Archive for the ‘Tax Reform’ Category

Captain Rick: The Senate and House passed a short-term spending bill that prevented a government shutdown at the end of the week. It has White House backing.

This legislation allows Congress to ‘kick the can down the road’ until after America elects a new President and new members of Congress. With a bunch of ‘lame ducks’ residing in congress at that time, you can bet they will again ‘kick the can down the road’ with another short-term spending bill to fund the government until after a new President and Congress take office in January. That’s when the excitement begins …

image

Fights over raising the debt limit broke out between the Obama White House and ruling Republicans in Congress in 2011 and 2013, unsettling Wall Street and foreign investors. The two sides struck a deal in 2015 to suspend the debt limit until Obama left office. The federal debt limit has been suspended since late 2015, but the law is set to be reinstated on March 16, 2017. The current debt limit of $20.1 trillion will be breached and another funding emergency will be at hand to prevent another U.S. government shutdown.

Government shutdowns in the past have become a ‘joke’ in that certain federal employees are told to stay home without pay, until Congress passed legislation to fund the government, which often included increasing the national debt and awarded compensation for all lost pay … meaning their time off was really an extra paid vacation; an insult to hard working employees of ‘Main Street’ America. The ‘Shutdown Game’ can not continue much longer because America is coming ever so close to falling off of the real and pending ‘Fiscal Cliff’. Many federal programs like Obamacare, Medicaid, Medicare and even Social Security are projected to implode in coming years without serious spending/taxation reform.

The U.S. National Debt has more than doubled since President Obama took office; from $9 trillion to $19.5 today. It is exploding at rate of $1.35 trillion each year. More than $10 trillion of ‘red ink debt dollars’ have been spent to keep the federal government functioning during the Obama Administration.

About 15% of money spent by the federal government has no revenue to support the expenditure and thus adds to the national debt. Much of this debt spending goes to states and cities in the form of federal grants. Our states and cities ‘drink up’ the grants like it is ‘free money coming from heaven’. Their philosophy is ‘if we don’t get the grant, some other city or state will’. What an awesomely greedy and fiscally reckless way to think. Shame on every city and state in America for slurping up these slush grants which add to the mushrooming U.S. National Debt. Our cities and states are a main contributors to the growing problem of America’s National Debt … debt which will be placed upon future generations to pay back … including our children and grand children. It’s a serious matter to think about.

I hope the next President and Congress will begin to balance the budget and curtail deficit spending. Saving America from falling off of the real and pending ‘Fiscal Cliff’, will not be easy. It will require ‘belt tightening’ by people, cities and states across America and most importantly by the U.S. Federal Government and our elected representatives in the U.S. Congress.

Advertisements

Captain Rick: U.S. entitlement programs are going broke. Disability will be broke by 2016, followed by Medicare by 2024 and Social Security by 2035. These sobering projections were made by the U.S. Social Security Administration. This report presents an in-depth study of the U.S. Disability program.

image

Disability recipients in jeopardy
Nearly 11 million people depend on federal disability payments.
Unless changes are made, beginning in 2016, the revenues coming in would not be sufficient to cover all of the disability payments.
Unless taxes are increased, disability benefits will have to be cut or the number of claimants reduced.

image

Disability soared 27% since the beginning of the Great Recession
The number of people collecting federal disability has soared to nearly 11 million, up from 8.7 million in April 2007.
The federal government spent nearly $250 billion in 2011 paying more than 23 million Americans some type of disability claim. That’s about 7% of the overall population, and 16% of the workforce.

Causes for the Disability Program Increase
The Great Recession pushed many people into the disability program because it was a safety net to save them from economic disaster.
The aging of the baby boomer generation is one of the primary drivers. Workers typically enter the disability program in their 50s.
Disability claims among veterans are up 28% since 2008, according to the Department of Veterans Affairs.
With better surgical techniques and body armor, soldiers are ten times as likely to survive today’s wars, according to the Veterans Administration. But soldiers often come home with severe injuries. The recent decision to recognize post traumatic stress disorder as a disability has also lifted the number of benefits claims. The Veterans Administration noted that illnesses tied to the cancer-causing chemical defoliant Agent Orange used in Vietnam are also now viewed as a disability.  
More women have entered the workforce in recent decades, making them eligible for the program should they become disabled.

