The Coming Debt Limit Crisis

[Jim]

[KeithE]

3 points:

1) I personally do not like it when disrespectful names are used for anyone let alone a President including "bubbadubyabushidiot", "ObamaMessiah" or "our dear leader". That does not mean I approve of what either of the Presidents have done.
2) Why doesn't this forum have a "moderator"?
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3) The Congressional Progressive Caucus (aka the People's Budget) reduces the national debt by $5.6T over the next ten years (the bipartisan CBO has it at $8.2T) and brings us to a balanced budget in ten years and does so quickly (down from our present day 9% of GDP to 1% of GDP by 2015). Read about it , and advocate for each of its points - maybe S&P will reconsider in a few years. Jobs will be created particularly for infrastructure repair, education, and renewable energy (R&D thru distribution). Plenty of work for small and big business, manual labor through think tank work. Personally I would add a budget line for "Accountability" at say 1% of yearly budget and implement campaign finance reform / term limits to better ensure we have not been co-opted by fraud.

As is (even if the Gang of Twelve finds another $2T) we are going down the tubes economically (and I will add morally as well) as a nation.

[Gene Scarborough]

Amen to the terms of disrespect----I think we can do better!!!

This is a time of needed communication and respect on the part of all politicians. What happened last week has been repeated far to often---in an attempt to hurt an individual with no consideration to national cooperation and compromise. The whole idea of debat and voting is to come up with the most meaningful and productive reform possible.

Jim---if you want to say anything, then how about making it a plan which would work better than what is being done now. Blind hostility in the face of economic issues hardly accomplishes anything, and is the root of the current troubles.

[Jim]

[Gene Scarborough]

Jim---

Your take above deals with retirement programs and utility costs. It really does not address how we positively address the issues.

How do we maintain adequate retirement?
What kinds of energy needs to be developed so it is reasonable in cost?

[Sandy]

Social Security, Medicare, and other similar programs operated by the government are responses to problems created by major changes which have occurred in society over time. Things which should be the joint responsibility of workers and their employers, such as the availability of wage deductions for pension funds and part of the employee's pay being put in as matching contributions would eliminate the need for a lot of social security and other government programs. However, the profit motive factored in means that a lot of employers won't offer those kinds of programs because of the cost of maintaining them. The other problem is that, in an investor class dominated economy, things like pension funds won't be allowed to just sit around, earn guaranteed interest and pay out what they are supposed to when they are supposed to. Individuals got their hands on those, put a lot of them in higher risk investments and lost the money. It was the Great Depression that bottomed out a lot of those funds and programs, and this time around, the shrinking stock market did the same to a lot of retirement funds and pension funds, all except those which were in stable, safe, but slower growth investments.

In theory, the contributions of those who pay into the system should sustain it, even when the number of those receiving payments grows, because the Social Security fund is based on economic growth. The odds are that those of us who have paid into the system all of our employed lives, me for 33 years at this point, plus the required employer contribution (unless you're self-employed) will wind up paying far more into the fund than we will ever take out. Only the first generation of recipients would be the exception to that, and that was covered by the initial budget set up by Congress. The system was estimated to collect about a third more in taxes from an individual recipient than it would pay out to the same recipient after he retired. The extra third would allow the fund to grow and cover times ahead when the number of people living on social security would continue to increase. But Congress has tapped into Social Security to pay for other things. It pays more than it was intended to pay. As a result, it will run out of reserves iin about 15 years. So you can only imagine how far behind it would have gotten if it had been allowed to be privatized, in addition to a certain percentage of the money going to pay profits and interest on debt.

[Gene Scarborough]

Sandy---

From 1986-99 I worked as an Insurance Professional focused on the highly paid executive / estate tax planning market. In that field, the successful agents were finding ways to use insurance as a tax-exempt tool for the wealthy. In businesses we were looking for approaches which allowed the business owner to benefit without having to share it with the employees.

