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    “The Government Comes Up With the Money”

    A mindset that's killing our economy
    by Adam Taggart

    Wednesday, January 29, 2014, 4:48 AM

I'm half-heartedly watching the State of the Union address right now. What a cynic I've become.

My younger self would be shocked and saddened to learn how I've come to view these annual addresses as little more than a game of charades. The President (not just Obama, but his predecessors, too) reads a carefully and expensively constructed script designed either to elicit self-congratulatory applause from the echo chamber side of the hall, or to lob political harpoons into the other.

But in the end, it's nothing more than a game of words. And the real issues that desperately need addressing get ignored, glossed over, or showered with pablum and over-promises that will never materialize.

A few minutes ago, the President just announced his new executive order to raise the minimum wage by nearly 40% for those employed by federal contractors.

Now, I'm not going to make this article about the rightness or wrongness of such a move. And I'm very sympathetic to those earning the current minimum wage amount of $7.24/hour. In a world where the basics of living like food, health care, housing, energy, and education have skyrocketed in cost (due in no small part to the intervention of central planners), yet real wages have actually regressed, how the heck does one get by on the minimum wage?

But I will share the thought that enters my mind whenever I hear a politician make such a magnanimous and grandiose claim: How is this going to be paid for?

I think I'm shocking no one when I emphasize that our political leaders act as if money is magically produced whenever the need is great enough. Weak economy? Print money to bring interest rates down. Banks unstable? Print more money to buy their bad assets from them. Can't balance the budget? Run the country at a deficit (as they don't matter anyway, right?).

But I'll share a recent personal experience with the government that still managed to shock me. And I think it captures well the magical thinking at the heart of our national dysfunction.

A relative of mine is in her senior years now without any savings to lean on. (By the way, that puts her in the company of 22% of US seniors over 65. In fact, a shocking 4 out of 5 of all U.S. working households have retirement savings totaling less than one year's worth of income so it looks like there will be many more in her situation soon)

There's no way to sugar-coat her financial condition. She's in a tough situation with limited options. But we're doing what we can to support her.

Which led my ears to perk up when a friend suggested there may be a relatively easy way to boost her monthly Social Security payment. It turns out that, despite being divorced for over 40 years from her former husband, she can claim a portion of his Social Security benefits. If you were married for over 10 years, the government allows this.

Okay, I thought. Good for her. But what about her ex-husband? I doubt he's going to be happy seeing a drop in his Social Security check, and even less happy learning that it's because the government decided to give the difference to someone he divorced four decades ago.

But here's the thing that bowled me over: His doesn't drop.

The government makes it clear that if a divorced spouse is awarded any claim to your Social Security benefits, the benefits you receive remain untouched. From the SSA.gov website:

Note: The amount of benefits your divorced spouse gets has no effect on the amount of benefits you or your current spouse may receive.

As the one investigating this opportunity, I spent a day on the phone with the Social Security Administration, and, sure enough, that's the way it works.

I couldn't help asking the nice folks at the SSA: Who funds this? Where does this extra money come from?

In theory, the Social Security trust fund is a kitty paid into by workers as they earn income during their lifetime. (In practice, we know the kitty is empty, having been raided by politicians for decades). In this case, the ex-husband worked for a certain number of years and had a certain amount of his income directed into Social Security to finance the payments he would later receive in retirement. Payments that he now is, in fact, receiving.

So, if the government later decides that his ex-spouse should also get a check based on his years of employment, but no extra hours were worked to fund that second check, how does that math work?

Well, as probably comes as no surprise, math doesn't factor into the answer I received. "It's just how the system is set up" I was told. "The government comes up with the money."

And that to me succinctly sums up why we deserve the economic predicament we find ourselves in: too many of our leaders and too much of the populace look at the government as a perpetual font of money. The curiosity to ask the questions: Is this sustainable? Is this wise? isn't there. Either because we're too lazy or too fearful to learn the answers.

For the record, I did prod further into how such a payment system could remain solvent. But it was clear to me that, not only was this a strange question to the folks I was asking it of, but it was something they had never even thought about before. It didn't take very long before they conceded that it probably doesn't make sense, but folks who qualify for the extra money would be crazy not to take it.

In the end, my family member did qualify. But not for very much. (There were uncommon exceptions that ended up reducing her claim)

And while I understand why she feels the need to take the money, I'm conflicted about my role in the affair. Because it's this very behavior of treating the government like a free money ATM (or a benevolent uncle with a bottomless wallet use whatever analogy you like) that's ruining us.

Which makes it all the harder to hear of 40% hikes in the minimum wage, or health coverage for all through the "Affordable" Care Act, or extension of the expired unemployment benefits for those who have been out of work for over 99 weeks, without asking: How are we possibly going to afford this? 

~ Adam Taggart

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71 Comments

  • Wed, Jan 29, 2014 - 7:01am

    #1

    rcmacl

    Status Member (Offline)

    Joined: Jan 30 2012

    Posts: 11

    Sighs

    I know there is no money for any of this, so why pick on the folks in extreme poverty.  At least the money they get is going back into the economy, maybe even some of it in a very local way.  I don't mean to pick on you Adam, maybe I am just feeling exhausted by all this too.  One of the things that I feel like gets forgotten is that for retirees and the spouses that supported them, Social Security isn't exactly an entitlement program, they put a good deal of money into it.  Why shouldn't she get some money for the time and life force she spent supporting him while he paid into social security, and I don't really see any point in penalizing him.  I suppose it may offend some people that we don't penalize people for divorcing.  Yes, paying federal contract employees enough so that they may not have to receive food stamps, does add to the deficit, but as we know it is all going to fall apart soon enough so how bout letting the poor have a last little bit of food and shelter while there is still money there.  I guess I feel like we should just save our outrage for the financial elites who get a rather amazing amount of welfare.

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  • Wed, Jan 29, 2014 - 7:03am

    #2

    Arthur Robey

    Status Platinum Member (Offline)

    Joined: Feb 03 2010

    Posts: 1814

    Beans

    How are we possibly going to afford this? 

    No sweat. The Machine will provide.

    Your relative's wages were probably screwed right down to where she had no excess reserves to invest in anything. Henry Ford had the nous to give his workers enough to be able to purchase his products. It seems that Henry was the last of the Thinkers.

    If the Machine chooses to print money and give it to the Bankers- why be coy about feeding a little old lady? Dig in. The more she gets, the less the bankers can stuff into their constipated vaults.

     

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  • Wed, Jan 29, 2014 - 11:26am

    Reply to #1

    Rector

    Status Bronze Member (Offline)

    Joined: Feb 07 2010

    Posts: 321

    Okey Dokey. That's the ticket

    Once again, thinking emotionally and not rationally, we will continue on our course to destruction.  Empathy, fairness, entitlement (legitimate), and all other considerations will by BRUTALLY thrown out the door if we don't make incremental changes to our behaviors.  I understand and agree with your concern for the people who find themselves without other options to survival, but if we keeping stacking more people in this wagon, we are going to kill the horse, and then we will all walk.  At that point, no one will give a crap about fairness, or pain, or the "Elites" – things will devolve into a brutal march for survival and all those who were vulnerable under this highly ordered and generous system will fail.Our government in all its endeavors is blowing money like the prodigal son.  All levels of society are exploiting the "system" in unique ways.  This is a classic Nash Equilibrium – no one benefits from changing their strategy unless we all do.  Human nature will ensure that never happens.  And so it goes. . .
    Inevitable means inevitable,
    Rector

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  • Wed, Jan 29, 2014 - 11:33am

    #3

    thc0655

    Status Platinum Member (Offline)

    Joined: Apr 27 2010

    Posts: 1435

    Don't worry

    Don't worry, Adam.  We will soon be administered a lesson via a 2X4 to the side of the head which will knock this attitude right out of us.  After the coming Big Reset, everyone from little old ladies to Lloyd Blankfein and Jamon Dimon will never again assume, "The government will come up with the money." That will be so much healthier for everybody, but getting there is going to be painful and nasty.

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  • Wed, Jan 29, 2014 - 12:43pm

    #4
    Rob P

    Rob P

    Status Member (Offline)

    Joined: Oct 09 2008

    Posts: 36

    That's real true

    Adam, I totally understand what you're getting at in this.  I think that part of the problem – and the solution – is that, in general, people are really ignorant in regard to economics, both micro and especially macro.

    Recently, in regard to home health services under Medicaid, I heard someone say "you might as well do it, they'll pay for it", with "they" being that Godlike fountain from which floweth all money and other goodies(i e the government).

    I used to teach policy at the local university and I saw the attitude you're describing continuously, at least in one subset of the students.  I remember discussing SS and the other federal programs in the context of the "budget" (Oh my goodness, what's that??), and asking the seemingly odd question "and how will we keep paying for all of this – especially with so many baby boomers retiring?".  One young lady said "print more money". I encouraged her to pursue a degree in political science and then go into  politics (Ha).  The thought came so easily; she seemed like a natural.

    But with that said, as with your relative's SS, I sure enjoyed having hospice in last year – 100% paid by medicare – when my dad was dying.  It was a HUGE amount of services, costing who knows? 

    For me, it's a moral delimma – "get it while you can", verses "oh shit, I seem to find myself in the middle of the money hole at the center of the problem". 

    Well, apart from your situation which doesn't really apply, here's a tip for you buddy:  "they paid in" seems to work pretty well in terms of glossing over any guilt or other concerns 🙂

    Ha, thanks for the reminder.

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  • Wed, Jan 29, 2014 - 12:46pm

    #5

    Joanne Matulis

    Status Member (Offline)

    Joined: May 17 2009

    Posts: 39

    James Dines's "Generation Immortal"

    Adam,

    My head is spinning because what you've written seems to be a very plausible outcome. 

    Need money? : JUST PRINT IT!

    In James Dines's KWN interview below, he mentioned the possibilities of 3D printing and how, in the future,  we can simply micro manufacture organs & other vital tid-bits leading to longer life spans.  In fact, he called something akin to generation of immortals. 

    Need body parts? : JUST 3D PRINT IT!

    http://kingworldnews.com/kingworldnews/Broadcast/Entries/2014/1/26_James_Dines.html

    So, I think the future bodes a whole lotta printing, which ever way you look at it. oh yeah, & 70 is the new 30.

     

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  • Wed, Jan 29, 2014 - 1:45pm

    Reply to #1
    carlo cappelletti

    carlo cappelletti

    Status Member (Offline)

    Joined: Oct 09 2008

    Posts: 2

    agree

    I agree with this reasoning. If you are giving many to banks for free, then there is no justification on earth to not giving to people in need for minimal surviving.Stay human!

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  • Wed, Jan 29, 2014 - 2:34pm

    #6

    sand_puppy

    Status Platinum Member (Offline)

    Joined: Apr 13 2011

    Posts: 1837

    Political Dissent in the Surveillance Era

     

    The Text that Changed the World

    Being a political dissident in an age of surveillance. Your cell phone (and street camera mounted facial recognition software?) give the government, against whom you are protesting, your identity and location. And they don't like what you are doing.  They send you a text message to let you know that they know who you are….

     

    On Tuesday the Ukrainian government sent the following text message to thousands of protesters in the streets of Kiev: “Dear subscriber, you are registered as a participant in a mass disturbance.” This short text belied a far more radical message. For the first time, a government was able to identify individual protesters and privately communicate to them that it knew who they were and where they were located.

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  • Wed, Jan 29, 2014 - 2:35pm

    #7

    KennethPollinger

    Status Silver Member (Offline)

    Joined: Sep 22 2010

    Posts: 616

    A LOWER Class society?

     
    Ken PollingerAwareness Centers
    Nyack, New York ~ The Catskills, New York ~ Lagunas, Costa Rica

    http://www.AwarenessCenters.com ~ [email protected]

     

    Comments by Ken:

     
    Here is my construct again for your review. Following this, you will find some observations by me concerning the US Census Bureau's culture of presenting income statistics–quite DECEPTIVE if you ask me.
     

    Then I came across three other attempts to do what I am trying to do. Please check these out.  I then make some comments about their attempts.

    Concerning the Income-Wealth Class Structure

     
     Inspecting the US Census Income data, we find the following:
     
    1. The chart starts with the lowest income range at the top (Under $2,500)
         and proceeds all the way to the LAST category at the bottom ($100,000 or more).
     
         Is this deceptive?  Why not present the ranges with the more income at the TOP and descend to the bottom one. I believe this would be a truer picture of the income structure; otherwise, one needs to INVERT the info to see the picture that is worth a thousand words (or ranges).
     
    2. From the lowest range to the next to last range ($97,500 to $99,999), all the brackets have a range of $2,500).  BUT THEN, we have the last income range of $100,000 or more!!!!!  How incredible!! How deceptive!!
     
        Why are there not many more income ranges, all the way to highest incomes where data is available, for example, Forbes 400 or highest Hedge Fund Manager: Ray Dalio with 3 BILLION?  Is this done ON PURPOSE by the Census Bureau??
     

    3.  Also, where is the income information of the very rich who can purchase TAX-FREE municipal bonds (frequently free of Fed, state, and city taxes)? For example, their wealth makes more income without any work whatsoever, thus money making money.  For example, if Ray invested just 1 BILLION of his "earnings" (income),  he could generate 60 million of additional income, TAX-FREE.  Not bad, for not working.
     

    If you have never seen the US Census Bureau Income data, please CLICK HERE.

     

    Academic Class Models

     

    Household income is one of the most commonly used measures of income and, therefore, also one of the most prominent indicators of social class. Household income and education do not, however, always reflect perceived class status correctly. Sociologist Dennis Gilbert acknowledges that "… the class structure… does not exactly match the distribution of household income" with "the mismatch [being] greatest in the middle…" (Gilbert, 1998: 92) As social classes commonly overlap, it is not possible to define exact class boundaries.

    According to Leonard Beeghley[citation needed] a household income of roughly $95,000 would be typical of a dual-earner middle class household while $60,000 would be typical of a dual-earner working class household and $18,000 typical for an impoverished household. William Thompson and Joseph Hickey[citation needed] see common incomes for the upper class as those exceeding $500,000 with upper middle class incomes ranging from the high 5-figures to most commonly in excess of $100,000. They claim the lower middle class ranges from $35,000 to $75,000; $16,000 to $30,000 for the working class and less than $2,000 for the lower class.

