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

[traineeinvestor]

But that's the joke . . . people on the verge of collecting SS already spent the money, mostly on themselves! The people who "chose not to fund" the SS "trust fund" are the very same people who think they are entitled to payments from this pile of money that doesn't exist.

Here is an example to illustrate . . .

Social Security takes $10 from Citizen A in payroll taxes. That $10 goes into the government's general revenue fund. Mr. Nice Politician says "Hey look, we have a $10 surplus! Why don't we spend $5 on current services and $5 on tax cuts for everyone?" Citizen A votes for the Nice Politician and everyone celebrates their good fortune. Mr. Nice Politician uses the $10 in SS "surplus" to fund all the goodies, and gives the SS trust fund an IOU in return. Many years later, it's time for Citizen A to retire, but low and behold, there is nothing in the trust fund to pay for his retirement benefits but IOUs . . . who's to blame? Citizen A who already got $10 in benefits for the taxes he paid, or "Still Too Young to Vote" Citizen B who neither voted for this system, nor got any benefits from it?

And if we want to be accurate, Citizen A actually voted for $11 or $12 in tax cuts and services considering the general fund deficit we've been running for several decades now. Given the circumstances, it's kind of hard for Citizen A to argue he has a right to anything other than the clean-up bill.

+1

Given that the choices are:

1. Citizen A who has already taken the money (and more); or

2. Citizen B who has received no benefit (and most likely will have to provide for themselves to a far greater degree than previous generations as well as picking up at least part of the cost of the actions of Citizen A),

the answer seems clear. It is not as though the Citizen As of this world can say that they didn't see this problem coming - the unsustainability of pay as you go financial practices has been debated since at least the early 1980s.

Of course nothing is ever that easy because everyone wants someone else to bear the cost, and the reality is that recipients of transfer payments will have to make do with less (and get it later) and taxpayers will have to pay more.

Put differently, the other way of looking at the choices are:

A. the Greek model - do nothing until things start falling apart

B the French model - take tepid fractional measures which will have only a limited impact

c. the British model - be decisive and take the rather painful measures to get the country's finances back on a sustainable path

The other related issue is how to get the economy growing at a pace which will create jobs. Introducing reduced and simplified regulations will make life a lot easier for small businesses (which account for a very high proportion of new job creation) would be a good first step.

 

[ERD50]

the answer seems clear. It is not as though the Citizen As of this world can say that they didn't see this problem coming - the unsustainability of pay as you go financial practices has been debated since at least the early 1980s.

Seeing it coming and being able to do something about it are two very different things.

I can vote third party to make a statement. Or I can vote for either of the two major parties, neither of which are doing anything to remedy this. And I can write my Representative and get a patronizing "thank you for your interest while we do whatever we damn well please" form letter style response.

-ERD50

 

[Pie Floater]

Seeing it coming and being able to do something about it are two very different things.

I can vote third party to make a statement. Or I can vote for either of the two major parties, neither of which are doing anything to remedy this. And I can write my Representative and get a patronizing "thank you for your interest while we do whatever we damn well please" form letter style response.

-ERD50

Exactly! All the A, B, C, logic pales in comparison to WTF can a taxpayer do. Politicians are not elected by taxpayers. They are elected by the 47% who pay no Federal tax at all in 2009. The same folks who pay almost no Social Security taxes into the system. The same folks who get most of the tax breaks.

The only solution is to separate the taxes in General Fund, Social Security and Medicare and let each system run it's own budget and set payout rates to match a balanced budget.

Start, NOW.

 

[traineeinvestor]

Seeing it coming and being able to do something about it are two very different things.

I can vote third party to make a statement. Or I can vote for either of the two major parties, neither of which are doing anything to remedy this. And I can write my Representative and get a patronizing "thank you for your interest while we do whatever we damn well please" form letter style response.

-ERD50

Politically, this is very true, although if taken to its logical conclusion would suggest that there is no point in anybody exercising the right to vote.

Practically, I respectfully disagree. Citizen A should have protected themselves from the foreseeable unsustainability by saving more. Of course, what actually happened was that savings rates in developed economies declined over this time period.

Personally, I haven't bothered voting in years, but I have kept up a respectable savings rate almost all my working life because [-]only the terminally optimistic and the seriously deluded would rely on something so obviously unsustainable [/-] I do not believe that it is prudent to rely on either unfunded state pension plans in an aging society or underfunded private sector retirement schemes in a competitive global economy for my (early) retirement needs.

 

[ziggy29]

Exactly! All the A, B, C, logic pales in comparison to WTF can a taxpayer do. Politicians are not elected by taxpayers. They are elected by the 47% who pay no Federal tax at all in 2009.

I didn't know the right to vote was determined by whether you paid any federal income tax.

And if the 47% alone could determine the outcome of the election, it would also be the fault of the other 53% for not voting in large enough numbers to offset them, yes?

