Getting To Simpson Bowles

The President's Commission on Fiscal Reform, known as Simpson Bowles because it was led by Alan Simpson and Erskine Bowles, recommended that we find $6 trillion in spending cuts and new revenues to get the Federal Budget to a healthy place. 

I stopped by the Wharton Economic Summit last week to hear Austan Goolsbee, formerly Obama's Chairman of the Council of Economic Advisors, give a keynote. In a wide ranging talk that touched on most of the key economic issues facing the US, Goolsbee pointed out that by hook and crook, we have already accomplished half of Simpson Bowles. We might not like the political nonsense around things like the "fiscal cliff" and the "sequester", but they have allowed the folks in DC to implement $3 trillion of spending cuts and new revenue.

But of course, if we have accomplished half of Simpson Bowles, that means we need to get to the second half. And that will be a lot harder because it requires our country to come to terms with entitlements. When asked why it is so hard for the politicians to tackle entitlements, Goolsbee pointed out that the general public believes two important things; we have a spending problem in Washington and we should not touch medicare, medicaid, and social security. Sadly, those entitlements are a big part of our spending problem and left alone, will be the entire spending problem in time.

I read with interest on Peggy Noonan's blog yesterday that the President had dinner last week with much of the Republican leadership and they had a frank and honest conversation about how to get to the second half of the $6 trillion. It's worth reading that post because it suggests that our political leaders actually do have the will to get to Simpson Bowles. It sounds like they all know it must be done.

Of course, there is a big difference between it must be done and it will be done. 

When it comes to the economy here in the US, I believe a few things. First, our country might be a mess but it is in better shape than most of the rest of the world. Second, that it is entirely in our power to fix the problems we face. Third, we must take in as much as we spend over the long haul or we will go bankrupt. Fourth, if we take our fiscal medicine and do that responsibly over time we will not go back into a recession. Fifth, our economy is expanding with some vigor now and we have a moment, both economically and politically, that we must not miss.

So I am hoping our leaders find the will to get this done. It is essential, not just for our generation, but most importantly for our future generations.


Comments (Archived):

  1. Dale Allyn

    I agree, Fred. Not to devalue your post, but your position is simply common sense, or so one would think. Surely that’s what puts implementation at risk.We need leadership in Washington now, not campaigning or blaming. If all parties can leave politics aside for the short term, this mess could be contained, and slow, but steady remedy can be achieved.

    1. awaldstein

      Acting on common sense has honestly always been exceptional behavior for those in positions of power.

      1. Dale Allyn

        True, Arnold. Since it requires integrity and a genuine commitment to service, it is, as you say, exceptional behavior for those in positions of power. I’d like to see progress in incentivizing such behavior, even though it really shouldn’t require it.

        1. awaldstein

          Agree with you completely.Courage to do the right (common sense) thing is actually a crazy statement on how upside down things can get.

          1. pointsnfigures

            What seems like common sense to you, might not be common sense to someone else. That’s the problem. For example, what if were somehow able to persuade the far right wing to leave abortion alone. Keep it legal etc. But, in return, we’d end all federal spending on all abortion programs. If someone wanted one, they could go to a doc and get it. But, they’d have to pay for it.I don’t think anyone passionate about that issue would call that policy common sense, but it seems pretty common sensical to me.

      2. bsoist


    2. William Mougayar

      “If all parties can leave politics aside for the short term,” That’s a tough Ask. They are controlled by the special interests groups.

      1. Dale Allyn

        Yup. But something must change, at least temporarily, if we are to see meaningful improvement. The 535 (in Congress) and the Executive Branch are presently failing miserably. An incredible model of incompetence and corruption. I’m hopeful, but the electorate must wakeup and demand responsible governance. The special interests are especially damaging in times such as these.

  2. Tom Labus

    Hallelujah!I have become increasingly bullish on the US economy over the last six months. This is after years of thinking we were about to skid off the road.There are amazing positive things happening in the US energy sector and lots of this innovation is coming from large and well established players. Our balance of payments dropped significantly since we are now exporting energy. Some economists see us in OPEC by 2020. This renaissance will bleed through manufacturing and it’s already happening. These are great signs.Do a Grand Bargain II now and the road opens for us big time.

  3. Pat Clark

    Though contrary to the way our democracy is set up, an interesting experiment would be to see the aggregate vote totals of these necessary entitlement/fiscal bills if the individual votes of members of Congress were not made public. I suspect we’d see more getting done, faster.

  4. jonwerbell

    One thing I’d like to see is the creation of a capital budget for the federal government (the way all other cities and states have). That way we can have an expense, capital and entitlement budget. Should make it easier to balance the non-entitlement budget in the future (still politically tough but easier to understand). And when rates go higher, we’ll be in big trouble as our borrowing costs will go up much too quickly.

  5. David Molina

    Solid points, Fred. While I agree that our leaders must act in Washington for our future generations and the sake of a healthy budget I don’t think its how our current electoral system is designed. Unless we implement term limits in order to ensure our leaders act in the best interest of the long-term, unafraid of being taken out in the next election, they will continue voting short-term interests. Entitlements not being one of them.

    1. FinLit

      Agreed that short-sighted interests of elected officials deters decisions that by nature require a long term perspective and this will have to change…

  6. Richard

    One of my favorite movies is “cat on a hot ton roof” . The film is people living lives filled with mendacity. The idea that we have 1000s of Ivy League school economists analyzing the economic data, yet we can’t even get agreement about the relative importance of the numbers is astonishing.

  7. Jack Barcroft

    We are in better shape than most of the rest of the world and our best days are ahead of us as a nation. It’s up to everyday citizens to do their part to help fix it. Harry Markopolos was an everyday citizen who identified financial distress with Madoff’s organization 10 years before it burst and tried to do what any upstanding citizen should do, make it right. ” We the people” have the right and duty to help correct the course and should do what ever it takes to aid those elected to represent us to execute a better design.

  8. Richard

    For that 65 year old woman who paid into social secuirity for 45 years, social secuity IS NOT an ENITLEMENT.

    1. Brandon Burns

      thank you.

    2. Elia Freedman

      From what I understand, social security isn’t a major concern. A few tweaks could make social security solvent again. Medicare and medicaid are the bigger issues. Besides, I don’t see how it is politically feasible to change benefits on the currently retired, as much as I’d like to see it happen. AARP is too strong for that.

    3. Aaron Klein

      And yet, we all know that Social Security isn’t a retirement plan. When the program started, it began collecting taxes and paying out benefits simultaneously. It is most definitely an entitlement program.

    4. fredwilson

      Right. But I don’t need it and should not get it. It should be means tested.

      1. Brandon Burns

        when you invest in a company, can that company simply not give you the shares you’re owed just because you don’t “need” them?if you put money into the kitty, you deserve it back at the terms set when you put it in — no matter who you are.

