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Tuesday, October 8, 2013

THE GRAND COMPROMISE

The lack of agreement on the Federal budget and debt ceiling only further underscores that our government is broken.  Is this terrible?  Well, not really.  Understandably, Barack Obama and Harry Reid are bullish, for they recently got re-elected and are in control.  Likewise, House Republicans have no bargaining power unless they hold important legislation hostage.  The White House and Congress revel in brinksmanship because the media pick it up and insure that incumbents get free campaign exposure.  Haven't you noticed on your nightly news how your congressional representatives get interviewed and try to impress the viewer that they are doing everything possible to solve the problems, but it is that other party or body that is impossible?

Remember that fiscal cliff?  In case you forgot, this was the previous national crisis, having to do with a simultaneous tax increase and decrease in government spending.  About a year ago, I posted:


I said there was only a slight berm.  You can read the details, but the result was something called sequestration, which magically cut spending without any congressional member getting blamed:


There were dire predictions and the sense that this was just so dumb for no logic was really being used to pare programs.  Well, the Military Industrial Complex would have prevented these defense cuts if Congress acted as normal. Amazingly enough, nothing bad happened to our economy and our military remains dominant.  Sequestration, by the way, continues into 2021, getting larger each year:



More so on defense spending:

Click on this one to read the details.  No reason why we need to spend so much.  Our defense budget can be cut in half and STILL BE THREE TIMES THAT OF CHINA.  China couldn't care less about attacking the USA.  Read my various Huffington Post articles on my 10% solution for worldwide peace, which is a more elegant way to leverage our "sacrifice."
The reason why sequestration worked is that we now live in a different world.  There is no threatening Soviet Union nor a Hitler out there.  There might be a few thousand serious terrorists, but our Navy Seals and Army's Delta Force, practically alone, can handle them over the next decade, and there might only be all of 3500 elite service members, total.  Expand their capabilities, but bring back our troops from foreign countries (we have 172,966 active duty troops in 150 countries--if eliminated, savings of about $35 billion/year) and delete unnecessary expenditures like the F-35 (who will it fight--savings of $1,500 billion or $1.5 trillion).

Maybe more so than our commanding military dominance of the world, though, is the fact that continued economic growth will soon no longer be possible.  The eventual decline of conventional fuels, global warming, world population size and limits to resources mean that the operative economic mode will be dynamic equilibrium.  There is an uncomfortable feeling by older parents today that their grandchildren will face tougher times, for already, starting salaries of college graduates have DECLINED over the past decade:


Thus, I can now pronounce my GRAND COMPROMISE for the future of the USA:
  • Republicans, the U.S. Congress created Obamacare and the Supreme Court ruled that the Affordable Care Act is constitutional:  accept this program.
  • Democrats and White House, as much as I have said our national debt is not a problem as long as the ten-year interest rate is around 2%, this figure is getting closer to 3%, so now is a good a time as any to just reduce this debt to zero.
  • House of Representatives:  Not to increase the debt ceiling next week is idiocy because the fiscal system has a lot of hysteresis, and it takes time for certain things to occur.  
  • THUS, THIS IS THE GRAND CROMPROMISE:  Democrats and Republicans, agree to extend this increase only for two years--in 2015 DROP the ceiling to what is is today, and work on a plan to reduce this debt to zero in a decade or so.
Thus, Republicans and Democrats each get something important for their constituency.

What will happen?
  • Spending will need to be reduced, so keep that odious sequestration through 2021.
  • More likely, Congress will change the details of sequestration, so there will need to be added revenues.
  • However, our federal income from our taxes as a percent of the Gross Domestic Product is at a 60 year low:

A 2% tax increase (16% to 18%) to the average of the past half century will enable higher spending while reducing the national debt.  Of course, the Republicans, especially the Tea Party, will not like this, so this GRAND COMPROMISE has no chance of being reached...unless something catastrophic occurs.

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That threatening and dangerous Typhoon Danas suddenly weakened into a tropical storm, and will only bring some wind and moisture to South Korea and Japan.  However, Tropical Depression 24 popped up east of the Philippines, will strengthen into a typhoon and strike north of Manila on Friday:


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