 

[traineeinvestor]

Exactly! All the A, B, C, logic pales in comparison to WTF can a taxpayer do. Politicians are not elected by taxpayers. They are elected by the 47% who pay no Federal tax at all in 2009. The same folks who pay almost no Social Security taxes into the system. The same folks who get most of the tax breaks.

The only solution is to separate the taxes in General Fund, Social Security and Medicare and let each system run it's own budget and set payout rates to match a balanced budget.

Start, NOW.

HL Hunt suggested that the right to vote should be linked to the payment of taxes. For some reason I can't quite put my finger on he was dismissed as a crank. If politicians and the electorate are collectively so incapable of living within their means, maybe it is time for a different system.

 

[ziggy29]

HL Hunt suggested that the right to vote should be linked to the payment of taxes.

The problem here is that some people "lock in" to federal income taxes as an absolute proxy for whether or not someone is a "taxpayer."

What about Social Security taxes, Medicare taxes, any embedded federal excise taxes on the goods we buy (i.e. federal gas tax)? Not to mention sales taxes and property taxes at the state and local level.

 

[Pie Floater]

I didn't know the right to vote was determined by whether you paid any federal income tax.

And if the 47% alone could determine the outcome of the election, it would also be the fault of the other 53% for not voting in large enough numbers to offset them, yes?

I clearly didn't say that only the 47% were allowed to vote so let's get that cleared up.

And exactly, the 53% need to learn that there is a big stake in voting even when you feel there is no hope because only a 3rd party candidate would propose rocking the entitlements boat.

 

[ERD50]

RE: (paraphrasing my quote) inability to change anything by vote...

Politically, this is very true, although if taken to its logical conclusion would suggest that there is no point in anybody exercising the right to vote.

If neither choice offers a solution, there really isn't much point. I think a lot of people do it for "bragging rights" - "I voted!".

Practically, I respectfully disagree. Citizen A should have protected themselves from the foreseeable unsustainability by saving more. Of course, what actually happened was that savings rates in developed economies declined over this time period.

OK, that's different. I personally did take action here, with LBYM, trying to hang on for retiree benefits once I was in striking range, etc. I can't change others behaviors though. If that is what the majority did, well, those are the ones the politicians are pandering to, so it all fits a nice, neat circle. And some of us are outside that circle.

-ERD50

 

[traineeinvestor]

The problem here is that some people "lock in" to federal income taxes as an absolute proxy for whether or not someone is a "taxpayer."

What about Social Security taxes, Medicare taxes, any embedded federal excise taxes on the goods we buy (i.e. federal gas tax)? Not to mention sales taxes and property taxes at the state and local level.

Agree - I was not seriously suggesting that HL Hunt's proposal be adopted. However, in the spirit of taking the argument to its illogical conclusion this may provide an explanation for how we got into this mess:

1. by any reasonable analysis, one vote will make no difference to the election outcome so there is no benefit in voting;

2. there is a cost to voting, the act of registering to vote, making the journey to the poling station and the mental anguish of forcing yourself to chose which illustrious candidate will get your worthless vote;

3. given that the benefit is zero and that there is a very real cost associated with voting, no intelligent, sensible or reasonable person would ever bother to vote;

4. it follows from 3, that only the unintelligent, insensible and unreasonable ever bother to vote and the candidates will base their election platforms on appealing to those sections of the electorate.

The more I think about it, the happier I am not to live in a full democracy.

 

[Pie Floater]

In 2009 the percentage of taxpaying eligible citizens that paid no Federal tax was 43%, and had they been deprived of the right to vote, the percentage of folks paying Federal tax would have gone up in 2010.

But, I do think people fixate on those paying "Federal taxes" as those who file 1040s or whatever and they miss that lots of folks pay FICA.

FICA should go into a separate pot. Put the SS portion of FICA into Treasuries with the taxpayer's tax ID attached and pay that person his/her due when SS retirement age. It was made into law as a retirement, survivor, disability fund, not a Congressional hog trough.

Put the Medicare portion into a yearly HSA type fund and make it available to the contributor at age 65 as their healthcare security net.

 

[Emeritus]

You mean paid no income tax, which is a totally different issue.

Since the proceeds of social security, as we all know, are co mingled in the budget it is deceitful on the part of politicians to suggest that those who pay one tax are somehow more deserving than those who pay another.

What you describe is essentially what happens. in either case the issue is how the bonds will be paid when they come due.

 

[Pie Floater]

Elimination of co mingling = elimination of political deceit tool

 

[LARS]

FYI,
I think people now 50 will get the current SS benefits...

This is the opinion of a friend with good ties in senior political circles. His exact words were its viewed as a "contract".

 

[GregLee]

HL Hunt suggested that the right to vote should be linked to the payment of taxes. For some reason I can't quite put my finger on he was dismissed as a crank.

Perhaps I can help guide your finger. The poll tax has an unhappy history of being a means of enforcing racism. Trying to revive the idea in this day and age just has no currency at all. We've gotten beyond that.