    Academic Class Models
    Dennis Gilbert, 2002 William Thompson & Joseph Hickey, 2005 Leonard Beeghley, 2004
    Class Typical characteristics Class Typical characteristics Class Typical characteristics
    Capitalist class (1%) Top-level executives, high-rung politicians, heirs. Ivy League education common. Upper class (1%) Top-level executives, celebrities, heirs; income of $500,000+ common. Ivy league education common. The super-rich (0.9%) Multi-millionaires whose incomes commonly exceed $350,000; includes celebrities and powerful executives/politicians. Ivy League education common.
    Upper middle class[1](15%) Highly-educated (often with graduate degrees), most commonly salaried, professionals and middle management with large work autonomy. Upper middle class[1](15%) Highly-educated (often with graduate degrees) professionals & managers with household incomes varying from the high 5-figure range to commonly above $100,000. The Rich (5%) Households with net worth of $1 million or more; largely in the form of home equity. Generally have college degrees.
    Middle class (plurality/
    majority?; ca. 46%)
    College-educated workers with considerably higher-than-average incomes and compensation; a man making $57,000 and a woman making $40,000 may be typical.
    Lower middle class (30%) Semi-professionals and craftsmen with a roughly average standard of living. Most have some college education and are white-collar. Lower middle class (32%) Semi-professionals and craftsmen with some work autonomy; household incomes commonly range from $35,000 to $75,000. Typically, some college education.
    Working class (30%) Clerical and most blue-collar workers whose work is highly routinized. Standard of living varies depending on number of income earners, but is commonly just adequate. High school education.
    Working class (32%) Clerical, pink- and blue-collar workers with often low job security; common household incomes range from $16,000 to $30,000. High school education. Working class
    (ca. 40% – 45%)
    Blue-collar workers and those whose jobs are highly routinized with low economic security; a man making $40,000 and a woman making $26,000 may be typical. High school education.
    Working poor (13%) Service, low-rung clerical and some blue-collar workers. High economic insecurity and risk of poverty. Some high school education.
    Lower class (ca. 14% – 20%) Those who occupy poorly-paid positions or rely on government transfers. Some high school education.
    Underclass (12%) Those with limited or no participation in the labor force. Reliant on government transfers. Some high school education. The poor (ca. 12%) Those living below the poverty line with limited to no participation in the labor force; a household income of $18,000 may be typical. Some high school education.
    References: Gilbert, D. (2002) The American Class Structure: In An Age of Growing Inequality. Belmont, CA: Wadsworth; Thompson, W. & Hickey, J. (2005). Society in Focus. Boston, MA: Pearson, Allyn & Bacon; Beeghley, L. (2004). The Structure of Social Stratification in the United States. Boston, MA: Pearson, Allyn & Bacon.
    1 The upper middle class may also be referred to as "Professional class" Ehrenreich, B. (1989). The Inner Life of the Middle Class. NY, NY: Harper-Colins.

    Comments about the THREE researchers by Ken:

     
    As a sociologist, the traditional manner of studying social stratification is the 3 major
    classes: Upper, Middle, and Lower, with each having three subdivisions.  The differentiation between all NINE classes is quite difficult to determine and is somewhat subjective, although each researcher should provide some rationale for his/her divisions/categories.
     
    Thus, Gilbert, Thompson and Hickey, as well as Beeghley ALL have the middle class being VERY large: the great middle class society, as preached by many in the mainstream.  They average about 45-47% while I present only 25%.  Who is right here??  One must look at the income statistics to determine where one stands.
     
     
    Thus, my image of our society is PREDOMINATELY LOWER class, not Middle class, contrary to what people WANT to believe.
     
    Gilbert presents NO ranges of concrete income!!  Quite vague, of course.
     
    Thompson and Hickey make no distinctions between $500,000 and above–I do!!
    In fact FIVE divisions!!   . . .and above: how high, praytell?  I go up to BILLIONS in income!! Also, they present some vague general suggestions as descriptions.
    I, on the other hand, offer photos, names, and sources.
     
    Beeghley has the superrich at $350,000.  Is he kidding?  Rich=net worth of a million.

    NO WAY!!  For example,  Jamie Dimon's COMPENSATION (fancy word for income)
    in 2011 was $23.1 MILLION; Lloyd Blankfein's was $21 MILLION; while John Stumpf's was
    $19.3 MILLION  (JP Morgan, Goldman Sachs, Wells Fargo, respectively)
     
    Much more could be said here but this just shows why very few KNOW what's really going on in terms of income and especially wealth.
     

    And speaking about this Paul Krugman, NYTimes, "The Populist Imperative," the following:
     
    ". . .most Americans don't realize just how unequally wealth really is distributed."
     
     
    THIS IS WHY I AM WORKING ON MY INCOME-WEALTH CLASS STRUCTURE–to enlighten people about what the hell is going on!!!!!!!
     
     
    If you have any interest in all this, I'd love to hear from you.

     

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  • Wed, Jan 29, 2014 - 2:47pm

    #8

    Arthur Robey

    Status Platinum Member (Offline)

    Joined: Feb 03 2010

    Posts: 1814

    Shemen, Money, Madness and 2x4.

    Money is not real. It is supposed to represent that which is real.

    If one note represents one widget and then somebody prints ten notes to represent the same widget, there is still only one widget. (Inflation)

    But if The Machine makes 10 widgets then the value of each widget becomes less than 1 note.

    For example, I am looking at Swiss timepieces that used to sell for $1000, they are now going for $160. Why? The Machine can make them far cheaper than any Swiss watchmaker and we have an oversupply problem. The price has plummeted in spite of the printing press. Why do you think that the sellers of watches loath both Deflation and Competition?

    Deflation, not only because the debt obligations vaporized but because the machine out-paced the rate at which money could be flooded into the hands of the consumers. It does not help that someone at the top has got religion about money and thinks that it is real. There is this mad scramble for the unreal at The Top that is preventing the trickle-down from becoming a deluge.

    I will stick to my guns. What we are watching is the destruction of the very idea of money.

    This is Future Shock. Those born before 1980 cannot get their heads around the idea that humans are falling out of the Economy. The process is accelerating. Working for a living and saving "money" is just so last century. Why save that which has no value?

    Overpopulation? No biggie. The Ape/Pig hybrid was never too fertile to begin with anyway. Just a little bit of this and a little bit of that and, voila, shemen.

    The biggie is carbon in the atmosphere. That is where the 2×4 comes in.

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  • Wed, Jan 29, 2014 - 2:49pm

    #9

    KennethPollinger

    Status Silver Member (Offline)

    Joined: Sep 22 2010

    Posts: 616

    Ooops, forgot to mention SOURCES

    SOURCES: 
     
    1. Census Bureau 2010  (last 3 years drastically LOWERs the Middle and Lower Class numbers.
     
    2. As for the UPPER Class numbers, here are some sources:
     
       a. Forbes: The Richest People in America (100 of them)
               range: 4.6 BILLION- 72 BILLION (Gates)
     
       b. Forbes: The 40 Highest-Earnings Hedge Fund Managers and Traders
               range: 90,000-2.2 BILLION
     
       c. Forbes: Top College Presidents
               range: 1.6 million-3.3 million (salaries ONLY)
     
       d. 50 Wealthiest POLITICIANS in USA
               range: 6.0-294 MILLION)(Rep. Michael McCaul, TX; Rep.Darrell Issa, CA)
     

       e. Forbes: The 10 Richest People in Medicine
               range: 1,12 BILLION-7.3 BILLION
     
       f. Forbes: The Top 10 Wealthiest Lawyers in the US
               range: 12 million-26.1 BILLION
     
      g. Federal Reserve Presidents
              range: 150,000-21.5 million
     
    Now, I need to tease out all these folks with their monies and see where they fit into my Combination Income-Wealth Chart.
     
    NOTE: I must admit that I have NOT seen anyone do what I am attempting–that is, gather much data and try to present the BIGGER picture of INEQUALITY in the USA.  This seems to be a topic of discussion these days centered around food stamps, unemployment checks, medicaid, pre-kindergarden, etc., BUT NOT THE REALLY BIGGER PICTURE.  I will have quite a few critical observations about the Census Bureau's chart, as well as the the title of my project.

     
    Top Ten Wealthiest:
     
    Rank Name Net Worth Age Residence Source
    1

    Bill Gates

    $72 B 58 Medina, Washington Microsoft
    2

    Warren Buffett

    $58.5 B 83 Omaha, Nebraska Berkshire Hathaway
    3

    Larry Ellison

    $41 B 69 Woodside, California Oracle
    4

    Charles Koch

    $36 B 78 Wichita, Kansas diversified
    4

    David Koch

    $36 B 73 New York, New York diversified
    6

    Christy Walton & family

    $35.4 B 59 Jackson, Wyoming Wal-Mart
    7

    Jim Walton

    $33.8 B 66 Bentonville, Arkansas Wal-Mart
    8

    Alice Walton

    $33.5 B 64 Fort Worth, Texas Wal-Mart
    9

    S. Robson Walton

    $33.3 B 70 Bentonville, Arkansas Wal-Mart
    10

    Michael Bloomberg

    $31 B 71 New York, New York Bloomberg LP

       IMPORTANT NUMBERS:     Total numbers: over 400 BILLION                                                                                                           

    and if we view the top 100 wealthiest: a total of 1,342 BILLION (if I am adding correctly!!!!!!!!!!!!!!!!!)

    So, a mere 10% tax on these folks could pay for food stamps, unemployment insurance, etc.

     

    Maybe a 25% tax could fund a LIVING WAGE for the LOWER-LOWER 44.95% (those nasty, lazy, unproductive non-seeking job suckers, at least according to the Republicans, and some Democrats)





    More from the NYTimes



    2 Parties Place Political Focus on Inequality



    Half of Congress Members are Millionaires, Report Says



    The Vicious Circle of Income Inequality



    Bailout Risk, Far Beyond The Banks

    One more to come today.  Sorry for hogging space, Ken

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  • Wed, Jan 29, 2014 - 2:51pm

    #10
    kaju0317

    kaju0317

    Status Member (Offline)

    Joined: Jan 25 2014

    Posts: 2

    SSI

    Read your SSI statement.  I don't think many people do, when I tell them what it says they are surprised. 

    I wish I had kept them all through the years but the oldest one I have is from December 29, 2008.  It states that "In 2017 we will begin paying more in benefits than we collect in taxes.  Without changes, by 2041 the Social Security Trust fund will be exhausted and there will be enough money to pay only 78 cents for each dollar of scheduled benefits."

    Today, January 29, 2014, my online statement states "Without changes, in 2033 the Social Security Trust Fund will be able to pay only about 77 cents for each dollar of scheduled benefits."

    So in just over 5 years the picture looks much worse.  Instead of exhausting the trust find in 2041 it now is scheduled to happen 8 years earlier in 2033.  They have also removed the statement indicating when we start paying more in benefits that they collect in taxes.  And they also eliminated the language that the SSI fund will be exhausted.

     

     

     

     

     

     

     

     

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  • Wed, Jan 29, 2014 - 3:05pm

    #11

    KennethPollinger

    Status Silver Member (Offline)

    Joined: Sep 22 2010

    Posts: 616

    Last one, I promise

    You MUST see the entire listings of both parties–fascinating  And these are the folks cutting food stamps. etc.

    SHAME on them!  Loved your post Adam–you've got HEART!!

     

    Comments by Ken
     
    I promised you periodic information about the Income-Weath Social Classes Chart.
    Last time it was the 100 wealthiest.
     
    TODAY, it is the "average worth" of US Politicians.
     

    House Democrats





    House Republicans





    Senate Democrats





    Senate Republicans

     

     

    Lastly, Please enjoy three articles from the NYTimes;
     
     
    "For the Love of Money," by Sam Polk (1/19/14)  Sunday Review  (POWER,baby!!!)
     
    "The Undeserving Rich." Paul Krugman 1/20/14  Op-Ed
     
    Comments?  Join the conversation.

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  • Wed, Jan 29, 2014 - 3:15pm

    #12

    Arthur Robey

    Status Platinum Member (Offline)

    Joined: Feb 03 2010

    Posts: 1814

    And tying it all together.

    1,342 BILLION (if I am adding correctly)

    You make my point for me sir.

    $1.3 T is not real. It would not make a jot of difference to their breakfast table if they misplaced 99% of it.

    I foresee a time when the Machine will give you a requisition slip for the quartermaster with your name on it and an expiry date. Then everyone will belong to the same social status.

    It is said that the Machine's intelligence will match that of a human, briefly.

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  • Wed, Jan 29, 2014 - 3:20pm

    #13
    soulinrevolt

    soulinrevolt

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    question

    Your piece makes an excellent point.  But what I always ask myself when I read something like this is this: would we be able to afford it if our pentagon budget wasn't, roughly, the rest of the world's combined?  The concepts of Social Security and Universal healthcare don't seem to me to be that unreasonable, but as long as the lion's share of national wealth is funneled into so few hands–military industrial complex, big banks–we can't really expect much for the average citizens.

    Don't get me wrong, I agree with your post and I'm against the money printing, but, if not now at least in the past, we have had the money to provide a better life for our society as a whole, but it went straight to the top.  Now it's too late I guess.

    Thanks for the post!

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  • Wed, Jan 29, 2014 - 3:32pm

    #14

    charleshughsmith

    Status Bronze Member (Offline)

    Joined: Aug 15 2010

    Posts: 683

    money printing and debt

    I think the most important facet of your story, Adam, is the unquestioned faith we collectively have in the central state's ability to fund every social program (as well as the Empire). The other point that needs to be made is *printing* the money for SSA would not be as destructive as *borrowing* the money, which is what we're doing now. If we simply printed $700 B a year to pay for SSA and were otherwise running no federal deficit, that is 4.3% of the $16T economy–given the many forces of deflation at work, that would be unlikely to spark runaway inflation. But we don't actually print money–we borrow it into existence and then owe interest on that debt forever. That's the real problem.

    Ken, I value your attempts to organize income/wealth data.  I have tried to do the same thing and also with taxes, which are a mess because they vary locally.  The Census Bureau data is a bit skewed because they report 245M people as receiving some income, but there are only 140 M people who are employed–and only 115 M of those are full-time employed.

    So perhaps we should start with employed people, and perhaps analyze full-time earnings more closely, as part-time work is not enough to qualify for middle-class incomes.

    Your primary point is clear: the super-wealthy are in a world far above merely wealthy or upper-middle class, and our political class is now drawn from the wealthy class. When governance can be bought, it's no wonder the game is dominated by wealth.

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  • Wed, Jan 29, 2014 - 3:38pm

    #15
    RoseHip

    RoseHip

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    Posts: 144

    Main act

    When in a circus one should act and dress appropriately. I hope your being entertained, cause the main act is about ready to begin and this one isn't to be missed. Don't take everything so seriously (future shocked) it is the circus after all. After the lights turn on, please be courteous of your neighbors and quickly head for the exits, cause this show going to bring the whole tent down. Do beware of the encore clowns.

    Rose 

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  • Wed, Jan 29, 2014 - 3:49pm

    #16
    Doug

    Doug

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    Bigger picture

    I don’t disagree with many of the points Adam made in the article, but I think it lacks perspective of the long term trends and forces that have brought us to this predicament.  That’s particularly true of inherent conflicts between the corporatocracy/gov’t.  (herein after referred to as the corporatocracy) complex and ordinary human beings that goes back a long way to the birth of the labor movement that resulted from what I consider the natural state of the corporatocracy, that of the robber barons.

