US Debt Ceiling in Perspective

[Glenn W]

Well guys & gals, like most Americans I've been trying to put the state of our Federal Government's finances in perspective for some time now and have heard views coming from the far left to the far right. It seems like the views in the middle have received the least attention.
I think most of us sit back ask ourselves three seemingly simple questions: (1) Where are we financially ; (2) how did we get where we are; and, (3) how can we assure a stable future?
IMO, if one can answer (1) and (2), the third answer becomes rather obvious. The following is a chart of annual budgets/surpluses adjusted for inflation since 1970.
The fact of the matter is that federal Spending has consistently been greater than the revenue it receives (except for a few good economic years during the Clinton Administration). Clearly, the deficit is now absurd and right or wrong, is largly a result of the bailouts and "stimulous" plans of both George W. Bush and Obama. For the moment, put the last few years aside and look at our government's spending vs revenue---- it seems we can almost never make ends meet.
We can all bicker over guns vs butter as different priorites have contributed at varying levels to the annual deficits over the years.
It would seem to me, that the Government's state of financial bleeding has gone from a hemorrhaging limb to a cut aorta. Clearly, spending needs to be significantly cut, and the "stimulous" spending needs to be eliminated very soon. What is also clear to me is that revenues need to be increased. Simply look at the deficits prior to the Obama administration--- revenue just ain't kept pace with spending.
The polititians cry and scream about who should (or shouldn't) bear the cost of our government. Well, the fact of the matter is, everyone should. It is clear that over the years, everyone has received benefits from this excess spending and it should now fall back on us to get our financial house back in order.
No one likes to pay taxes, but reality is what it is. What's most important to remember is that those that make no income pay no income taxes (personal or corporate). Instead of increasing taxes only from the highest incomes, and due to our progressive tax system, all taxpayers should share the pain a little by increasing all tax brackets. The issue of corporations paying no taxes is a bit is a misnomer. Sure, several companies are currently paying little to no taxes, but this is a result of two political games: the right (wall street interests) wanted to minimise corporate taxes at all costs, and the left (stimulous plan) afforded temporary bonus depreciation, and other deductions which enabled no taxes from businesses.
Finally, While I never agreed with many fiscal policies of Ronald Reagan, at least he had a well thought out plan with the Tax Reform Act of 1985--- that is, it was not a helter skelter wish list or political band-aide.
I think we all knew the answer all along: the reality is we must all expect to pay more in taxes going forward, and even a complete idiot would see that spending must be reduced--- and this means less benefits across the board.

[-Æ-]

Good read Glenn. Personally I feel that a flat tax on each and every American should be imposed. Right now, 49% of us don't pay taxes, yet take a large majority of handouts from the government. If they are receiving this money, then it is income. Because, after all, it is money coming in. Put a flat tax on everything and if you don't spend money, you don't pay. Its that simple. The rich will pay more by default than the poor and the problem will be taken care of.

[Glenn W]

Good read Glenn. Personally I feel that a flat tax on each and every American should be imposed. Right now, 49% of us don't pay taxes, yet take a large majority of handouts from the government. If they are receiving this money, then it is income. Because, after all, it is money coming in. Put a flat tax on everything and if you don't spend money, you don't pay. Its that simple. The rich will pay more by default than the poor and the problem will be taken care of.

That would be nothing more than a shell game Kevin. The reality is, our progessive tax system will not go away and has been the collective wisdom of policy makers since income taxes were established.
If the ultra right would accept reality and address solutions instead of the constant whining about the leaches in our society, progress may be possible. The realities are: there will always be such leaches; no one likes lazy scumbags, and most important---- you can't change social behavior over night. Look at the graph again---- these "handouts" have certainly not been the source of the constant deficits for the last 40 years. I would hope all would agree that some "handouts" are proper. If one were to take a look at the level of welfare payments in relation to the total Federal budget, you would see that it is only a small part of the problem.
However, I do agree that benefit payments to the non-working are out of control, but this is only a small part of the problem and yes, they need to be reduced.---- so with that and no further corrections, one has only pissed on the forest fire.
A flat tax system will not (and IMO should not) be implimented that is a reality. Instead of the self serving promotion of shifting the cost burdon to others, perhaps the answer lies in the obvious--- all taxpayers should share in the fix to the current state of affairs---- lazy handout receiptiants as well as high income wage earners.

