real cuts but mostly smoke and mirrors. No surprise since the Democrats held the best hand, the White House and the Senate albeit by a much-reduced majority. Memories of President Clinton’s success in blaming the Republicans for the 1995 shutdown also blunted the fervor.

Obama’s request to raise the debt ceiling puts the House Republicans in the spending breach once again. This time with a stronger hand from the crushing defeat of the Democrats in November 2010 but still not enough for the Rs to go all in. Failure to reach a settlement on the debt ceiling will most assuredly be blamed on the Republicans. No Social Security check for Grandma, economic disaster, stock market crash, yadda, yadda, yadda, all the fault of those wacko Tea Party types. Today’s White House press conference put on full display the power of the President to shape (demigod) the discussion. In the end, President Barack Hussein Obama will save the world by invoking the 14th Amendment and unilaterally raise the debt limit. It’s a lose/lose for the GOP.

So how do the Republicans stay true to their values and still duck the incoming fire? The House took the first step in by passing the Cut, Cap and Balance Act, the only proposal actually in written form. Senate Democrats on a straight party line vote promptly tabled it. It is now time, if for no other reason than there is no time left, to propose a mixture of substance and symbolism. On the substance side, there seems to be general agreement to cut spending by several trillion dollars so offer a cut of around $3 trillion with at least a quarter of the reductions in the first year. The symbolism, which could turn into substance, comes in two parts. First, require both houses of Congress to debate and vote on a balanced budget amendment to the Constitution. Pass or fail it will put every legislator on record as to how serious they really are about controlling our escalating debt. Such an amendment came within one vote in the Senate from passing in 1995. Second, appoint a blue ribbon committee to draft a tax system reform bill for an up or down congressional vote before the 2012 elections. Again, pass or fail it would separate the serious from the frivolous and move the whole tax issue debate off the Bush tax cuts and corporate jets on to the obvious need for reform.

The compromise may be only the spending cuts but considering the cards in the GOP’s hand, they should take it and wait for a winning hand in November 2012.

Sound Politics

What Made Me Me

Thanks to my high school classmate A.C. for sending this bit of nostalgia, a poem titled “What Made Me Me” by an unknown author. Below is a web site that accompanies the poem with a song from the ‘50s one can actually sing, “My Prayer” by the Platters. Stay tuned and hear many more great songs from that time when Rock & Roll was born.

CLICK HERE

A slightly different version is printed below. Enjoy.

What Made Me Me

Long ago and far away,
In a land that time forgot,
Before the days of Dylan,
Or the dawn of Camelot.
There lived a race of innocents,
And they were you and me,
Long ago and far away
In the Land That Made Me Me.

Oh, there was truth and goodness
In that land where we were born,
Where navels were for oranges,
And Peyton Place was porn.
For Ike was in the White House,
And Hoss was on TV,
And God was in His heaven
In the Land That Made Me Me.

We longed for love and romance,
And waited for the prince,
And Eddie Fisher married Liz,
And no one’s seen him since
We danced to “Little Darlin,”
And Sang to “Stagger Lee”
And cried for Buddy Holly
In the Land That Made Me Me.

Only girls wore earrings then,
And three was one too many,
And only boys wore flat-top cuts,
Except for Jean McKinney
And only in our wildest dreams
Did we expect to see
A boy named George, with Lipstick
In the Land That Made Me Me

Girls fell for Frankie Avalon,
Annette was oh, so nice,
And when they made a movie,
They never made it twice.
We didn’t have a Star Trek Five,
Or Psycho Two and Three,
Or Rockey-Rambo Twenty
In the Land That Made Me Me.

Miss Kitty had a heart of gold,
And Chester had a limp,
And Reagan was a Democrat
Whose co-star was a chimp.
We had a Mr.Wizard,
But not a Mr.T,
And Oprah couldn’t talk, yet
In the Land That Made Me Me.

