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

[MasterBlaster]

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..

The key word being "should" as opposed to what actually is going to happen.

If it makes you feel better, quit thinking about SS as an insurance program where you pay money in and get money out. Think about it as welfare for those that don't have anything and would starve otherwise.

 

[ziggy29]

If it makes you feel better, quit thinking about SS as an insurance program where you pay money in and get money out. Think about it as welfare for those that don't have anything and would starve otherwise.

Or alternatively, as a way to get people out of the workforce so the next generation has jobs to fill.

 

[Gone4Good]

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.

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.

 

[HFWR]

I choose voter A...

 

[IBWino]

Or alternatively, as a way to get people out of the workforce so the next generation has jobs to fill.

If today I was given a lump sum payment equal to the approximately $300K paid into SS by me and my employers for-benefit-of me, I would free up a job tomorrow.

 

[RunningBum]

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.

Did you get that in writing? I always figured my SS tax was going to pay someone else's retirement (not knowing it was going into the general fund), and hope that someone further down the line would fund my SS benefit. That's how it started, right? If you didn't understand that it worked that way, whose fault is that?

My IRA, on the other hand, has my name on it. I have a different expectation on getting that. It's mine.

 

[Pie Floater]

If it makes you feel better, quit thinking about SS as an insurance program where you pay money in and get money out. Think about it as welfare for those that don't have anything and would starve otherwise.

But that is not the way it was pitched originally. It was to be a retirement fund, and mandatory. To support you in old age. Not a fund to be collected and doled out to welfare.

 

[Pie Floater]

Did you get that in writing? I always figured my SS tax was going to pay someone else's retirement (not knowing it was going into the general fund), and hope that someone further down the line would fund my SS benefit. That's how it started, right? If you didn't understand that it worked that way, whose fault is that?.

Well, now that we know that, it then is time for folks presently working to take on the same responsibility I took on, and support me. I want to collect Social Security the same way the generation preceding me did.

 

[Emeritus]

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

How much time have you spent in Europe ? Which failure are you describing?

 

[MasterBlaster]

But that is not the way it was pitched originally. It was to be a retirement fund, and mandatory. To support you in old age. Not a fund to be collected and doled out to welfare.

What you say is true.

However, that won't change what is going to happen.

You'll probably get something, in my opinion. It just won't be what you thought you'd get.

I want to collect Social Security the same way the generation preceding me did.

You too ? get in line

 

[Pie Floater]

How much time have you spent in Europe ? Which failure are you describing?

18 years.

 

[Emeritus]

But that is not the way it was pitched originally. It was to be a retirement fund, and mandatory. To support you in old age. Not a fund to be collected and doled out to welfare.

Certainly the "welfare" components had been added by 1939.

 

[Emeritus]

18 years.

Which failure?

 

[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.

FYI,
I think people now 50 will get the current SS benefits - that takes us to about 2022. Also, the VAT in 2025 should hold off some of the drastic cuts in other Federal gov't pensions etc, people are talking about. State gov't will be cut back around the same time as SS.

Here is my thinking.
2015 current recession bottoms out
15-20 economy improving but politicians not willing to increase taxes for fear of it stalling (Tax the rich will continue)
20-25 - income taxes increase & talk and implementation of VAT
25-70 VAT puts off drastic cuts (European VAT has been in effect for about 25-30 years).

So income tax increases and VAT are more likely for those 50 and older than a reduction in SS etc.

If the USA continues to get embroiled in wars - all bets are off.

 

[MasterBlaster]

Dex:

Add to your analysis:

The Boomers retire en masse more than doubling outlays in SS/medicare

$25B+ of debt at 2020 interest rates requires $1B+/year just for interest

High levels of debt induce other countries to throttle back loans to US. Interest rates skyrocket, a crisis in what gets paid ensues.

Increased taxation drives down economic performance into a cycle of desperation.

 

[Pie Floater]

Which failure?

Greece for one, any more questions?

 

[dex]

Dex:

Add to your analysis:

The Boomers retire en masse more than doubling outlays in SS/medicare

$25B+ of debt at 2020 interest rates requires $1B+/year just for interest

High levels of debt cause induce countries to throttle back loans to US. Interest rates skyrocket, a crisis in what gets paid ensues.

Increased taxation drives down economic performance into a cycle of desperation.

I thought about the interest rates increasing and gov't expenditures and interest on the debt increasing but, the VAT is a response to it.
On another thread a poster mentioned that the USA could be pressured by other countries to get it's debt under control and I'm thinking politicians will press for VAT as result of that pressure.

I don't know what a 20% VAT on a 15T economy will bring in but it should kick the can down the road as it did in Europe.

