The Deficit Commission’s Trial Balloon: A Few Good Ideas, and Two Horrible Ones that Deserve to Die
Social Security is a ponzi scheme. (As one wag said, when Madoff does it, its called fraud, when the Federal government does it, its called Social Security.) I would eliminate Social Security, although I would do so over a very long time period so that no age cohort is hurt too badly. One way is to raise the retirement age a few months at a time as age-cohort turn 21. For example, those turning 21 in 2011 would see their retirement age go up by a few months; those turning 21 in 2012 would see their retirement age go up by another few months, and so forth. Eventually the retirement age will exceed the oldest person in the population, and Social Security will disappear.
As to eliminating the mortgage deduction, I don’t think the long run consequences will be all that bad, but the short run consequences will be, especially during this recession. To ease to the adjustment process to long run equilibrium (and ease the pain of the adjustment) I think a two step process should be implemented. The first would be to move to a flat tax — one marginal rate for everyone irrespective of income, and one large deduction for every family member, and no other deductions. (That is, eliminate Schedule A.) But as with Social Security, the elimination should occur in stages, possibly over a 25 year period. As we eliminate Schedule A, we move to the flat tax.
Then we come to the gasoline tax. If the tax is meant to be a user tax to improve streets and highways, then I’m fine with it. If it is to subsidize other things (such as hare-brained rail schemes, whether inter or intra-urban) or to subsidize other parts of the budge, then I would adamantly oppose it.
Finally, a comment on Sandy Salt at @3 about ending the deficit. We have a deficit because our currency is the world reserve currency. Ending, or trying to end the deficit would send the world into a recession. Also, remember, we are not at risk by the Chinese or others holding our debt; they are. We get real goods and services and they get little pieces of paper. If they don’t behave, we can walk away from the paper and they can use it to wallpaper their banks with it. Note how irate they became when Bernanke said he was going to buy $600 billion in US bonds. They know that such an increase in reserve money would inflate away the value of the US bonds they hold. Their billions would become millions. Lastly, should our deficit become very worrisome to the rest of the world so that the US dollar is no longer a reserve currency, then whether we like it or not, the deficit will disappear on its own. That is the wonder of flexible exchange rates.
