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Monday, December 24, 2012

Abseiling Down the Fiscal Cliff

When you look at the magnitude of the problem it seems insurmountable. Nonetheless, let's have a look and see whether we can break this down and make a difference...

- Pass the bill in chunks (3-4 $500 Billion USD chunks) if you can't do it at the moment. Situation is manageable but not dire. There is still time.
- Seems as though both sides are attempting to for a 1-1 dollar debt cut/revenue raise ratio. Use this as the basis for what essentially amounts to a trade of what can be done now if we need to pass an intermediate/stop gap package.
- Think about negotiatons in another way. Focus on the big things that affect the largest number of people first or have the largest impact first or do the exact converse.
- Another option is to simply find finding those who are willing to cross and convincing to see whether they will do so.
- Think we may be looking at this too simplistically. It's not just cutting costs and revenue raising. One of the things that has always surprised me with the United States is the total number of agencies and the size of the government/administration. Many different agencies with overlapping responsibilities. Believe that their may be signifiant savings to be made if there were simply greater co-operation and a streamlining of many activities. Best way to achieve this without cutting required/critical programs would simply be to ask the heads of the relevant agencies (consult individual states as well. Look at programs that aren't producing results, look for alternatives, you'd be surprised what you can provided you have the right in people in the right position in place). Look at the big picture but try to see the smaller details as well. It's clear that there are loopholes everywhere if you spend enough time and consult enough people. If you pass the bill in chunks then you can spend more time dealing with these issues as well.
- Clear that there are generally limited options when it comes to elected officials and members of the administration/executive. Need a clearer vision of where the country is headed. Once this is done, use this as the basis of cuts (if they are required). Have seen a number of times where programs have been stopped and then restarted. In the end of the cost of this administration actually outweighed the cost of having the program running for that entire period.
- Continue 'economic stimulus' and using this money to restructure/reinvest in infrastructure and other projects that are likely to result in strong returns. Use it wisely though. If not, it basically amounts to a risky bet and if the investment doesn't produce the expected return or does not keep pace with inflation then you may be worse off then when you began. Reminds me of dogs chasing rabbit at the race track. Theoretically, if the growth curve runs ahead of the debt curve you could do this forever. Not recommended though. Best used in combination with other reforms.
- Not sure we should be looking at only 1/2 tiers for tax increases. Perhaps 3/4 so that the impact  is not as strongly felt. Need to factor in implementation and overheard issues though. Moreover, clear that there each state has different costs of living. By having a larger number of tiers we can increase flexibility and 'spread the load' better so to speak without pushing family budgets over the edge.
- Changing measure of inflation (CPI-U Vs chained CPI) difficult and possibly dangerous route to take. At the end of the day, it is just another metric/variable. By not changing this and focusing in on other issues you may actually save on administrative costs associated with the switch. Moreover, in practive, over time it may just push too many people over the edge. Need to realise that the theory/principle behind this is much like broad based taxation anyhow. If that's what you want why not use it? Moreover, other styles of taxes have greater flexibility naturally built into them. For instance, GST/VAT can be applied to whatever goods/services are relevant and changed when required if they are written well.
- Let the cliff occur. Then start working backwards. Horrible option but an option nonetheless. Won't give markets much confidence. Temporary pain obviously. Need to put this into perspective though. United States economy is huge and should be able to absorb it.
- Focus in on cause and effect issues. Look at the number of healthcare programs that are currently  being considered to be cut. If you increase the tax on products/services (and it successfully leads to a reduction for these particular products/services) that are likely to cause them health issues then you ultimately reduce the burden on the healthcare system and also gain extra revenue from the product/service themselves. Question is of course, just exactly what is the level of taxation required to achieve this?
- Large number of healthcare problems/costs. Consider bringing in overseas healthcare specialists/staff to help relieve possible costs. Really need to be careful with screening though. Local experience has taught us that this can lead to medium/long term pain if insufficient checks regarding qualifications are made.
- Link the increase in age for Social Security to occupation (labourer, office workers, etc...). Dig enough into your data and you'll figure out what is a fair age for the relevant occupation so that ultimately everyone averages out
- Economy is too dependent on gas/carbon at this stage. Larger carbon producers and transportation for both people in general as well as for goods may be too strongly impacted (If public transportation were safe, could handle extra load, and was cheap enough it may be a viable option though but this doesn't seem to the case in many cases. Have noticed that price of gas in the United States is significantly lower than elsewhere in the world.). Australian implementation of carbon tax to top producers of carbon have had limited impact on end consumers but there has still be an increase in price. May consider this further along the line or stagger it as Green technology uptake becomes stronger (in first year and increasing in 1% increments until reaching a chosen target?)
- VAT/GST with exemptions for staples/necessities. This would allow people to budget better while maintaining a revenue stream. Need to be careful with implementation though. Overheads of changing it once in place is not easy as indicated by local experience. While there are critics with regards to transparency experience indicates that if you remove other complex, competing, tax schemes at the same time a lot of overhead can be reduced for businesses in the long time making business easier.
- Despite the obvious problems, need to be wise about this. Policy that is created hastily without thought of the medium/longer term effects can be damaging not only for your economy, but for morale, healthcare, and a large number of other issues as well.

- as usual thanks to all of the individuals and groups who purchase and use my goods and services

Quick Beef Stew Recipe, Random Stuff, and More

This is the latest in my series on quick, easy, and tasty meals:   http://dtbnguyen.blogspot.com/2017/11/chinese-style-congee-jook-recipe...