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Author: Subject: Tipping Point

Ultimate Peach





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  posted on 4/6/2010 at 08:19 AM
Wonder which party is actually going to make the hard choices necessary to rein in the national debt? Granted it's gong to be politically unpopular, as no one wants to pay higher taxes or have "their" favorite federal programs cut. My guess neither party is going to do so.

quote:
Those crowing about the president's healthcare victory neglect to explain how he plans to pay for his new entitlement. They assume that America's line of credit is endless. But borrowing isn't prosperity, and we'll soon have to start paying up, either in raised taxes or spending cuts--probably both--or face a major crisis of solvency.

National debt seen heading for crisis level

Carolyn Lochhead, Chronicle Washington Bureau


(04-05) 04:00 PDT Washington -- Health care may have been the last big bang of the Obama presidency.

With ferocious speed, the financial crisis, recession and efforts to combat the recession have swung the U.S. debt from worrisome to ruinous, promising to handcuff the administration.

Lost amid last month's passage of the new health care law, the Congressional Budget Office issued a report showing that within this decade, President Obama's own budget sends the U.S. government to a potential tipping point where the debt reaches 90 percent of gross domestic product.

Economists Carmen Reinhart of the University of Maryland and Kenneth Rogoff of Harvard University have recently shown that a 90 percent debt-to-GDP ratio usually touches off a crisis.

This year, the debt will reach 63 percent of GDP, a ratio that has ignited crises in smaller wealthy nations. Fiscal crises gripped Canada, Denmark, Sweden, Finland and Ireland when their debts were below where the United States is shortly headed.

Japan's debt is much higher, but most of it is held domestically, and Japan's economy has been weak for 20 years. "I really don't think we want to be like Japan," said UC Berkeley economist Alan Auerbach.

One advantage the United States has - and it is a big one - is that it issues the world's reserve currency and so can print dollars to service its debt.

The Obama budget will add $10 trillion to the national debt in the next decade and will not stabilize the deficit, the CBO found. Deficits are expected to dip as the recovery takes hold, but never below $724 billion a year. Interest costs alone will consume $5.6 trillion this decade. A balanced budget has been widely ruled out as unattainable.

"The real problem is not just current deficits but where we're heading," Auerbach said. "We're on a trajectory where the deficit's going to go down a little and then go up again. And we have no solution for that."
Deficits won't reverse

No one is advocating big tax increases or spending cuts before a recovery takes hold. The problem is that deficits will not reverse even after a full recovery.

Credit rating agency Moody's warned last month of a possible downgrade in U.S. Treasury debt. This year, Social Security is crossing a long-feared milestone at which it is paying more in benefits than it receives in payroll taxes. Study after study in the last year has raised alarms.

"In my judgment, a crisis could occur next week or 10 years from now," said Rudolph Penner, an Urban Institute economist who co-chaired a huge budget report sponsored by the National Academy of Sciences and the National Academy of Public Administration. "I don't really think we can go much beyond 10 years."

Polls show rising public alarm - and public refusal of specific spending cuts or tax increases required to change course. A Field Poll last month showed most Californians do not want to cut the largest parts of the state budget, such as education or transportation.

The polling firm Democracy Corps recently warned Democrats that the deficit now tops unemployment as a voter concern. But it also found voters "unenthusiastic" about the options to close the deficit. Voters overwhelmingly prefer spending cuts to tax hikes but reject cutting specific programs.

Republicans promise to make deficits a premier political issue. But during the health care debate, they opposed any cuts to Medicare, the chief source of rising deficits. They also oppose tax increases and defense cuts. In January, they sabotaged rare bipartisan legislation to create a powerful deficit-reduction commission that would have forced action.

Stabilizing the debt without raising taxes, cutting Medicare or defense, or defaulting on the debt would eviscerate everything else, from the Border Patrol to highways. Earmarks constitute a pittance.

The numbers don't add up for Democrats either. For all their railing against the Bush tax cuts that contributed to the current dilemma, Obama intends to extend almost all of them. That will cost $2.5 trillion, said the Committee for a Responsible Federal Budget. Obama also escalated the war in Afghanistan.

And he joined Republicans in sabotaging the deficit commission by creating a substitute commission by executive order that seems designed to fail. It cannot compel action, and its recommendations are postponed until after the November election.
Consensus difficult

Obama and party leaders stacked it with partisans, from Rep. Jeb Hensarling, R-Texas, to Andrew Stern, head of the Service Employees International Union, making it difficult to get the 14 out of 18 votes required to agree on anything.

