America is Broke?

[Jonsa]

I keep hearing from republicans that "America is broke". this strikes me as a)stupidily false and an unpatriotic slander.

The current debt of the United states as expressed by as a % of its economic output is about average. The total debt is $14 trillion which is about 97% of gdp. That ranks the US 37th. The world average is 95%.

I can understand having concern, but this seems more like political opportunists creating a " chicken little" scenerio to further an ideological agenda.

The obvious first step is to reduce the deficit.

According to some the "best/only " way to do this is by reducing spending and "slashing entitlements". Making the really tough choices. I don't think anyone would argue that getting control on spending and eliminating waste is a bad thing. But according to Republicans the resulting job losses are okay regardless of their election promises and the jobless rate.

The really tough choices seem to be in the area of entitlements. Now these entitlements are paid by revenues raised thru payroll taxes not income taxes. Seems any increase in payroll taxes kills jobs but that is definitely not acceptable.

Likewise, income taxes. Recent compromises to create jobs have resulted in the lowest taxes in decades. this ain't bad news, but reducing revenue when you have to borrow to pay the bills seems rather illogical. Particularly on the wealthiest 2%, where the billions and billions in revenue a modest increase would generate are apparently a small price to pay for the 5% of the 2% that would actually create some jobs.

As long as you are slashing spending job losses are acceptable but raising taxes in totally unacceptable because it inhibits job growth. there are kernels of truth on both sides of the deficit/spending debate, but there is so much more ideological obfuscation.

According to the OECD, the US average tax burden is 29.7% which is fourth lowest within that organization.

The US also ranks #1 in lowest consumption (goods and services) taxes at 17% of total taxes .

What this all boils down to is that there are a lot of different ways to skin the cat and this seemingly single minded slash and burn has more to do with ideology than sound fiscal practice.

Slightly raising a few taxes, maybe allocating some of those "death taxes" to social security in conjunction with reigning in federal spending would quickly reduce the deficit, enable the "entitlements" to be preserved and generate some surplus to reduce the debt.

I guess I'm a tad naive thinking common sense could trump ideology in solving collective problems.

[Shady]

You've stated several inaccuracies that I feel the need to correct:

I can understand having concern, but this seems more like political opportunists creating a " chicken little" scenerio to further an ideological agenda.

The concern is not only the unprecedented deficts, but the long term structal debt of the entitlement programs. The current dollar total of unfunded liabilities of all entitlement programs is $112 trillion dollars.

According to some the "best/only " way to do this is by reducing spending and "slashing entitlements". Making the really tough choices.

No, the best way to reduce the long term deficits and debt is to tackle entitlement spending. Not by necessarily slashing, but by increasing the age of retirement, indexing increases to inflation, and means testing for qualifying.

But according to Republicans the resulting job losses are okay regardless of their election promises and the jobless rate.

No, they're ok with the loss of government jobs because of it.

Now these entitlements are paid by revenues raised thru payroll taxes not income taxes. Seems any increase in payroll taxes kills jobs but that is definitely not acceptable.

No. Only Social Security is paid for through payroll taxes.

You really need to familiarize yourself with this..... US Debt Clock

[punked]

You've stated several inaccuracies that I feel the need to correct:

The concern is not only the unprecedented deficts, but the long term structal debt of the entitlement programs. The current dollar total of unfunded liabilities of all entitlement programs is $112 trillion dollars.

No, the best way to reduce the long term deficits and debt is to tackle entitlement spending. Not by necessarily slashing, but by increasing the age of retirement, indexing increases to inflation, and means testing for qualifying.

No, they're ok with the loss of government jobs because of it.

No. Only Social Security is paid for through payroll taxes.

You really need to familiarize yourself with this..... US Debt Clock

What are you talking about SS is completely funded.

[Shady]

What are you talking about SS is completely funded.

Huh?

Social Security: The Red Ink Starts Next Year

The Congressional Budget Office now projects that Social Security will start operating at a deficit next year.

