All you financial gurus....
 

PLEASE tell me why I should not be scared to death.

The two articles below are certainly OPINION pieces but they sure do strike a bad future for our economy.

The first is from a well known economist, who admittedly has a "horse in the race"......and from Bloomberg...

"With California mired in a budget crisis, largely the result of a political impasse that makes spending cuts and tax increases impossible, Controller John Chiang said the state planned to issue $3.3 billion in IOU’s in July alone. Instead of cash, those who do business with California will get slips of paper.

The California morass has Democrats in Washington trembling. The reason is simple. If Obama’s health-care plan passes, then we may well end up paying for it with federal slips of paper worth less than California’s. Obama has bet everything on passing health care this year. The publicity surrounding the California debt fiasco almost assures his resounding defeat."

http://www.bloomberg.com/apps/news?p...d=aTKrn1jUJwdE


The second article comes from the UK, and as I said, both of these articles are slanted a bit in my opinion and that is why I would love to hear the TOTV resident economic folks give comments.

"The US economy is lurching towards crisis with long-term interest rates on course to double, crippling the country’s ability to pay its debts and potentially plunging it into another recession, according to a study by the US’s own central bank "

http://www.telegraph.co.uk/finance/f...to-double.html

Bucco, I am anxious to read what response comes to this thread.
 

I would point out you refer to the possibility of another recession.....the current debate is whether the current recession has even bottomed out yet.
Perhaps you had another thought.

My contribution to your question: There is absolutely no discussion ever....by anybody....about repayment. In fact the trend is spend only.

Add to the spend only the willingness of the current administration to commit tremendous amounts of money with no accountability, no expectation of results, no discussion about repayment, no ability to track where the money went, continuous loss of employment.....the ONLY responsible financial conclusion is we will never be out of recession under this POTUS unless something drastic changes.

Now add the wild card of a terrorist attack on one or more of America's big cities and the future ranges from bleak to hopeless.

I hope to be proved wrong.....but doubt it.

btk

Your reference to a calamity of some sort just gives me so much angst. We discuss today on here..."silent majority" and participation on the forum...for the life of me I cannot understand how you cannot be concerned with our direction and financial woes, and only about Sarah Palin. It is as if we expect magic to happen. We have no money and are continuing to plan to spend.

We are basically giving this country away and nobody seems to care !

PS: To those who think that everything is anti Obama....HE is the President thus anything that is not good will be perceived that way...sorry, that is just the way it is. THIS IS NOT ANTI OBAMA.....JUST MY CONCERN FOR OUR COUNTRY AND ITS FINANCES ! I consider this more important than Sarah Palin !

Uncle Jay..News so you can Understand
 

Not sure what this has to do with our countries financial situation but whatever !

I apologize Bucco...It has absolutely nothing to do with finance but I had this compulsion to post it somewhere..so I took the liberty..
And now back to our regularly scheduled post on finances....

PS. I had a good link this morning about the current situation...I'll see if I can find it...

nope, I agree, you should be scared.

Anybody shifting investments to TIPS?

No Justification For Deficit Spending, But...
 

Much of the effects of the deficit spending done by Congress in the last decade or so can be offset by increasing the marginal tax rates. We raise about $1.5 trillion in personal income taxes each year, so inceased taxes along with some reduced spending can resolve the deficit pretty quickly. No one will like a tax increase and such a move would be political suicide, but our fiscal problems are far from insoluable. Even if a significant tax increase was enacted, the result would likely be far from the highest marginal rates ever experienced in the U.S.

All I'm saying is that there is a solution to runaway inflation and skyrocketing interest rates--inreased taxation. Maybe it will take the political outcome of such a thing to return Congress to true fiscal conservatism.

The ship of state changes course slowly--but change it will.

