by | ARTICLES, BLOG, ECONOMY, GOVERNMENT, OBAMA, POLITICS, TAXES, TRUMP
Nick Timiraos’ recent article in the Wall Street Journal ( Donald Trump’s Spending Push Rankles Fiscal Conservatives, 11/28/16) , is rather disingenuous with his so-called analysis of Trump’s fiscal roadmap. He clearly aims to torpedo Trump’s plan to cut taxes by tying the discussion to deficits — though correlation, of course, does not necessarily mean causation. Timiraos’ analysis is full of half-truths, but it is not entirely certain if that is willfully written or just plain economic ignorance.
First, Timiraos suggests that budget deficits “fell from 2010” but “are on track to climb in the next decade,” yet doesn’t even give any hard data to back that up — because their really isn’t any. A deficit is still a deficit. Going from a $1.4 trillion budget deficit, as Obama had in 2009, down to a $600 billion deficit in 2016, is still a massive deficit. And of course, Timiraos also doesn’t even mention that the “the total national debt nearly doubled to $19.3 trillion from $10.6 trillion when Obama took office.” Those two data points indicate an enormous spending problem on the part of Obama, something Timiraos totally ignores.
Timiraos then has the audacity to try to link rising deficits to tax cuts by Republicans. Timiraos writes, “the last two times Republicans reclaimed the White House from Democrats—in 1981 and 2001—they also successfully pushed for large tax cuts. Deficits nonetheless rose during their administrations.” Again, another instance of Timiraos telling only part of the story. Both tax cuts resulted in huge revenue increases, but it was even greater spending that created larger deficits. The tax cuts were not the problem; the deficits were not caused by a lack of revenue. Even Republicans can overspend.
Once more, near the end of the article, Timiraos tries again to make Obama’s economics to be the pinnacle of fiscal responsibility, when he writes, “Concerns about deficits over the past few years have faded because economic growth remains disappointing and because Washington took several steps to cut spending and increase taxes after deficits jumped in 2009. Deficits have also fallen below projections in recent years due to a surprising decline in the growth rate of health care spending and because interest rates have been lower than projected.” Only the Democrats are unconcerned about deficits — because their deficit spending is so astronomical, it’s better not to talk about it at all! Suggesting that Obama “cut spending and increased taxes” and that “Deficits have also fallen below projections in recent years” again ignores Obama still spent $600 billion – $1.4 trillion more than his revenue receipts were. When deficits are projected to be $1 trillion, and the actual deficit comes in a bit lower than that (but still in the hundreds of billions), you still have a deficit problem! Timiraos also ignores the fact that Obama regularly had record tax receipts each month (noted on this blog numerous times), and yet Obama still could not control his overspending.
To ignore this economic reality of the past eight years, and the simultaneously try to suggest that a tax plan with tax cuts will alarmingly increase the deficit is reckless. Timiraos ought to be ashamed at such blatant hypocrisy.
by | ECONOMY, GOVERNMENT, TAXES
One of the most commonly heard criticisms on the Ryan plan is that even though it will reduce the cost of Medicare to the government and move us more toward solvency, it will increase the amount of medical care that will have to be paid for by seniors.
The answer to this critique is not that they won’t be paying more, but rather, of course they will be paying more. Medicare is going broke, and the reason why is that it is unaffordable in its current form to the government. Paying more by seniors is certain – both by Ryan’s plan but also by doing nothing — because the system right now is almost bankrupt.
Ryan is trying to minimize the extra cost to those 55 and over by modifying how the system is subsidized by the government. The Ryan plan is the best one out there right now because it will allow the seniors to choose the kind of coverage options they want. Democrats try to say that the insurance companies will gouge seniors, but you simply can’t engage in price gouging when there are competing businesses. The people will select the health the coverage they want for their particular needs and ability.
The rational view for the future of health care is that the retiree will want to have choices for medical care, such as choosing a private room or shared, a hip replacement or hobbling a bit. It should be up to the individual if they want a procedure that is more or less invasive, standard or innovative. Having choices drive competition, which will in turn drive down the cost.
