Future Tax Increase

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  • Wed, Jul 27, 2011 - 02:43am

    #101

    darbikrash

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    Huey Long circa 1935

The more things change the more they stay the same.

 





  • Wed, Jul 27, 2011 - 07:25am

    #102
    Grover

    Grover

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    Gone for awhile

Hi all,

I’m heading out for the high mountains for a 10 day backpacking trip. I’m going with some friends who I consider to be deep thinkers. We’ll definitely discuss this (and other) topics during the trip. Please continue the banter. I’ll read your comments when I get back.

Grover

  • Thu, Jul 28, 2011 - 12:29am

    #103

    dshields

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    xraymike79 wrote: MarkM

[quote=xraymike79]

[quote=MarkM]

dshields,

I believe "undue hardships" and tough questions will be the order of the day. Tough questions, it seems, involve hardships in their answers. It is my opinion that we must change our expectations and learn that a life with less (hardship) will be part of the alternative system.

[/quote]

+++Great one. And combined with humility for starters.

[/quote]

Yep, I hear that.  My wife was talking with her parents today (retired and mostly dependent on social security) and they are not happy.  It is the same story you are going to be hearing a lot in the coming months.  They paid all their lives into the social security and medicare systems and they expect to receive what was promised they would receive if they did that.  My mother says the same thing.  If social security is cut, and it very well may be, then a boat load of older people who kept their end of the deal will get a very raw deal indeed.  Older people vote.  And, when push comes to shove they will vote for anyone who will tell them they will continue to receive their social security.  When things get tough, the class of dependency will vote to retain their benefits – they have to or take the beating of a lifetime.  So, the economic situation is going to change the way people vote.  When it gets desperate people will vote to save themselves.  I would.

The class of dependency runs the gambit:

1) Retired people of which many will be homeless if their social security is cut substantially.

2) People with houses that depend on the mortgage interest deduction to balance their family’s budgets.  If that deduction is removed the housing industry will simply collapse.  Many people take extra deductions to lower their withholding (increases their take home pay) counting on the fact their mortgage interest will even out their Fed tax bill.  You take the deduction away their take home pay goes down or they owe a bunch of Fed taxes at the end of the year they simply can not pay.

3) So called welfare – section 8 housing, feed stamps, WIC, and all the other programs.  You can’t say "go get a job" because there are very few jobs that pay a living wage these days.  The sad part here is the job situation is only going to get worse, not better.

…and I could go on and on.  Out of control Fed Gov spending and the establishment of a massive class of dependency has basically destroyed the nation.  And now the bill is coming due and we simply do not have the money.  Oh yea, it is going to get real ugly.

I think they will print all the way to the end.  I am not a real big Ron Paul guy for various reasons but he may well be right.  Default now and take our medicine or print a bunch and default later and get a much worse dose of medicine.

We will print because the status quo must be supported.  The super rich and the banking system are not going to stand up and volunteer for a buzz cut.  I think they will try to debt slave us like they are trying to do to the Greeks.  That would mean suffering for years and then defaulting when we have nothing.  Ron Paul might just be right but the politicians just will not do that.  Defaulting to save ourselves is not part of the current mainstream debate.

 

  • Fri, Aug 12, 2011 - 04:59am

    #104
    Grover

    Grover

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    Big surprises coming

[quote=dshields]

[Yep, I hear that.  My wife was talking with her parents today (retired and mostly dependent on social security) and they are not happy.  It is the same story you are going to be hearing a lot in the coming months.  They paid all their lives into the social security and medicare systems and they expect to receive what was promised they would receive if they did that.  My mother says the same thing.  If social security is cut, and it very well may be, then a boat load of older people who kept their end of the deal will get a very raw deal indeed.  Older people vote.  And, when push comes to shove they will vote for anyone who will tell them they will continue to receive their social security.  When things get tough, the class of dependency will vote to retain their benefits – they have to or take the beating of a lifetime.  So, the economic situation is going to change the way people vote.  When it gets desperate people will vote to save themselves.  I would.

