The Economy

[SirSnookalot]

I'll stick to policy and facts, not politics, I rant on other forums both pro and con regarding elected officials, but not here. I wont favor or discredit any party or politician.

People have been led to believe that taxes are high in this country, actually they have been the lowest in about 50 years, true 47% of Americans pay no federal income tax. Even at the older tax rate and better employment the amount of federal revenue has been getting less and less. Corporations say they pay too much 35%, reality after deductions they average about 16%, GE paid zero. Most of the largest times of growth have been when taxes were high, like in the 50's.

I'm not new taxes, been paying federal, state and local both personal and business since 1973 until my retirement, I know what is to pay higher taxes.

All that said I'm in the camp who believe more income to the government in both higher taxes and income thru more jobs is the answer. Late 90's higher tax rate, more employed = surplus, 2001 thru now, lower taxes, less employed, less revenue = deficit.

True 2 wars, internet bubble, real estate bubble, and 8 years of spending. Blame can be put in a number of places and people, but this isn't the pace to do it.

[Fishing Rhino]

Jobs will not come back by raising taxes. Revenues are down because jobs are down, not solely because taxes are lower. Lowering or raising taxes will not have a significant impact on jobs, though raising taxes will likely cost jobs. The reason jobs left is because there are greener pastures offshore with better business climates, particularly for manufacturing. It's the trifecta of cheaper labor, lower taxes, and fewer regulations which force, yes that's right, force, companies to move their manufacturing offshore. It's not a matter of greed. It's a matter of survival.

Manufacturing, the foundation of our economy, cannot compete in the world marketplace and manufacture here in this country. Yes, Harley Davidson can manufacture bikes in the country because they have a cultlike following. You cannot buy a Harley that is made overseas. Buying most of the daily goods that we use is an entirely different story.

Businesses in Chicago/Illinois are considering leaving for greener pastures in other states for no reason other than the tax hikes being considered in the city/state. Many of these are service jobs in finance. Companies and folks are leaving NY for no other reason than confiscatory taxes.

So, in their attempt to increase revenues by raising taxes, rather than increasing revenues, they drive productive taxpayers from the state. The only folks who are not trying to escape the taxes are those who are the beneficiaries of tax revenues. While the needs do not diminish, the numbers of the very folks and businesses who account for the revenues to meet these needs does shrink, placing an ever disproportionate burden on those who do remain.

The truth is that for the most part, businesses do not pay taxes. Sure, on paper they do. But in reality, it's the consumer of their product or service that pays the taxes.

Let's say the government enacts a ten cent per gallon tax on the oil companies for every gallon of motor fuel they produce. What do you think will happen to the price of fuel at the pump?

I'll agree that there may be times when companies absorb some taxes without passing them on to the consumer. But by and large increasing the taxes on the ABC widget company will increase the price of widgets.

Some think it's a wonderful thing to whack these rich companies by eliminating tax breaks and loopholes. They don't understand that these evil, greedy, companies will recoup those tax increases out of our pockets in the form of higher prices.

It's the old, "Be careful what you ask for. You just might get it." adage. Taxing companies at higher rates by one means or another will come back to bite us, not them.

[Catt]

I'll stick to policy and facts, not politics, I rant on other forums both pro and con regarding elected officials, but not here. I wont favor or discredit any party or politician.

People have been led to believe that taxes are high in this country, actually they have been the lowest in about 50 years, true 47% of Americans pay no federal income tax. Even at the older tax rate and better employment the amount of federal revenue has been getting less and less. Corporations say they pay too much 35%, reality after deductions they average about 16%, GE paid zero. Most of the largest times of growth have been when taxes were high, like in the 50's.

I'm not new taxes, been paying federal, state and local both personal and business since 1973 until my retirement, I know what is to pay higher taxes.

All that said I'm in the camp who believe more income to the government in both higher taxes and income thru more jobs is the answer. Late 90's higher tax rate, more employed = surplus, 2001 thru now, lower taxes, less employed, less revenue = deficit.

True 2 wars, internet bubble, real estate bubble, and 8 years of spending. Blame can be put in a number of places and people, but this isn't the pace to do it.

