I finally figured it all out and we are all screwed! No way Out

Any of the mathematical policies are guidelines and these will be pushed whenever there is perceived a national reason to do so. Like today I'm guessing the president and Congress dislike deficit spending but the alternative is ugly...both the fiscal and political fallout. In the US, IMO, government costs are too high and the economy does not have an impetus for higher growth, therefore, we will go merrily down our current path of deficit spending, higher debt, and resistance to increase taxes. I think it's a huge stretch for the US to see a balanced budget in the next 20 years and paying down $1 dollar of debt ain't going to happen...

 

http://www.ssa.gov/oact/TRSUM/index.html

In 2014, the projected difference between Social Security’s expenditures and dedicated tax income is $80 billion. For HI, the projected difference between expenditures and dedicated tax and premium income is $25 billion. 3 The projected general revenue demands of SMI are $248 billion. Thus, the total General Fund requirements for Social Security and Medicare in 2014 are $352 billion, or 2.0 percent of GDP. Redemption of trust fund bonds, interest paid on those bonds, and transfers from the General Fund provide no new net income to the Treasury, which must finance these payments through some combination of increased taxation, reductions in other government spending, or additional borrowing from the public.

There is reality and the Enron accounting. When the government is spending more than 500 billion a year than it takes in, where does it get this 352 billion? No , we do not have surpluses.

 

There is debt hiding all over the place, in all different forms. Many of the "assets" people think they own are really, if you look underneath the surface, someone else's debt. When the government is finally forced to deal with all the debt it has amassed over the years, taxes are going to have to be raised, only they will find out the people simply do not have the money to pay it. You can't place more burdens on someone struggling to keep their own head above water. Even many successful professionals are sandwiched between helping take care of their aging parents and still providing for their underemployed grown up children who cannot afford to go off on their own.

 

I agree that we can not just cut the deficit over night even if we wanted to (without doing harm). The impetus simply is not there on either side of the fence.

I guest the 24,000 dollar question is "how much is too much". The answer is not easy but there is a limit after which there is no turning back. A point at which the water is coming in faster than it can be bailed out. Much of course depends on how fast the economy is growing.

Right now, as you suggested previously, we are being helped by the fact that we are the most stable game in town. In times of economic uncertainty the money will continue to flow towards stability even if there is little return on investment. It is preservation of capital mode.

China Stocks got hammered 29% so far this year. Greece has and will continue to default and gave the proverbial finger to creditors by voting no.

We are starting to see protectionism rear its ugly head. Sanctions are just another form of protectionism to add to the problem.

High deficits are countered by robust economic growth. If we start to see a global slowdown that counter balance will no longer exist.

I have exited most of my positions that have much risk. If I see this Greek crisis start to spread I will liquidate even my more stable positions and sit on the sidelines for awhile.

Hopefully this is just a short term ripple but I got to say that my spider senses are tingling like they have not done since the 2008 crash.

 

Table 1. Trust Fund Operations
(in billions)
OASI
Reserves (end of 2012) $2,609.7
Income during 2013 743.8
Cost during 2013 679.5
Net change in Reserves 64.3
Reserves (end of 2013) 2,674.0

Taken from the link you provided above SS trust fund reserves are growing. No matter where the income comes from, whether payroll withholding or income interest SS is paying for itself today.

When the general fund takes FICA cash they must provide in return interest-bearing bonds, which means when SS wants to cash out the bonds, the government must pay the principal amount plus interest. This is the cost the government must pay to use SS funds and how they finance this is through taxation, higher taxes or more debt as your information above shows.

 

Gotta wonder how much the service costs of all the personal, business and government debt is each year? All of this credit spending forces inflation way beyond where it should be with more fiscally responsible spending. And since wages/income don't need to track inflation, it's no surprise to me that everyone has trouble making ends meet. So we have billion$ in debt interest payments as well as higher inflation and neither can be avoided. We get absolutely nothing in return for our interest payments so we're spending more but getting less. We've already screwed the pooch on debt and debt interest so now we're stuck since greatly reducing government spending eliminates jobs and hurts the economy. And as you say, there just isn't a lot more cash that can be extracted from society to fund government except taking more and more from the wealthier and this will backfire due to diminishing returns. We have constantly growing governments at all levels meaning constantly growing tax revenue requirements. Seems like all levels of government have become too big to fail and therefore must be propped up with more debt waiting for something magical to happen. One thing magical is increasing GDP by $3-$4 trillion but what can possibly be the impetus for this happening?

 

If you think about the political process, and the fact that a majority of voters refuse higher taxes, only the dumbest of dumbest politicians will try to increase taxes and/or reduce government spending because they will soon be out of a job. So a politician tries to give as much to the voter yet throw a bone to higher tax revenues which IMO is why politicians only talk about higher taxes on the wealthy instead of the masses. The masses demand more government, the politician proclaims they will raise taxes on the wealthy, but in the end the politician simply uses deficit spending to calm the political waters...around and around we go!

I don't understand the protectionism concept? IMO it is critical for the US to function in global markets. If we refuse imports for example then we must also stop exports, and I think greatly expanding US exports should be one of our goals.

I have no comments on stocks since at my age stocks are too risky and I don't need to take those risks. For those who do take the risks, just remember that if things can go up they can also go down...

 

My point is that SS/Medicare is paying out more than it is taking in in dedicated taxes. When the government borrows from it it is only funding current wants at the expense of future Americans. The bonds are worthless until paid by general taxation, which we have to borrow. Again, the accounting provided is no different than The Enron accounting that destroyed that company.

If private investment/insurance companies did this, people would be jailed. The government has no business borrowing these funds and having future American pay the bill.