[/quote]

dshields,

I think you’ll be surprised with change of attitude just around the corner. The Baby Boomers have always resisted moving into the next phase of life. Once the inevitable is obvious, we jump into it and make it our own. We held onto our childhood years too long and then made the 60s and 70s into our personal playground to discover ourselves. Once we had to move into adulthood, we put "baby on board" placards in our car’s back windows and proceeded to nurture a generation of team players. Now that we’re moving into retirement, are we going to abandon our childrens’ future so we can have a comfortable existence? I think not. I expect that we’ll finally exercise the values we discovered about ourselves in our young adulthood. The generation born before the Boomers will follow the Boomers lead and adopt whatever standard is set forth. The GI generation still believes that they deserve whatever largess they receive from the government, but they are rapidly dying out. Deep down, none of the generations after the GIs feel as if they’ve contributed enough to our society to justify the fiscal carnage that would ensue from selfish voting.

I’m paraphrasing the work of Strauss and Howe’s, Fourth Turning. (http://www.fourthturning.com/) They’ve looked through Western history and found repeating themes. As we’re in or near a crisis point, their work predicts how it may work out and when we’ll be ready to start the cycle over again. In my opinion, our situation can’t continue forever (peak oil, peak resources, overwhelming debt, unfounded hubrism, etc.) and logically it won’t. When it becomes obvious that our situation is untenable, you’ll see a long dormant civic attitude reawaken.

Grover

  • Fri, Aug 12, 2011 - 06:04am

    #105
    Grover

    Grover

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    Back to the grind

I’m back from the backpacking trip. Spring was about 3 weeks delayed in the high country with occasional snow drifts above 10,000′ and 30%+ snow cover above 11,000′ on the north facing slopes. There were more mosquitoes than I’ve ever seen up there, we had thundershowers every day, and worst of all, the cutthroat trout were still spawning so fishing was mostly unproductive. On top of it, a couple of my friends were preoccupied with family issues. It was hard to discuss anything without the conversation circling back to the morass.

I was able to focus the conversation on taxes, our country’s fiscal and financial calamity, and potential solutions for less than an hour at one time. We all agreed that the time for salves and bandages has past. We need to amputate programs that no longer make sense. Unfortunately, each program has tentacles that reach throughout society. Nothing significant can be cut without harsh and drastic consequences.

The other option we considered was increasing revenues. Again, any significant increase will hurt the economy and therefore will likely reduce revenue and increase benefit payments later on. The only area that we saw a potential short term magic bullet was with 401(k) and IRA accounts. The government can confiscate these with a promise of future payments from the Treasury. The sum of these accounts is measured in $ trillions. Most of these funds are invested in stocks and bonds. Withdrawing significant amounts would harm prices, which would mean a reduction of capital gains taxes and higher interest rates. Neither of these would be positive for the economy.

With the current political climate, the only real option we could see congress doing was to borrow as much as they could and have the Fed monetize the debt as much as possible – pretty much just more of the same. Eventually, our creditors will balk and demand higher interest rates. None of us was able to forecast when this would happen.

One of my backpacking buddies has a small business. He says that all the taxes and regulations strangle his ability to do more than muddle through. His typical day has him jumping from one fire to the next. He’d like to see regulations reduced and taxes get simplified (a third of his time is spent just completing various paperwork to prove he’s abiding by the laws.) He’s a fan of VAT (value added tax.) I don’t know enough about this particular tax to say one way or the other. Can someone give a brief synopsis of pros and cons here?

I wish I had better news to report.

Grover

  • Fri, Aug 12, 2011 - 06:37am

    #106

    Travlin

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    I’m with Dshields

[quote=Grover]

[quote=dshields]

They paid all their lives into the social security and medicare systems and they expect to receive what was promised they would receive if they did that.  If social security is cut, and it very well may be, then a boat load of older people who kept their end of the deal will get a very raw deal indeed.  Older people vote.  And, when push comes to shove they will vote for anyone who will tell them they will continue to receive their social security.  (Edited by Travlin)

[/quote]

Now that we’re moving into retirement, are we going to abandon our childrens’ future so we can have a comfortable existence? I think not. I expect that we’ll finally exercise the values we discovered about ourselves in our young adulthood. The generation born before the Boomers will follow the Boomers lead and adopt whatever standard is set forth. The GI generation still believes that they deserve whatever largess they receive from the government, but they are rapidly dying out. Deep down, none of the generations after the GIs feel as if they’ve contributed enough to our society to justify the fiscal carnage that would ensue from selfish voting. (Edited by Travlin)

[/quote]

Sorry Grover.  I’m totally with Dshields on this.  For the Boomers who had children, nearly all of them are now grown and on their own.  Many of those offspring have good incomes. I think the Boomers will see their kids as resilient and fully capable of looking after themselves.  Keeping their Social Security, so they won’t be a burden on their kids, will seem much more sensible than sacrificing themselves for the good of a faceless younger group.  Boomers borrowed heavily and saved little. Social Security is vital for many of them. Their wrath at politicians who cut it would be merciless. Not only are older people more likely to vote, but Boomers are a very large portion of the population. Yes, I am a Boomer, and my generation has been notorious for its selfishness..

