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

[dex]

I don't expect the USA to be in Britain's position any time soon - maybe 2070. I'm guessing that after the mid-east wars are ended there will be deep military cuts.

But we can look towards Europe for some of our future. There will be a VAT (around 2025?) that will not (like it didn't in Europe) solve the debt/deficit issue. Then as in Europe there will be increased taxes and fees.
Something to add to your retirement planning.


British Armed Forces Cuts Announced: UK Addresses Deficit, Trims Defense Spending

UK budget cuts of £81bn announced - Leadership | Ireland's online business and management news service - Businessandleadership.com
Confronting debt bills

"Today is the day when Britain steps back from the brink, when we confront the bills from a decade of debt. It is a hard road, but it leads to a better future," said Osborne.
The pension age is to rise to 66 in 2018, a date much sooner than expected. However, universal benefits for pensioners will remain unchanged and the temporary increase in the cold weather payment will be made permanent.
Local councils are also to be affected, with a 7.1pc decrease in money available to them.
The Ministry of Defence was told yesterday that it would lose 8pc of its budget, requiring 42,000 job losses over the next five years. It will also lose high-profile equipment and aircraft.
About 490,000 public sector jobs are to be lost overall, across all departments.

 

[Pie Floater]

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

 

[ziggy29]

IMO, any system which makes promises of future benefits based on rather optimistic long-term assumptions is setting itself up for failure.

I understand the desire for future guarantees as a way to eliminate some uncertainty about our future. But it replaces one set of problems with another once those rose-colored assumptions begin to fail.

 

[Gone4Good]

2070 is a long time away, and beyond my point in caring.

But in the here and now, the Brit's seem very far ahead in displaying adult leadership.

He said that 490,000 public sector jobs would be lost over the four-year savings program and the size of government departments in London would be cut by one third. Public spending would be cut by a total 83 billion pounds, or around $130 billion, by 2015.

Mr. Osborne said an increase in the official retirement age from 65 to 66 would start four years sooner than planned,

Mr. Osborne promised savings of an annual 7.1 percent in the budgets of local government councils and said there would be a freeze followed by a 14 percent cut in tax funds allocated to maintaining the royal household of Queen Elizabeth II. Public housing tenants, he said, would face higher rentals closer to the market rates for private housing. Defense spending would be cut by 8 percent by 2014, he said, but he promised not to reduce spending on British forces in the Afghanistan war.

In June, Mr. Osborne also unveiled an increase in value-added tax next year that will increase the cost of many basic transactions.

An awful lot of sacred cows getting gored. Meanwhile, this is what passes for "fiscal responsibility" in the U.S. at the moment . . .

Cut $100B in spending, cut taxes $4,000B

 

[ziggy29]

2070 is a long time away, and beyond my point in caring.

This is exactly the attitude which allowed previous generations to live it up on the national credit card while they let their grandkids pay it off. We get the party; future generations get the hangover.

Let's just kick the can farther down the road. Who cares about what mess we leave our grandchildren as long as we "get ours" today?

(I'm not saying you are advocating deficit spending. But governing in a way that doesn't care about the conditions we create past our own life expectancies is a part of what brought us to this point.)

 

[Gone4Good]

Let's just kick the can farther down the road. Who cares about what mess we leave our grandchildren as long as we "get ours" today?

And yet the clear intention of my post is exactly the opposite of this, regardless if I care about 2070 or not. Which I don't.

Of course, we don't need to hypothesize about 2070. This isn't a theoretical abstraction applicable to some far off year. We can solve this today. If the boomers don't want to tax their grandchildren to pay for the benefits they promised themselves, then we wouldn't have a long-run fiscal problem at all. But we do, because they do. And all the hand-wringing and teeth gnashing out of concern for "the children" doesn't change this simple fact.

 

[jacob]

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.

 

[BigNick]

As a Brit living in France, it's going to be interesting to watch the difference in reactions to these substantial cuts in the UK (albeit only taking government spending back to 2003 levels), compared to the union-led action in France as a reaction to the government's plan to raise the retirement age from 60 (the lowest in any major OECD country) to 62 (where it will still be the lowest in any major OECD country).

I live near the German border, so when I flew back from a week's vacation today (southern coast of Spain, 77F every day, thanks for asking), I landed in Germany and was able to fill up my car on the drive back. A third of gas stations in France have no fuel. And polls show that 2/3 of the public backs the anti-government action. This is one strange place.

 

[MasterBlaster]

The inevitable decline of the welfare state. Be it there or here it's coming. If not now then in the not too distant future.

