Obama ‘Abruptly’ Walks Out of Debt Talks

[Trader]

Could you explain this in lay terms?

For starters, government accounting for purposes of the reported deficits counts a loan as the same as a gift. A normal person would know the difference between lending me $100 that I will pay back with interest next year and just giving me a gift that you will never see again. Yes, in both cases you have $100 less today, but with a loan you also have a corresponding asset created on the other side of balance sheet. Politicians love this sort of thing because a student loan and a student grant count as spending the same, but the student prefers the grant and more likely will vote for someone who gives out free money than loans.

Social Security and Medicare take tax money today and vaguely promise you a benefit in exchange some time in the future. If they collect less than the value of the benefit promised the missing money has to come from somewhere. A private company would have to recognize the value of the shortfall by taking a charge against earnings. The value of that future benefit has to be set aside in a fund with real assets. Government accounting does not include the value of the shortfall in the official deficit. They use Scarlett O’Hara logic, “I’ll think about that tomorrow”. Eventually tomorrow will come and there is no money set aside to cover the obligation. That is why Greece had to cut the pensions of people already retired by 25% and raise the retirement age for everyone else. They could no longer borrow enough money to pay what they promised to the retirees.

Greece no longer has its own currency, so they could not inflate their way out of the problem. The US still has its own currency so we could just pay all our bills by creating money out of thin air, but the same nominal amount of money would have reduced purchasing power. Congress cannot repeal the law of supply and demand.

 

[qui_est_ce]

For starters, government accounting for purposes of the reported deficits counts a loan as the same as a gift. A normal person would know the difference between lending me $100 that I will pay back with interest next year and just giving me a gift that you will never see again. Yes, in both cases you have $100 less today, but with a loan you also have a corresponding asset created on the other side of balance sheet. Politicians love this sort of thing because a student loan and a student grant count as spending the same, but the student prefers the grant and more likely will vote for someone who gives out free money than loans.

Social Security and Medicare take tax money today and vaguely promise you a benefit in exchange some time in the future. If they collect less than the value of the benefit promised the missing money has to come from somewhere. A private company would have to recognize the value of the shortfall by taking a charge against earnings. The value of that future benefit has to be set aside in a fund with real assets. Government accounting does not include the value of the shortfall in the official deficit. They use Scarlett O’Hara logic, “I’ll think about that tomorrow”. Eventually tomorrow will come and there is no money set aside to cover the obligation. That is why Greece had to cut the pensions of people already retired by 25% and raise the retirement age for everyone else. They could no longer borrow enough money to pay what they promised to the retirees.

Greece no longer has its own currency, so they could not inflate their way out of the problem. The US still has its own currency so we could just pay all our bills by creating money out of thin air, but the same nominal amount of money would have reduced purchasing power. Congress cannot repeal the law of supply and demand.

So it will count it as deficit sometime in the future, because the government doesn’t do balance sheets?

 

[Trader]

So it will count it as deficit sometime in the future, because the government doesn’t do balance sheets?

Yes, and the future deficit will be attributed to whoever is in office then, not the Congress and administration who created it now. It could be described as stealing from children who have not yet been born. We spend the money now, they pay for it later.

To be fair, it could also work in reverse if we build a highway system that our children get to use in the future, but we pay for it now. In reality, we borrow the money to pay for the construction and then let them pay for it with interest later. The federal government does not use capital budgets either, so spending for something that lasts a long time counts the same as something consumed today. A private company would depreciate the value of a long lasting asset a little each year. This helps provide the funds to replace the asset when it wears our or becomes obsolete. The government just ignores the problem until a bridge collapses somewhere and kills people; then they start a massive rebuilding program for something they knew would wear out, but never set aside money to replace it.

I would say that an individual is living beyond his means if his regular budget does not include a significant portion for sharing and for saving. That makes me a rare bird who could never get elected, but because I followed my own advice, I don’t really need the Social Security check I got last week. My first. I wanted to get mine before it was all gone. You can complain about how unfair that is, but I promise to use it better than the government would. None of it will go to support abortion, or the promotion of irresponsible behavior.

 

[Monte_RCMS]

So it will count it as deficit sometime in the future, because the government doesn’t do balance sheets?

Someday …

… to quote the economist Keynes … in the long run, we are all dead.

Maybe someday will never come.

Or the way the little first grader won election to president of her class: “Free ice cream for everyone”.

Someday …

Or …

youtube.com/watch?v=QhzbzwPNgXA

Not intending sarcasm. But that’s how everyone has been thinking.

So … how will YOU weather the coming financial storm?

What if the United States becomes another Argentina under Juan Peron?

And, while you are at it, if North Korea and Iran develop an EMP device and one morning you wake up and there is no electricity … how will you get past that?

For “fun”, read Peter Ferrara’s book, “America’s Ticking Bankruptcy Bomb” … but, Ferrara gives solutions that have been proved to work.

 

[bbarrick8383]

Yes, and the future deficit will be attributed to whoever is in office then, not the Congress and administration who created it now. It could be described as stealing from children who have not yet been born. We spend the money now, they pay for it later.