Travlin 

 

  • Sat, Aug 13, 2011 - 01:46am

    #107

    dshields

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    MaDnEsS on the way

[quote=Travlin]

[quote=Grover]

[quote=dshields]

They paid all their lives into the social security and medicare systems and they expect to receive what was promised they would receive if they did that.  If social security is cut, and it very well may be, then a boat load of older people who kept their end of the deal will get a very raw deal indeed.  Older people vote.  And, when push comes to shove they will vote for anyone who will tell them they will continue to receive their social security.  (Edited by Travlin)

[/quote]

Now that we’re moving into retirement, are we going to abandon our childrens’ future so we can have a comfortable existence? I think not. I expect that we’ll finally exercise the values we discovered about ourselves in our young adulthood. The generation born before the Boomers will follow the Boomers lead and adopt whatever standard is set forth. The GI generation still believes that they deserve whatever largess they receive from the government, but they are rapidly dying out. Deep down, none of the generations after the GIs feel as if they’ve contributed enough to our society to justify the fiscal carnage that would ensue from selfish voting. (Edited by Travlin)

[/quote]

Sorry Grover.  I’m totally with Dshields on this.  For the Boomers who had children, nearly all of them are now grown and on their own.  Many of those offspring have good incomes. I think the Boomers will see their kids as resilient and fully capable of looking after themselves.  Keeping their Social Security, so they won’t be a burden on their kids, will seem much more sensible than sacrificing themselves for the good of a faceless younger group.  Boomers borrowed heavily and saved little. Social Security is vital for many of them. Their wrath at politicians who cut it would be merciless. Not only are older people more likely to vote, but Boomers are a very large portion of the population. Yes, I am a Boomer, and my generation has been notorious for its selfishness..

Travlin 

 

[/quote]

I agree with Travlin about government retirement benefits.

However, there is madness on the way.  Very very few of the people I know have saved basically any money at all for their retirement.  They are totally dependent on the government for retirement funding, period.  I have saved some money but it was hard to do and inflation is higher than the capital gains I have been making for the last 3 years so that is all bad.  The only reason I was able to save some was because I am lucky and have a decent job.  The vast majority of Americans do not.  My savings are in the markets and they have gone plumb crazy.  It is all craziness.  The fundamentals do not mean squat any more.  It is all on the whim of the news stream and technical analysis by computers or trends and/or government action or inaction.

The bottom line truth is there is WAY to much debt.  Government debt and private debt.  If you take a hard look at the numbers it is terrifying.  There is no possible way people are going to be able to save enough money for retirement.  There is no possible way the government is going to be able to pay the benefits they have promised.  The sad part there is a serious fraud under the government retirement program.  The deal was that you pay all your life into the SS system and when you retire you will get paid back.  People kept their end of the deal.  The government is not going to keep theirs.  They simply can not – they spent the SS money and replaced it with Treasury instruments and now they do not have the money to redeem them.  The result will be either default, you simply will not get a SS check or the Federal Reserve will create money to buy the treasury instruments – otherwise known as printing.  They will print.  And they will keep printing.  As the money supply is increased the buying power of the dollar will decrease – otherwise known as inflation.  They will raise the retirement age and they will stop or massively reduce cost of living adjustments because as inflation increases there is no way the fed gov will have sufficient funds to continue to grant colas based on the CPI like they used to do.  I would like to point out that for the 2 colas have already been canceled.  So, if you have not saved a lot of money, and I mean a lot of money, then you are going to be dirt poor in your retirement.  There will not be any retirement in the sense our parents have.  That is already gone.  People will have to work until they simply can not work any more.  That is how it used to be.  There was no such thing as "retirement".  You worked until you could not work any more.  Generally you died not long after that.