Our enemy was government regulations and rules put into place to INCLUDE employees in any benefits owners wanted to give themselves. There were always things "left open" by law so that the owner could benefit himself and his heirs without including employees. Our lobby was strong and our product was good. It was expanded so that equities could be used inside Variable Products. In other words, Mutual Fund's enhanced return was available. As long as the money stayed inside the Cash Values of the product, growth was not taxed. The battle when I left the business was to keep Cash Values from being taxed like other investments. Another battle lost was to keep banks out of the insurance business. They must have had more legislative influence the insurance industry. Knowing was a bank client had in their financials was a distinct advantage to any bank and they benefited greatly by putting agent inside all the banks. He just sat and sold products based on his information of money held by a bank's customer.

The slickest approach to benefit the high dollar executive was a 3-stage approach to retirement security. The wealthy could put a maximum amount of money into the product. What was not used to fund the Death Benefit went to investments of his choice. The superior tax benefits of this approach led the government to put a MEC (Modified Endowment Contract) cap on how much could be put in. If the MEC were exceeded, then it became more an investment tool than a life insurance contract. Only the top skilled and educated agents was capable of the knowledge and company backing to maximize wealth to the client.

At retirement, the client begins to withdraw from the money accumulated in the policy. First funds are premium money so "money in / money out" prevented any taxible gain. Next, the client was advised to take money out in the form of a loan at 4.5%. Since this was borrowed money---no tax to be paid! At the end of life the policy paid its tax-free death benefit to the designated beneficiaries. The first part of the death benefit repaid the loan---and the residue went to wife and children and sometimes to the business which paid for it. In toto the client enjoyed tax advantages not available to the average worker and had the kinds of dollars to "invest" in himself without sharing a penny with the government!!! The government got not one red cent to pay for its programs and infrastructure maintenance.

That is why no agent working a debit route to small wage earners could get ahead. In fact, debit routes are a thing of the past. Companies accept monthly premiums only by bank draft--thus eliminating the need of agents going around each month. Now, most companies try to sell their policies via the Internet and eliminate even paying agents a commission!

The poor suffer from limited personal services. The rich get the tax advantages and the agent knowing how to do the programs is a Sales Leader and member of the Million Dollar Roundtable!

This is but one example of how "rich wins / poor lose!"

[KeithE]

[Gene Scarborough]

Keith---

You are covering issues in a way which makes far more sense to me than Jim's rants. His claim about paying taxes is patently false. We all have taxes from many areas which support government: fuel tax / sales tax / property tax / etc. We all pay taxes, like it or not!

Let's put this on a personal perspective. If you have a credit card costing 18-23% and go out buying as you please, you get a bill at the end of the month. If you can't pay that bill, then the interest ticks on unpaid balances. There is a credit limit on all credit cards. So you go and get another one to continue your big spending. Items purchased help the economy as jobs (if only they were American jobs) are involved in producing the goods you purchase. At the grocery story the fuel surcharge for every 18-wheeler bringing in the good is translated into higher prices on items. The individual always must pay for debts incurred or the calls start coming and the credit rating goes down. In recent years Corporate Profits dictate outsourcing to foreign labor, but we are still standing in line at Wal Mart with credit card in hand!

The US has been using it's credit card with a debt ceiling limiting how much credit is available. The Treasury can print new money, but may not have gold to back it. That is the basis of inflation. After Viet Nam and War on Poverty sucking the treasurey dry, we had 23% inflation! Social Security Trust Fund was sucked into the general budget to cover the red ink.

We are on that track now with the Middle East War and a 5-generation run of welfare recipients who figure ever-better ways to get more. We have now whole segments of the economy functioning off of nothing but entitlement programs. Former bank buildings now support a Title XX transport system with some 200 cars out front for all the people involved in running that one program in Rocky Mount. Another large building is at the hub of Social Services. The workers have regular checks to support their lifestyle. It is a monster eating its own tail daily!!!

