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  • mlevine44 mlevine44 Dec 14, 2012 12:48 AM Flag

    OT: Fiscal Cliff

    If the Federal Govt is spending $1T/yr more than it raises in taxes, why don't we want to reduce spending by $100 mil/yr and raise taxes by $500 mil/yr, as will occur under current law (the Fiscal Cliff)?

    The main problem that I see is that the Fiscal cliff doesn't cut spending enough. We should cut another $400 mil/yr and balance the budget!

    Now, the above is merely cash basis accounting. On an accrual basis, our unfunded liability for Social Security and Medicare would require $7T/yr in contributions to a Trust Fund (That Social Security/Medicare Trust fund doesn't exist. The file cabinet is fill with promises to raise taxes in the future to pay the U.S. Treas Bonds). You might want to sell those U.S. Govt bonds before it all hits the fan.

    If you assume that the Govt were to maintain the current entitlement system through the life cycle of the Baby Boomers, then the unfunded liabilities of the Govt are $86T. Try and figure out how high taxes would have to rise, on everyone, to fund those benefits. The entire GDP of the country is only $16T/yr. The Federal Govt does have other important duties in addition to paying transfer payments!

    The Media doesn't seem to care that America is headed for bankruptcy. I guess that Journalists don't study economics.

    The history of what happens to a country after bankruptcy is not pretty. Revolutions tend to follow with massive disruption and violence.

    If we're headed over the Fiscal Cliff and back into a recession, it can be a teaching moment. If we fail to address the real problem of entitlements, the ultimate recession, when the U.S. Govt can't sell it bonds, will be worse than the Depression of the 30's.


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    • mlevine, I think this country has passed the point of no return. We have lived through the best of times but the chickens eventually come home to roost. The founders understood the flaws in democratic systems and carefully established a republic. This has been dismantled and now we will be ruled by one after another of charlatan politicans cattering to those who will pick the pocket of the responsible until there is nothing more to take. The media has done nothing to educate the people about the danger and the executive branch has given itself near dicatorial power given any crisis. This grew under repbulican and democrats alike, GWB moved this agenda and Obama has extended it further. I run into thinking people frequently who ask where can we go to escape this socialistic future and there really isn't any place. It doesn't matter for me, only those who come after us and they will not understand how it happened and will look to government to take care of them. In china you can go to jail for years without a trial simply for bad mouthing the system. The whole world is turning into an indian reservation. The very smart guy who conducted the Peter Grace study back in the Ronald Reagan years warned then that the opportunity to fix the system was nearing it's end. Probably now the public would not accept a budget that would match spending with revenues, or anything close. WW

      • 1 Reply to wixiewaxy
      • I'm concerned about the country's future, but I'm not quite that gloomy. It is natural that, after a financial panic, the public would fall for the populist rhetoric. However, Socialists are incapable of delivering economic success, no matter how much Keynesian stimulus they try. Even in energy rich countries, the Socialists soon muck it up.

        Americans are fickle. Another couple of years of stagnation, and it will be time for the pendulum to swing back.

        The politicians will play games, understating inflation and cheapen the purchasing power of the benefits. They will raise the retirement age. And, they will euthanize geezers.

        The Country survived the Civil War, it will survive Obama.

        But, the damage is real enough. There is no discipline in the Country. From the politicians in Washington to the nutcase murdering children in a classroom, none grew up with a healthy fear of the strap, should a child forget the difference between fight and wrong.

        Obama's masses will fare the most poorly under Socialist policies. Wealthy folks will always figure out ways to limit their exposure to the tax collector.


    • The really sad part of all this is that neither party has shown any real resolve at cutting spending. The only "cuts" we see are reductions in the scheduled increases. Without abrogating past laws with great social upheaval consequences, there is no way out. Therefore I maintain there is no way out other than kicking the can down the road and declaring the problem is solved as has happened so often. We are now living in a fictitious world. Illusion has displaced reality.

      • 3 Replies to jpage63
      • The can is only being kicked a short distance down the road this time. Dema and Repubs playing chess with a slow clock. In the meantime, the debt continues to rise.

        The world is watching this clown show in amazement.

        Happy New Year! GLTA!


      • Either you deal with reality, or reality deal with you. See e.g., Greece.

        It will happen here unless the people wake up soon. Nothing of any substance is coming out of Washington with the current crop of weasels.


      • The Republicans are also weasels who are more interested in keeping their jobs and keeping the contributions coming in, than they are in teaching the public the reality of the situation and leading us out of the woods.

        Social security has an obvious fix: Raise the retirement age and cutting the purchasing power of the benefits. They have already changed the CPI formula once to understate inflation. They will do it again, and again. Oh, the Govt will pay the benefits, but gradually, the purchasing power of those benefits will shrink. They will also "means test" and tax your benefits regardless of your age.

        They will also institute annual reviews and start throwing people off of disability.

        Also, since obesity is causing metabolic disease in younger people, fewer people will be collecting Social security for as long. My best investment this year was in AMLN which treats diabetes (acquired by BMY).

        Medicare also has a fix, but its ugly: They will gradually limit access to expensive procedures and euthanize geezers. But, they will pass out lots of Rx for pot.

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