Posts Tagged ‘tax cuts’

Captain Rick: The U.S. Legislature has failed to balance America’s budget almost forever. If it compromised by using the economic common sense rule of 20% of GDP for both revenue and spending, its budget crisis would end and a much brighter future would await the children of our world.

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Record Tax Revenue: I am glad to see we have hit a new record of $2.7T in revenues, just a tick above the previous record of $2.6T in 2007. As population grows, we better hope our tax revenue keeps going up every year. Things went far astray during the ‘Bush War and Tax Cut’ era, the Great Recession that followed and ‘Obamas Record Spending Spree’ to try to fix it, including a reckless 2 point payroll tax cut. Thankfully, it and some other irresponsible tax cuts vanished on Jan 1 as a result of the Fiscal Cliff and helped bring us closer to sanity. Unfortunately this new revenue record leaves America with a very anemic tax revenue of only 16.9% of GDP. The 40 year average is 18%. A healthy economy achieves revenue equal to 20% of GDP…so America is still far short of needed revenue…and part of the reason why America’s finances are in such terrible shape.

Record Spending: The other part of the reason America’s finances are in such terrible shape is because America’s spending is too high. America is currently spending $3.55T or 22.2% of GDP. That percentage is higher than almost every year since 1986. A healthy economy limits  spending equal to 20% of GDP…so America is still far over the limit for spending…the other part of the reason why America’s finances are in such terrible shape.

Republicans, Democrats, Conservatives and Liberals debate: Republicans and conservatives argue that taxes are too high and do not agree to any further increases. They say the entire answer lies in cutting spending. Democrats and liberals argue that spending levels should be held. They say the entire answer lies in tax increases. Its easy for me to see why our legislature is in gridlock. Both sides are stubborn and illogical. Neither side possesses the the solution. The solution resides in compromise. 

Captain Rick’s proposal of compromise: I propose that the U.S. Legislature uses the economical common sense guideline of 20% of GDP as a target for revenue and spending to achieve a balanced budget. 20% has proven to be workable figure for successful governments in the past. The figure can be argued…19 v 21…but 20% is a good starting point. Diminishing America’s national debt is a story for another day. It would require the balance to shift to more revenue and less spending…perhaps 21% of GDP revenue and 19% of GDP spending. Real compromise needs to begin soon … in order to protect the future of our children.  

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Info from previous reports:

Fiscal Cliff: https://atridim.wordpress.com/category/fiscal-cliff-course-101/

U.S. Debt Crisis: https://atridim.wordpress.com/category/u-s-debt-crisis/

GDP: https://atridim.wordpress.com/category/gdp/

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.

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‘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: The ‘Fiscal Cliff’ is a monumental financial challenge that faces the U.S. and all Americans on January 1, 2013. $7 Trillion in tax increases and spending cuts will begin. The only thing that can stop them from taking affect is for congress and the president to come to an agreement before January 1, 2013. That is not likely with America’s current slate who are in gridlock. A change of faces in D.C. as a result of the November election could improve matters.

Short of a miracle to break Washington D.C. gridlock, on January 1, 2013 the $7 Trillion ‘Fiscal Cliff’ will take place. This is what I anticipate:

Defense will be cut $55 billion in 2013, 10%. I believe our defense department is overloaded with inefficiency and waste beyond 10%. Perhaps this will help our defense department to become more efficient in the expenditure of tax payer funds.

Non-defense will be cut $55 billion in 2013, 10%. Non-defense includes education, Medicaid, food inspections and air travel safety and Medicare. Perhaps this will help all of these departments to become more efficient in the expenditure of tax payer funds.

Bush era tax cuts will end. These tax cuts were stupid and reckless and should never have been implemented. In view of the poor state of the American economy, they should end.

Obama’s Payroll tax holiday will end. The Social Security tax rate reverts to 6.2%, up2%. This tax cut was stupid and reckless and should never have been implemented. It has robbed the Social Security trust fund and shortens the time before the fund become insolvent. This reduction was stealing promised receipts from Social Security trust fund of all elderly Americans. This tax holiday must end.

Unemployment benefits will revert back to the old norm of 26 weeks, down form the current 99. It worked for the better part of the last century. It can work again. The solution to put America back to work will not be accomplished by providing long term unemployment benefits. We need a plan to grow our economy, which will create new jobs.

Medicare Doc Fix expires. Payment to care providers will drop 2%. This is not a problem for people on original Medicare…only those that subscribe to the plans offered by the insurance companies…ones I think should be put out of commission or figure out a way to provide Medicare for the same price the government pays for original Medicare…without the 20% subsidy the insurance companies are receiving now.

The bottom line is that America has been floating on so much fat for so many years. We can and should give up the fat. The ‘Fiscal Cliff’ will have a large impact on those who abuse tax dollars. It will have a minimal effect on honest, hard-working Americans.

It is no secret that America has been living ‘high on the hog’ … well beyond its means for many years. The time has come to pay the price. We either do it now in a constructive manor or pay a much steeper price later…one that could convert the United States of America to a third world country in the not to distant future.