    The abuses by the corporatocracy were epic and legendary.  See the Jim Crow laws, The Jungle by Upton Sinclair or Grapes of Wrath by John Steinbeck.  The labor movement slowly addressed the worst of these abuses with plenty of sacrifices by the masses along the way until after WWII when quite suddenly we underwent massive industrial expansion that required lots of workers to support.  There were plenty of inflection points along the way, notably Jeckle Island, WWI, the roaring 20s, the depression and dust bowl 30s, the Social Security Act and WWII.  The “greatest generation” and their parents were born during this era and survived the various meat grinders along the way.

    Cheap fossil energy and incredible technical innovations fueled the industrial revolution that gave the veterans coming home from WWII perhaps the most incredible opportunities for economic improvement ever in history.  Responding to market forces the labor movement increased rapidly in numbers and power, directly benefitting the working class and creating the largest middle class ever.

    Despite the increases in wealth there was still a large underclass being left behind based largely on race, citizenship and economic dislocation.  The LBJ Great Society programs (continued by Nixon) were intended to address the discrimination and poverty of these people.   The rapidly expanding economy gave little reason to think we couldn’t afford the social safety net.  The corporatocracy was still doing just fine spending money for guns and butter.

    As a young adult and early member of the Boomer generation, I remember the promise that the economy would continue to grow with decreasing work hours and improving working and living conditions for ourselves and our children.  That promise was, in short, the American dream.  The relatively unsophisticated (i.e. most of us) didn’t see a lot of reason to doubt that promise.  Of course, implicit in that dream was the notion that increased productivity would continue to ensure economic expansion and increasing opportunities for everyone.  One of the curious ironies of this period up until the present is that productivity has steadily improved throughout, but the benefits seem to go mostly to the 1%.

    The standard workweek got to 40 hours and got stuck there.  In addition, wages have done no better than remain stagnant and workplace benefits are steadily declining since the 70s.  There are far fewer jobs for the relatively unskilled, meaning that even the lower level jobs require training/education that is becoming increasingly expensive and difficult for many.  I think it is undeniable that globalization, or more accurately, off-shoring, has exacerbated all of these trends.  And, of course, we are also in the age of limits.

    The bottom line in all of this is the reality that there just isn’t enough work to be done to maintain full employment, no matter how you define it.  I believe that the corporatocracy has been fully conscious of these trends all along and has expanded the safety net to absorb all of those left behind and to keep them off the streets.  They remember what happened the last time the citizenry rose up en masse and disturbed their comfort during the civil rights era and Vietnam.  Government entitlements and support payments have been sufficient to keep the underclass quiet so far.  But, the underclass is growing and the middle class is shrinking.

    Having seen the growth of some of those entitlements and support payments from the inside, I am convinced that subtle and not so subtle pressures from Congress and the leadership of those programs, right up to the oval office, have been to expand those benefits and incomes by the bureaucracies that administer those programs.  They have also been expanded by the judiciary, of course, but that too at least partially results from pressures from tptb.

    So, today’s underclass is made up of the elderly, others who are no longer able to work because of some kind of disability, those whose skills don’t qualify them for more than unskilled work, which is decreasing in availability and remuneration anyway, and, to be sure, low level grifters who take advantage of the system.  Many of the latter supplement their gov’t payments with black market incomes.  There is little doubt in my mind that we have an economy that can no longer support all of us and tptb are just fine with that.  They keep throwing us bones and engorging themselves with financial shenanigans on a global scale.  Minimum wage laws are also a big part of the entitlement culture, and the fact is a family, whose members are increasingly taking those jobs, cannot live on $7.24/hr.  I boldly predict it will rise with the corporatocracy’s grudging approval.

    It still comes down to the 1% vs. the 99% and will probably continue until some kind of black swan comes along prompting the masses to take to the streets.  When that happens we may see real change.  In the meantime all most of us can do is increase our personal resilience.   The mistake we make is blaming those who need their gov’t checks possibly supplemented by Wally World jobs.  The people in charge know exactly what is going on.

     

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  • Wed, Jan 29, 2014 - 3:54pm

    Reply to #9

    Chris Martenson

    Status Platinum Member (Offline)

    Joined: Jun 07 2007

    Posts: 4501

    Important numbers indeed

    [KennethPollinger]
      IMPORTANT NUMBERS:     Total numbers: over 400 BILLION 

    While I do believe that the growing wealth gap is a big problem, I want to side-step that a bit and put these numbers into the context of government spending and the mindset that accompanies that (the original thrust of Adam's piece).
    If We The People decided to entirely expropriate every single dollar from the list above, it would not even plug a single year's budget gap for the U.S. federal government.
    Assuming the appropriated $400 billion was not viewed as a windfall to be spent, that is encourage more spending by holding the current budget constant and just adding this to that amount, all that would be accomplished would be a temporary reduction not elimination! of the amount of new debt being taken on.  In our names, of course.
    To really drive the point home, imagine if the federal government decided to apply a 100% income tax on all incomes over $250,000…that would surely fix it, no?  We'd have entirely eliminated the deficit and had plenty to spread around, right?
    No.  
    There would still be a deficit.
    And that deficit is only projected to get worse going forwards, and that's with an assumption of the return of rapid economic growth in the 3.5% real range.
    The bigger story here is one that we all are participants in and that involves the idea of living beyond your means.  That's something we are doing both economically and ecologically, and the only remedy that works is to reduce your consumption in both places.
    That's the first hard truth that has to be faced up to.
    Once that's been done, the very important next step is to decide how to do that equitably and fairly.  That's where we also need to have a hard conversation about how our current system of money just automatically grants ridiculous advantages and gains to those who already have more than they can spend.  That's the miracle of compounding for you.
    But I believe it's unworkable to start with the idea that if we just divided things up differently that this would all somehow work out.  It's missing the first step, which states that we're past the point of all this working out and we have to dial our expectations and consumption back.
    Both issues are important, and I think they are best served by keeping them linked but distinct from each other.

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  • Wed, Jan 29, 2014 - 3:58pm

    Reply to #10
    Doug

    Doug

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    Posts: 1357

    kaju0317 wrote:Read your SSI

    [quote=kaju0317]
    Read your SSI statement.  I don't think many people do, when I tell them what it says they are surprised. 
    I wish I had kept them all through the years but the oldest one I have is from December 29, 2008.  It states that "In 2017 we will begin paying more in benefits than we collect in taxes.  Without changes, by 2041 the Social Security Trust fund will be exhausted and there will be enough money to pay only 78 cents for each dollar of scheduled benefits."
    Today, January 29, 2014, my online statement states "Without changes, in 2033 the Social Security Trust Fund will be able to pay only about 77 cents for each dollar of scheduled benefits."
    So in just over 5 years the picture looks much worse.  Instead of exhausting the trust find in 2041 it now is scheduled to happen 8 years earlier in 2033.  They have also removed the statement indicating when we start paying more in benefits that they collect in taxes.  And they also eliminated the language that the SSI fund will be exhausted.
    [/quote]
    You are confusing programs.  SSI is essentially a poverty program that has no trust fund.  It is means tested and comes accompanied by Medicaid.  Social Security Retirement and Disability programs do have trust funds and entitle the recipient to Medicare.
    I know it is popular to consider the SS trust funds to be a fiction, but that rationale only applies if you also consider other gov't securities held by private parties, pension programs and trust funds to be fictions.  It's all debt owed by the gov't.
     

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  • Wed, Jan 29, 2014 - 4:06pm

    #17
    anexaminedlife

    anexaminedlife

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    Posts: 5

    Wrong focus

    While I agree with the bigger point of this article, i.e., that the government is not an endless source of free money, I have to take exception to your examples.

    Minimum Wage: You imply that this is going to be paid for by the government. Unless I am missing something, that is incorrect. It is, of course, paid by the employers. (Just to assume for a moment that no one lost his or her job if the minimum wage were increased, it would likely have the effect of reducing the number of people on government programs.) If you want to argue that raising the minimum wage would hurt the economy (implication: more people lose jobs>more people eligible for gov't programs) or make a political/philosophical argument that it is not the government's role to meddle in wages, I think those discussions are important but not germane to your point here.

    Social Security for spouses: So my first question is: Do you think it is beneficial to children (and ultimately to society) that one spouse stay home with the children while they are being raised? This is the point of the social security benefit of which you complain. If a spouse stays home to raise the children, she (it could just as well be Dad but I will use "she) will lose a good portion of her working years and when/if she enters or reenters the workforce, she will likely never catch up. This was especially true in your Aunt's pre-Internet days. The benefit is small: only 50% of the former spouse's benefit and only that if it is greater than the benefits she earned by her own work. It is unfortunate that people get divorced but as long as we are forced to contribute to social security, this arrangement makes sense. The way it is structured, the most likely recipient is a former stay-at-home spouse who was in a long marriage. (That some marriages do not produce children, etc. has no bearing on this point as my only point is that this is why this particular benefit exists.)

    As to the bigger picture, i.e., educating the populace that the government cannot forever be an endless source of money, after all money is not created out of thin air (oh wait!) – I think we should start with the TBTF banks, the military expenditures (which is actually the economic engine running this country), and the daily extraction of money that crony capitalism engenders. Why point a finger at the little guy or gal when his or her share of government (funny) money is merely a drop in the bucket?

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  • Wed, Jan 29, 2014 - 4:10pm

    #18
    AustinHorn

    AustinHorn

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    Posts: 14

    I'm a financial planner, and

    I'm a financial planner, and there are so many Social Security "planning" options in the case of married (or divorced) couples, it's astounding.  My grandmother was divorced from my grandfather.  After her husband (my stepgrandfather) and my grandfather had both passed away, she had the option of claiming survivors benefits on the higher their benefit amounts.  Prior to that, she was claiming a 50% spousal benefit based on my stepgrandfather's earning record.

    We also have a client who is getting survivors benefits based on her deceased husband's benefit amount.  Nevermind the fact that we manage about $9 million for her.  And she has probably another $3-5 million in "nonfinancial" assets.

    Ultimately, the spousal benefits and survivor benefits were put in place when typically only one spouse worked.  It was a way to compensate the non-working spouse for staying at home and raising a family and taking care of the household.  While this made sense, these planning options are likely going to be the next thing that gets targeted during SS reforms (after chained CPI, pushing back the full retirement age, etc).  As Adam noted, this type of benefits won't be sustainable.

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  • Wed, Jan 29, 2014 - 4:40pm

    Reply to #10
    kaju0317

    kaju0317

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    Posts: 2

    I was wrong to call it SSI,

    I was wrong to call it SSI, my mistake, my comments refer to Social Security Retirement & Disability program. 

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  • Wed, Jan 29, 2014 - 4:51pm

    #19

    rhare

    Status Silver Member (Offline)

    Joined: Mar 29 2009

    Posts: 397

    Only 20% of US budget is military, most of it is social programs

    [quote=soulinrevolt]

    Your piece makes an excellent point.  But what I always ask myself when I read something like this is this: would we be able to afford it if our pentagon budget wasn't, roughly, the rest of the world's combined?  The concepts of Social Security and Universal healthcare don't seem to me to be that unreasonable, but as long as the lion's share of national wealth is funneled into so few hands–military industrial complex, big banks–we can't really expect much for the average citizens.

    [/quote]

    Actually the lions share goes to non-military items. Social Security, Medicare, Medicaid are more than double the defense budget.  If you add in many of the mandatory/discretionary items you probably have 3x the defense budget going to "social" programs. This graphic from 2011 illustrates this the best.  The 2013 numbers are similar.

    Also, you have to realize that that defense budget keeps more than a million people employed.  So while I agree we need less spending on defense (and everything else), that defense budget is not going strictly to a few people, its more like it goes to a lot of people with those at the top skimming from it.

     

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  • Wed, Jan 29, 2014 - 4:55pm

    #20

    KennethPollinger

    Status Silver Member (Offline)

    Joined: Sep 22 2010

    Posts: 616

    Not proposing ROOT solutions

    Just trying to show how skewed it is right now. I'll throw in the INCOMES of Hedge Fund Managers soon, as well as medical doctors and educational Presidents.  I do not pretend to provide answers as I personally think the system is beyond fixing, maybe a class warfare?  But then there are two sociology/political science principles:

    1) The Circulation of the Elites (always happens after revolutions), and 2) The Iron Law of Oligarchy (pyramidal structures always manifested themselves, at all times).

    So, I'm off to warm Costa Rica where I eat rice, beans and corn–really good stuff–VERY resilient, no? And mingle with the poor locals, the salt of the earth!

     I just thank GOD (Quantum Consciousness, my definition) everyday that I'm not in the LOWER class–poor karma???

     

    Really LOVE these conversations.  Many thanks to Chris, Adam and ALL you folks.

     

     

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  • Wed, Jan 29, 2014 - 4:58pm

    #21

    rhare

    Status Silver Member (Offline)

    Joined: Mar 29 2009

    Posts: 397

    More "hate the rich" sound bites....a way to avoid reality

    [quote=KennethPollinger]

    and if we view the top 100 wealthiest: a total of 1,342 BILLION (if I am adding correctly!!!!!!!!!!!!!!!!!)

    So, a mere 10% tax on these folks could pay for food stamps, unemployment insurance, etc.

    Maybe a 25% tax could fund a LIVING WAGE for the LOWER-LOWER 44.95% (those nasty, lazy, unproductive non-seeking job suckers, at least according to the Republicans, and some Democrats)

    [/quote]

    You have some critical errors in your thinking here.  First, that $1342 Billion is net worth, not income, so yeah you can tax it at 25% and then in 4 years what are you going to do when it's gone?  But the more important question than that, who's going to buy those assets so you can make use of it?  The vast majority of that wealth is going to be stocks & bonds, who's going to purchase it – the little old lady your trying to help?  How are you going to turn that paper wealth into something real?

    As far as having more breakouts above $100K, would be nice but it doesn't matter.  While it's annoying to see much of the "wealth" flowing to the top right now, much of it is simply paper wealth (again high value of stocks) that doesn't represent real wealth.  Also, it doesn't really matter.  The problems is that in the US nearly all citizens are living far beyond their means – supported by the reserve currency of the world, deficit spending at all layers of government, and personal deficit spending using credit.

    If you take the conservative number (some estimates are double) that we have $100T in debt and unfunded liabilities you quickly find that no amount of taxing or wealth confiscation will make a bit of difference.  To put it in perspective, the total value of US assets is estimated to be $188T, but only  $46T of those are tangible assets.  If you took all those "real" assets and distributed them evenly among the 112M households, that still only a net worth of $410K/household.  How is that 100-200T ever going to be paid, that's 2-4x that $410K/household value?

    Want another way to look at it, if you want even wealth distribution, if you have more than $410K in household assets (house, savings, pensions, personal belongings, share of national parks, forests, roads, etc of everyone in your house) of more than $410K, then you need to be ready to give up anything above that in the name of fairness. I'm guessing quite a few on this forum wouldn't find that very appealing.

