Alliduncism Is A Pandemic

Prog #1 writes:  "Number one reason for the Debt Crisis: Two unfunded wars under "Deer in the Headlights Bush." Entitlements are a much smaller percentage."

Incorrect. The budget deficit was lower in 2007 than it was in each year before until 2001, when it was $17.91 billion. The deficit rate had slowed. It picked up again in FY 2008, which is important. Do you know why?

For most of the 20th century, military expenditures ate up about 50% of the national budget.


 

Part I

Fact: In 2009, the Federal government collected $2.1 trillion in taxes.

Fact: In 2009, the Federal government spent $3.52 trillion.

Fact: In 2009, the Federal government spent $678 billion on Social Security.

Fact: In 2009, the Federal government spent $676 billion on Medicare.

Fact: In 2009, 38.47% of the entire budget went to Social Security and Medicare and the two programmes consumed 64.48% of all Federal tax revenues.

Fact:  In 2009, the Federal government spent $794 billion on defence.

Fact:  If we stripped out Social Security and Medicare, then defence consumed 37.81% of the all collected Federal revenues.

Fact:  In 2009, defence consumed 22.56 % of the entire budget.

Recapping, in 2009, Social Security and Medicare accounted for 38.47% of the budget and defence accounted for 22.56%.

Part II

Fact: In 2010, the Federal government collected $2.16 trillion in taxes.

Fact: In 2010, the Federal government spent $3.618 trillion.

Fact: In 2010, the Federal government spent $701 billion on Social Security.

Fact: In 2010, the Federal government spent $793 billion on Medicare.

Fact: In 2010, 41.29% of the entire budget went to Social Security and Medicare and the two programmes consumed 69.17% of all Federal tax revenues.

Fact:  In 2010, the Federal government spent $847.2 billion on defence.

Fact:  If we stripped out Social Security and Medicare, then defence consumed 39.22% of the all collected Federal revenues.

Fact:  In 2010, defence consumed 23.41 % of the entire budget.

Recapping, in 2010, Social Security and Medicare accounted for 39.22% of the budget and defence accounted for 23.41%.

Part III

Ida May Fuller was the very first recipient of a monthly SS cheque. At the time, there were 159.4 private-sector workers contributing to the Social Security "Trust Fund," which has never really existed, for her alone. Last year, there were a mere 1.75 private-sector workers paying payroll taxes so that retirees today can receive their Social Security cheques.

That's a decrease of 98.9%.

I am not trying to be mean to or disrespectful of the retired. I am outraged by what the government has done, but think about it:

Fact: In 2010, the Federal government collected $2.16 trillion in taxes.

Fact: In 2010, the Federal government spent $3.618 trillion.

Fact: In 2010, the Federal government spent $701 billion on Social Security.

Fact: In 2010, the Federal government spent $793 billion on Medicare.

Projection: In 2010, 41.29% of the entire budget went to Social Security and Medicare and the two programmes consumed 69.17% of all Federal tax revenues.

Fact:  In 1940, the average worker had to pay only 0.2% of his salary to sustain the seniors of his time.

Fact:  In 1950, the average worker had to pay only 2% of his salary to sustain the seniors of his time.

Fact:  In 2011, the average worker has to pay 11% of his salary to sustain the seniors of his time.

Fact:  In 2131, the average worker will have to pay 17% of his salary to sustain the seniors of his time. 

Projection: When today's college students reach retirement (about 2054), Social Security alone will require a 16.6% payroll tax, one-third greater than today's rate, according to the non-partisan Peterson-Pew Commission on Budget Reform. 

Payroll taxes hurt a lot more today than they did decades ago.  As time has past, more and more of the employee's cheque and the employer's profits have been consumed by the demands of just two government programmes.  The situation will only get progressively worse.  37% in 2054?  This is a staggering sum, considering that such would be apart from all the other taxes an employee would pay to sustain other functions of government.