I find it hard to give more money to the government when they are nothing more then spendaholics. Like you say , it would be easy to reduce the deficit but we part ways on how to accomplish it.
I know this is rather simplistic but if you have a household budget, you try to balance it at the end of every month, right? In most cases you cannot go to the source of your income, be it your employer or SS or pension, or a combination of all, and ask for more money to balance your checking right?
You know..deep down I think some or maybe the majority would like to pay a little more if they really thought the money wasn't going to go into a rat's hole.
Give an example from here in Massachusetts: Our state is in deep debt, just like many other states. Anyways, they just raised our sales tax and are looking for more ways to raise revenue. Well, guess what our esteemed governor tried to do a few weeks ago until it got out into the newspapers? He put his unemployed neighbor on the payroll for an annual salary of over $200,000 for a position that was vacant for over 11 years.
He got caught and the red-faced governor had to un-hire his buddy. This crap goes on and on and on..This is just a small time example of the billions of taxpayer money that is thrown around the USA.
My personal opinion is that we should not be feeding this monster. Government needs to tighten their belt and reorganize their budget just like corporations do when they are in trouble.
Don't feed the government....Restructure the government!!!!!

Well put, Keedy. Don't think that anyone can argue with that advice.

Who killed California's Economy?
 

Thank-you barb1191

California once boasted of having the 7th largest Gross Domestic Product in the world. Check out this link and note, also, that California has 365,000 "workers" and unions.
http://www.newgeography.com/content/...ornias-economy

It Ain't That Easy!
 

Easier said than done, Keedy.

Total federal expenditures in 2008 amounted to about $2.55 trillion. Here's a real rough breakdown of where the money went...

• $660 billion in Social security payments
• $790 billion for the Defense Department, Veteran's Affairs and Homeland Security
• $550 billion for interest on the national debt
• $550 billion for everything else the government spends money on

So...taking your sound advice to heart, Keedy, where do we cut? We can't do much about Social Security and that problem will get worse as the baby boomers get older. Stop paying the interest on the national debt? Maybe issue IOU's like California? Substantially lower defense spending? Or cut back on Veteran's Affairs? Would we feel "safe enough" if we took a big cut out of Homeland Security?

Like I said, Keedy...it ain't that easy. Accomplishing the goal of a balanced federal budget would require almost a 100% cut in spending in those areas that are "controllable" (Defense, Veterans, Homeland Security and everything else). Not much we can do about interest on the national debt or Social Security, is there? Bill Clinton was pilloried, mostly by the conservative right, when he cut defense spending and the expenses of what is now Homeland Security. A look at the numbers shows pretty clearly why he chose those areas to cut. It's also pretty easy to see why George W. Bush handled the financing of the Iraq War outside of the normal budget process. To include those costs as we do now is simply too alarming!

And guess what? With the legislation passed recently and that being considered currently (the stimulus, the omnibus spending bill and now healthcare reform), the amount of annual federal deficit will skyrocket dramatically.

I invite everyone here to present a federal budget they'd be comfortable with, including how much more in taxes you'd be willing to pay. Don't skip the tax increase, because I guarantee you our fiscal problem cannot be solved without more revenue! You won't hear those words from any of our feckless members of Congress, but I can say these words with impunity because I'm not running for any office!

P.S. This may be the first time in modern U.S. economic history that getting out of wars has a more favorable impact on our fiscal problems and our economy than getting into them.

Well VK That 550 Billion for "everything else" sure leaves alot to play with. For example: California

http://www.dynamist.com/weblog/archives/003014.html

Because of unions and politics it cost $45,000 for every prisoner in the California Penal System.
About the same price annually to send a kid to an expensive college.

Us debt clock
 

Medicare fraud was over $60Billion in 2007, so I doubt it was much less in 2008. Half of that alone in prevention and recovery is significant.

A 1-2% reduction in defense spending is realistic. This should be realistic, and as one example of that happening, the quadrennial Defense Base Closure and Realignment Commission (BRAC) recommendations show approximately $35Billion in savings over 20 years by the latest round of consolidations.

A single read-through of the Plum Book makes one wonder why many federally-funded organizations and agencies exist. Examples of some that could be eliminated (and their costs removed from the budget) include: Barry Goldwater Scholarship and Excellence in Education Foundation; Christopher Columbus Fellowship Foundation; Harry S Truman Scholarship Foundation; James Madison Memorial Fellowship Foundation; Japan-United States Friendship Commission; Millennium Challenge Corporation; Office of Navajo and Hopi Indian Relocation; President's Commission on White House Fellowships; Presidio Trust; and United States-China Economic and Security Review Commission.