        1. fredwilson

          I disagree. Consider it a tax on the wealthy which we already do in the country

          1. Brandon Burns

            once you call it a “tax,” i can see it as fair.#semanticsmatter #sadbuttrue

        2. Aaron Klein

          Be honest about what Social Security is and you’ll see that Fred is right.Go back to when the program started. How did people get benefits who had never paid into the program? And yet the taxes and benefits started simultaneously.I’ve never met an “investment” that could do that.It is a government entitlement program, period. I’m not saying it’s an invalid one or a program that we should end. But it is an entitlement and pretending otherwise is silly.

          1. Brandon Burns

            you’re absolutely right its an entitlement, and in every neutral/positive connotation of the word.if i give you $10 at 1% APR, and you accept those terms, i’m entitled to the $11 you owe me a year from today. i don’t see the use in debating that simple real word, when it comes to that analogy as it applies to social security, i can get with a program in which the government doesn’t give the wealthy back the social security repayments they’re entitled to, in the name of taxation, which is totally par for the course in this country, but to make a blanket statement claiming that no one paying into social security should expect their money back is wrong. worse, its stealing.

          2. Aaron Klein

            Ha! The government didn’t offer you an investment and accept terms. Show me your prospectus!Dude, the government is taxing the money away and it will pay it out in benefits as it sees fit.If you really think the federal government is like a mutual fund company, you’re in for a rude awakening.

          3. Richard

            I remember some fat politician, named Al Gore, who talked about a lock box.

          4. Aaron Klein

            Further proof you don’t understand what Social Security is. That was a proposal to try to turn it into the very thing you claim it is, but the proposal NEVER PASSED. (Wasn’t a bad idea at all.)

          5. andyidsinga

            stealing or not probably depends on what people thought when they started contributing to the system.we need more of a sense of shared duty and responsibility in this country …to contribute to some things for our common good without expectation of a _specific_ thing in return ( says the guy sipping his coffee from the comfort of a warm dining room )

          6. PhilipSugar

            That is completely 100% correct. I also would point out to people that say “I put the money in”, understand since the money is co-mingled if it is a year that the government ran a deficit since the funds are co-mingled you really didn’t put the money in so that would be every year.Don’t get me wrong, I am bitter about the amount of taxes I pay, I don’t employ as many people as I used to, and I might just move for tax purposes only this year.But it is an entitlement program and the greedy geezers that are AARP should be ashamed of the debt they rang up during their tenture running the country.

          7. Richard

            You are conflating a lot of issues. Fuck the AARP.

          8. Richard

            We can argue sematics, but we know that we had a federal income TAX and social security (NOT TAX) and that the average joann on the streets believed that this was a pseudo account. Remember Bush talking about “privatizing” social security?

          9. PhilipSugar

            As the employer that pays the matching side, yup I pay as much in social security for each employee as they themselves do, you are telling me its not a tax???I know Warren Buffet doesn’t think I pay my fair share, but this year which is the year I’ve employed the fewest number of people in the last twenty (I’ve figured out how to do more with less people) my social security taxes way outnumbers my income tax.

          10. Aaron Klein

            Guess what? When the taxes are due, they don’t even bother splitting it up. I pay employee income taxes, employee social security taxes, employee Medicare taxes, employer social security taxes and employer Medicare taxes in one single bill to the Feds.So don’t tell me Social Security isn’t a tax. I’m not arguing it’s a worthless tax or an unneeded program. But there isn’t even a whit of proof for your pseudo argument.

          11. Aaron Klein

            We’re 100% aligned on this. You are not making an argument against Social Security by telling the truth about what it started out as: a federal program funded by federal taxes to ensure that seniors didn’t starve after bank failures that wiped out their savings.And it still is that program today. Every penny of federal taxes: income, Social Security and Medicare, both employee and employer paid, are collected on a single bill from the federal government.When a few of the other folks here start signing the other side of the check, they’ll get it. Unless they too have given up math for lent.

          12. PhilipSugar

            What people do not address is the true corporate income tax is 10% on every dime you pay employees (moronic if we care about employment) 25% on income earned in U.S. (truly dumb) and 0% if I go to St. Thomas (visited and it was nice)

          13. Aaron Klein

            Indeed. There are a lot of benefits to the US and I love this country with all my heart, but we are incentivizing exactly the wrong things.We could fix a big chunk of our budget problems the fun way — economic growth — if we’d just put the right incentives in place.

          14. fredwilson

            i saw this great interview with Stanley Druckenmiller, one of the best investors of the past 25 years, on this topic of wealth transfer from the young to the old in our country.…he is super passionate about this issue and i am 100% with him on it

          15. PhilipSugar

            What a great talk.

          16. fredwilson

            yeah. i want to meet him now. so smart.

          17. kidmercury

            druckenmiller is right. too bad he donated to romney. so basically he, like everyone else, voted for politicians who support these policies. #hypocrisy

          18. fredwilson

            you have two choices in this country

          19. kidmercury

            if that’s what you believe, that is the reality you create for yourself. that makes this whole post irrelevant though because budget cutting is not a part of either party so it is not a choice in your world.

          20. fredwilson

            we will see. i am hopeful. you are not. that’s cool with me. but we just think about this stuff differently.

          21. kidmercury

            i believe i am hopeful, we simply have different definitions of the term hopeful. to me hopeful means focusing on problems because they are simply solutions in disguise. to most people hopeful means pretending the problem doesn’t exist.

          22. pointsnfigures

            Is Obama better? Don’t think so.

          23. kidmercury

            obama is definitely not better. but so long as the american people vote within the 2 party system, they are basically voting for all the stuff being complained about in this thread.

          24. ShanaC

            i’m bitter about it. I have a sense of filial piety. But my sense of filial piety doesn’t extend that far.

          25. pointsnfigures

            Milton Friedman famously said that’s all a lot of programs do. Give to the wealthiest (older people) and take from the youngest. I am reminded of the idiot Chicago alderman that gave free rides to seniors on the CTA. My bus was always loaded with blue haired ladies shopping on Michigan Avenue or older couples with bottles of wine headed to Millenium Park. Instead, they should have let kids get to school for free.

          26. Richard

            That fact that we allowed recipients to benefit without contributing is a RED HERRING. We merely commingled two programs.

          27. Aviah Laor

            How did people get benefits who had never paid into the program?This is based on specific assumptions about demographics and life expectancy, When theses assumptions break, the models breaks.

          28. Aaron Klein

            No, no. Go back to the 1930s when Social Security started. They started the taxes for the young and the benefits for the old AT THE SAME TIME.That, my friend, is not an investment or a retirement program. Fred is right.

