USA's Future - UK budget cuts of £81bn announced

[ERD50]

This forum really needs an "embedded quote" option, gawd this is tedious to get the Q, reply and next Q for context...

G4G: At the very least they can admit that they already consumed benefits roughly equal to the taxes they paid...

ERD50: Debatable, very debatable - and I solidly do not agree.

How?

If over the course of our lifetime our government runs up a huge amount of debt (spending > than taxes) AND we require future generations to pay a higher level of taxation than we paid to fund benefits we promised ourselves, how can it be that we didn't consume more, far more, in government services than our taxes paid for? It seems a mathematical impossibility for it to be otherwise.

It is a mathematical impossibility, but not a practical one.

For easy arithmetic, let's just say the Govt collects $100 in taxes from me, and spends $150 adding $50 to the deficit. So while they spent $150 for my $100 input, due to inefficiencies and the fact that I didn't get to specify how I wanted the money spent, maybe I only got $25 'worth' of benefits out my $100. But I could have got $100 worth out of that $100 if I kept it. So clearly, I did not "consume benefits roughly equal to the taxes I paid", since $25 is far less than $100.

Sure, I just pulled those numbers out of the air for illustration, but let's go back to the fact that us higher wage earners pay the vast majority of Fed Income Tax, that the Feds are handing out money to pay for my neighbor's "clunker" or my neighbor's high efficiency furnace, or electric car or whatever. I don't think it's a stretch that we wont get what we pay in, even if we ignore the future cost of that debt (which we will be paying also).

-ERD50

 

[Pie Floater]

We sure as heck are not guilty of over-benefiting with respect to SS. We dutifully paid in SS tax, as did our employer, if we are not yet collecting SS, we have received nothing yet in terms of a benefit.

But it si tru that we ALSO paid income tax into the general fund. Now if there were tax breaks that over-benefited us and exceeded our tax input to the general fund, hey, that is over-benefiting with respect to that tax scheme.

It has nothing to do with SS. Don't confuse the two. They are separate issues.

 

[ERD50]

Your quick calculation provides an absolute floor based on all of this, and the actual deal is considerably more generous than this.

There is another factor that is tougher to define, but while I used a 95% success rate to hit 5.2% SWR, I think that a fund that averages payouts over many years could be based on something much closer to 50% success rate, which increases the effective SWR significantly (>8.5%). We shoot for 95% or higher because it is a single point of failure for us. I don't think a general fund needs to be that conservative.

Which gets back to my thinking that we ought to have accounts with our names on them (like a 401K), but with the option to turn that over to the govt for an annuitized payout. They can average out that longevity risk, don't need to take a profit, low advertising/enrollment costs, and would have a very large group to average out.

-ERD50

 

[Pie Floater]

There is another factor that is tougher to define, but while I used a 95% success rate to hit 5.2% SWR, I think that a fund that averages payouts over many years could be based on something much closer to 50% success rate, which increases the effective SWR significantly (>8.5%). We shoot for 95% or higher because it is a single point of failure for us. I don't think a general fund needs to be that conservative.

Which gets back to my thinking that we ought to have accounts with our names on them (like a 401K), but with the option to turn that over to the govt for an annuitized payout. They can average out that longevity risk, don't need to take a profit, low advertising/enrollment costs, and would have a very large group to average out.

-ERD50

If the government would give me the money I paid in I would be more than happy to take my chances. I cannot imagine that I would mismanage it more than they will.

 

[Gone4Good]

If the government would give me the money I paid in I would be more than happy to take my chances.

You already spent it. But I suspect you'll never understand that because it isn't in your interest to.

 

[Gone4Good]

So clearly, I did not "consume benefits roughly equal to the taxes I paid", since $25 is far less than $100.

Certainly some people pay more, and some people get more. But regardless of whether any individual is getting a raw deal, we as a group spent more money than we paid in taxes. That is undeniable. So as a group, we need to have our benefits reduced, because, as a group, we took far more money out than we had any right to. I'll let you decide who's benefits get cut, but somebody's has to.

 

[Hobo]

What you say is true. No argument from me

Still we have to live in the real world.

In the "real world", we are going to need really big money to pay for future retirees. I forgot the exact figures, but when the time comes when SS must pay out some really big money, there will not be enough taxpayers to in America to generate that kind of money. SS benefits will eat up half the tax revenues.

That is not realistic to expect and still run a country. So if we don't have a big pot of money sitting in the SS Trust Fund, the country will just not have enough money to pay the benefits from tax revenue alone.

That is the reason why everybody expects SS benefits to be cut - because we will not have the money to pay existing benefits. Instead of getting $20k per year, you will get $10k per year... try to live on that!

That, in the real world, is what most people expect will happen.

 

[Emeritus]

We sure as heck are not guilty of over-benefiting with respect to SS. We dutifully paid in SS tax, as did our employer, if we are not yet collecting SS, we have received nothing yet in terms of a benefit.

. They are separate issues.

Yes since you received the insurance coverage for disability and dependents from day one. Its is to be sure a welfare or social insurance benefit but it is clearly a benefit.

 

[stoutboy]

Let's hope we follow some model other than Europe's proven failed system.

