Fed Debt Components

[Guest]

I'm wondering, does it bother anyone else that Social Security and Medicare are part of the Debt talks?

They're separately funded programs. Social Security, in particular, has collected an excess $2.6 Trillion over the last few decades. It's an insurance program, and it's funded from the payroll tax. Calling it a tax used to be a misnomer. It was meant to be an insurance premium. Like insurance premiums, it's not deductible (most people don't realize they paid income tax on the withheld FICA all those years). Historically, there was an argument that it was taxable because, like other insurance, the benefits aren't taxed. We know that's no longer true.

Anyway, the payroll tax is dedicated to the social programs, Social Security, Medicare. It's extremely regressive. If you only make $1/yr, they'll withhold 7.6 cents. Many pay more payroll tax than income tax. It's only on wages, and only up to a little over $100,000. So it doesn't impact the wealthy class much. They don't pay after they hit the cap, and some truly rich escape even that through non-wages, dividends, capital gains, etc. It's also not middle class family friendly. A couple earning wages of $100,000 each pay twice what the individual earning $200,000 pays.

All that aside, the middle class has fully funded Social Security for 30 years into the future. Yet the debt talk is all about fixing Entitlements. We can't plan for next quarter, but we have to fix Social Security 30 years from now?

What they're really saying is we're never going to use the Trust Fund. Therefore Social Security is just another budget item. That being the case, why don't they just zero out the Trust Fund (that lowers the debt to about $12T), drop the unfair payroll tax in favor of the wider-base income taxes, and make Social Security pay-as-you-go, rather than pay-more-than-as-you-go.

[Guest]

1. The debt ceiling has been raised 3 times under this administration without a problem. It is only a problem now because the House wants to use it as leverage to address broader budget issues. This "manufactured crisis" is a stupid game that places the entire world economy at risk. We have already done serious damage to our economy as well as our leverage in the world with this silly partisan debate.

2. We actually have a very real budget crisis involving the nation's debt as a percentage of GDP as well as an potentially explosive problem involving the concentration of wealth and capital in fewer hands.

First, the debt. No party has the high ground on this issue. We were spent into a hole by the last administration and the bursting of the real estate bubble with the resulting Wall Street crisis made a bad situation worse. This is not Obama's debt or Bush's debt - this is our debt and we are all going to have to accept pain to resolve it.

That will mean higher taxes. Hopefully, this will be in the form of simplifying the tax code and curtailing deductions/subsidies - plus, lowering rates for small business as well as encouraging business investment in this country (no more PO box overseas tax shelters). Still, if you insist on 1950's tax rates, you better insist on 1950's government programs -- otherwise, you need to accept the hypocrisy in your belief system.

And -- of course, lowering the debt will require significant reductions in spending. And - those who think that entitlements and the military will not be touched have spent a day too long in Fantasyland. That is where most money is spent.

My own belief system leans me to look for discretionary spending cuts that weigh more heavily on those who can afford it. I think it is a mistake to cut spending in education (unless you like living in the third world) and in those government programs that protect our health plus those programs that root out fraud and abuse.

Those value judgment choices need to be made by folks who take governance seriously and who know the fine art of compromise and horse-trading. Ideologs need not apply. They will not help us get out of this royal mess we are in.

Lastly, the increasing gap between rich and poor needs to be addressed and soon. It is a social powder keg. Moreover, ours is a consumer-based economy. Want to get the economy moving again, shift some money to folks who will spend it instead of those who want to move more of their portfolio to gold. I'm not talking about handouts to the poor - I am talking incentives to move capital back into the system and into the hands of folks who will spread it around.

I am not a left-wing fanatic (well, not all of the time) - but, if you value your freedom and liberty you need to understand that you can't always keep what you want (Rollings Stones reference here). It is a lesson learned the hard way in France, Russia, and over and over in poorer countries.

Lesson over - class dismissed. Sorry for any hurt feelings.

Cheers!
Harbor

[Guest]

I'm wondering, does it bother anyone else that Social Security and Medicare are part of the Debt talks?