          29. Dave Pinsen

            The first Social Security recipient, Ida May Fuller, paid into the system for 3 years. She lived to 100 and collected about 1000x more than she paid in.

          30. Aaron Klein

            I do remember reading that…and it, among other things, disproves the silly idea that Social Security is a retirement plan and not a government entitlement.

      2. Richard

        Here the problem with means testing: two bothers, ones worked hard but spent harder and foolishly squandered his money, his brother, worked hard too but lived modestly, lived within his means and saved 20% of his earning.

        1. fredwilson

          i understand that problem. it hits very close to home. and i am not the least bit disturbed by that outcome.

          1. PhilipSugar

            It is easy to say that when you are an edge case.

          2. fredwilson

            am i?

          3. PhilipSugar

            Most definitely

          4. Richard

            I see your point.

        2. kidmercury

          the other problem is that it assumes a government capable/willing to create a responsible, cost-efficient method for means-testing.

          1. Richard

            Yep, or to put it another way…Ma nishtnah halyna hazeh mikol halaylot?

          2. ShanaC

            shebekol halailoat, anu ochlim chametz u matzah?

          3. Pete Griffiths

            Good luck with that.

      3. Jeffrey Hartmann

        This is absolutely 100% spot on. Why give the money to those who don’t need it with this sort of program? The situation that all seniors need and get medicare with our current insurance system is another crazy thing as well. I personally don’t mind paying money into a system to help my fellow man, but when those who don’t need it get it as well my money has a lot less impact. SS is not a retirement account and medicare shouldn’t be the only remotely affordable insurance for seniors either.Speaking of entitlements, I don’t mind the welfare program personally, but it should be means tested in another way and could use some restructuring. If you are able bodied and capable of earning a wage, when you fall down the safety net should provide you opportunities to educate and improve yourself so you can get back on the horse. It shouldn’t provide a small level of income forever for these people. Obviously for some people who can not make a wage we need something different, but the people who absolutely need a hand out are a small portion of the welfare receiving population. Restructure welfare to be a hand up, and the program will be much more successful. I also think that people on welfare who are able bodied should work on infrastructure/public works projects. That way we get something for our tax dollars and the person gets valuable experience so they can do something better. We don’t need people to continue in a disadvantaged state, we need a way to make them great and contributing members of society when they have fallen down.

        1. Pete Griffiths

          I think there are many popular misconceptions about what the $ is actually spent on.

      4. ShanaC

        yes. so should medicare.

      5. Cam MacRae

        It’s means tested here, but then it should be — we have the highest median wealth in the world by a very long way. It also helps that we have compulsory superannuation so the classic saver vs. spender argument is hard to apply. From time to time what Government defines as means creates significant hardship in some demographic.

      6. Pete Griffiths

        That’s fine but denying it to people like yourself won’t make a dent. The overwhelming majority goes to people in need.

    5. takingpitches

      As a historical footnote, during the debate about Social Security, some of FDR’s advisers and other politicians debated using a sales tax, estate tax, or general appropriations to fund Social Security. FDR chose the payroll tax to strengthen its foundations, reasoning that something seen as a welfare or redistributionist program would be on a shakier foundation. He once said in a discussion with someone about the sales tax alternative:“I guess you’re right on the economics. They are politics all the way through. We put those pay roll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program. Those taxes aren’t a matter of economics, they’re straight politics.”

    6. xian

      The word entitlement has become toxic by people ascribing all sorts of negative connotations to it. All it denotes is a government program from which peole who qualify automatically benefit, per the title (law) that defines it.

    7. Dan Abnormal

      Rich, there is nothing wrong with entitlements. Don’t fall for that right-wing propaganda. Rush Limbaugh has spent the last 20 years spitting out the word with contempt trying to demonize government entitlements. But he is wrong. The elderly woman who paid into Social Security is entitled in every way to use the program – legally, morally, and ethically.Social Security is an entitlement program and seniors are entitled to it. Veterans are rightly entitled to health care through the VHA. Investors are entitled to protection and oversight from the SEC. And all Americans are entitled to our fundamental rights under the Constitution including the freedom of speech.This is what society is. We come together and through the government we enact laws which entitle people to certain rights and responsibilities. This is the social contract.

      1. Richard

        I agree. The point was gov acting like they are actually giving you something

  9. kidmercury

    This will sound rude and arrogant, but it is late in the game and the time for tolerating ignorance passed us by long ago.The bottom line is that none of these people know wtf they’re talking about. Debt is all that matters and the only solution is debt cancellation and monetary policy reform. The problem is also international and ignoring the need for an international approach also ensures failure. The country is already broke and the economy is already in a recession; actually, it never left great depression 2.0 in the first place, but this will become clearer in less than one year. 16t in national debt is a number based on cash accounting, if you use accrual accounting like most businesses do the number is much, much, bigger. Don’t forget all the state and municipal debt, or mortgages, car loans, student loans, credit cards. Anyone who thinks all that will ever be paid off is delusional.Entitlement spending can only be cut significantly if debt is canceled, otherwise the impact is too severe.That the US is Better off than many others is entirely irrelevant, looking Down on others will not bring anyone prosperity or happiness.

    1. raycote

      YUP !

    2. fredwilson

      i think the debt is manageable if we get our budget in balance. for what it is worth, so does Buffet

      1. kidmercury

        let’s see if anyone has a plan for balancing the budget that won’t result in a 1930s style great depression. i’ll tell you it’s pretty much impossible without debt cancellation and international monetary policy reform being the cornerstone of the plan, but even if that’s not true, let’s see if congress and the president can actually get such a plan, which would invariably be hugely unpopular given how dependent the whole country is on government spending, formulated and for buffett he didn’t see the allegedly unforseeable economic crisis coming and so he won’t see the solution in spite of its obviousness. almost anyone who saw the crisis coming and understands its true causes will say the same thing i’m saying.

        1. pointsnfigures

          I disagree, and I am on the opposite side of the debate as Buffett. We can cut a lot of government spending, shrink the size of government, and recalibrate entitlements-and not break the economy. Especially if they lower tax burden and change incentives to invest, employ, and grow.

          1. Cam MacRae

            If you know a way to achieve that without triggering another round of private debt deleveraging you should expect a call from Sveriges Riksbank.