Americans are abusing the system because of the ease of entering the program. It’s morphed from a program that pays benefits to stroke victims and cancer patients to people with mental illness and chronic pain.

Prognosis for a Disability Program Solution
The disability program … the smallest of the three, will be the first that Congress has to deal with.
There is not much consensus about entitlement reform on Capitol Hill these days. Attempts to rein in Medicare spending have gone nowhere recently.

Disability Program Solution Possibilities

Solution 1
Congress could authorize increasing the amount of payroll tax supporting the disability program from its current 1.8%. An increase paid by workers and employers by 0.2% each would keep the program solvent for 75 years. But there’s little appetite among lawmakers to raise taxes these days.

Solution 2
Congress could authorize increasing the share of Social Security payroll tax going toward disability, instead of Social Security. Currently, the combined rate paid by employers and workers is 12.4%. The disability program’s rate is 1.8%, while the retirement system’s rate is 10.6%. Congress could authorize increasing the share going toward disability payments to 2.6% for two years and then slowly cut it back to 1.8% by 2030. This would keep the disability fund solvent until 2033, but it would shorten the retirement system’s predicted lifespan by two years, to 2033.

Solution 3
Congress could take the most controversial approach by raising the bar for eligibility for disability benefits.

Captain Rick’s Disability Solution Preference: I believe Solution 3 is the most intelligent solution … but considering how welfare-oriented the U.S. Congress is becoming, I do not hold much hope for this solution. I believe Congress will take the most cowardly path … Solution 2 … and rob money from Social Security to pay the rapidly expanding crowd who are abusing Disability. Do you agree/disagree? I welcome you to comment below.

I welcome your comments, likes, shares and following of my blog! (If not visible, click the red title above)

Associated ATRIDIM NEWS JOURNAL Report Categories:

Entitlement Reform: https://atridim.wordpress.com/category/entitlement-reform/

Medicare: https://atridim.wordpress.com/category/medicare/

Social Security: https://atridim.wordpress.com/category/social-security/

Medicaid: https://atridim.wordpress.com/category/medicaid/

Tax Reform: https://atridim.wordpress.com/category/tax-reform/

Captain Rick: Here we go again. Treasury Secretary Tim Geithner warned Congress in a letter that U.S. borrowing will hit the debt ceiling on Monday, and that Treasury will begin using ‘extraordinary measures’ to prevent government spending from exceeding the legal limit of $16.394 trillion. On Monday, debt subject to the limit was just $95 billion below the $16.394 trillion debt ceiling. That allows for spending over $13 billion a day through next Monday. It makes my head spin thinking about how fast the U.S. spends money and that over $1 trillion of what it spends each year is borrowed money (deficit spending) that adds to the U.S. National Debt.

image

The extraordinary measures include suspending the reinvestment of federal workers’ retirement account contributions in short-term government bonds. All told, the extraordinary measures can create about $200 billion of headroom under the limit — normally about two months worth of borrowing.

If America begins going over the ‘Fiscal Cliff’ on Tuesday, January 1, as all indications point to now, $600 billion in annual spending cuts and tax revenue increases will kick in and slow the generation of debt to half speed. This would double the period of time to 4 months remaining before extraordinary measures would be exhausted.

After the extraordinary measures run out, Treasury won’t be able to pay all the country’s bills in full and on time. At that point, the United States will run the very real risk that it could default on some of its obligations, such as making interest payments on America’s National Debt which total a staggering $260 billion per year. This would have a severe negative impact on America’s credit rating which would have a ripple effect of making it more costly for the U.S. Treasury to borrow money. At some point foreign governments, like Japan and China, which hold large sums of American debt, would slow lending or even curtail it. The American economy would grind to a halt and be thrust into a deep recession, dragging all world economies along with it.

Other solutions could be to default on Social Security, Medicare, Medicaid and other government program payments. We all can comprehend the immediate, massive, destructive effect that would have on society.