    EDIT: Chris said this much more eloquently. smiley

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  • Wed, Jan 29, 2014 - 5:08pm

    #22

    Christopher H

    Status Bronze Member (Offline)

    Joined: May 29 2009

    Posts: 120

    Arthur, I think that you're digging well beneath the surface...

    … with your acknowledgement that our money is, for the most part, FAKE.

    This view meshes well with that expressed by E.F. Schumacher and expanded upon by The Archdruid, JMG.

    Schumacher wrote that there are two types of wealth.  Primary wealth is the first, which is made up by the services provided by the earth's ecosystems and the raw materials that the earth provides.  Secondary wealth is made up of all of the products and services that are created through human manipulation of primary wealth.  Without primary wealth, there can be no secondary wealth.

    Greer expanded (updated?) this definition to include tertiary wealth — financial instruments that are ultimately founded on primary and secondary wealth.

    We now live in a time where primary wealth is completely discounted/misunderstood, secondary wealth is following the same path, and tertiary wealth has been elevated to replace the first two — and in the process has become increasingly disconnected from the first two.  It is this fundamental disconnect that drives our slavish devotion to perpetual exponential growth extracted from a world that is increasingly coming apart at the seams.

    The top 0.001% knows this.  It's why you have hedge fund managers buying up farmland while simultaneously taking advantage of the Fed's free money program.  Personally, from an expediency standpoint, this is why I can't really blame those on the lower end who are trying to get what they can from the system — because it's not that the system is going to fall apart, it already is falling apart.  I'm sure as hell not going to refuse to take advantage of state and federal rebates for alt. energy when I build out my PV system in the next couple of years, just because the monetary system is falling apart, just as I'm not going to refuse to have a backhoe help build my backyard pond or use a chainsaw to process firewood because peak oil is upon us. 

    I'm not going to judge those on the lower end of the econometric scale who try to game the system to their own advantage, even if it contributes to the decline, because the decline is occurring regardless of what they do.  That die was cast long before today….

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  • Wed, Jan 29, 2014 - 5:44pm

    Reply to #17

    Adam Taggart

    Status Platinum Member (Offline)

    Joined: May 25 2009

    Posts: 2523

    Not quite

    Examined -Let me clarify, as I think you've made some assumptions about my intent that aren't accurate.
    1) My question on the 40% increase in minimum wage was: How will it be afforded? Yes, the employers will pay the increase, but can they do so at acceptable cost? And by 'acceptable cost', I include factors like:

    will prices need to rise, thus exacerbating the already-painful price increases in essentials (food, energy, housing, health care, etc) that so disproportionately inflict injury on the poor and middle classes?
    will workforces shrink as employers can afford to hire fewer workers?
    will work benefits shrink as costs/employee rise?

    In your comment you mention "Just to assume for a moment that no one lost his or her job if the minimum wage were increased". Sorry, but I just don't see any probability above 0% for that outcome. It strikes me as the same sort of reality-detached magical thinking that's at the heart of the point I'm trying to make within this article. If your assumption were possible, then why stop at a 40% minimum wage increase? Why not make the minimum wage $1 million and eradicate poverty altogether? Because as we all know, you can't produce real wealth with more paper. Paper can only distribute wealth (or more accurately, claims on wealth), and even then, it has consequences that need to be taken into account.
    And lastly, in the case of the President's executive action to increase the minimum wage paid to federal contractors, the government may indeed end up being the root source of funding for this increase. It's highly likely these contractors will charge the government more for their services in the future, because their labor costs just jumped so severely. And where will the government get the money to pay these higher bills? From the taxpayers (or more likely, as Charles notes, it will fund the cost increases with debt borrowed on the taxpayer's backs)
    2) I may be misreading you here, but you seem to imply that I have a philosophical issue with spousal benefits as a part of SS. I don't.
    The issue I have is that the system is acting in a mathematically irresponsible fashion.
    In the example I cite, the ex-husband's SS payments were calculated based on his income over the years he worked. By its rules, the system determined he paid in enough wages to merit a SS retirement income stream of $X.
    Does his ex-wife have a claim on that? Maybe, maybe not. That's not my point. But if it's determined that she does, which the government indeed thinks, then I would expect her to receive a payment of $Y and the ex-husband's payment to shrink to ($X-$Y). That would keep the system solvent, in theory.
    But that's not the case. Instead, it's an ($X + $Y) situation. His payments stay the same, and she also gets a check.
    By writing the above post, I wanted to highlight the broken math behind the system. But more importantly, I wanted to expose its consequence-free thinking. It's the free money mindset that's the root evil here which pervades ALL government spending and borrowing (on both the politician and populace sides). 
    3) You (and several other commenters) appear to have interpreted my position as attacking the SS check recipient. Let me be clear: that's not my intent at all. As described above, I'm instead criticizing the system and the mindset driving it.
    My article above was based on a personal vignette; it was not suggesting the vignette was the entire scope of the problem.
    And I thought I gave a sufficient nod to the equal insanity of throwing fresh money & debt at the markets, banks, etc. But in case it wasn't enough: heck yes! we should be running our national fiscal books in ALL cases within our means (and fairly, too, while I'm making wishes here). I'll loudly applaud and actively participate in any discussions that delve into reforms for Wall Street, the military-industrial complex, corporate subsidies, etc. 
    Sadly, IMO, even under the best of circumstances should saner thinking suddenly break out across the country, before we can live within our means, we will need to live beneath them for a painfully long time in order to make up for the over-excesses we've been enjoying.

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  • Wed, Jan 29, 2014 - 6:39pm

    #23
    Hotrod

    Hotrod

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    Posts: 159

    Thanks for the clarification Adam

    Adam,

    One question I have that nobody seems to be able to answer is this? Is it possible to balance a budget permanently in a financial system that is paper based, backed by debt?  I don't think so.  Many people simply suggest cutting expenses and the problems will be solved.  But doesn't a paper money system need to continually expand to avoid serious recession or depression? Along with the resulting lack of trust in such system?

    My contention is that most of the corruption we see is a result of the easily predicted death throes of a paper based money system. Making moral judgments in a system lacking morality may be wasted time and thought. 

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  • Wed, Jan 29, 2014 - 7:27pm

    #24
    Doug

    Doug

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    Joined: Oct 01 2008

    Posts: 1357

    A word about gov't contracting

    Adam

    [quote]And lastly, in the case of the President's executive action to increase the minimum wage paid to federal contractors, the government may indeed be the root source of funding for this increase. It's highly likely these contractors will charge the government more for their services in the future, because their labor costs just jumped so severely. And where will the government get the money to pay these higher bills? From the taxpayers (or more likely, as Charles notes, it will fund the cost increases with debt borrowed on the taxpayer's backs)[/quote]

    I've seen some of this from the inside also.  Davis-Bacon is a nightmare of complexity and confusing standards.  I certainly understand the frustration of contractors trying to comply with the regulations.  But, having overseen compliance with those regulations for a segment of gov't contractors, I can say that I don't know of one contractor who went out of business or significantly reduced their workforce. 

    Second, again in that segment of contractors, they bid for the jobs.  They can't just willy-nilly jack up prices.  Most of those contracts were for construction or maintenance of gov't structures.  These kinds of contracts tend to have fairly fixed costs and require certain numbers of employees.

    Another observation.  I was doing this work back when Reagan was supposedly privatizing all kinds of gov't programs.  The myth is that somehow all that work was suddenly shifted to the private sector and were, ipso facto, less expensive.  On the contrary, it turned into a gravy train for contractors at the cost of huge increases in taxpayer dollars.

    I would love to see a full accounting of all those formerly gov't functions that were outsourced but are still paid for by the taxpayer.  Particularly, I would like to see how much more we pay for all those military and "security" functions that the military and spook agencies formerly performed, but are now performed by the Blackwaters of the world.

    So, in summary, we are paying more for a lot of those services at least partially because they are now performed by the private sector and when one contractor raises his prices, they all do; and those services are largely necessary for the rest of the private sector to perform their functions.  The contracting system is fairly transparent among the contractors and they know how to play the game.

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  • Wed, Jan 29, 2014 - 7:49pm

    #25
    liz cowen

    liz cowen

    Status Bronze Member (Offline)

    Joined: Oct 14 2009

    Posts: 132

    does anyone out there know

    does anyone out there know where the break even point is? where does it make sense to give up being middle class and settle for free entitlements. ? just wondering. Strategy change?
    the system is the system and we are all free to play the system any way we each choose.if i decide to play by the systems rules, that is my choice. i have no reason to be upset if everyone doesn’t see my wisdom!! or folly. your choice is your choice . no matter what i think.

    i see the system changing right in front of our eyes. and i am hearing a lot of comments that are bemoaning how unfair it is to change the system

    .the reality is — it’s changing. and we can chirp away or start adapting.

    Arthur says : I will stick to my guns. What we are watching is the destruction of the very idea of money.

    i agree but i would change that to say i see a desperate attempt for folks to say the money is real , the system is wrong. People are desperately trying to hang on to the idea of money…to their own detriment.

    the money is worthless so who cares about all the numbers and charts. Or the idea of money having real value.. we are just waiting for a disclosure event to shed light on this fact.

    i was taught to work hard at something i loved doing, save 10% every year for when i was old.

    a few years back i realize that that was no longer going to be a good strategy and i had been duped into giving my years of work for a sheet of paper with numbers on it. so in 2006 i started transferring my “paper wealth” into owning my own hard assets: land, shovels, fences etc.

    i live in michigan. we have lots of snow and it’s been extremely cold in the negative numbers. it’s currently 16 degree and as soon as i send this, i am taking a book out to my greenhouse , where it is 85 degrees, and i will sit down and enjoy reading for awhile. i bought and built my greenhouse with some of my worthless paper money before everyone has realized it’s worthless.

    last month my heating bill was $15 for the whole month, because i worked hard and chopped and stacked enough wood to heat my well insulated house.

    the numbers i care about are how many cords of firewood do i need for a cold winter like this. and how long does it take me to split it all. i stay one or two years ahead on my wood. better than paper!!

    a little hard work is actually good for this 60 yr old woman.

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  • Wed, Jan 29, 2014 - 8:40pm

    Reply to #19

    davefairtex

    Status Diamond Member (Online)

    Joined: Sep 03 2008

    Posts: 3107

    military spending vs social spending

    The data agrees with rhare:US Defense Spending: FDEFX / FGEXPND
    US Social Spending: social security (W823RC1) + medicaid (W729RC1) + medicare (W824RC1) + unemployment (W825RC1) + "all other benefits" (W827RC1) / FGEXPND

    I'm not trying to argue that military dollars are well (or even necessarily) spent.  He's just right on the numbers.
    But I certainly wouldn't use the argument that "the military employs a million people."  I'd much rather NOT tax people, let them use their own money, and NOT hire the million people in defense, and assume the private sector could find a better use for the money.  Strictly from the standpoint of a jobs program, dividing 1 million workers by the 777B spent by the miliary, we get a cost of $777k per worker.
    Expensive jobs program.  Even for the government.

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  • Wed, Jan 29, 2014 - 9:56pm

    #26

    rhare

    Status Silver Member (Offline)

    Joined: Mar 29 2009

    Posts: 397

    Miliary spending

    [quote=davefairtex]

    But I certainly wouldn't use the argument that "the military employs a million people."  I'd much rather NOT tax people, let them use their own money, and NOT hire the million people in defense, and assume the private sector could find a better use for the money.  Strictly from the standpoint of a jobs program, dividing 1 million workers by the 777B spent by the miliary, we get a cost of $777k per worker.

    Expensive jobs program.  Even for the government.

    [/quote]

    I guess I stated that kind of poorly.  What I was trying to point out was that when you look at the Military budget and say people are getting rich off it, it's misleading.  Only a very small percentage of that $777B is being siphoned off to make people wealthy.  A lot of it is going to  a lot of people's salaries and equipment that does have a "useful" purpose.  It's the "slash the military budget" and everything will be better that I think ignores other impacts, for example, what happens when millions are suddenly unemployed and have unusable skill sets.  For a while the problem will probably be much worse.  Don't get me wrong, I think it needs to be cut considerably (move to defense versus empire building).

    I also was way off on the number of people being supported by the military budget.  I was just counting the defense contracts (can't find the link to the number now, but it was in the million range), and left off the 2 million active and reserve troops that the budget also pays for.  So the cost/jobs is actually much less than the $777k/worker. A few billion dollar planes and other equipment takes up a lot of that amount so it's not all salaries anyway.

    The key takeaway is that the "Slash the military" and "Tax the rich" are not realistic approaches to our current issues.  They make good sound bites but do nothing as far as addressing the magnitude of our problems.  As Adam, Chris and others have pointed out, we have a very bad spending problem.  We are living well beyond our means and have for years.  Until that is accepted, which means giving up on the naive sound bites, we will not be working towards a solution.  Then on top of that so much of the wealth we perceive is an illusion based on a faulty monetary system.  If the money is not real, then the wealth is not either.

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  • Wed, Jan 29, 2014 - 10:34pm

    #27

    Arthur Robey

    Status Platinum Member (Offline)

    Joined: Feb 03 2010

    Posts: 1814

    In The Iron Grip of an Illusion.

    Nice clear graph Dave.

    I interpret it thus:

    Drones, no matter how repulsed you are by them, are a cost effective method of stirring up a hornets nest. They are an example of the Machine increasing "productivity" and decreasing costs while eliminating humans. (On both sides). Who would dream of sending in serried ranks of grunts in this day and age? Far too expensive! Consider the medical bills alone.

    And we haven't even begun to discuss the cost/benefit ratio of autonomous robots. Obviously large aircraft carriers just aren't in the cost/benefit ballpark.

    I have to concede that there are still cheap humans to be bought. Classic evolution should come into conflict with designer humans over that issue.

    My hope is that the illusion of money pops soon and we wake from its nightmare. Our culture must be go the way of the Bushido. In support of my view I regurgitate I, Pet Goat II.

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  • Wed, Jan 29, 2014 - 10:40pm

    Reply to #25

    Chris Martenson

    Status Platinum Member (Offline)

    Joined: Jun 07 2007

    Posts: 4501

    The Breakeven Point

    [quote=ferralhen]does anyone out there know where the break even point is? where does it make sense to give up being middle class and settle for free entitlements?[/quote]I have a friend who is on disability, but dreams of the day she might be off of it again.
    While the amount she is living on is tiny, once the various health insurance benefits are factored in that come along with a tiny income, we calculated that she'd have to earn $42,500 on a pre-tax basis to break even. 
    In a county where the median income is a fraction of that, that's a tall order.

