Size Of Government - What Do We Really Want?

[explanade]

It wasn't tongue in cheek because the poll shows most people here want smaller govt.

But smaller govt. implies cuts to SS and Medicare, two things which presumably a lot of people here rely on for ER planning.

As far as waste in Medicare, how much would the care have cost through private insurance, assuming private insurance would cover the elderly who have preexisting conditions?

Or would the "waste" have been eliminated by not providing care for people of a certain age?

My father just had major surgery. Medicare covered most and he is paying several thousand out of pocket for hospital stay and tests before and after. He has resources but without Medicare, his savings would be destroyed.

He's been paying premiums for supplemental coverage for over a decade. Now if he had had to pay private insurance premiums for that time, before really making claims for a serious condition, would he still have resources?

Or would the insurance company cover the surgery and other associated care?

 

[Midpack]

It wasn't tongue in cheek because the poll shows most people here want smaller govt.

But smaller govt. implies cuts to SS and Medicare, two things which presumably a lot of people here rely on for ER planning. With all due respect, anyone who is planning retirement or retired in the last 10 years or so counting on no change in entitlements has not been paying attention IMO.

As far as waste in Medicare, how much would the care have cost through private insurance, assuming private insurance would cover the elderly who have preexisting conditions?

Or would the "waste" have been eliminated by not providing care for people of a certain age?

My father just had major surgery. Medicare covered most and he is paying several thousand out of pocket for hospital stay and tests before and after. He has resources but without Medicare, his savings would be destroyed. Who ever proposed eliminating Medicare or any other existing program? We're talking about reducing benefits and/or reducing the rate of increased spending. When politicians talk "cuts", they are usually talking reducing projected spending.

He's been paying premiums for supplemental coverage for over a decade. Now if he had had to pay private insurance premiums for that time, before really making claims for a serious condition, would he still have resources?

Or would the insurance company cover the surgery and other associated care?

By and large health care costs what it costs. Premiums are a small part of the cost, they don't necessarily translate to the actual cost of the health care. If "premiums" are lower, it's largely because they're subsidized by taxpayers, not that they are cheaper. So while your "premium" may be less, you (or the rest of us) are paying the rest of it through taxes, Medicare isn't really cheaper.

As for waste, it's been shown over and over that the health care costs in the US are (much) higher than the rest of the world. Look at the charts below, or Google your own, they're all over the place. The first argument that we have better health care here is not borne out by longevity, infant mortality or any other metric that I know of. The arguments used against universal health care (long waits/poor access, inferior care) have also been largely disproven, not hard to find that information.

We can argue forever about how, but let's get on with it and do something. It's not going to get better through inaction...

 

[explanade]

Well one of the politicians talking about changes to Medicare is essentially talking about eliminating it in favor of vouchers to buy private insurance.

So that's more than just a few cuts.

They did do something but a big part of the electorate wants it repealed before it's fully implemented and we have a chance to see if it improved things or not.

 

[FinanceDude]

Well one of the politicians talking about changes to Medicare is essentially talking about eliminating it in favor of vouchers to buy private insurance.

That would be Paul Ryan. However, he is suggesting an insurance exchange where ALL private companies could be on the platform and the public decides who gets their business, that is a FAR CRY from Obamacare.

My feeling is Obamacare will be fully implemented, will not do what we think, but by then it will be an entitlement program that is so large and complex it can't be repealed or changed, and will hasten our rush to implementing austerity measures of our own, but that's just me.........

 

[Hamlet]

I'm not clear that those vouchers would be workable without some of the changes required in Obamacare.

If Obamacare is repealed, the insurance companies will just cherry pick the healthiest seniors and take their vouchers, while leaving the sicker seniors without coverage.

Insurance is not a particularly good model for paying for health care. Those that are deemed high risk get priced out of the system. This is only going to get worse, as insurance companies get better and better at determining who is going to be expensive and who will not. I wouldn't be surprised if in the future some genetic testing at birth made people uninsurable.

