I know you did, but you and many others, always target pensions and other areas where the vulnerable of society get hit first. [/quote}
I can't speak for others. But my references to pensions and health care (mainly in discussions concerning U.S. imbalances) is strictly on account of those programs accounting for almost all of the long-term imbalances. I've also noted that the U.S. cannot grow its way out of its imbalances. Tax hikes, discretionary spending cuts, and mandatory spending reform (which will require significant health care reform to address the excess cost issue) will be needed.
One has to ask why sometimes.
I usually try to skim through the ideological "noise" when it comes to economic/fiscal discussions. I suspect that perceptions about what the role of government should be, size of government, etc., are involved.
Why not force companies and rich people to pay their fair share of the tax burden? We all know they avoid as much tax as they can where as the "normal" man and woman pay their full load every year. Was it not GE who paid no US tax last year? Plug those legalistic holes so that companies like GE pay their taxes fairly.
Why not cut massive subsidy programs (tax breaks, direct subsidies and so on) for private companies before cutting those for the weakest in society? We all know what we are talking about. Airbus in Europe, Boeing in the US, banks world wide and of course the big multinational food companies that press the farmers on price world wide. All this is done by your and my tax euro/dollar.
I believe the tax code as a whole should be examined in the U.S. All firms should be treated alike. Special industry subsidies should be eliminated. Closing those loopholes/ending special subsidies, etc., could allow tax rates to be lower than they might otherwise be.
On the individual tax front, I believe a similar approach should be applied. The recent economic crisis raises the real question whether, for example, the mortgage interest deduction should be preserved. That deduction, among many other factors, skews investment flows. Moreover, the experience in Canada where that deduction was eliminated (no wrenching dislocation of the housing sector and now a higher home ownership rate than the U.S.) suggests that doing so is feasible. That is just one example of deductions. Rates should be set to meet revenue objectives and avoid, to the largest extent possible, economic distortions, deadweight from inefficiency, etc.
In the US case, why not cut massively in the military and security budget? Do you really need 4 branches of the military (not counting the Coast Guard)? Do you really need 1500+ nuclear bombs and the cost of upkeeping them? Do you really need 20+ intelligence agencies? Other countries do fine with far fewer.
IMO, there should be no "sacred cows" so to speak. While I favor a strong defense, that is very different from expecting that Defense should be immune. I believe it is both reasonable and appropriate to expect that the Pentagon increases its returns (ability to meet objectives, resource deployment, etc.) per dollar of funding, just as is expected of any other agency.
As I never bought into Krauthammer's "unipolar" argument that the U.S. had achieved military preeminence--it had the greatest military power but that power did not begin to approach preeminence--understand that economic concepts pertaining to resource scarcity/limits are relevant in the dimension of power, and recognize that the U.S. has numerous highly dependable partners overseas (including countries that were foolishly mocked as comprising "Old Europe"), I am comfortable with a framework that recognizes the reality of a multipolar world, the continuing importance of balance of power considerations, and partnership with allies. I don't believe ad hoc coalitions are a very effective security mechanism, as they are functions of expediency, not enduring interests and shared values.
Why is it when we talk about spending cuts, we always go straight for healthcare (in Europe) and pensions?
I can't speak for others. My view is that the focus should start where the greatest imbalances exist and then the policy framework needs to consider how to achieve the necessary objectives while minimizing economic harm, considering social needs, etc.
That is how it was before the New Deal and the implementation of the so called welfare state. The poverty rate among the elderly was massively high.
I'm well aware of that. I don't think it would be reasonable, politically feasible, or ethical to go back to a situation akin to those times. Social Security in the U.S. (and I apologize for resorting to a U.S. example, but I am far more familiar with the data concerning those examples), even as the program has some serious problems, has done enormous good in virtually eliminating the incidence of poverty among senior citizens. Just cutting expenditures is not a viable reform. Gradually slowing expenditure growth over an extended timeframe, raising the retirement age to better reflect changes in life expectancy, adjusting payroll taxes, perhaps separating the pension component from supplemental programs, will likely be needed. On an actuarial basis, the challenges facing that program are far more manageable than the health-related imbalances in the U.S.
With respect to those latter imbalances, the introduction of budgeting (financial rationing) or cutting expenditures/raising taxes, won't achieve the desired ends. A large part of the problem rests in the structure of the U.S. health industry itself. Far-reaching changes will be required there. Those changes will need to address technology procurement, the supply of personnel (touching on licensing issues, determining what is/is not empirically supported as useful), among numerous other factors. The degree of structural reform will likely be magnitudes of order greater than what was pursued in the recently-enacted health care law.