Now, the credit card is maxed out. Who has the courage to cut spending? Most talking of cuts a doing so at the expense of SS / Medicare / other things affecting "someone else" besides the legislators who put them in place. What legislator will take a salary and benefits cut to participate????

Now, today, S&P has reduced Treasury Bond ratings by 1 level. The Stock Market is going down as I type. The Navy Seals killed in Afghanistan are having officers calling on relatives in Virginia Beach to announce who won't come home.

Death / Market decline is the news of the morning. Something must give and government must act more wisely. We are on a brink of reality = THE CREDIT CARD IS MAXED OUT!!!! AND---it's not ALL Obama's fault!!!! Our government structure is not dictatorial, but collegial. The economy is composed of many facets as well---investment / banks / regulatory agencies (not doing a job at all lately) / etc.

Get real---suggest what we CAN DO to fix this mess. Too much is criticism without "constructive" attached!!!!!

[ET]

[Gene Scarborough]

ET----

Citing theories and varying facts skewed by personal preconceptions------ WHAT DO YOU RECOMMEND????

[KeithE]

[Gene Scarborough]

We don't need to do it and it gains us absolutely NOTHING but hatred of the countries our boots and tanks trample!!!

[Gene Scarborough]

The flip side of economic woes:



Those "caring" Tea Party crazies now tack on elimination of environment protection to "expand" uranium mining to the Grand Canyon where East Coast drinking water passes by.

I have a monster open pit mine across the river from me. They are producing phosphates all the way to pure phosphoric acid. Now do I want the Canadian owned operation polluting our waters. Without EPA monitoring, who knows what could seep out in the name of "Profits."

[ET]

[ET]

[Gene Scarborough]

ET---

I thought the Income Tax was put in right after WWI as a temporary measure to pay for that war. You date it to the late 1800's. Either way it was introduced 2011 is hardly "temporary!"

Don't really know that much about all the particulars of VAT. As a visitor to England some years ago it did not hurt my purchases. At the time our dollar was superior to the Pound so I was glad to visit Harrod's and purchase a few items on a tight budget.

At any rate, what, in your good reasoning IS a better approach to end all this abuse of the working folks of the US who have their wages deducted from each check and sent to Uncle Sam???

[ET]

Other tidbits of information. You can download the spreadsheets from the OMB site. Please note that in 2008 Democrats regained control of both houses of Congress, Constitutionally placing on them the amounts and trends of the spending figures below. Federal tax revenue per :

2003...$1.78 trillion
2004...$1.88
2005...$2.15
2006...$2.41
2007...$2.57
2008...$2.52
2009...$2.11
2010...$2.16

Tax revenue INCREASED BY 42 PERCENT after the Bush tax cuts until the recession started. How can this be? More tax revenue after taxing the rich (and everybody else) less?? Wow. If you get a 42% increase in pay over the course of 5 years and at the end of that time you still spend more than you make, do you have a spending problem or an income problem? Say anything other than a spending problem and I think it's clear you're a spoiled brat or in denial about your own stupidity. There's no way around it.

Deficits:
2001...surplus
2002...$158 billion
2003...$378
2004...$413
2005...$318
2006...$248
2007...$161
2008...$458
2009...$1413
2010...$1293
(estimates below)
2011...$1645
2012...$1101
2013...$767
2014...$645
2015...$607
2016...$649

So even while fighting two wars, the deficits under Bush were trending down before the recession as tax revenues increased and even as Bush and the Republicans increased non-military spending.

National debt:
2001...$5.77 trillion (Bush inauguration)
2002...$6.2
2003...$6.76
2004...$7.35
2005...$7.91 (Bush second inauguration)
2006...$8.45
2007...$8.95
2008...$9.99
Jan 2009...$10.6 (Bush leaves office)
2009...$11.88
2010...$13.53
Current....$14.4
(estimates below)
2011...$15.48
2012...$16.65
2013...$17.75
2014...$18.76
2015...$19.78
2016...$20.82

Bush increased debt $5 trillion, with $3 trillion coming with Democrats controlling Congress in his second term. Obama has increased the debt $4 TRILLION in just 2 1/2 years. Projections have that debt increase at the end of his first term somewhere in the neighborhood of $5-6 TRILLION, more than Bush did in two terms.