Using private insurance as the payment method is going to require a mandate that insurance companies take all comers, and that requires a mandate that everyone buys insurance. ie the basic premise of Obamacare.

That would be Paul Ryan. However, he is suggesting an insurance exchange where ALL private companies could be on the platform and the public decides who gets their business, that is a FAR CRY from Obamacare.

My feeling is Obamacare will be fully implemented, will not do what we think, but by then it will be an entitlement program that is so large and complex it can't be repealed or changed, and will hasten our rush to implementing austerity measures of our own, but that's just me.........

 

[Texas Proud]

After thinking about it for a bit.... I wondered how we were paying 20% of our budget toward interest... so I looked it up myself.... and we are FAR from paying 20%... it shows 6%.

Now, this is not from a gvmt site, so the split might not be the same as other would have.... who knows what is in that 12% welfare..


Now if I used the number below... I would cut as follows, the percent is based off of 100% of the budget.....

Education 3% (should be paid for by state an local)
Welfare 10.0% (sorry, can't afford this at this time)
Defense 10.0 (get us out of these wars and cut back our military)
Health 8% (this probably includes all sorts of items, so it can be any of them)
Transportation 3% (same as education for the most part)
Pensions 6% (sorry, your checks just got smaller as we can not afford to pay them)


Again, once revenue starts to come back you can increase some of the spending here and there.... but it will not come back anywhere close to what we are spending now...

US Federal Budget Pie Chart for FY12 - Charts

 

[MasterBlaster]

After thinking about it for a bit.... I wondered how we were paying 20% of our budget toward interest... so I looked it up myself.... and we are FAR from paying 20%... it shows 6%.

It depends on how you count interest.

6% of total spending

or 20% of discretionary spending

 

[Texas Proud]

For FY2010 total federal spending is roughly 3.5 trillion dollars. That number, less tax revenue, leaves a deficit of 1.3 trillion, just under 2/5 of the total spending.

If we look at the spending pie, we can slice it up roughly as:
1/5 non-defense discretionary spending
1/5 defense
1/5 Social Security
1/5 Medicare (less than that now, much more than that in 10 years)
1/5 interest (which will be growing) plus smaller bits of entitlements

Now, nobody wants to touch the defense slice.
Not paying the interest is Bad. Really Bad. Greek Default bad, only it's the largest economy in the world, not something the economic size of Connecticut. You really want to zero out your retirement savings to make a political point?

Balance the budget without tax increases by removing 2/5 of the spending without touching any sacred cows.

It depends on how you count interest.

6% of total spending

or 20% of discretionary spending

Not what was posted earlier..

And interest is not considered discretionary spending...

 

[Purron]

Another fine mess.

YouTube - ‪Laurel & Hardy - Another Fine Mess‬‏

 

[Midpack]

After thinking about it for a bit.... I wondered how we were paying 20% of our budget toward interest... so I looked it up myself.... and we are FAR from paying 20%... it shows 6%.

US Federal Budget Pie Chart for FY12 - Charts

M Paquette took some liberties (to put it mildly), see post #26 for 2010 actual. Much like this 2012 projection. And interest is non considered discretionary anywhere I've ever seen...

 

[M Paquette]

M Paquette took some liberties (to put it mildly), see post #26 for 2010 actual. Much like this 2012 projection. And interest is non considered discretionary anywhere I've ever seen...

I DID say that 20% was interest and assorted smaller entitlements.

My goal was to slice the budget into reasonably comprehensible, easily grasped chunks. People have a hard time dealing with 3%, here, 1.82% there sort of figures. Five pieces, or fifths, is about as small as most folks can intuitively grasp. Less if one is a congresscritter, apparently.