The CBO's updated forecast, reported by the Associated Press, now sees costs pushing above tax revenues by $10 billion in 2010 and $9 billion in 2011, before the system goes temporarily back into the black again until 2016.

HP

[Jonsa]

Huh?

Yes, I guess the payroll tax "holiday" as part of the tax package slipped under a lot of peoples radar. So the Government REDUCES tax revenue and a program pays out more than it takes in. WOW, who in their right mind could have predicted that!

It boggles the mind how twisted American fiscal priorities are.

[Shady]

Yes, I guess the payroll tax "holiday" as part of the tax package slipped under a lot of peoples radar. So the Government REDUCES tax revenue and a program pays out more than it takes in. WOW, who in their right mind could have predicted that!

The program isn't paying out more than it takes in because of the tax holiday. It's paying out more than it takes in because there aren't as many workers to support an ever growing population of retirees.

[Shady]

When Social Security began, there were 15 workers for every retiree. Soon, there will be 2 workers for every retiree. Not only that, but retirees are living much longer than before.

[Jonsa]

You've stated several inaccuracies that I feel the need to correct:

The concern is not only the unprecedented deficts, but the long term structal debt of the entitlement programs. The current dollar total of unfunded liabilities of all entitlement programs is $112 trillion dollars.

Please supply a reference - IMHO this number is not credible so a factual reference would be appreciated.

No, the best way to reduce the long term deficits and debt is to tackle entitlement spending. Not by necessarily slashing, but by increasing the age of retirement, indexing increases to inflation, and means testing for qualifying.

Three suggestions that are reasonable. Unfortunately Republican messaging rhetoric doesn't lend itself to reasonableness. The country's broke seems to be the justification for a host of ideological cuts. Is america that stupid?

And I disagree that long term deficits and debt is best achieved with "tackling" entitlement spending.

Its better managed by balancing tax revenues (maybe having this generation start paying its own way) with judicious discretionary program cuts - like billions of dollars in subsidies and tax breaks to big oil, and a significant reduction in military spending.

No, they're ok with the loss of government jobs because of it.

So a public service job is not really a good job? or a productive job? Is it that public servants are merely leeching off taxpayers? That somehow they the source of the problem with government and debt?

No. Only Social Security is paid for through payroll taxes.

You really need to familiarize yourself with this..... US Debt Clock

I agree I should familiarize myself with US Payroll taxes include federal social insurance tax (social security & medicare) and unemployment tax.

http://en.wikipedia.org/wiki/Payroll_tax#Social_Security_and_Medicare_taxes

Now what were those inaccuracies again?

[maple_leafs182]

America is spending borrowed money which gives the appearance of growth by the rise in the GDP. However, their economy isn't growing.

I love how when Obama was talking about the new budget he was saying that over the next 10 years they will cut 1 trillion dollars in spending, that won't be enough to pay the interest on their debt and Obama can't bind other presidents or congress to a certain spending limit. He was just trying to make it sound like things are changing when it is really just business as usual.

[Shady]

Please supply a reference - IMHO this number is not credible so a factual reference would be appreciated.

I already provided a reference.

Three suggestions that are reasonable. Unfortunately Republican messaging rhetoric doesn't lend itself to reasonableness. The country's broke seems to be the justification for a host of ideological cuts. Is america that stupid?

Nope, I think it's a fairly accurate assessment. $14 trillion in debt. Trillion dollar deficits for the foreseeable future. As well as $112 trillion dollars in unfunded promises in several entitlements.

And I disagree that long term deficits and debt is best achieved with "tackling" entitlement spending.

Its better managed by balancing tax revenues (maybe having this generation start paying its own way) with judicious discretionary program cuts - like billions of dollars in subsidies and tax breaks to big oil, and a significant reduction in military spending.

You can disagree, but you'd be wrong. Cutting tax breaks for so-called big oil and military spending doesn't even come close to solving the long term fiscal problems. You may as well spit in the ocean.

