Budget Insanity

Townhall.com ^ | July 11, 2012 | John Stossel

[Kaslin]

Last year, Congress agreed to $1.2 trillion in automatic spending cuts, unless politicians find other things to cut. They didn't, of course. So now, with so-called sequestration looming in January, panic has set in. Even the new "fiscally responsible" Republicans vote against cutting Energy Department handouts to companies like Solyndra and subsidies to sugar producers. Many claim that any cut in military spending will weaken America and increase unemployment.

It's another demonstration of the politicians' addiction to spending -- and how we are complicit. "One more infrastructure bill" or "this jobs plan" will jumpstart the economy, and then we'll kick our spending addiction once and for all.

But we don't stop.

For most of American history, government was tiny. But since Lyndon Johnson's Great Society and the promise that government would cure poverty, spending has gone up nonstop. This is not sustainable.

Progressives say: If you're so worried about the deficit, raise taxes! But it's a fantasy to imagine that taxing the rich will solve our deficit problem. If the IRS grabbed 100 percent of income over $1 million, the take would be just $616 billion. That's only a third of this year's deficit.

It's the spending, stupid.

Even if you could balance the budget by taxing the rich, it wouldn't be right. Progressives say it's wrong for the rich to be "given" more money. But money earned belongs to those who earn it, not to government. Lower taxes are not a handout.

That's the moral side of the matter. There's a practical side, too. Taxes discourage wealth creation.

Even if you think -- despite all evidence -- that government spends money more usefully than people in the private sector, there is a limit to how much government can tax before people work less or flee.

Progressives claim a small increase in tax rates won't stop the wealthy from producing. But some would stop. When the top marginal rate was 90 percent, actor Ronald Reagan worked just half the year. He said that woke him up to the damage that high taxes impose.

Higher taxes give rich people and politicians more reasons to collude. The rich make contributions, and politicians pay the rich back by giving them tax loopholes.

That's a big loss to America. That money and creative energy spent on figuring out taxes might have gone to build new products, make music, cure cancer or ... who knows what?

Politicians promise to balance the budget by getting rid of what is wasteful, redundant or unnecessary. There's plenty of that, but they have promised to eliminate it for years. They cannot. It's just in the nature of the beast. Centrally planned monopolies do things that are wasteful, redundant and unnecessary.

What will bankrupt us first are the wealth transfers to my generation: Medicare and Social Security

When FDR started Social Security, most people didn't even live to age 65. Today, we average 78 -- and we baby boomers demand all the cool new stuff that modern medicine invents: anti-cholesterol drugs, hip replacements, etc. And we don't want to pay for most of it because we've been trained by government to assume that we're entitled to these things for free, or nearly free. We paid into Social Security and Medicare for our entire working lives, and damn it, we're entitled to get our money back!

Few of us realize that most of us get back up to three times what we paid in, that politicians have promised Social Security and Medicare recipients an impossible $46 trillion more than will exist and that our sense of entitlement will ruin America much faster than foreign aid, subsidies for NPR or foreign wars ever will.

Amazingly, we could grow our way out of debt if Congress simply froze spending at today's levels. That would balance the budget by 2017. If spending growth were limited to just 2 percent per year, the budget would balance by 2020!

But the politicians won't do even that.

It's depressing writing this. But it's not hopeless. There are examples of fiscal sanity we can follow -- if we have the will.

[1010RD]

if Congress simply froze spending at today's levels. That would balance the budget by 2017.

What could be easier, but these guys couldn't cut the sugar tariff that goes to a couple of sugar tycoons. That's how you can tell we're doomed.

[Texas Fossil]

and we baby boomers demand all the cool new stuff that modern medicine invents: anti-cholesterol drugs, hip replacements

I am a boomer, born in 1947. But that statement is total rubbish. My wife "required" a hip replacement at age 59. She either had a hip replacement or be in a wheel chair the rest of her life. It was paid for largely by private insurance and out of our pocket. She is now enrolled in Medicare.

Now, the article is correct about Medicare being a total ponzie scheme. It was always a tax, not what they sold it as. Yes, the "evil" boomers have been paying into this scheme their entire career, involuntarialy. And now as they approach the age when the benefits were "promised" it is clear that the money is not there to finance it. And the solution presented by government is to simply tax more? Yes, Insanity indeed.

[aces]

It is obvious we are no longer practicing fiscal sanity, debt for generations, and no desire to even care about it, the only answers are tax us to death or print money..what ever happened to no debt now!!! I mean sell off washington dc first, the ones that sell the people the BS we have got into..cut off all rights of the federal “g” to raise any money, make states have balanced budgets and any savings from a fiscal responsible state could then be “allocated” by the state for specific federal programs..now federal programs is short for waste and rob you..lies and deceit..let me hold your cash..the federal “gangsta” is out of control...