That's some of the places where "efficiency in government" is obvious and necessary.

When you give the Congress more money, they spend it on pet projects before they will ever look at it as targeted solely for debt reduction. Just the vernacular they use when a tax reduction is proposed - How will we [the Congress] pay for a tax reduction? - indicates they have it backwards. So, a tax increase is actually counter-productive to the reality of government spending and budgeting.

Before another dime is sought from the taxpayers - regardless of which tax bracket is the target - the Congress and the Executive Branch need to take the paring knife to the federal monstrosity and get rid of what is no longer needed, really go after fraud and poor management, and
run it like the business it is.

Throwing more money at a problem by itself does not cure it. All that happens is that the problem just adds more gilt to its edges.

:agree: Indeed they do, Steve. The whole thing needs massive restructuring. Send the whole Federal budget into bankruptcy court and start fresh. If that means massive lay-offs...so be it. Put them all back to work in the dreaded private sector and start manufacturing again. Boycott Walmart and buy American again.
This "service nation" experiment is, and will be, a massive failure.:blahblahblah:

OK..You can come out now...Rant Over:beer3:

Probably Not a Very Good Question
 

But, couldn't lots of money be saved if the perks were cut from both factions of Congress? Why does everyone propose freezing wages, cutting salaries, fewer benefits, etc. without addressing those people. Their compensation packages are ridiculous beyond belief, yet are never mentioned. How about a movement along those lines. What's good for the goose........

Please understand, Keedy, that the "everything else" funded by the $550 billion includes...

• Department of Agriculture
• Office of Personnel Management
• Department of Labor
• Department of Education
• Housing and Urban Development
• Department of Justice
• Department of Energy
• NASA
• Department of the Interior
• Environmental Protection Agency
• State Department
• Department of Commerce
• National Science Foundation
• Expenses of operating the U.S. Capitol and Congress
• Office of the President
• Corps of Engineers
• And several other smaller independent agencies.

Like I said, simply cutting and slashing government spending won't be all that easy. Even relatively small cuts to the agencies and departments listed above would result in many, many gored oxen. That's not to say that lots of oxen should be gored. I'm just saying it isn't as easy as it's made out to be.

Dilly, if we were to eliminate ALL the perks and benefits provided to members of Congress, the savings wouldn't be enough to buy even one of the F-22 Raptor fighters that DOD says it doesn't want or need and that Congress voted for anyway.

Steve, if we were able to eliminate all the Medicare fraud (although I don't now how) and save the $60 billion, add in the $30 billion from a 2% cut to DOD and simply eliminate all those foundations and agencies you mentioned (they fall under the "independent agencies" category) with total cost savings of of about $40 billion...we've saved only about $130 billion, less than 10% of the federal deficit projected for FY 2009. Where do we get the REAL cost reductions? A whole lot more than a 2% cut to DOD? Some serious means testing for Social Secuirity? A really serious reduction in government-funded healthcare benefits? A major whack at the Department of Health & Human Services, like slashing the budget for the FDA, the Center for Disease Control, Medicare and Medicaid previously mentioned, maybe eliminate the National Institute of Health, simply whack the departments addressing family services and problems of the aging. We can get along without NASA and maybe the Corps of Engineers, can't we? How about making the national parks float on their own bottoms and fund them totally with entrance fees? Why do we need national public radio? Let the states build the interstate highways. If they can't afford them, drivers will need to learn to avoid the potholes or the dangerous bridges. Why can't the airlines fund the operation of the FAA? They're the only beneficiaries. Why do we spend so much on NTSB trying to figure out why planes crash? It won't bring the victims back to life. How about OSHA? Let the employers police worker safety themselves. If they do a lousy job, the free market will increase their insurance premiums and workers will steer clear of working for them. Might be a few people killed in the process, but so what? We simply can't afford such government intervention in our lives. Speaking of another branch of government--can we really afford all those federal judges, courthouses, staff, etc.? Would anyone care if court backlogs were increased a lot? Hey, that might be a good justification for tort reform!