So a public service job is not really a good job? or a productive job? Is it that public servants are merely leeching off taxpayers?

In some cases, yes, they are leeching off taxpayers. It's why several states are facing bankruptcy, and many states are restructuring their public sector salaries, pension and benefits. Because they're unsustainable. Public sector jobs are fine, but not at the expense of the private sector.

I agree I should familiarize myself with US Payroll taxes include federal social insurance tax (social security & medicare) and unemployment tax.

http://en.wikipedia.org/wiki/Payroll_tax#Social_Security_and_Medicare_taxes

Now what were those inaccuracies again?

Social Security is funded by it's own tax, as is Medicare. They're funded by seperate taxes. But again, that's not why the need to be reformed. And that's not why they're in trouble. They have structural problems that need to be reformed.

[Shady]

America is spending borrowed money which gives the appearance of growth by the rise in the GDP. However, their economy isn't growing.

I love how when Obama was talking about the new budget he was saying that over the next 10 years they will cut 1 trillion dollars in spending, that won't be enough to pay the interest on their debt and Obama can't bind other presidents or congress to a certain spending limit. He was just trying to make it sound like things are changing when it is really just business as usual.

You're exactly right. It won't be long before the annual interest on their debt is at the $1 trillion dollar per year level. His so-called savings will be enough to pay interest on the debt for one fiscal year.

[GostHacked]

The good ol USA has been broke since part way throught Bush Jr's term.

Actually at this point the whole world is broke. I mean why would 100 trillion dollars of money would need to be injected into the worlds credit markets to keep it stable? Where does that money come from? Anyone who can't see the coming global financial crisis is either an idiot, or ignorant with their heads in the sand.

[Jonsa]

America is spending borrowed money which gives the appearance of growth by the rise in the GDP. However, their economy isn't growing.

I love how when Obama was talking about the new budget he was saying that over the next 10 years they will cut 1 trillion dollars in spending, that won't be enough to pay the interest on their debt and Obama can't bind other presidents or congress to a certain spending limit. He was just trying to make it sound like things are changing when it is really just business as usual.

The american economy is growing. Borrowing money is called financing.

You do know that the president is NOT the authority for spending don't you? Constitutionally Congress is the sole spending authority.

[GostHacked]

The american economy is growing. Borrowing money is called financing.

You do know that the president is NOT the authority for spending don't you? Constitutionally Congress is the sole spending authority.

How is the economy growing when you have nations in trillions of debt?

[Jonsa]

I already provided a reference.

didn't see it, can you please point me to your reference as my research has failed to find a figure that even remotely approximates that.

Nope, I think it's a fairly accurate assessment. $14 trillion in debt. Trillion dollar deficits for the foreseeable future. As well as $112 trillion dollars in unfunded promises in several entitlements.

sorry but for a $15 trillion economy $14 trillion is debt doesnt mean the country is broke. If it was broke, lenders would be calling in loans, existing loan interest rates would be SKYROCKETING, the value of the currency would PLUNGE, the stock market would collapse. Standing on a soap box spouting spurious talking points doesn't make them true.

And I still can't find the several entitlements that have unfunded "promises" amounting to $112 trillion. I ask you once again to provide me with your reference.

You can disagree, but you'd be wrong. Cutting tax breaks for so-called big oil and military spending doesn't even come close to solving the long term fiscal problems. You may as well spit in the ocean.

Don't be foolish. I said "like". Controlling expenses MEANS cutting subsidies and tax breaks for ALL recipients that don't need them and for some that do. It doesn't mean, keep these because its "only" 58 billion over ten years.

Cutting $150 billion from the military budget 1,5 Trillion over 10 years. Yep that's spit in the ocean money.

Raising taxes is the RIGHT thing to do. Your generation has to start paying for the mess you've gotten yourself into at some point. Americans should consider it the price of freedom, liberty and opportunity.

I am amused by your logic.

