MaxedOutMama

Yeah, it is ugly right now.
 

innumerate progressives

Redundant. Numbers are like kryptonite to a Liberal.

The truth is, both conservatives and liberals, cooperating, steered the US onto this path of doom. It will take both, cooperating, to steer us off.

It can't happen with both parties bought and paid for and/or communist/fascist/statist. At least not by any political process I've ever seen.
 

Glorious Nightmare Scenario:

Nancy Pelosi stages a primary challenge to Barack Obama. Her running mate is Jerry Brown.
 

We are so screwed.

M.O.M.,

Indeed, we are so screwed! Strangely, a sense of freedom and liberty come with that realization! Perhaps, therein LIES redemption. If one can't reLIE on the welfare state then one won't. And if the welfare state loses its dependents, then the welfare state loses its power.

Mutually assured dependent destruction (MADD).

p.s.

We can easily "afford" social security - we've already paid for it. Paying for a replacement knee or hip for the last 6 months of every American's life is a different story.
 

Angry Saver, you are just not gettin' it.

Everything about federal accounting is due to change in a few years. Programs that are not sourced by a payment flow adequate to fund them will all be on the chopping block.

Once you can no longer borrow (for the US, between 2018/2019), the only thing that matters is cash flow.

And I can assure you that the federal workers and the military will come in ahead of SS recipients. And that will be enforced by judges, who (hah-hah) are depending on federal retirements themselves.

This election was largely about whether state retirees were going to get to the pool of federal assets before SS recipients. It turns out that, no, they are not. But still the problem of funding is inexorable; Social Security/Disability is running at a deficit now and will not come back into a positive balance before 2018.

It doesn't matter whether, in the past, current and new retirees have paid in enough to fund their promised benefits. What matters is whether we will have the funds on hand to pay those benefits when they need them, and it is now clear that we will not.

Therefore, you either take it out of other portions of the budget, or raise payroll taxes again. And since we always planned to default on Social Security benefits for people who would begin getting payments around 2040, it is highly unlikely that those who are assured of not getting much in the way of Social Security would agree to pay higher payroll taxes to pay benefits to others which they will, by law, not get themselves.

You are living in a fantasy world. There is no question that the US is going to default on promised retirement benefits to a bunch of people by 2025. The argument, and the reason that states are rolling red, is about who is not going to get their retirement FIRST.

Judging by what happened in PA, the first major group of retirees that will not get benefits will be Philadelphia retirees. After that, CA municipal and state retirees.

From there on, it's all up for grabs. Start thinking the unthinkable, because that's what's about to happen.
 

because American progressive thought has been seized by people who cannot add and subtract,

And they're deaf and blind. Too bad they aren't dumb: the polls taken at the time regarding Obamacare, the auto bailouts, etc. were all against the programs. The Dems went ahead and passed them anyway - spitting directly in the face of the electorate and then bitch and moan about how stupid the electorate is.

Eventually a third party will come into existence - it will be breakaway reps and governors from both parties forming it, so it will be the social and economic moderates that form it. The seed has been sown, but it won't mature and start bearing fruit for another 15 years. Essentially, the 2 parties will take turns shooting themselves in the foot until neither party can stand anymore.
 

If the moderates form a new party, they will have no choice: it will have to be fiscally conservative.

And a Pelosi run for the White House would be a good thing! She would stand on a base so deep it would be unshakeable and so narrow that Karl Rove could run against her and win. (Okay, now we are so screwed ...)
 

MOM said, "Judging by what happened in PA, the first major group of retirees that will not get benefits will be Philadelphia retirees. After that, CA municipal and state retirees."

Yes, that's the way it happens in a private bankruptcy. My old company's pension plan was approved by the bankruptcy judge to be turned over to the PBGC. The PBGC looked at the money available, the benefits promised, the ages of the recipients, and made the cuts according to some actuarial formula. Everybody gave some, many gave a whole bunch, but the benefits will be there. Many (myself included)had to lower our standard of living. Yeah, it is a B***h! You thought the benefits were there and would last, and then they weren't. But you cut ypur standard of living until income exceeds outgo. Then you watch your outgo very closely. You also pick up extra money with temp work, selling "things" that you no longer need, and trying to invest your assets carefully.