Thus, we can conclude that default of any kind  is not an acceptable solution. The only immediate solution will be to increase the national debt again. Those who have studied Captain Rick’s FISCAL CLIFF Course 101, know that its just a matter of time before raising the national debt ceiling will no longer be a workable option. This is why it is so important that the ‘Fiscal Cliff’ spending cuts and tax revenue increases take effect on January 1.

Captain Rick’s Dream for America

I find the manner in which the President and Republicans and Democrats in Congress are trading off fiscal ‘trinkets’, in an effort to fool America that they can come up with a better solution than the ‘Fiscal Cliff’ to solve America’s serious problem of thirst for debt … almost laughable.

The President and Congress should stop playing fiscal games. The current members of Congress should stay home on vacation for the rest of the year. A new slate of legislators will be sworn in on January 3, hopefully with a work ethic that is void of politics (I am holding my breath), and work towards raising the debt ceiling along with the creation of Fiscal Cliff 2 … another painful round of spending cuts and tax revenue increases that would finally balance America’s budget and eliminate deficit spending. Ideally, it would start on January 1, 2014, when the next raise of the national debt ceiling will most likely be required. Hopefully that would be the last need to raise the America’s National Debt Ceiling.

Perhaps Fiscal Cliff 3 could kick in on January 1, 2015 with another round of spending cuts and tax increases that would begin reducing America’s National Debt and its interest on the debt which will be well over $300 billion per year by then.

If America were to follow this painful fiscal road, our children and grandchildren could have a realistic chance to make a descent living and recapture some of the Great American Dream that kids growing up in America back in the 1950’s and 1960’s once had. I was one of them. They were great times that are ‘long gone’, but can be rekindled if we, the generations who helped create America’s fiscal ‘nightmare’, accept some sacrifices. I urge everyone in America to accept the ‘Fiscal Cliff’ with a ‘grain of salt’ as it becomes effective on January 1, 2013 and urge your legislative representatives to work towards achieving Fiscal Cliff 2.

View Captain Rick’s entire FISCAL CLIFF Course 101: https://atridim.wordpress.com/category/fiscal-cliff-course-101/

Captain Rick: 2012 is drawing to a close with no congressional deal in sight, which means the ‘Fiscal Cliff’ will happen automatically, by law, on January 1, 2013. The ‘Fiscal Cliff’ is a combination of the expiration of temporary tax cuts and spending extensions and other spending cuts from laws passed previously. In total, it reduces half of Americas deficit ($600 billion per year…approximately $7 trillion over the next 10 years). Previous laws allowed America’s staggering national debt to be raised to keep the U.S Government running in exchange for the ‘Fiscal Cliff’ if the congressional appointed ‘super committee’ did not produce a better solution. No agreeable alternative solution was found, as appears likely with current negotiations…so America will most likely witness the ‘Fiscal Cliff’, by law, on January 1, 2013.

13145646-2560x1440+s2-f1-AWS-Fiscal Cliff+R-c

‘Fiscal Cliff’ Solution Scenarios:

Scenario of Congress agreeing to stop, postpone or ‘water down’ (lower) the ‘Fiscal Cliff’

Captain Rick’s chances of this happening: Near 0%

Captain Rick’s rating for such action: “F” (FLUNK)

Captain Rick’s prognosis: While this is what is being portrayed by the news media as the best solution, it is mathematically impossible and fiscally irresponsible…because America’s National Debt Clock continues to tick. Its just a short time before America will need to raise the debt ceiling again, because it spends $1.2 trillion more per year than it receives in revenue. That will foster ‘Fiscal Cliff 2’…perhaps twice as high as ‘Fiscal Cliff 1’. Keep in mind that even if America were to balance its budget (a far off dream), it would be left with its staggering debt of $16.2 trillion and its annual interest of $258 billion, the 5th largest U.S. expenditure of tax revenue. This money is paid to America’s debt holders…the largest being Japan and China.