    3. raycote

      Given the linear 20th century economic institutional-structures and value-systems still operating the global economy all the solution on the table are like bringing a knife to a gun fight.Our modern network-synchronized economic/technical environment imposes a complex interdependent economic homeostasis affair on all the players at every level of social granularity.The 20th century economic environment, where every entity could focus on taking care of its own isolated interests and somehow the hidden hand of the market would integrate the the whole affair into economic equilibrium is long gone(or never was?).We don’t even seem to have any real movement towards a proper framing of the problem. How to micro-manage the massive top-to-bottom economic interdependencies of the modern networked world.All this talk about slashing entitlement spending as if it were isolated from the overall distributional stasis of production and consuption.The way automation is going we will need to figure out new ways to expand entitlement-spending or there won’t be much spending going on at all.Them robots are efficient cheap workers but they are not very good at consumer spending.We need to define new intuitional structures and values that collectively generate an interdependency-driven economic-feedback-array, a new micro-managed hidden-hand, a new set of economic-strange-attractors, a new set of statistical economic gradients that drive the whole system towards a homeostatic set point that maintainsPOTENTIAL PRODUCTION = EFFECTIVE DEMANDall while respecting all the interdependencies of living on a space ship with critically limited resources. A spaceship with 7 billion citizen who will not tolerate being denied their basic needs without a crippling counter productive food fight with the obstructive, economic-bottle-neck, incumbent oligarchs.It is not about slashing spending on basic social-safety-net infrastructure. It is about increasing the overall efficiency of team America and team world in order to produce enough real tangible wealth to meet basic societal infrastructure needs.Framing the problem as anything less ambitious is simply delusionary and domed to failure. It is level-mixing delusion. Trying to solve a high level structural problem by tinkering with low level minutia in an obsolete system.Think about it as an Operating System problem.If you had a OS kernel that wasted huge percentages of CPU cycles pointlessly moving blocks of data around in memory you would not look for better block transfer algorithms you would rewrite the kernel to stop wasting time on pointlessly data shuffling.Rewriting our economic infrastructure to ban the massive built-in-obsolescence waste-factor might be a good place to start restructuring the economic rules of the road and recapture enough productivity to easily cover necessary social infrastructures.But that requires pushing the present, old-world, economic-bottle-neck, oligarchs out of the way and those old-world oligarchs seem to have so effectively captured the flag on public debate and governance that such concepts can not even be seriously entertained when framing the problem at hand.Add to that monetary and investment-allocation control-distortions that serve only the old-world, economic-bottle-neck, oligarchs and you have lots of room to improve global productivity to cover basic social infrastructure costs.WE HAVE AN ECONOMIC OS DESIGN PROBLEM !WE DO NOT HAVE A SOCIAL SAFTEY-NET ENTITLEMENT COST PROBLEM !WELL DESIGNED SOCIAL-ENTITLEMENT-SPENDINGIS NOT A PROBLEMIT IS A MAJOR SOLUTION-OPPORTUNITYIN AN AUTOMATED WORLDTHAT WILL PIVOTAROUND NETWORK-SYNCHRONIZEDSOCIAL AND ECONOMIC INTERDEPENDENCIES

  10. Richard

    I havnt spent a lot of time on macro issues lately, but keep your eye on Total Factor Productivity numbers. Productivity is the Tide.

  11. SamuelHavelock

    Sorting out our empire of debt is like answering the question: “Have you finished beating your wife yet?” The answers are confounded by caveats and contextual dependencies. -Structural recessions are absolutley part of the medicine and unavoidable, the other choices are outright depression, and default in which case the bond markets impload, global trade seizes and the world descends into a grinding crash. Read: un-modelable & tragic issues to global stability and economies: Human Suffering.-There is no fixing our without systemic cost of health care reform-We are out of silver bullets, already.-Ditto reckoning with the fact that as a nation we have taken resources from people who are less sophisticated than other segments of our society and re-allocated & privatized those resources based on promises for the future while at the same time fostering synthetic (read “ponzi”) markets through financial innovation. We chose winners and losers.Now everyone must take haircuts. Main Street, Wall Street, and Foggy Bottom.

  12. Brandon Burns

    This is the least critical of Obama / D.C. leadership I’ve heard from you. Quite a turn!And the thing is, if things are truly progressing, we should all do away with the “everything’s going to hell” attitude. It’s not good for the american image or morale. I, for one, was not aware of this bi-partisan cooperation you speak of (and will go read up more on it) but, if it’s truly there, I’m 100% willing to stop hating on the GOP (for the spending issue, at least).The question is: what was the trigger that took you from hating on Obama hardcore last week, to giving him a tepid (yet very positive!) pat on the back this week? And how to we amplify and multiply that trigger, package and distribute it for the general public, and get everyone to see unbiased truth… and get into better spirits?

    1. fredwilson

      i don’t appreciate his “campaign tactics” now that he’s been elected for the last time in his life. i think he is above that now and should be taking a different approach. peggy noonan’s piece about the dinner turned me around because that is the leadership i want from him.

      1. Brandon Burns

        I think Obama’s “campaign tactics” are a bit more than that; the tools he used to win elections are also used to drum up public support for his initiatives, and put weight behind him when he goes to battle in Washington.That said, even though I’m one of the few fervent Obama supporters here at AVC, I can admit he’s a bit of a fearmonger. And I wish the same goals were accomplished in a better way.But I digress. The big thing here is figuring out how to get the words of the Peggy Noonans, and other journalists who do deep-dive thought pieces of truth, into the hands of an open-eared general public. And getting that public to be open-eared.I think Upworthy is trying. There should be more, though.

      2. Steve

        Nothing wrong with a president using the “bully pulpit” to sway public opinion and build public support for his positions. That’s what leaders do. Happens in the private sector, too. Think investor calls.

  13. Marc Barros

    Good post as usual Fred. I’m glad you’re talking about the subject. The entrepreneurial community doesn’t usually get tied up into what politics is doing, so I’m glad you’re voicing your concerns, especially in a non-partisan way.As an entrepreneur I see a few issues.1. What is the role of government? No different than having the same vision in a company there is a big difference in belief about what our government should and should not provide. Regardless of what our constitution says, people appear to want very different things from the government. As long as this exists, there will always be a divide about what to spend money on.2. What drives the economy? Another major difference in opinion there are a lot of people who think the government spending money drives the economy. As someone who likes to start companies I would say that the private sector does. I’d argue for the government to get out of the way, to be offering as few services as possible, and make it as easy to fail as it is to start a company, For every successful company there are hundreds that will fail. Make this easy and you will see lots of companies started, which means more jobs. Change patent law and regulations that prevent small companies from competing against the big ones. Unfortunately a lot of the government believe their spending drives the economy.3. We compete with there rest of the world now. The american glory years everyone talks about are long gone. The rest of the world has caught up and in may ways passed us. Our companies and jobs are no longer competing with the person next door, they are competing with similar companies all over the world. Because of the internet and many of the things you believe in, companies can start anywhere and compete world wide over night. The jobs Americans used to have aren’t coming back, but there are millions of new kinds of jobs, like engineering, where we can’t find enough talented people. How do we shift the work force to what America is great at?4. People are afraid to cut. I’ve seen it running companies people are afraid that if you cut something you are going backwards. I have found that not to be true. Capitalism is founded on the belief that if people want a service someone will create it and others will use it, that includes things like education, medical, etc.The US government collects more than enough money every year to be profitable. Maybe get some entrepreneurs in there who will make hard cuts or change the rules that force them to balance the budget.