This is what awaits many public employees. It will seem bad, but it is not impossible and the sooner they adjust their thinkling to the new realities, the easier it will be for them to move on.
 

Well, Jimmy, see the next post. To an astounding degree, the voting in this election we just had correlates with hand-in-the-public-trough.

I think the GOP is not profiting from any wave of conservatism, but a wave of scared realism.
 

Charles and njcommuter:

I can square that circle. In 15 years, what we call fiscally conservative will be re-defined as fiscally moderate. It's an open question as to precisely how conservative we'll go--a flat tax is on the table for sure, maybe even a gold standard. By that time, people will be telling me I'm a liberal, I'm pretty sure.
 

If we have a gold standard it's either because a) the international community forces it upon us, or b) it's a taxation scheme by the central government (aka, those who are presently holding gold will have their gains capped by a government-fixed price).
 

Charles, I have no doubt that you are correct. It would take a lot for Washington to willingly give up the fiat dollar, and I don't actually think it's going to happen. But I'd bet people will be talking about it seriously in Congress within your time frame.
 

If the courts decided Federal employees had first claim on the revenues, particularly from Social Security, I would expect open revolt. I just cannot see the populace, having had 15% of their earning taken for their whole working life, allowing that to be given to Federal employees by the edict of the courts, courts which would have an inherent conflict of interest.

If it were not torches and pitchforks at the Supreme Court, White House, and Capitol, it would be the most massive tax strike in the history of the world. The Federal government would end up with virtually no revenues to pay anyone.

Of course that would lead to mass starvation as only those who actually raise food would have any.
 

Rick--don't be so sure. Out of the generation born after the early 60's, I've never talked to anyone who thought they would be getting Social Security. It's just accepted as a given that it'll be completely bust. People that age and younger probably aren't going to get up in arms about losing something they never had.
 

Rick - it's not a matter of having a claim to funds somewhere - the Social Security and Medicare "Trust" funds are a pile of IOUs from taxpayers.

And in fact, the courts have found that there is no "right" to Social Security, whereas in general it is legally believed that government workers do have a legal right to their retirements.

But seriously, dude.

There is absolutely nothing that would have produced the Dem bloodbath at the state level but the impact of the state fiscal crises, but of course the same is true at the federal level.

There are currently three lawsuits pending over states' attempts to adjust COLAs for state retirees. Article.
 

Also, more info specifically on the CO suit can be found here.
 

The COLA increases are insane. No private corporation that I know of has ever promised a defined benefit pension plan that included COLAs. What has been offered is a double plan. One a defined benefit that is assured for life (an annuity) and a second plan that is basically a 401k or IRA type plan that is invested to keep up with inflation. (Tricky, but doable with a bit of effort and good management.)

The COLA became the big rage back in the late 70s when we had high inflation and there was inflation of wages as well as prices. Inflation has been a relatively benign factor sonce the late 80s. Yes, there's been a bit, but a well invested stock/real estate/commodities portfolio has more than kept one ahead.

Government pensions should be a guaranteed minimum like an annuity with periodic 9every 3 years?) updates where, finances allowing, inflation adjustments could be made.

All of these pension problems would go away rather quickly if we had a roaring, three-year bull market. If the government moves to cure the anti-business bias of Obama and the Dems, such a market move is possible. A three year bull would also cure a lot of the job and tax receipt problems. In fact, increased business activity due to a pro-business stance by government is the solution to a lot of problems. The reason why Obama and the Dems don't want that to happen is that a lot of people who are in the right places or right investments will make a lot of money. Obama and the Dems find that "unfair." Meh!
 

M_O_M

I understand the SS and Medicare trust funds are just a pile of of special T-bonds that are backed solely by "...full faith and credit" and that there is no actual money. I also understand the younger people do not expect to get anythig out of SS, but I also claim those people do not expect to support their parents because the government took away SS and Medicare. As I understand the projections, after 2040, the income stream to Social Security will support 75% payments.

Further, I claim if the courts were to rule that the 15% payroll tax should go to federal retirees, there will not only be open revolt, there would be a "wave election" that put all previous ones to shame and that after that election, SCOTUS would be told their ruling was being ignored which would end their legitimacy.

Basically, I am taking issue with your claim the federal employees would be funded before the rest of the country.