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  • Wed, Jan 29, 2014 - 10:58pm

    #28
    Thetallestmanonearth

    Thetallestmanonearth

    Status Bronze Member (Offline)

    Joined: Feb 28 2013

    Posts: 307

    My new plan to fix the economy

    Forget cutting military spending etc. What if we just all at once ban petroleum powered farm equipment. Think of all the jobs that would open up. (Clearly I'm being sarcastic, but I think there is an some twisted wisdom in the idea).

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  • Thu, Jan 30, 2014 - 12:51am

    Reply to #28
    Hotrod

    Hotrod

    Status Member (Offline)

    Joined: Apr 20 2009

    Posts: 159

    New Plan

    Tallestmanonearth, 
    What you suggest may not be all that farfetched.  Modern agriculture uses  massive amounts of petroleum and credit, both of which could become a limiting factor very quickly. The Amish purposely limit technology in an attempt to keep many people of their community actively farming. Unfortunately, in our society, your standing is inversely proportional to how dirty your hands become while earning a living.  As well as your financial compensation. 

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  • Thu, Jan 30, 2014 - 1:25am

    #29

    KennethPollinger

    Status Silver Member (Offline)

    Joined: Sep 22 2010

    Posts: 616

    Undue Influence?

    From our prior list of top ten Billionaires:  Charles Koch,  36 Billion; and, David Koch, also 36 BILLION.  Let's see what they are up to now–could this possibly be true?  Surely Rachel is biased, no?  WEALTH MATTERS and can keep the Plutocratic Elites in control.  Focusing ONLY on income is quite deceptive, no?  Do these brothers consider sustainability, limits to growth, etc., important??  That's why I claim that we need Income-Wealth Social Class Charts–wake up America.

     

     

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  • Thu, Jan 30, 2014 - 3:14am

    #30

    westcoastjan

    Status Bronze Member (Offline)

    Joined: Jun 04 2012

    Posts: 177

    thoughts on the machinations of govt spending

    I have been following with interest the comments and thinking on this article. Where does the money come from is a really good question, and one that most people do not truly understand, from the perspective of how governments operate. My work has me connected to the provincial government budgetary process, and I can tell you that there are many senior executives with spending power who do not know how budgets actually work.

    The key that most people in general do not understand is that a Budget is actually legislated and passed into being, making it a law. This is the validation process, which is done by the different but similar legislative processes in various countries. To spend more than is legislated in a budget is to literally break the law…

    What has amazed me is that Obama has never brought in a budget (at least that is my understanding from the outside looking in).  So the reality is that in not doing so, he has been able to make these grand gestures, such as what he just did in raising the minimum wage for federal contractors, without fear of actually breaking the law. Had he brought down budgets each year, he would not have been able to do this (and many other things) legally speaking. So I have to ask has he been a sneaky SOB in purposefully not bringing down a budget knowing that he could do what he wanted and not be technically breaking the law?

    Should the first order of business then not be creating new legislation to make it mandatory to table an annual budget? It should be illegal for a President to just spend, spend, spend without legislative accountability. Maybe I am out to lunch and really do not understand the American political system, but to me, the basic first step is table a budget, and if you don't stick to it then the people will call you on it.

    Thoughts?

    Jan

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  • Thu, Jan 30, 2014 - 3:55am

    Reply to #25

    RNcarl

    Status Silver Member (Offline)

    Joined: May 13 2008

    Posts: 179

    As good a place as any

    [quote=cmartenson][quote=ferralhen]does anyone out there know where the break even point is? where does it make sense to give up being middle class and settle for free entitlements?[/quote]
    I have a friend who is on disability, but dreams of the day she might be off of it again.
    While the amount she is living on is tiny, once the various health insurance benefits are factored in that come along with a tiny income, we calculated that she'd have to earn $42,500 on a pre-tax basis to breakeven. 
    In a county where the median income is a fraction of that, that's a tall order.
    [/quote]
    Well,
    I have been away… from the site for a while. Seems, when the chips are down, I cough up the red pill (or is it the blue one, I can never remember) and scramble to support my family. This diatribe is germane to the topic even if it isn't clear now. Please keep reading.
    First, according to most of Kenneth's tables, I was/am about a 10%'er. That is until my employer of ten years decided to give me a "pink slip" as my tenth anniversary gift. I am employed in that evil medical device industry. My competitors became my friends and I quickly was employed by one of them and returned to my 10%-ish status. But, I am learning that the 10% status is very tenuous because of all of the rants about the ACA. I am in that age group that is too young to "retire." And retirement is out of the question anyway because like Adam's relative, my retirement account does not amount to much. I also have two teenagers who will be going off to college soon. (Yes, I believe in college.)
    Currently, in the state that I live in, if I were to go "back" into the hospital and take a job as a nurse, I would NOT be making more than that $42,500 figure Chris was talking about above. Why? I thought nurses made good money you say. They can, just not in the south. And, hospitals are NOT hiring full time. It is far easier to "cancel" your extra shifts (when you try and make 40 hours) if the census is low than try to either shift you around the hospital or make you use your vacation time to be paid full 40 hours… But I digress.
    Last summer, one acquaintance even asked me, "Why don't you go on disability and collect?" I replied that I am not disabled and how could I do that? She replied, "I don't know, but I know someone who just got their disability decision and are collecting and he doesn't seem disabled either!" And just think, on disability, getting assistance, SNAP and whatever else, my daughter would most likely get to attend UNC – Chapel Hill pretty much for FREE because of the state's College Promise program.
    What is wrong with this picture?!?!
    Pure and simple, our entire system is broken. But like any good machine, it will continue to work, limping along until there is a catastrophic FAILURE. – Perhaps.
    The question is, how long will it limp along? Chris is still in awe that it hasn't "broken" yet. He saw the warning signs back in the early 2000's. He saw the numbers perhaps, but a lot of us, "knew there was something wrong." We are now almost half way through the "Next twenty years will be nothing like the last twenty years" prediction that Chris made. In some ways he is right. In other ways, not much has changed.
    Bottom line, the rich will continue to get richer because they make the rules. And, until the system really "breaks" that will only change in that a new cast of characters will take their place. Ask the Pharaohs, the Caesars, and the kings of the western world, each new realm succeeding the last.  How long did Rome last? Folks, we have a long way to go even with bumping up against the edge of energy production. Will it get a lot harder before it gets easier? Probably.
    So, what's the answer? Live your life. Provide for your family as best and any way you can that has the most joy and causes you the least amount of grief. Because unless you are one of the 1%'ers you are just making ends meet.
    I choose to help others. I choose not to worry if someone getting SNAP "deserves" it or not. And even the military Industrial complex and all of it's "military welfare" to the soldiers families does not bother me any more. Why? Because we are all just trying to feed our families and live out our time on this rock in relative comfort.
    The "big reset" will come when it comes. Maybe sooner, maybe later – much later. It doesn't matter. If you are reading this, you are already more "prepared" than the other 99% who are not aware.
    ~ Peace 

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  • Thu, Jan 30, 2014 - 4:08am

    #31
    aggrivated

    aggrivated

    Status Bronze Member (Offline)

    Joined: Sep 22 2010

    Posts: 441

    Unraveling our ties to un-money

    On one hand, Un-money is debt based money.  It's 'value' is borrowed from the future.  It will primarily be repaid by future labor (ours and those after us ) and our use of stored energy either fossil or nuclear. This money will also  become of less value as either human labor becomes less important to the economy, or our stored energy supplies become unavailable. Either way it is based on the use of power in the future.

    On the other hand, Money is commodity based.  Gold and silver fit here and IMO so does bitcoin, since the mining must be done before the bitcoin can exist. Other commodities are also wealth and could be used as money. Money exists because energy has been expended to get it.  It's value is determined by it's desirability in the current economy.

    My take away from all this discussion on Uncle Sam's largesse out of empty pockets is to strive to live in ways that untangle our lives from the web of un-money.  To do this requires accumulating 'primary wealth' as defined in "Small is Beautiful' by Schumacher. As each is able, begin to take your energy and resources out of the system of un-money.  This can't be done quickly for most of us. Decompression must be gradual or it kills.

    The stock markets withdrawal symptoms from the FED's backing down Quantitative Easing is an example of the shock of weaning off un-money.  As we do so ourselves life for each of us will change. So before un-money becomes too worthless we need to be adequately untied from un-money. 

    Here are a few examples discussed on this site….Chop your own firewood. Use the sun's energy. Take your 'unemployed' time and invest it directly in your family, friends and community. Teach your children.  Save your excess in forms of wealth that are not dependent on un-money. Invest in local enterprise. Become your neighbor's social security.

    I'm not saying this is an easy transition. Chris pointed out the example of the friend on disability. Some won't be able to do it and survive.  Still, I think that it's worth trying to untangle ourselves from the web of un-money.  The community on this site is full of living examples on that journey.  Hopefully the demise of un-money's value will be gradual enough for lots of others to wake up to it's deception and join in the untangling journey.  But then, I'm not waiting around either.

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  • Thu, Jan 30, 2014 - 4:19am

    #32

    rcmacl

    Status Member (Offline)

    Joined: Jan 30 2012

    Posts: 11

    I still want to know why we are after the poor

    Adam you really seemed quite outraged about this:

    "And while I understand why she feels the need to take the money, I'm conflicted about my role in the affair. Because it's this very behavior of treating the government like a free money ATM (or a benevolent uncle with a bottomless wallet  use whatever analogy you like) that's ruining us."

    She "needs to take the money"? You make it sound like she is touching something dirty, and that if she weren't in such a piteous condition, she should turn it down.  She earned the money.  Let us look at it another way.  I imagine that whatever property you live on you now own free and clear, but I think it likely at one time that you had a mortgage and the you got a considerable subsidy from the United States government to support your home ownership.  Money that the government really wasn't in a position to afford.  Perhaps you should look at how much of a gift you got from the government during your years of home ownership, and see if you can return some of it to your aunt and then you wouldn't be in the position of abetting an old woman in getting an extra thousand or two a year from the Feds.

    I do understand your point, every single gosh darn one of us has at one time or another expected the government to step up to the plate without thinking about where the money is coming from, but this just does not excuse directing outrage towards programs that may mean the difference between whether someone gets one healthy hot meal a day or not.  Leave that to the right wing pundits who no doubt think your aunt is a welfare queen.  
     
    Yes the dollars add up as we try to find funding to feed the steadily increasing number of people in this country who no longer have food security.  And yes we can't solve all our problems by taxing the rich, but what the rich folks have adds up too.  If we liquidated the Koch brothers 72 billion is assets we could support the entire Social Security retirement and survivors benefits for almost two entire months, ALL 39 million of those folks.  And another issue no one else has addressed, that money will actually be spent in ways that benefit the economy as a whole.  Heck if we let the poor be the last big beneficiaries of the final gasps of our debt bubble, I suspect the world would be a better place.
     
    Yes I am speaking my mind, but I spend a lot of time here listening to folks who don't have the glimmerings of a clue of what it is like for an urban family of four to get by on 24,000 a year, which by the way means they aren't even in poverty according to our government.  Try eating on food stamps.  Mostly I just sigh and shake my head, but I really want to speak out when one of our respected guides on this website starts heading off in this direction.

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  • Thu, Jan 30, 2014 - 5:02am

    Reply to #32

    Adam Taggart

    Status Platinum Member (Offline)

    Joined: May 25 2009

    Posts: 2523

    You really aren't getting me

    rcmacl -Gosh, you're really not getting me. Did you read my further clarification below?
    I'm beginning to think that more words from me are not going to help you understand my position better.
    Let me reiterate a few bullets here. If that doesn't help, I guess we'll just have to agree to see this issue differently:

    First off, be careful with your assumptions. Both of the relative I mention in this story, and of me. For example, I rent. In fact, I'm over 40 and have never owned a house. When you make an ungrounded assumption about my background or motives, you open yourself up to the possibility of missing the mark widely. It's much better to stick to facts and data.
    I'm not clear at all that you do "understand my point." Because it has nothing to do with whether my relative deserves the money, morally. It's that our SS entitlement system (like most other government funded programs) has a mathematically broken model. And this is exacerbated by an irresponsible, consequence-free "free money forever" mentality that both the operators and beneficiaries embrace.
    And this line really confuses me: "this just does not excuse directing outrage towards programs that may mean the difference between whether someone gets one healthy hot meal a day or not". I see the situation completely differently. I think it's our responsibility to express outrage if a support program tens of million of people depend on is running itself into insolvency. If we don't, and the program is run into the ground, ending those hot meals for good are we not complicit in our negligence to act?
    If you want to rail at the obscene concentration of wealth happening in the U.S. as a result of our misguided and crony capitalist policies, have at it with my blessings. Chris, Ken and others have already contributed intelligently on that topic in previous comments on this thread. I'll just reiterate that even if we appropriate all the wealth of these modern-day robber barons, it won't fill the financial hole we're in. Not by a long shot. To your observation though, it might make us feel better for a few months.
    I sense it's important to you to hear that I and the PP community believe those living on government assistance should be treated with kindness, compassion, and understanding of the challenges they face on a daily basis. If my assumption is accurate (and please forgive me if it's not), then speaking for myself, let me clearly state I completely believe that. But I also think that, consistent with that belief, these folks deserve programs that are based on sound math, meaningful support, effective incentives for true self-betterment, and measurable impact. Simply handing out money until the doomed system breaks does not serve their real interests, nor those of the future generations that will have to bear the costs of the aftermath.

    I hope this helps.
    cheers,
    A

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  • Thu, Jan 30, 2014 - 5:10am

    Reply to #30
    earthwise

    earthwise

    Status Silver Member (Offline)

    Joined: Aug 10 2009

    Posts: 277

    Lawless lawmakers

    Jan,I'm pretty sure that a budget is mandated by law. This is just another example of the flagrant disregard of the law by our 'elected' representatives.

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  • Thu, Jan 30, 2014 - 11:14am

    #33

    SingleSpeak

    Status Bronze Member (Offline)

    Joined: Nov 30 2008

    Posts: 162

    Since Adam rents

    and therefore did not feel the need to respond to the the following jab from rcmaci, I will.

    Perhaps you should look at how much of a gift you got from the government during your years of home ownership, and see if you can return some of it……….

    The government allowing me to keep some of the money that I earned doesn't qualify as a gift IMO.

    If someone goes into your bank account and takes a few thousand dollars and then gives you back a few hundred, would you really consider it a gift just because he was stealing more from someone else?

    SS

     

     

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  • Thu, Jan 30, 2014 - 12:48pm

    Reply to #26

    davefairtex

    Status Diamond Member (Online)

    Joined: Sep 03 2008

    Posts: 3107

    slash the military - not a solution?

