Posts Tagged ‘U.S. taxes’

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 …

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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.

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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 term “Fiscal Cliff” is a newly coined term that represents the effect of a number of laws that become effective in January 2013 that will cause $600 billion in spending cuts and tax increases, meant to reduce the U.S. deficit beginning in 2013. The deficit (the negative difference between what the government receives in revenue and what it spends) is expected to be reduced about 50% in 2013. That’s a good start, but lots more effort is needed to get America back on track to a balanced budget, so that America’s monumental debt is not just “kicked like a can down the road” for our younger generations to manage.
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America is currently spending $1.1 trillion more each year than it receives in revenue. This continues to increase the U.S. national debt, that stands at a staggering $16.2 trillion. America’s debt is financed by other countries like China and Japan. Interest on the national debt is $259 billion per year … an alarming 16% of the U.S. GDP … growing at a reckless rate of speed. Each year the foreign debt holders own a larger hunk of America.
The “Fiscal Cliff” is a “baby step”, but an important one, towards curbing the growing fiscal catastrophe that will face America’s future generations.
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America’s fiscal problems need to be addressed now, while the American dollar is still recognized by world investors as a strong currency. The value of the dollar will continue to degrade over the next few years if this fiscal crisis is not addressed appropriately. If not, at some point the American Dollar will no longer be recognized as a strong currency. When that day comes, America will have no more “cards left to pull out of the hat”. It will be too late to save America from economic destruction. I believe the “Fiscal Cliff” needs to happen as current law provides, without interference from legislators. America can handle the “Fiscal Cliff”. The economy might slow a bit, but that is far better than the ugly economic consequences that will assuredly result if this serious fiscal problem is not addressed now.
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FISCAL CLIFF Course 101 EXTRA CREDIT: The economic math in support of the “Fiscal Cliff”
Many economists pick 20% of GDP to be a respectable point to balance America’s budget for revenue and spending. I agree!
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Current U.S. annual fiscal situation:
Value of the economy (GDP): $15.5 Trillion
Revenue: $2.4 trillion (15.5% of GDP…needs to be raised 4.5% to 20% of GDP to balance the budget and be equal to expenses)
Expenses: $3.5 trillion (22.6% of GDP…needs to be lowered 2.6% to 20% ($403 billion) to balance to budget and be equal to revenue)
Deficit: $1.1 trillion (this is the amount added to the national debt each year)
National debt: $16.2 trillion ($52,000 per citizen / $142,000 per tax payer)
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U.S. Revenue:
Income Tax: $1.129 trillion
Payroll Tax: $843 billion
Corporate Tax: $238 billion
Total revenue: $2.438 trillion (15.5% of GDP…needs to be raised 4.5% to 20% ($698 billion) to balance the budget and be equal to expenses)
Required revenue to reach 20% of GDP and balance budget: $3.1 trillion
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U.S. Expense:
Medicare/Medicaid: $728 billion
Social Security: $759 billion
Defense: $653 billion
Interest on national debt: $259 billion
Federal Pensions: $212 billion
Other expenses: $889 billion
Total expenses: $3.5 trillion (22.6% of GDP…needs to be lowered 2.6% to 20% ($403 billion) to balance to budget and be equal to revenue)
Required expenses to reach 20% of GDP and balance budget: $3.1 trillion
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Revisions required to reach a balanced budget (based on above figures):
$698 billion increase in revenue
add
$403 billion decrease in expenses
$1.1 trillion total increase in revenue and decrease in spending required to balance the budget
subtract
$600 billion – increase in revenue and decrease in spending produced by “Fiscal Cliff”
$500 billion – amount of correction needed beyond “Fiscal Cliff” to balance the budget
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Bottom Line: The “Fiscal Cliff” is a “baby step” … but, a good one  towards fixing America’s monumental fiscal problem. The “Fiscal Cliff” is monumental legislation that all Americans need to embrace in an effort to save America from inevitable fiscal ruin. Any action by legislators to reduce tax increases or cuts established by the “Fiscal Cliff” legislation will be counter productive. Let’s all hope our legislators in Washington go home for the holidays with no agreement to “water down” the “Fiscal Cliff”. Hopefully, they will start working on “Fiscal Cliff 2” when they return in January 2013.
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