Obama should target Republican districts with the consequences of the sequester

[Martin_Hyde]

@Voyager

Really? Medicare is pretty well run. Sure there are people ripping it off, no shock there. I think the IRS is a hell of a lot better than equivalent agencies in lots of countries, Italy and Greece to name two. And the anti-government bias of some people hurts too. Cutting IRS auditing is dumb.

Thaler and Sunnstein talk about the retirement system of Sweden, I think. While good, people tend to put money in the fund that is probably the worst investment, triggered by highest growth so far. There are also a limited number of funds. That works fine for them, but the size of our retirement system is so great that any sort of limit on investing (which would be necessary) would distort the market terribly. While 401Ks and IRAs have not worked out as well as people claimed they would, because of lack of investment and bad investment, a system with both defined benefits and defined contributions seems the safest.
It appears that lots of people pulled money out of stocks at the depth of the crash, and are just putting money back in. That was stupid.

I don’t think you’re talking about the retirement system of Sweden at all, actually. Sweden uses a virtual account system called “notional defined contributions.” In an NDC system, everyone pays a fixed rate into the pension system. The contribution rate is considered to be “permanently fixed.” As your working life progresses, a larger and larger amount of “credit” builds up in your notional account that you’ve put money into throughout your working life.

When you retire, the total value of your notional account is annuitized using standard actuarial / annuity principles. There is no guaranteed benefit amount, instead your benefit is based on the value in your notional account as it is annuitized when you retire. If life expectancy is dramatically higher for persons aged 65 when you retire than it is now, then the annuity value of your notional account would be lower.

If population is declining, contributions to the notional accounts declines as well. This system incentivizes people to work, as there is no special benefit to retiring and you continue to improve your retirement payout the longer you work.

This system, once implemented, basically makes it impossible to reach a scenario where the massive old person population consumes a huge portion of the working-age population’s resources. Since the benefit is not defined, it will adjust with society, as it should be.

What you seem to be talking about is a 401k type system in which people make investment choices to participate in various funds. There may be some government-sponsored plan like that in Sweden in addition to what I just mentioned, but the primary pension system in Sweden is the NDC system I just described.

I think 401ks have problems for the average investor, which is why they haven’t worked out nearly as well as they were supposed to have. The 401k as a vehicle has offered too many options and choices, and needs reformed. I’d make some level of 401k contribution mandatory along with making employer matches mandatory. I’d also institute a rule that you cannot make any pre-retirement withdrawals from your 401k. Further, I’d create regulations on the type of funds 401ks could have (basically stock index, bond index, money market) and I would require someone to be a “qualified investor” to have access to more active trading models and even additional investment options. (Becoming a qualified investor would mandate a certain level of net worth or income, and passing some form of competency exam.) Regular investors would only have access to a limited number of index style funds and would be limited to one rebalancing of plan assets per year (eliminating any ability to market-time.)

Which is why more money to the states through a federal stimulus package would have accelerated the recovery. Austerity at the state level hurt quite a lot, and it would have been worse without the federal help they got.

People keep saying this, but the evidence just isn’t clear at all. I can point to many scenarios where stimulus efforts have resulted in mild, mediocre , or even negative results in terms of GDP growth. The only response the Keynesians ever have is that “you weren’t spending enough.” It’s hard to believe this could be true during the worst parts of the Great Depression when Roosevelt was engaging in massive amounts of spending.

We’ll know when this happens by the trigger of the Fed raising interest rates.
Let’s not talk about the 1990s, where revenues obviously outpaced increased spending. Let’s talk about the 2000s, where the deficit increased in good times due to both increased spending and continued tax cuts. It seems Republicans are for cutting spending when we need it and increasing spending when we don’t.

Of course, we’ll know when a debt crisis happens, but the point is to respond before it gets to that point. This concept of “needing spending” and “not needing spending” is simply asinine. A society has to decide what actions it wants to take, what services it wishes to provide and etc. Based on those decisions you have to decide to spend or not. The idea that sometimes the economy “needs” spending is fallacious. Markets will always correct over time without active stimulus.

[Zakalwe]

@Martin_Hyde

The country is not so neatly divided as you seem to wish to believe, and in fact the most extremely lopsided districts are almost all Democrat 80-90% districts in heavily urbanized areas. The “red districts” tend to be a lot more like that 60/40 split I’m talking about.

Actually, the majority of the country is divided into EXACTLY the districts the Republicans wanted. Otherwise, they would be the minority party in both houses of Congress. The phenomenon you are describing was carefully planned, not some accident of the country’s demographics. And you know that.

[Evil_Captor]

@DrumBum

I hope that Pres. Obama will base any decisions on less partisan feelings. While I don’t feel the debt is as big a issue as it is been made out to be, it was made possible by both parties so it seem to me that the cuts should hit both sides. To target specific districts strikes me as quite childish and something that those in the House would do. Pres. Obama is better than that.

