Political Insanity (No Party Is Serious About Fiscal Sanity)

[Julia-C]

Several decades ago, it was thought to be irresponsible to get a loan for a car. The perception was, if you can't afford to buy it out right, you shouldn't be buying it. This logic should apply to government spending as well, but sadly it doesn't. We can split hairs about this forever about who is to blame. The simple fact is that we are all to blame regardless of each of our political affiliation.

Americas National Debt is $14,000,000,000,000, ($14 TRILLION). If every man woman and child in America worked a 40 hour a week job, earning minimum wage $7.25 an hour. If they donated 100% of their income to the federal government. It would take 3 years to pay off the national debt, and that's assuming the interest on the debt is zero, and during those 3 years the federal government spends $0.

As of 2009 the G.D.P. (Gross Domestic Product) in America is $14,200,000,000,000. For those of you who are unsure what the G.D.P. is. It is the cash flow of a nation. If you were to add together all the money which changes hands in America from little Cindy Lou Whoos babysitting jobs to the paychecks of Donald Trump. All the earned income, all the tips, profits of each and every company. Add all the cash, all the profits which changed hands in a year that is the G.D.P.

In 2011 the national debt will be equal to and possibly exceed the G.D.P. We as a nation are heading down an unsustainable path. A path which will lead this country into ruin. It's a problem both sides created, and neither side is serious about fixing.

The government will spend $1,600,000,000,000, ($1.6 TRILLION) more then what the government collects in taxes this year. Which means the government will borrow $1,600,000,000,000 from other countries plunging us further in debt. We need $1,600,000,000,000 in spending cuts just to break even with what we plan to spend in the 2011 fiscal year. We need an additional $505,000,000,000 in order to break even plus pay the interest on the debt we already have. Bringing our grand total short fall of funds to $2.1 trillion.

There has been two budget proposals. One of them by democrats who proposed spending cuts in the neighborhood of $6 billion, and the republicans proposal of $61 billion. Neither one of these proposals have the ability to cure our debt. It's equivalent to handing Ethiopia a loaf of bread and a can of Spam. Then standing back proudly, then scratching our heads is disbelief wondering why people are still malnourished.

The fact is $6 billion in cuts is only .286%. Just over 1/4 of 1% of the cuts we need to break even. $61 billion which was proposed by the republicans is only 2.9% of the cuts we need to break even. Neither one of these is acceptable. To make matters worse, cuts of $61 billion which was proposed by the republicans are called extreme. When in reality we need 35 times as large of a spending cut to break even, leaving ZERO tax revenue to put towards the national debt.

Currently we are paying about about 3.6% in interest on our debt. That's about $505,000,000,000 ($505 BILLION) just in interest on our national debt. Currently the interest rate we are paying on the national debt is quite low. What happens if the interest rate on our national debt goes up to what it was in 1980? In 1980 the interest rate was about 18%. If the interest rate were to climb that high with our national debt being $14 TRILLION, we would be paying $2.025 TRILLION a year just in interest. The total income of the federal government in 2011 is estimated to be $4.46 TRILLION. That means half of the tax revenue collected would be going solely toward interest. Adding an additional $1.5 trillion to the already $2.1 trillion a year that we are adding to our national debt.

In London earlier this week, there were riots over spending cuts of only $130 billion. Here in America we need slightly more then 16 times the cuts just to break even. Just think how bad the riots could be here, when government politicians finally decide to to get serious about spending cuts. How did We The People let it get this far out of control? I have heard the solution is to increase taxes on the rich. That won't work. Even if the government was to seize all the assets of each and every one of the 413 individual billionaire in the U.S. it would only add up to $1.5 trillion. Not even enough to cover our deficit. We would still have to borrow $100 billion to break even on spending plus an additional $505 billion to pay the interest. http://amerpundit.com/2011/03/10/co...as-billionaires-less-than-our-federal-deficit

We don't have a revenue problem, we have a spending problem. This problem wasn't caused by one political party over the other. It was caused by both republicans and democrats. Under Bush's Presidency, the national debt grew faster then it ever had in history. Now under Obama's Presidency, it is climbing even faster.