Projection: By 2020, every penny in tax revenues taken in by the US Treasury will be consumed by Social Security, Medicare, Medicaid, and debt service, the latter of which will amount to $1 trillion alone.  For those of you, who believe that we should gut defence and have a Department of Peace, congratulations!   You win!  One suggestion, however, order the Rosetta Stone edition of Mandarin Chinese.  You're going to need it.

Part IV

From Day One, payroll taxes have gone into the general fund and, as the Supreme Court ruled in Helvering, they have NEVER been earmarked for a specific purpose. Yes, there are over $2 trillion in IOUs sitting in the Social Security "Trust Fund," but they are worthless. By law, they cannot be sold on the ...open market as can be the Treasuries held by China, Japan, or hedge funds.  The IOUs are intragovernmental debt.  They do not have priority to primary creditors.

Furthermore, and actually more importantly, the IOUs are only worth the money the Federal government has.  Currently, the Feds borrow 40 cents out of every dollar it spends.  The largest expenditures of the Federal government are SS, Medicare, and Medicaid.  By 2020, the entirety of Federal tax revenues will be consumed by SS, M/M and debt service.  Forget about national defence.

Math is not an emotional science.  In the case of SS/MM, the math is just hard reality.


 

Part V

Here's the scary part, if you seized EVERY PENNY OF INCOME AND ACCUMULATED WEALTH OF THE RICHEST 400 AMERICANS ($1.3 TRILLION), YOU WOULD STILL:

1. Likely have a deficit for the first year and would definitely have deficits in the out years.

2. Not be able to pay for Social Security and Medicare expenses for ONE YEAR, which approximate $1.4 trillion).

The US is enjoying a false sense of security. As we have seen, neither Republicans nor Democrats are serious about confronting the MASSIVE fiscal disaster that is heading this way. For this reason, someof you may remember a while back that I announced that my "team" would henceforth be the "bond vigilantes" because only they will be able to force government to downsize.

The bond vigilantes have gone after the spendthrifty Greeks, forced long-term yields on Italian bonds near 8% (7% is considered unsustainable), Spain is in a similar situation, Portugal has been downgraded to junk status, French banks have enormous exposure, and the Germans DO NOT WANT TO BE THE 1% BAILING OUT THE 99% AND BEING CALLED "NAZIS" FOR THE EFFORT. The market is demanding a higher rate for even GERMANY.

Part VI

If the bond market is demanding a higher interest rate for even Germany, how long do you think it will be before it happens in the US?

Consider this:

1. In the mid oughts, the yield in the US was around 5%. If the yield were to rise again to that rate, debt service alone would consume 40% of national revenues.

2. John Kitchen of the U.S. Treasury and Menzie Chinn of the University of Wisconsin published a study in 2010 entitled:

"Financing U.S. Debt: Is There Enough Money in the World—and At What Cost?"

By 2020, Kitchen and Chinn project them to rise to about 19% of the rest of the world’s GDP, which they say is . . . do-able....BUT TOTALLY NEVER GONNA HAPPEN UNREALISTIC.

Whether the rest of the world will want to do it is another matter. A future that presumes the rest of the planet will sink a fifth of its GDP into U.S. Treasuries is no future at all.

Progs always say that we are 5% of the world's population, but use 25% of its resources, which, according to them, is a very bad, racist, oppressive, selfish, and mean thing to do.

Evidently, being 5% of the world's population and expecting the equivalent of the Coolies to build our modern-day railroads, which are known as Obamacare, Social Security, Medicare, free college, subsidised housing, cradle-to-grave welfare, etc., by demanding that the rest of the world spend 20% OF THE GLOBAL GDP EVERY YEAR ON US TREASURIES beginning in 2020 while we sit on our bums, as couch potatoes, eating Twinkies watching American Idol while our solar-panel-generated air conditioners are blasting away because "we are so trying to save the planet, man" is perfectly acceptable.

Part VII

Prog #2 writes: "The solution is simple. Tax all income the same. Capital gains and W-2 wage income taxed using the same tax rates based on income. End of problem."