 

[jdw_fire]

Yes. Example: If the business owner decides to buy bonds from another company rather than invest the money back in his own business, it follows that he expects a greater risk/adjusted return.

i doubt you are truly considering the difference in funds being invested (i.e. 100% of net profit in his business or [100% of net profit - taxes] in bonds of another company) as well as the current prevailing interest rates and the fact that if he has a large net profit (as i stated in my example many posts ago) he has a reasonably thriving business. i can see that it is tough for you to give in to my logic, probably due to your dogged belief in your position but i think i have done what you have asked i.e. give an example of how raising personal income taxes could produce growth. if you really think that your refutation of my example is the way things would happen in the majority of cases then lowering tax rates wont help small businesses one little bit, it would only give that small business owner more money to buy other companies bonds. also if your refutation was true, by now there would be no small businesses left since their owners arent investing in their own businesses. are you really making that arguement?

 

[jdw_fire]

To me there is a huge flaw in this logic...

The business owner will only invest to grow his business if there are customers.... putting money into a business that is not attracting a lot of new customers is wasting money....

in my example the business owner does have customers otherwise s/he wouldnt be "expecting a large net profit from his/her business this year".

A good busines owner will expand his business when he/she can expect to make a profit on that expansion, which includes taxes... raising taxes will make a lot of marginal expansions not happen...

s/he wont pay taxes on an expected profit if said profit has been reinvested in the business (as i said in my example) because then it is expensed and is then no longer a profit. so i submit that higher tax rates will actually make more of the marginal expansions (that you mentioned) make sense to do and therefore they will actually happen.

 

[jdw_fire]

I am planning on a lesser Soc Sec and Medicare benefit. Anyone who is about to retire or retired in the last 10 years or so who didn't has been asleep at the wheel IMO.

that isnt reality. 10 years ago we were coming off a year where the fed government had run a surplus and there was talk that soon, the entire national debt would be owned by the SS trust fund. the federal government's finances looked pretty good thus giving the impression there wasnt anything unsure about SS or medicare. why would anyone retiring then (and for some years after then) not expect to receive them both in full?

 

[Texas Proud]

in my example the business owner does have customers otherwise s/he wouldnt be "expecting a large net profit from his/her business this year".

Just because someone is expecting a large net profit from business this year does not mean that investing more will bring a comensorate of profits... I work at a small company and can tell you that we are expecting the best year ever.... but if we invested that profit, it would go to waste as there are not any more 'current customers'...

s/he wont pay taxes on an expected profit if said profit has been reinvested in the business (as i said in my example) because then it is expensed and is then no longer a profit. so i submit that higher tax rates will actually make more of the marginal expansions (that you mentioned) make sense to do and therefore they will actually happen.

Or the exact opposite occurs.... they decide not to generate those profits in the first place as the work/reward ratio is no longer in their favor... laying off people and making things worse....


If you never get profits out of a business, then the business will eventually fail...


Again, if you reinvest you are doing so to GET MORE PROFITS than what you invest.... so the taxes hit you harder.. and at some point you do not get more profits than you invest and you are throwing away money.... it just does not add up....

 

[jdw_fire]

Just because someone is expecting a large net profit from business this year does not mean that investing more will bring a comensorate of profits... I work at a small company and can tell you that we are expecting the best year ever.... but if we invested that profit, it would go to waste as there are not any more 'current customers'...

the same can be said in response to the suggestion that lowering income tax rates will increase investment in small businesses. i.e. if investing in the business wont bring comensorate profits than lowering the tax rates wont induce additional investment in said business. so why wasnt anyone making your argument when tax rates were being lowered in the 2000 decade?

Or the exact opposite occurs.... they decide not to generate those profits in the first place as the work/reward ratio is no longer in their favor... laying off people and making things worse....


If you never get profits out of a business, then the business will eventually fail...