We had our share of heroes,
We never thought they’d go,
At least not Bobby Darin
Or Marilyn Monroe
For youth was still eternal,
And life was yet to be,
And Elvis was forever,
In the Land That Made Me Me

We’d never seen the rock band
That was Grateful to be Dead,
And Airplanes weren’t named Jefferson,
And Zeppelins weren’t Led.
And Beatles lived in gardens then,
And Monkees in a tree,
Madonna was a virgin
In the Land That Made Me Me.

We’d never heard of microwaves,
Or a GPS in cars!
And babies might be bottle-fed,
But they weren’t grown in jars.
And pumping iron got wrinkles out,
And “gay” meant fancy-free,
And dorms were never coed
In the Land That Made Me Me.

We hadn’t seen enough of jets
To talk about the lag,
And microchips were what was left at
The bottom of the bag.
And hardware was a box of nails,
And bytes came from a flea,
And rocket ships were fiction
In the Land That Made Me Me.

Buicks came with portholes,
And sideshow came with freaks,
And bathing suits came big enough
To cover both your cheeks.
And Coke came just in bottles,
And skirts came to the knee,
And Castro came to power
In the Land That Made Me Me.

We had no Crest with Fluoride,
We had no Hill Street Blues,
Girls wore superstructure bras,
Designed by Howard Hughes.
There were no patterned pantyhose
Or Lipton herbal tea,
Or prime-time ads for condoms
In the Land That Made Me Me.

There were no golden arches,
No Perriers to chill,
And fish were not called Wanda,
And cats were not called Bill.
And middle-aged was thirty-five
And old was forty-three,
And ancient was our parents
In the Land That Made Me Me.

But all things have a season,
Or so we’ve heard them say,
And now instead of Maybelline
We swear by Retin-A.
And they send us invitations
To join AARP,
We’ve come a long way baby,
From the Land That Made Me Me.

So now we face a brave new world
In slightly larger jeans,
And wonder why they’re using
Smaller print in magazines.
And we tell our children’s children
Of the way it used to be,
Long ago, and far away
In the Land That Made Me Me.

–Author unknown

Cut Spending. Increase Taxes. Do Both?

Commentator, actor and attorney Ben Stein was on Fox News’ O’Reilly Factor with Laura Ingraham last Wednesday. Stein, generally considered a conservative, made the case for tax increases as part of any debt reduction plan. Ingraham countered with the, “We don’t have a revenue problem, we have a spending problem.” mantra.

Indeed we do have a spending problem and it has caused a debt crisis that spending reductions alone will never resolve. The Federal government is currently borrowing 40 cents of every dollar of expenditure. Arrival of that elusive economic recovery would take care of a portion of the revenue/expenditure gap but significant cuts across the board would still be required to achieve a balanced budget. Cuts in Social Security, Medicare/Medicaid, and the military would surely be included. Even then, a balanced budget does nothing to reduce the $14 heading to $16 trillion debt.

At some point tax increases will be required but before the deficit hawks toss in the tax increase chip, they must extract a high price. Something more than just a high ratio of spending cuts to tax increases. A constitutional balanced budget amendment tops the list. It would give cover for legislators from the demands of special interest groups. Liberals would be forced to temper their demands for more spending and conservatives would have to at least be open to tax/fee increases. Both could blame the balanced budget amendment for having to make painful votes contrary to their principles. A close second is true tax reform. Not revising the current code but repealing it and instituting a Fair Tax (national sales tax) or a flat tax with a single standard deduction. In either case, everyone should be required to have some “skin in the game” by paying a minimum tax even if it is only a nominal amount. A simpler tax system would be a transparent system. No burying tax breaks in the massive code, no fiddling with brackets and deductions.

Former President Bill Clinton has suggested a lower spending and increase taxes plan that would not go into effect until the economy has recovered. It speaks to the “don’t cut spending, don’t raise taxes in the middle of a recession” debate. It’s an interesting idea, clouded by some cheap shots at Republicans, but not nearly strong enough. The time line for approval of a balanced budget amendment and a new tax system would accomplish the implementation delay Clinton is suggesting but the result would be two powerful tools for fixing our fiscal mess.

It’s trite but true, if not now, when, if not soon, Greece?

Cross posted on: Sound Politics