They're separately funded programs. Social Security, in particular, has collected an excess $2.6 Trillion over the last few decades. It's an insurance program, and it's funded from the payroll tax. Calling it a tax used to be a misnomer. It was meant to be an insurance premium. Like insurance premiums, it's not deductible (most people don't realize they paid income tax on the withheld FICA all those years). Historically, there was an argument that it was taxable because, like other insurance, the benefits aren't taxed. We know that's no longer true.

Anyway, the payroll tax is dedicated to the social programs, Social Security, Medicare. It's extremely regressive. If you only make $1/yr, they'll withhold 7.6 cents. Many pay more payroll tax than income tax. It's only on wages, and only up to a little over $100,000. So it doesn't impact the wealthy class much. They don't pay after they hit the cap, and some truly rich escape even that through non-wages, dividends, capital gains, etc. It's also not middle class family friendly. A couple earning wages of $100,000 each pay twice what the individual earning $200,000 pays.

All that aside, the middle class has fully funded Social Security for 30 years into the future. Yet the debt talk is all about fixing Entitlements. We can't plan for next quarter, but we have to fix Social Security 30 years from now?

What they're really saying is we're never going to use the Trust Fund. Therefore Social Security is just another budget item. That being the case, why don't they just zero out the Trust Fund (that lowers the debt to about $12T), drop the unfair payroll tax in favor of the wider-base income taxes, and make Social Security pay-as-you-go, rather than pay-more-than-as-you-go.

In fact, the trust fund is just another budget item and the public has no inherent right to tax contributions...see Flemming v. Nester -- http://www.ssa.gov/history/nestor.html

[Guest]

It should not be part of the discussions but I think the various governmental units threaten to cut the services they think the voters most want and not the waste, duplicate or poorly performing services.
SS does have a problem as do most pension systems. The government made promises that it can not keep. These have to be fixed so senior benefits have to be part of the long term discussion, but they do not belong in todays debt talks. Paying the SS benefits will not increase the debt limit. The government can sell some of its "lock box" treasury bills (reducing government debt) to the Federal Reserve. The Federal Reserve will print new money to send to the SS beneficiaries. Of course this will be inflationary but then the government has being doing this for the past year or two to finance the recovery programs.

[Guest]

It is wrong to cut Social Security and Medicare. We paid into it all our working years and we all deserve this money. Bring all the soldiers home. We are spending over a million dollars a day for the two wars. Get rid of loopholes for the rich and subsidies for the oil companies. Take care of the american people.

[Guest]

The people have spoken at the last election. New house members were voted in to stop the fiscal insanity. We borrow 40 cents for every dollar that goes out. There are no trust funds. This is a money-in, money out budget. The debt ceiling must stop where it is now. Cut backs on every line is needed. Federal government needs to shrink. Layoffs are needed.
If it takes a great depression to bring sanity back, so be it.

[Guest]

There is no sanity with default - or even a lowering of our AAA rating. To embrace this is to embrace the logic of suicide bombers.

Harbor53

Everyone who wants to do good to the human race always ends in universal bullying.
Aldous Huxley

[Guest]

1. The debt ceiling has been raised 3 times under this administration without a problem. It is only a problem now because the House wants to use it as leverage to address broader budget issues. This "manufactured crisis" is a stupid game that places the entire world economy at risk. We have already done serious damage to our economy as well as our leverage in the world with this silly partisan debate.

2. We actually have a very real budget crisis involving the nation's debt as a percentage of GDP as well as an potentially explosive problem involving the concentration of wealth and capital in fewer hands.

First, the debt. No party has the high ground on this issue. We were spent into a hole by the last administration and the bursting of the real estate bubble with the resulting Wall Street crisis made a bad situation worse. This is not Obama's debt or Bush's debt - this is our debt and we are all going to have to accept pain to resolve it.

That will mean higher taxes. Hopefully, this will be in the form of simplifying the tax code and curtailing deductions/subsidies - plus, lowering rates for small business as well as encouraging business investment in this country (no more PO box overseas tax shelters). Still, if you insist on 1950's tax rates, you better insist on 1950's government programs -- otherwise, you need to accept the hypocrisy in your belief system.