If the Federal government had limited growth in spending to the rate of inflation since 2007, we would have had a $413 billion deficit in FY 2011. This would be even lower in the current year given projections of $2.9 trillion in unified tax receipts.

When you consider that total unified outlays in 2007 - before the Democrats took over Congress! - were $2.7 trillion, and that they rose to a staggering $3.8 trillion in just four years or 41%, it's just absurd to blame our fiscal woes on revenues.

You can't solve the problems that this country faces by taxing all income at the same rate. 

 

At most, you MIGHT be able to knock $50-70 billion off of a $1.4 trillion annual deficit.

You remind be of Olga Stefou. The poor, Greek girl suffers from a terrible case of Alliduncism.

Part VIII

Prog #3 writes: "The marginal tax rate on middle class families is 40.3% (25% Federal income tax plus 15.3% payroll tax)."

Middle class families do NOT pay a 15.3% payroll tax, AS I HAVE TOLD YOU MANY TIMES.

Either:

A. Employers pay matching payroll taxes, which means middle class families DO NOT PAY a 15.3% payroll tax.

OR

B. Corporations pass tax burdens onto:

i) employees in the form of lower wages and/or benefits

ii) consumers through higher prices

and/or

iii) shareholders, including public sector pension funds, through lower dividends.

CORPORATIONS DO NOT PAY TAXES, PEOPLE DO.

It is for this reason that I have long advocated the abolition of the corporate income tax.  I do not argue for such because I love corporate "fat cats," but because I know who pays the taxes ultimately...and that would be you, and you, and you, and you, and I.

Part IX

Prog #4 writes:  "Hmmmm, no comments to Goldberg's piece yet? Let me say plainly why: it is incomprehensible claptrap.  

Here's a telling bit: "Oh, and what about labor? There's one labor union in China, and it's run by the government. (The Nazis had pretty much the same system.) Stern doesn't seem to care."

Stern doesn't seem to "care" about this inconsistency because it is a fiction entirely of Goldberg's creation.  I haven't read such a distorted, non-nonsensical piece in a long time. Poor effort, Goldberg and please, do yourself a favor and read most other contemporaries views of Wells."

Obviously, you have never been to China. You know nothing about the abject poverty, the gross inequities, and the fragility of the society that exists in China.

China has just quadrupled the number of its citizens that it estimates to be living in poverty.

The average, annual income is $3,500.

Almost 500 million Chinese earn less than $1.25 a day.



Food costs as a percentage of household income have decreased following the reforms made by the Communist government in the 1980s, but are still close to 40% in urban areas and 45% in rural areas.  Before the reforms, Chinese households spent more than half of their incomes on food stuffs alone.

Hundreds of millions of Chinese live in various levels of peasantry and are still washing their clothes in streams.

21.5 million rural population live below the official "absolute poverty" line (approximately $90 per year); an additional 35.5 million rural population live above that level, but below the official "low income" line (approximately $125 per year)

You have to get, essentially, a "green card" to travel and/or move from rural to urban areas.

There are 119 males for every 100 females - males are wanted because they take care of their parents in old age since there isn't any social welfare programme.


The Chinese government builds 10 new cities each year - most remain completely empty - and even though there is a housing shortage, there are 65 million vacant, new houses. Basically, the Party is creating busy work to stave-off revolution. BUT, what is interesting is that workers in areas are moved around frequently. You see, they can't be allowed to see all of these new, beautiful houses and cities because they might start asking why they are living in poverty and who is living in these paradises. So, as projects near completion, the control over the workers - often they switch to prisoners or slaves, who have no contact with the outside world - becomes greater.

So far, China has managed to succeed where the Soviet Union failed.  That is, there can be varying degrees of economic freedom with little to no personal and political freedom, but it is only because of the iron fist.

Every year in China, there are over 100,000 strikes and that's just the number that the government confesses to and the Chinese government is notoriously untruthful.

Andy Stern is wrong. In the end, it will be the Chinese model that is thrown on the ash heap of history...or so you and I had better hope.