These are the types of cuts that will be necessary in order to achieve a meaningful reduction in federal spending. Are Americans ready for such reductions? Like I said, lots of oxen will be gored. Gored? Heck no...lots of oxen will be killed.

Short of all that, get ready for some serious increases in income taxes, something we've avoided for a couple of decades, even as our spending has increased so dramatically. The time may have come when the piper will have to be paid.

Anything worth doing does not come easy. Merge and cut..merge and cut...merge and cut...Completely eliminate the Dept of Education...Cut the politics out of EPA and use real science. Cut money that supports ACORN or any other political scam programs...There's tons of wasted "jobs" that are created by hacks for hacks.
I'll have to investigate further and report back.:crap2:

Like I said, Keedy, cutting the federal budget will not be an easy job. Seriously cutting the federal budget will certainly change our way of life.

Maybe everyone reading this thread ought to do as you suggest and "investigate further and report back". I'm certain we're all going to find that it's not an easy project.

Continuing to feed the ravenous beast of Government with more and more tax revenues will accomplish nothing unless the direction is first changed. Today. the average national government employes earns twice what employees in the private sector earn. The easiest way to start to cut costs is to (1) freeze all government hiring except for the Military; (2) Start systematically eliminating entire operating branches of the government (National Park Service, the entire Dept of Education, all backroom processing activities of the IRS, all activities of the Department of Agriculture that are not a part of direct interface with American Farmers, Bureau of Prisons, etc); fire all government employees now employed in these positions and contract with private companies to do the work with savings shared with the US People. If the existing govt employees are good enough, they can be hired by private contractors, if not, then we are better off having them off our payroll. This cannot be done by government agencies - if any of you remember Al Gore reengineering govt and the savings he claimed, you can discover for yourselves that well over 100% of the savings came from slashing the number of Military personnel, reducing our fleet by several hundred ships, etc. All this came back to haunt us during Gulf I.

Private Sector Analysis...Future Gloom
 

Future Gloom
 

The article is correcto-mundo, Keedy.

Once the Fed cuts the short-term rates to zero or near zero, that's one more tool in their arsenal to control or encourage economic growth that isn't working. And it's one step closer to increased taxes. Once the traditional tools used by the Fed don't work anymore, it's time to balance the budget--either by spending reductions, which are difficult as I've pointed out, or by increasing taxes.

Interestingly, we should be paying attention to what economic tools are working and those that don't seem to be effective anymore. The long-held theory has been that reducing interest rates will hype spending on capital goods, either housing, cars or major appliances by the consumer, or capital spending by corporations. Rates are near an all-time low right now and not too much increased spending has resulted. Maybe those with their fingers on the pursestrings have become motivated by something other than interest rates. Someone better find out what it is--in a hurry!

Proposals Anyone?
 

I tried to solicit proposals for balancing the federal budget with little success here. How about this...

An across-the-board 10% cut in the budgets of the Defense Department, Homeland Security, and ALL the other agencies of the federal government. That leaves interest on the national debt and Social Security untouched--for the moment anyway. It would include a 10% mandatory cut in Medicare payments.

Heck, we've all worked in companies that at one time or another, we experienced 10% cutbacks. Why not the government?

The spending reductions would total about $1.35 trillion. That's about the amount of the deficit last time I looked.

What do you think?

What I mentioned was a start, but it can go a lot deeper than that without meaningful change in our way of life.

You can go into any one of the "deparments" and make cuts in the headquarters and agencies which would not affect their operations an iota. Each headquarters is staffed with congressional liaison, policy, public relations, and similar types which serve no purpose other than to publicize the department/agency. Having them at the "Department" level in competition inter-departmentally is wasteful enough, but having them at every subordinate agency as well is downright sloth.

Want a real laugh - go to the Government Printing Office and review what is published, who gets it (in copy-counts in the thousands) and how much of that just gets thrown away because nobody ever really wanted or needed the product. But, agencies blow fortunes there on publications which for the most part do nothing other than tout the political appointee heading the agency.

Another ROFLMAO would be a trip to the General Accounting Office just to review the list of vacant office buildings (rented and owned by the fed), as well as the list of upcoming construction projects which are already superceded by events, but still under contract to do. Yet, this waste continues because some congressperson's backer is the recipient of the funds.