[-Æ-]

I agre Glenn, but the lower earners are not paying taxes. Frankly, I feel I pay enough of my share. Its time for others to step up and pay something. My reason for this view is that when I look at what I am getting for the tax money that I pay, it is disproportionate. I pay a lot and get almost nothing, where others that are getting a lot, are paying nothing. Something for nothing? Where else int he world does this happen? We could get rid of most paying positions in some of the state and government manual labor jobs by filling them with people that are getting the checks. I know that this is just a drop int he bucket, but several thousand government programs could and need to also be deleted. The cowboy museum, the shrimp running on the treadmill, I could go on and on. They are nothing but kickbacks. This too is a drop in the bucket. Stop giving great housing deals to those that cannot afford them! It is just a reality that not everyone is cut out to own a home. Maybe the government should become a landlord and take over the forclosed homes and charge monthly rent to get additional income. After all, the banks were bailed out by the government, so the government should just step in and take them over. I know its not that easy, but every little bit helps. I still see nothing wrong with having a flat tax. 35% out of everyones taxes is fair and right. After all, why should someone that has no skin in the game have the same vote as someone who makes $5million a year? It is just not right that someone who makes no contribution to society should have the ability to cancel out the vote of someone that contributes $500,000 or more in taxes each year.

"Shared sacrifice", I think thats what the king puppet has been touting lately? Time to share...

[longfisher]

Thanks.

But isn't that essentially the Obama position on things? I think it is but for one thing, he wants to do it long-term vs. merely as a bandaid. That's what the "grand bargain" is all about.

FYI, I sold all my financial holdings and those of my wife yesterday. Because we invested in vehicles (TIPS funds and commodities including precious metals) which were bets against the economy getting better and because the GOP is making that a certainty, we made a small profit too.

Why not stay in then as our investments seemed to be on the winning side? Because there's just too much uncertainty now. The markets tend to punish all when uncertainty exceed confidence. Just look at how both stocks and bonds did in 2008 - 2009 to see what I mean.

As a failure of political will and compromise (as Glenn so well points out above) is highly likely on the Debt Ceiling and on austerity programs it makes sense to take profits when they're good, not to wait on what may be the inevitable.

Here's one of my investing rules...when you hear Cramer say, "Don't panic." you're already late in moving everything to a cash position. Cramer said that on the TV yesterday.

I was so concerned with the debt ceiling stuff going awry earlier in the year that when the 1st one year term expired on my annuities (last one in May) I moved all of the money in them to cash with interest rather than in an S&P bucket where they'd been.

We took out the annuities in 2009 and 2010 from cash we'd stashed when we anticipated the last bust. We rode the market up to where it was in about May and then switched to interest bearing buckets, instead.

It really pays to invest counter-current in the U.S. today.

LF

Edit: No sooner than did I post the above then the WaPo has a front page headline saying that the markets are nearing a tipping point:

http://www.washingtonpost.com/busine...y.html?hpid=z1

Here's some worrying excerpts:

"“This would be bigger than September 2008,” Simon Johnson, economic analyst at the Peterson Institute in Washington, said of a possible U.S. default. “You could be talking about another world recession.”

In the event of even a limited default, the world economy would suddenly be plunged “back into uncharted territory,” said Thomas Mayer, chief economist at Deutsche Bank in Frankfurt.

“You’d have to presume a severe stock market sell-off globally at a time when there are already signs of a global slowdown,” he said. “The only nations that would not feel such an event are those not integrated in the global financial system. You’d have to be North Korea.”"

SELL BABY SELL

LF

[reelaxin]

This may be a bit off track but can any of y’all really smart people on here accurately identify how much money our government gives away for foreign aid?
I have done some checking but any data available seems to end at about 2008 – Some numbers I have run across are in the neighborhood of 40 to 50 billion dollars per year. Are those numbers accurate?

I have been running businesses for many years now and when times get lean the first thing we usually do is to look at our major expenditures and evaluate the ROI. If we can not afford an expense it is very simple – we stop spending the money. Why can our government not take the same approach?

I am just a simple redneck but it seems to me that we could put a huge dent in this deficit thing by keeping our money. If some country in the middle of Africa (or wherever) needs a hand out politely say no and send them off to another country to ask for help. This simple redneck mind also thinks that we started all this “war on terrorism” stuff primarily looking for the head of one man, he is now dead so WTF are we still doing over there putting our soldiers lives at risk. I say bring our troops (and our money we spend to support them) back home.

I really do not feel that I should pay more taxes - I believe the focus has to be on controlling expenses.

Sorry for the derailment of the thread.

Mike

[clt_capt]

all taxpayers should share in the fix to the current state of affairs---- lazy handout receiptiants as well as high income wage earners.

There lies the rub - a huge portion of eligible tax payers are not carrying any tax burden.

Quite frankly the tax code needs to be simplified - real simple - 1 page or less.

2 deductions allowed for corporations - US Job Creation and Product Export

On the personal tax side, poverty level and below zero, flat tax across the board above that at a considerably lower rate than some of us pay.