In some cases, yes, they are leeching off taxpayers. It's why several states are facing bankruptcy, and many states are restructuring their public sector salaries, pension and benefits. Because they're unsustainable. Public sector jobs are fine, but not at the expense of the private sector.

and how many of these public servants are leeching (expressed as a percentage)? I'd be very interested in understanding exactly how widespread this leeching crisis is.

If you think that the states are in financial trouble because of public servants then you've drunk the koolaid. this is an opportunistic ideological battle cloaked in a fiscal cess pool of politicians own devising.

Please explain to me exactly how public sector jobs can be at the expense of the private sector?

Social Security is funded by it's own tax, as is Medicare. They're funded by seperate taxes. But again, that's not why the need to be reformed. And that's not why they're in trouble. They have structural problems that need to be reformed.

Glad to see you familiarized youself with that. Structural problems. Okay so they don't need to be slashed just restructured. I don't think anyone would object to improving the system. Now exactly what are these structural problems.

[Shady]

didn't see it, can you please point me to your reference as my research has failed to find a figure that even remotely approximates that.

Sure. US Debt Clock. It's in my 2nd post.

sorry but for a $15 trillion economy $14 trillion is debt doesnt mean the country is broke. If it was broke, lenders would be calling in loans, existing loan interest rates would be SKYROCKETING, the value of the currency would PLUNGE, the stock market would collapse. Standing on a soap box spouting spurious talking points doesn't make them true.

Yes it does. Having a debt that's 100% or more of GDP is usually the tipping point of insolvency. It's not just the $14 trillion dollar debt. It's that, plus the projected trillion dollar deficts for the next several years, plus the multi-trillion dollars of entitlement promises made to people already alive. No soap box is necessary.

And I still can't find the several entitlements that have unfunded "promises" amounting to $112 trillion. I ask you once again to provide me with your reference.

Sure. US Debt Clock. It's in my 2nd post. Since I've posted it, the debt has probably increased by several billion dollars.

Raising taxes is the RIGHT thing to do. Your generation has to start paying for the mess you've gotten yourself into at some point.

Raising taxes might be necessary. But only after real cuts and real reforms have taken place. Otherwise it's just bandaid solutions for more serious problems. And my generation has nothing to do with it. It's prior generations that have created these ever-growing programs, and ever-increasing deficits and debt. It's future generations that are gonna have to pay for promises made by past generations.

and how many of these public servants are leeching (expressed as a percentage)? I'd be very interested in understanding exactly how widespread this leeching crisis is.

It's fairly bad in several states. Illinois, New York, New Jersey, and California. The new Governor there is trying to reform the salaries and pension of state employees. The same way the new Governor of New York is trying to do. And the same way the current Governor of New Jersey has.

If you think that the states are in financial trouble because of public servants then you've drunk the koolaid.

No koolaid is necessary. States are in financial trouble for a number of reasons. Public sector salaries, pensions and benefits are just a part of the problem. Many states have defined benefit pension plans, which most places and businesses have done away with, because they're unsustainable. Defined contribution pension plans are being phased in.

Please explain to me exactly how public sector jobs can be at the expense of the private sector?

When you have to keep raising taxes on the private sector to pay for the salaries and benefits of the public sector, you make take money out of the pockets of individuals and businesses. Making them less competetive and creating an economic environment that's negative to job creation.

Now exactly what are these structural problems.

How have you already made conclusions about what needs to be done, while at the same time not knowing what the problems are? That's kind of odd, don't you think? Like I've already said. When Social Security began, there were 15 workers supporting 1 Social Security recipient. Soon there will be 2 workers for every 1 Social Security recipient. When Social Security began, most recipients only lived a few years after retirement. Now recipients live decades after retirement. It shouldn't be hard to figure out why those are significant problems. That's why it's necessary to raise the retirement age for people under the age of 40. To index benefits to inflation. And to means test, so that at a certain level of income, you no longer recieve benefits, or they're at a reduced rate. It's not rocket science.

[Bonam]

Actually at this point the whole world is broke.