    1. ShanaC

      I think there are nuances of 2 – it isn’t as much that the government drives the economy as much as the lower and middle middle class does – but without government regulation and guarantees there might not be a middle middle or lower middle class. This is the issue of obamacare – can there be enough of a support system to make a middle class function

      1. Marc Barros

        People spending money drives the economy, weather they are rich or poor. A small increase from millions is generally more impactful than large increases from a few.I think it is less about class and more about enabling opportunity. How do you enable everyone to start companies, create jobs, and in turn more spending. I believe people are naturally creative and therefore are creative enough to start companies. The more we facilitate people creating companies and jobs the more money people have to spend. It is hard for the government to do this when they “add” more in every session. I would love to see a congress that “removes” and doesn’t just add more rules to what we already have.Capitalism has no guarantees, just opportunity.

        1. ShanaC

          certain groups have way more return on the dollar. Eg: Fred can only eat so much food even if it is of the best quality of the world. If I get someone poor to suddenly buy somewhat more expensive food, that returns directly into the food industry.

          1. Marc Barros

            That doesn’t make any sense. A dollar spent is a dollar spent, it doesn’t matter who’s pocket it comes from. If you are suggesting some people have excess money well then that is a different subject. Regardless, the government regulating and redistributing is no longer capitalism, again a very different conversation.

          2. ShanaC

            it isn’t because money has velocity. If you can’t spend it you can’t move that dollar. In theory investments are part of the velocity of money, but with interests rates so low, returns are hard, so money isn’t going to move that way. Dollars spent though are clearly moving. If you have to spend, that money will definitely move, whereas if you don’t, right now it might not.

          3. Marc Barros

            But you can’t force people to spend their money, not in a capitalistic system. All you can do is incent them to invest it, spend it, etc. Redistributing people’s money doesn’t mean the money gets spent either. People have the opportunity to make and spend money. it’s not the government’s job to dictate that.

          4. Dan Abnormal

            “But you can’t force people to spend their money” – Taxes?Pretty sure the government is forcing me to pay taxes. Haven’t tried not paying, but I think I know what will happen. (People with guns will lock me up?)This is because we are not a purely capitalistic system. The United States has a mixed economy, just like every other country on the planet. And biggest political argument everywhere is always about what the mix should be.(Should schools be funded by publicly or privately or both? How much should the public regulate private utilities? Should the public fund healthcare for only seniors, poor, and veterans or for everyone? Who should be forced to spend money through taxes for publicly funded projects?)

          5. Marc Barros

            True the government does force you to spend a chunk of your earnings on what they think is best.And yes, the fundamental question does come back to the role of the government and what they should provide versus not. People seem to be very divided on this subject.

    2. fredwilson

      cut we must and cut we will. cutting is never fun but responsible leaders and managers know they need to do it from time to time. now is that time.

      1. Marc Barros

        Couldn’t agree more.

  14. Jeffrey Hartmann

    I don’t think spending cuts are really the answer here, I think the problem is something much deeper and will take something much more interesting to solve. I will start off saying I’m a died in the wool democrat as many already know, but I’m very middle of the road when it comes to so many issues.1) Spending itself isn’t the problem, its that we are not investing in the right things. Imagine if the government took the money it has collected from rate payers of nuclear energy and invested it in solutions that burn the nuclear ‘waste’ as fuel like Liquid Choride and Liquid Fluoride reactors. If we decided to have a Manhattan style project for energy, it would rapidly pay all sorts of dividends for our society. If we fix energy, production becomes massively cheaper and our growth accelerates. Energy is but one example here, my basic premise is we invest in the wrong things. Solar energy is a nice idea, but if you run the numbers it just doesn’t make sense. Defense spending is necessary but even the pentagon has been saying for years we want to spend different. I think entitlements are hear to stay and will only become more of our spending, not less. We need to figure out how to grow the pie for everyone, and really be strategic about our investments. There is multiple quadrillion’s of dollars of resources in the solar system, why don’t we make it a priority as a species to acquire the technology so we can all have abundant wealthy lives. Cheap energy + cheaper production methods like 3d printing can really change our lives, lets make it a priority to get there. Don’t spend on stupid stuff and be strategic with our spending and we won’t have a problem.2) Government and business needs to start thinking 5, 10, 15, 20 years out and laying the foundation to dominate in those time frames. This is what the Chinese are doing, why aren’t we? Immediate profit at the expense of our health down the road is just stupidity. We can still be profit motivated, just have a longer and more holistic view about it.3) Strive for and be prepared for disruptive change. As long as we are chasing the status quo and are complacent we won’t get anywhere. Embrace change, and strive for 1% improvement every day. Alfred Lin of Zappos calls us out when he says: ‘Think about what it means to improve just 1% per day and build upon that every single day. Doing so has a dramatic effect and will make us 37x better, not 365% (3.65x) better, at the end of the year.’ If we embrace this as a society we won’t have to worry about where our economy is going. The law of compound interest applies here, lets fall on our face a little while we reach for the stars. I promise you if we did this we would have no financial problems.

    1. ShanaC

      for 2 – because the soviets did it and it failed badly. And it is failing badly for the chinese as well – everyone knows their numbers they give out are for 1 – because social security has to be basically guaranteed So you need a security that has a return but is almost the same as cash – which basically leaves only treasuries….While logical from a return point of view , using nuclear tech as a example is much too risky.

      1. Jeffrey Hartmann

        1) Nuclear technology is not risky, in fact it is the only thing energy dense enough to solve our energy problem. Look how many people have died due to oil, natural gas and coal. Now look at the nuclear industry, and you will find it has an incredible safety record. Of course those with huge investments in traditional energy don’t want you to think about it this way.I can hold the amount of energy that I will use my entire life in my hand. We have known how to do it since the 60’s and 70’s, but noone wanted to go that way because it was bad for bombs. Traditional nuclear technology is a giant steam bomb, I’m not talking about that. Read up a little on Liquid Fluoride Thorium Reactors and the MSRE. When I can build a 100 MW reactor in a factory, without massive containment requirements, and that operates like a chemical plant not a giant steam bomb I have something that will solve our energy problem. Development costs of this are a few billion, and it is totally disruptive. But noone will do this because it makes the investment in big steam bombs worth much less. I say don’t be afraid of change and go for it. I can point you to resources and calculations about energy if you want.2) Having a long view isn’t what made the Russian’s fail. Human weakness and not giving people incentive to be awesome are what did. I didn’t say don’t make a profit, I said if you can make 2 million this quarter at the expense of making 10 million a year from now, don’t take the 2 million when it will hurt your future growth. Things like firing just to make numbers are stupid. Unfortunately we celebrate this sort of action today with our quarter based yard stick. Socialism is a great idea, but it will never work because it assumes the leaders are not greedy. My idea is that we need to be greedy, just a little more patient and realize it isn’t a zero sum game.