To be fair, it could also work in reverse if we build a highway system that our children get to use in the future, but we pay for it now. In reality, we borrow the money to pay for the construction and then let them pay for it with interest later. The federal government does not use capital budgets either, so spending for something that lasts a long time counts the same as something consumed today. A private company would depreciate the value of a long lasting asset a little each year. This helps provide the funds to replace the asset when it wears our or becomes obsolete. The government just ignores the problem until a bridge collapses somewhere and kills people; then they start a massive rebuilding program for something they knew would wear out, but never set aside money to replace it.

I would say that an individual is living beyond his means if his regular budget does not include a significant portion for sharing and for saving. That makes me a rare bird who could never get elected, but because I followed my own advice, I don’t really need the Social Security check I got last week. My first. I wanted to get mine before it was all gone. You can complain about how unfair that is, but I promise to use it better than the government would. None of it will go to support abortion, or the promotion of irresponsible behavior.

Reminds of Chris Christies speech after he got an unwelcome greeting at a firefighters convention. He tossed his prepared speech out and gave them the low down on what it’s like dealing with the **** that former elected officials put in place knowing they weren’t going to be the ones to deal with the financial problems caused by their pandering actions down the road.

 

[Monte_RCMS]

Currently, the U.S. government’s Treasury Dept takes in about $5 Billion per day.

President Obama wants to spend … or IS spending … about $10 Billion per day.

You can do the long division.

The ONLY way to balance the budget without cutting spending by 50% … none of this $3 billion per year as the maximum spending cut “baloney” … which is you can do the numbers 1/500th of one percent or some such … is to increase tax revenues by 100% … in other words to double U.S. Treasury revenues from $5 Billion per day to $10 Billion per day.

So EVERY Federal tax would need to be doubled.

Not a small increase, but a doubling.

Run the numbers.

And that would only work for one year or even less than one year, because with that level of taxation, the economy would collapse.

The government now has an effective tax rate of around 40%, all things considered.

Doubling it would be an 80% tax rate.

A friend of mine lived through the Nazi occupation of France in World War II. The Nazi’s imposed, on France, a tax rate of 80%.

Just to provide a sense of comparative proportion.

With respect to the “extremism” of suggesting an upcoming 80% tax rate:

Michael Boskin wrote a piece in the Wall Street Journal …former economic advisor for George H. W. Bush, and he ran the numbers. He added up the federal tax rate, what it’s projected to be (just eliminating the Bush tax rates, just going back to Clinton with the top marginal rate of 39.6%), current state tax rates, then adding up everything Obama wants. Obama wants no ceiling on earnings that are taxed for Social Security. Right now it’s $106,000 a year.

Once you go past that you stop paying Social Security deductions. He wants to go past that as Medicare is, Medicare is now, what, 2.5% or 3% of every dollar you earn. Social Security is about 12.5% when you add it all up, 15% of everything up to $106,000. Obama wants to eliminate that.

The states are going to raise their income tax rates. By the time all of this happens in the next five years, a school teacher in California earning $60,000 a year will have an effective marginal tax rate of 69-point-something percent on all income, counting all taxes. So when you hear Obama and the Democrats say that the middle class isn’t gonna get taxed, and when you hear them say that only people at $250,000 a year or more are gonna pay the tax increase, it’s not possible, folks.

There isn’t enough money there to run this government for very long if you confiscate all of the wealth of people who make $250,000 a year or more.

Those of you who earn $60,000 and live in California, New York, Massachusetts, and some other states? You are looking – very soon if this man gets his way on everything, and if there isn’t any spending reform, and if there’s no entitlement reform, and if there isn’t any tax reform. This is the difference between 1967 and today. This is the difference between 1979 and today. To just service the debt, we’re gonna add $13 trillion of debt the next ten years if Obama gets what he wants. A total aggregate national debt of $27 trillion in ten more years, and everybody is going to be paying a combined tax rate of 70%.

This doesn’t count your property taxes. This doesn’t count all those little fees in your phone bill and your cable TV bill and all that other rotgut hidden stuff that’s in there. It’s not going to be productive to work, which is just fine with Obama. This is really point-of-no-return time here.

 

[Monte_RCMS]

I don’t consider wkipedia, coyoteblog, american thinker and grandfather economic to be a long line of government sourced data. do you? I am not going to even read this propoganda so I won’t be respondinng. Does anyone care if I respond or not?

I posted the data published by the Government Printing Office. Historical and current data.

No comments from you!

But we need someone to plot the graphs using the official U.S. government data.

Can we get you to volunteer to do the graphs?

 

[ComputerGeek25]

With respect to the “extremism” of suggesting an upcoming 80% tax rate:

Michael Boskin wrote a piece in the Wall Street Journal …former economic advisor for George H. W. Bush, and he ran the numbers. He added up the federal tax rate, what it’s projected to be (just eliminating the Bush tax rates, just going back to Clinton with the top marginal rate of 39.6%), current state tax rates, then adding up everything Obama wants. Obama wants no ceiling on earnings that are taxed for Social Security. Right now it’s $106,000 a year.