 

[MasterBlaster]

I thought about the interest rates increasing and gov't expenditures and interest on the debt increasing but, the VAT is a response to it.
On another thread a poster mentioned that the USA could be pressured by other countries to get it's debt under control and I'm thinking politicians will press for VAT as result of that pressure.

I don't know what a 20% VAT on a 15T economy will bring in but it should kick the can down the road as it did in Europe.

DEX:

A VAT may or may not have merit. The type of tax is secondary.

I don't beleive that we can only tax our way out of this problem. Without changes we are looking at another $2T in extra SS/medicare and another $1T in interest.

If you try to extract another $2-3 trillion out of the economy it (the economy) will retract big time. Think higher unemployment, and surprise - lower taxable income hence lower taxes. The vicious downward cycle will demand that benefits be reduced.

It's not as easy as you point out.

 

[dex]

DEX:

A VAT may or may not have merit. The type of tax is secondary.

I don't beleive that we can only tax our way out of this problem. Without changes we are looking at another $2T in extra SS/medicare and another $1T in interest.

If you try to extract another $2-3 trillion out of the economy it (the economy) will retract big time. Think higher unemployment, and surprise - lower taxable income hence lower taxes. The vicious downward cycle will demand that benefits be reduced.

It's not as easy as you point out.

My guess is that it is implemented at a low rate to show the world we are working on the problem and then the rate increases over time so as not to negatively impact the economy. But, as Europe, it doesn't solve the debt problem.


Value added tax - Wikipedia, the free encyclopedia
House Speaker Nancy Pelosi stated in October 2009 that a new, national VAT was "on the table" to help the federal government garner needed revenues.[10] After her speech, the Americans for Tax Reform group urged the public to contact their members of Congress to oppose this potential measure.[11] President Barack Obama was reported to be open to a national VAT.[12] One day later, US Treasury Secretary Tim Geithner stated that President Obama does not support a VAT for the US.[13]
Robert J. Samuelson has estimated that a VAT would need to be about 16 percent because, although an 8 percent VAT would theoretically suffice, there would be huge pressures to exempt groceries, rent and housing, health care, education, and charitable groups.[14

 

[MasterBlaster]

Dex:

I know what a VAT is...

It's not the type of tax it's the magnitude required. Right now the whole US economy has a GDP of around $14 trillion. The government takes in maybe $4.5 trillion and spends maybe $5.5 trillion.

fast forward to 2020 or just a few years later. The economy still at around $14 trillion (or perhaps a little more) but now we need to take in around 7.5 trillion just to pay for what is promised.

Or to put it another way, we are on course for the government to be spending more that half of the GDP each year on benefits should nothing change.

Or to put it aother way, we as a country don't have the capacity to pay for what is promised. That is true no matter what the tax levels are or what the type of taxes are.

 

[dex]

Dex:

I know what a VAT is...

It's not the type of tax it's the magnitude required. Right now the whole US economy has a GDP of around $14 trillion. The government takes in maybe $4.5 trillion and spends maybe $5.5 trillion.

fast forward to 2020 or just a few years later. The economy still at around $14 trillion (or perhaps a little more) but now we need to take in around 7.5 trillion just to pay for what is promised.

Or to put it another way, we are on course for the government to be spending more that half of the GDP each year on benefits should nothing change.

Or to put it aother way, we as a country don't have the capacity to pay for what is promised. That is true no matter what the tax levels are or what the type of taxes are.

You trying to talk me into a fallout shelter?

http://www.cbo.gov/ftpdocs/108xx/doc10871/budgetprojections.pdf

 

[MasterBlaster]

dex:

I'm still looking at the CBO projections you linked to.

How do they get away with stating that we only have $8.7 trillion in debt when it's really ~$ 13 trillion ? Is there a differnce between "public" debt and outstanding debt ?

Nonetheless, the trends I referred to are real. The Boomers are all retired by 2030 so maybe it will be closer to then. But one way or another cuts in benefits will happen.

 

[dex]

dex:

I'm still looking at the CBO projections you linked to.

How do they get away with stating that we only have $8.7 trillion in debt when it's really ~$ 13 trillion ? Is there a differnce between "public" debt and outstanding debt ?

Nonetheless, the trends I referred to are real. The Boomers are all retired by 2030 so maybe it will be closer to then. But one way or another cuts in benefits will happen.

Is it possible they do not count US debt held by other US Gov't agencies?

2030 - I'm estimating I check out by 2040 - it isn't going to be easy.

 

[HFWR]

The Tea Party will fix all this...

 

[Bikerdude]

I would like to know how the UK plans to balance their budget with job cuts. Not only do the people who are cut stop paying taxes but they go on unemployment (called "the dole") for what, 2 to 5 years?