It looks like we're currently following Japan's proven failed system.

I agree with Jacob that we appear to be following Japan's path. What 'failed system' in Europe are you referring to? On every measurable scale I am aware of, they have a higher standard of living, and are much happier overall. If you want to get all preachy about failed systems, get your own house in order first.

US salaries are nominally higher, but when you take into account health care, paid vacation, pensions, social security safety nets, it is abundantly clear that Europe is not failing at all.

They may not live in McMansions and drive gargantuan SUVs, but they also aren't up to their necks in personal debt.

 

[ERD50]

Naturally, because in Lake Woebegone where everyone is above average, everyone also pays above average taxes and receives below average benefits.

Totally inapplicable. Our progressive tax system and deductions shifts averages and means.

In this case, those who paid more into SS over their careers on average paid much more than average in Fed taxes. The top half of taxpayers paid almost all the Federal Income tax. So if we are lumping all this money together, half of the taxpayers are getting close to a free ride off the other half. And since that 50% split point is just $33,000 I think it's fair to say that most FIRE people were in the group that paid the vast majority of FIT.

Couple that with the fact that SS payments are very progressive, capped for the higher wage earners, I don't see where averages play into it at all. You could try to make that case if SS and FIT was a "head tax", but not under the current system.

-ERD50

 

[ERD50]

Certainly some people pay more, and some people get more. But regardless of whether any individual is getting a raw deal, we as a group spent more money than we paid in taxes. That is undeniable.

And in my example, it is undeniable that a large group of taxpayers did not "benefit" from the deficit spending, and that was your attempted point, that we all "benefited" from this. And it is very likely that we will be the ones paying taxes to pay down that debt and/or the interest on that debt. Interest on that debt is currently ~ 9.5% of govt spending.

-ERD50

 

[Emeritus]

Totally inapplicable. Our progressive tax system and deductions shifts averages and means.

In this case, those who paid more into SS over their careers on average paid much more than average in Fed taxes. The top half of taxpayers paid almost all the Federal Income tax. So if we are lumping all this money together, half of the taxpayers are getting close to a free ride off the other half. And since that 50% split point is just $33,000 I think it's fair to say that most FIRE people were in the group that paid the vast majority of FIT.

Couple that with the fact that SS payments are very progressive, capped for the higher wage earners, I don't see where averages play into it at all. You could try to make that case if SS and FIT was a "head tax", but not under the current system.

-ERD50

Are you talking about taxes on EARNED income or overall income? Because of the high concentration of unearned income among the wealthy in the USA you get very different results. Because of the cap on SS. the top half of taxpayers (not population) don't pay that much more into SS than the bottom half.

 

[Emeritus]

And in my example, it is undeniable that a large group of taxpayers did not "benefit" from the deficit spending, and that was your attempted point, that we all "benefited" from this. And it is very likely that we will be the ones paying taxes to pay down that debt and/or the interest on that debt. Interest on that debt is currently ~ 9.5% of govt spending.

-ERD50

I don't think anyone can easily characterize who "benefits" from deficit spending. E.G Does a person who owns a lot of property "benefit" more from a huge military? How much benefit arises from social peace?

 

[ziggy29]

Are you talking about taxes on EARNED income or overall income? Because of the high concentration of unearned income among the wealthy in the USA you get very different results. Because of the cap on SS. the top half of taxpayers (not population) don't pay that much more into SS than the bottom half.

Maybe that was because SS was designed to replace EARNED income so people wouldn't have to work any more once they reached a certain age?

Non-earned income receives no benefits, either.

 

[Pie Floater]

You already spent it. But I suspect you'll never understand that because it isn't in your interest to.

Someone may have spent it but it was not Pie Floater who benefited. He was overseas working, and using English and French roads, and schools and healthcare and social goodness.

If anything, I'd like a refund on my income taxes so I can give it to the UK to help bail them out.

If you use of "sense of entitlement" is intended to mean "greedy old bastard" then I am one. I want my Social Security.

I did not "already spent it".

 

[harley]

Someone may have spent it but it was not Pie Floater who benefited. He was overseas working, and using English and French roads, and schools and healthcare and social goodness.

If anything, I'd like a refund on my income taxes so I can give it to the UK to help bail them out.

If you use of "sense of entitlement" is intended to mean "greedy old bastard" then I am one. I want my Social Security.

I did not "already spent it".

Hmmm...tough luck?

You made your choices lifestyle-wise, like we all did. Maybe you should have had some foresight and given up your citizenship a couple of decades ago. You'd have been out of Uncle Sam's financial grip by now, and could be whinging to the symbol of whichever country you chose to live in. But you stayed, you're in the same boat as the rest of us, and no amount of pissing and moaning is going to change it. If you're saying TANJ, be careful what you as for.

 

[Emeritus]

Maybe that was because SS was designed to replace EARNED income so people wouldn't have to work any more once they reached a certain age?

Non-earned income receives no benefits, either.

See note above on earned versus social welfare benefits.

 

[Pie Floater]

I agree with Jacob that we appear to be following Japan's path. What 'failed system' in Europe are you referring to? On every measurable scale I am aware of, they have a higher standard of living, and are much happier overall. If you want to get all preachy about failed systems, get your own house in order first.

