Category Archives: Broken in the USA

guns & gas

Politics as Usual

Politics as Usual

Most of my friends describe themselves as Republican Conservatives. I suspect they view me as at least some form of Liberal. I have real problems with “labels”. I do not view myself as either Democrat or Republican or Conservative or Liberal. I am not a supporter of the two-party system. In that regard President Washington and I are on the same page (refer to his farewell speech). The two ruling parties are unindicted co-conspirators responsible for bankrupting our country.

With regard to my political views I come very close to the principals espoused by the libertarians. That said, I like to think I am “issue” oriented and hope to rely on “facts” when establishing a position, and not align with the “party line”.

I believe that less government is best government. I am extremely conservative when it some to fiscal issues. Both parties have a history of spending money that we do not have. The national debt and unfunded liabilities are unbelievable. We have mortgaged the future for our citizens with absolutely no plan to recover.

Everyone agrees that our government is not efficient and the facts show that we pay federal government employees at a rate fully 50% above the free market rate for comparable jobs. Despite this, studies have shown that productivity among government employees lags far behind that in private industry. My opinion is that achieving a 20% reduction in employee costs could be easily achieved by addressing both rates and productivity without decreasing services. Whom in our government is working on this?

 

Almost everyone agrees that Defense is important. I completely agree with providing the highest level defensive system. Where I vary with many of my friends is on how to accomplish this. My view is that it can easily be accomplished with-in existing budget limits. Having been in the military I can assure you that the same malaise the infects the other government departments is alive and well in the military. My belief in the 20% reduction factor would also apply here.

While I believe in an extremely effective defense, my views on offensive military operations are quite different. I do not support the idea of being the “World’s Cop”. We have spent many Trillions of Dollars on the civil conflicts in both Afghanistan and Iraq. We have sacrificed the lives of countless men and women. The vast majority of our citizens realize that we have to pull out of these conflicts at some point, but what is the cost of continuing, both in lives and $? What will these countries revert to when we finally do withdraw? Most now realize that Vietnam was a huge mistake, but we tend to repeat this insanity.

I completely agree that we need to attack terrorism where ever it exists and is supported. In that regard I favor “surgical strikes” with small or no commitments of bodies. I would hope that we could move in the direction of using technology rather than putting our men and women in harm’s way whenever possible.

Our National Debt – Update

Our National Debt – Update

I like to keep track of our debt since it the Elephant in three rooms (Oval office, the House & the Senate). It is our most significant financial issue and one which none of our elected representatives are willing to address. The solutions are easy, but it will be painful which is why no “career” politician will pursue them.

Now that the Republicans control the Executive & Congress you would expect that we would start to slow down the rate at which the debt is increasing. If you believe that, then you would be wrong. The National debt is currently increasing at the rate of $1 million every 50 seconds. It now stands at $21 trillion. The annual deficit is actually accelerating vs 2017.  President Trump is on schedule to set new budget deficit records:

The Total Actual plus Budgeted (projected) for the next 4 years = $5.683 trillion, almost as much in one term as Obama accumulated in two.

I am not taking sides politically as my view is that both the Dems & Reps are in this together. Ignore what they say, look at what they do. A significant contributor to the runaway debt is the recent tax cut. What we are doing is borrowing the money to fund this tax cut.

President Obama actually did the same thing in 2010:

In 2010, the Obama tax cut (an extension of the Bush tax cut) added $858 billion to the debt in its first two years. Obama increased defense spending, adding as much as $800 billion a year. Federal income decreased due to lower tax receipts from the 2008 financial crisis which was a result of the financial industry’s mismanagement during the President Bush terms.

Tax changes are always just a method of income redistribution. The only real difference is in who gets what. The problem is that we primarily fund these cuts out of borrowings which increases the size of the elephant.

The redistribution formula of the current tax cut is extremely complicated, but in general terms only about 20 – 25% of the funds end up in the pockets of the middle class and overall is the equivalent of a 2% pay increase. The vast majority of the benefit is going to the wealthiest segment and to corporations.

If tax payers had to payoff their portion of this debt it would require over $173 thousand each and it grows larger every day.

A significant measure of the financial health of country is the ratio of debt to GDP. Many were dissing the Greeks when they were facing bankruptcy at a ratio of 1.8 to 1. They were very lucky to have the EU to bail them out. Our current ratio is 1.06 to 1. The most optimistic projections for growth in GPD over the next 20 years is 3%. There are others that predict the new average real growth norm will be in the 1 – 1.5% range. Using a mid-point of 2% (inflation adjusted) and the current growth rate of our debt at 5% we will be approaching the level of the Greek financial status by 2050, if not sooner. Who will bail us out? Our grandchildren? China?

Our Insane Income Tax Code

Chapter 67 Our Insane Income Tax Code

The original Income tax code, a bit over 100 years old, was 400 pages. Today is now runs 70,000 pages! Originally the rate was a fixed 1% and only paid by highest income earners.

The 1935 form 1040 had 2 pages while the current form contains 100 pages of sub-forms and instructions!

It is estimated that the code results in 9 billion hours (that’s 9,000,000,000) to comply with the tax code and that equates to $400 billion in lost economic productivity In either lost personal time or the cost of paid preparers). This does not include the cost to fund the IRS which currently is running at $13+ billion.

The real problem with the tax code is that it has evolved as a result of special interest influence which creates a plethora of complexity to reward those interests.

The solution is relatively simple, but not politically feasible. The following suggestion is taken from one of my earlier posts as simple way to replace our current level of income tax revenue:

“You have heard several potential solutions to this issue and here is my suggestion:

An average flat income tax of (5%) on all gross income except for capital gains. My math could be a bit off here, but the rate stated should be close to working. I would segment this into five categories with gross incomes at or below the poverty level at 0% (currently $25,000 for a family of 4). I would not provide incentives for larger families). For incomes from $25,000 to $50,000 I would make the rate 2%, from $50,000 to $100,000  4%, from $100,000 – $250,000 6%, from $250,000 – $500,000 at 8%,  and all over $500,000 at 10%. These rates would become the automatic withholding and there would be no deductions

The above would not change either SS or Medicare tax rates.

I would completely eliminate capital gains taxes. Instead I would propose an annual tax on wealth (assets minus liabilities). The proposed rates would be: 1% for under $500,000, 1.5% for $500,000 – $1,000,000, 2% for $1,000,000 to $5,000,000 and 3% for $5,000,000 to $100,000,000 and 4% over $100,000,000.

Also, a flat national sales tax at 2% on all business sales at retail. I would completely eliminate corporate income taxes.

At this time, I would not suggest any change to the excise tax structure.

Note: I have done my best to ensure that the above would effectively replace the total revenue achieved by the current tax system and freely admit that the results may not be perfect, but you get the idea. These numbers can be tweaked to achieve the desired revenue results.”