[NTHockey]

The entire Congress needs to be prosecuted under RICO statutes. Capone on his best/worst day was a chior boy compared to Congress.

They are traitors to their oath to “preserve, protect and defend the Constitution”. Lock them up on a remote island in the Pacific Ocean with no means of communication or access to the outside world.

IF NOT SECESSION< THEN REVOLUTION MUST BE.

[NTHockey]

The entire Congress needs to be prosecuted under RICO statutes. Capone on his best/worst day was a chior boy compared to Congress.

They are traitors to their oath to “preserve, protect and defend the Constitution”. Lock them up on a remote island in the Pacific Ocean with no means of communication or access to the outside world.

IF NOT SECESSION, THEN REVOLUTION MUST BE.

[palmer]

Hip replacement is expensive and there’s little amibiguity, when your wife needed it there was and is no alternative. However one has to be careful of what one wishes for. The drugs mentioned are going to get incredibly cheap and government is going to want to give them to everyone for everything. The dirty secret of government health care especially medicare is that the government will choose to put everyone on drugs. Already it is truly awful at a (primarily medicare-funded) nursing home that I am familiar with. They give out generic Oxycodone like candy. Worse than candy, they force it on patients to get them under “control”. It won’t surprise me if pain killers eventually become a replacement for hip replacement.

[TurboZamboni]

Republicans won’t call the rat’s bluff on sequestration because it would cut 50 billion from the 680 billion Pentagon budget.

oh the horror. as if a 1.2 trillion over 10 years is a “draconian cut”.

[cuban leaf]

So, the third city to file bankruptcy in CA did so. San Bernardino.

Are the dominoes tumbling?

[sickoflibs]

House Republicans slipped out that Highway/student loan bill that Obama demanded after the Holder vote smokes screen.

The debt limit deal (automatic after election budget cuts) was the Boehner House signature achievement(more a RINO Senate bill that Boehner signed on to as well as Ryan) , now the same Republicans who voted for it are calling it Armageddon.

Not much voter opposition to deficit spending now.

[cuban leaf]

It became OBVIOUS in 2010 and is almost boringly clear today: There is no human solution to our problem. I think we passed the point of no return in the early years of this century.

The only “solution” that will survive, politically, is to borrow and print, print and borrow, until the whole thing goes Zimbabwe. And it will probably result in WWIII before it even gets to that point, but if not, certainly after.

Now I know what Bible prophecy meant when it said that in the last days it would be worse than at any time in human history.

And it’s been pretty darned bad in the past. Fortunately, life is a mist, and we all die eventually anyway.

[Texas Fossil]

they force it on patients to get them under “control”

My wife and I cared for my mother-in-law in our home for 2+ years. She could not walk for the last 3 years of her life, had congestive heart failure and had 4 strokes. She was in a nursing home for the last 2 months of her life. We lost her in March. I know about the wrenching judgment call concerning medication and patient well being. Unfortunately, your statement is very valid in most nursing homes. And unless we can overturn ObozoCare it will get infinitely worse.

[cuban leaf]

Regarding Social Security, the author states, “Few of us realize that most of us get back up to three times what we paid in...” as though there is a problem with that.

However, if you had paid $100 per month into a bank account that earned just 4% interest from age 21 to age 65, you would have paid in $52,800 and gotten back $186,247.14.

That’s well over three times as much.

But wait! Thanks to the rule of 72 and the miracle of compound interest, if you increase the interest rate to just 7% you will be looking at $331,328.37. Almost twice as much! And if you could get 10% (it was much higher than that during parts of the last few decades) you would be looking at $824,972.94. MORE than twice the last figure.

It is also 15 times more than you would have put into it.

So this “get back three times what you put in” comment suggesting that you are getting too much back is pure BS.

[cuban leaf]

But the politicians won't do even that.

It's because the electorate would boot them out in a New York minute. The electorate votes their wallets.

It's depressing writing this. But it's not hopeless. There are examples of fiscal sanity we can follow -- if we have the will.

Not only do we not have the will, but we are as far from changing our will on this as the Palestinians are to allowing Israel to take over the whole area and they (Palestinians) just blend back into the Arab nations from which they came. Every time I read one of these "we can fix this" articles, I'm reminded of Dagney Taggart, the good little trooper, always trying to change with the new rules. But she finally got it. May she and John Galt live happily ever after. I'm not trying to be a doom and gloomer, but a realist. One needs to analyze the situation they face and choose actions accordingly. If you plan your future around how life has been the last 50 years, you are going to come up short. It could cost you your life and the lives of your loved ones. Literally.