Lets say they decide to print instead of default.  OK, you get say 2000 a month from SS.  By then gas will be 5 dollars a gallon and bread will be 5 dollars a loaf.  Just how far is that 2000 going to go ?  Even cat food will be 2 dollars a can.  Where are you going to live ?  You better have a mortgage free place to live in a low cost of living area.  I live in NJ.  My property taxes are 800 a month.  By then they will be 1000 a month.  My property taxes alone will eat half the 2000 I will get if they print all the way to the end.  No, there is going to be madness.  There is no way the economy of America can support 1 person retired for every 2 people working.  It is impossible and will not happen.  If they try to do that there will be a collapse the likes of which people have never seen.  It is all going to be cut.  The total inbound revenue stream into the fed gov right now is about 2.4 trillion.  They are spending about 3.8 trillion.  At some point through either an organized method like legislative action or some disorganized method like collapse, spending is going to have to become aligned with inbound revenue.  That means fed gov spending will be cut by something like 40%.  Since much of the spending is related to SS, medicare, and medicaid these programs are going to have to be cut.  They can cut them by actually cutting them or they can cut them by inflating.  It will probably be a combination of both.

I don’t know what is going to happen but whatever it is it will be amazing.  People are just going to freak.  Vast numbers of people when faced with being poverty stricken will vote for anybody who will get on TV and tell them I will give you money.  People will be desperate and desperate people will do anything.  Demigods will say anything to get power and money.  It is all shaping up to be a very bad gig indeed.  The fed gov is going to become another desperate entity at the party.  Desperate governments will also do most anything.  I do not see a good end to this.  The politicians have made catastrophic mistakes.  The education system collapsed and the class of dependency was fostered by the politicians.  Look at Obama.  Look how he got elected.  He plays the class warfare thing constantly.  I watched many of this stump speeches.  He basically told each crowd whatever he thought they wanted to hear.  The people made another catastrophic mistake and elected him.  We are already on the road to ruin.  Don’t get me wrong, it is not just Obama, there is a long string of politicians before him that worked us into this mess.  Obama is just the pinnacle of it.

We have nobody to blame but ourselves.  We did this to us.  We allowed the education system to fail.  We allowed the class of dependency to rise.  We elected the politicians that bankrupted the nation.  We exported our jobs.  We decided to not save for retirement.  We decided that half the population does not have to pay income taxes.  The top 10% of wage earners pay 70% of the income taxes.  The top 2% pay 38% of income taxes.  So when Obama and the dems say tax the rich they are playing the class warfare card.  We already tax the crap out of the most productive (productive being defined as the highest wages) element of society.  It is all crap and the entire system is broken.  The politicians have done us dirty.  We elected them.  And, now we are going to pay the price.

 

  • Sat, Aug 13, 2011 - 06:49am

    #108
    Grover

    Grover

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    A bend in the linear future

Travlin and dshields,

We’ve never before faced our current situation as a nation, but we’ve had rhyming periods in the past. At those times (WWII, Civil War, 1776) the generation analogous to the Boomers stepped up to the plate and made huge sacrifices for the good of the country. I expect the Boomers to step up to the plate when it becomes obvious that there isn’t any other option. We’re not quite there yet.

I agree with your rant, dshields! It is a travesty that we’re in this situation and that there isn’t any positive way out of it. Anything that isn’t sustainable simply won’t last forever. The Boomers will pay dearly for our collective mistakes. It won’t be pretty, but there won’t be any good options to choose from.

As a country, we’ll continue to borrow and print as long as we can. Once we can’t, the pain and misery will come home to roost. At first, people will be angry and search for a scapegoat. Spotty unrelated riots will break out. Then others will start their own disobedience protests. Once the riots and looting become pandemic, you’ll see a brave, gray haired Boomer stand up and put his/her life on the line to stop the madness. (Think of the brave soul who stood in front of the tank at Tiananmen Square – granted that he was not a Boomer, but the act helped to galvanize the cause.) Society’s attitude will have to change or we will have to kiss our country goodbye. There won’t be other options available.

I’ve got 2 years until retirement. I doubt the system will remain solvent long enough for me to achieve this goal. I’m part of the problem and I intend to be part of the solution. I no longer vote for politicians promising huge handouts (although I did until the mid ’90s.) If a politician offered to give you a million dollars of other people’s money, would you vote for him/her? That same politician will offer the same deal to the person next to you. Your windfall will be taken (taxed) by the politician in order to give it to him. You end up with less than you started with.

If I’m wrong and we continue with our self centered ways – sacrificing everyone else so we can continue to have the comfortable life we’ve always had – we’re doomed. The government will fail and we’ll have anarchy. Population centers will become "self cleaning ovens" until the population dwindles to the point that it is balanced against immediately available resources. Once we’ve achieved a sustainable balance, we’ll try to institute a "more perfect" government. Humans have an innate proclivity for creating governments and gods.

Grover 

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