26 Comments

1. 

   d.a.n on March 28, 2009 at 1:13 am

   Nation-wide debt has grown from 100% of GDP in year 1956 to 500% of GDP (as of MAR-2009).
   Total nation-wide debt is $67 Trillion.

   Then there is the non-federal debt too.
   Here’s a summary of all current (not future) U.S. (One-simple-idea.com/Abuses.htm#NationWideDebt) nation-wide debt:
   Private domestic financial sector debt=$15.8 Trillion;
   Household debt= $13.88 Trillion;
   Business debt=$10.16 Trillion;
   Federal government National Debt = $11.1 Trillion
   State and local government debt = $2.2 Trillion;
   Other private sector foreign debt = $1.8 Trillion;
   ______________________________________________________________
   Total nation-wide debt = $55 Trillion;

   Now consider the $11.6 Trillion Rescue Spending in late 2008 and early 2009 (as of 24-FEB-2009):
   (24-FEB-2009)====================== LIMIT =======CURRENT
   Total (amounts in Billions) ____________ $11,623.63 ___ $3,800.18
   Federal Reserve Total _______________ $7,565.63 ___ $1,478.88
   FDIC Total _____________________ $1,551.50 _____ $400.30
   Treasury Total ____________________ $2,206.50 ___ $1,621.00
   HUD Total ________________________ $300.00 _____ $300.00

   Now consider that the wealthiest 1% of Americans owns over 40% of all wealth.
   80% of all Americans own only 17% of all weatlh.
   20% of all Americans have negative net worth (i.e. debt).
   40% of all Americans (on average) have ZERO net worth.

   Here’s some other resources to check out:
   http://www.ShadowStats.com
   http://One-Simple-Idea.com/
   http://FOAVC.ORG
   http://VOIDnow.org

2. 

   d.a.n on March 31, 2009 at 5:51 am

   There is no money in the Social Security Trust. They spend the Social Security tax revenues and replace them with government treasury certificates (i.e. I.O.U.s). That’s why it makes no sense to break out the so-called surpluses from the total $11 Trillion National Debt.

   Yes, new money created by the Federal Reserve is not debt, but it is inflationary. That is why Federal Reserve spending is listed separately in the list above (the Rescue spending).

   Lastly, the tax system is regressive (meaning that most people in the middle income group are paying a higher percentage of their income to federal taxes, and this is verified by Warren Buffet. That’s how Warren Buffet paid 17.7% in total federal taxes on $46 Million in year 2006 , while his secretary paid 30% in total federal taxes on $60K of income. Even Warren Buffet testified before Congress that this is unfair. Remember, there are no Social Security and Medicare taxes on capital gains, which are taxes at 5%-to-15%. However, a wage earner’s income is first hit with a whopping 15.3% (2 x 7.65%) for Social Security and Medicare, and then they still have to pay federal income tax too. Also, to make it more regressive, income above 97,500 (for year 2007) is not subject to Social Security and Medicare taxes. Since the wealth earn much of their income via capital gains, it is no wonder they pay a lower total percentage of their income to federal taxes.

   That question I’d like to ask you is do you think it is OK for the wealthy to pay a smaller percentage of their total income to taxes than the less wealthy? That is, do you support a regressive tax system. Few realize it (excluding Warren Buffet), but the current tax system is regressive.

3. 

   Mike Beacom on March 31, 2009 at 4:56 pm

   That’s how Warren Buffet paid 17.7% in total federal taxes on $46 Million in year 2006 , while his secretary paid 30% in total federal taxes on $60K of income.

   Isn’t Buffet’s income mostly from investments though, or does he get 46 million as a salary? Investments should never be taxed at the same rate as wages.

   Also, according to my calculations, Buffet paid nearly 8 million dollars in taxes, while his secretary paid 18 thousand. If this issue is “fairness” and taxes go to fund government services, is it really fair for Buffet to fund the government at four hundred times the rate of his secretary? Do you think that Buffet consumes 400 times the amount of government resources as his secretary? They drive the same roads, have access to the same public schools and I can speak from experience, (I drive by Warren Buffets house every day) shop at the same grocery store. (its called Wohlners, and I’ve seen Buffet there several times myself shopping for his own groceries). Anyway, the point is, it’s a communist concept that each should pay according to their ability, rather than each should pay according to their consumption. Just because you have more doesn’t obligate you to give more, so lets just remove that from any arguments on taxation.