BTW, the box that I can check to have responses sent to my Google account seems to have gone away in both Firefox and IE.
 

Angry Saver, you are just not gettin' it.

M.O.M.,

Your response is based upon bogus assertions founded upon bogus assumptions about cash flows, taxes, future CONgressional & Court decisions, etc. Is that all you can come up with?

I don't have time to refute all the inherent inconsistencies in your statements but I think a re-cap is in order.

This whole debate started when you cried wolf about the fact that the SS Trust Fund was founded on Government IOUs. I called bs and explained why the often repeated "the money was spent" statement was hollow.

Rather than admit you had been influenced by propaganda and that you had never even considered the foolishness of your line of thinking you proceed to turn all doctrines of debt, equity, seniority of claims, etc. on their heads. All so you can CONtinue to delude yourself that you are well "informed". It's unbelievable. Americans truly are "so screwed".

SS is in the cross hairs of Wall Street. It's the last big pot of wealth they haven't looted. Don't let others choose what team you are on and trick you into doing their dirty work. If you truly think we should default on SS promises at least come up with some sound reasoning.

p.s. Many of the "reports" claiming that SS is now cash flow negative are yet more propaganda. They were CONveniently issued just prior to June 2010. Why is June important? Because interest on the trust fund debt is only accrued twice a year and June is one of the interest accrual months. I know..... you knew THAT too.

I'm a simple person and I admit I don't "get" everything. But here's what I do get - if one is "informed" by propaganda, they're not informed at all. They're the "informed ignorant".
 

Angry Saver - no, I have always taken this position. I took it back in 1983, shortly before I ended up on the couch drooling. Sometimes it takes a person with a half-functional brain to see the blindingly obvious.

In 2004 and 2005 I was writing about this, and I took the same position.

If we had the money - or if we had the ability to borrow - your assertions would be quite correct.

But we don't.

The absurdity of your position is made clear by considering what would change about Social Security and Medicare financing if Congress were to repudiate the bonds in the "Trust Funds".

Abruptly, they would have no value at all and no interest would be paid on them.

Now I ask you, what would be the objective result? Please answer.
 

PS: Why don't you look at the September balances for Social Security by looking at the September (end of fiscal year) Monthly Treasury Statement?

It's here.

Income ex fed employer contributions is on page 6. Page 16 shows outgo. On page 17 you can find the amounts of the employer contributions from the federal government. Add, subtract, and tell me what you get!

When people were talking about OASDI running a deficit, they were talking about the primary deficit - income less outgo. From the point of view of fiscal stability, it makes no difference whether Treasury is paying interest to the fund to cover payments or the general fund is throwing in cash.

The whole idea of this was always that when OASDI rolled into deficit (where we are) we would borrow the money to pay for it. Unfortunately, we are very close to maxing out our national credit card, and that is why the Catfood Commission is giving us such a nice Xmas present. Somewhere around 20/20, we will not be able to borrow more funds, and then we will have to pay for the programs we want to sustain out of payments to the treasury.

Seriously, you are repeating the same mistake made by the funny-money lenders who figured people would pay the mortgages off their credit cards. Well, that did not happen, because people saw the endpoint, paid their credit cards, and defaulted on their mortgages.
 

And finally, Angry Saver, you might want to go through my post from 2005, in which I calculate that will hit the negative line in about 2015.

Well we made it sooner, but that is because the recession dropped the worker per retiree ratio, and that will correct up a bit if we don't get to Bernanke'd. But in 2015, it looks like we'll be negative and never correct until the boomer bulge passes through system and the worker/retiree ratio corrects on its own.
 

Rick - the courts will never rule that Social Security current payments should go first to recipients other than Social Security beneficiaries.

But that is why the question of whether those taxes are enough to fund current payments is crucial. And they are not currently, even if we just look at OASDI. There is a good chance we'll get back positive briefly, but by 2015 it looks like we'll be in deficit again.

So the question is over the unfunded portion of the benefits. We can only ensure that currently scheduled benefits are paid by legally allocating a stream of payments to them.

Legally, until the Medicare and Social Security Trust funds run out, retirees are entitled to their scheduled benefits. But that would mean that we would have to cut a huge amount from benefits going to other people, and the funding gap is such that it will be very hard to close.

