Oh Look, Truth!
The Market Ticker ® - Commentary on The Capital Markets
Posted 2013-01-15 14:28
by Karl Denninger
in Health Reform
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Oh Look, Truth!
 

Oh oh, now he went and did it.

Blinder on CNBC just pointed out the obvious -- if you stop the deficit spending (because you refuse to raise the debt ceiling) GDP contracts on a dollar for dollar basis, which is about 6% -- instantly.

This of course means that GDP is overstated by that very same 6% compared against actual private demand, and what's worse is that it's perpetually being overstated.

This is an exponential function which is why our debt is expanding at an ever-increasing rate.

We can't keep doing that forever.  Everyone admits that.  But the longer we keep doing it the more it's going to suck when we stop doing it.

And this means you must stop doing it now, because tomorrow it will be worse, and the day after that even more so, and on and on and on.

The payroll tax cut (now expired) moved the Social Security exhaustion date to 2033, supposedly.  I called it as 2019 assuming the tax cut remained in place but now that's gone I figured we might make it to 2025 or thereabouts.  A pair of professors now believes it's 2031.

To stop this we would have to either index the program's retirement age, immediately cut benefits or permanently increase the FICA tax 2.7%.

Yes, that's on top of the 2% tax increase you already got on the 1st of January.

But again, when you get down to the bottom line nobody is yet facing down the real issue -- the exponential expansion of medical costs.  Until that is addressed nothing else matters because you will never, ever grow the economy at a constant and never-interrupted 5, 6, 7, 8, 9 or more percent a year -- and the record from 1980 to today suggests that you need that number to be in excess of 9%.

Worse, for that growth rate to be real it must be in excess of debt increase in the system as a whole.

That has simply never happened in the history of America. 

Ever.

Either take on the medical monopolies or shut your pie holes gentlemen.

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User Info Oh Look, Truth! in forum [Market-Ticker]
Fraudster
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Quote:
But again, when you get down to the bottom line nobody is yet facing down the real issue -- the exponential expansion of medical costs. Until that is addressed nothing else matters because you will never, ever grow the economy at a constant and never-interrupted 5, 6, 7, 8, 9 or more percent a year -- and the record from 1980 to today suggests that you need that number to be in excess of 9%.


Since 1970, I think the best growth we have recorded was 7% in 1984. That, however, was just a snap-back from a particularly brutal recession and some very loose monetary policy (though debt levels then were still very low). So to answer the (rhetorical) question. No, it won't happen.

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"Let China sleep, for when she wakes, she will shake the world." - Napoleon Bonaparte

"Circulation ceases first at the outer edges [Europe and Japan]. It will take a while yet for the decay to reach the heart [America]." - Foundation & Empire by Isaac Asimov
Genesis
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I have the data from 1953 forward.

There have been QUARTERS where we have recorded ~10% annualized figures, but sustained rates in excess of 5%? Nope.

And worse, those are fake as the spread between that growth and systemic debt has been approximately 3% the entire time.

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I don't care if it makes sense -- only if it makes money. -- Me
Bank (n): See scam, fraud and theft. Eat a bankster -- they're low-carb.
What part of "shall not be infringed" was unclear?

Pika-steph
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Wonder if they'll put up a clip?

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Fraudster
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I believe that's right given the take-off in the systemic debt:gdp ratio that started after 1981.

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"Let China sleep, for when she wakes, she will shake the world." - Napoleon Bonaparte

"Circulation ceases first at the outer edges [Europe and Japan]. It will take a while yet for the decay to reach the heart [America]." - Foundation & Empire by Isaac Asimov

Genesis
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Fraud, yep. Published the debt-adjusted chart many times around here.

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I don't care if it makes sense -- only if it makes money. -- Me
Bank (n): See scam, fraud and theft. Eat a bankster -- they're low-carb.
What part of "shall not be infringed" was unclear?
Lunatic_fringe
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Obamacare is designed to increase market share for Big Medical - examples of this include electronic records for hospitals and limiting overhead costs for insurance companies, only large hospitals can afford to implement the EMR system and only the big insurance companies can afford to meet the overhead requirements. The result of this will be the small players will be sold to the large players, creating monopolies and limiting choices for consumers.

Costs will continue to rise until we simply can't afford it anymore (if we're not there already) and I actually welcome that.
Heisenberg
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What are you sayin TS? I'm not going to collect my soc sec entitlement check when I retire in 2029? Where do I sign up for the riot?
Splashdown
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Quote:
if you stop the deficit spending (because you refuse to raise the debt ceiling) GDP contracts on a dollar for dollar basis, which is about 6% -- instantly.


What about the 'multiplier effect' many people toss around when they speak of government spending and stimulus? People, when arguing for stimulus, have claimed the value is something between a 1.5x to 3x multiplier.

If their argument is true, the contraction in GDP associated with an end of deficit spending would be greater than a dollar for dollar basis at a minimum - maybe as much as 1.5 to 3 times. It's a double edged sword.

Crzymorse
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It's a long way down back to 1981 looking at that chart. BTW- Greenspan is a lying sack of **** when he stated that he never knew about the frothy housing market. He knowingly made a Faustian pact in 2001, deflation was considered a fat tailed risk of his asset pumping and he ignored the risk.