    Actually, if we were to tax the rich AND slash the military budget, it would come very close to solving our problems.  Whether that's a good idea or not, it would work.According to the latest data (from the treasury department's monthly MTS spreadsheet, smoothed with a 12 point moving average because the underlying series is so volatile) we're running a deficit of about 560 billion per year – annualized.  You can see from the chart below that the deficit reduction activities actually have reduced the deficit.  Wonder of wonders.
    http://www.fms.treas.gov/mts/mts.xls

    Given the military budget is 777 billion, less deficit of 561 billion, + "tax the rich" scheme that could conceivably be able to garner at least some money (say – taxing those hedge fund owners at ordinary income rates instead of LTGC, just for a starter – and the futures traders who also get a LTCG benefit too, for some unknown reason), I think rummaging underneath the seat cushions we could zero out the deficit in fairly short order.  It would be a drastic reduction in military spending, but – let's be clear, it would work.
    And if we combined this with "means testing" social security, and/or expanding SS taxes past the current income limit of – what is it, around 110k/year – why, bob's your uncle and we'd be all set.  Why not gradually raise the retirement age while we're at it.  Gore enough sacred cows, and what do you know, we really can fix our budget issues after all.
    And in terms of dealing with the dislocation with downsizing our military – most likely it is cheaper to do it now and retrain all those guys to do something peaceful, rather than borrowing all that money to keep the system going and pay them not only current salaries but pensions as well.
    Bottom line: regardless of whether or not you approve of the policy, the numbers say, it would work.

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  • Thu, Jan 30, 2014 - 2:15pm

    #34

    Arthur Robey

    Status Platinum Member (Offline)

    Joined: Feb 03 2010

    Posts: 1814

    Taxes, Just for Fun.

    A tax on every stock exchange transaction would also work wonders. The VIX would set new records. Even if there is no logic to it, it would be a hoot to see what happens to the HFT algos.

    I guess the Machine would not take too long to factor it in. It would be a neat test to see just how intelligent the machines have become. It would not surprise me if the algorithms are capable of learning.

    Everywhere I cast my mind I see the sign. This is a Great Transition. Stay healthy, get enough sleep and break out the popcorn.

    I see that the old guard have fallen off their perches at last and NASA and the military (especially the Navy and air force) are embracing LENR. They would be mad not to. The army still has not got over having to abandon swards.

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  • Thu, Jan 30, 2014 - 2:35pm

    Reply to #30

    westcoastjan

    Status Bronze Member (Offline)

    Joined: Jun 04 2012

    Posts: 177

    re those lawless lawbreakers...

    Earthwise, thanks for the response – I am certain as well that there are laws saying budgets must be tabled. Apparently laws have become like stop signs in that many people ignore them, driving right on through them because there are no consequences.I marvel at the fact that there is no outrage over the fiscal mismanagement of Obama (and others before him), yet a previous President was called on the carpet because he couldn't keep it in his pants. Meanwhile, people care enough to get a 100,000 signature petition to the Whitehouse calling for the deportation of Justin Bieber, but there is nary a peep calling for a petition to end to deficit spending or anything else that is "material". Therein lies the problem – what has become "material" for most, the entertainment and sports worlds, is so immaterial it makes me want to barf!
    But once again, I find myself very much alone in my thinking when amongst family, friends and colleagues. Most are too busy talking about the latest Superbowl commercials, or the goings on in the latest reality show, and they cannot be bothered to even think about anything that might pop their fantasy happiness. Sigh…
    Jan

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  • Thu, Jan 30, 2014 - 3:19pm

    Reply to #26
    Nate

    Nate

    Status Silver Member (Offline)

    Joined: May 05 2009

    Posts: 316

    haircuts dead ahead

    [quote=davefairtex]Actually, if we were to tax the rich AND slash the military budget, it would come very close to solving our problems. 
    [/quote]
    According to Laurence Kotlikoff, the federal governments unfunded liabilities are $220 trillion.  If we add state and local government unfunded liabilities into this figure we are near $300 trillion.  This works out to about $1 million per US citizen. 
    Taxing the rich AND slashing the military budget would come no where near solving our problems.

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  • Thu, Jan 30, 2014 - 4:24pm

    Reply to #32
    earthwise

    earthwise

    Status Silver Member (Offline)

    Joined: Aug 10 2009

    Posts: 277

    rcmacl wrote:I do understand

    [quote=rcmacl]I do understand your point, every single gosh darn one of us has at one time or another expected the government to step up to the plate without thinking about where the money is coming from, but this just does not excuse directing outrage towards programs that may mean the difference between whether someone gets one healthy hot meal a day or not.  Leave that to the right wing pundits who no doubt think your aunt is a welfare queen.  
    [/quote]
     
    Sorry Rcmacl, but your just plain wrong. This may be true in your world, but not in mine. I've never taken a single dime from any government program and the very few people I know that have, are evenly split between those who were entitled by way of lifetime contributions (Social Security) or were people ripping off the system. As a blue collar, middle class guy, all I want from my government is to be left alone. And, I think about where the money comes from all the time: every week when I see the taxes taken out of my paycheck. 
     
    The entitlement system as we know it was designed for fraud. I know that's a bold statement but I can tell you some anecdotes describing some "inside baseball" that would curl your hair; private admissions by high ranking congressman regarding the well known level of fraud. The "help the poor" mantra is just a facade.

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  • Thu, Jan 30, 2014 - 5:16pm

    Reply to #26

    Chris Martenson

    Status Platinum Member (Offline)

    Joined: Jun 07 2007

    Posts: 4501

    Budget Deficit Benefits From Monetization

    [quote=davefairtex]According to the latest data (from the treasury department's monthly MTS spreadsheet, smoothed with a 12 point moving average because the underlying series is so volatile) we're running a deficit of about 560 billion per year – annualized.  You can see from the chart below that the deficit reduction activities actually have reduced the deficit.  Wonder of wonders.
    [/quote]
    There's a bit of monetary 'sleight of hand' going on here.  
    The first component is the Fed printing money out of thin air, vacuuming up all the Treasury paper and then not charging the Treasury any interest on it. That cut the deficit by some $88 billion last fiscal year.
    The second component is slightly more complicated as it involves a third party, but the mechanism is the same.  In this case, the Fed prints money out of thin air and buys MBS paper with it, which drives up the value of said paper, which drives down the mortgage interest rate and cost of capital for Fannie Mae and Freddie Mac, which drives up their profitability, but, more importantly, allows them to reduce their bad debt allowances enabling them to book higher profits and return more to the U.S. Treasury.

    Payments to the Treasury from Fannie Mae and Freddie Mac were about $34 billion more last month than they were a year earlier, according to the report. Fannie Mae and Freddie Mac have taken $187.5 billion in U.S. aid since they were taken into conservatorship in 2008.
    They’ve returned $185.2 billion, which is counted as a return on the nearly 80 percent stakes the government holds, not as repayment.
    (Source

    Taken together, Fed printing has directly reduced the federal deficit by more than $250 billion, or roughly a third.
    We can say that "deficit reduction activities have worked,' but it would be just a tad more direct to say that when the Fed prints up money and hands it to the government, the government's apparent cash deficit shrinks.
    One gigantic problem with this is that it fails to provide any lessons or restraints to the D.C. crowd, not unlike failing to allow big banks to take losses and/or go to jail.  
    The Fed should win the all-time award for enabling behavior…they deserve it.

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  • Thu, Jan 30, 2014 - 5:24pm

    Reply to #26

    davefairtex

    Status Diamond Member (Online)

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    the unfunded liabilities issue

    Unfunded liabilities are a bugaboo that assumes we will continue driving 100 mph right into the brick wall.  What we can't afford, we won't pay for, end of story.  If we keep on trying to balance the budget as time goes on, we'll default on stuff one small step at a time, rather than all at once in a very messy way.Seriously, means-testing social security (I.e. not giving it to the rich – or the moderately well-off), raising the retirement age, and eliminating the social security tax cap fixes the whole problem.  That's seriously unpopular, of course, so it won't happen, but it would work.
    Medicare is its own beast of course, but if we were to adopt the (rationed) medical care system of any one of the other major nations of the world that provide medical care to their people for 50% of what we pay, that would solve that problem.  Yes some procedures and some drugs would no longer be provided, but that's just how it goes.  If you want the Cadillac, you have to pay for it.
    Did you know that even Thailand provides basic universal healthcare?  Thailand!
    Seriously.  Its all fixable.  It just requires goring a few sacred oxes.  To mix a metaphor.  And we have to stop ignoring the data and quoting figures that just don't add up.  Turns out, cutting defense spending AND taxing the rich really will balance the budget.
    And we're going to have to default on our crazy medical system, but that's probably a blessing for everyone other than Big Pharma and the hospital administrators making seven figure salaries.  Give me death panels and rationed universal care over our overpriced system that provides worse outcomes, expensive unnecessary procedures for profit, and lower overall life expectancies any day of the week.
    Just my opinion, of course.  Sorry about the soapbox.
     

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  • Thu, Jan 30, 2014 - 6:16pm

    #35

    rcmacl

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    Posts: 11

    Thank you for your clarifications

    Thank you Adam, I do appreciate your additional explanations.  I absolutely agree that a bankrupt system is of no use to the folks who need it.  I am sorry this format does not allow room for my more nuanced views on this matter.  Yes I did make the assumption that you have been a homeowner. And I certainly appreciate that you are not suggesting we should not care for those in need, and certainly I did not mean for a moment that you do not care about the circumstances of your aunt, obviously you do, or other persons in need.  My rant is more how on we focus on the many problems of our failed system.  I do understand that programs that benefit the poor should not be immune from this scrutiny, I just think the insolvency of this system could be better blamed on systemic and policy problems, now and in the past that primarily benefit major corporations.  I just am very sensitive to suggestions that benefits to the poor are part of the problem, although in a macro sense obviously they are, it is a subject that I like to address with great care.  Due to an unusual biography and unusual opportunities I have the gift to have as a close part of life people that are of the top 1% and of the lowest 5%.  I have family who are working poor and family who are on benefits, and I do see that those on benefits have a better life.  Frankly to address the question as when the middle class should give up for benefits, I would say based on very personal experience, that the breakover point is about is about $15,000 for an individual who has health insurance and much higher for someone who doesn't.  I also want to be clear that I have found no difference in the good and caring qualities of any of the people I know regardless of their circumstances.  The only exception might be that I truly find that the caring potential does go down when certain of them are spending more time listening to conservative talk radio, thus part of my sensitivity to poor bashing.

    As to the matter of whether or not a tax break is gift when it lets you keep money that you earned, I am sorry I do not have time to address it in more depth.  Put simply we do have a basic tax rate.  When we are allowed to keep money that we otherwise would pay, we are being given a benefit that others do not receive.  It comes out of the national balance sheet, just as a retirement payment to a social security recipient is a benefit that comes out of the national balance sheet.  Folks tend to see this kind of benefit more clearly when they see major corporations that pay almost no taxes, but the result is precisely the same.  Tax breaks are a government subsidy, they may be good they may be bad.  We provide huge support in this country for people to own their own homes. Is this something we should be doing, these are interesting policy questions, but it does not change the fact that a tax break is a financial benefit given to us by the government deficit.

     

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  • Thu, Jan 30, 2014 - 6:48pm

    #36

    darbikrash

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    It doesn’t take long before

    It doesn’t take long before the race to see who can quote the highest number for US debt starts in earnest. $80 trillion, no $120 trillion, no wait, it’s really $300 trillion. This parlor trick has been going on for far too long, whoever decided that a forecast must extend 60 – 70 years into the future- and then make hysterical claims about the enormous numbers?

    And of course, it goes without saying, the only response from “reasonable” proponents of sound money is to cut social programs. I wonder who and what is sponsoring this rhetoric?

    I’m pretty sure if I forecast my grocery bill over the next 70 years, I too would be broke.

    But RNCarl is right, we’ve been hearing this story for way too long. Maybe it had some credibility in 2008 just after the crash, but the dire, hysterical warnings of chronic overspending and impending financial collapse simply have not happened. Yet the narrative continues unabated and unswayed by observable facts.

    It seems to me regarding Social Security that most everyone agrees that if the annual cap of $106k were lifted on the taxable income threshold any and all deficits for the program would be eliminated insuring solvency for any credible future projection. And this (significant) component of the future deficit would then be retired from the tally. Yet not one word of this anywhere in this thread as a potential (and very simple) solution. (Edit- I now see davefairtex's comment)

    In a similar vein, I find it a little frustrating that the same tired old claims are being thrown about, that even if we were to tax every rich person in the country, we still would not resolve the issue. So let’s not try! Great logic.

    This group like data and numbers, so let’s look at some data and numbers and see if a different narrative emerges.

    I like reading the IRS documents for “Statistics of Income” for US Corporations. I find that there are some eye opening facts and figures buried within these voluminous documents. Let’s consider the most recent version I have for CY 2010. Link.

    Extracting some top level numbers to make my point, from pages 5-8:

    –        Total Assets claimed for tax purposes by US Corporations………..~$80 trillion.

    –        Total Income (receipts) for US Corporations in 2010…………………. $26.2 trillion

    I have some more numbers, but I want to stop here because when I first found these documents a few years ago, I was rather shocked to find this number for aggregate annual revenue. This folks, is a very big number, especially when you consider US GDP is ~ $15 trillion. The total is nearly double GDP. This should stop and give pause to those that would make the case that there simply isn’t enough money in the economy. The problem is that such pundits are not looking in the right place.

     

    Taxation and revenue in the US is divided into two generalized buckets, income of US Corporations, and income of everyone else (1040 etc.) The vast majority of US Corporations are subchapter S, or some other filing entity that pays tax not in the corporate bucket, but under the 1040 personal income bucket- as we shall see in more detail shortly. The rest of the firms in the US Corporations bucket are typically subchapter C, often (but not always) publicly traded entities.

     

    So, let’s find out how much tax US corporations paid on the aforementioned $26.2 trillion in 2010? But first, let’s make a point about this astoundingly large gross revenue number. If we consider our current national deficit to be ~ $15 trillion, it would take about 7 months of aggregate income for all US Corporations to zero out the entire national deficit. How many American families could zero out their entire debt burden, mortgage, credit cards, auto loans, etc., in 7 months total gross income? Not many.

     

    Back to the tax paid by US Corporations, on $26.2 trillion of total receipts. From the IRS document, page 6:

    –        Total Corporate Income tax paid, after credits, 2010………………………………………$223 billion

    Let’s do some arithmetic! $26.2 trillion in gross income, $223 billion of tax actually paid, let’s see, that’s less than 1% tax paid against gross receipts (.0085%)

     

    Unfortunately, we can’t really bank on this (yet) as it includes the pass through entities that pay tax through personal income tax filing (1040), as well as individual shareholders who pay tax on dividends and capital gains.  The number of these pass throughs is quite significant, again quoting from the IRS document “……..of the 5.8 million corporations filing tax returns for 2010, 4.1 million of these were pass through”

    Oh, so the numbers really don’t count- as these entities do not pay tax at the corporate level? Wrong. Here are the details.

     

    Of the massive 5.8 million corporate tax returns filed in 2010, only 1.7 million of these were taxable at the corporate (Federal) level. This means that only about 29% of the returns comprise the tax paid in the 1% number above, the other 71% pay tax at the personal level- and not represented in this document.