The reason for the Catfood Commission is that the US budget can't be corrected unless we cut a lot of US entitlement programs for the middle class.

Don't forget, a big part of the health care reform was to cut funds from Medicare and shift those funds to pay for Medicaid. About 600 billion over 10 years. It's not as if we are not already doing this.

Also, we cannot balance the budget just by cutting benefits across the board to an actuarially sustainable level. The reason is that many Social Security recipients - about half - have very moderate retirement incomes and little in assets other than perhaps a house. So if we were to cut 25% of benefits from everyone, at least a third of recipients would then become eligible for various types of welfare programs, which would hardly balance the net budget.

The way we will eventually get out of this is to cut benefits to higher income recipients or to tax their other income more heavily, and that is well under way. For example, high-income retirees pay much higher Medicare premiums, and tax-sheltered income is taken into account when figuring their income.
 

M.O.M.,

The SS trust fund had $103 billion more in September 2010 than in September 2009. The fund has real assets that pay interest. To ignore the interest is to ignore the obligation - politically driven nonsense.

http://www.ssa.gov/cgi-bin/ops_series.cgi

You bought into the specious notion that since the trust fund money had been "spent" the trust fund assets were worthless. If that line of thinking holds, then all treasury debt is worthless - something the domestic and global markets clearly don't agree with.

Whether we should have ramped up the trust fund beginning in 1983 to pre-fund boomer retirements is water under the bridge. We did what we did. Trashing social security now is nothing but a giant public ripoff - a ruse designed to allow a small minority to deprive the majority. Like most political arguments these days, the SS debate is driven by propaganda not economics. Even with the recession, the SS fund's finances are sound compared to the rest of our eCONomies's debt issues.

If we can bailout trillions in phony wealth (much of which was held by the Chinese and other foreigners via GSE paper) we can certainly keep our promises to ourselves and pay modest retirement benefits.

They say the U.S. doesn't manufacture anything anymore. I disagree. We manufacture propaganda like no one else.
 

M_O_M,

I don't think we are actually disagreeing after all. I had misread your initial post and thought, obviously, you were arguing rather than pay SS and Medicare that money would be funneled into pension payments to federal employees. Sorry for the misread.

I don't have a good feel for what the Medicaid burden on the states will be, but ObamaCare is double counting the $.5 trillion to be saved, somehow, from Medicare. On the one hand it is to be used to extend Medicare and on the other to fund newly insured under Medicaid. I will do some more research, but I have a feeling the burden on the already bankrupt states will hasten their bankruptcy.

The current estimate is the expansion of Medicaid will cost $410 billion or just about all of the $.5 trillion to be saved from Medicare.
 

@Angry Saver,

I really don't think you understand the depth of the problem. By 2020, the US is projected to have a national debt of $20 trillion. At 5% interest, that means interest payments of $1 trillion. We currently have a budget of a little over %3 trillion. So, interest payments on the debt would be about 30% of the total federal budget, but even then, that posits deficits of about $1 trillion. There just is no money to pay back those special treasury bonds or and other treasury bond.

The problem is not that there isn't a Social Security surplus. The problem is there is no money to redeem those bonds. It is like the guy who lost his job and now cannot pay his mortgage. There just is no money to pay the mortgage no matter how badly he wants to pay and no one will lend him the money to make the payment.

The argument the surplus has been spent has always been about the inability of the Federal government to come up with the money to pay back those bonds. It is not that they don't exist or are not real debts. It is a financial impossibility to pay them back and still do the necessary functions of government.
 

It's also an argument about what one generation owes to the next. AS's implicit position is that since he paid 15% tax for his parents' retirement, the next generation should willingly pay 33% for his.

My guess is that not many youngsters will follow that logic.
 

Angry Saver - I think the truth about Social Security is important because it implies that in fact we do have a special moral obligation to pay Social Security benefits as planned to at least the lower income third.

In one way, of course it is water under the bridge. In another way - a much more objective way - it is not.

We took, by action of law, a very large percentage of lower-income people's earnings. We then spent it.

We do not have the moral right to then turn around and say "Hah-hah, the joke's on you!"

If we do not act to generate the dedicated revenue stream, what will happen is that lower income people will be the worst hurt. I am arguing against that, and for recognizing the truth of what we did.