        1. kidmercury

          nuclear is the future, it is inevitable. there are more reactors under construction now than were before fukushima. because ultimately you are either pro-nuclear or is also the ultimate investment opportunity……a contrarian’s dream come true…….

        2. ShanaC

          be clear that I think nuclear is the future – but that doesn’t equal risk free rate investment compared to a treasury.That’s part of the problem of funding old people out of the current account rather than a previous existing cohort account. If my payroll taxes went to nuclear power (among other things) so that my cohort group can pull from the account, that’s ok. *sigh*

          1. pointsnfigures

            Can we frack in the meantime?

          2. ShanaC

            i think we can frack as long as we are very very careful about it – eg: NYC’s water source sits right near an area people want to frack – if you poison that water source, you kill a lot of the productivity here (and a big us economic engine)

    2. fredwilson

      my partner albert agrees with you…

  15. Dave W Baldwin

    Interesting read (thanks Noonan link).

  16. ShanaC

    wasn’t social security supposed to be funded out of the payroll tax exclusively? And the money goes to a totally separate account from the rest of the deficit?

    1. Elia Freedman

      No, the money is collected with a separate tax but it doesn’t go to a separate account. It’s surpluses have gone into the general fund and kept us from reporting even larger deficits.

      1. Aaron Klein

        Ah…so you didn’t give up math for lent. Well played.

        1. Elia Freedman

          Lent!? For a Jewish boy like me? 🙂

          1. Aaron Klein


          2. ShanaC

            are you ready for passover though

          3. Elia Freedman

            Vaguely. My kids are finally old enough for the story (7 and 5), which is nice, and I’ll be with family for the first time in years. You?

          4. ShanaC

            nope, not until my parents house is turned over at least partially so I can do baking.Also this is the first year where I am going to have to go to someone else’s seder (bf’s family) 🙁

          5. pointsnfigures

            might do you good : ) !

          6. Elia Freedman

            Not in this lifetime.

          7. pointsnfigures

            I’ll do Yom if you do Lent next year!

      2. ShanaC

        that is just wrong

        1. Elia Freedman

          This is the problem with accounting. There are all kinds of ways to “cook the books.” On the flip side I believe federal government is not allowed to amortize assets so it makes expenses look higher then they are for a company. (I may be wrong on this but I’ve had it in my head since a college prof told me this too many years ago.)

          1. pointsnfigures

            When the govt says it balanced the budget, odds are really good it used accounting, and not economic numbers to reach that conclusion. Accounting is pretty meaningless in budgeting.

          2. Elia Freedman

            Yes, of course. The difference is most corporations use accrual accounting and the government uses cash accounting. I’m sure Fred discussed it in the MBA Monday posts, if you don’t know the difference.

  17. Elia Freedman

    I read an interesting analysis in the National Review this week how the ACA (Obamacare) could be used to reform Medicare. I don’t know how valid or reasonable this is, but interesting none the less:http://www.nationalreview.c

    1. Tom Labus

      It’s already started according to some governors.

  18. RudyC

    There are a lot of problems in this country and most of the civilized countries in this world and I’m going to go out on a limb here and say something that EVERYONE is going to call me some sort of MONSTER but it’s true. The world is getting older and with that society has problems that it never had to deal w/before.Older people have a larger number of the % of wealth yet take a greater proportion of entitlements. It also doesn’t help that the avg. age of congress is in the high 50’s low 60’s.I did notice that one of the things that you didn’t write about is Defense. Defense spending in this country is absolutely obscene. In order to be confirmed by Congress did you notice how Chuck Hagel suddenly changed his tone about defense cuts?

    1. fredwilson

      the aging thing is a huge issue. i agree with you.

  19. Aaron Klein

    I’m with you on all of this. It’s true that we’re basically doing Simpson Bowles in pieces and entitlements are next. It’s going to be tough and painful but we have to take our medicine.The reality is that we have to close a total gap of $10 trillion over ten years, not just $6T. Our annual revenue is $2.5T and spending is $3.5T.But the hope is that we can do the last $4T the fun way. Because unlike raising taxes, which retards economic growth, or spending cuts, which are painful to the people they affect, driving economic growth up to 4% is a blast. It increases incomes, reduces dependency and drives up tax revenue.We ought to be spending way more time and attention on figuring that out over anything else.

  20. gregorylent

    social security, already funded, but the money siphoned off, yes?wars and defense? an easy trillion, not needed, apart for value as jobs program.medicine? a joke, price fixing, venality, “insurance will pay for it” lack of accountability, an easy several billion.subsidies for ag? stupid.

  21. andyidsinga

    re : ‘Fourth, if we take our fiscal medicine and do that responsibly over time we will not go back into a recession.’ the short term, but in the long term recessions seem inevitable, so what safety net will we, as a society, build for ourselves for eventualities such recession, man made disasters, health problems?

  22. Lee Blaylock

    Think about this folks, the Democratic controlled Senate has not passed a budget since the iPad was announced. + Obama’s only proposals have been a reduction in spending growth (that is already asinine) that he calls “cuts.” He, nor the Senate, has no interest in real cuts. Otherwise, they’d propose a budget rather than talk to the media, pretty simpleHe came up with the sequester b/c he thought the cuts were so draconian, that the legislative branch would do something about it. Well, they didn’t b/c he insisted on raising taxes even more and had no chips left. We’re spending 3% more in 2013 with the sequester than we spent in 2012 and the President is saying the sky is falling. He cancel’s White House tours at a cost of $18k a week to play politics, but flies to FL to play golf and Airforce One costs $180k an HOUR to fly, not to mention all the other costs.I have to say Fred is a little to optimistic that we’re better off than other countries. Our ratios are worse than most we benchmark with and, even sadder, is we have 1 party and a president that wants to spend even more and won’t pass a budget to cut current spending. Peliso told 60 Minutes, Rangel told ABC and many other Dem leaders in interviews said we don’t have a “spending problem” (HA!) we have a tax problem.Our currency will be devalued if this madness doesn’t stop. Our federal budget was $2.06 trillion in 2003 and is now $3.6 trillion in 2013. We borrow 40% of every dollar we spend. We need leadership in Washington from both sides if we’re going to fix this.

    1. fredwilson

      i agree with your last line!

