Government

Taxes you say? No problem 🤦🏻‍♂️ But where the heck is this all headed?

The United States is currently running an annual deficit of about one trillion dollars. The accumulated debt of the US is almost twenty-three trillion dollars on which we spend about $373 billion in interest.

In 2019 the combined earnings of all S&P 500 companies, America’s largest, is estimated to be $1.4 trillion.

US billionaires are estimated to have a total net worth of about $3 trillion dollars.

All that means that this year company earnings could pay our current deficit spending with just $400 billion left.

It also means that if we confiscated the 100% of the wealth of all US billionaires it would cover our current rate of deficit spending for about three years.

To cover our overspending for a few years, we would have to destroy our economy, the stock market and all the people who directly or indirectly depend on it … that’s you by the way.

And after three years or so we would be much worse off and our debt, deficit and unfunded liabilities would remain.

We have many new promises being made and still no resolution to making Social security sustainable. Tremendous debt and we still don’t adequately fund infrastructure.

We are living under an umbrella of fantasy. Our taxes are not sufficient to pay for what we have let alone what we are are told we should want. Even the tax the other guy strategy is insufficient.

Into this caldron we have calls for more spending of various sorts. Forgive student loan debt, pay teachers a minimum of $60,000, free tuition, M4A with generous benefits beyond that of other countries. $1,000 to each newborn to age eighteen, guaranteed minimum income, government paid child care, retroactively reinstate pension cuts in bankrupt union plans and I’ve probably missed a few.

But don’t just blame the politicians, their supporters want all this good stuff too. Just this morning I heard of a survey that found 53% of Americans want government to help with home down payments.

Sen Sanders likes to say we are richest country in the world, there is no reason we can’t afford …

Apparently we can’t afford the promises already made without using a very big credit card. Do Americans understand where government gets its money?

What seems to be missing from the rhetoric is that if you want to emulate other countries with extensive social programs, you must also accept their taxing strategies. Strategies that apply to all citizens, not just the “wealthy.”

We could start small copying other countries. Perhaps a 20% value added tax, raise gasoline to $7.50 a gallon and a 50% car purchase fee for gas engines. Then we could raise payroll taxes for pensions and health care to 12% of pay.

See, it’s fun doing what other countries with lots of free stuff do.

It’s time to stop and ask, where is all this unrealistic promising headed?

5 replies »

  1. Mik:

    To answer your second question – “are we headed for a meltdown and/or reset” – I have to say I don’t know. I’m not one to claim I know the future with any degree of certainty.

    I can say, I expect this sort of thing (Fed QE actions) to continue. They have to. When Treasury is placing increasing demands for Cash on the U.S. economic and financial systems, something has to “limit out” – unless the Fed intervenes and just prints the cash, as they’ve just stated they will do.

    And the Fed has the pre-existing statutory right to do so. I’m just not at all convinced it’s very clever of the Fed TO do so. In all respects, it’s the functional equivalent of MMT – with ALL of the similar detrimental implications and effects, as far as I can tell.

    I’ll just state again that I’m getting very worried. But I don’t know how this will all play out.

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    • Actually, a valid question, Mik – even if you meant it to be somewhat “tongue-in-cheek” and/or sarcastic. Until recently, there haven’t been readily detectable serious consequences.
      That changed in the middle of September.

      Something unique happened beginning on the week of the 16th of September – a “cascade” of related (and mostly predicable) events came up that quickly drove short-term credit markets to charge even overnight lending rates at near 10%.

      The two primary components of the “cascade” were: 1. Quarterly Tax payments due September 16th (Monday), and 2. Large additional Cash payments to Treasury to pay for Bills and Bonds auctioned the previous week. An hypothesized third component was that Saudi Arabia withdrew a substantial amount of deposits in the U.S. financial system to address the oil field bombing that occurred during the weekend.

      The combination of these two (three) Cash demands (Treasury demands Cash for both Tax and Bill/Bond payments) effectively drained Cash from the entire financial system, such that the Federal Reserve had to “step in” to the money markets to provide in excess of $270 Billion in low-interest short-term lending (money creation). And that was a great big nasty surprise for everyone. The Fed has to “step in” with money creation just to cover well known and anticipated cash withdrawals from the U.S. financial system? Really?

      I don’t expect that incident to be the last one of its kind. Nor does the Fed, evidently. They came up with an announcement that they were going to “reverse” their prior stance of selling down their Treasury Debt holdings into the markets, and instead will be again “buying” Treasury debt from the markets (supplying cash) – to the tune of about $60 Billion per month. A “QE-4-Ever”, as it were.

      Point being, if the U.S. financial and money markets are “straining” to supply the Cash Treasury regularly demands, both in Taxes AND Debt funding, the “Serious Consequences” you allude to are already in place. And you can bet, I’m very worried.

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      • Thank you for recognizing and pointing this out regarding our deficit…are we headed for a meltdown and/or reset ??

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  2. Mr. Quinn, you are exactly, precisely “on point” with your allusion to the Federal Government’s “very big credit card”!!!

    To a bewilderingly increasing degree, all manner of proposals and promises are being and have been made based on the adherents’ assumption of increasing access to the Federal Government’s “Line of Credit”. That has to stop.

    We are at the beginnings of the “campaign silly season”. Two years ago, about this time, a physician knocked on my door, applying for a job as my state representative. I asked her that same question I ask all such applicants, “What are you going to do about the cost of health care?” Her answer was that she intended to “fight for restoration of Medicaid funding in the State”. So I asked her, “Who is going to pay for that?” To which she responded, “Oh, State taxpayers won’t see an increase in taxes. I intend to demand that Federal funding deleted with the 2017 tax act be restored.”. I then asked her if she thought that I wasn’t also paying Federal taxes. She responded that, “The rest of the 2017 Act tax reduction benefits would stay in place (ostensibly NOT raising my Federal tax burden), but only restoring Federal Medicaid funding”.

    That Federal “credit card” is just like magic!

    (Yet another Hogwarts graduate applying for a job as my representative. Get ready for more of them – they’re coming to your door soon.)

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