We basically used the surplus of Social Security to fund tax breaks for the middle class and the wealthy, and in doing so, we have created a terrible situation. A poorer person didn't get the benefit of the IRAs and no AMT bonds and the 401Ks. We prevented a lot of poorer people from being ABLE to save AT ALL, and now the proposal being pushed is to just screw them again.

This was never right. We should absolutely raise taxation on people with more wealth, especially retirees, to fund full Social Security for the beneficiaries receiving lower benefits.

In 2004 I pointed out that the net effect of the Social Security 1983 Bipartisan was to tax a staggeringly high proportion of the income of lower earners. Here that post is.

The thing about lower income workers is that they just did not have the surplus to be able to save very much, much less to be able to take advantage of tax-free savings.

Therefore, I claim that we have a moral obligation to this class of people, and current plans to apply an even cut in Social Security benefits across the board are grossly unrealistic and morally untenable.

Sorry, we busted them, we owe them.

It is only right to impose a tax - it could be a small percentage for most people - on tax-advantaged earnings over a certain amount annually, and to shift those funds to Social Security to maintain full benefits for people who earned the least.

All current proposals I have seen essentially disregard the fact that the US has been engaged over the last few decades in a bipartisan class warfare against a class of our citizens.

Taxing capital gains is a bad thing, because it cuts growth and jobs. But taking some of the benefits back which were granted in a very skewed and unrealistic manner is not, and it can be done in such a way that we do not overall injure our economy very much.

The other way these folks are being beaten to death is via our "alternative" energy subsidies. We need to sit down and take a hard look at that.
 

And another thing, Angry Saver.

The last thing we need to do to solve a problem created by regressive taxation is to create a system of additional regressive taxation.

The early proposal in the Obama administration was to implement a national sales tax or a VAT. Oh, great. So now we tax the person making 20K a year some more.

Oh no. That does not fly. If the Democrats can't be Democrats than a new party will have to emerge that can at least add and subtract.

Rick is quite correct. Even at the massively low interest rates the Fed has engineered, interest on our debt is rising rapidly because our total debt held by the public is galloping upwards. By 2020, it's game over. At that point we will default on Social Security. Before that happens to everyone, I want an adjustment, and I want it in real money, not mythical bonds.

We cannot pay back these obligations. We must recognize this, and take steps to protect those who have no other option and recourse.
 

"All current proposals I have seen essentially disregard the fact that the US has been engaged over the last few decades in a bipartisan class warfare against a class of our citizens.

I would argue the middle class and below were completely ripped off while being placated with consumer non-durable bling sold on installment plan.

The jobs we couldn't export, we imported in aliens to do the work for a fraction of the cost.

On the radio this morning, I actually had to listen to some effing economist argue outsourcing, most people's primary economic fear, shows how stupid they are because nothing in the precipitating financial crises was is the result of outsourcing employment.

WTF, how does one answer somebody that dense? Did the current account surplus from outsourcing to China not affect interest rates? Did hollowed-out manufacturing not make construction the only source of employment available to a large class of workers, and thus give the economy nothing to fall back on if the construction sector took a breather?

More to the point, I'd like to ask him is he really that stupid, or like Walter Duranty, has he been bought off? Given his venue I think it's the former.
 

Bear with me, I'm on a roll...

placated with consumer non-durable bling

which was driven by technology developments in plastics and semiconductors.

Oil's no longer cheap, and the semiconductor revolution is mature. So what's next?
 

Next: Energy.

Everybody used to say biotech, but health care is all balled up in red tape. Energy is getting subsidies, but there's not much regulation that would disrupt a business plan that actually delivers cheap energy. On top of that, there's lots of research money getting dumped into the field. Sooner or later, something will connect.
 

Hey, there's already a collectibles market for vintage plastic artifacts. It gives a whole new ambiance to trash-picking. You just tell people that you are recovering valuable hydrocarbon resources.

The more of a services economy we become, the longer the "jobless" recoveries stretch out and the more bling the Fed throws in to try to stimulate us into spending. So we move from one bubble to the next.

But I think the next one is the last one.
 

Neil - that, or we don't back off our current no-energy policy and the next big thing in energy becomes India-style home and business generators.

Now that wouldn't be efficient, but it certainly would make us all spend some money!
 