4. 

   Brian Karpuk on March 31, 2009 at 5:41 pm

   DAN, thank you again for your comments and your expanded explanation of your postion. A few questions/comments of my own.

   With respect to income tax progressivity/regressivity. My view mirrors Justice Stewarts definition of obscenity, I know fair taxes when I see them. Given the current needs of the country, do I think that raising taxes is okay? Yes. Do I think that the bulk of that increase should come from the wealthy? Yes. Do I get queasy when you start calculating top effective tax rates that approach 60%? Yes, ABSOLUTELY.

   Effective Federal Tax Rates Are Not Regressive

   This table provides the Total Effective Federal Tax Rates for 2005. This includes all federal taxes, not just income taxes.

   Lowest quintile	4.3 percent
   Second quintile	9.9 percent
   Middle quintile	14.2 percent
   Fourth quintile	17.4 percent
   Percentiles 81-90	20.3 percent
   Percentiles 91-95	22.4 percent
   Percentiles 96-99	25.7 percent
   Percentiles 99.0-99.5	29.7 percent
   Percentiles 99.5-99.9	31.2 percent
   Percentiles 99.9-99.99	32.1 percent
   Top 0.01 Percentile	31.5 percent

   Source

   Questions About Buffett

   Warren Buffett represents many of the choices which confront us. Choices which impact the fairness of the tax code:

   • Why is the SSI system currently structured to provide that Warren Buffett still receives a monthly SSI check? I believe that there should be means testing to receive SSI.
   • How much income do you want entrepreneurs to give up now or give up later?
   • How does the fact that Warren Buffett is giving away his entire fortune impact your argument that his effective tax rates are too low?

   These are questions which I have some thoughts on, but few real answers.

   Social Security

   With respect to Social Security. I’m 34 years old so I’m a part of that demographic which is going to have to “pay the piper” for the easy political choices which have occurred previous to me. That is why I like discussing these topics.

   I view the SSI deficit as $7.7 trillion. That is the combination of the Trust Fund and Unfunded Liabilities over the next 75 years. I prefer to view these numbers in combination because you are correct in basically asserting that the Trust Fund is an accounting gimmick.

   Sidenote: We are using different numbers and we may or may not be able to agree on the them. I’ll simply say that the source you referred me to provides “The short answer is that Social Security is already $12.8 trillion in debt” but then three paragraphs later provides “Remember, because Social Security is already $11.9 trillion in debt.” I can’t personally verify my numbers, but they are at least based upon a published paper by a Fellow at the Cato Institute and a Wharton school professor.

   They conclude that SSI is NPV $10.4 trillion in the hole to the infinite horizon. I prefer to use 75 years because that is one of the numbers which they provide and it is long enough to cover the expected life span of someone who isn’t born yet.

   It is fruitless to separate the Social Security Trust Fund from the unfunded Social Security obligations. Yes, debt held by the public is a legal liability that must be honored by the federal government while Social Security and Medicare are mere obligations of the government, amendable by act of Congress.

   Participants earn “fully insured” status after they contributed for 40 calendar quarters. Fully insured participants do not accrue a contractual right to specific amounts of benefits.

   Instead, they earn a non-contractual right to benefits that are payable according to the laws in effect at the time–laws that are subject to change by Congress. Thus, Social Security is a “defined benefit” plan where a retiree’s benefit is determined by a specific formula applied to his or her wage history. (More…)

   But while there is a legal difference between the obligations associated with the Trust Fund and the Unfunded Obligations, in practice there is little difference.

   In other words, we’re going to need to increase taxes or reduce benefits by NPV $7.7 trillion over the next 75 years if we’re going to satisfy all the social security benefits that are currently promised. Its mostly irrelevant how the government currently accounts for it.