 

[ziggy29]

Perhaps I can help guide your finger. The poll tax has an unhappy history of being a means of enforcing racism. Trying to revive the idea in this day and age just has no currency at all. We've gotten beyond that.

While I don't disagree with this, I think we're talking about apples and oranges. A "poll tax" as was historically levied to keep blacks from the polls (until they were outlawed) isn't the same thing as suggesting that only those with a "positive" income tax burden can vote.

 

[Gone4Good]

Seeing it coming and being able to do something about it are two very different things.

I can vote third party to make a statement. Or I can vote for either of the two major parties, neither of which are doing anything to remedy this. And I can write my Representative and get a patronizing "thank you for your interest while we do whatever we damn well please" form letter style response.

-ERD50

Individually people can hide in a crowd and point the finger of blame at everyone else. But collectively, there is no one to blame but ourselves.

Even if someone didn't vote for the system, they benefited from it. They enjoyed the higher government benefits and the lower general taxes it produced. At the very least they can admit that they already consumed benefits roughly equal to the taxes they paid and that, as a result, they aren't entitled to anything more. But maybe, just maybe, it's actually time to man-up and take responsibility for the mess we created over the past several decades and stop demanding full payment on promises we made to ourselves that we collectively never bothered to adequately finance.

 

[Zathras]

If neither choice offers a solution, there really isn't much point. I think a lot of people do it for "bragging rights" - "I voted!".

-ERD50

I don't know about a lot of people, but I vote because it is my civic duty as a citizen of a republic.
It may be futile to vote for a third party, but if that is the only one making sense, that is who gets my vote.
The reason 30% of our citizens can select the president (and even less for representatives) is that only 60% or less can be bothered to take an hour out of their day one day every couple of years to vote

 

[Emeritus]

While I don't disagree with this, I think we're talking about apples and oranges. A "poll tax" as was historically levied to keep blacks from the polls (until they were outlawed) isn't the same thing as suggesting that only those with a "positive" income tax burden can vote.

Purely on the word Poll

Poll is an old word for the "Head"

A poll tax was a Head tax. you had to pay your head tax to vote
so it was called a poll tax and the word poll was transformed inot the vote itself.

So any tax which is levied "per capita" is a poll tax without any regard to voting.

 

[Emeritus]

Elimination of co mingling = elimination of political deceit tool

possibly, but your proposal does not have that effect.

All projections of property or wealth or obligations into the future depend on both a functioning social system and a meaningful economy. It is "deceitful" for politicians to suggest for example that corporate stock is somehow better than the SS bonds held by the system. both only have value if the econolmy overall is functioning

 

[Texas Proud]

Exactly! All the A, B, C, logic pales in comparison to WTF can a taxpayer do. Politicians are not elected by taxpayers. They are elected by the 47% who pay no Federal tax at all in 2009. The same folks who pay almost no Social Security taxes into the system. The same folks who get most of the tax breaks.

The only solution is to separate the taxes in General Fund, Social Security and Medicare and let each system run it's own budget and set payout rates to match a balanced budget.

Start, NOW.

The voting is why Venezuela has Chavez.... he keeps paying out to the poor and they keep voting him in... I hope we are not like them... but in a way we are....

 

[Texas Proud]

You mean paid no income tax, which is a totally different issue.

Since the proceeds of social security, as we all know, are co mingled in the budget it is deceitful on the part of politicians to suggest that those who pay one tax are somehow more deserving than those who pay another.

What you describe is essentially what happens. in either case the issue is how the bonds will be paid when they come due.

It really doesn't matter if they were comingled or not... the only difference is the reported defecit...


If you comingled, and you say you have a $100 defecit... with $20 of excess SS... the total spending was $120... with an IOU to SS...

Now, do not comingle... you have a $120 defecit... but that $20 has to be invested somewhere... which will be Treasuries... sooo, total spending is $120 with an IOU to SS...

Talking about putting money aside etc. is meaningless unless we have an option to invest that money where we want.... any other way is the same in the end...

 

[Texas Proud]

Just as a FYI.... they had a news segment last night on TV about the British budget... the important thing that was said was in their system the budget does NOT come up for a vote.. the Prime Minister and his group has full control over the budget... so, no earmarks, pork, etc. etc. if they do not want it..

 

[dex]

The voting is why Venezuela has Chavez.... he keeps paying out to the poor and they keep voting him in... I hope we are not like them... but in a way we are....

This is the Hard Core of Freedom" by Elmer T. Peterson in The Daily Oklahoman (9 December 1951): "A democracy cannot exist as a permanent form of government. It can only exist until the majority discovers it can vote itself largess out of the public treasury. After that, the majority always votes for the candidate promising the most benefits with the result the democracy collapses because of the loose fiscal policy ensuing, always to be followed by a dictatorship, then a monarchy."

What family do you think will be the USA's monarchy?

 

[TromboneAl]

On a related note: why are French high school students rioting over the decision to raise the retirement age from 60 to 62?

Reactions To Austerity: Passivity In The UK, Strikes And Riots In France | NEWS JUNKIE POST