The hysteria that costs are going to rise is absurd because, although the Democrats won’t say so, costs will rise regardless of any plan because the system is broken. At least the Ryan plan is an alternative solution to Medicare, which, according the very trustees of Medicare, is completely unsustainable in its present form:
Medicare and Social Security “are on unsustainable paths” and will be insolvent within a few decades, according to the 2012 annual report of trustees of the funds. Since 1970, Medicare trustees have predicted the end is near and then nearer. The program must soon face up to demographic realities: Americans are living longer and fewer workers are paying Medicare and Social Security funds per retired citizen.
And in a letter to the Senate Budget Committee, in fact, the actuary at the Center for Medicare & Medicaid Services proffered a different set of more realistic circumstances—that the trustees themselves are being far too optimistic with their projections. In the actuary’s scenario, wherein we discount next year’s imaginary 30 percent rate cut to doctors and Obamacare’s supernatural ability to hold down costs, there will be an additional $10 trillion unfunded obligation over that 75 years.
Medicare trustees have warned that the program is facing more than $36 trillion in unfunded obligations. There needs to be a major change to the way it works but the Democrats are unwilling to acknowledge this fact or provide any solutions – only attacks. In doing so, the Democrats are really saying that they don’t care if they destroy Medicare.
It is imperative that the Republicans stand by Ryan and continue to hammer home the point that the Democrats have no Medicare plan, just like they have no budget plan (for 1200 days and counting). But by doing nothing and keeping Medicare the way it is, the Democrats will surely hasten the demise of the program within ten years. What will happen to the seniors then?
by | ECONOMY, SOCIAL SECURITY, TAXES
Under federal tax law, Social Security amounts that people receive are either 1) not taxable if income is low enough; 2) partially, from 0% to 85% as your income rises or 3) fully if you pass a certain income threshold. Your income is based on a Modified AGI which is basically gross income, subject to certain things such as municipal bond interest income.
Should Social Security be taxed? A fundamental principle of taxation is that you should not be taxed on money on the monies you have already paid. Because people have already paid taxes to Social Security by having it withdrawn from their pay, people have this (correct) assumption that when they get the money back, it should not be taxable.
Interestingly, the current method of taxation calculation was set up 15 – 20 years ago. At that time, it was determined that that the average person would collect in benefits much more than they put in; their costs (the amount they put in) would be likely 15% of the total amount they collect. If that’s correct, it seems only fair you pay taxes on 85% on what you collect.
For instance, if a person paid $15K into Social Security over their working years, and then withdrew 100K during their retirement, they should rightly pay taxes on that amount above and beyond what they put in. The problem is that it would not be fair if you put in 50K and get back 100K. In this case, you should only pay on 50%, not 85%
In the earlier years of Social Security, people didn’t put in anywhere near the 15%, they put in more like 1% of the total they collected, and got it back 100x. But it wasn’t even taxed. Then they changed the laws as they needed more revenue. And since then, the percentage that recipients are getting back as opposed to what they do put in, has drastically changed. Now, the average person is putting in more while getting back less, and the situation will only grow more acute as the Social Security Fund runs out of money. The scenario of money-in, money-out has changed.
Congress, in its infinite capacity to forget things, has never changed that rule resulting in more income being fleeced from the taxpayer.
Social Security began as a trust fund to remain separate for American workers. LBJ raided the trust fund and put it in the government’s general fund – to be spent and never repaid. Social Security was also not taxed until the Clinton Administration, and the FICA withholding income tax deduction was also eliminated.
One might think that the double taxation incurred today supports the egregious Social Security system. But actually, the money goes into the general tax revenue account and not in the Fund. The Social Security Administration collects and records the gross Social Security tax receipts, while the net amount, after deductions, is sent to the IRS. Yet the gross amount is spent by the government, resulting in the staggering deficit we face today. According to the Social Security trustees, in a report released last month, unfunded liabilities amount to an $18 trillion deficit.
Social Security is merely an unsustainable ponzi scheme. Considering the fact that citizens will receive far less – of their own money – than they put in, it is morally reprehensible that Social Security is taxed they way it is.