5. 

   d.a.n on March 31, 2009 at 11:07 pm

   Many wealthy are paying a lower percentage than most American tax payers. What we need is more tax fairness. There is obviously something skewed when Warren Buffet paid 17.7% on $46 Million (in year 2006) in total federal taxes, while his secretary paid 30% in total federal taxes on a $60K salary. Source

   Total effective federal tax percentages will vary depending on the type of income, and that is a problem too. But the end result is that many (not all) wealthy with a lot of capital gains only taxed between 5%-to-15% in total federal taxes is less than the 15.3% for Social Security and Medicare taxes alone.

   Why should hard labor be taxed more, and also be subject to 15.3% for Social Security and Medicare taxes on gross income, while some capital gains are taxed as low as 5% and only as high as 15%? Now add the effects of the $102,000 exemption cap of Social Security taxes.

   Anyway, the Warren Buffet example is not an isolated incident. Much wealth is made via capital gains, but not by the poor and not nearly so much by the lower-to-middle class Americans who earn most of their income via wages that are subject to federal income tax, 12.4% Social Security taxes, 2.9% Medicare taxes.

   By the way, I’m not criticizing Warren Buffet. In fact, I’m praising Warren Buffet for being honest about the regressive nature of the current tax system. Therefore, Warren Buffet is proof positive that the current tax system is regressive under certain circumstances. Since many wealthy usually have a lot of income from capital gains, many wealthy naturally pay a lower effective federal tax rate on their gross income.

   Personally, I think an flat 17% only on all types of income above the poverty level should be enough to fund the federal government. 17% of GDP (about $13.86 Trillion in year 2007) would be almost enough to match total federal revenues ($2.4 Trillion in year 2007): $2.356 Trillion. If not, then the severely bloated federal government needs to cut some waste, redundancy, and pork-barrel spending.

   I think there is a glaring flaw in those numbers above. All wage income is subject to a 15.3% for Social Security (6.2% x 2) and Medicare (1.45% x 2). The poor have very little capital gains income, and as income levels increase, the amount of capital gains income usually increases. Since Social Security and Medicare are 15.3% of gross wages, how is the lowest 3 quintiles less than 15.3% ? Since Social Security and Medicare are 15.3% of gross wages, how is the 4th lowest quintile only 17.4% (meaning federal income tax were only 1.9%)? Even if you exclude half of the employer’s portion of Social Security and Medicare taxes (e.g. 7.65% = 15.3 / 2)? How is the lowest quintile less that 7.65% ? And how is the second lowest quintile only 9.9% (only 2.25% above the 7.65% for Social Security and Medicare taxes?

   ___________________
   Mike Beacom wrote:
   Investments should never be taxed at the same rate as wages.
   _______________________________

   Why should capital gains be taxed less that the guy’s wages digging ditches, or the waitress waiting tables, or the mechanic fixing vehicles, etc.? Especilly when the wealthy have a LOT more income from capital gains?

   ___________________
   Mike Beacom wrote:
   Also, according to my calculations, Buffet paid nearly 8 million dollars in taxes, while his secretary paid 18 thousand. If this issue is “fairness” and taxes go to fund government services, is it really fair for Buffet to fund the government at four hundred times the rate of his secretary? Do you think that Buffet consumes 400 times the amount of government resources as his secretary? They drive the same roads, have access to the same public schools and I can speak from experience, (I drive by Warren Buffets house every day) shop at the same grocery store. (its called Wohlners, and I’ve seen Buffet there several times myself shopping for his own groceries). Anyway, the point is, it’s a communist concept that each should pay according to their ability, rather than each should pay according to their consumption. Just because you have more doesn’t obligate you to give more, so lets just remove that from any arguments on taxation.
   ________________________________

   I’m not advocating a progressive or regressive tax system. I’m advocating a flat 17% tax on all types of income above the poverty level only. What is not fair about that? If Warren Buffet paid 17.7% in total federal taxes on $46 Million, when why isn’t 17% for everyone on all types fo income more fair.

   Most Americans polled prefer a flat rate percentage on all types of income above the poverty level, and elimination of all tax loopholes. That would save tens (perhaps hundreds) of billions per year by eliminating the massive complextity, record keeping (for many years past too), legal costs, etc. I’m just saying we should all pay less, and the same flat percentage on all types of income seems most fair (certainly more fair that the current tax systems).

6. 

   Mike Beacom on April 2, 2009 at 7:14 pm

   Wow, Dan, that’s quite a lot of typing there. With regard to the portion that relates to my comments…….