Ya just put the blame & in the wrong place at that

[WdyCrankbait]

I read on cnn.com this morning China drops US's credit rating. Mmm,

[Fishing Rhino]

I read on cnn.com this morning China drops US's credit rating. Mmm,

When you have a good credit rating, you can borrow money from any lender. However, as your debt liability increases, your credit rating decreases, which lowers the ability to borrow, and to borrow at the best rates. Continuing to increase debt will eventually wreck your credit rating, and prevent you from borrowing from any lender.

Increasing the debt ceiling does not magically solve anything. To the contrary, it exacerbates the very problem the government refuses to address in any meaningful way. Increasing the debt ceiling allows the government to borrow more money from China, or whoever. What happens when China, or whoever will no longer lend the US money?

It would be political suicide for the current crop of solons to do what really needs to be done. Unfortunately they are more concerned with their political well being than they are about the country. And you can take that to the bank. Pun intended.

[tyrius.]

People have been led to believe that taxes are high in this country, actually they have been the lowest in about 50 years,

This is a prime example of using statistics to fit your view. Tax receipts are at their lowest point true, but tax rates are not. Tax receipts are low mainly due to extremely high un/underemployment rates and has little to do with actual tax rates.

[SirSnookalot]

This is a prime example of using statistics to fit your view. Tax receipts are at their lowest point true, but tax rates are not. Tax receipts are low mainly due to extremely high un/underemployment rates and has little to do with actual tax rates.

Are these statistics regarding individual rates inaccurate?

http://ntu.org/tax-basics/history-of-federal-individual-1.html

The lowest rates since harry Truman.

Just look at the state of the economy in the last 10 years, lower tax rate with generous deductions, unemployment rising, treasury dwindling, just not enough income generated.

Previous years, higher tax rates, better employment numbers and a surplus, enough $$ was generated. In fact in those years many employers had to offer higher starting salaries and signing bonuses. we had nafta and jobs were going offshore then too, yet the economy was good. The gravy train ended with the Clinton era.

Bush said " read my lips"........you know what happened, he had to raise taxes.

Reagan lowered taxes and saw unemployment jump from 7 to over 10%.

I understand no wants to pay more, myself included, but I think it's needed. I'm not convinced that middleclass taxes need to remain at current levels, but I'll go with it, but taxes to the rich must be raised. IMO most people are basing their opinions on their own desires, I'm pretty sure history proves higher taxes are better for the overall health of the country.

I did it since 73, paying fed, state and local income tax, also paid them for business as well. Paid not only my full ss but 1/2 of my employees, their workmans comp, and so many other hidden taxes, not to mention healthcare too, and there was money left over for savings, amazing how that worked. During recession years I took out of my pocket to keep the business running, I never laid off anyone. People that are working today are whining with a loaf of bread under their arm, we got a cheap deal in this country.

[Lund Explorer]

The bottom line on all of this isn't solely about taxes or spending, but the shortfall between the two.

Taxes? It doesn't take too much digging to find numerous loopholes in the existing tax laws that allows certain companies/individuals to pay less than their contemporaries. There are companies that pay little to no taxes in this country because they shelter profits off shore. It's very simple. Company XYZ has its products manufactured by Subsidiary "A" in a foreign country which then sells the product to Subsidiary "B" in a country that doesn't tax corporations. Then the Subsidiary "B" resells the products to the retail branch of Company XYZ at an inflated price to be sold in this country for little if any profit. Little or no profit means little or no tax liabilities. The individuals who truly own and manage Company XYZ pay greatly reduced taxes on their earnings due to other loopholes. Taking a modest (in their view) salary to manage the company, while taking any excess out in the form of stock options and dividends which avoid social security and regular income taxes. Many of these folks, much like Warren Buffet pay a flat 15% capital gains tax on the majority of their income. Also, many small businesses in this country may never leave our shores but still avoid some taxes. Companies run as "S" Corporations distribute profits to their shareholders who then report those taxes on their respective individual returns. However, anything these owners receive in excess of what is loosely referred to as a fair wage, is also not subjected to social security taxes. That is a savings of almost 15% on much of that income.