According to the web site, the current cost of the war since 2001 is around $1.2 TRILLION dollars. That's about $120 billion per year on average, which means even without the military spending on the wars that Obama is planning to spend 3 or 4 times as much money that we don't have than we are spending on the wars. Ending the war spending will reduce potential deficits, but it is not the primary problem.

[Gene Scarborough]

ET---

You wax a little too philosophical using the above figures. Is it possible to admit a simple 2 facts:
1) Bush got us into the MIddle East with bogus claims of WMC
2) All the intial bail outs went to Banks / Insurance / Auto and all they have done is improve their bottom line and grant outlandish bonuses to those who led them into the tank 4 years ago.

They all knew they were in trouble long before the fat hit the fan. They covered such things with bogus figures. Regulators did not regulate even when they knew things were fishy. Derivatives were clearly illegal sine the 1930's it is hard to say that wasn't known nor stopped under our Securities Regulations.

What is the value of any laws or regulations if the "slick bandits in suits and ties with tax accountants and lawyers helped by legislators" can step around them and not have to pay back one red cent nor spend time in the Federal Pen for their violations????

[Jim]

England is afire and has been for five days and nights. The excuse of a police shooting was turned into riots by people who make no apologies for the claim that they intend to have what the rich have, the rich being most anyone who works and tries to make the economy sustainable. It is the result of class-consciousness carried to the extreme. The socialist government is supposed to guarantee that everyone has the same “things” as everyone else. It’s supposed to do this by taxing the workers to a degree that will take care of everybody cradle-to-grave. Eventually, as in Greece, Spain, England, Italy and now France currently, the government bankrupts itself, can no longer feed the classes, and the classes take to the streets. For these countries, it’s virtually too late. The top tax rate in England is 50% (those making over 150,000 pounds ($241,950). This doesn’t touch all the other taxes they pay, so the better off are being taxed inordinately at a rate that still can’t support the system. The next step down, tax-wise, is at 40%, (over $56,900), both rates far above those paid in this country, yet, the economy can’t be sustained. Germany’s tax rates are similar (top rate at 45% but with corporate rate at 33.3%). The U.S. economy can’t be sustained under current law but when Obamacare is added it’s gangbusters. These countries have found it out the hard way, though Germany may last a while longer. Part of the tragedy in the socialist health systems is the rationing of care and the long lines. This is the kind of back-breaking taxes that Obama wants (his 39.6% just the start), but it’s been proven that constant raising of taxes, besides not saving the economy, degrades all the goods and services. These countries go after the middle class just like they go after the biggies, and this is also Obama’s agenda, notwithstanding any of the high-flown rhetoric about saving the middle class. The middle class to Obama is the unions.

[Gene Scarborough]

You are ranting and speculating again, Jim!!!!

The countries you are citing have a more reasonable cost associated with public healthcare. True, we get better care for those with insurance--but those without or having medicare is another story.

Do you think we might improve on the short-comings of those systems by a better approach?

My exact case in point is how many Americans cross the border to Canada or Mexico to buy their meds----at 20% of the cost inside the borders of the US and from the same companies which make them!!!!!!!!

The addition to what you are saying is: "We love paying exhorbitant prices for drugs so those corporations get rich quick. We believe Doctors and hospitals have the right to raise their prices and income at 3 times the inflation rate. We don't mind a rectal exam without K-Y Jelly most times we go for medical treatment----much of which is totally unnecessary."

[KeithE]

[Jim]

[Gene Scarborough]

I think Keith just blew up your battleship!!!!!!

My little torpedo just got your rudder before he sunk you!!!!

[ET]