Impossible by definition. There is a vast amount of physical, material, wealth that exists in the world.

[punked]

Huh?

The idiot speaks again. SS is fully funded through 2037 and has a 2.5 TRILLION dollar surplus.

http://abcnews.go.com/US/wireStory?id=12774385&page=1

See what you want to do is cut SS back so that you can steal from it offer tax cuts to the Rich. Thats is stupid no one should touch SS period.

Edited February 17, 2011 by punked

[Shady]

The idiot speaks again. SS is fully funded through 2037 and has a 2.5 TRILLION dollar surplus.

http://abcnews.go.com/US/wireStory?id=12774385&page=1

See what you want to do is cut SS back so that you can steal from it offer tax cuts to the Rich. Thats is stupid no one should touch SS period.

Um, your link clearly states that social security will post a $600 billion dollar deficit over the next ten years. That's an odd way to describe something as fully funded.

[punked]

Um, your link clearly states that social security will post a $600 billion dollar deficit over the next ten years. That's an odd way to describe something as fully funded.

And that has a 2.5 Trillion Dollar surplus. Again it is fully funded. What you want to do is steal money from SS to give tax breaks to millionaires. IF they change retirement age by one year it will be fully funded till 2070. No radical restructing is needed. You are making a big deal about a problem that doesn't really exist. Now runaway military funding there is a problem you for those cuts?

[Jonsa]

Sure. US Debt Clock. It's in my 2nd post.

Yes it does. Having a debt that's 100% or more of GDP is usually the tipping point of insolvency. It's not just the $14 trillion dollar debt. It's that, plus the projected trillion dollar deficts for the next several years, plus the multi-trillion dollars of entitlement promises made to people already alive. No soap box is necessary.

Thanks for link. Apart from a bunch of big numbers, not much information and no explanation of how these numbers were arrived at. You do realize that "unfunded liabilities" is a theoretical calculation based on significant number of acutarial assumptions projected far out into the future - like 75 years into the future.

Stop for a moment and think about what life was like in 1935 compared to today.

Using such an abstract, academic, future based theoretical calculation to present the case that the US is insolvent is specious and spurious.

Now, please present ANY evidence that 100% is usually a tipping point to insolvency. Like I said in my original post, THE PLANETARY AVERAGE is 95%.

I'll keep it simple for you. If you own a house worth $1 million with a mortgage of $500,000 and an annual income of $250,000 your indebtedness is 250% of your personal gross domestic product. Are you insolvent? Are you broke? Have you reached a tipping point?

Sure. US Debt Clock. It's in my 2nd post. Since I've posted it, the debt has probably increased by several billion dollars.

Yeah thanks. my bad for not following it in the first place.

Raising taxes might be necessary. But only after real cuts and real reforms have taken place. Otherwise it's just bandaid solutions for more serious problems. And my generation has nothing to do with it. It's prior generations that have created these ever-growing programs, and ever-increasing deficits and debt. It's future generations that are gonna have to pay for promises made by past generations.

Oh dear. your generation had nothing to do with it. What are you 12?

In 1980 US debt was $907Billion or 33% of GDP.

In 2010 US debt is $14.2 Trillion or 97% of GDP.

Your generation had nothing to do with it?

You need some clarity on these "ever growing" programs and their contributions to the deficit so far. How much has medicare contributed to the $14.4 trillion deficit? How much has medicaid contributed to the deficit. How much has Social insurance contributed to the deficit? I don't doubt that they have contributed, but you seem to be implying that they are the driving force behind the debt and annual deficits. Can you provide any reference?

It's fairly bad in several states. Illinois, New York, New Jersey, and California. The new Governor there is trying to reform the salaries and pension of state employees. The same way the new Governor of New York is trying to do. And the same way the current Governor of New Jersey has.

No koolaid is necessary. States are in financial trouble for a number of reasons. Public sector salaries, pensions and benefits are just a part of the problem. Many states have defined benefit pension plans, which most places and businesses have done away with, because they're unsustainable. Defined contribution pension plans are being phased in.