US salaries are nominally higher, but when you take into account health care, paid vacation, pensions, social security safety nets, it is abundantly clear that Europe is not failing at all.

They may not live in McMansions and drive gargantuan SUVs, but they also aren't up to their necks in personal debt.

Go live in England for 15 years or so, then get back to me on those comments. Not London but try Huddersfield, or Halifax or Bradford. If you still feel that is "a higher standard of living", I'll be shocked.

 

[haha]

Go live in England for 15 years or so, then get back to me on those comments. Not London but try Huddersfield, or Halifax or Bradford. If you still feel that is "a higher standard of living", I'll be shocked.

Never been to these places, but the average American town or smaller city is not exactly a day at the races either.

Ha

 

[Pie Floater]

Never been to these places, but the average American town or smaller city is not exactly a day at the races either.

Ha

Ha, those cities are in the 100,000 to 300,000 size range and the pictures you would see in tourist ads would suggest a great place to live but the reality is much different. Still pretty much Dickensian existences. Not exactly the same model that some were suggesting for touting England as a major improvement of the US. Just not the case.

 

[Pie Floater]

Hmmm...tough luck?

You made your choices lifestyle-wise, like we all did. Maybe you should have had some foresight and given up your citizenship a couple of decades ago. You'd have been out of Uncle Sam's financial grip by now, and could be whinging to the symbol of whichever country you chose to live in. But you stayed, you're in the same boat as the rest of us, and no amount of pissing and moaning is going to change it. If you're saying TANJ, be careful what you as for.

I refuse to relinquish my right to my Social Security, I paid it in, I want it.

You do whatever you like, I intend to fight to receive my due.

 

[stoutboy]

You are correct that the UK overall is more similar to the US than the rest of western Europe, but if that is the basis of your argument that Europe is a 'failed system' then you were being disingenuous. I would wager that for the great majority of people, what comes to mind upon hearing 'Europe', especially in the context of your statement, is continental Europe.

Europe, in every important social indicator of which I am aware, rates higher than the US. As do three other countries that follow a more European model: Canada, Australia and New Zealand. The UK does for most as well, though not to the degree of Europe. Your assertion that most in the UK suffer a Dickensian existence is absurd.

I'm an American, but I have lived overseas for a good deal of my adult life. And I can tell you that the quality of life for the majority of citizens and rate of contentment among people in these places is higher than it is in the US. And for good reason.

Ha, those cities are in the 100,000 to 300,000 size range and the pictures you would see in tourist ads would suggest a great place to live but the reality is much different. Still pretty much Dickensian existences. Not exactly the same model that some were suggesting for touting England as a major improvement of the US. Just not the case.

 

[ziggy29]

Europe, in every important social indicator of which I am aware, rates higher than the US. As do three other countries that follow a more European model: Canada, Australia and New Zealand. The UK does for most as well, though not to the degree of Europe. Your assertion that most in the UK suffer a Dickensian existence is absurd.

And herein lies the rub. Someone has to define the "social indicators" and they tend to focus more on cradle-to-grave security than on maximizing freedom.

Not that this is necessarily right or wrong, but it's different. And which quality of life is better largely depends on which you value more.

 

[stoutboy]

Valid point. But it depends on how you define 'freedom'. I doubt most reasonable Americans who actually go to Europe/Canada/Oceania come away thinking these are enslaved people. In my experience, the Americans who belabor 'freedom' vs. 'socialism' when contrasting the US and Europe have never visited these places, much less lived there for any length of time.

And herein lies the rub. Someone has to define the "social indicators" and they tend to focus more on cradle-to-grave security than on maximizing freedom.

Not that this is necessarily right or wrong, but it's different. And which quality of life is better largely depends on which you value more.

 

[Pie Floater]

You are correct that the UK overall is more similar to the US than the rest of western Europe, but if that is the basis of your argument that Europe is a 'failed system' then you were being disingenuous. I would wager that for the great majority of people, what comes to mind upon hearing 'Europe'. especially in the context of your statement, is continental Europe.

Europe, in every important social indicator of which I am aware, rates higher than the US. As do three other countries that follow a more European model: Canada, Australia and New Zealand. The UK does for most as well, though not to the degree of Europe. Your assertion that most in the UK suffer a Dickensian existence is absurd.

I'm an American, but I have lived overseas for a good deal of my adult life. And I can tell you that the quality of life for the majority of citizens and rate of contentment among people in these places is higher than it is in the US. And for good reason.

Hahahah, very interesting. Do you distort everything? I clearly said UK more than once.

"Your assertion that most in the UK suffer a Dickensian existence is absurd." is a serious distortion of what I said. At least try honestly addressing an issue. If you have lived in Bradford or Halifax and do not find the existence there Dickensian then you likely do not understand what Dickensian means.

If you are going to "assume" and then distort, it's really not worth my time to address your points. Whatever they might be. You've drifted off to New Zealand now, so carry on.

BTW, as an American living overseas keep in mind you may have had biases at play. And, please, notice I said "may".