Again, if you reinvest you are doing so to GET MORE PROFITS than what you invest.... so the taxes hit you harder.. and at some point you do not get more profits than you invest and you are throwing away money.... it just does not add up....

well they may decide to do what i said (or just invest the amount of profit over say $250K/yr) in the short term to focus on growing the value of the business in that same short term thus attempting to converting the income from the net profit to a capital gain (provided said business does actually grow). eventually this business owner may grow his/her business large enough (hire enough employees) that s/he can cut back on his/her own work hours and actually receive a higher per hour wage for his/her business without moving his income into a higher tax bracket. a desire to reduce working hours without reducing total pay is a valid reason to grow the business while keeping the net profit about constant (say, maybe, $250k/yr).

it may be funny but it seems to me that, all other things being equal, the higher the tax rate, the more likely profits will be reinvested in the company producing said profits because greater investment can be made in that company at a lower after tax cost. (eg. at a tax rate of 10%, $1 of reinvestment costs the owner $.90 in after tax money but at a tax rate of 50%, $1 of reinvestment costs only $.50 in after tax money.)

also, when you consider the current tax rates and consider the greater job/economic growth that has happened at higher tax rates i think the tax rates would have to be very much higher then they are now for these business owners to "decide not to generate those profits in the first place as the work/reward ratio is no longer in their favor". therefore there is lots of room to raise the tax rates before your dire prediction would occur and in the mean time my example could easily be happening.

o and btw i was, in response to an earlier post, providing an example of how a tax increase could increase job/economic growth. it doesnt have to work for all tax rates to provide said increase for some of them.

 

[FreeAtLast]

My daughter just took a job with the Federal Government so I have to say with her as an addition it is just the right size.

 

[samclem]

It's a rare ability indeed to imagine a tax increase that simultaneously removes money from private businesses, reduces the efficiency of capital use, but somehow makes businesses grow despite (because of?) these handicaps.

"Children, I have just ten pounds of seed corn for use next year, all that is left of our small harvest. Our land is poor. Yes, I know of Yadrow's bountiful land where I might grow much corn from these meager seeds, having a plentiful haul to feed us even after paying him rent. How lucky are we to have the tax man instead, for he would take half our seeds if I dare plant them elsewhere. My decision is made! I'll plant the seeds in our own rocky dust and await the meager harvest. Likewise, Yadrow benefits not from our seed nor our labor. This policy is wise, surely, though see the wisdom I do not."

And thus the nation grew poorer.

 

[nphx]

Maybe we need to look at what Germany is doing? QUOTE]

I.Q. Test Scores by Country

would suggest that lovers of Germany or Denmark may suggest that these top 10 countries iq wise versus a dilluting #32 rank for the USA...

 

[samclem]

Maybe we need to look at what Germany is doing? QUOTE]

I.Q. Test Scores by Country

would suggest that lovers of Germany or Denmark may suggest that these top 10 countries iq wise versus a dilluting #32 rank for the USA...

Leaving aside the difficulties of normalizing a cross-cultural IQ test, I wonder if anyone is going to be swayed by a by-mail test administered to self-selected samples. And the sample sizes: How was it possible to find the right 2 people to represent the intelligence of all Russians?

 

[Hamlet]

This thing is saying that the average IQ in the US is 138?

I'm pretty sure that that is at least 30 points too high.

Isn't 100 generally considered the average score?

Leaving aside the difficulties of normalizing a cross-cultural IQ test, I wonder if anyone is going to be swayed by a by-mail test administered to self-selected samples. And the sample sizes: How was it possible to find the right 2 people to represent the intelligence of all Russians?

 

[Midpack]

that isnt reality. 10 years ago we were coming off a year where the fed government had run a surplus and there was talk that soon, the entire national debt would be owned by the SS trust fund. the federal government's finances looked pretty good thus giving the impression there wasnt anything unsure about SS or medicare. why would anyone retiring then (and for some years after then) not expect to receive them both in full?

Soc Sec first got into trouble almost 40 years ago. Though effective steps have been taken to shore up Soc Sec (at a cost to payers), most everyone knows the fixes would not be permanent as the demographic challenges have been known as long. Soc Sec has been amended many, many times, some to add/improve benefits and others to extend solvency Social Security (United States) - Wikipedia, the free encyclopedia. The demographic challenges have been known for way more than 10 years, and they're the fundamental challenge that everyone was or should have been aware of IMO. And though it's certainly used often enough, the use of the term 'trust fund' is questionable.