     

    But wait, let’s look beyond the sheer numbers, let’s look at the actual income this 29% of the returns comprises- it’s astonishing- this 29% of corporate tax returns represents $20.1 trillion in receipts, or about 77% of all corporate income. So the numbers are relevant.

     

    Based on this, we recalculate the average tax paid against total revenue- $20.1 trillion in receipts, $223 billion in tax= 1.1% Federal tax paid by US (Sub Chapter C) Corporations. Yes, I know businesses have deductions, cost of goods sold, etc., obviously this eats up the lion’s share of income, but if we look at the total profits claimed by all US Corporations is $1.4 trillion, or about 5% profit. I find this suspiciously low, this indicates, to me, the efficacy of the corporate deduction/avoidance scheme. Notably, for 2010 if you exclude the pass throughs, the pre-tax profits of US Corporations increased more than 80% from the previous year. 80%!

     

    Another interesting data point is that of the 5.8 million tax returns, only 2,772 of these returns (.04% of the total) account for a whopping 81% of total assets, and 51% of total receipts (They also paid 69% of the total tax received by the US government for corporations) But still, this is only 1.1% of total receipts.

     

    By contrast, individual (personal) rates for Federal income tax are on the order of up to 40% for income over $406k. I don’t know about anybody else, but I wish I had that 1.1% rate deal.

     

    Still wondering where all the money went?

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  • Thu, Jan 30, 2014 - 6:57pm

    Reply to #26
    Nate

    Nate

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    View from 30,000 feet

    [quote=davefairtex]Seriously, means-testing social security (I.e. not giving it to the rich – or the moderately well-off), raising the retirement age, and eliminating the social security tax cap fixes the whole problem. 
    [/quote]
    Dave,
    First, thanks for the civil post.  I have a lot of respect for you and the information you provide this site. And I agree with you on many of the issues you present. 
    Unfunded liability arguments require lots of assumptions and hand waving. Reduced medical care (and earlier death) for seniors or increased wars involving our youth could significantly alter the demographics rendering both of our argument's incorrect.  We do know that working longer will keep unemployment higher than normal and reducing benefits will reduce the tax base going forward.  I see a negative feedback loop here and deflation ahead WITHOUT governments cranking up the printing presses.
    Let's take a peek at the other 2 E's. Energy will become increasing scarce and more difficult to bring to market. My current pick for the biggest issue the next 5 years is water.  In California local farmers (my neighbors) have elected to plant 1/2 their acreage to provide adequate water for their crops. 
    If you increase the cost of energy and food, I see governments' receipts dropping quicker that they can shed their liabilities.  Until they are forced to.  The unknown is when the bug meets the windshield (JM).
    Nate
     

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  • Thu, Jan 30, 2014 - 9:00pm

    Reply to #36
    Doug

    Doug

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    Thanks Darbikrash

    You make some excellent points and thanks for wading through IRS documents.  If I ever need a sleeping pill, that will do it.  I have long thought that using those exponential numbers for unfunded liabilities was very misleading because, as you point out, a small change now can have colossal effects on the out year numbers.Just a couple typo type errors.
    [quote] our current national deficit to be ~ $15 trillion[/quote]
    The national debt is about $15T, the deficit is measured annually and has been running around a $1T/year.
    [quote]that’s less than 1% tax paid against gross receipts (.0085%)[/quote]
    You're right about the less than 1%, but it's actually .85%.
    Sorry for being a stickler.
    Doug

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  • Thu, Jan 30, 2014 - 9:10pm

    Reply to #26
    Doug

    Doug

    Status Platinum Member (Offline)

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    Thanks Dave

    I read and responded to Darbikrash's post before I read yours.  Excellent points.  One addition.  Those gov't run systems that the rest of the advanced world (plus Thailand) have include negotiating prices with the providers to much lower levels than we pay.Doug

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  • Thu, Jan 30, 2014 - 9:35pm

    Reply to #26

    davefairtex

    Status Diamond Member (Online)

    Joined: Sep 03 2008

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    shrinking deficit - why?

    So since I happen to have the data here, I figured I'd post yet another chart, this time instead of doing the math, I thought I'd show both the receipts and the outlays from the US treasury.  Again, I caution you all that these are modified by a 12-point moving average, which effectively turns them into a seasonally averaged number, but it also introduces a lag so any major changes that are occurring today won't dramatically affect the numbers for several months.(My charting package doesn't do seasonal averaging, unfortunately, so I'm stuck using moving averages which are less good because of this introduced lag)
    So what changed?  Receipts increased by a lot, and spending was actually reduced by a little.  As in, spending is actually lower than it used to be – as opposed to simply reducing the rate of increase.

     
    And just for fun, I included a chart of the data without the moving averages.  This is why the data is pretty useless for seeing trends without applying some kind of transformation to it that massages away the seasonal variation.  You can still kinda/sorta see the trends, but it is much harder.

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  • Fri, Jan 31, 2014 - 2:50am

    #37

    SweetDoug

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    How are We gong to pay for this? Simple…

    '

    '

    '

    UItimately, we won't be able to pay for this reckless spending.

    I hear you. I hear the angst. There are a lot of people who are caught in this dilemma. And the ones who are in it? They don't have a clue, like your relative.

    You and I do. I'm terrified of the future.

    We are 17 trillion, and hundred of trillions unfunded, in the hole.

    We. Are. Not. Getting. Out. Of. This.

    Simple as that.

    I said to friends in 2008, in 4 years we're going to be 15 Trillion in the hole. They laughed. They laughed harder when I said 20 Trillion in 2016.

    Nobody will be laughing in 2024 @ 28 Trillion. If rates don't skyrocket up to 4 or 5%…

    Robots will be taking over the economy by 2020. There will be a permanently under and unemployed underclass of 10-15% and growing, if were lucky. Current thought holds 50% of the jobs will be gone in 20 years.

    Let's hope I'm wrong.

    We both know this ends in (hyper?) inflation.

    All we can do is prepare. By something that you hope, if you have the money, will serve as a store of wealth, or growth of it.

    Otherwise…

    We're doomed.

    •∆•
    V-V

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  • Fri, Jan 31, 2014 - 6:10am

    Reply to #26

    davefairtex

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    nate's high level view

    After thinking about what you said, I have to revise my overall viewpoint.From a budgetary perspective, based on the numbers I see, moving things into balance is eminently doable in the relatively near term, if we can move beyond the talking points of both sides of the the puppet show participants.
    But if we look further out to what the future entitlement promises really mean, rather than focusing on the numbers themselves, the picture isn't quite so nice, and it all has to do with energy.  Entitlements and even the concept of retirement requires society to have a large enough surplus to support a bunch of people who aren't currently working for one reason or another.  And that societal surplus requires energy.
    Let's say in today's society, we have enough surplus production to allow half the population to simply not work.  One half supports the other – and the accounting of who gets what slice of surplus is handled through entitlement programs, social security, medicare, medicaid, as well as pension plans, IRAs, savings accounts, etc.  This accounting is society's way of dividing up the available treasure amongst the people – but the actual amount of treasure to divide up remains the same, regardless of the accounting system we've selected.
    Projecting forward, let's imagine that the society's energy budget dwindles to where our surplus production only allows 1/4 of the population to simply not work.  In some sense, regardless of how "the accounting bit" gets handled, a huge chunk of formerly not-working people will end up having their supply of gravy defaulted upon, simply because of a lack of resources to back it up.
    This huge chunk might well include a big group of people who were promised a pension and now don't get it, or people who had saved properly for retirement, or people who are genuinely disabled, and so on.  However with the overall surplus of society reduced by lower energy (or Peak Everything), the default must occur.  Somehow.
    To my mind, we can either engage in a process of deliberate, conscious default as time passes, trying to "balance the budget" the whole way down, or we can take the approach that since "everyone deserves everything they were promised" (or conversely, "cutting defense can't possibly close the gap" and/or "the rich don't have enough money") we decide that we cannot default on anything and/or make any sacrifice whatsoever, and so we run our society 100 mph into a brick wall.
    And that brings us back to Chris and his desire for an adult-style conversation about the future.

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  • Fri, Jan 31, 2014 - 10:56am

    Reply to #26

    thc0655

    Status Platinum Member (Offline)

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    Adult-style conversation

    I completely agree with your post davefairtex. We either make some hard choices now while we can, or we hit the brick wall going 100 mph. Unless human nature has suddenly changed, I guess we're going to have the 100 mph crash because that's what most of "we the people" insist upon. However, I've seen police and firefighters having adult-style conversations at the scene of major fires, riots and active shooter incidents, shouting over the background noise, trying to bring order to chaos. That usually works out pretty well considering the hand they're dealt, aside from the unavoidable death, injury and destruction. But that's because of training and experience leading to the best outcomes in very bad situations. When a whole society hits the wall, there's no one there to have those urgent, shouted "adult-style conversations" who has any experience or much training in handling such a thing. That's where the panic sets in and a perfectly civilized and rational country can CHOOSE to install a Hitler to lead them. Yikes! Brace for impact.

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  • Fri, Jan 31, 2014 - 3:01pm

    Reply to #36

    Chris Martenson

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    Some corrections and clarifications

    [quote=darbikrash]Extracting some top level numbers to make my point, from pages 5-8:
    –        Total Assets claimed for tax purposes by US Corporations………..~$80 trillion.
    –        Total Income (receipts) for US Corporations in 2010…………………. $26.2 trillion
    I have some more numbers, but I want to stop here because when I first found these documents a few years ago, I was rather shocked to find this number for aggregate annual revenue. This folks, is a very big number, especially when you consider US GDP is ~ $15 trillion. The total is nearly double GDP. This should stop and give pause to those that would make the case that there simply isn’t enough money in the economy. The problem is that such pundits are not looking in the right place.
    [/quote]
    You cannot compare the $26 trillion in corporate revenues with the $16 trillion in GDP.  It's mixing up stocks and flows.  The GDP is supposed to measure how much our economy produces.  It fails at that because it measures non-production such as the 'value' of free checking and the 'value' of not having to pay yourself rent if you own your own home, but that's a different story for a different day.
    To illustrate, suppose we have a simple economy where somebody grows (produces) a really nice standing rib roast.  Person A wants it and they pay $100 for it.  So far our economy has a GDP of $100 and revenues of $100.  But then person B wants it and buys it for $110.  And then person C buys it for $120.  And then person D for $130.
    Now our economy still has a GDP of $100 but has revenues of ($100 + $110 + $120 + $130) = $460.
    I hope that made sense.
    Because of this idea that one company's products are another company's input costs it does not make sense to compare total revenues to taxes.  Taxes are paid on net income, not revenues, for hopefully obvious reasons. 

    So, let’s find out how much tax US corporations paid on the aforementioned $26.2 trillion in 2010?  (…) Let’s do some arithmetic! $26.2 trillion in gross income, $223 billion of tax actually paid, let’s see, that’s less than 1% tax paid against gross receipts (.0085%)

    I totally agree that corporate taxation is far too low, and especially I deplore the lower rate of taxation on passive income (div/inc) over active income (working for a salary).  Seems to me that's exactly backwards.
    But I will vigorously debate that taxation should be based on revenues instead of net income.  If it were, that would destroy the entire practice of investing (which is deducted from income, usually on a depreciation schedule) which is the basis for improving a business.  
    [/quote]

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  • Fri, Jan 31, 2014 - 5:10pm

    #38

    darbikrash

    Status Gold Member (Offline)

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    Posts: 297

    Hi Chris- thanks for your

    Hi Chris- thanks for your comments. I totally agree that GDP is a poor metric, at least for measuring the subject matter discussed here, and I am making the point that total (corporate) revenue is a better measure of precisely what is going on.

    It is not that I am interested in comparing GDP and total corporate revenues, they are clearly not comparable, but the illustration does serve to highlight how much money there is in the “pot” that our economy actually generates, in cash. And based on this cash, how much (corporate) tax is really being paid.

    I am not suggesting that taxation should be determined solely by revenues, nor by the same token am I suggesting that corporations direct 7 months of their gross revenues to pay off the national debt. These examples are not meant in a literal sense- but they do serve to scale the problem. In particular, I think the very notion that our entire national debt can be paid (not that it ever would) with just 7 months of earnings from the aggregate of US corporations is simply shocking. 

     

    The ratio I presented of taxes paid (1.1%) against a total “pie” of over $20 trillion in annual gross receipts is meant to give pause to the conventional thinking that further taxation is futile and that America is “tapped out” from a perspective of taxation. Taxation on individuals- yes absolutely tapped out. Taxation on corporate income- by far the larger income stream- not even close. By comparison, IRS documents for 2010 CY show individual tax returns- (the other bucket of income class) with AGI of  ~ $8.1 trillion paying a total of almost $1 trillion in income tax for a nominal (Federal) tax ratio of 12.1%.

    I think this is rather a substantive point.

    I might also argue that most Americans are in fact taxed solely on revenue, according to the Brookings Institute, 2/3 of all Americans do not file itemized deductions for Federal tax returns, which means they essentially pay tax directly on their wage income. “Inputs” for gasoline for example, necessary to get to work, are not tax deductible for individuals, regardless of whether a long or short form is filed.

    I do not suggest that (corporate) taxation should be based on receipts, but I do use this ratio of 1.1% to suggest that the total reported net profits – at least of the 2,772 corporate returns that comprise the 51% of total receipts and 81% of the total assets, is grossly – and I mean grossly to the point of abject fraud- under reported.

    Another subject entirely is the billions of corporate revenue that are not reported at all, by the use of offshore shell companies and other avoidance strategies. These income numbers do not show up at all on the IRS documents.

    I cannot really see having a dialogue about not being able to afford Social Security and other public social safety net programs until this is rectified in some meaningful fashion. Cries that we can’t afford such programs, coupled with tabulations for future expenditures that purport to show looming bankruptcy are just not credible when the largest revenue stream is clearly getting away with murder from a taxation standpoint.

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  • Fri, Jan 31, 2014 - 9:47pm

    #39

    Grover

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    Fairness

    This is a great thread! So many good comments. Thankyou, one and all.

    Because of human nature being what it is, we're not going to be able to avoid hitting the wall. Politicians who advocate austerity won't get elected. People will only vote for austerity if that alternative appears to be the least painful right now. As long as there is a glimmer of hope, people will choose that path instead. It doesn't matter that the glimmering light at the end of the tunnel is from a train coming at us at breakneck speed. By the time we collectively recognize our plight, it will be too late.

    Promises were made when the future seemed limitless. The future doesn't seem as limitless now. When I was young, I balked at paying social security "taxes," but I assumed that others would pay for me when I needed it. As a result, I didn't fight it too hard.

    "Where ignorance is bliss, 'tis folly to be wise."

    If this truly is a predicament (as Chris defines the word,) there are no solutions – only outcomes. We should move beyond the "tax the rich … and everything will be okay" argument. At best, that will only kick the can down the road a bit more. It solves nothing. We may as well just tilt at windmills (or borrow money and pay others to tilt at windmills for us.)