What does fairly bad mean? are 30% leeches or 50% or maybe only 2%? Are the workers to blame for their pension plans? How much of those pension liablities have to do with the deficits and the current debt of those states you mentioned?

When you have to keep raising taxes on the private sector to pay for the salaries and benefits of the public sector, you make take money out of the pockets of individuals and businesses. Making them less competetive and creating an economic environment that's negative to job creation.

You aren't raising taxes to pay for salaries and benefits of the public sector. You are raising taxes to pay for government services. Or do you think you can provide government services without any people? You know things like policing, firefighting, teaching, road maintenance, water, licensing, tax collecting, etc. etc. etc.

If everyone is paying the same taxes how is one business less competitive than any other? In recession, temporary tax cuts are stimulative but the bush tax cuts didn't generate more jobs during his tenure. In a growth economy, job creation in business has way more to do with how much business is being done as opposed to how much tax is paid.

How have you already made conclusions about what needs to be done, while at the same time not knowing what the problems are? That's kind of odd, don't you think? Like I've already said. When Social Security began, there were 15 workers supporting 1 Social Security recipient. Soon there will be 2 workers for every 1 Social Security recipient. When Social Security began, most recipients only lived a few years after retirement. Now recipients live decades after retirement. It shouldn't be hard to figure out why those are significant problems. That's why it's necessary to raise the retirement age for people under the age of 40. To index benefits to inflation. And to means test, so that at a certain level of income, you no longer recieve benefits, or they're at a reduced rate. It's not rocket science.

Okay lets start with the fact that social security is by LAW unable to add to the deficit. It must standalone.

Now worker ratio. this is meaningless and your number was generated in 1950 when SS expanded to incorporate many millions of more workers. Since then, there have been a number of adjustments to compensate for the baby boomers. the last adjustment was in 1988 when SS was "balanced" through 2057. Yes, a 2 to 1 ratio does translate into higher costs, but those costs have so far been accounted for in the periodic balancing of the insurance fund.

Let's take a look at "people living longer". While the average life expectancy has gone up over the years, closer analysis shows that compared to 1982, higher income people are living 5 years longer but lower/average income people are living only 1 year longer. And considering the ALE for US 79.4 averaging out, people are living roughly 15 years past retirement, not decades. And we won't even get into stats analysis of things like mortality by age to examine the various factors in the ALE increases.

I have no problem with means testing, nor indexing to inflation those are very reasonable.

[Oleg Bach]

When all the jobs were shipped off to third world nations and to China...it was a great deal for a few...In eccense America is NOT broke ...there was a great profit made by those that sold millions of American slaves...who now work as bean counters that keep track of inferior product that is useless to us... Yes America is broke..but not the top on tenth of one per cent..They are fabulously rich! At the expense of betrayed workers...who now are persecuted for being lazy and not working...odd though...there really are no jobs for Americans...to pick on the un-employed is a sham...it's like kicking a slave for not picking your apples when you have chopped down all the trees.

[Luzifull22]

yess Ok thankss! :P

[Yukon Jack]

Why is it so damn difficult for some to accept the fact that the retirement and qualifying for government provided pension should be raised?

When the age of 65 years was first proposed (by that pre-Nazi German chancellor, Bismark) and since then universally accepted by the entire world, life expectancy was about 45 years.

By that standard, today's retirement age should be no less than at least 75 years. Or more.

Phase it in gradually, but phase it in.

Edited February 18, 2011 by Yukon Jack

[maple_leafs182]

The american economy is growing. Borrowing money is called financing.

Fine, the economy is growing but it is growing only to service the debt. Imagine if America stopped QE2 or the government stopped running a 1.5 trillion dollar deficit, all the jobs that have grown up around that money would disappear.

Eventually China will no longer finance America and they will not be able to print money to prop their economy up because inflation will get out of hand.

America needs to start producing/manufacturing things again if they really want to grow the economy.