Spending? Taking a look at what the government spends is something no one can really grasp. What is the difference between discretional on non-discretional spending? We don't even need to mention pork projects. I'm really tired of listening to politicians and others say that we only have a spending problem, especially when those same people probably have little understanding as to what we really spend.

So here's my take on it. We need to figure out just what this country NEEDS to spend. We need to figure out how much it is going to really cost to maintain a sane amount of social programs, a military that can protect us, to maintain and expand our infrastructure, to set aside enough to insure that we can survive a potential catastrophe, and with enough left over to pay off this horrendous debt load. Once we know what we really need to spend, then we can figure out how to pay for it. We need to close loopholes that allow multinational companies to operate here tax free, just as much as we need to revisit the idea that a single mother of two children earning $10k per/year qualifies for a $5k tax refund. We need to enforce fair trade through the use of tariffs on products dumped on our shores. A country that artificially lowers the value of its currency to gain an unfair trade advantage, should be treated the same as a country who sells their products here for less than they charge their own people. Finally, we need to figure out what activities should require a user fee based type of tax to fund the many government organizations that oversee those activities. Just like hunters/fishermen pay built in taxes on the products they use in turn for game/fish management, people who want to travel on smooth roads or cross safe bridges should be willing to pay fuel taxes to cover the cost to have that privilege. If an industry needs to be monitored by organizations such as the EPA or OSHA, then there should be a fair way to generate the revenues to cover those costs.

Almost sound like I'm proposing that we have a balanced budget.... And maybe I am. There will always be times when a country, company, or individual needs to borrow money for some unforeseen problem, or to fund an expansion, and there isn't anything wrong with that. But regardless of the entity, none should think they can last long spending more than they make on day to day expenses.

A year or so ago, I read an editorial where the author said that "Taxes are the cost of citizenship.", and I couldn't agree more. If we want to live in a country that offers the most to its people, then we should be willing to pay the most. If we don't mind living in a banana republic, then we should pay their taxes. I truly think that a country full of people who will pay almost any amount to have a cell phone that does everything, anywhere, should be willing to agree to do this.

[Fishing Rhino]

The problem is the government spending like a drunken sailor. They talk about cutting the deficit. That is absurd on every level.

Let's see how this would work for me.

This year, I spend a hundred thousand more than I take in. I'm now in debt to the tune of that hundred thou, plus the interest which accrues until I pay it off. So, next year, I'll do better. I'll cut my deficit spending to ninty thousand. It doesn't matter that I have increased my debt. I have reduced my deficit spending. I am demonstrating great fiscal responsibility and restraint.

To quote Ron Popeil, "But wait, there's more." I'll do even better next year, I'm going to rein in my deficit spending to 80,000 dollars. There, aren't I doing a grand job on my deficit spending? Over the next ten years, I will have reduced my deficit spending by more than a hundred thousand dollars. Iterest on all the deficits? What's that? No matter that my total deficit spending would be well over a half million dollars in ten years, I'm no longer spending at those earlier levels. Essentially this is what we're being told by the politicians.

Is that the truth? Absolutely. Is that honest? Absolutely not. Anything, even the truth, used in any way to mislead is dishonest.

Comparing the tax rates, using only the historic income tax rates according to the brackets is hardly conclusive. The governments, federal, state, and local have raised taxes and created new taxes which have nothing to do with income. Sales taxes, utility taxes, fuel taxes, users fees, excise taxes, etc., etc., etc. The typical political reasoning works like this.

You live in town A, and tie up your boat at the town dock. The town charges you ten dollars per foot per year for that space. Then some politician from your town, which is having cash flow problems discovers that neighboring town B is charging twenty dollars per foot per year for its dock space. Automatically the assumption is that town A is charging too little. Mr. Politician from town B will never, under any circumstance consider that they may be overcharging for their dock space.

As soon as a politician discovers that their town/city charges lower rates for any service than the other towns in the area, their first instinct is to raise those fees/taxes. I have seen this argument made countless times in my lifetime. It's the typical political speak and logic. I don't care if they are paying ten dollars per gallon for gas in Europe or Asia. That's their problem. Don't make it mine.

