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Tag Archives: deficit

Getting involved


A bit dramatic, but it does make the point, the debt is a huge issue and we need to get involved to do something about it. Freedomworks.com is a great way to get involved in the political process. Their FreedomConnector is a great way to connect up with other conservatives who are active in your area.

 
 

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Does this concern you in the least bit?


I know I go on about balanced budgets and massive deficits, but it is because I think they are a real problem. It seems that neither party wants to address the elephant in the room, with the exception of a few individuals. This article by Jeffrey Anderson on the Weekly Standard site emphasizes the point, Mandatory Spending Exceeds all Federal Reveunes for Fiscal Year 2011

That’s right, the mandatory portion (medicare, social security) of the budget exceeds the revenue that the government will collect in 2011. That means that if we cut all discretionary (defense, interstate highways, homeland security) we would still run a deficit. As the article points out, just 4 years ago the Bush administration projected that this would occur in 2057. So much for accurate projections by the government experts.

We need to get serious about cutting spending and reforming entitlements now. Our representatives in Washington are dithering around talking about $60 billion or $100 billion in cuts which are essentially meaningless in light of the magnitude of the problem. In 2011 there is a $20 billion deficit between revenue and mandatory spending. When you add in the $207 billion interest payments the total is a $227 billions deficit before we spend $1 on discretionary spending and we can’t get agreement on a measly $100 billion in cuts. When you add in the discretionary spending the deficit is over $1.5 trillion. When are our representatives going to get serious about this issue. How long will they kick the can down the road?

Because the amount of money is so large, people lose perspective of the scale of the issue. To give you an idea of the scale, please check out this video from 10000 Pennies

I urge you to contact you Senators and Representatives and insist that they vote against another extension of the continuing resolution. Also, insist that they pursue significant budget cuts across the board.

 

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I don’t want this kind of trust fund


“Social Security tax receipts for the first half of 2010: $346.9 billion; Social Security benefits payments for the same period: $347.3 billion. Before this year, projections have always been that Social Security wouldn’t cross that line into negative cash flow for five years or so. Now it’s a reality. Congress has been spending Social Security’s positive cash flow for years. Now there’s no positive cash flow to spend.”

Michael Tanner of the Cato Institute “the Trust Fund contains no actual assets. The government bonds it holds are simply a form of IOU, a measure of how much money the government owes the system. It says nothing about where the government will get the money to pay back those IOUs.”  In other words, the Trust Fund doesn’t actually have any real money in it.”


I’ve posted a bit on my concerns with our governments unfunded liabilities. Social Security is a disaster in the making unless we undertake some serious reforms.  There are claims that the trust fund will keep Social Security solvent until 2037, that is of course if you don’t consider that there is no trust fund and the government will have to tax or borrow the money in order to pay it out.

Personally would like to see Social Security privatized while protecting those too close to retirement to take advantage of reforms. I would settle for some simple changes, such as rasing the retirement age and removing the income limit on contributions. When SSI was created the average life expectancy was about 62 or 63 years. The thought was the people would not draw on their SSI benefits for many years before they died. Now life expectancy exceeds the retirement age by roughly 15 years, which really screws up the actuarial calculations.

Others propose means testing, but I don’t agree with this approach because SSI is supposed to be insurance not welfare. If people pay in to the system for years, they deserve to get their money back. Otherwise we will reward bad behavior and penalize good behavior. An example, let’s say we have two workers who both average $75,000 in income for their lifetime and pay in pay roughly $500,000 (including employers contributions). Let’s say that worker 1 also saves 10% of his income in a 401K and invests wisely and is able to save another $1 million for his retirement. Worker 2 doesn’t contribute much to his 401K or personal savings, uses the cash to buy a Harley and a boat, and ends up with $100,000 in savings at retirement. We then apply means testing and Worker 1 gets nothing and Worker 2 gets nearly his full SSI benefit. Is this fair and reasonable, I think not.

To make matters worse, we have an Adminstration in the White House that this that there is not a problem and we don’t need to do anything about it.  The article by Charles Krauthammer sums things up nicely.

http://www.nationalreview.com/articles/261893/obama-s-social-security-hoax-charles-krauthammer

 

 
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Posted by on March 11, 2011 in Unfunded Liabilities

 

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Michael Moore is a genius


Not really! Mr. Moore believes that wealth is a national resource that belongs to all of us. So if you invest your money to start a business, work 80 hours a week for years to make ends meet and eventually become successful enough to be profitable and expand your business, then the wealth you earn is everyone’s. If you don’t use it they way he agrees, I suppose if he had the power, he would confiscate it.

He made this revelation in light of the debt problem. According the Michael we don’t have a debt problem. If the rich would just free up their capital, problem solved! As Mary Katherine Hamm points out in her tongue in cheek video he is very wrong!