A 6% cut to GDP would quickly lead to another 6% decline in GDP. As a matter of fact wages would have to drop by about 2/3 before the economy would stabilize. Essentially Chinese wages would come here with asset deflation as the norm. We might as well spend the money and try to get something worthwhile accomplished.

Mo
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Quote:
Obamacare is designed to increase market share for Big Medical - examples of this include electronic records for hospitals and limiting overhead costs for insurance companies,


Around here, the health insurers are buying the hospitals and other medical facilities.

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Lenguado
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Quote:
Blinder on CNBC just pointed out the obvious -- if you stop the deficit spending (because you refuse to raise the debt ceiling) GDP contracts on a dollar for dollar basis, which is about 6% -- instantly.

Did he just call the Precedent a Mudder F~&%ing LIAR on National TV?!?!?!?
Quote:
"We don't have a spending problem. We have a health-care problem."
- 30 Dec 2012, B. Hussein Obama

http://www.cnn.com/2013/01/10/opinion/be....
http://online.wsj.com/article/SB10001424....

Wwwhhyyy, YES! I believe that he did!!!! He DID call him a Mudder F~&%ing LIAR!
smiley

Logic being that if your credit card is cut off, you can't spend any more. And OBVIOUSLY, you do have a "SPENDING PROBLEM."

But we already knew that, didn't we - that Barry Soetoro is a BORN liar...

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I just realized... they aren't saying, "Keynesian Economics"
they're saying "Kenyansian Economics". Grass Huts for everyone!
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Calmb4thestorm
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Quote:
either index the program's retirement age, immediately cut benefits or permanently increase the FICA tax 2.7%.


Or increase the Social Security wage base (currently $113,700) to an amount substantially higher. There is no wage limit on Medicare taxes so why is there one on Social Security taxes?
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There is no wage limit on Medicare taxes so why is there one on Social Security taxes?

Because the system is already strongly progressive and benefits cap off as well. You get nothing more for earning more, in short.

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I don't care if it makes sense -- only if it makes money. -- Me
Bank (n): See scam, fraud and theft. Eat a bankster -- they're low-carb.
What part of "shall not be infringed" was unclear?
Calmb4thestorm
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Well then what's to say the current wage limit ($113,700) is the right wage limit? What's to say it shouldn't be an amount substantially higher, say $200,000 or $250,000 if that would help make the system more sustainable? I understand your point, Karl, I'm just saying maybe it should be raised, more than just by an inflation index each year, to help solve its fiscal problems.
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So you think they should simply steal more but not pay a higher benefit?

Do you like having a login here? Because advocating theft is a great way to lose that access.

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I don't care if it makes sense -- only if it makes money. -- Me
Bank (n): See scam, fraud and theft. Eat a bankster -- they're low-carb.
What part of "shall not be infringed" was unclear?
Calmb4thestorm
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I'm not advocating theft, Karl, and I'm sorry that you think that's what it was. I am simply suggesting another alternative to help make the SS system sustainable for a greater length of time, just as you were, with your suggestion to permanently increase the FICA tax 2.7% (which I assume you don't think is stealing more or you wouldn't have suggested it). If my suggestion wasn't clear to you before, I hope it is now.

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Increasing the tax on everyone, increasing the retirement age, and cutting benefits across the board all share the pain across all stakeholders more-or-less equally, not just a limited few.

If we're playing pragmatic, then 2 of the 3 would be the most even-handed fix.

Means-testing and wage limit changes are decidedly not even-handed, only some people bear the cost of a much larger number of people not being able to do math.
Calmb4thestorm
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Then how is my suggestion of an increase in the wage base any different than what was just done with the income tax (raising the rate on only those individuals making more than $400k and couples making more than $450k)? If this can be done with the income tax, why not the SS tax? The income tax rate change applies to just a limited few. Why would my suggestion of a SS wage base change be any different?
Mrbill
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I'm just explaining to you how what Karl said is different from what you said.

Your suggestion is just like what was done with the income tax. And Karl put your suggestion in the "theft" bucket.

He writes many tickers a day about how everyone is going to have to take a bite of the **** sandwich.

Plans that try to force-feed the whole thing to a select few both can't work and will be counter-productive.
Calmb4thestorm
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I understand the difference now. However, what Karl thinks of as "theft," not everyone agrees, and I don't think there's anything wrong with that, that being a difference of opinion. And I'm not suggesting that the whole thing be force-fed to a select few. If there's pain to be taken, everyone should share in it. Although some may be able to absorb a little more than others, and be "asked" to.

Ben
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"Because the system is already strongly progressive and benefits cap off as well. You get nothing more for earning more, in short."

They should just cap benefits to what you were taxed. Give you a figure and some actuarial choices and when it reaches zero you get cut off.

Won't happen, but it will fix some of this.

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Calmb4thestorm wrote..
. . . and be "asked" to.
Having the IRS help themselves to the contents of your wallet while ancillary JBTs stick a gun up your nostril if they believe you might express displeasure is not "asking".

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Mo
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It's a tax. It can be raised to any rate on any portion of the population that Obama can strongarm the legislature into. If he can get Boehner to agree to raise the cap, the cap will be raised.


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Calmb4thestorm
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Quote:
Having the IRS help themselves to the contents of your wallet while ancillary JBTs stick a gun up your nostril if they believe you might express displeasure is not "asking".


Why do you think I put the word in quotation marks?
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