But it ain't just about tax revenues - spending has to be cut - and cut big. Self funding programs - Highway Taxes, Medicare, Social Security should be in their own bucket - not in the General treasury fund - in Business raiding the pension fund is illegal - why is it legal for congress?

Cut foreign aid, cut benefits to illegals, bring our boys home...

[seapower]

I think alot of has to do with the "perception" that is rubbed in our faces everyday. Nothing gall's me worse than having to in line for a "poor" person to buy 20 buck's in lottery tickets and a 48 ounce Malt Liquor. Most of us (folk's that own businesses that I have talked with lately, including myself) can not even get traction anymore. Yes we "handle" money but none seem's to stick, it all goes right back out. Are we working less, well no, can't afford to. Maybe it's because it's such an obvious waste of our money.
I've heard pilot's say, "this plane will fly on 3 engines", OK, but it alway's made me feel better to see them ALL working! You? Frank

[Glenn W]

Kevin and Frank,
All I can say is try not to sweat the small stuff. While your frustration over society's leaches mirror those of most people, try to look for real solutions. What I mean is your focus seems to be on "getting even" with the loafers---- "make them pay their fair share"--- admirable no doubt, but so is getting a court judgement against a wino who runs their truck into your house--- good luck ever collecting on the judgement and perhaps your priorties should first be focused on fixing the house to keep the rain out.
The reality is we (the US) have a very big system and there will always those that take advantage of it--- but I think we all agree there is a need for helping the poor. This waste from the lard asses is a very small prtion of the crisis we are currently in and worring about collecting on their worthless asses is not going to even begin to solve the bigger issues.

Fred, I didn't mean to exempt the spending cuts that are obviously required-- I thought I was clear on that originally.

Longfisher, I suppose if I were in Congress, I would be one of the "grumblers" that Eric Cantor is talking about and would not go along with the Speaker's plan---- do I support the Obama plan???----- no.----- would I vote for it?--- yes. I don't trust Obama anymore than I trust Cantor.
Which brings me back full cirlcle, severe spending cuts are needed as is increased tax revenue.
Even Obama doesn't have the balls to propose my plan for increasing taxes--- increase every tax bracket by 2 1/2 to 5%. Very quick withdrawl of troops fighting winless wars, immediate withdrawl of the ridiculous 2011 reduction in FICA taxes, terminate the 2011 and 2012 large business "bonus depreciation" on any projects not started by Oct 2011--- then---- then--- get some people together with balls (like Reagan did in 1984) and redo the tax code.--- impose penalites on corporations with a large percentage of labor force outside the US yet seek Federal protection and contracts, limit or eliminate 2nd home deductions, eliminate private school deductions, raise the fuel tax $0.01 per gallon.---- all kinds of things that no one wants, but everyone needs.

[Big Fish Billy]

This may be a bit off track but can any of y’all really smart people on here accurately identify how much money our government gives away for foreign aid?
I have done some checking but any data available seems to end at about 2008 – Some numbers I have run across are in the neighborhood of 40 to 50 billion dollars per year. Are those numbers accurate?

I have been running businesses for many years now and when times get lean the first thing we usually do is to look at our major expenditures and evaluate the ROI. If we can not afford an expense it is very simple – we stop spending the money. Why can our government not take the same approach?

I am just a simple redneck but it seems to me that we could put a huge dent in this deficit thing by keeping our money. If some country in the middle of Africa (or wherever) needs a hand out politely say no and send them off to another country to ask for help. This simple redneck mind also thinks that we started all this “war on terrorism” stuff primarily looking for the head of one man, he is now dead so WTF are we still doing over there putting our soldiers lives at risk. I say bring our troops (and our money we spend to support them) back home.

I really do not feel that I should pay more taxes - I believe the focus has to be on controlling expenses.

Sorry for the derailment of the thread.

Mike

There we go, kind of like my 88 year old mother, who over the years was given a pill for this and a pill for that, to the extent that they all wouldn't fit in that plastic daily/weekly pill planner container...finally she got hold of a "new" younger doctor that said "let's get you off all this crap and see what happens"....well it's been a few months now and she's never felt better, more alert, and is a little less "alzheimers-ish." So....let's get the world off all of our hard earned tax money, balance our budget, bring our troops home from all across the world, vote all the politicians that are in office out, and "let's see what happens." My guess is we'll all feel a little better, be a little more alert, and less locked into our Alzheimer's syndrome where we can't even remember where our money is going and what for. Then when we have a handle on things, and another country wants to DO something of value for us, we can see about giving them some compensation. Who wants to give it a try?