If we as a nation do not get serious about getting spending under control. Keeping up with our debts interest will be impossible within 15-20 years. If we don't get this debt and deficit spending under control, we will become a third world nation.

This is a problem we must take care of now, we can no longer afford to put this off. We are on the edge of a cliff, with an avalanche of debt at our backs.


Sources:
http://amerpundit.com/2011/03/10/co...as-billionaires-less-than-our-federal-deficit
http://www.forbes.com/wealth/billionaires
http://www.debtclock.org/
http://www.federalbudget.com/

 

[seekinghope]

No, raising taxes on the rich won't fix the problem, but it's a good start. Fact is cutting the budget alone isn't going to do it. Any economists will tell you that there is no way we can cut 1.6 trillion from the government without disastrous economic consequences. Which is just as well, as any politician who decided to make massive cuts to Medicare, Medicaid, the army and Social Security might as well write a letter of resignation as soon as the pen touches the bill.
Maybe we need to quit blaming the politicians so much, and start taking some responsibility for ourselves. We won't give up government services, but we won't pay for it either.

 

[Julia-C]

No, raising taxes on the rich won't fix the problem, but it's a good start. Fact is cutting the budget alone isn't going to do it. Any economists will tell you that there is no way we can cut 1.6 trillion from the government without disastrous economic consequences. Which is just as well, as any politician who decided to make massive cuts to Medicare, Medicaid, the army and Social Security might as well write a letter of resignation as soon as the pen touches the bill.
Maybe we need to quit blaming the politicians so much, and start taking some responsibility for ourselves. We won't give up government services, but we won't pay for it either.

Raising the taxes on the rich, simply because they are rich is wrong. They pay a high enough rate as it is. I know you don't want to hear it and it seems like all you hear from politicians is that they don't pay their fair share.
A person who grosses more then $1,000,000 a year already pays 35% federal income taxes plus 6% for social security and another 1.5% for Medicare. A grand total of 42.5% That means for every $100 they earn $42.50 goes to the federal government. If the Bush tax cuts weren't reinstated, an additional 4.6% would be added. Then they still need to pay local and state taxes. What about that is fair? Please tell me.

Greater then $1M in annual income
35% federal income tax, 6% social security tax, 1.5% Medicare tax.
42.5% total. The federal government gets $42.50 out of each $100

On someone who earns $250k-$1M
33% federal income tax, 6% social security tax, 1.5% Medicare tax.
40.5% total. The federal government gets $40.50 out of each $100

$70K-$250k
28% federal income tax, 6% social security tax, 1.5% Medicare tax.
35.5% total. The federal government gets $35.50 out of each $100

$34k-$70k
25% federal income tax, 6% social security tax, 1.5% Medicare tax.
32.5% total. The federal government gets $32.50 out of each $100

$15,081-$34k
15% federal income tax, 6% social security tax, 1.5% Medicare tax.
22.5% total. The federal government gets $22.50 out of each $100

Less then $15,081
10% federal income tax, 6% social security tax, 1.5% Medicare tax.
17.5% total. The federal government gets $17.50 out of each $100

I agree that there should be a progressive scale, but it is progressive enough. You say raising taxes on the rich is a start. That's the same argument put forth forever. What % is enough? If 42.5% isn't enough, then what is?

Like I said it's not a revenue issue, it's a spending issue. You could confiscate 100% of all the assets of all 413 U.S. billionaires and it wouldn't even be enough to cover the deficit. We would still have to borrow over $100 billion from other countries to cover the spending. If you don't believe me, do the math. Here is a list of all the worlds billionaires and how much they have.

Huge cuts will have to be made across the board. ALL PROGRAMS.