Sleazy politicians always looking for another vein to tap so they can extract more of my hard earned dollars. Haven't you noticed they, the president included have hinted at making cuts to medicare and social security. It's never welfare, or government pensions. The reason is obvious. Most folks on Medicare and receiving SS are nearing the end of their lives. Their voting value to the politicians is less than the younger segments of our society. They'll gladly lose a few votes from us old timers but don't want to lose the younger voting blocs which have far more votes and years of voting remaining.

It doesn't matter that you have been a productive member of society all your life. Your usefulnes to them as a voter is what really matters. They'll gladly swap the votes of the seventy plus crowd to keep the votes of the twenty through fifty year olds.

[tyrius.]

So here's my take on it. We need to figure out just what this country NEEDS to spend. We need to figure out how much it is going to really cost to maintain a sane amount of social programs, a military that can protect us, to maintain and expand our infrastructure, to set aside enough to insure that we can survive a potential catastrophe, and with enough left over to pay off this horrendous debt load. Once we know what we really need to spend, then we can figure out how to pay for it.

Agreed 100%.

[K_Mac]

SirSnookalot and Lund Explorer you both do a great job of making your points. There is disagreement on why and how we've gotten to this spot. There may be even more disagreement on what the solutions are. The common ground is agreement that what we have is not working, and changes have to be made. I think it is fair to say that the two of you represent opposite sides of the political/ideological spectrum, yet you can discuss the problems civilly, rationally and intelligently. I would bet that there are some solutions that the two of you could agree to that would change the course of this big ole ship. It is unfortunate that the knot-heads in DC have placed politics ahead of their duty to do what is best for the American people. While there are no easy solutions, there are solutions.

[Glenn]

Ok guys, that makes 3 posts I've deleted already today. Either you leave out the finger-pointing towards specific politicians and/or parties, or we'll close this thread.

Last warning.

[tyrius.]

Are these statistics regarding individual rates inaccurate?

http://ntu.org/tax-basics/history-of-federal-individual-1.html

The lowest rates since harry Truman.

Rates have been close to this level since the 90's and total tax receipts have risen and fallen with employment. Under these same "low taxes" the IRS collected over 5 trillion in 2007.

My point is that getting people back to work (through private industry and not gov't spending) will be the biggest driver to increasing total tax receipts.

I do agree with you in that if the US needs to be more responsible in it's budgeting. If the gov't wants to continue to fight expensive wars then THIS gov't should be the one to pay for it and not foist the problem onto future generations. This goes along with every other un/underfunded program that we have (SS retirement, Medicare, etc, etc).

[SirSnookalot]

My explanation is pale in comparison to Lund's, he's a tax professional and I'm only a retired "junk dealer", if I read him correctly he feels more income is needed, not saying fiscal responsibility isn't important.

"Taxes are the cost of citizenship.", I've heard this quote before, I don't think anyone has any doubt where I stand. I can't be convinced that spending cuts alone without tax increases will make a meaningful difference.

[tyrius.]

My explanation is pale in comparison to Lund's, he's a tax professional and I'm only a retired "junk dealer", if I read him correctly he feels more income is needed, not saying fiscal responsibility isn't important.

"Taxes are the cost of citizenship.", I've heard this quote before, I don't think anyone has any doubt where I stand. I can't be convinced that spending cuts alone without tax increases will make a meaningful difference.

I don't know that we're really in any disagreement with respect to the situation at hand. If we as a country want to continue on as we have been then tax increases will be required and NOT just for the wealthy. If instead we choose to provide less benefits and project our power less through the world then we can drastically shrink spending without increasing taxes. The truth is likely somewhere in the middle though.

As an example, if you want to make SS solvent again then you simply raise the retirement age to 70 and means test the benefits. If you want to leave the benefits as is then you must remove the cap on taxable SS wages. Leaving it as is, is not a viable option.

[Catt]

The blame is not Democrat or Republican or even who sits in the oval office, the blame is all of them and that sir is fact.

The United States President cannot pass any legislation that first does not come from both the United States House of Representatives and the United States Senate again this is fact.

Social Security, Medicare, & Medicaid are not underfunded; all 3 would not be part of the budget if congress had just left the money collected where it belonged. Again the United States House of Representatives, the United States Senate, and the United States President voted to remove the money for these 3 programs to pay off other deficits.

You cannot spend your way out of debt and that too is a fact!