 

[Gone4Good]

And polls show that 2/3 of the public backs the anti-government action. This is one strange place.

I haven't followed the protests in France closely, but do the protesters believe there is a viable alternative to the cuts? To an outsider looking in, it seems like people are causing violence in support of an unsustainable system, which, if true, is completely irrational . . . and frightening.

 

[MasterBlaster]

I haven't followed the protests in France closely, but do the protesters believe there is a viable alternative to the cuts? To an outsider looking in, it seems like people are causing violence in support of an unsustainable system, which, if true, is completely irrational . . . and frightening.

In France they like to protest - Off with their head.

They all understand the economics, It's also about how (poorly) the leaders treat the workers. There needs to be some street justice.

 

[Pie Floater]

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

And doing an excellent job of it, it appears. What we need to do is quit following and get back to leading.

Our defense expenditures is supposedly close to 50% of the entire world's expenditure. Can't justify that.

 

[friar1610]

For some time now I have been psychologically preparing myself for cuts that will impact me directly. The 3 largest parts of the federal budget are:
- Defense
- Social Security
- Medicare

No serious discussion of cutting the deficit can occur unless these sacred cows are put on the table and/or if tax increases are put into place.

- I'm retired military and receive a pension which, along with other military pensions, is part of the Defense Budget every year.
- I'm on SS as is my wife.
- I'm on Medicare and my wife will be in another year. (Tricare, the military medical plan, is the supplement to Medicare.)

So, if there is any serious effort to trim the deficit, by definition I will be personally impacted. Here's what I predict will happen if and when the pols finally decide to take the deficit seriously:

- COLAs on all Federal pensions will be eliminated or pegged to some level well below that of inflation. (This was a moot point in 2010 and will be in 2011 since the rate of inflation has not triggered any COLAs.)
- There will be higher premiums for Medicare. There will be higher/new premiums for Tricare. (Current premiums vary or are non-existent depending on the specific Tricare plan is used.)
- Co-pays/deductibles under Medicare and Tricare will increase.
- Either receipt of SS will be means-tested or the amount of SS subject to Federal income tax will increase. Or both.

If any of this happens I will not like it. But I can't really argue with it on economic grounds either. Fortunately, I think I have enough cushion to absorb it but for older retirees just scraping by on SS and needing prescriptions such cuts will be very tough.

 

[Pie Floater]

friar1610, I can't seem to prepare myself for the changes because if feels very much like the rules under which I willingly paid my taxes are being changed simply because other programs cannot operate within a budget.

I should be entitled to Social Security based on the rules that were in place during the period that I worked and paid in. Not some after-the-fact rules.

 

[BigNick]

I haven't followed the protests in France closely, but do the protesters believe there is a viable alternative to the cuts? To an outsider looking in, it seems like people are causing violence in support of an unsustainable system, which, if true, is completely irrational . . . and frightening.

There's no great rationality about it. They have structurally high unemployment because it's very hard to fire anyone. So employers don't offer proper jobs to anyone under about 26 - you're expected to spend 4-5 years at college and then spend 3-4 years doing internships and part-time stuff, to prove your worth. Then you're expected to work for 40 years because you acquire state pension rights at 1.75% per year and everyone thinks that if you retire on 64.75% of your salary after 37 years instead of 70% after 40 years, you will be eating cat food. But you're also expected to retire at 60 because you want a long and happy retirement.

There's already a number of mathematical and economic conundrums in there, plus the unions and left-of-centre politicians will tell you that there's a
simple fix, which is to tax companies and rich people more.

Of course, French companies are actually very successful. One of the things they like to do is to send their managers on 3-5 year tours in subsidiaries outside France. Here they can get all the frustrations of not being able to fire people and do other real management stuff at home, out of their system.

In essence, France has created security for its own workers and exported the uncertainty to countries where the laws aren't so biased against employers (employer payroll deductions typically run at 70% - seventy percent - of salary in France). The rest of the world is now saying that this can't go on, and France has to join the real world and stop pretending that the rules don't apply there. Whether that means working a bit longer, or making it slightly easier to fire people from entry-level jobs (an idea from 8-10 years ago that also brought people out on the streets, youngsters because they didn't want a less good deal and older workers because they didn't want to be undercut), it's never going to be popular.

 

[ziggy29]

But you're also expected to retire at 60 because you want a long and happy retirement.

There's quite a conundrum here. On one hand, we can't really afford to keep the current deal going at the current retirement ages -- but on the other hand, increasing the retirement age would make the unemployment problem even worse.