Once you go past that you stop paying Social Security deductions. He wants to go past that as Medicare is, Medicare is now, what, 2.5% or 3% of every dollar you earn. Social Security is about 12.5% when you add it all up, 15% of everything up to $106,000. Obama wants to eliminate that.

The states are going to raise their income tax rates. By the time all of this happens in the next five years, a school teacher in California earning $60,000 a year will have an effective marginal tax rate of 69-point-something percent on all income, counting all taxes. So when you hear Obama and the Democrats say that the middle class isn’t gonna get taxed, and when you hear them say that only people at $250,000 a year or more are gonna pay the tax increase, it’s not possible, folks.

There isn’t enough money there to run this government for very long if you confiscate all of the wealth of people who make $250,000 a year or more.

Those of you who earn $60,000 and live in California, New York, Massachusetts, and some other states? You are looking – very soon if this man gets his way on everything, and if there isn’t any spending reform, and if there’s no entitlement reform, and if there isn’t any tax reform. This is the difference between 1967 and today. This is the difference between 1979 and today. To just service the debt, we’re gonna add $13 trillion of debt the next ten years if Obama gets what he wants. A total aggregate national debt of $27 trillion in ten more years, and everybody is going to be paying a combined tax rate of 70%.

This doesn’t count your property taxes. This doesn’t count all those little fees in your phone bill and your cable TV bill and all that other rotgut hidden stuff that’s in there. It’s not going to be productive to work, which is just fine with Obama. This is really point-of-no-return time here.

Again, this isn’t addressed by any of the so-called liberals/progressives on the thread, other than some vague comment of “the poor/middle class are going to be hurt so why can’t the rich pay more?”

The issue is that not only do we have a tax problem, the over arching issue is we have a spending problem. Quite simply, no amount of simply taxing the rich will solve the current issues.

While I agree that we should close down loopholes, deductions and may have to raise rates (yes, I think the rich can and probably should, pay more), we need to bring spending more inline with current and projected revenues.

 

[ComputerGeek25]

I posted the data published by the Government Printing Office. Historical and current data.

No comments from you!

But we need someone to plot the graphs using the official U.S. government data.

Can we get you to volunteer to do the graphs?

When you lose the debate, attack the source.

 

[Monte_RCMS]

Again, this isn’t addressed by any of the so-called liberals/progressives on the thread, other than some vague comment of “the poor/middle class are going to be hurt so why can’t the rich pay more?”

The issue is that not only do we have a tax problem, the over arching issue is we have a spending problem. Quite simply, no amount of simply taxing the rich will solve the current issues.

While I agree that we should close down loopholes, deductions and may have to raise rates (yes, I think the rich can and probably should, pay more), we need to bring spending more inline with current and projected revenues.

If we limit Federal spending to $5 Billion per day, everything will be fine.

More than enough for Social Security, Medicare, debt service, the military, and essential Federal services.

 

[SamH]

When you lose the debate, attack the source.

Don’t be so hard on yourself, I wouldn’t consider that an attack.

 

[rstinson1]

Everyone is against raising taxes on the poor but not all of them are that poor.

Medical care is not free but if you do not pay something it is very abused. The poor are not so poor. It is a political term. I have a friend who is struggling to make ends meet but he is badly mismanaging his life. He pays too much in rent and refuses to get something cheaper. We did we lived in a place with bars on the window and brought our first born home to that.

I have enough money but I tell my kids no all the time to teach them to do without and to make do. I have cut back my cell phone plan. I would do without a home phone and I do not have cable but I pay taxes. We do not eat out that much etc… We grow our own food.

In Austin the city clinic is stuffed with illegals waiting to have their US citizens. Locally there are people driving up to the clinic (with new cars Hummer, Infinity and others) and they are on medicaid.

I pay property taxes so illegals can vote themselves benefits.

 

[Monte_RCMS]

Some hands-on assistance from someone with better computer skills than me, would be appreciated.

You really need to look at the trends in Government spending … and you can tell that a lot of places that post numbers don’t really want you to know what the trend line really is on military spending of the United States.

Go to this Web page. It is by the Government Printing Office:

gpoaccess.gov/usbudget/fy10/pdf/hist.pdf

Visit Table 3.1

Just scroll down.

It shows from 1940 to 2014 spending … And at the BOTTOM, is National Defense spending as a percent of total Federal Government outlays.

Unfortunately, until someone here can find a graph that shows all that data in one graph, you [or someone here who has a better computer than I have] would need to manually write the data down and graph it and post the graph here.

But the current military spending as a percent of total U.S. outlays is about as low as it has ever been … except for Bill Clinton’s spending just before 9/11.

That’s the actual Federal government data.

Interesting stuff.

Could someone take the time to plot the data on their computer and post it here?

I can’t find that data plotted onto a graph by year anywhere and if someone would do it, they would be making an actual contribution to the world of research.

Thanks.

I will go out on a limb for the third time in this thread … [and maybe copy and post this to other threads] … somebody please! convert the GPO data to a graph.

 

[exoflare]

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