The problem is the United States House of Representatives, the United States Senate, and the United States President has all left off the Constitution of the United States and United States Bill of Rights.

Y’all really want to fix America’s problems? Then go back to the basics

The Constitution and Bill of Rights served us well and it wasn’t until we decided to

fix what wasn’t broken did we fall off the cliff!

[tyrius.]

Social Security, Medicare, & Medicaid are not underfunded; all 3 would not be part of the budget if congress had just left the money collected where it belonged. Again the United States House of Representatives, the United States Senate, and the United States President voted to remove the money for these 3 programs to pay off other deficits.

Sorry, but you're wrong.

From SSA itself,

http://www.ssa.gov/OACT/TRSUM/index.html

Social Security expenditures exceeded the program’s non-interest income in 2010 for the first time since 1983. The $49 billion deficit last year (excluding interest income) and $46 billion projected deficit in 2011 are in large part due to the weakened economy and to downward income adjustments that correct for excess payroll tax revenue credited to the trust funds in earlier years. This deficit is expected to shrink to about $20 billion for years 2012-2014 as the economy strengthens. After 2014, cash deficits are expected to grow rapidly as the number of beneficiaries continues to grow at a substantially faster rate than the number of covered workers. Through 2022, the annual cash deficits will be made up by redeeming trust fund assets from the General Fund of the Treasury. Because these redemptions will be less than interest earnings, trust fund balances will continue to grow. After 2022, trust fund assets will be redeemed in amounts that exceed interest earnings until trust fund reserves are exhausted in 2036, one year earlier than was projected last year. Thereafter, tax income would be sufficient to pay only about three-quarters of scheduled benefits through 2085.

So the Social Security Administration itself disagrees with you. The link above also covers Medicare deficits.

Also, the "removal" of the money has nothing to do with the projected deficits. In fact, Congress turning those funds into T-Bills actually helps the SS fund in that those T-bills pay interest to the SSA and that interest can be used to pay SS benefits.

[GrundleLove]

Cant we all just agree that the United States of America will crumble within the next 15 years. I really cant see how anything could get better, everything has to get worse. There is no plan, there is no out, its over. We as a country are finished.

[Catt]

Sorry tyrius nice try though but what you link fall to acknowledge is that Social Security was enacted in August 14, 1935. Medicare and Medicaid were added in 1965 by the Social Security Act of 1965, part of President Lyndon B. Johnson's "Great Society" program. The government adopted a unified budget in the Johnson administration in 1968. This change resulted in a single measure of the fiscal status of the government, based on the sum of all government activity. The surplus in Social Security trust funds offsets the total debt, making it appear much smaller than it otherwise would.

Long story short in 1968 under the Johnson administration the federal government voted to allow itself to take all of the money.

[tyrius.]

Long story short in 1968 under the Johnson administration the federal government voted to allow itself to take all of the money.

Nope. Gov't accounting is done using fund accounting and no reporting of numbers has changed that. The US gov't has operating funds, a social security fund, etc, etc. Money taken from one fund is not taken but borrowed. The borrowing is done by the SS fund purchasing T-Bills from the treasury with the excess money that the SS fund had. The money from the purchase of the T-bills then goes into the operating fund where it can be used on whatever they want. However, those T-Bills exist as assets in the SS fund and pay interest from the operating fund to the SS fund. Those assets (T-bills) can also be sold to other investors to gain the cash needed for the SS fund to pay it's obligations.

All of this is explained in the link I provided above. It's not explicitly stated, but the different phases are in there. Phase 1 (already past) SS receipts are greater than outlays. Phase 2 (from now until 2022) SS receipts are less than outlays but the interest income more than makes up the difference. Phase 3 (from 2022 -2036) SS receipts plus interest income are less than outlays and assets have to be sold to pay benefits. Phase 4 (2036) no assets remain and benefits can not be fully paid.

[Lund Explorer]

Cant we all just agree that the United States of America will crumble within the next 15 years. I really cant see how anything could get better, everything has to get worse. There is no plan, there is no out, its over. We as a country are finished.