   First of all, I don’t agree with any type of income tax. I think the very principle of tying a tax rate to your income is wrong. I think we should have purely consumption based taxes. If you want to make that 17% tax in the form of sales tax, or gas tax, or whatever combination of consumption taxes, I don’t care, in fact, I would support an even higher rate. Just don’t try to take more money from me simply because I choose to earn more of it. I think income tax is fundamentally ridiculous. I recognize why they do it, but I don’t agree with it.

   “Why should capital gains be taxed less that the guy’s wages digging ditches, or the waitress waiting tables, or the mechanic fixing vehicles, etc.?”

   I can’t speak for everyone in this regard, but all my investments come from dollars that have already been taxed at a pretty high rate. I don’t appreciate them being taxed again simply because I did something smart with those dollars.

   “That depends on what you mean by more (more in total dollars or more in total percentage).”

   Why would you EVER talk about “more” in a percentage? We pay taxes in dollars. I can’t buy dinner with a percentage. I have to use dollars. Talking in percentages is just an attempt to hide the reality that one person is paying drastically higher taxes than another. The reality is, Warren Buffet pays a HUGE amount in taxes. According to the numbers you give, nearly EIGHT MILLION DOLLARS. I don’t care what the percentage is, he’s paying way more than his secretary.

   “Do you not believe an equal percentage is fair?”

   See my comments about consumption. I think using percentages is a deceptive way to take more from people who have more while saying you’re taking the same or less. Even if you take 17 percent from Buffet and his secretary, the reality is that you’re taking hundreds of times more from Buffet. That is NOT fair. I think FAIR has to do with the government services that are consumed. For example, if my kids are in private school, that portion of my property tax should be credited back to me. Is it fair that a do-nothing on welfare should get more from the government than they put in? That a hardworking taxpayer should get less? The idea of even using the word “fair” when taxes are not consumption based is preposterous to begin with.

   Why should someone who spent their lives working to better themselves, educating themselves for a high paying job, sacrificing family time and relationships, ignoring hobbies and personal interests, have to give hundreds of times more (in raw dollars) than someone who didn’t try in school, was only concerned with gratification of the moment or decided to become an alcoholic who can’t make a decent wage? Its as simple as the ant and the grasshopper. Why should the guy doing little to nothing get some of the guys money who works his ass off. Don’t kid yourself because that’s exatly what’s happening.

   People try to demonize the wealthy for being greedy or not paying their “share”. I think we should be thanking the wealthy because without them the government would go largely unfunded. You drive a road with no pot holes? Thank a doctor. You see a policeman doing a good job? Thank a lawyer.

   Basically, you think it’s OK for the government to take money from Buffet and give it to somebody else. Maybe it is, but I don’t think so. I don’t want any of Buffets money. And I don’t want the government to take mine and give it to someone who doesn’t use it wisely. I give money to charities who use money efficiently to help people. The governent is the most inefficient charity ever and they take my money by force.

   Now, that being said, I certainly like the idea of a flat percentage better than what we have now, as I agree with you that simplicity is worth a lot.

   More importantly than how they tax us though is how they spend it. We wouldn’t even have this conversation if it weren’t for the fact that the gov’t is incapable of being responsible stewards of our tax dollars. I’m confident no amount will ever be enough.

7. 

   Brian Karpuk on April 2, 2009 at 8:58 pm

   My responses are going to come in pieces.

   I understand that you have issues with some of the government statistics that I’m using. That said, although it makes for great sensationalist headlines can we please stop using the canard that Warren Buffett’s secretary pays 30% in federal taxes?

   As of 2006, the minimum earnings to fall into a particular percentile was as follows: Top 1%: $388,806
   Top 5%: $153,542
   Top 10%: $108,904
   Top 25%: $64,702
   Top 50%: $31,987

   The fourth quintile of income, which is what her $60,000 salary would fall into, paid 17.4 percent. So, either she has the worst tax accountant in Omaha or Buffett was using marginal income tax rates plus SSI tax. I’d guess it was the latter.

8. 

   Brian Karpuk on April 2, 2009 at 9:13 pm

   Since Social Security and Medicare are 15.3% of gross wages, how is the lowest 3 quintiles less than 15.3% ? …how is the 4th lowest quintile only 17.4% (meaning federal income tax were only 1.9%)? …how are the other subcategories of the highest quintile only 20.3%-to-31.5% ?