 

[kayte23]

does that include state/local taxes?
plus lets remember that employers need to pay a % tax on top of the employees paycheck.
and then anytime someone uses their cash, they need to pay more taxes... and then (if its a house or land), taxes just for owning it.

it's ridiculous. should just be a flat tax on income. there are so many programs that aren't necessary, and so many inefficiencies and over-spending in government that lead to money being wasted.

"you have to spend money to make money" is also ridiculous... those grants that give people money to spend, in hopes that it will stimulate the economy... it takes tax money and redistributes part of it (after taking out money for operating costs).

As for raising taxes on the rich... they already give nearly half their money to income taxes. Now I'm not saying those $20 million dollar salaries of CEO's are worth it... but if the extremely wealthy were like Rockefeller, then they could possibly make a larger difference than the government.
for example, he provided conditions for schools to receive donations... like that they had to prove that the money wouldn't be squandered on an "inefficient, ill-located, unnecessary school". can the government say that? no. all they can do is redirect more cash to poorly performing schools in the hopes that they'll change. but the fact is that suburban schools, with half the budget of inner-city schools, will have better performing students. Now, psychology and socio-economic factors do play a role- but mostly regarding the home life and parental nurturing of the kids.

 

[Phteven]

Which is just as well, as any politician who decided to make massive cuts to Medicare, Medicaid, the army and Social Security might as well write a letter of resignation as soon as the pen touches the bill.

I think what you said here reflects the true problem with politicians today, which is, they are more concerned about getting reelected than they are about making tough decisions. The solution is obvious but everybody is dancing around it because it's political dynamite and no one had the balls to do what needs to be done, least they sacrifice the political career. I think term limits for any elected official would help curb some of this but i dont know if just doing that would be enough to change how things are done.

 

[aoeu]

Fiscal sanity is insane. Cutting government spending in a depression leads to more depression - which leads to bigger deficits (Britain's projected income dropped when they cut their spending, rather predictably).

Cut taxes, raise spending now - but be responsible and raise taxes and cut spending when the good times come around.

 

[johnnysays]

I don't believe there's an easy answer and I don't believe any single person has it.

The answer will come out of the cloud; err, the dust that settles after the war is over.

The answer is something that's unpredictable and nobody by themselves entirely wants or prefers it.

I mean you can get an answer from people, from it's only the ideal answer they perceive from their limited experience.

I have my own set of ideals and principles. I realize I will never fully agree with what happens after the dust settles. But that's how democracy works. We can never be satisfied, for the day we're is the day democracy ends.

I think people need to accept this. Democrats and republicans might get 4 to 12 years of joy. But then someone from the other party gets elected and it's 4 to 12 years of angry protest. Partisanship is the illusion that we can be happy with the results. They ride the ups and downs of policy like a drug addict. If you try to be a moderate you start to notice this after a while.

As a moderate you can never be satisfied with the results because you've already admitted that the answer is a mix of the ideals and solutions offered up by the entire population, not just yourself. So it's bittersweet acceptance. But at least this way you don't ride the ups and downs of partisan politics. It avoids the extremes of victory and loss. It's a smoother ride with frequent bumps.

So a moderate must wake up every morning reminding himself/herself that it'll be a rough day. There's no 4 to 12 years of joy. There's no kumbya or ceremonial dances around the fire in jubilant thankfulness. Winning and losing happens every day.

I think being a moderate is a state of mind. You don't ever allow yourself to feel victorious.

 

[Julia-C]

does that include state/local taxes?
plus lets remember that employers need to pay a % tax on top of the employees paycheck.
and then anytime someone uses their cash, they need to pay more taxes... and then (if its a house or land), taxes just for owning it.

it's ridiculous. should just be a flat tax on income. there are so many programs that aren't necessary, and so many inefficiencies and over-spending in government that lead to money being wasted.

"you have to spend money to make money" is also ridiculous... those grants that give people money to spend, in hopes that it will stimulate the economy... it takes tax money and redistributes part of it (after taking out money for operating costs).