 

[MasterBlaster]

I should be entitled to Social Security based on the rules that were in place during the period that I worked and paid in. Not some after-the-fact rules.

Yeah you'd think. That would only be fair.

However since the SS cash flow/trust fund isn't there for you we'll see what actually happens now won't we.

I would expect that you'll get less than what is promised now.

 

[FIREd]

I haven't followed the protests in France closely, but do the protesters believe there is a viable alternative to the cuts? To an outsider looking in, it seems like people are causing violence in support of an unsustainable system, which, if true, is completely irrational . . . and frightening.

I think, deep inside, people know cuts and changes are necessary. But:

1) people are being manipulated by some political parties (socialists mainly) into thinking they can have their cake and eat it too. The socialists are trying to get back into power after a long hiatus and they are growing desperate. The last socialist president actually created the retirement crisis when he lowered the legal retirement age from 65 to 60 in 1981. It seems like they are back at it again, with foolish promises and even more foolish ideas about how to pay for them. Their latest idea: instaure double taxation on anyone with a French passport living abroad (of course they would have first to renegotiate 156 bilateral treaties, but who cares about the details...).

2) people don't mind some cuts, as long as it's not their sacred cow being slaughtered...

The violence has nothing to do with the protests. A few opportunistic people always infiltrate demonstrations and create chaos to push their often anarchist agenda which has nothing to do with the retirement reform. It's nothing new unfortunately, but it makes for some juicy headlines.

 

[ziggy29]

The violence has nothing to do with the protests. A few opportunistic people always infiltrate demonstrations and create chaos to push their often anarchist agenda which has nothing to do with the retirement reform. It's nothing new unfortunately, but it makes for some juicy headlines.

It's not much different than people rioting because their local sports team just won a championship. These aren't really sports fans, but punk hooligans looking for an excuse to raise hell.

 

[Pie Floater]

Yeah you'd think. That would only be fair.

However since the SS cash flow/trust fund isn't there for you we'll see what actually happens now won't we.

I would expect that you'll get less than what is promised now.

And the effect of that on me is that I am looking at every way possible to pay nothing ever again into the IRS. I don't feel they are doing anything in my best interests, simply taking my money to fund government handouts to Wall street billionaires.

So the end result is disenfranchisement of the taxpayer.

 

[BigNick]

There's quite a conundrum here. On one hand, we can't really afford to keep the current deal going at the current retirement ages -- but on the other hand, increasing the retirement age would make the unemployment problem even worse.

Meh. Barely. There aren't lots of 23-year-olds waiting for a 59-year-old to move on. It's either a 50-level cascade during which something will get optimised, or the 59-year-old should have been downsized years ago but nobody had the courage.

 

[Gone4Good]

I should be entitled to Social Security based on the rules that were in place during the period that I worked and paid in. Not some after-the-fact rules.

That's an interesting theory, and would probably work if the taxes paid in were actually saved in some fashion. They weren't. Just like today, social security taxes went in to the general fund and were used to help pay for expenditures in the year the tax was collected.

So what you're arguing for is the ability to use your historic social security taxes to pay for historic benefits (in the form of lower historic income taxes or higher historic spending), and also for current and future Social Security benefits. Sorry, you can't spend the money twice, and seeing as how it was already spent once . . .

 

[Texas Proud]

From Wiki... but assume it is right..


You can see that you could cut 100% of SS and Medicare and get the budget balanced.... nobody wants to do that (well, nobody that is not a nut case)...

But, with a $1.4 trillion deficiet two years ago and $1.2 this year.... we NEED to do something...

Anybody know what the other mandatory spending is for?

 

[ziggy29]

Anybody know what the other mandatory spending is for?

US Federal Budget - How the FY 2011 Social Security Budget and Health Care Budget Affects the US Economy

All other mandatory programs - $619 billion. These programs include Food Stamps, Unemployment Compensation, Child Nutrition and Tax Credits, Supplemental Security for the Disabled and Student Loans.

 

[Pie Floater]

That's an interesting theory, and would probably work if the taxes paid in were actually saved in some fashion. They weren't. Just like today, social security taxes went in to the general fund and were used to help pay for expenditures in the year the tax was collected.

So my thought is; let whatever programs took the SS money be cut to reimburse SS for money pilfered from it's coffers.

We invented a TRILLION dollars to bail out Wall Street, Detroit, banks, etc., let's have them pay back the money in spades and put it into social security.

The monies paid in for SS, Medicare, etc should be our right. If you paid into an IRA, you expect that money to be yours, not dispersed to those who chose not to fund one.

Lousy government.