The easy way out is always to raise taxes. That's what monopolies of needed products do rather than get more efficient. The Fed needs to act like a competitive business would - constantly reviewing costs, getting more efficient to reduce overhead - in order to keep the cost of their services/products more attractive than the competitor. Until that mindset occurs - and something has to make that happen - the easy way out is to dump it on the backs of the public - just like in feudal times!

But no government ever tightens it's belt. All they do is increase taxes. Never even look at the cost side. Look at your property taxes every year for the past 10 years. There will be headlines when "the rate" goes down. But the amount of money you pay still goes up because your property value went up. Then the bottom falls out of the housing market. The tax base drops. Never even a discussion about also cutting cost. Just "we need to raise the rate" because values have dropped. I have worked for several companies over my career. Every time revenue drops, we find ways to reduce cost to maintain margins. Same with the home budget. But never with government.

Until they do I will not support any tax increase. If they made a concerted effort to decrease spending, I would support a tax increase to balance the budget. But the way you want to do it VK will cause more problems. Tax increases will cause federal revenue to drop unless the economy is growing. Just go back a few years to Jimmy Carter. Exactly what he tried. Inflation and unemployment went to double digits, and interest rates hit very close to 20%. That is where we are headed again and no one will even go back to look at why it happened and what can be done to prevent it. I have zero faith in our elected officials. They are there for the power only. They all must go ASAP.

How about eliminating the so called Czars, their staffs,
 

their offices, their benefits? These are nothing more than short cut organizations around other organizations already in place to do the very same thing. They also allow the bypassing of Congress in specific instances as the report directly to the POTUS. So we have an oblique message that they too know the Congress is an ineffective body. And like most big organizations....they never fix or eliminate what does not work...they just add staff around it....hence gargantuan increases in spending. This usually gets caught sooner or later in organizations that need to show a profit. In the case of the government....the sky is the limit. No end to their money supply....no accountability for spending....and no objections from the constituency.

I would love to see a survivor mentality approach be taken by the government as is done by big and small for profit businesses every day.
Unfortunately the incompetents in Washington are not capable.

btk

Just want to give kudo's to 4 consecutive posts. Great ideas and articulated very thoughtfully. Do not have much to add as I have had other coals in the fire this morning.

Seems to me that there are two things that really need our attention.

Jobs......Real jobs that don't have the government emblem on the paychecks.
Government restructuring...A better system that utilizes our hard earned money efficiently.

The Villages Is Different, Of Course
 

My property taxes here in the Sumter County part of The Villages have decreased--both the millage rate as well as the actual tax bill--each of the years that we've lived here. Since "One Sumter" was passed, the new group of County Commissioners seem to be doing an outstanding job of controlling county spending while at the same time maintaining or even improving services. I've attended several commissioner's meetings and it's pretty clear that they give each and every dollar spent here serious thought, considering all the alternatives available.

Don't get me wrong. I know that the primary reason why our property taxes have declined is because tax revenues from the fast-growing Villages part of the county are increasing far faster than the county budget. The "truth" will be told when the population of the county stabilizes, of course. But in the meantime, we enjoy our little "bubble" of prosperity here in central Florida, where many of the experiences that we've come to expect from government don't seem to apply here.

There is a good article in today's Daily Sun which demonstrates how gov't can "tighten it's belt". Sumter county made massive spending cuts to avoid any tax increases. Very impressive.

Glad there is at least one exception to the property tax growth across the country. But as you pointed out, once TV stops building 3000 new homes a year to add to that tax base the problem I stated will return. In fact it might even be worse then other places. The county government is by now probably addicted to the tax base increase and spending the money almost as fast as it comes in. When compared to most other places in the country, the counties that make up TV should be providing great service at very low rates. The biggest portion of county taxes in the rest of the country go for schools. Don't know this, but my guess is the per capita student to resident ratio in those counties is much lower then the national average. Unless there is something going on there I don't know about. :confused:

Finally some good news
Boy we could use much more. :beer3::beer3:

Kahuna, given your analysis of our nation's fiscal dilemma, is it prudent and good government to be implementing Obama's National Health Plan at this time?