Throughout the 1950s and 1960s, during the phase-in period of Social Security, Congress was able to grant generous benefit increases because the system had perpetual short-run surpluses. Congressional amendments to Social Security took place in even numbered years (election years) because the bills were politically popular, but by the late 1970s, this era was over. For the next three decades, projections of Social Security's finances would show large, long-term deficits, and in the early 1980s, the program flirted with immediate insolvency. From this point on, amendments to Social Security would take place in odd numbered years (years that were not election years) because Social Security reform now meant tax increases and benefit reductions. Social Security became known as the "Third Rail of American Politics." Touching it meant political death.
Several effects came together in the years following the 1972 amendments which rapidly changed the outlook on Social Security's long-term financial picture from positive to problematic. By the 1970s, the phase-in period, during which workers were paying taxes but few were collecting benefits, was largely over, and the ratio of elderly population to the working population was increasing. These developments brought questions about the capacity of the long term financial structure based on a pay-as-you-go program.

 

[explanade]

Well it is a fact that SSI proceeds were diverted to pay for other programs, which would have had shortfalls otherwise, because of the tax cuts.

 

[jdw_fire]

It's a rare ability indeed to imagine a tax increase that simultaneously removes money from private businesses, reduces the efficiency of capital use, but somehow makes businesses grow despite (because of?) these handicaps.

thank you for the complement, the rare ability seems to be being able to think outside the box and keeping an open mind.

i think you are missing the point that actually may make this work which is that because of the higher tax rates the business owner (instead of taking the profit and paying taxes on it) decides to reinvest some or all of the profit from his/her business back into his/her profitable business. there is a large incentive for him/her to do this reinvesting in his/her own business because s/he can in essence get the federal government to subsidize that investment by making it tax deductable. the higher tax rates would actually make more of the possible business equipment upgrades and/or expansions cost effective since the business owner wouldnt have to pay full price (due to the federal government subsidy via taxes). remember, anything the government subsidizes it gets more of, so higher tax rates should really encourge investment in small businesses.

it is interesting though that your response only contains general platitudes of the "lower taxes is better" crowd but no specifics about where my example (specifically) is wrong. all the "refutations" presented have to assume that the business i am talking about is not doing well, or that investment in it wouldnt grow it or that investment elsewhere would be more profitable. well if these are the case then it would make even less sense to reinvest in it if the tax rates are low, and that refutes the agrument that lower tax rates will stimulate the small business owner and provide him/her incentive to invest in his/her own company.

"Children, I have just ten pounds of seed corn for use next year, all that is left of our small harvest. Our land is poor. Yes, I know of Yadrow's bountiful land where I might grow much corn from these meager seeds, having a plentiful haul to feed us even after paying him rent. How lucky are we to have the tax man instead, for he would take half our seeds if I dare plant them elsewhere. My decision is made! I'll plant the seeds in our own rocky dust and await the meager harvest. Likewise, Yadrow benefits not from our seed nor our labor. This policy is wise, surely, though see the wisdom I do not."
And thus the nation grew poorer.

cute story but totally doesnt fit my example. again with the assumption that the business isnt doing well. the whole point of many stimulus packages it to encourge the start up and investment in small businesses. higher tax rates will do that, as i have shown. and the higher tax rates have the added advantage of helping to balance the federal budget.

 

[samclem]

i think you are missing the point that actually may make this work

I think you are missing the point that capital produces the most growth (jobs, wealth, etc) when it is put to the best use. "Best Use" may or may not be in the small business that produces it. If your tax scheme artificially reduces the efficiency of these capital flows (that is, it impedes them) by favoring one business (the business that produced it) over other businesses (that the market shows are expected to produce more grwth-per-dollar-invested), then the tax doesn't help businesses overall.
You claim to have an open mind, but you seem to be reading right past my main point. You've responded "around" my fundamental "issue" with your idea three times now without addressing it. Step back from the case of a single business which might be favored by a particular tax policy and look at the universe of all businesses. Then ask: How does it help the economy when we discourage the flow of capital to the businesses expected to produce the most growth-per-dollar-of-new-investment? Obvious answer: It does not help the economy, it hurts it.