Nope.... I'm going to disagree. This is a country that figured out how to go to the moon less than two decades after the first rocket was launched into orbit. As long as we all decide to band together for a common cause I don't think anything is beyond our ability to overcome it. Granted it seems that we have gone from Menlo Park to "As Seen On TV".... But I wouldn't throw in the jockstrap too quick!

[GrundleLove]

Nope.... I'm going to disagree. This is a country that figured out how to go to the moon less than two decades after the first rocket was launched into orbit. As long as we all decide to band together for a common cause I don't think anything is beyond our ability to overcome it. Granted it seems that we have gone from Menlo Park to "As Seen On TV".... But I wouldn't throw in the jockstrap too quick!

Hope. It is the quintessential human delusion, simultaneously the source of our greatest strength....and our greatest weakness.

There are to many variables in play, to many hands to feed and to many politicians with opinions who are unwilling to change for the greater good.

Greed.

The country's biggest threat, coupled with stubbornness, will destroy us all and nothing will be left. Give someone a taste and they will want it all for themselves and do whatever they can to get more of it. Greed you say? How can politicians and elected officials be greedy? Lobbyists. When someone wants to get elected or funded to be elected the lobbyists make that happen, and what happens when it's time to pay the piper? Greed. Funded by large corporations or unions or whomever, whatever is the best interest for groups, unions, business NOT individuals gets priority. Greater good? HA! There is none. Everyone has a motive, everyone has another reason that benefits someone else when making a decision. Which is why our current economic stance is the way that it is. It's OVER. The delusion of individuals that believe that the good Ol' USofA will make it out of this one and everything will be hunky dory lacks common sense of the whole picture.

[Catt]

According to the federal government, accounting for inflation, a maximum tax collection of $1,655 per person in 2010 dollars.

In 2010, the maximum payroll tax collection per person was $13,243 or eight times the promised maximum

Since 1982, Social Security has had surpluses ranging from $89 million to $190 billion per year. By law, these surpluses must be loaned to the federal government, which is obligated to pay the money back with interest. This is referred to as the "Social Security Trust Fund," and at the close of 2009, it had a balance of $2.5 trillion.

Accountability

In 2009, the administrative costs of the Social Security program were $6,182,000,000. This was equal to 0.90% of all Social Security outlays for the year or enough to pay 442,583 retired workers the average annual old-age benefit of $13,968 for 2010.

The figures above do not include the administrative costs borne by employers, which, according to Congressional Budget Office, are "probably substantial" but "difficult to assess." The same report states that employers "bear the burden of the collection costs" of Social Security taxes and "are also responsible for transmitting substantial amounts of information to the SSA [social Security Administration] and the IRS."

In 2009, Social Security made roughly $2,547,000,000 in improper overpayments. This was equal to 0.37% of all Social Security payments for the year or enough to pay 182,345 retired workers the average annual old-age benefit of $13,968 for 2010.

*Between January 2004 and April 2007, the Social Security Administration made 44,000 corrections for instances in which it had erroneously listed individuals as deceased. This required face-to-face interviews with each person and the subsequent processing of "resurrection transactions" to remove individuals from the "death master file."

NEED I ADD MORE

[Glenn]

Ok guys, quit trying to be "right" and move on. You've stated your opinions quite well. No need to try to force somebody to agree with you.

[Lund Explorer]

Before this gets shut down sadly, I wanted to recall a story I heard a few years back.

Former Senator Alan Simpson had taken the floor of the Senate during a debate on SS & Medicare, and to make his point he told a story about his Grandfather being pulled over by a Wyoming State Trooper for speeding.

The elder Simpson was driving the old farm truck into town when he got pulled over. When the tropper explained why he had been stopped, he exclaimed that it was impossible for this old farm truck to go that fast. So the trooper asked him if he had a governer on board, an office that the middle of the Simpson clan held at the time. "Naw" the elder Simpson stated, "That's just manure you're smelling!"

Of course at the time he told this story, Mr. Simpson had already decided to retire from the Senate, and as he told it that it mattered very little if he actually spoke his mind. Maybe we just need a little more of that these days.

BTW, he is still telling it the way it is. Googling up his latest comments on social security as the co-chair of the bi-partisan debt commission only proves it. Not an exact quote, but close....

"Social Security is like a milk cow with 310 million teats!"