Fix the Economy
 

Never thought I would post a Jon Stewart video but the link was on a conservative site:

http://www.thedailyshow.com/video/in...ix-the-economy

Without commenting upon the people who understand the economy far better than I, may I say that link was hilarious. The Daily show is a national treasure, not because of the views of Jon Daily, but because of his wonderful sense of humor. I try to learn to laugh at myself as much as I should. When I do not, JD provides a perspective that we need.

I don't know. I haven't studied the content of the proposed bill enough to understand it.

On second thought--yes, I do know. As much as I think there should be healthcare for a bunch of people who don't currently have it, unless our Congressional geniuses can come up with a way to make the proposed legilslation "deficit neutral", then enacting it now is a lousy idea.

From the little bit I'm hearing on the news coverage, that seems to be the direction it's going. I don't think even the huge majority of Congressional Democrats would have the guts to pass a bill that added over a trillion dollars to the national debt right now. Then again, maybe I'm giving them too much credit for their intelligence. If we don't already know that we need a new "435", that move would put the icing on the cake.

P.S. Keedy, that was a good segment from The Daily Show. I try to watch him as often as I can. Believe it or not, I think he often presents a view of the news in a way that a whole lot of people often agree with. And he makes you laugh while doing it. From the times I've watched him, he doesn't seem to lean left or right. If some politician does something really dumb, he leans on them. Like he said in the segment you linked that was critical of President Obama's "renaissance man" mentality, "...that's nice, now fix the economy."

A Socialist Economy
 

The best way to determine where a nation is on the capitalist/socialist scale is to measure how much of it's economy is in the public sector. In other words, what percentage of its GDP comes from government spending.
The USA is 9th on the list with 36.4% and Sweden is the highest, number 1 on the list with 57.0% of their GDP that goes to their government.

Total U.S. GDP $ 14,000 billion
Total government spending $ 5,096 billion (36.4%)

Additional government spending under Obama


Stimulus package $787 billion
Supplemental appropriations 410 billion
Estimated health care spending 625
------------------------------------------------
Total new Obama spending $1,822 billion
New percentage of GDP from government 49.4%


Where U.S. government once accounted for 36.4percent of our economy, it is now rising to 49 percent---sending us soaring past Britain and Germany and nestling right under France---the very model of a modern socialist democracy!

So, when it comes to Barack Obama's spending programs "socialist" is no political slur. It is a simple description.

List of Nations
 

TOTAL GOVERNMENT SPENDING AS A PERCENTAGE OF GDP

Sweden..............57.0%
France................54.0%
Italy...................48.6%
Netherlands..........47.1%
Germany...............47.5%
United Kingdom......43.7%
Canada................40.1%
Japan...................37.5%
United States........36.4%

Figures Don't Lie...
 

C'mon, Keedy. Let's be fair with the numbers.

The financial stimulus was passed at the end of the Bush administration and would have almost certainly been necessary regardless of who was President at the moment.

Similarly, the Supplemental Appropriation, which covered only a couple of months of federal spending, was needed to pay for the items also budgeted by the Bush-Cheney administration. How much of that was to fund Iraq and Afghanistan, which Obama included in his budget but Bush did not, is another source of your "socialist spending".

And it's a bit too early to lay a $675 billion bill for the healthcare changes on the Obama doorstep just yet. There's still a lot of negotiating going on in the House to make the proposed bill more "deficit neutral". Then there's the Senate, which will probably have their heels dug in even more than the House on wild-eyed spending.

I think it will only be fair to look at the spending of the Obama administration after a year or two passes. Even then it still wouldn't be totally fair to blame him for spending that was authorized and started by his predecessor.

Hey, hold your horses!!!!! My post is a wake-up call not an Obama bashing.
The figures I posted are to show people where were heading if we continue down this path. The more of the GDP that the government has...the more socialistic we will become and that will stagnate business. The more the government has...means less vested for buiness which means less jobs and a push away from a capitalistic economy which has been very good for us for over 230years.

Wow...Didn't realize that I was spitting on your hero. My bad.