Scenario of America going over the ‘Fiscal Cliff’

Captain Rick’s chances of this happening: Near 100%

Captain Rick’s rating for such action: “B” (Best possible current solution, but America can and must do much better in the future)

Captain Rick’s prognosis: As horrible as the news media has made the ‘Fiscal Cliff’ sound, it is Americas best hope to get ‘back on track’ to prosperity. Yes, it might mean a small drop in GDP and small rise in unemployment…but that is far better than a large drop in GDP and large increase in unemployment and possible recession or even depression a few years from now if America does not confront its extremely serious debt problem ‘head on’ NOW.

Captain Rick’s hope for the future of America

Once we go over the ‘Fiscal Cliff’ and begin to realize the shock of it all, our Congress needs to ‘come to bat’ for America and produce constructive legislation to fix a few urgent, very serious problems like the Medicare ‘Doc Fix’. Historically congress provides for a periodic ‘cost of living’ adjustment for reimbursement to Medicare doctors. This years adjustment has been stopped by the ‘Fiscal Cliff’. If this is not fixed, eventually many doctors might stop seeing Medicare patients, leaving them without a doctor. Congress will also need to begin serious reform to its entitlement programs…Medicare, Medicaid, Social Security and federal pensions, which have expenditures growing at astronomical speed in comparison to tax revenue. The U.S. fiscal problem is monumental and deserves our immediate attention now, in an effort to ward off significant fiscal failure of the U.S. with a ripple effect to the entire world in years to come.

View Captain Rick’s entire FISCAL CLIFF Course 101: https://atridim.wordpress.com/category/fiscal-cliff-course-101/

Captain Rick: In Lesson 4 we examine the Chemistry of the “Fiscal Cliff”… the composition of the $600 billion of tax revenue increases and spending cuts that will automatically take place by law on January 1, 2013, unless the U.S. Congress agrees to revised legislation and President Obama signs it into law before then. Agreement does not appear to be very likely as the two sides are currently far apart. The Democrats are for minimizing spending cuts and maximizing tax revenue increases, while the Republicans are for the opposite.

As large as $600 billion sounds … we learned in the “Fiscal Cliff” Math of Lesson 2 … it will only eliminate half of America’s deficit (the extra amount that is spends every year over that which it receives in revenue). In simple terms, it would take two “Fiscal Cliffs” to fix America’s deficit problem. That would balance the budget but do nothing to reduce America’s staggering $16 trillion national debt (the accumulation of all of deficit spending in past years). Even with the “Fiscal Cliff” spending cuts and tax revenue increases, Americas National Debt will continue to grow by $600 billion a year.

Congress and the President are currently trying to find ways to agree to cut the size of the “Fiscal Cliff” spending cuts and tax increases … ways to “water it down” and “kick the can” down the road for future generations to solve the U.S. Debt Crisis. It would require over 26 “Fiscal Cliffs” to eliminate the U.S. National Debt. In perspective, the “Fiscal Cliff” more closely resembles the slope of an ant hill.

13145646-2560x1440+s2-f1-AWS-Fiscal Cliff+R-c

“Fiscal Cliff” Spending Cuts that take effect on January 1, 2013

Defense will be cut $55 billion in 2013 from projected levels of discretionary defense spending. That translates into at least a 10% cut to every program, project and activity that’s not explicitly exempt.

Non-defense will be cut $55 billion in 2013 from projected levels of nondefense spending, which includes things like education, Medicaid, food inspections and air travel safety. Budget experts estimate the cuts will result in at least an 8% cut to programs, projects and activities. These cuts include:

Medicare Doc Fix expires. Payment to care providers will drop 2%.

Unemployment benefits extension expires. Unemployment benefits will revert back to the old norm of 26 weeks, down form the current 99. That means workers who lose their jobs after July 1, 2012, will only receive up to 26 weeks in state unemployment benefits, down from as many as 99 weeks in state and federal benefits that had been available until recently. By one estimate, more than 2 million claimants will lose their benefits by January.

“Fiscal Cliff” Tax Revenue Increases

Bush era tax cuts will end on December 31, 2012. As a result:

Income tax rates: Rise to 15%, 28%, 31%, 36% and 39.6%, up from 10%, 15%, 25%, 28%, 33% and 35%.

Capital gains rate: Rises to 20% from 15% for most filers.