      1. Lee Blaylock

        Yes, it will definitely take both parties to agree to something significant. President Bush and the GOP started it taking us from $5-$9 trillion in debt. Obama in July 2008 rightly called that unpatriotic And I agreed with him! But then he’s taking it from $9,000,000,000,000 to $ 20 trillion in less than eight years and his Senate won’t even pass a spending bill showing us where they want to cut spending. Unbelievable. Both parties need a fiscal enema’

  23. TruePerspective

    This is definitely worth reading. It is the original pamphlet given to every worker in 1936, highlighting the Social Security promises. Enlightening:

    1. fredwilson


  24. William Mougayar

    This is a good step in the right direction, but is it enough for the long term? What you are asking for is a lot of common sense and independent thinking, both hard to come by in today’s special interests groups-controlled political environment. You need to also solve the root of the issue.Did anyone listen to Al Gore live yesterday from SXSW? He said when he was Senator, he used to spend 1% of his time on campaign funding vs. now on average, it’s 4-5 hrs per day for senators or reps. In essence, a lot of “common sense” things can’t be achieved because they start “pulling the puppet strings.” (e.g. the gov can’t negotiate for lower drug prices because pharma is a powerful lobby and won’t make it happen).Gore said there’s too much concentration of power and decision-making in Washington that is far removed from the wisdoms of the crowds, i.e. what the people want and need.

  25. Noam

    <third, we=”” must=”” take=”” in=”” as=”” much=”” as=”” we=”” spend=”” over=”” the=”” long=”” haul=”” or=”” we=”” will=”” go=”” bankrupt.=””>This is incorrect. Rather, we must reasonably stabilize debt as a percentage of GDP. (As a practical matter, no nation that prints its own currency can go bankrupt; it can, rather, put itself in a position that requires uncomfortable inflation.) To seek a balanced budget that *reduces* public debt as a percentage of GDP is to prioritize the interests of the wealthy. After all, government can borrow at near a *0%* real interest rate while the poor borrow at near 20%. Especially when unemployment is elevated and real interest rates are near 0%, prioritization of debt *reduction* ahead of infrastructure investment and early education investment is the height of policy foolishness, perpetuated by well-meaning rich folk who neglect to consider the federal government’s ability to borrow on behalf of the poor at extraordinarily favorable rates, to *invest* in infrastructure and education at extraordinarily favorable rates.

    1. fredwilson

      those are good and strong arguments. but i don’t know how you stabilize debt as a percentage of GDP without getting our budget under control

      1. ShanaC

        I guess the question is, given that argument, should it be a value to stabilize the debt level right now as opposed to when unemployment falls?

        1. pointsnfigures

          one way is to grow GDP. But that’s hard. Would take a lot of deregulation and tax decreases to begin to change—but we’d be under water before we grew our way out at this point.

      2. Anders Larsson

        According to the CBO, the debt is alread stabilizing. It is enough that the debt grows slower than the economy. The HUGE deficits the last three years have been driven by the downturn, increased unemployment payments and reduced revenues due to tax cuts and the poor economy. Without these deficits the country would likely have gone into a tailspin, the recession would have been a true depression.True, healthcare will destroy the budget if left unchecked. For social security there are easy fixes, like remove the cap on the payroll tax. Healthcare is harder, however as the rest of the world is paying 1/2 of what the US is paying with better outcomes the solution is glaringly obvious: Single payer system.

  26. pointsnfigures

    no chance.

  27. christopolis

    Let me opt out,please.

  28. christopolis

    fiscal reform will do nothing , we need philosophical reform. Until Americans understand and act to stop government from taking from one person to give to another, which is both immoral and impractical, we will continue onward and downward.

  29. Pete Griffiths

    This piece assumes that there is a clear national interest and that all we are lacking is the political will be implement the policies that would address the will defined problem to further that interest.I think this is predicated on a broken model of political reality. Politics is the process whereby what are often fundamentally opposing interests are mediated. There is no reason to assume that everyone in society has the same interests and it is perfectly normal for interests to be fundamentally opposed. In such cases there is no supra rational standard that may be appealed to to resolve matters. Any mediation is a messy imperfect process that consists largely of power plays. The idea of a national interest is, in most cases, an illusion that is conjured up to drape around the shoulders of one side or another.Imho our current crises stems from the fact that past power plays by some segments of society won rights (at the time referred to as welfare programs or benefits) and at for some time they were affordable because our post war margins were so high. But now, with heavyweight competitors breathing down our necks, such programs are unaffordable overhead and so the groups that endured them in the past are now trying to rein them in. It is ration for those who see them as costs to try to cut them. It is rational for those who see them as essential benefits, to which they may have contributed, to defend them to the death. The outcome won’t be determined by appeals to politicians to do the right thing for politicians are in thrall to one group or another. It will be determined by political force. And the outcome is uncertain.

  30. Dale Allyn

    Here’s a worthwhile point of view to add to the mix:…Disclosure: I like Tom Coburn’s position on fiscal responsibilities.This is no time to be spending on frivolous programs.

  31. Matt Convente

    What are your thoughts on raising the cap on income taxed for SS from its current level to cover all income?

    1. laurie kalmanson

      right now it’s extremely regressive

    2. Aaron Fyke

      I guess the question is – is it a tax, or an insurance premium? If it is the latter, then it should be tied to benefits. If benefits are capped, then the premiums should be as well. I SS fully funded from contributions? I don’t know, but it changes the discussion a bit when we speak of general revenues and spending.

  32. laurie kalmanson

    these three things would solve a lot of other things– jobs that pay living wages for people to support themsleves, invest in their families and build their communities– education that prepares people for work that is productive, valuable and meaningful– universal access to affordable healthcare not tied to employment

  33. JLM

    .Disqus has been particularly ill behaved this morning having ingested two of my comments. This will be the last attempt.I am extremely pessimistic on the prospects of arriving at anything other than a more heavily dented can situated a bit further down the road.Why? Fiscal imcompetence.Let’s review the bidding:1. In FY 2013, the US will have record revenue — per CBO — primarily from EOY tax planning and capital gains driven sales and attendant taxes. Highest since 2007. The money is coming in, folks.2. In FY 2013, even if every stinking cut contemplated is actually made, we will spend more money than in FY 2012.3. Nobody is contemplating any real cuts — no hiring freeze, no failure to fill government workforce vacancies, no layoffs, no pay reductions, no spending freeze, no elimination/consolidation of departments — nothing that a turnaround business would contemplate as part of the most basic plan of recovery. Nothing.4. The ONLY thing being contemplated is a reduction in the RATE OF GROWTH.5. The White House and the Congress will not put their own personal necks in any of the nooses they are pretending to fashion. They will not share the burden in even the most symbolic gesture — Beyonce, Adele, Michelle be damned.6. President Obama, the Sec Treas, the Republican Wisemen/dinosaurs — are not financially competent to handle this problem. They are simply incompetent. Not their fault, they do not have the experience or training.7. Whenever anyone says “savings” — it is over a 10-year period. $1.6T in savings is really $1.6B per year for 10 years. We have a $1.6T deficit, so $1.6B is just not very much.We have a $3.7T FY 2013 budget in front of us and we are playing pocket pool to eliminate $45-55B this fiscal year.$3,700,000,000,000 budget$45,000,000,000 savings targeted.Let’s eliminate some zeros.$3,700 budget and $45 in savings — huh? Hey, that’s not very much when you look at it that way. Hell, that’s only the difference between a nice cup of coffee and a latte. Right? Right!JLM.