The executive order is a study in artfulness. It calls for a deficit target in 2015 that will be largely reached through the recovery and opens a wide escape hatch by saying decisions are contingent on the economy.

Democrats are already picking off low-hanging, deficit-reduction fruit to increase spending instead. Led by Rep. George Miller, D-Martinez, Democrats approved $61 billion in savings last week by cutting banks out of student lending - and used it to expand aid to students and colleges.

Democrats often give the impression that taxes on the rich can fix everything. But the center-left Tax Policy Center ran simulations showing that Obama's budget would have to raise $775 billion in new taxes every year to stabilize deficits at 2 percent of GDP. That means that if Obama keeps his promise not to raise taxes on the middle class, the rich would pay 90 percent of their income in taxes, the center said.

Obama "promised to be honest with the public, and he has a talent for doing so," said Maya MacGuineas, president of the moderate Committee for a Responsible Federal Budget. "Yet he hasn't used it yet to describe what types of hard choices will be involved."
Soaring levels of debt

$10 trillion Amount the

Obama budget will add to the national debt in the next decade.

$5.6 trillion Amount interest costs alone will consume this decade.

63% Debt-to-gross domestic product

ratio this year.

90% Debt-to-gross domestic product ratio anticipated within this decade.

E-mail Carolyn Lochhead at clochhead@sfchronicle.com.

This article appeared on page A - 1 of the San Francisco Chronicle



 
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Maximum Peach



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  posted on 4/7/2010 at 08:30 AM
quote:
My guess neither party is going to do so


This is my thinking as well. You can't trust the Republicans based on the spending and deficit growth during the Bush years. I think the Democrats have taken some symbolic steps, such as Pay-go, but whether or not that ends up holding water I'm still not sure.

Supporters of the health care bill would take exception with saying the President/Democrats "neglect to explain how he plans to pay for this new entitlement". They think it is all in there and has CBO approval, which I also think is suspicious. Regardless of my opinion, supporters of the healthcare bill will say the spending is accounted for.

One of the big thing I've been hearing is the claim of reducing the deficit by $1.2 trillion in the second decade. All that does is wipe out the deficit accumulated from the FY 2009 budget (in fairness the 09 budget deficit isn't all on the new administration). Second decade estimates on these kind of things aren't exactly something you can hang your hat on. I think the most reliable figures come from the shorter time frame. The second decade assumption might be more of a wing and a prayer.

Simply put, I think we are pretty much on an out of control train with no way to stop without crashing, just a matter of when, where and what the damage will be afterwards.

[Edited on 4/7/2010 by nebish]

 

Sublime Peach



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  posted on 4/7/2010 at 08:35 AM
Bummer I thought this was a cow tipping thread.

 

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  posted on 4/7/2010 at 09:08 AM
I think prudent people would be making plans for survival after the crash. It appears inevitable. Maybe this is what we need...for our economic system to crash. Then we can build a new one, one which will include a little more reward for the people who do the actual work.

 

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Maximum Peach



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  posted on 4/7/2010 at 09:11 AM
quote:
I think prudent people would be making plans for survival after the crash. It appears inevitable. Maybe this is what we need...for our economic system to crash. Then we can build a new one, one which will include a little more reward for the people who do the actual work.
As opposed to us who do fake work.

 

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Zen Peach



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  posted on 4/7/2010 at 09:13 AM
quote:
quote:
I think prudent people would be making plans for survival after the crash. It appears inevitable. Maybe this is what we need...for our economic system to crash. Then we can build a new one, one which will include a little more reward for the people who do the actual work.
As opposed to us who do fake work.


Exactly. You know the ones I'm talking about.

 

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True Peach



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  posted on 4/7/2010 at 09:14 AM
quote:
quote:
I think prudent people would be making plans for survival after the crash. It appears inevitable. Maybe this is what we need...for our economic system to crash. Then we can build a new one, one which will include a little more reward for the people who do the actual work.
As opposed to us who do fake work.

I used to do fake work, but I retired.

 

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  posted on 4/7/2010 at 09:19 AM
Btw, Brendan, the concept of 'actual work" does exist. When I was helping to build Plant Scherer, they had people who walked around and observed people working. They categorized them based on what they were doing. If you were driving a truck or walking around, or carrying something somewhere, none of those things were considered actual work. Actual work consisted of anything that was expanding the structure, such as welding on a beam that was in place. As I recall, the actual work rate for our projec t at any given time was around 22%, right where they expected it to be.

For my purposes, I'm referring to those who make money only because someone else did some work they aren't capable of doing themselves.