    The system is unsustainable. Collapse is inevitable. If the system collapses soon enough (and hard enough,) there may be the opportunity to rebuild society. What parts of the current system should be kept? What parts should be scrapped?

    Insurance is only as sound as the insurer. Should the government get involved in the insurance business? I've "paid into" the social security system for 42 years. (I started young.) I still have more than a few years before I'm eligible to "withdraw entitlements." I don't expect to get anything out of it. Is it fair to the bag holders who didn't have the opportunity to vote for this law?

    It isn't just generational fairness that needs to be preserved. Was it right for the founding fathers to grant majority status to land-owning males only? Would you feel the same way if your gender and racial circumstances were different? It is important to have fairness and equal economic opportunity.

    Government needs taxes to exist. The higher taxes are, the more incentive there is to get around them. If taxes are low enough, it isn't worth getting around them. If we deem income taxes to be the most efficient way to collect taxes, then consider all income to be equal. It doesn't matter if it comes from wages, capital gains, or government entitlements. Consider it all as income. Exclude a set amount and then have a fixed percentage tax on any income above that level. Do away with all deductions. Is it fair for a renter to subsidize my mortgage costs?

    In Chris' example, I'd say the GDP is $130 rather than $100. The producer produced $100, while "A", "B", and "C" each contributed $10 to GDP. The producer also had a cost basis in this simplistic example. In darbikrash's defense, wage earners trade portions of their life in exchange of wages. They have many other expenses that are ignored by the tax code. Couldn't we all argue that our costs equal our wages? Income is taxed because it is easy to quantify. Government needs to get income from somewhere. The bigger it is, the more income it needs. What is the solution?

    Grover

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  • Fri, Jan 31, 2014 - 10:04pm

    #40
    CrisisMode

    CrisisMode

    Status Member (Offline)

    Joined: Dec 21 2011

    Posts: 18

    Timing

    There's a basic theme propounded by Chris and others writing similar blogs: Greer, Orlov, Kunstler, McPherson, Foss, Heinberg, C.H. Smith, Berman, et al.  Which is . . . in short form . . . that the entire structure of the global financial/corporate/government system has grossly bloated up beyond resemblance to any historical precedent, and its foundation is in the process of significant deterioration before our very eyes.

    One can argue the merits of various scenarios in how this all plays out – hyperinflation/hyperdeflation and fast collapse of the global financial structure, a slow, grinding decent of catabolic collapse, global climate change with catastrophic results in 10-100 years, major depletion of energy resources resulting in a massive decline of industrial civilization, and other options too numerous to mention here – either separately or in combination.

    The salient point however is that, whatever scenario(s) you personally subscribe to, the denouement is coming, and it will not be pretty. Take your pick on the degree of horrors that will obtain.

    However, that being said, in my mind, the $64,000 question always revolves around the famous phrase: “Timing is everything.”

    If, for instance, you are currently implementing a plan of personal preparation –  by paying down all debt, gradually reducing your resource consumption, moving from your current suburban house into a more sustainable homestead, implementing/improving/expanding your gardens and livestock, building up your skills education in many aspects of self-reliance, etc., etc. You have embarked on a project that will certainly take several years to complete.

    However, if August, 2014 brings not only the 100-year-anniversary of WWI, but also a massive crash of the world financial system, followed by a systemic breakdown of the global just-in-time distribution/transportation structure . . . well, you just may find yourself not-quite-ready for prime time. A much earlier start, or a significant acceleration of your plan, would have put you in a much better position.

    If, on the other hand, you are implementing the same plan and there is no sharp collapse along the way . . . just a gradual, steady, and significant erosion over time . . . you may well be privileged in later life to watch your grandchildren harvesting walnuts from the trees you planted 50 years previously, on your now mature permaculture homestead.

    Two different scenarios, with big differences between them. And obviously there are many, many other scenarios that can be imagined, with equally different results – based on timing.

    That’s the problem with “knowing” how this is all progressing. You may “know” that it’s going to all turn out pretty awful. But unless you have a really solid “feel” for the RATE at which it is progressing, your plans may either be a matter of “too little, too late”, or “weren’t we lucky we started seriously preparing when we did.”

    Timing IS everything.

     

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  • Sat, Feb 01, 2014 - 4:21pm

    #41
    twinbeech

    twinbeech

    Status Member (Offline)

    Joined: Nov 17 2008

    Posts: 1

    How can we afford this?

    Well, we could start by taxing the HFT trades. If the HFT traders threaten to leave the country, GOOD!

    Let them go somewhere else to front run trades. We would be better off without them since they provide zero benefits toward the common good and make a mockery of the market is a price setting mechanism.

    We could close the loopholes corporations use to avoid paying taxes. GE is a good example. They paid zero corporate tax in 2012. So fix the tax code.

    Strip away the huge farm subsidies that go to wealthy farmers. Stephen Fincher, a wealthy TN Congressman has received over 1.3 million is subsidies.

    Stop these insane wars and for God's sake quit making weapons for the armed forces that they don't even want. This is costing billions. 

    I have just skimmed the surface. We need to re-order our priorities.

     

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  • Sat, Feb 01, 2014 - 4:28pm

    #42
    CrisisMode

    CrisisMode

    Status Member (Offline)

    Joined: Dec 21 2011

    Posts: 18

    Timing

    There's a basic theme propounded by Chris and others writing similar blogs: Greer, Orlov, Kunstler, McPherson, Foss, Heinberg, C.H. Smith, Berman, et al.  Which is . . . in short form . . . that the entire structure of the global financial/corporate/government system has grossly bloated up beyond resemblance to any historical precedent, and its foundation is in the process of significant deterioration before our very eyes.

    One can argue the merits of various scenarios in how this all plays out – hyperinflation/hyperdeflation and fast collapse of the global financial structure, a slow, grinding decent of catabolic collapse, global climate change with catastrophic results in 10-100 years, major depletion of energy resources resulting in a massive decline of industrial civilization, and other options too numerous to mention here – either separately or in combination.

    The salient point however is that, whatever scenario(s) you personally subscribe to, the denouement is coming, and it will not be pretty. Take your pick on the degree of horrors that will obtain.

    However, that being said, in my mind, the $64,000 question always revolves around the famous phrase: “Timing is everything.”

    If, for instance, you are currently implementing a plan of personal preparation –  by paying down all debt, gradually reducing your resource consumption, moving from your current suburban house into a more sustainable homestead, implementing/improving/expanding your gardens and livestock, building up your skills education in many aspects of self-reliance, etc., etc. You have embarked on a project that will certainly take several years to complete.

    However, if August, 2014 brings not only the 100-year-anniversary of WWI, but also a massive crash of the world financial system, followed by a systemic breakdown of the global just-in-time distribution/transportation structure . . . well, you just may find yourself not-quite-ready for prime time. A much earlier start, or a significant acceleration of your plan, would have put you in a much better position.

    If, on the other hand, you are implementing the same plan and there is no sharp collapse along the way . . . just a gradual, steady, and significant erosion over time . . . you may well be privileged in later life to watch your grandchildren harvesting walnuts from the trees you planted 50 years previously, on your now mature permaculture homestead.

    Two different scenarios, with big differences between them. And obviously there are many, many other scenarios that can be imagined, with equally different results – based on timing.

    That’s the problem with “knowing” how this is all progressing. You may “know” that it’s going to all turn out pretty awful. But unless you have a really solid “feel” for the RATE at which it is progressing, your plans may either be a matter of “too little, too late”, or “weren’t we lucky we started seriously preparing when we did.”

    Timing IS everything.

     

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  • Sun, Feb 02, 2014 - 6:13pm

    #43
    mwn560

    mwn560

    Status Member (Offline)

    Joined: May 13 2011

    Posts: 1

    On SSI

    Growing up I always thought you worked till you were 65 and just collected SSI, life is a dream? This was never well explained. About 10 years ago I learned you cannot live on SSI. ( I did not know that). So about 10 years ago I started a 401 K. That got destroyed, However I'm still putting in. It did well the last few years. Why can't you use a trailing stop on a 401 K? I might need that money one day. The whole thing is stacked against you. Every time I have a few bucks in there I would like, at the very least the option to buy an anunity. I'm 58 so don't have a lot of time to make up what I will need. 

        I believe the solution would be to slowly, like over 30 years raise the age to 85, so people would at least know they got to plan for retirement. I would in the short term cut all the payments by 1/2 the rate of inflation till that time. Old people spend less money.

       Another important thing I did not know before is that, You get your SSI statement and it says you get X amount of money, then your wife gets one that says she gets X amount of money. It never tells you about the marriage penalty. When you both collect they don't pay what they said they would, I don't know how much less, but it is less.

     

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  • Mon, Feb 03, 2014 - 8:59pm

    Reply to #1
    Noizydan

    Noizydan

    Status Member (Offline)

    Joined: Feb 11 2013

    Posts: 1

    rcmacl wrote:... I guess I

    [quote=rcmacl]
    … I guess I feel like we should just save our outrage for the financial elites who get a rather amazing amount of welfare.
    [/quote]
     
    I think it's perfectly clear to most people where the money SHOULD come from. Little doubt it won't though. Sadly, I'm a cynic too.

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  • Fri, Feb 07, 2014 - 9:16am

    Reply to #26

    Mark_BC

    Status Bronze Member (Online)

    Joined: Apr 30 2010

    Posts: 278

    rhare wrote:The key takeaway

    [quote=rhare]
    The key takeaway is that the "Slash the military" and "Tax the rich" are not realistic approaches to our current issues. As Adam, Chris and others have pointed out, we have a very bad spending problem.  We are living well beyond our means and have for years.  Until that is accepted, which means giving up on the naive sound bites, we will not be working towards a solution.  Then on top of that so much of the wealth we perceive is an illusion based on a faulty monetary system.  If the money is not real, then the wealth is not either.
    [/quote]
    I disagree with the assertion that “tax the rich” won’t work, purportedly because the system is so far gone that even 100% taxes wouldn’t balance the budget. The problem with this argument is that while we all agree that dollars have now completely divorced themselves from any relevance to the “real world”, well you know what… I can’t help but notice that dollars can sure still buy lots of “real things”…
    So while the ultra-wealthy accumulate more and more (worthless, "illusory", we’re being told…) dollars by gaming the system, and while we’re being told by the anti-tax crowd that it’s pointless to tax the rich now because the system is mathematically beyond saving (so gosh darnit we might as well just let them keep their illusory dollars), those same ultra-wealthy are busily, happily, and actively converting those "worthless" dollars into tangible things (and saying, “thank you very much for your support, rhare!”); tangible things that the average person can’t own because he's just scraping by – things like farmland, shares in any remaining “productive” industry, etc.
    I have asked this before, but who owns America’s farmland? Monsanto and other behemoths like it? Who owns Monsanto? Average people? Or instead, a few extremely wealthy elites that aren’t even listed in that table presented by KennethPollinger? The ones in that table are merely the celebrity elites, the Donald Trumps of the financial world. The really wealthy people … we don't even know about.
    This is the same process that’s happened all throughout history: wealth accumulates in the hands of a few, and the masses become serfs who own nothing. There are only three ways out of this: 1) violent bloody revolution in which those privately owned assets are seized and redistributed, which leads to the ugliness of communism, 2) by growing the economy so the impoverished middle class can increase its wealth without impoverishing the elites (that’s what’s happened over the last couple hundred years), or 3) institute a wealth tax, which as far as I know has never happened because the wealthy overlords own the political system in that scenario and would never institute a wealth tax against themselves, so that brings us back to Scenario #1.
    The only kind of taxation system that will work in an economy that can no longer grow is a wealth tax. Income taxes will not work, because the “the flow” (income) is dropping in relation to “the stock” (wealth). Of course, “tax the rich” won’t save the current system because the current system is fundamentally flawed. No one could legitimately refute that. But a wealth tax would help to enable the 99% to actually outright own something tangible so that when the reset comes and a new monetary system is put in place they aren’t brought into that system as serfs with a net worth of zero (since I presume that mortgage debt will simply be repriced, so they won't even enjoy the benefit that hyperinflation might bring of actually owning their homes via debt devaluation).
    We do not have a “very bad spending problem”. Government spending has gone down by about 30% over the last 30 years, and on a per capita basis, even further. Spending money to keep people eating and alive who have no jobs because they got displaced by a robot is not "living beyond our means". We are nowhere near the point yet where resources are so scarce that people need to be starving. If people are starving then the problem is due to unfair wealth distribution. If the monetary system is purportedly falling apart because of the spending to keep people alive (which it isn't), then the problem is with the monetary and taxation systems themselves; not the spending.
    Do I expect to work less and live roughly the same standard of living that people did 40 years ago did? Until fossil fuel production dramatically declines (and it hasn't yet), then YES, you're damn right I do! That’s what technology is supposed to do! Make our lives easier. If there’s a robot doing something that a person used to do, then the economy can “produce” just as much “goods and services” afterwards as before robots took over, except it should now offer more free time to its workers while still maintaining their previous take-home pay. If the worker who gets displaced by a robot ends up impoverished because of it, it’s NOT because the system's dying because that worker’s now sucking from the teet of society; it’s NOT because the “wealth” of society has decreased in terms of how many “goods and services” are produced (because it hasn't); it’s because the wealth isn’t being distributed fairly! Because the wealthy aren’t paying their fair share; it's that simple.

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  • Fri, Feb 07, 2014 - 10:05am

    Reply to #26

    Mark_BC

    Status Bronze Member (Online)

    Joined: Apr 30 2010

    Posts: 278

    Mark_BC wrote:Do I expect to

    [quote=Mark_BC]
    Do I expect to work less and live roughly the same standard of living that people did 40 years ago did? Until fossil fuel production dramatically declines (and it hasn't yet), then YES, you're damn right I do! That’s what technology is supposed to do! Make our lives easier.
    [/quote]
    In reviewing my post, I realize that this comment may be interpreted wrongly by readers. I'm not suggesting that it's acceptable or sustainable for people to live the standard of living we have enjoyed over the last 40 years. I was instead making a comparison between two hypothetical economies. One, with no robots, and thus "production" is done by hand, which provides jobs for people. As a result it has full employment. The other economy has lost half its workforce due to robots, but the robots plus the remaining labour are still capable of producing the same amounts of total goods and services (assuming demand remains the same) that the first economy produces. There is no reason why both economies cannot have the same average standard of living for the average person. Economy #2 is our current economy, and the reason people are suffering today is because of the way the monetary and taxation systems are structured. What we need to be doing is two-fold: 1) reduce the work week which spreads out the remaining jobs to provide full employment. This in itself would just result in more impoverishment for the workers, so along with this we need to 2) institute a wealth tax, which will keep the wealth within the working class. Then the government won't be burdened with any more welfare programs than it was with economy #1.

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