    1. fredwilson

      third time is a charm

  34. Steve

    We need smarter, more targeted government spending to further stimulate the economy. More money in consumers’ pockets will help drive consumer spending, causing business expansion, which will become self-sustaining — at which point government spending can be reduced. But, starving a weakened economy by premature spending cuts will only result in driving the US closer to the stalled economies that are being experienced right now by Greece, UK and other nations that have embraced the “austerity solution.”

  35. Dan Abnormal

    Fred, I didn’t see anything in your post about the real problem with the economy: unemployment.Unemployment: an immediate, urgent problem with real human suffering.Fiscal Reform: long-term, theoretical problem which is largely self-imposed.Why do we hear so much from you about fiscal reform and nothing about unemployment?

    1. fredwilson

      because fiscal reform will get the markets moving again and get companies to start hiring

  36. Yepi Friv

    Very interesting news with me. I haven’t been heard about it before

  37. Richard

    The problem with your hypothetical is that is assumes a 5 % perpetual growth rate (historic highs for the Economy ) a 3 % cost of borrowing (historic lows) and a deficit spending of 1% (again historic lows).

  38. kidmercury

    This is entirely wrong as it assumes a fantasy land in which growth and interest rates are fixed. Sadly if you live on planet earth in reality you may know this is not the case. Government spending is just like personal finance, folks just use your common sense and do not be deceived by equations that suggest otherwise, as such equations are invariably built upon false assumptions.

  39. fredwilson

    small deficits can be managed, you are right about that. big ones cannot be managed.

  40. kidmercury

    Yup, Beat me to it

  41. Richard

    Im not a big tax guy, except for using it to cover Hidden costs (Smoking). Thoughts on taxing high frequency trading?

  42. Richard

    Yep, aka the ignorance of static analysis.

  43. ShanaC

    nah, don’t leave. I agree with you.I do think we need to go through the math more carefully so everyone understands it. I also know that, from experience, when it comes to economic numbers and data there are massive issues with how we think of economics by the numbers. Math gets proven and disproven all the time, and unless people like you bring in data, this argument is going to be a lot harder

  44. Elia Freedman

    I agree with ShanaC, Paul. If we all got this upset every time kid disagreed with us, the only one left here would be kidmercury! (and that includes Fred himself.)

  45. kidmercury

    lol if you cannot tolerate disagreement and discussion you will find it difficult to go many places. i do not have a dislike for equations, only for equations built on faulty assumptions — which the vast majority of economics equations are. economics is not nearly as conducive to engineering as most would like to think, it is an organic, soft science. government spending is exactly like personal finance with the exception that government can print money. failure to understand this simple concept is part of why the economy never heals and why the nation has been enslaved by debt. understanding how money is created is all that is needed to fix the economy.

  46. TruePerspective

    “The Monte Carlo model of the same scenario gives the same results.”No way. Once you get rid of the ridiculous 5% growth rate, your math falls apart. In fact, if, during the next 1000 years of your spreadsheet, you had just a few recessions, it blows up.”simplistic sloppy thinking, …conceit for “equations” and math that disprove statements,”That’s EXACTLY what you did here with this ridiculous, “the river is only 2 feet deep on average”, spreadsheet. {snarky LTCM remark redacted}

  47. TruePerspective

    Oh, and I forgot to mention the 133% ratio of our current federal spending/income. Try a few years of THAT in your spreadsheet, instead of your 101%. Heck, even try 102%, 103%, 105%, 110%.You’ve really cherry-picked your figures here to spin the argument

  48. ShanaC

    all I can think of when I see that is there is a reason that undergraduates have suicide prevention day

  49. fredwilson


  50. Elia Freedman

    A $100 investment at 3% interest over 40 years is $330. $180 in benefits is a deal for the government.

  51. TruePerspective

    But, Paul, that is not the case. You have ignored the time value of money, and compound returns:

  52. Elia Freedman

    Actually, Paul, I think your analysis argues that it is just like personal finance. Not from the perspective that we can’t spend more than we take in. After all, that doesn’t even happen in personal finance. There are very few Americans whose liabilities are lower than their assets (buying a home does that almost immediately). What your example illustrates to me is that, just like personal finance, there is a limit to borrowing. At some point rates get higher and at some other point bankers will stop lending. Your example keeps this borrowing within a control.Clearly US government is still within control otherwise we wouldn’t be able to borrow 10 year treasuries at 3%. The questions, and none of us can answer it, is when do we hit the cut off and when interest rates do rise, and they will eventually whether the government has hit it’s limits or not, how much of our annual income will we have to pay out in debt.That’s a really long way of saying that debt isn’t bad in and of itself as long as it is within control and as long as it is paying for assets rather than operating expenses.I would bet Rich and kid would argue that we are close to or already out of control and those debts are paying for old people benefits anyway, which are far from paying for assets.

  53. Brandon Burns

    logic, for the win.

  54. andyidsinga


  55. kidmercury

    i don’t like the idea of giving government more money unless they have a good plan for how to use it

  56. kidmercury

    lol good point! 🙂

  57. fredwilson

    our drone policy is a good topic of debate and i am glad we are finally having it. it seems to be bringing the far right and the far left together which in and of itself is unusual

  58. TruePerspective

    Are you deleting your comments, Paul? Would be far more intellectually honest, and scholarly, to admit you were wrong and correct your thinking, than to just delete all your posts when they’ve embarrassed you.Further to my point of using a faulty model:1.02^1000 / 1.01^1000 = 19000.Meaning your math blow up quickly when you get away from that 1% silliness.It’s from the Austan Goulsbee or Paul Krugman school of economics, where you distort economics to fit your politics, which is false economics. Not really economics at all.

  59. ShanaC

    We need to have that debate – big data plus drones is a terrifying thing on a day to day level in the US

  60. fredwilson

    whoa. let’s not get in each other’s faces here. respectful discussion is the thing here

  61. pointsnfigures

    Austan works at the Univ of Chicago, but he is NOT a “Chicago economist”.

  62. pointsnfigures

    On any given day, with an adverse administration, anyone could be construed as being an anarchist. I am a small govt fiscal conservative. When I leave my apartment I look for drones.