Because the markets are being manipulated and are imperfect. Hence the idea that the free market is the best way is a stupid thing. It should be the job of regulators to minimize the manipulation as much as possible.. by for example demanding that if you want to speculate the you need to own the good/stock/stuff that you are speculating in and not "borrow" it from someone else. It would cut speculation dramatically. Just think if those who pushed up oil to 150 dollars were forced to actually take delivery of the oil they were buying?
Yes, because the markets along with the speculators were looking for the supposed weak nations. We see it all the time but so far we as a society just shrug it off despite we all having to pay for the consequences of these speculators actions.. and all the while these speculators are making trillions on the misery of others. We saw it when the markets went after Sweden a decade or so ago, they tried to do the same with Denmark.. and failed. They tried with stronger economies in Asia but had to settle with the weaker ones. They tried and succeeded in South America several times. They forced the pound out of the Europe currency thing (can never remember what it is called) 20 years ago almost, and tried to do it with other currencies also .. but failed.
As numerous factors (market structure, information asymmetries, human psychology/behavior, interests of market participants, etc.) assure that markets are not perfect, not always rational, produce externalities, can go to excess (and speculative attacks on currencies is one dimension of excess), a level of regulation is necessary. The regulation needs to be sufficiently robust and its enforcements sufficiently effective to assure that the objectives of such regulation are achieved. Markets are a wonderful mechanism. But one should not lose sight of the reality that markets, like any other human institution, have imperfections and can produce failure, as well as success.
On the US .. no way. The rating wont change. There might be a lot of threating, but it wont change. The US has been in the toilet budget wise for decades and nothing has happened on the credit rating. Its projected debt vs GDP in real dollars is massive, and nothing has happened. Its actual debt vs GDP is huge and nothing has happened. Nothing will happen as long as most if not all ratings agencies are American owned and run the way they are. These rating agencies wont bite the hand that feeds them.
I'd like to see more empirical work done on the effectiveness and utility of ratings agencies relative to measuring risk. They are a deeply embedded component in the world of finance, but are they really effective at what they do? The recent financial crisis exposed major problems, but such problems have been exposed time and again each time there has been a major crisis be it the Scandanavian banking crisis of the early 1990s or the Asian financial crisis in the late 1990s, or the most recent U.S.-led financial crisis.
In the broader context, risk management needs to be improved markedly. It is not clear that risk management is qualitatively better than it was in the past. Early findings concerning such models as the Value at Risk (very widely used) suggest that such models may actually have amplified the risk as the financial crisis was beginning to develop. Judgment, reliance on historic cases, understanding/research in market structure, among other approaches need to be given much greater weight in an improved risk management environment.
And neither is the whole Greek budget deficit.
That's correct.
Legacy effect? Spain has had a budget surplus.. yes a budget surplus for over a decade, cutting their debt vs GDP every year until the world wide crisis. That is a legacy. In the same time frame, the US had deficits increase year after year, with debt piling up for .. yes decades. The UK was a tad better though. If anything the legacy of the US economy is far far far worse than the Greek since the US has been in a budget deficit since before Carter pretty much. The whole legacy is most likely built up on the fact that the US consumer is a spending nut but that is solely based on the wishful thinking that the US consumer will go back to previous consumption levels and as it stands now that aint gonna happen any time soon.
Looking at your point, I think "legacy" was the wrong word to describe the situation. To rephrase it, there is a prevailing conventional wisdom under which it is taken as an article of faith that the U.S. won't default, the UK won't default, etc. IMO, such assumptions are not helpful when one is actually trying to get a better understanding of sovereign debt risk.
it can I know, just pointing out that Ireland has the worst total debt on the planet, by far, followed by the UK. Another thing is how each country does its mortgage markets .. it is all different.
I looked a little further into the matter on Ireland. Reasons for ratings agency confidence--which may or may not be justified--included:
It is "too early to conclude that most of the factors that contributed to (Ireland's) economic vitality have been structurally eroded." "Ireland has some room to manoeuvre." The government's financial strength heading into the financial crisis/recession was "very high."
and that is not how many right wingers sound when talking about such entitlements. Cut cut cut, without thinking of the consequences of such cuts. Every dollar/Euro you take out of entitlements is less spending by said group (especially the elderly), which means less growth and in fact I would claim higher overall costs.