   Even if you exclude half of the employer’s portion of Social Security and Medicare taxes (e.g. 7.65% = 15.3 / 2), how is the lowest quintile less that 7.65%?

   I’m assuming, but am not sure, that the effective tax rate statistics which I provided do not include the employer’s portion of SSI and Medicare. Arguably, you are correct to assert that they should be included. If they were it would probably decrease the spread between the lowest and highest rates.

   That said, its very likely that the statistics in the lower quintiles are skewed by the EITC and other deductions. For tax year 2008, the EITC is up to $2,917 for one child and $4,824 for two. The EITC is fully phased out at $37,782.

   Example: Someone with two children and $15,399 in earnings (the level where phaseout begins) gets a refundable tax credit of $4,716. Even after paying SSI and Medicare, that person has a -24% tax rate.

   I understand that this is only certain people. It is however one example of how the statistics are skewed.

9. 

   d.a.n on April 2, 2009 at 10:06 pm

   We simply disagree about the fairest forms of taxation. I think we all (as most do) that the current tax system is ridiculously complex. That complexity is also at the root of a lot of tax evasion.

   I have a strong disdain for sales taxes because they are regressive (i.e. taxes as a percentage of income increase as income decreases). I don’t like progressive income taxes either, for the same reason I don’t like regressive income taxes (i.e. taxes as a percentage of income increases as income increases). I also don’t like labor income taxes being taxed 15.3% for Social Security and Medicare, and then gross income taxed at higher rates (up to 35%) than capital gains are taxed (5%-to-15%). I also have a disdain for taxing the hell out of certain things, like liquor, cigarettes, Big Macs, or other sin-type taxes. I absolutely despise sales taxes on food, medicine, and basic necessities.

   Thus, I think neutral (flat) income taxes are better than both of those regressive or progressive models, and most Americans polled agree.

   Theoretically, there is a way to have a NO-TAX system , and I’m not the only person to consider the possibility.

   The SOLUTION – Reform the Monetary System:

   The federal government controls the monetary system; creates the money it needs (interest free), and controls the money-supply.

   The federal government shall prohibit usury (interest) by government and member banks. Private banks are still free to lend money with interest, but usury will be less of a problem. If a lot of interest is bad (i.e. usury is immoral), how can a little interest be good? If inflation is bad, how is a little inflation good?

   This creates a stable money supply with the flexibility for small fluctuations. If inflation is too high, some money in circulation can be removed. If there is deflation, or the population increases, the government can create and spend some money. If they do a bad job of it, the voters know exactly who to hold accountable. Currently, the Federal Reserve is a quasi-government controlled / privately owned bank, and the voters have little (if any) control over it. Why would people borrow from a bank (with interest) when they can borrow from the government, interest free? Thus, there would be little (if any) usury. Usury, predatory lending, and other manifestations of unchecked greed and the other numerous negative side effects would be greatly reduced.

   However, that is such a huge leap, change, and different way of looking at economics, it has little (or no) chance.

   So we have an honest disagreement. That’s OK. All I can recommend to voters, regarding any tax system, is to look at the real effective tax as a percentage of income. I think most Americans will agree that any tax system should not hammer the poor or the middle class the hardest. Sales taxes hammer the poor the hardest (especially in states that tax food). But the largest income group is the middle class, and it is shrinking, and it has been paying larger percentages of their income to all federal taxes than many wealthy people. Whichever tax system is considered, it should be no more complex than necessary, should distribute the tax burden fairly, and should raise sufficient revenues. Otherwise, it won’t be respected by as many, and will lead to more tax evasion.

10. 

    Brian Karpuk on April 2, 2009 at 10:11 pm

    I think FAIR has to do with the government services that are consumed. For example, if my kids are in private school, that portion of my property tax should be credited back to me.

    I don’t think I agree with this Mike.

    Education is fundamental to the economy and the overall well-being of our society. As a society, we have every interest in providing those people that need it the proper level of education such that they are able to maximize the country’s overall welfare.

