You're tax $$ at work!

[MrChaos]

edit:

see last post no need for this one anymore

[Jimen]

QUOTE (MrChaos @ Apr 17 2011, 10:07 PM) Jimen

There are no vaults filled with cash waiting for the SS inflow to go negative just IOUs from the government to the government. The government raises money by taxing us or they cut benefits. One or the other will happen.

Thing is, it's literally impossible for the government to run out of US dollars. A government IOU for a hundred dollars is essentially equivalent to a hundred actual dollars, because there is absolutely no situation in which it will not be paid back, short of something ridiculous like Congress refusing to increase the debt ceiling. Those IOUs are every bit as reliable and trustworthy as actual cash, though whether that's reassuring or not depends on your views on monetary policy.

[MrChaos]

thanls cleared it up for me

we will invest the IOUs via printing more cash which we pay to ourselves. No need to cut benefits or raise taxes.

[Jimen]

Obviously, printing money has other side effects which make it undesirable to do too much of, but it beats throwing up our hands and saying "well, no more money!" It's no different from any other deficit spending - in fact, the US government is the largest holder of US debt! One's first impulse would be to scream about unsustainability and spending cuts, but considering that taxes have plummeted over the last thirty years, I don't think it's really surprising that we can't afford the things we used to be able to.

Honestly? We should be pissed off as hell about it! Ever since the 80s, politicians have been undermining the federal budget by cutting our parents' taxes to the bone, and now we're being told that we're going to have to give up on ever benefiting from any of the programs they enjoyed because the money's just not there anymore - they gave it all to the boomers and there isn't any left! Never mind that taxes on the wealthy are less than half what they were forty years ago, or that GE didn't pay any tax at all last year - there's just nowhere left to get money from! Oh, and don't think the IRS is going to so much as give GE a stern look: Obama appointed the CEO of GE to be the chairman of the Council of Jobs and Competitiveness, a position that he will hold while retaining his position as head of GE! So it's all $#@!ing bought and paid for. Look forward to six more years of taxing the heck out of the poor to fund tax cuts for the wealthy!

[mcwarren4]

QUOTE (Jimen @ Apr 17 2011, 10:03 PM) When the money leaving the program exceeds the money entering the program...nothing happens. Even when Social Security starts losing money, it'll still take decades to burn through the hefty surplus it's built up. Under current estimates, both you and I will be eligible to receive Social Security benefits by the time the program is in any actual need of changes.

And even then, there's plenty of ways to keep the program afloat without resorting to draconian cuts. For example, we could remove the FICA tax cap which means that Bill Gates pays exactly as much payroll tax as any doctor worth his salt. No, I don't mean that they pay the exact same percentage, I mean that they pay a precisely equal number of dollars, because income over $100k is completely exempt from the Social Security tax!

Also, we could increase the FICA tax back to its 1965-2009 level! Obama's 2010 tax deal included a significant cut to the FICA tax, making this the first and only president to cut Social Security's only source of revenue! Keep that in mind the next time some @#$%@# politician steps up and talks about how there's just no choice but to slash Social Security; their rhetoric about tough decisions and unsolvable deficits rings hollow when they defunded Social Security five goddamn months ago.

Here, I'll give you the quickie version of what the future of SS looks like. Approximately twenty months from now, Congress is going to either extend that tax cut for 5+ years or make it permanent. Approximately twenty-one months from now, the Congressional Budget Office is going to recalculate Social Security's projected budget, taking into account the heavily reduced revenue - and discover, unsurprisingly, that the program is suddenly in a big crisis! Then the same double-talking @#$%@#s who sacrificed Social Security on the altar of tax cuts in the first place are going to stand there on national news and tell the entire country that there's just no choice but to cut our goddamn retirements and that there is absolutely nothing else they could possibly do about it.

Seriously Jimen, where do you get your information from? I have to believe you aren't a complete idiot because you say intelligent things from time to time, but this post is full of ignorance. # list format begin!

a) Bill Gates' FICA tax is probably currently $0. He has very little, if any, earned income. Most of his income is derived from dividends, interest, and living off the principal of his investments. The only reason this is worth mentioning is that most billionaires are in the same position as Bill Gates.

b) The FICA tax cut is for the year 2011 only. Your proposal of raising it back to the previous level is already scheduled to take effect in 8 months. The net effect of this tax cut is so minuscule in the big picture it is hardly worth mentioning given that this problem has been building for nearly 30 years now.

c) The program is, has been for thirty years, and will continue to be in a crisis. The tax cut is making the problem worse now, but it isn't politically feasible for either side of the aisle to continue it while also cutting program benefits. It will be gone in 8 months.

d) Who's retirement are we cutting? FYI... Social security isn't, hasn't been, and never will be intended to be used as a retirement plan. Progressives have won the battle of words to make people believe that it is a retirement plan, but it wasn't designed that way and isn't sustainable as one.

QUOTE (MrChaos @ Apr 17 2011, 10:23 PM) Until the bottom falls out of the entire economy and all your money you've invested goes * poof * ... you know like just what happened to us all.

MrC, I can understand why you would not want to see it invested in any risk assets, but competent investment pros should be able to mitigate much of the risk. Most institutional pools of money have fully recovered from the downturn and didn't lose much to begin with. I can't say much more about this area due to regulatory concerns, but investing for more return doesn't necessarily mean putting a large chunk of the money in the stock market as you understand it.

QUOTE (Jimen @ Apr 18 2011, 01:09 AM) Thing is, it's literally impossible for the government to run out of US dollars. A government IOU for a hundred dollars is essentially equivalent to a hundred actual dollars, because there is absolutely no situation in which it will not be paid back, short of something ridiculous like Congress refusing to increase the debt ceiling. Those IOUs are every bit as reliable and trustworthy as actual cash, though whether that's reassuring or not depends on your views on monetary policy.