[cuban leaf]

If you're so worried about the deficit, raise taxes! But it's a fantasy to imagine that taxing the rich will solve our deficit problem. If the IRS grabbed 100 percent of income over $1 million, the take would be just $616 billion. That's only a third of this year's deficit.

That is covered in great detail here. It is a very interesting video by Bill Whittle called "Eat the Rich". Enjoy!

http://www.youtube.com/watch?v=661pi6K-8WQ

[cuban leaf]

—It is obvious we are no longer practicing fiscal sanity, debt for generations,—

I think the reason it was so easy for me to become a doom and gloomer back in 2007 is that it has always been the direction I've leaned.

I remember when I was in high school (graduated in 1972) I would tell my friends that the economy was like a family that always spent more than they earned to enjoy the life style they did. I said that if it was just a little more than they earned it could go on for a LONG time, especially if their wages kept increasing. But eventually, there would be a day of reckoning. Eventually the interest alone would be more than they could pay with their income.

I called it a hyperbolic curve then. What I meant was exponential growth. It is described really well here:

Imagine a magic pipette. It is magic because every drop of water that comes out of it will double in size every minute. So the first minute there is one drop, the second minute there are two drops, the third minute four drops, the fourth minute eight drops and so on… This is an example of exponential growth. Now, imagine a normal sized football stadium. In this stadium you are sitting on the seat at the very top of the stadium, with the best overview of the whole stadium. To make things more interesting, imagine the stadium is completely water-tight and that you cannot move from your seat. The first drop from the magic pipette is dropped right in the middle of the field, at 12pm. Here’s the question: Remembering that this drop grows exponentially by doubling in size every minute, how much time do you have to free yourself from the seat and leave the stadium before the water reaches your seat at the very top? Think about it for a moment. Is it hours, days, weeks, months?
The answer: You have exactly until 12:49pm. It takes this tiny magic drop less than 50 minutes to fill a whole football stadium with water. This is impressive! But it gets better: At what time do you think the football stadium is still 93% empty? Take a guess.

The answer: At 12:45pm. So, you sit and watch the drop growing, and after 45 minutes all you see is the playing field covered with water. And then, within four more minutes, the water fills the whole stadium. This means that you think you are safe because it seems that you have plenty of time left, whereas due to the exponential growth you really have to take immediate action if you want to have any chance of getting out of this situation.

Personally, I think we are at 12:45 but are quickly approaching 12:46. That is, EVERYONE is starting to notice and panic is setting in. Europe is in trouble, China's cracks are finally becoming quite apparent and now the city bankruptcy dominoes are starting to fall (San Bernardino is California's third - they should start coming fast and furious now). We are living in very interesting times, but by this time next year this month will seem downright boring. I'm actually quite confident about that "prediction". It's really not rocket science.

[cuban leaf]

—Hip replacement is expensive and there’s little amibiguity, when your wife needed it there was and is no alternative.—

Actually there is one. It is the one people chose when there was no such thing as hip replacement.

[Kaslin]

0bama wants the tax rates for the rich to go back to the Clinton era which would bring in $85 billion a year revenue. The government spends $85 billion in just 8 1/2 days. Nuff said

[kabar]

In January of this year, C. Eugene Steuerle and Stephanie Rennane of the Urban Institute published an update to their earlier work "Social Security and Medicare Taxes and Benefits over a Lifetime." The chart below illustrates their findings and shows the huge discrepancy between lifetime Medicare taxes paid and Medicare benefits received.

This graph shows that the average man and woman (average defined in the study as average income over their working lives and living to the average life expectancy) who start receiving benefits in 2010 get over 3 times more in benefits than they pay in to the system! Of importance, the study accounts for inflation by calculating all past taxes and future payments in 2010 dollars to provide an accurate comparison.

If the notion that Medicare recipients are simply "getting back what they paid in" is false then where is the money coming from? Simply, the excess received is being borrowed from younger generations and the cost is more than we can bear.

We are constantly reminded of the government's inability to manage a budget under the arbitrary debt ceiling (raised 80 times since 1940) and that the national "on budget" debt is over $14T. The debt conversation all too often omits the "off budget" debt that includes underfunded liabilities to Social Security and Medicare which is about $110T according to a Forbes article; totaling more than $900K per working American.

[Texas Fossil]

Have not studied what you posted. Sounds credible.

But, my point is: Do not blame the “boomers” for this mess. It started when the Social Security System was originated. No one was “asked” if they wished to participate.

The government will simply refuse to deliver what they promised, because they cannot.