    I’m not talking rich/poor here (yet). I’m concerned with making sure that every smart kid has the opportunity and access to a ladder that he can use to go become the lawyer/dentist/rocket scientist necessary to make society’s gears move. I’m concerned with making sure that every not as smart kid has the opportunity and access to get the education necessary to function in society at whatever job he is geared to do.

    Fundamental to that vision is “opportunity and access.” Public education works and has worked because it is paid for by everybody. If you get a credit for paying for your child’s education, should the 65 year old get a credit because he doesn’t have anybody in school? I’m assuming you’re talking parochial school. Should the other members of your parish not give on Sundays because they don’t have children in the school? Should they get a property tax credit for their donations to the school?

    To see where I think your vision would take us, look at the higher education system. At some point long ago we decided that public higher education was not the same as secondary. Society said that we’re not funding the whole thing, you’re going to have to pay for some portion of it yourself. I don’t disagree with that sentiment in general.

    But costs have gone up so much that I’m not really sure that we can expect a single person to pay for their education alone. How many qualified candidates, candidates that would benefit society if they had more education, are we leaving out.

    I don’t have an answer. Its just a concern.

11. 

    Mike Beacom on April 2, 2009 at 10:42 pm

    “If you get a credit for paying for your child’s education, should the 65 year old get a credit because he doesn’t have anybody in school?”

    No. I agree with what you’re saying about what’s best for society. I agree we should all share the burden of educating the nations children. The point is that if my tax dollars are TRULY going to educate children wouldn’t it be the same net outcome if MY dollars went to educate MY children? It’s not about whether or not I pay to educate children, since while I have kids in private school, I AM contributing to the nations educational collective, it’s a matter of choice. Either way my money goes to offer what you just said we as a nation need.

    Once my kids our out of school, then I would be obligated to continue to pay for the general population. Likewise if the 65 year old has no children in school, they should be helping pay for SOME children. Basically, we should all shoulder the responsibility of educating the nations children, but for the limited time we have our own children, we should be able to offer that expense up as meeting that social responsibility. Does that make more sense?

    “Should the other members of your parish not give on Sundays because they don’t have children in the school?”

    I’m guessing those parishners will pay less. I’m fine with that.

    The way my local parish does it, actually is pretty good. Instead of like, say, Blessed Sacrament which might have a tuition of $4500 per year (non-tax deductible), my parish has a much lower tuition with a “required” donation level that IS tax deductible. You end up paying the same, but this way you get some tax benefit. I’m pretty satisfied with that as far as it goes. Even though I disagree with it, I’m content to pay for other kids to get educated for the reasons you mention even while they don’t pay for mine.

    “Should they get a property tax credit for their donations to the school?”

    That idea has merit, I’ll have to think about it.

12. 

    Brian Karpuk on April 2, 2009 at 11:23 pm

    Wow, the required donation. Pretty sneaky. I like it.

    I see your argument that your contributing to the collective educational hive and I’m not totally opposed to it. I think that Iowa might have some sort of tax break for that. Or at least they did for a year or two recently.

13. 

    Brian Karpuk on April 3, 2009 at 5:26 pm

    Mr. Obama’s characterizations of his budget unfortunately fall into this pattern. He claims to reduce the deficit by half, to shave $2 trillion off the debt (the cumulative deficit over his 10-year budget horizon), and not to raise taxes on anyone making less than $250,000 a year. While in a Clintonian sense correct (depends on what the definition of “is” is), it is far more accurate to describe Mr. Obama’s budget as almost tripling the deficit. It adds $6.5 trillion to the national debt, and leaves future U.S. taxpayers (many of whom will make far less than $250,000) with the tab. And all this before dealing with the looming Medicare and Social Security cost explosion.
    (More…)

14. 

    Mike Beacom on April 6, 2009 at 4:20 am

    The details in that WSJ article are astonishing.

15. 

    d.a.n on April 6, 2009 at 7:01 am

    QUESTION: Do smokers (on average) increase Medicare costs?
    Or do smokers save Medicare by dying earlier.
    Smokers live 1.9-to-3.9 years less (on average).
    Men live (on average) to age 75.
    Women live (on average) to age 80.
    Medicare eligibility age is 65.
    I’ve see conflicting studies on this, but medical costs were much less 10 years ago.