 

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True Peach



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  posted on 4/7/2010 at 09:21 AM
quote:
Btw, Brendan, the concept of 'actual work" does exist. When I was helping to build Plant Scherer, they had people who walked around and observed people working. They categorized them based on what they were doing. If you were driving a truck or walking around, or carrying something somewhere, none of those things were considered actual work. Actual work consisted of anything that was expanding the structure, such as welding on a beam that was in place.

This is generally referred to as "direct" or "indirect" labor.

 

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  posted on 4/7/2010 at 09:23 AM
Maybe so, but on this job there was a category for "actual work," and that is the term they used.

 

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True Peach



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  posted on 4/7/2010 at 09:30 AM
"Actual work" sounds like the equivalent of "direct labor". In manufacturing these are cost classifications that are used to determine manufacturing costs, burden rates, overhead, sell prices, etc. They don't really mean that any work is more or less real or necessary than other work.

[Edited on 4/7/2010 by bob1954]

 

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  posted on 4/7/2010 at 09:35 AM
quote:
"Actual work" sounds like the equivalent of "direct labor". In manufacturing these are cost classifications that are used to determine manufacturing costs, burden rates, overhead, sell prices, etc. They don't really mean that any work is more or less real or necessary than other work.

[Edited on 4/7/2010 by bob1954]


Really, Bob? Thanks for explaining that to me.

It's always great to have a managerial type around to explain to the guy with the shovel what "work" is.

[Edited on 4/7/2010 by SantaCruzBluz]

 

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True Peach



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  posted on 4/7/2010 at 09:38 AM
quote:
quote:
"Actual work" sounds like the equivalent of "direct labor". In manufacturing these are cost classifications that are used to determine manufacturing costs, burden rates, overhead, sell prices, etc. They don't really mean that any work is more or less real or necessary than other work.


Really, Bob? Thanks for explaining that to me.

It's always great to have a managerial type around to explain to the guy with the shovel what "work" is.

No problem.

 

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Maximum Peach



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  posted on 4/7/2010 at 09:39 AM
"The" real work, implies more than your definition above from Plant Scherer.

I have measurable output and am tired at the end of the day. That's work. Oh, and I manage poeple too... Definitely work.

 

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Zen Peach



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  posted on 4/7/2010 at 09:43 AM
quote:
"The" real work, implies more than your definition above from Plant Scherer.

I have measurable output and am tired at the end of the day. That's work. Oh, and I manage poeple too... Definitely work.


I was implying more than that, but I wasn't really talking about any particular job. I'm talking about our economic structure itself. I don't think anyone would argue that having a behemoth like Walmart, which makes hundreds of billions in profit while the people who do the actual work, in the stores, live like paupers, is the best way to run a society.

 

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Maximum Peach



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  posted on 4/7/2010 at 09:59 AM
So, is it time to save our country from it's govt yet?

 

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  posted on 4/7/2010 at 10:01 AM
quote:
I think prudent people would be making plans for survival after the crash. It appears inevitable. Maybe this is what we need...for our economic system to crash. Then we can build a new one, one which will include a little more reward for the people who do the actual work.


We will also need to examine the governments role in the collapse, and the types of programs that caused it. Make sure and never do it again.

 

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Maximum Peach



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  posted on 4/7/2010 at 10:01 AM
I walk by the WTC everyday on the way to work and there is all of this construction going on, so it makes for a lot of pedestrian traffic and sometimes the pedestrians can clog up the street as well if they cross against the light. So they now have what is called “Pedestrian Control”. There are two guys on either side of the street that hold a large chain and when the Don’t Walk sign comes on they spread the chain out to keep people from crossing against the light. I heard two of the guys talking not long ago and I was surprised by the amount of money they make. One of the gentleman mentioned how he makes close to $45 an hour. In all fairness, it doesn’t look like a fun job, particularly when you have stand out there all day in the rain and snow and heat and cold, but I thought it was an insane amount of money for holding a chain. On the other hand, people in my profession are also paid for doing pretty much nothing….sometimes they even get rewarded for doing a horrible job too.

I need to get me one of these non-working jobs that pays well….even if I do a crappy job.

 

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  posted on 4/7/2010 at 10:11 AM
quote:
I need to get me one of these non-working jobs that pays well….even if I do a crappy job.

"even if I do a crappy job."...that's the key for me!