As for raising taxes on the rich... they already give nearly half their money to income taxes. Now I'm not saying those $20 million dollar salaries of CEO's are worth it... but if the extremely wealthy were like Rockefeller, then they could possibly make a larger difference than the government.
for example, he provided conditions for schools to receive donations... like that they had to prove that the money wouldn't be squandered on an "inefficient, ill-located, unnecessary school". can the government say that? no. all they can do is redirect more cash to poorly performing schools in the hopes that they'll change. but the fact is that suburban schools, with half the budget of inner-city schools, will have better performing students. Now, psychology and socio-economic factors do play a role- but mostly regarding the home life and parental nurturing of the kids.

My figures didn't include state and local taxes, or sales tax. I strictly dealt with federal taxes as the state, local, and sales tax differs from state to state city to city.

Flat tax won't fix the problem either. The GDP is $14 trillion. Total government spending is $3.578 trillion plus an additional $500 billion plus on interest on our debt. Total of $4.1 trillion in spending. Which is 30% of the GDP. Which means the tax will have to be 30% federal income tax across the board. Then we still will have to pay state and local taxes in addition to the 30% federal tax.

 

[Julia-C]

I think what you said here reflects the true problem with politicians today, which is, they are more concerned about getting reelected than they are about making tough decisions. The solution is obvious but everybody is dancing around it because it's political dynamite and no one had the balls to do what needs to be done, least they sacrifice the political career. I think term limits for any elected official would help curb some of this but i dont know if just doing that would be enough to change how things are done.

Term limits like you said are needed, but would have little affect on the debt. You are correct, they are all too afraid to be serious, as it is taboo to make huge needed cuts.

 

[Lovecraft]

Right now the US debt per capita stands at roughly $47 000 US; solving debt is simple then, we just need every single American to send $47 000 US to Washington.

Alternately all Americans can agree to take a 100% paycut next year.

Also an option: Tell the American military that they spend 2 to 4 times as much as a percentage of the GDP than any other of the countries in the so-called civilized world. South Korea is still technically at war with North Korea, they've seen a few incidents like the artillery fire being traded and boats sinking while Kim Jong-Il said a war between the two could go nuclear. Their military spending as a percent of GDP? Less than 3/4 of the US's.

 

[johnnysays]

I haven't read the entire OP's post but I agree with the initial point about not putting things on credit. We shouldn't invent currency if it's not backed by something of real value. And if we're putting off paying for something (isn't that what a loan is) and do it repeatedly then how can we learn to spend wisely unless sooner or later we're prevented from borrowing more.

Maybe somebody should put a limit on our borrowing? Should we try to do that? I heard there is a debt ceiling and we're approaching it. But I often wonder why our debt gets bigger and bigger like there's no end in sight?

If you think about it every young adult is a loan waiting to be payed back. An investment. Interesting thought.

 

[jota1]

You cant spend yourself out of a recession if its done purely on increasing your debt. People have to be sensible once again.

Examples:
I find it funny that people in the Uk are moaning about the new benefits legislation where there is a 2000 pounds a month ceiling for housing benefits. They are also worried that some people on housing benefits have to leave central London. For gods sake 2000 pounds a month is huge if your unemployed, and if your on housing benefits you cant expect to live in the center of a mega Capital like London. Most working people in this world could not afford to live in Central London so why anyone should think they have the right to live there and have the government pay is beyond me. I have a brilliant idea, lets all move to London and ask the British tax payer to support us...
Another example is the idea that girls can decide to have a child and expect the government to give them a house, subsidies and keep them at home. No wonder Britain has one of the highest teen pregnancy rates, having a baby is the solution for many teens. Make it harder to collect benefits and you will see teen pregnancy drop like a hot potato.

There are many more examples of abuse of the system and government dependence. Yes there should be a social net for true unemployment/social problems but not for abuse.