I am amazed at the lack of understanding of basic economics demonstrated by Mr. Moore. I hope that many people don’t share his views. Not only is he wrong, but downright scary.

 
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Posted by on March 11, 2011 in Deficit

 

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Impending Doom?


Most people are not aware of a financial crisis which may be even worse than our Federal Government issues with the budget deficit and unfunded liabilities for Social Security and Medicare. The local and state unfunded pension crisis is something that you should care about because it is big and it is coming soon. Many cities pensions are just a few years away from running out of money.

From a the report, The Crisis in Local Government Pensions in the United States by Robert Novy‐Marx, Univ of Rochester and Nberjoshua Rauh, Kellogg School of Management courtesy of the Heritage’s Foundry. full report

Chicago takes first prize in underfunded city pensions, and this in a state that already has such seriously underfunded state employee pension plans that each household in the city already owes $29,000 just for the state plans. The authors estimate that the combined underfunding of the two jurisdictions equals about $71,000 per household.

However, other city pension funds are so underfunded that they could run out of money in the next few years regardless of the amount owed per household. In order, the first 10 to run out of money unless they do some major reforms quickly are as follows:

1. Philadelphia: $9 billion underfunding ($16,700 per household) in 2015
2. Chicago: $45 billion underfunding ($42,000 per household) in 2019
3. Boston: $7.5 billion underfunding ($31,000 per household) in 2019
4. Cincinnati: $4 billion underfunding ($15,700 per household) in 2020
5. St. Paul, MN: $1.4 billion underfunding ($13,700 per household) in 2020
6. Jacksonville, FL: $4 billion underfunding ($13,000 per household) in 2020
7. New York City: $122 billion underfunding ($38,900 per household in 2021
8. Baltimore: $3.7 billion underfunding ($15,400 per household) in 2022
9. Detroit: $6.4 billion underfunding ($18,600 per household) in 2023
10. Fort Worth, TX: $2 billion underfunding ($7,200 per household) in 2023

The paper goes on to report that the total of State and Municipal unfunded liabilities is over $3 trillion. California alone has a $500 billion unfunded liability.

The time has come to reform these pensions. Contributions by public union members must increase. The retirement age to receive a full pension must be raised (with the possible exception of Police and Fire pensions due to the physical demands of these jobs). Pension benefits have to be reduced for younger workers and those who are not immediately dependent upon the benefits.

I suppose we could continue to ignore the problem and assume that the states can punt and ask the Federal government for a bailout. Yes, the Federal government with a $14 trillion debt and near $100 trillion in unfunded liabilities. No, that is not workable and it just shifts the burden. Or we could raise taxes, but given the size of these liabilities the increase would have to be so large that they would depress the economy (I would prefer that we grow the economy in order to increase tax revenues).

Promises have been made that could never be kept in order to garner votes and political contributions. Reality has set in and it is no longer a future problem that we can delay, but a pressing current issue that has to be addressed. The reaction of the Wisconsin public unions, over the proposed increases in pension and health care contributions and limiting collective bargaining to just wages, tells me that this is going to be a long and difficult battle. I hope that the American people arm themselves with the facts and press our political leaders to make the hard choices that are necessary to get ourselves out of this mess.

 
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Posted by on February 19, 2011 in Pensions

 

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Time to face the music


I have been working on a post about the looming state pension crisis that exists for many state and local unions.  The amount of unfunded liabilities are frightening and must be addressed and not ignored because it will not go away.  But the drama taking place in Wisconsin sheds light on the situation and serves as an example of what is yet to come.

The situation in Wisconsin is just the tip of the iceberg of what is yet to come.  I felt compelled to post an article about the situation there because of the vitriol and hyperbole.  The language coming from the unions and being repeated by those who don’t apply critical thinking to the message are examples of what is wrong with our country.

So first, let me state that I am not fundamentally opposed to unions.  I believe there was a time a place for unions, particularly for trades and unskilled laborers that were treated unfairly by their employers in the past.  However, I will say that I do not understand nor do I believe that there is a need for unions for teachers, state employees or other white collar professionals, so I am making my bias clear.  The primary issue is that unionized civil servants create a conflict of interest.  The politicians that negotiate agreements with the unions agree to terms that are not in the best interest of the state in exchange for votes from the union members.  This is a topic for another post, but the pension and benefits crisis is an example of politicians making long-term promises that the could not possibly keep in exchange for short-term votes .  The auto industry suffered the same issue, committing to pension and benefits packages that they cannot afford to pay.

So, let’s look at what is being proposed in the legislation and then compare that to what the unions are saying and you decide for yourself if the Governor of Wisconsin is Hitler or Mubarak (I’m not kidding, see here) .

This summary is from a Daily Caller artical by Matthwe Boyle Why the Wisconsin Hype

Walker’s proposal, which is part of his plan to address the $137 million deficit in Wisconsin’s current budget and projected $3.6 billion shortfall over the next two years, would allow public sector unions many of the collective bargaining privileges they enjoy now.