 

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  posted on 4/7/2010 at 10:20 AM
quote:
I walk by the WTC everyday on the way to work and there is all of this construction going on, so it makes for a lot of pedestrian traffic and sometimes the pedestrians can clog up the street as well if they cross against the light. So they now have what is called “Pedestrian Control”. There are two guys on either side of the street that hold a large chain and when the Don’t Walk sign comes on they spread the chain out to keep people from crossing against the light. I heard two of the guys talking not long ago and I was surprised by the amount of money they make. One of the gentleman mentioned how he makes close to $45 an hour. In all fairness, it doesn’t look like a fun job, particularly when you have stand out there all day in the rain and snow and heat and cold, but I thought it was an insane amount of money for holding a chain. On the other hand, people in my profession are also paid for doing pretty much nothing….sometimes they even get rewarded for doing a horrible job too.

I need to get me one of these non-working jobs that pays well….even if I do a crappy job.



$45 an hour times 40 hours equals $1800 a week, before taxes. Assuming the guy works every single hour of every single day, he could make almost $94,000. I'm not sure how he can get by in NYC on that paltry sum, but maybe he lives with his parents or a room mate.

And remember, someone is supervising that guy, and making more money than he is. And somewhere up the line, a pointy head nephew of an owner is making more money than any of them telling his uncle what people are saying about him.

 

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Maximum Peach



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  posted on 4/7/2010 at 10:32 AM
Allen, let me ask this. Do you think that a CEO or CFO or executive director of a firm like Walmart does no work? Further, do you really think they do those jobs because they can't stock a shelf or use a cash register?

 

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Zen Peach



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  posted on 4/7/2010 at 10:57 AM
quote:
Allen, let me ask this. Do you think that a CEO or CFO or executive director of a firm like Walmart does no work? Further, do you really think they do those jobs because they can't stock a shelf or use a cash register?


Brendan, you can call what they do "work" if you want to, though I personally have a hard time calling anything work that doesn't involve using your hands to do something besides gesture. But it is all relative. When I'm sitting with some friends, joking and having a good time, while at the same time shaping a pipe I know I will sell for $25, it is hard for me to call that work.

But CEOs and others do work, obviously. But is their work worth so much more than the people who actually create the goods they sell, transport them to their stores, stock the shelves, and sell them to their customers? I don't think so. And many of those people stocking those shelves could do just as good a job, if not better, than the people supervising them, if given the chance. Those CEOs wouldn't make a cent without the rank and file workers. The rewards of their labor should be shared more fairly.

 

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Universal Peach



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  posted on 4/7/2010 at 11:50 AM
......but just look at all the jobs 'saved' and 'created'....yeah, and pigs are flying over my house dropping $1,000. bills out their asses.

 

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Maximum Peach



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  posted on 4/7/2010 at 12:02 PM
quote:
$94,000. I'm not sure how he can get by in NYC on that paltry sum, but maybe he lives with his parents or a room mate.



Or commutes a long distance like many people that work in NYC....like me!!

quote:
And many of those people stocking those shelves could do just as good a job, if not better, than the people supervising them, if given the chance


But that is the great thing about this country, they DO have the chance. Nearly everyone has a chance. I realize there are people out there that can’t live without assistance from others, not doubting that at all.

I keep thinking about guys from the town where I live now. Their story sort of reminded me of the one you just told about sitting with friends and doing your craft. They started making granola out of their garage many years ago; I think it was just two guys. They then tried to sell it to local supermarkets. The story goes that they called one place in the area, Stew Leonard’s, numerous times, but with no luck. So one morning they just showed up at Stew’s with breakfast, unannounced. They eventually sold something like 50 cases to Stews, and the ball was rolling. They just recently sold their company to Kashi for some absurd amount of money; I want to say close to $100 million. The compnay was called Bare Naked.

You can also move up the ladder in any other business. You just have to have experience, be extremely driven, educated (sometimes, not even), and know how to manage people (which I think is the most difficult part). Oh, and you also have to be pretty lucky at some points too. Look up guys like Stanley Ho (gaming industry) or Francois Pinault (Converse, Christie’s auction house, Samsonite), or Al Lerner (deceased, but he was MBIA, owner of the Browns). There are also many, many like them. They came from squat basically.

There is actually a pretty good show on right now where CEOs go undercover in their companies, and do the work of their employees. Pretty funny and interesting to watch. I think its called Undercover Boss...or something like that.

 

Maximum Peach



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  posted on 4/7/2010 at 12:04 PM
The quick change in the percentage of pay received by CEO's compared to the average worker is what seems unfair to me.

When I worked for corporate America I knew the CEO made more when he took a leak than I made in a year. I never stood at the urinals with him but, if I had, I might have hit his shoes.

 

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