    P.S. Regarding the nation-wide debt and federal debt, have you seen this web-site?
    http://mwhodges.home.att.net/nat-debt/debt-nat.htm

16. 

    Mike Beacom on April 6, 2009 at 8:18 pm

    Dan,

    Great question. I guess we need to know the additional average annual costs due to smoking and if they total more than the savings due to 3 years less of paying.

    My guess is that smoking is a net expense, even without factoring in the increased medical costs for children of smokers who are many times more likely to have asthma, sinus infections, and myriad other maladies.

17. 

    Mike Beacom on April 6, 2009 at 8:28 pm

    Also Dan, with regard to the link you included, that site is nearly unreadable, even after you consider the 10 years of website design you have to timewarp/destroy to get there. I’ve found sites that look like that to be somewhat suspect. If one can’t be bothered to unclick the “center justify” button, are they really going to be bothered with getting facts straight? Somebody help that guy with some formatting, please.

    Also, I have a hard time taking “facts” seriously on a webpage that uses this animated gif. 🙂

    http://mwhodges.home.att.net/nat-debt/doggif.gif

    [img]http://mwhodges.home.att.net/nat-debt/doggif.gif[/img]

18. 

    d.a.n on April 6, 2009 at 9:06 pm

    I’m not gonna try to defend the animated gif.

    However, I wouldn’t be too quick to dismiss the information due to style and poor web-page design.

    Do you see anything here that is incorrect?
    http://One-Simple-Idea.com/TotalNationWideDebt20090101.htm

19. 

    Brian Karpuk on April 6, 2009 at 9:39 pm

    A few incomplete thoughts:

    I think you have to differentiate between smokers that are currently in the workforce and smokers who are not. A while back I read/heard a defense of “expensive” healthcare treatments which postulated that spending a large amount of money on a procedure, e.g. a quadruple bypass for a 40 year-old, is cost effective because the persons life is then extended from 40 to, let’s say, 60 years. Provided that the guy spends the next 10-20 years working, his continued payment of health insurance premiums ends up reducing the overall burden on the system.

    In other words, the longer that people pay for health insurance the less of a burden they are if they end up being one of those people that consumes lots of healthcare.

    Second, I tend to think that life span doesn’t correlate perfectly with burden to the system at any given point in time. A few articles ago I tried to provide a breakdown of Health Care Spending by Age Group. On average, the annual numbers were:

    55 to 64 $7,703
    65 to 74 $21,116
    75 and over $20,965

    I suspect that these numbers are really skewed in the top two age groups. There are probably a lot of 65-74 year-olds that don’t spend any more annually than their younger counterparts. But at the same time there are lots of people in the last few years of their life who are spending tens of thousands a year.

    I think we’re all going to experience those “High-cost Last Few Years.” Maybe smokers are a little more expensive in those years, I don’t know. But my guess is that much of the costs associated with smokers occur in the years prior to those High-cost Last Few Years.

    Third, I think where you may really see the savings with smokers is with Social Security, not Medicare. (I feel the same with the obesity “epidemic.” )

20. 

    Brian Karpuk on April 6, 2009 at 9:48 pm

    DAN, I’ll try and work up a short, coherent response to your position. In the mean time I’ll answer your question with a question: Do you see anything with this statement that is incorrect?

    Microsoft Corporation owed approximately $31.4 billion to creditors as of December 31, 2008.

21. 

    Brian Karpuk on April 6, 2009 at 10:13 pm

    Obviously, my previous response should have provided you with the gist of why I have concerns about your data. Is your data inaccurate? Mostly no. Is your data skewed to fit your viewpoint? Yes.

    Business Sector Debt

22. 

    d.a.n on April 7, 2009 at 12:05 am

    There’s no doubt that the U.S. has assets.
    The wealthiest 1% owns 40% of all wealth.
    80% of Americans own only 17% of all wealth.
    That gap has never been larger since the Great Depression.

    MSFT is cash rich, unlike most corporations.

    The nation’s net assets (well over one hundred(s) of trillion dollars) are significantly larger than the nation’s total nation-wide debt of about $70 Trillion (which includes $12.8 Trillion borrowed and spent from Social Security).