And -- of course, lowering the debt will require significant reductions in spending. And - those who think that entitlements and the military will not be touched have spent a day too long in Fantasyland. That is where most money is spent.

My own belief system leans me to look for discretionary spending cuts that weigh more heavily on those who can afford it. I think it is a mistake to cut spending in education (unless you like living in the third world) and in those government programs that protect our health plus those programs that root out fraud and abuse.

Those value judgment choices need to be made by folks who take governance seriously and who know the fine art of compromise and horse-trading. Ideologs need not apply. They will not help us get out of this royal mess we are in.

Lastly, the increasing gap between rich and poor needs to be addressed and soon. It is a social powder keg. Moreover, ours is a consumer-based economy. Want to get the economy moving again, shift some money to folks who will spend it instead of those who want to move more of their portfolio to gold. I'm not talking about handouts to the poor - I am talking incentives to move capital back into the system and into the hands of folks who will spread it around.

I am not a left-wing fanatic (well, not all of the time) - but, if you value your freedom and liberty you need to understand that you can't always keep what you want (Rollings Stones reference here). It is a lesson learned the hard way in France, Russia, and over and over in poorer countries.

Lesson over - class dismissed. Sorry for any hurt feelings.

Cheers!
Harbor

:BigApplause::BigApplause::BigApplause:

[Guest]

It is wrong to cut Social Security and Medicare. We paid into it all our working years and we all deserve this money. Bring all the soldiers home. We are spending over a million dollars a day for the two wars. Get rid of loopholes for the rich and subsidies for the oil companies. Take care of the american people.

:BigApplause::BigApplause::BigApplause:

[Guest]

1. The debt ceiling has been raised 3 times under this administration without a problem. It is only a problem now because the House wants to use it as leverage to address broader budget issues. This "manufactured crisis" is a stupid game that places the entire world economy at risk. We have already done serious damage to our economy as well as our leverage in the world with this silly partisan debate.

2. We actually have a very real budget crisis involving the nation's debt as a percentage of GDP as well as an potentially explosive problem involving the concentration of wealth and capital in fewer hands.

First, the debt. No party has the high ground on this issue. We were spent into a hole by the last administration and the bursting of the real estate bubble with the resulting Wall Street crisis made a bad situation worse. This is not Obama's debt or Bush's debt - this is our debt and we are all going to have to accept pain to resolve it.

That will mean higher taxes. Hopefully, this will be in the form of simplifying the tax code and curtailing deductions/subsidies - plus, lowering rates for small business as well as encouraging business investment in this country (no more PO box overseas tax shelters). Still, if you insist on 1950's tax rates, you better insist on 1950's government programs -- otherwise, you need to accept the hypocrisy in your belief system.

And -- of course, lowering the debt will require significant reductions in spending. And - those who think that entitlements and the military will not be touched have spent a day too long in Fantasyland. That is where most money is spent.

My own belief system leans me to look for discretionary spending cuts that weigh more heavily on those who can afford it. I think it is a mistake to cut spending in education (unless you like living in the third world) and in those government programs that protect our health plus those programs that root out fraud and abuse.

Those value judgment choices need to be made by folks who take governance seriously and who know the fine art of compromise and horse-trading. Ideologs need not apply. They will not help us get out of this royal mess we are in.

Lastly, the increasing gap between rich and poor needs to be addressed and soon. It is a social powder keg. Moreover, ours is a consumer-based economy. Want to get the economy moving again, shift some money to folks who will spend it instead of those who want to move more of their portfolio to gold. I'm not talking about handouts to the poor - I am talking incentives to move capital back into the system and into the hands of folks who will spread it around.

I am not a left-wing fanatic (well, not all of the time) - but, if you value your freedom and liberty you need to understand that you can't always keep what you want (Rollings Stones reference here). It is a lesson learned the hard way in France, Russia, and over and over in poorer countries.

Lesson over - class dismissed. Sorry for any hurt feelings.

Cheers!
Harbor
Thanks....this is very well put. I agree with you.