 

The Social Security and Medicare liabilities are a huge area that many are overlooking. Basically the government has taken on a huge obligation to provide for all these people. That is basically like debt in a way. These programs used to have trust funds set up, and then the government, always looking for quick money, raided them, and replaced the accounts with unfunded liabilities.

 

but that doesn't make any sense, the tax revenue is generated from business, now if your saying the government should start a guaranteed income program (something ive been a proponent of for years), then yes, i guess there would be no reason for minimum wage and that would actually make sense, but the government is not seperate from business, it prints the money therefore all of the money is theirs.

how do you fund something with general revenues without taxing industry? that doesn't make any sense, besides tying the minimum wage too inflation and productivity is reasonable and very likely too happen soon, many countries do it, what would be hard, would be passing a measure that provides shelter, food, health care, transportation, wages, etc. but i do agree if they did that minimum wage wouldn't be an issue

 

A politician does not possess the discipline to allow an investment fund in the trillion$ to just sit there...like telling Oprah she can't touch the ham sandwich that is on the table in front of her! I'm not even sure if it's legal for the government to accrue trillion-dollar cash funds? So unless we have a policy change in our government, there will be no way to accrue cash funds like the SS fund.

On the other hand, if the SS fund is realizing investment gains, no matter if it's from ourselves, then I say great!

 

Then maybe we should stop doing things like giving millionaires and billionaires loopholes from paying SS taxes.

SS taxes stop at about $120k or so, meaning a millionaire who actually earns his money is paying an effect SS tax rate which is about 1/10 of what a average working guy pays.

And the really rich who live off their investments pay no SS or medicare taxes at all.

 

I believe that poll after poll says the vast majority wants higher taxes on higher income earners, but it is the politicians, and particular those in the Republican party, that protects the perks for the well to do.

 

There are no loopholes regarding FICA?? It's a mathematical formula applied to all people and business.

Why should one person who earns $250K pay into FICA $15,500 while another person who earns $50K pays $3100 when both get the identical payback at retirement age? The answer is wealth redistribution and politics.

You also are punishing the employer who now must pay $15,500 into FICA instead of $7500...how do you justify this business expense?

People who don't pay into FICA don't get SS and Medicare when they retire...why is this a problem for you?

 

Your 'higher income earners' already pay the lion's share of income taxes but this is not enough for you?

You remain clueless about diminishing returns as you believe you can extract more and more.

How about greatly reducing the size of government?

Where is the positive in taking more cash from the private sector and giving it to government?

 

False. SS taxes do not apply 1 cent to incomes over $118,500. SS and Medicare do not apply 1 cent to investment income.

It's a regressive tax on the middle/lower classes the rich guys don't effectively pay.

Stop the loopholes for them and then we wouldn't have a SS/medicare budget problem.

Because he makes $250k.

Taxes are not investments for which you get corresponding returns.

Why are you punishing the poor and middle class folks and giving the rich a freebie?

Other than the obvious reason, I mean.

Why would you think it is a problem with me?

 

They get the lion's share of income and over all pay no more than the income they getting. Our nation has gone dangerously in debt so they could get more and more of the nation's income and wealth.

So no, its not enough for me.

You remain clueless as you believe you cannot extract more and more.

Already did it.

It gets spent into the economy instead of going into the offshore accounts of the richest.

 

Haven't figured much out. The government is not trying to cause inflation to make debt denominated in our own made up currency cheaper. They couldn't care less about the cost of debt. Inflation is a tool for economic growth and efficiency. The movement of money is necessary for economies to grow and inflation creates an atmosphere where you have to continue moving money or face the consequences of losing some purchasing power. Money that gains value over a long period of time would be the death of an economy.

There is plenty the Fed can do. What we need is a WW1, WW2 like fiscal expansion. It's all on the politicians now. They are starving the private sector of what it needs.

 

FICA payroll withholding applies to all wage earners...the same formula.

FICA is not a regressive tax...it's payroll withholding from the individual to invest in future retirement and health care.

You have a FICA budget problem because politicians refuse to collect the appropriate funding. Obama even reduced that funding a few years ago by lowering the FICA contributions. 62 million Americans collect SS while only 40 million of them are of retirement age...how about removing or qualifying the 22 million?

So when the $250K wage earner goes into a restaurant they should pay $150 for their steak dinner while a $50K wage earner should only pay $15 for the identical steak solely because one earns more than the other?

FICA payroll withholding is an investment in one's future regarding retirement and health care and the pay back is determined by the individual's income. If you want to claim this is false then what happens to people who DO NOT pay any FICA withholding?

I asked how you justify the extra business expense and your response is a political diatribe?

 

You remain in 100% social and political denial.

Fact is the wealthy pay the lion's share of income taxes.

Fact is diminishing returns is an accurate scenario.

Fact is how people accumulate wealth and government goes into debt have no relationship.

Fact is on average the federal budget increases every single year.

Fact is money remaining in the private sector energizes the economy at a higher rate than government spending.

 

Here's another example why we can't move forward;

http://www.msn.com/en-us/money/mark...arly-60000-could-rattle-us-economy/ar-AAcMUfS

The U.S. Army’s plan to cut nearly 60,000 military and civilian employees in the next few years has sent shockwaves through Congress and sparked fears about the adverse effect it could have on a still-struggling economy and scores of military communities across the county.

The military, and government in general, have become too big to allow to fail...too many people are dependent on government spending! It makes no difference that government is bloated, and that we have deficit spending and debt, or that we need to be more fiscally responsible. We are told the economy is great yet any action to reduce government spending and people come unhinged.

I do have one solution to allow the US military to remain bloated; let's charge all other nations in the world for US military presence and intervention!