It was NOT made possible by both parties. Sheer Republican intransigence, pure and simple, as usual, and everyone knows it.

[gamerunknown]

@Martin_Hyde

Further, I’d create regulations on the type of funds 401ks could have (basically stock index, bond index, money market) and I would require someone to be a “qualified investor” to have access to more active trading models and even additional investment options. (Becoming a qualified investor would mandate a certain level of net worth or income, and passing some form of competency exam.) Regular investors would only have access to a limited number of index style funds and would be limited to one rebalancing of plan assets per year (eliminating any ability to market-time.)

Expertise and knowledge are poor predictors of success at picking stocks, with Malkiel claiming no relationship between the first two variables and the third.

[Zoe]

I don’t think we should target certain political parties. That just tears us more apart. Besides, districts aren’t all red or all blue. Don’t try to punish the people. Single out those who are getting us in this mess. Many of them have a very “let them eat cake” attitude.

[LonghornDave]

@Voyager

Once we get unemployment down the budget gets to be in better shape as we pay less in benefits and get more in taxes. It has started already.

This just isn’t true. The short term deficit can get a little better as the economy improves. Going out slightly further though and the deficit increases due to demographics changes. We have trillion dollar annual deficits out into perpetuity not because of the economy but because of an aging population.

[Evil_Captor]

@Zoe

I don’t think we should target certain political parties. That just tears us more apart. Besides, districts aren’t all red or all blue. Don’t try to punish the people. Single out those who are getting us in this mess. Many of them have a very “let them eat cake” attitude.

Worked for Teddy Roosevelt, a fine Republican President!

[Martin_Hyde]

@Zakalwe

Actually, the majority of the country is divided into EXACTLY the districts the Republicans wanted. Otherwise, they would be the minority party in both houses of Congress. The phenomenon you are describing was carefully planned, not some accident of the country’s demographics. And you know that.

That’s both incorrect and irrelevant to what I said. Let’s address the second point first, its irrelevancy. Say you were correct (which you are not), and that the reason we have many GOP candidates winning 60/40 while Democrats accumulate in 90/10 districts. If that was “true in a majority of the country and divided into districts exactly ho Republicans want”, does that still justify punishing the 40% of the people in those districts who reliably vote Democrat just because they haven’t moved? Is it reasonable to expect life long Democrats to either move or face targeted partisan spending cuts focused on their district for no reason other than they are outnumbered by a 20% margin by neighbors who vote Republican?

For that matter of course it isn’t justified to cut even in 100% Republican districts.

Now on to the other point, I’ve demonstrated at least several times that if you have a certain political ideology whose supporters tend to accumulate in concentrated urban areas, you can very easily " naturally" come to situations in which they “gerrymander themselves.” Now, I’m not saying that in states like Ohio, Pennsylvania, and famously Texas there is not more direct, intentional gerrymandering. But that isn’t “every state” in the country, and many of the smaller states that are red the gerrymander opportunities are limited because of there only being 1-3 House districts in those states. So you’re really only talking about some of the larger States that sent red Congressional delegations that were gerrymandered intentionally, and even some of those it’s not always so clear cut.

The way I explained this last time so that people could understand it (even through partisan blinders, which most Dopers do not ever take off), is:

@Martin_Hyde

Sure, simple math imagine a country with five “districts.”

Let’s assume the constitution mandates that districts be as close as possible in population size and “maximum geographic compactness.” [While not the only concept of a fairly drawn district, it does have some traction in States that have attempted to make district non-partisan and among algorithm makers and geographers somewhat relevant Slate article]

Let’s also say that there are two parties, the “People’s Party” and the “Citizen’s Party.” Let’s say in American political parlance the People’s Party is “liberal” and the Citizen’s “conservative.”

In two of the districts, District 1 and District 2, there are large (for this small country) cities. They have large minority populations, young unmarried people, college students and professors and basically many of the traditional groups that would vote Democrat in the United States.

Districts 3, 4, and 5 are more suburban or rural, more from the majority race, more older married couples, more religious people etc. Basically groups that vote more Republican in the United States.

Alright, so each District has 100,000 residents. District 1 and 2 are very small, because they center on the country’s only two large cities, and under the concept of geographic compactness there is no way to avoid this.

So in an election the break down comes down to:

District 1: 100,000 votes - 90% People’s Party, 10% Citizens
District 2: 100,000 votes - 90% People’s Party, 10% Citizens
District 3: 100,000 votes - 30% People’s Party, 70% Citizens
District 4: 100,000 votes - 40% People’s Party, 60% Citizens
District 5: 100,000 votes - 45% People’s Party, 55% Citizens

So in total, the People’s Party wins two districts and 295,000 voters preferred a candidate from the People’s Party. The Citizen’s Party wins three districts, and 205,000 voters preferred a candidate from the Citizen’s Party.