PEP/Pease limitations: Restored. High-income households may not be able to take some itemized deductions and personal exemptions in full.

Child tax credit: Falls to $500 per child from $1,000. The refundable portion also reduced.

American Opportunity Tax Credit: Expires. The lesser value HOPE tax credit for college tuition is reinstated. Several smaller education tax benefits also expire.

Earned Income Tax Credit: Expansion of eligibility for the credit expires.

Marriage penalty relief: Expires. Effectively that means a low- or middle-income two-earner couple will owe more to the IRS than they would if they were single making the same income.

Estate tax: Parameters revert to pre-2001 levels. The exemption level falls to $1 million from $5 million; and the top tax rate on taxable estates rises to 55%, up from 35%. AMT patch

Expired already for 2012. Income exempt from the Alternative Minimum Tax in 2012 — for which taxpayers will file returns next year — falls to $33,750 for individuals and $45,000 for married couples. That’s down from $50,600 and $78,750, respectively, if the exemption amounts had been adjusted for inflation. As a result more than 30 million people will be hit by the so-called “wealth” tax, up from 4 million to date.

Obama’s Payroll tax holiday expires. The Social Security tax rate reverts to 6.2%, up from 4.2%, on the first $110,100 in wages. Effectively, someone making $50,000 will pay another $1,000 in payroll taxes next year;  someone making $150,000 will pay $2,425 more.

Some budget experts count as part of the fiscal cliff the onset of a new Medicare surtax on high-income households under health reform. They include:

A 0.9% surtax will apply to wages on earned income over $200,000 ($250,000 if married). That’s on top of the 1.45% Medicare currently owed on all wages. Those making between $200,000 and $500,000, for instance, will only pay about $633 extra while households making $1 million or more would pay another $11,242.

A 3.8% Medicare surtax will also apply for the first time to at least a portion of high-income households’ investment income.

How the “Fiscal Cliff” could effect America’s citizens

The top 1% of households, which have incomes above $506,210, would face an increase of $121,000. Within that group, the top 0.1% — those making more than $2.66 million — would get hit with a tax hike of nearly $634,000.

By contrast, households making up to $20,113 would see a $412 average increase. That may simply represent a smaller refund to those households, many of which have very little if any federal income tax liability to begin with.

Households in the middle — with total incomes between $39,790 and $64,484 — can expect a roughly $2,000 increase.

Captain Rick’s closing thoughts …

The sacrifices presented by the “Fiscal Cliff” for Americans are small in comparison to the positive effects towards solving America’s monumental debt crisis for the benefit of our generations to come. Many of the “Fiscal Cliff” elements originate from the expiration of very fiscally irresponsible previous tax cuts by Bush and Obama … ones that should have never been implemented in the first place. Giving them up is a “no-brainer”.  We should all hope that the U.S. Congress goes home early for the holidays and does not do anything to “water down” the fiscally intelligent “wheels-in-motion” that the “Fiscal Cliff” will automatically bestow on January 1, 2013.

View Captain Rick’s entire FISCAL CLIFF Course 101: https://atridim.wordpress.com/category/fiscal-cliff-course-101/

Captain Rick:  Click and Play the video below to get an excellent 3 minute summation of the world’s 5 Global Risks, each of which can completely change the global outlook. There are two in Europe, one in the Far East, one in the Middle East and one in the U.S. … the pending Fiscal Cliff … potentially the biggest global risk of them all. 3 Fiscal Cliff scenarios are discussed of which one is following the current course of doing nothing. This would cause a 4% contraction in GDP and cast the U.S. into Recession. For the first time in a very long time our kid’s generation would be worse off than ours. Two other scenarios are discussed that offer hope. The conversation includes a statement that a fix must include compromise of tax increases and entitlement cuts. Mathematically, the problem can’t be fixed by addressing one side only.  We are fortunate that we have a currency that everybody still wants, so we still have some time to get it right by enacting proper tax and entitlement reform. We just need politicians that are willing to compromise, which could be the most difficult job of all.

FORTUNE Video by PIMCO CEO: http://money.cnn.com/video/magazines/fortune/2012/10/04/f-el-erian-pimco-ceo-global-risks.fortune/