Jimen, I think you mean well, but I want to beat my head against the wall when I read your posts sometimes. Do you not understand that $100 from newly printed money isn't the same as $100 right now? Printing more money would have exactly the opposite effect you are looking for. The poor are hit the worst in those situations. Printing money IS taxing the poor. Its taxing everyone equally. The problem is, inflation is most painful to those in or near poverty (see everything going on in the Middle East for examples). What you are saying is that you are in agreement with a flat tax system where everyone pays the same rate except the wealthy. It doesn't hit the wealthy because they can simply move their assets overseas to avoid the domestic inflation.

[takingarms1]

QUOTE (Jimen @ Apr 17 2011, 10:03 PM) When the money leaving the program exceeds the money entering the program...nothing happens. Even when Social Security starts losing money, it'll still take decades to burn through the hefty surplus it's built up.

Assuming you are correct (which you are not), then what?

You talk about printing more money but I hope you know what the side effects are (see banana republic). That is also merely a temporary fix. I take it from the rest of your post that you favor the massive tax increases? $#@! you. I'd rather save that money in my own retirement account, which I know will have a better return on investment than the government's stupid program.

QUOTE (mrchaos)The early Boomers already have started to retire and like the swarm of locusts they have been through out my life they will consume everything in their path leaving me holding the dregs and paying for it as well.[/quote]

Pretty much this. The gov'ts finances have been mismanaged for decades by our parents. It's bull@#(! and now we have to pay the price for it. So, $#@! them. Let them run out of social security and have to struggle a bit, because you sure as hell better realize that in our lifetime we are going to be paying for their mismanagement until we die, and then our children will pay. Hell we've already starting paying for it, in a lot of different ways.

Jimen, I do think we need some serious tax reform. The biggest problem I see is that congress keeps trying to use taxes as a form of social manipulation, penalizing decisions they don't like and encouraging those they like, which results in people with lots of money typically being able to evade the tax man. I don't think we should have a massively progressive income tax because that retards economic growth, but I think a moderately progressive income tax makes sense. It also makes absolutely no sense that billionaires pay lower rates because they derive their income from investments rather than salary. That should change, too. But, since congress generally appears to be a wholly owned subsidiary of big corporations, what is more likely to happen is tax increases on the upper middle class while the truly wealthy just keep getting wealthier.

[Raveen]

QUOTE (Clay_Pigeon @ Apr 17 2011, 09:31 PM) I actually listened to a very interesting podcast on this. I'll post it, but here's what I remember

1) Social Security has been running surpluses for much of its history.
1) Saving those surpluses is not trivial, however. The prospect of any government saving money is trickier than it looks. Most governments save money through US Treasuries.
2) The Social Security program has essentially done the same thing, but it creates this weird situation where the government is lending itself money and promising to pay itself back (with interest) later. It seems perverse, but it essentially converts a government surplus into debt.
3) As a result, those surpluses have essentially subsidized the cost of government services, training people to believe that government services cost less than they really do.
4) Those days are coming to an end, as the government now has to pay itself back to cover the increasing cost of Social Security.

Edit: Here's the link: http://www.npr.org/blogs/money/2010/11/12/...ity-trust-funds

BTW, planet money is a great podcast and I highly recommend it.

No wonder you have financial and taxation problems over there, your maths teachers can't even count up to five...

[Clay_Pigeon]

It's ok. You guys keep making "math" plural.

[notjarvis]

QUOTE (Clay_Pigeon @ Apr 18 2011, 02:42 PM) It's ok. You guys keep making "math" plural.

Meh - they are both abbreviations of Mathematics.

All together now

[Camaro]

QUOTE (Jimen @ Apr 17 2011, 09:48 PM) Obviously, printing money has other side effects which make it undesirable to do too much of, but it beats throwing up our hands and saying "well, no more money!" It's no different from any other deficit spending - in fact, the US government is the largest holder of US debt! One's first impulse would be to scream about unsustainability and spending cuts, but considering that taxes have plummeted over the last thirty years, I don't think it's really surprising that we can't afford the things we used to be able to.

Honestly? We should be pissed off as hell about it! Ever since the 80s, politicians have been undermining the federal budget by cutting our parents' taxes to the bone, and now we're being told that we're going to have to give up on ever benefiting from any of the programs they enjoyed because the money's just not there anymore - they gave it all to the boomers and there isn't any left! Never mind that taxes on the wealthy are less than half what they were forty years ago, or that GE didn't pay any tax at all last year - there's just nowhere left to get money from! Oh, and don't think the IRS is going to so much as give GE a stern look: Obama appointed the CEO of GE to be the chairman of the Council of Jobs and Competitiveness, a position that he will hold while retaining his position as head of GE! So it's all $#@!ing bought and paid for. Look forward to six more years of taxing the heck out of the poor to fund tax cuts for the wealthy!

Taxing the poor will never generate sufficient revenue, they don't make enough.

I would propose doing the pension fund reorganization I mentioned, remove any caps, and make the payroll deduction applicable to any source of income. Does this mean rich people will get ludicrous amounts of payout from Social Security? Well yes, but they would have paid a lot in so its only fair.

That coupled with a progressive tax ladder (1% for the poorest working up to whatever is needed for funding) with no credits, no deductions for your typical wage-earner (or business - aside from work expenses). Applicable to any source of income, earned or investment.

Doesn't get much more fair than that. Plus it will greatly ease taxes for most Americans.

::EDIT:: Might also look into a 10-20% reduction in spending so that we can start making some payments on our debt, as long as we can grow our debt slower than inflation we will be making headway.