    Again, there’s no doubt about assets existing too.
    I was only trying to look at current debt only (and not future debt and liabilities either). That is, the future debt and liabilities of Social Security and Medicare could be $60+ Trillion for the next several decades, but that’s future debt.

    Anyway, what I’m trying to establish is whether the total current debt is accurate ($57 Trillion excluding the $12.8 Trillion borrowed from Social Security/Medicare surpluses, leaving them pay-as-you-go, with a 78 Million baby boomer bubble approaching; $70 Trillion including that $12.8 Trillion borrowed from Social Security/Medicare).
    I choose to ignore that so-called $7.5 Social Security/Medicare surpluses, since those are only non-negotiable/non-marketable I.O.U.s. (but fortunately, no interest due either on that $12.8 Trillion debt).

    But, while we’re talking about net worth, what is the nation’s net worth (federal and non-federal)? I’ve seen estimates well over $100 Trillion, and that sounds low to me, since it seems to me that all land, buildings, corporations (and via stocks) mines, natural resources, real estate, etc., would total more than $100 Trillion (about $323K per-capita; but 40% of that wealth belonging to the wealthiest 1%).

    Thanks for the info on the smokers/non-smokers medical costs.
    I think Medicare costs may have been less for smokers at one time due to earlier death.
    But I doubt it now, since medical costs are now much higer, longevity for both smokers and non-smokers has increased, smokers only live 1.9-to-3.9 years less (on average), the eligibility age is still 65, males live to an average age of 75, women live to an average age of 80, and Medicare coverage and benefits have increased to include medications and prescriptions too.

    At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , . . . , at least until that finally becomes too painful).

23. 

    Brian Karpuk on April 7, 2009 at 1:00 am

    But even much more modest progress–extending healthy middle age from 60 to, say, 80–would permit significant shifts in retirement ages and allow for a longevity dividend that could go a long way toward preventing the looming pension meltdown. Greater progress might make the problem go away entirely. So perhaps it would make sense to steer some of the federal money currently going to research on treating the diseases of old age–an approach that leads to older, but frailer, people who are a drain on public resources and whose quality of life is iffy–to research on slowing or reversing the damage that aging does, leading to healthier old people who can work (and pay taxes) longer, while feeling better and enjoying life more. (More…)

24. 

    Brian Karpuk on April 7, 2009 at 1:03 am

    Dan, a couple of times you have referred to “$12.8 Trillion borrowed and spent from Social Security.” I meant to ask you about it before but forgot. Where does this number come from? What is it?

25. 

    d.a.n on April 7, 2009 at 1:28 am

    The $12.8 Trillion figure comes from the CATO Institute.

    source: http://www.socialsecurity.org/reformandyou/faqs.html#2

    Some people speak of trust funds consisting of treasury bonds, but those non-negotiable/non-marketable I.O.U.s (of about $7.58 Trillion).

    source: http://zfacts.com/p/461.html

    Therefore, the real total federal debt consists of $11.1 Trillion National Debt, and the $12.8 Trillion borrowed and spent from Social Security (totalling $23.8 Trillion of total federal debt).

    Still, excluding the $12.8 Trillion borrowed from Social Security, the current $11.1 Trillion National Debt is 65% higher per-capita ($35,807) than the previous record high National Debt per-capita ($21,719 in 2008 dollars) in year 1945 after World War II, and 664% higher than the National Debt per-capita ($5,396 in 2008 dollars) in year 1941 (near the end of the Great Depression).

    If the $12.8 Trillion borrowed from Social Security is included, the debt per-capita and as a percentage of GDP is even more dismal today.

    The point is, this nation has a very serious debt problem.
    Not merely a credit problem.
    And that debt is growing fast.
    If the debt is untenable, how will growing it larger help?

    http://One-Simple-Idea.com/DebtUntenable1.htm

26. 

    Brian Karpuk on April 7, 2009 at 7:04 pm

    Dan, I believe that you are misreading this data. I’ve put my best attempt at an explanation here. I think that the CATO Institute site is the source of the problem. There are not $12.8 billion in borrowings from Social Security. Its only about $2.4 billion and those borrowings are included in the $11 trillion national debt.

    I’m going to close this thread and clean it up. Its gotten too long. Please feel free to continue the conversation on the other post.