Some key points:

  • Public sector employees would still be allowed to collectively bargain on wages, but not on health-care or pension plans.
  • Raises would be tied to the inflation rate, unless the state’s voters deemed the employees worthy of larger raises.
  • Public sector employees would have to pay slightly higher rates for their health care and other benefits, but those rates would remain lower than those of the average private sector employee.
  • Public sector employees would be required to pay 12.6 percent of their health-care premiums; they currently pay about 6 percent.
  • Public sector employees would have to contribute 5.8 percent of their salaries to their pensions under Walker’s plans; currently some pay nothing. From 2000 to 2009, public sector employees paid $55.4 million into a pension system that cost $12.6 billion.

Walker promised not to lay off or furlough any of the 170,000 government employees in the state, saying about 5,500 state jobs and 5,000 local jobs would be saved if the unions give in to this plan.

So, to summarize, the state has a huge deficit problem and rather then layoff 10,500 state employees, he has asked them to pay 6.6 percent more for their healthcare premiums and 5.8 percent to their pensions.  He is also reducing their collective bargaining power to just wages and not benefits.

So what are those opposed to these changes saying. Are they addressing the issue at hand or are they trying to change the message.

From the former Speaker of the House Nancy Pelosi, “workers must have a seat at the table to fight for good wages & a safe workplace-I stand in solidarity” So, the issue is worker safety, no. Does the bill eliminate the ability for the unions to bargain for wages, no. Thanks for your continued wisdom and insight Rep. Pelosi.

Former WI Senator Russ Feingold has weighted in, in an obvious attempt to get his job back. “This state is one of the originators of many of the workers’ rights and protections on child labor, unemployment compensation, and almost all kinds of workers’ rights. The fact that our governor is trying to destroy those rights is something worth fighting against.” So the legislation outlined above is going to re-instate child labor and get rid of unemployment. Thanks for adding common sense to the debate, ex-Sen Feingold. He couldn’t stop there, he added “It’s a very meaningful and very difficult effort against one of the most mean-spirited things I’ve seen in a long time.” Perhaps you haven’t bothered to look at the signs of those union protesters Sen. Feingold.

This from a teacher, yes a teacher at the protests “He’s putting all this money into education and expects the best for his children and our children, and he has to understand that we can’t work for less, and we can’t get sick and have no health insurance to cover us,” said Bitto. “And when our children get sick and lose their BadgerCare, what’s going to happen to them? What’s going to happen to the system? What’s going to happen to our future?” Increasing your pension and healthcare contributions translates to working for less and no insurance for the kids. Don’t forget dog food for the old people. I suppose you would prefer to raise the taxes of those who pay your salary than have to pay a bit more for you own benefits.

From the Congressional Progressive Caucus, “ Wisconsin’s Republican governor, Scott Walker, seeks to slash the benefits and collective bargaining rights of workers in Wisconsin.” I don’t see anything about reducing benefits, let alone slashing, only asking workers to pay for more of them, at a rate significantly less that the private sector. I expect nothing less from the Progressives, as they rely on millions in contributions and votes from the Unions.

I have been a bit sarcastic in response to the hyperbole and vitriol from the unions and the left but the point is, their responses have nothing to do with the reality. They are intentional exaggerating the reality because they hope the average person is only going to listen to the sound bites. They hope you are stupid and will react to the misleading rhetoric rather than looking into the facts. It is very frustrating when we cannot discuss the real issues at play and we resort to outright fabrications in order to prevent the inevitable. The pending fiscal disaster awaiting not only our nation but many of our states will not go away. It is not better to have a job with better than average benefits than no job at all. Taxpayers are paying enough and are struggling to make ends meet and will not pay more taxes so that the unions can continue to get pay increases and have better benefits than the average taxpayer.

The unions need to wake up to the new reality. The gravy train is over. In a time of over 9.5% unemployment (more realistically, 18% resulting in significant decreases in government revenues) record foreclosures, increased usage of food stamps and welfare you would think that accepting reasonable increases, or what our liberal friends like to say, ‘paying their fair share’ would be done so in a gracious manner. Instead the unions have decided to double down and not only not accept the changes, but become belligerent and vitriolic.

 
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Posted by on February 18, 2011 in Deficit

 

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Budget Freeze, wow that sounds impressive.


OK, his stuff is just so good, I have to share another one of 10000Pennies videos from YouTube.  This one is about the proposed budget freeze President Obama mentioned in his SOTU speech.

Billions and Trillions are such big numbers, people have no idea of the scale.  These visualizations help bring perspective and make it easy to spot rhetorical BS when you hear it.  The proposed spending freeze is so trivial as to be meaningless.  We need across the board cuts to get out of the mess we are in.

 
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Posted by on February 7, 2011 in Reckless Spending

 

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