With regards to increasing taxes the only thing I can say is that people are crazy. You increase taxes and most small medium sized businesses will go under creating yet more unemployment. The inequality in the distribution of wealth is (I am tired of repeating myself) our fault as consumers. We shop in the mega stores because they are cheap, easy and convenient but the end result is that the medium/small size stores go out of business leading to a huge concentration of power and money. We have to pay a bit more and support our local businesses, they are the ones that create jobs and as a result the money stays in the area of influence of the businesses making for healthy towns and cities.

I love Apple stuff but I hate the business ethic, its a good example of concentration of wealth. Apple produces everything in Asia and only creates jobs there, it is now in the process of selling all software online so if you have an Apple computer you will be obliged to buy everything through them, the Igadgets are all closed systems, lion OS promises to be ever more closed, the new cloud services are there so that everything you do on an Apple computer is within their grasp and gain. I am sure that Apple pays taxes only where its more advantageous for them and I can bet its not in one of our countries (you cant tax a company twice for the same revenue), yet we as consumers are not worried about this.

 

[Lovecraft]

I rather like the idea of Canada's tax system.

15% on the first $41,544 of taxable income, +
22% on the next $41,544 of taxable income (on the portion of taxable income between $41,544 and $83,088), +
26% on the next $45,712 of taxable income (on the portion of taxable income between $83,088 and $128,800), +
29% of taxable income over $128,800.

Maybe not the exact numbers, but I think all taxes should be calculated in this sort of manner.

Tax businesses by income. Increase the tax rate on revenues above a certain increment and lower it on the lowest increment, get small businesses more breathing room while taking some of the great profit pie that McDonalds and the like are sitting on.

 

[Julia-C]

I rather like the idea of Canada's tax system.

15% on the first $41,544 of taxable income, +
22% on the next $41,544 of taxable income (on the portion of taxable income between $41,544 and $83,088), +
26% on the next $45,712 of taxable income (on the portion of taxable income between $83,088 and $128,800), +
29% of taxable income over $128,800.

Maybe not the exact numbers, but I think all taxes should be calculated in this sort of manner.

Tax businesses by income. Increase the tax rate on revenues above a certain increment and lower it on the lowest increment, get small businesses more breathing room while taking some of the great profit pie that McDonalds and the like are sitting on.

This is ours. There are slight variances with in each shown bracket, but my numbers are meant to display the median of each.

Greater then $1M in annual income
35% federal income tax, 6% social security tax, 1.5% Medicare tax.
42.5% total. The federal government gets $42.50 out of each $100

On someone who earns $250k-$1M
33% federal income tax, 6% social security tax, 1.5% Medicare tax.
40.5% total. The federal government gets $40.50 out of each $100

$70K-$250k
28% federal income tax, 6% social security tax, 1.5% Medicare tax.
35.5% total. The federal government gets $35.50 out of each $100

$34k-$70k
25% federal income tax, 6% social security tax, 1.5% Medicare tax.
32.5% total. The federal government gets $32.50 out of each $100

$15,081-$34k
15% federal income tax, 6% social security tax, 1.5% Medicare tax.
22.5% total. The federal government gets $22.50 out of each $100

Less then $15,081
10% federal income tax, 6% social security tax, 1.5% Medicare tax.
17.5% total. The federal government gets $17.50 out of each $100

These are merely federal income taxes, we still have state and local taxes plus about an average of 6% state consumption tax.

 

[kayte23]

My figures didn't include state and local taxes, or sales tax. I strictly dealt with federal taxes as the state, local, and sales tax differs from state to state city to city.

Flat tax won't fix the problem either. The GDP is $14 trillion. Total government spending is $3.578 trillion plus an additional $500 billion plus on interest on our debt. Total of $4.1 trillion in spending. Which is 30% of the GDP. Which means the tax will have to be 30% federal income tax across the board. Then we still will have to pay state and local taxes in addition to the 30% federal tax.