M_O_M, you have it precisely. I've been preparing for just that for 15 years. Not in the sense of hoarding diesel fuel, but in the sense of studying the technologies required. The grid is maxed out, at least politically. Grid-tie distributed generation is too chaotic to be more than a small percentage of the total sources. Decentralized energy production and usage is the way forward.

In other words, the future of energy production will be in the white-goods department at Sears.

In some ways, it's less efficient. But it's much more robust.
 

"But I think the next one is the last one."

Ha! I thought each of the last two (stocks 98-00 and houses 03-07) were the last one.

I do agree a currency bubble shall be the last for a very long while.


BTW, that was me on the roll. Didn't realize I posted as Anon.
 

Neil, while I think one could quite effectively steal the wealth of the middle class through energy policy, you're not going to keep them remotely placated while doing it.

That was my point about cheap consumer gizmos. People didn't notice their wages were stagnant for 30 years because their TV kept getting bigger and brighter.
 

MOM said, "This was never right. We should absolutely raise taxation on people with more wealth, especially retirees, to fund full Social Security for the beneficiaries receiving lower benefits."

So, where does the cutoff come for "wealthy" retirees? $25,000,
$ 50,000, $75,000 $200,00, or ???

My brother and sister-in-law never made big money. They both worked, lived within their means, saved, and now have a comfortable retirement. They have Medicare Advantage for their healthcare and will get that cut under Obamacare. Should the Feds also adjust their SS downward? Or just tax more of it? Or raise their taxes on their pensions? (Guess who votes in greater numbers than anyone else in this country?)

My situation is a bit different. Even though my company pension has been cut, I have SS as a supplement. In addition, over 25 years I managed to accumulate a decent IRA from which I now must take annual minimum payments. I pay taxes on 85% of my SS, should I pay on all of it? I pay taxes on 100% of my IRA withdrawals even though a good part of them are long term capital gains? Should I have to pay additional taxes on gains made inside my IRA?

Both my brother and I worked hard, saved, and knew we would need something to live on in our old age. Yes, I could get by without SS, but I paid into it for 48 years and I have always voted for politicians that wanted less government and less government spending. In other words I have always voted for fiscal sanity that would insure the stability of SS and Medicare. Fat lot of good that did me. Now I'm old and the government considers that I'm too much of a liability because my medical care costs too much. Their solution - tax me more and ration my health care. Thanks, from a veteran and citizen who has always tried to play by the rules.

There is a way out of this. Cut spending at all levels of government. Not drastically - just stop the increases and hold the line for three years. Start cutting unnecessary departmets. Education, energy, agriculture, (all failures in doing what they were set up to do)and HUD. Quit putting new people on SSI - it's a welfare program for mostly parents of immigrants. Close the border to Mexico and quit paying for illegals in schools, welfare, and medical care. Get the extractive industries (oil, gas, coal and lumber) moving again. (Stop the eco-terrorists from tieing these indiustries in knots with law suits) Revive nuclear power production in this country. (Our economy floats on a sea of reasonably priced energy.) Cut corporate income taxes to 10% or less. (Corporations don't pay taxes, their customers do.) Low taxes for corporations would repatriate a lot of jobs. Get government and evironmentalists out of the way of businesss. The solution is to do what the U.S. knows how to do and that is create more wealth. When there is more wealth everyone benefits.

Congressman Paul Ryan has a rational plan for getting entitlements under control. If he is not given a fair hearing (Obama brushed off his health care reform ideas - which were far superior to Obamacare), it will be a tragedy. There are solutions, but what we are seeing is an economy that can't recover because of an anti- business government and a FED that thinks QE will actually create an incentive for new jobs. No, QE is creating a commodities boom that is going to sink business because they cannot raise prices to pass the costs on to customers. Meh!
 

Speaking of energy, we watched a 2008 Top Gear last night. They showed the hydrogen car owned by Jay Leno, built by Honda. It's the perfect solution for our energy use, at least as far as transportation. Yet I've heard little about it over the last two years. Instead, we get more expensive light rail/mass transit systems.
 

Teri: Sadly, no, it's not even close to perfect. At least not yet. Not until somebody comes up with an economical way of storing and transporting hydrogen. There are technologically feasible ways of doing it, but they're very expensive in material costs.