In a fictional country with two cities that are almost the size of a district, and with the district guidelines above it would be very, very hard to “fix” the “disadvantage” that the People’s Party has because of their extreme concentration of voters. Basically, people who identify with that party have chosen to collect in a manner that isn’t an even distribution around the country and that has electoral negatives for them. I’m not 100% sure how you fix that with a single member district system that has first past the post voting without basically saying “well, this is the majority party in overall votes so we will just draw the districts to make sure they win all 5.”

That may “feel” right to someone that thinks whichever party has the most votes should be in power, but it would seem to violate the concept of non-partisan and “fair” district drawing. (A very hard to define thing, the concept of geographic compactness is suggested as a fair drawing technique, but there is no true objective fairness and most people define fair to equate to what benefits their party the most.) The truth is if you choose a single member district system with first past the post voting unless parties have voters perfectly evenly distributed throughout the country I am not 100% sure how you can avoid situations like I’ve outlined in this ‘extreme worst case’ scenario above. Even in the UK which almost everyone agrees is not intentionally gerrymandered, there have been arguments made that differing geographic concentrations of voters have created “undesirable” differences between national popular vote and the party that ends up winning overall.

[Martin_Hyde]

@gamerunknown

Expertise and knowledge are poor predictors of success at picking stocks, with Malkiel claiming no relationship between the first two variables and the third.

Who is talking about stock picking? Expertise and knowledge can definitely aid you in developing a competent, proven investment strategy (value investing focused on diversification and a asset allocation that can help protect you from risk.) Anyone who is banking on their individual stock picking abilities to provide for a good return in their 401k is not someone who should be a qualified investor. A properly developed diversification and investment strategy comes very close to guaranteeing solid returns in line with the market and in line with your strategic aim without you needing to be particularly skilled at picking one stock over another.

This would mainly be a mechanism for people who want to diversify their portfolio to include assets like precious metals, specialized investments like REITs and etc which can in fact give your portfolio strong diversification at least somewhat unrelated to the performance of stocks and bonds. (Famously, a portfolio made up of 25% stocks, 25% long term treasuries, 25% short-term treasuries or cash, and 25% gold is only 1-2% worse than the S&P 500 since the 1920s but almost never loses money and in the years it does lose money it never loses as much as the broad market.)

In your 401k the goal is not to beat the market or even necessarily to precisely match it, it’s to get really close without exposing yourself to timing risks. You only have one life to live and while most investors will never beat the returns of say, a S&P 500 Index fund, it can be dicey trying to time when you should move out of that fund and more into bond funds to avoid losing your entire nest egg on the eve of retirement. Alternative asset allocation strategies can help here, and usually involve assets that I would not want regular 401k investors exposed to unless they demonstrated some level of financial competence.

But finally, I feel on some level you should be able to fuck up your life, but if we let too many people do that it becomes a societal problem. If a qualified investor, someone who has met asset and educational standards puts all of their eggs in a few baskets and goes belly up, I’m okay with that as that was a decision they made and were equipped to make better.

[Fear_Itself]

The fear of Obama punishing red states has begun to occur to some Republicans:

McConnell had floated the idea of writing legislation that would keep cuts in place, but would give President Barack Obama’s administration “flexibility” to implement them in the best way. That plan did not fly, however, as the Kentucky Republican ran into opposition from members who don’t want to cede the legislative branch’s traditional authority to the president.

“I was speaking for myself,” McConnell explained to reporters. “There are some members of our conference who are suspicious that the administration taking advantage of such flexibility would seek to punish their political enemies. There are differences of opinion about that.”

[Zakalwe]

@Fear_Itself

The fear of Obama punishing red states has begun to occur to some Republicans:

This is modern-day “Republicans” in a nut-shell. “The federal government should stop spending money! Wait. You’re going to stop spending money in MY district? Fuck that!”

It’s like the protest signs that proclaimed that government should keep their hands off Medicare. Pure ignorance.

[Chronos]

Personally, I think we should have a voluntary opt-in program where anyone who wants to can choose to get government’s hands out of their Medicare. It’d save money, and it’d give the people what they want: It’s a win-win.

[CJJ]

ISTM Obama’s basic strategy here is to divide Congressional Republicans between the defense hawks (who don’t want the sequester) and the deficit scolds (who do). They are the real groups who need to negotiate a replacement for the sequester.

The only wildcard is whether or not Obama will stick to that strategy and keep his Congressional caucus on board; he has a history of backing down when encountering some pushback, but considering he never needs to run for re-election again and there is enough polling that shows the public will blame the GOP for the effects of the sequester, he certainly has a winning political hand.