Yes, I perhaps phrased that poorly... I just wanted to make sure you weren't including them in as an 'average'...
And as for the flat tax, I proposed it in addition to spending cuts and weeding out inefficiencies in government. For example, once I went to the DMV in the morning when it wasn't busy, and there were more employees there than customers. Just standing around chatting. I filled out the form to register to vote. Gave the girl the completed form. Now I understand it takes a while for it to go through the system, but I highly doubt that system involves my form being tossed in the trash.
The government should be treated like a private business, in that it can't spend more than it receives. And that employees not doing their job are fired... or they pay more attention to whether or not the employees are actually doing their job.
Now if they did that, a flat tax would be easy.

 

[seekinghope]

Raising the taxes on the rich, simply because they are rich is wrong. They pay a high enough rate as it is. I know you don't want to hear it and it seems like all you hear from politicians is that they don't pay their fair share.
A person who grosses more then $1,000,000 a year already pays 35% federal income taxes plus 6% for social security and another 1.5% for Medicare. A grand total of 42.5% That means for every $100 they earn $42.50 goes to the federal government. If the Bush tax cuts weren't reinstated, an additional 4.6% would be added. Then they still need to pay local and state taxes. What about that is fair? Please tell me.

Greater then $1M in annual income
35% federal income tax, 6% social security tax, 1.5% Medicare tax.
42.5% total. The federal government gets $42.50 out of each $100

On someone who earns $250k-$1M
33% federal income tax, 6% social security tax, 1.5% Medicare tax.
40.5% total. The federal government gets $40.50 out of each $100

$70K-$250k
28% federal income tax, 6% social security tax, 1.5% Medicare tax.
35.5% total. The federal government gets $35.50 out of each $100

$34k-$70k
25% federal income tax, 6% social security tax, 1.5% Medicare tax.
32.5% total. The federal government gets $32.50 out of each $100

$15,081-$34k
15% federal income tax, 6% social security tax, 1.5% Medicare tax.
22.5% total. The federal government gets $22.50 out of each $100

Less then $15,081
10% federal income tax, 6% social security tax, 1.5% Medicare tax.
17.5% total. The federal government gets $17.50 out of each $100

I agree that there should be a progressive scale, but it is progressive enough. You say raising taxes on the rich is a start. That's the same argument put forth forever. What % is enough? If 42.5% isn't enough, then what is?

Like I said it's not a revenue issue, it's a spending issue. You could confiscate 100% of all the assets of all 413 U.S. billionaires and it wouldn't even be enough to cover the deficit. We would still have to borrow over $100 billion from other countries to cover the spending. If you don't believe me, do the math. Here is a list of all the worlds billionaires and how much they have.

Huge cuts will have to be made across the board. ALL PROGRAMS.

I never said the rich didn't pay their fair share. They pay more than everyone else, as is the case in pretty much all other advanced societies. My point is we ALL have to make some sacrifices, either by paying higher taxes or giving up government services. Your argument is that the rich have sacrificed enough already, so the rest of us need to sacrifice a huge portion of government services. Since over thirty percent of our budget goes to Medicaid and Social Security, one could argue your plan would require the greatest burden to fall on the elderly.

 

[seekinghope]

I think what you said here reflects the true problem with politicians today, which is, they are more concerned about getting reelected than they are about making tough decisions. The solution is obvious but everybody is dancing around it because it's political dynamite and no one had the balls to do what needs to be done, least they sacrifice the political career. I think term limits for any elected official would help curb some of this but i dont know if just doing that would be enough to change how things are done.

A politician can't do anything he doesn't get elected, and there is only so much one can do in one term. Therefor one can say that every decision a politician makes is a hard one, because not only do they need to figure out how to make good policy, but how to not get kicked to the curb for doing so. We always accuse politicians of not "fighting for people", but how are they supposed to do this if they are not elected to begin with?