Monday, November 29, 2010

Simpson-Bowles Deficit Commission has some good ideas

The National Commission on Fiscal Responsibility and Reform has come up with a lot of recommendations for reducing the deficit.

Folks are grumbling, but many of the recommendations don't seem that bad.

Here are two of their suggestions that come to mind.

Raising retirement age to 68 by 2050 and 69 by 2075. It sounds drastic, but 2075 is a long ways off. Few folks alive today will need to worry about that.

Who knows, by then the average lifespan may be a lot longer than today, assuming breakthroughs in medical science dealing with the genetics of aging.

If lifespans increase significantly, we'll have to make many adjustments to accommodate the population. Dealing with increased lifespans would mean adjusting more than just Social Security. World population explosion, for instance. Maybe we'll start building colonies in space to accommodate all the people.

Who knows, after 2050, machines might be doing most of the work. Maybe folks will already be semi retired even before retirement age.

As for dropping the home mortgage deduction, that sounds like a good idea to me. All these breaks for home buyers are supposed to make buying a house more affordable, but the opposite might be true. The incentives just push up the value of owning a home thus helping to inflate the real estate bubble and making first time home buying less affordable.

It's a good news bad news situation. The good news is, you get a tax break on interest for buying a home. The bad news is, the home is now a lot more expensive as these policies have inflated the market. For every step forward in the name of affordability, we slide back two steps due to the housing inflation these steps promote.

The mortgage interest deduction may have done us no good in the long run. Houses are just more inflated in price and the government has lost this revenue.

Today, I hear that Obama has ordered a pay freeze for federal employees. Another step that sounds okay to me. Saving some money, but also making a symbolic gesture. We've got to start somewhere if we are going to control the deficit.

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